SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. __)
Filed by 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 ss.240.14a-11(c) or ss.240.14a-12
V-ONE Corporation
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
V-ONE Corporation
--------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11:
1) Title of each class of securities to which transaction
applies:______________________________________________________
2) Aggregate number of securities to which transaction
applies:______________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing 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.
<PAGE>
1) Amount Previously Paid:_____________________________________________
2) Form, Schedule or Registration Statement Number:____________________
3) Filing Party:_______________________________________________________
4) Date Filed:_________________________________________________________
-2-
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V-ONE [LOGO]
-----
Security for a Connected World(Trademark)
www.v-one.com
April 7, 2000
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Meeting of Shareholders of V-ONE Corporation (the "Company"). The
Annual Meeting will be held at The Hampton Inn Germantown, 20260 Goldenrod Lane,
Germantown, Maryland 20876, on Thursday, May 11, 2000 at 10:00 a.m.
Germantown, Maryland time.
At the meeting, you will be asked (i) to elect two directors, each for
a three-year term expiring in 2003, (ii) to ratify the appointment of Ernst &
Young LLP as independent public accountants for the Company, (iii) to approve an
amendment to the Company's amended and restated certificate of incorporation to
increase the number of shares of common stock which the Company is authorized to
issue from 33,333,333 to 50,000,000 shares, and (iv) to approve an amendment to
the Company's 1998 Incentive Stock Plan increasing shares authorized from 2.5
million to 5 million. The Board of Directors has unanimously approved these
proposals and we urge you to vote in favor of these proposals and such other
matters as may be submitted to you for a vote at the meeting.
Your vote is very important, regardless of the number of shares you
own. Please sign and return each proxy card that you receive in the postage-paid
return envelope, which is provided for your convenience. The return of your
proxy card will not prevent you from voting in person but will assure that your
vote is counted if you are unable to attend the Annual Meeting. We look forward
to seeing you on May 11.
Sincerely,
/s/ David D. Dawson
DAVID D. DAWSON
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
20250 Century Boulevard, Suite 300, Germantown, Maryland 20874/ (301) 515-5200
<PAGE>
V-ONE CORPORATION
20250 CENTURY BOULEVARD, SUITE 300 GERMANTOWN, MARYLAND 20874 (301) 515-5200
NOTICE
ANNUAL MEETING OF SHAREHOLDERS
APRIL 7, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders
("Annual Meeting") of V-ONE Corporation ("Company") will be held on Thursday,
May 11, 2000 at 10:00 a.m., Germantown, Maryland time, for the following
purposes:
1. To elect two directors, whose terms shall expire at the
2003 annual meeting, or until their successors have been
elected and qualified;
2. To ratify the appointment of Ernst & Young LLP, independent
public accountants, as the auditors of the Company for the
year ending December 31, 2000;
3. To approve an amendment to the Company's amended and restated
certificate of incorporation to increase the number of shares
of common stock which the Company is authorized to issue from
33,333,333 to 50,000,000 shares;
4. To approve an amendment to the Company's 1998 Incentive Stock
Plan increasing shares of common stock authorized and reserved
for issuance from 2.5 million to 5 million; and
5. To transact any other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 22,
2000 as the record date ("Record Date") for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting and at any adjournment
thereof. A complete list of shareholders of record of the Company on the Record
Date will be available for examination by any shareholder, for any purpose
germane to the Annual Meeting, during ordinary business hours, for the 10-day
period prior to the Annual Meeting, at the executive offices of the Company,
20250 Century Boulevard, Suite 300, Germantown, Maryland 20874.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joseph D. Gallagher
JOSEPH D. GALLAGHER
SECRETARY
Germantown, Maryland
April 7, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING, OR IN
PERSON, AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
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V-ONE CORPORATION
20250 CENTURY BOULEVARD, SUITE 300 GERMANTOWN, MARYLAND 20874 (301) 515-5200
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors ("Board") of
V-ONE Corporation, a Delaware corporation ("Company"), for use at the Annual
Meeting of Shareholders on Thursday, May 11, 2000 ("Annual Meeting"), and at any
adjournment thereof. The approximate date of mailing of this Proxy Statement is
April 7, 2000
INFORMATION RELATING TO VOTING AT THE ANNUAL MEETING
The securities to be voted at the Annual Meeting consist of (i) shares
of common stock of the Company, $0.001 par value per share ("Common Stock"),
with each share entitling its record owner to one vote on each of the proposals
("Proposals") and on all other matters properly brought before the Annual
Meeting and (ii) shares of Series C Preferred stock, $0.001 par value per share
("Series C Stock"), with each share entitling its record owner to ten votes on
proposals 2, 3 and 4 and on all other matters properly brought before the annual
meeting, except with respect to the election of directors. The close of business
on March 22, 2000 has been fixed by the Board as the record date ("Record Date")
for determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting. As of the Record Date, there were 143 record holders of
Common Stock and 18,250,780 shares of Common Stock outstanding and 25 record
holders of Series C Stock and 335,000 shares of Series C Stock outstanding and
eligible to be voted at the Annual Meeting. The Common Stock and Series C Stock
(collectively "Voting Stock") are the only outstanding voting securities of the
Company.
The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of the Voting Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting. If
less than a majority of the outstanding shares are present at the Annual
Meeting, either in person or by proxy, a majority of the shares so represented
may vote to adjourn the Annual Meeting from time to time without further notice.
Directors receiving a plurality of votes will be elected in the order of the
number of votes received. There is no cumulative voting in the election of
directors. With respect to any other matter properly brought before the Annual
Meeting or any adjournment thereof, the vote required for approval shall be the
affirmative vote of a majority of the total number of votes that those present
at the Annual Meeting, in person or by proxy, are entitled to cast.
All shares entitled to vote represented by a properly executed and
unrevoked proxy received in time for the Annual Meeting will be voted at the
Annual Meeting in accordance with the instructions given; in the absence of
instructions to the contrary, such shares will be voted FOR the Proposals to
elect the designated nominees for director. If any other matters properly come
before the Annual Meeting, the persons named as proxies will vote upon such
matters as determined by a majority of the Board.
Under Delaware law, shares represented at the Annual Meeting (either by
properly executed proxy or in person) that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee that are represented at the
Annual Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions as to any Proposal will have the same effect as votes
against the Proposal. Broker non-votes, however, will be treated as unvoted for
purposes of determining approval of such Proposal (and therefore will reduce the
absolute number - although not the percentage - of votes needed for approval)
and will not be counted as votes for or against the Proposal.
The cost of soliciting proxies will be borne by the Company. In
addition to use of the mails, proxies may be solicited personally or by
telephone or telegraph by officers, directors or employees of the Company who
will not be specially compensated for such solicitation activities. Arrangements
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will also be made with brokerage houses and other custodians, nominees and
fiduciaries for forwarding solicitation materials to the beneficial owners of
shares held of record by such persons, and the Company will reimburse such
persons for their reasonable expenses incurred in that connection.
A shareholder may revoke his or her proxy at any time prior to its
exercise by (i) filing with Joseph D. Gallagher, Secretary, V-ONE Corporation,
20250 Century Boulevard, Suite 300, Germantown, Maryland 20874, written notice
thereof, (ii) submitting a duly executed proxy bearing a later date or (iii)
appearing at the Annual Meeting and giving the Secretary notice of his or her
intention to vote in person. Unless previously revoked or otherwise instructed
thereon, proxies will be voted at the Annual Meeting on the Proposals as
described above.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The number of shares of Common Stock held as of March 1, 2000 by each
holder, if any, of more than 5% of the outstanding Common Stock of the Company,
by each director of the Company, each nominee for reelection as a director, each
executive officer named in the "Summary Compensation Table," and by all
executive officers and directors of the Company is set forth below. All of the
shares shown in the following table are shares of Common Stock and are owned
both of record and beneficially by the person named; the person named possesses
sole voting and investment power, except as otherwise indicated in the footnotes
to the table.
NAME AND ADDRESS (1) SHARES BENEFICIALLY OWNED (2) PERCENT OF CLASS (3)
---------------- ------------------------- ----------------
James F. Chen 3,290,552(4) 18.0%
David D. Dawson 370,000(5) 2.0%
Margaret E. Grayson** 60,000(6) *
William E. Odom 19,066(7) *
Steven Mogul 5,000(8) *
A. L. Giannopoulos** 10,000(9) *
Robert E. Kelley 0(10) *
Executive Officers and 3,754,618 20.2%
Directors as a group (4)(5)(6)(7)(8)(9)(10)
* Less than 1%.
** Nominee.
(1) Unless otherwise indicated, the mailing address of each shareholder is
c/o V-ONE Corporation, 20250 Century Boulevard, Suite 300, Germantown,
MD 20874.
(2) In accordance with Rule 13d-3 of the Exchange Act, a person is deemed
to be the beneficial owner of a security if he or she has or shares
voting power or investment power with respect to such security or has
the right to acquire such ownership within 60 days.
Each director and executive officer possesses sole voting and
investment power with respect to the shares listed, except as otherwise
indicated. The number of shares beneficially owned by each director or
executive officer is determined under rules promulgated under the
Exchange Act by the Securities and Exchange Commission ("SEC"), and the
information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, beneficial ownership includes any
shares as to which the individual currently has sole or shared voting
power or investment power, and also any shares which the individual has
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the right to acquire within 60 days after March 1, 2000. As of March 1,
2000, the Company had 18,243,530 shares of common stock outstanding.
(3) Number of shares deemed outstanding includes any shares subject to
stock options and warrants beneficially owned by the person in question
that are currently exercisable or become exercisable within 60 days
after March 1, 2000.
(4) Includes: 600,000 shares of Common Stock held in a family limited
partnership, the general partner of which is a corporation controlled
by James F. Chen and his wife Mary S. Chen. Does not include 71,110
shares of Common Stock registered in the name of Mary S. Chen as
Trustee under trusts for the benefit of Mr. Chen's children with
respect to which Mary S. Chen possesses voting and investment power.
(5) Includes options and warrants to purchase 360,000 shares of Common
Stock. Does not include options and warrants to purchase 750,000 shares
of Common Stock, that are not currently exercisable.
(6) Includes options to purchase 60,000 shares of Common Stock. Does not
include options to purchase 165,000 shares that are not currently
exercisable.
(7) Includes options to purchase 6,666 shares of Common Stock and warrants
to purchase 10,000 shares of Common Stock.
(8) Includes options to purchase 5,000 shares of Common Stock. Does not
include options to purchase 80,000 shares of Common stock that are not
currently exercisable.
(9) Includes warrants to purchase 10,000 shares of Common Stock.
(10) Does not include options to purchase 77,500 shares of Common Stock that
are not currently exercisable.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company's restated bylaws provide for a Board consisting of up to
seven members serving staggered terms. The term of office of A.L. Giannopoulos
on the Board will expire at the Annual Meeting. A.L. Giannopoulos has been
nominated by the Board for reelection to the Board to serve for a three-year
term. Margaret E. Grayson was elected to the Board in August 1999 to fill a
vacancy on the Board. Her term will also expire at the Annual Meeting. She has
also been nominated by the Board for reelection to the Board to serve for a
three-year term.
There are no arrangements or understandings between the Company and any
person pursuant to which such person has been elected as a director or selected
as a nominee, except under Mr. Dawson's employment agreement, the Board was
required to elect Mr. Dawson to fill a vacancy on the Board, and pursuant to Ms.
Grayson's employment agreement, Mr. Dawson nominated Ms. Grayson to fill a
vacancy on the Board.
If any nominee becomes unavailable for any reason, or if any other
vacancy in the class of directors to be elected at the Annual Meeting should
occur before the election, the shares represented by the proxy will be voted for
the person, if any, who is designated by the Board to replace the nominee or to
fill such other vacancy on the Board. The Board has no reason to believe that
the nominees will be unavailable or that any other vacancy on the Board will
occur. The nominees have consented to be named and have indicated their intent
to serve if elected.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE NOMINEES FOR
REELECTION AS DIRECTORS SET FORTH ABOVE.
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INFORMATION CONCERNING THE BOARD OF DIRECTORS
The directors of the Company are currently classified into three
classes, which are elected on a staggered basis. Each director serves for a
three-year term and until his or her successor is duly elected and qualified.
The current members of the Board are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
OF THE
COMPANY TERM POSITION(S) CURRENTLY
NAME SINCE EXPIRES HELD WITH THE COMPANY
---- ----- ------- ---------------------
<S> <C> <C> <C>
Director
James F. Chen .................. 1993 2002
David D. Dawson................. 1997 2001 Chairman of the Board, President and
Chief Executive Officer
A.L. Giannopoulos(1)(2)(3) 1998 2000 Director
Margaret E. Grayson (2)......... 1999 2000 Director, Senior Vice President, and
Chief Financial Officer
William E. Odom (1)(3).......... 1996 2002 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee.
(2) Nominee for election.
(3) Member of the Compensation Committee
Biographical information regarding the directors of the Company is as
follows:
JAMES F. CHEN, 49, founded the Company in February 1993 and has since
served as a director. He also served as Chairman of the Board from November 21,
1997 to July 22, 1998. From inception until November 21, 1997, Mr. Chen served
as the Company's President and Chief Executive Officer. From 1980 to 1990, Mr.
Chen managed INTELSAT's world-wide ground network engineering projects. From
1990 to January 1993, he managed the INTELSAT Ground Network Engineering
Department and, from March 1992 to January 1993, he also directed its Management
Information Systems Division. Mr. Chen was a consultant to the Company through
12/31/99. Mr. Chen recently founded and is CEO of DrFirst.com, Inc.,an
application service provider for medical doctors. Mr. Chen holds an M.S. in
Computer Science from George Washington University and a B.S. in Electrical
Engineering from Georgia Institute of Technology.
DAVID D. DAWSON, 52, has served as the President and Chief Executive
Officer of the Company since November 21, 1997, as a director since December 12,
1997 and as Chairman of the Board since July 22, 1998. From March 1996 until
November 1997, he served as General Manager of Ascend Communications, Inc., a
data communications hardware company and from April 1994 until March 1996, he
served as Chief Operating Officer. From November 1995 until March 1996, he
served as Chief Executive Officer of Morning Star Technologies, a firewall and
communications company. From October 1992 until April 1994, he was Vice
President of Development for Net Express Systems, a data communications hardware
company. Mr. Dawson holds an M.S. in Computer Science from Fairleigh Dickinson
University, an M.S. in Operations Research from Air Force Institute of
Technology, and a B.S. in Electrical Engineering from the United States Military
Academy at West Point. He is a director of Network Flight Recorder, Inc., a
private company in which the Company holds 9% of the Common stock.
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MARGARET E. GRAYSON, 53, has served as the Senior Vice President
and Chief Financial Officer of the Company since July 1, 1999 and as a director
of the Company since August 20, 1999. From October 1998 through July, 1999, Ms.
Grayson served as a senior executive and consultant to high technology start-up
companies. From September 1994 through October 1998 Ms. Grayson served as Vice
President of Finance and Administration and CFO for SPACEHAB, Incorporated .
Immediately prior to joining SPAB, Ms. Grayson served as Chief Financial Officer
for CD Radio, Inc. in Washington DC, an early entrant in the satellite radio
mobile communications market . Ms. Grayson holds an M.B.A from the University of
South Florida and a B.S. in Accounting from the State University of New York at
Buffalo.
A.L. GIANNOPOULOS, 60, has served as a director of the Company since
July 22, 1998. Mr. Giannopoulos was elected a director of MICROS Systems, Inc.
("MICROS") in March 1992 and was elected President and Chief Executive Officer
of MICROS in May 1993, which was a majority owned subsidiary of Westinghouse.
Effective as of June 1, 1995, Mr. Giannopoulos resigned as General Manager of
the Westinghouse Information and Security Systems Divisions, having been with
Westinghouse for approximately 30 years. In prior assignments at Westinghouse,
Mr. Giannopoulos was General Manager of the Automation Division and National
Industrial Systems Sales Force, Industries Group. Mr. Giannopoulos is a graduate
of Lamar University with a Bachelor of Science degree in Electrical Engineering.
(RETIRED) LT. GEN. WILLIAM E. ODOM, 67, has served as a director of the
Company since June 1996. Since October 1988, General Odom has served as Director
of National Security Studies at the Hudson Institute. He has also served as an
adjunct professor at Yale University since January 1989. Prior to his retirement
from the military in 1988, General Odom held several military posts including,
Director of the National Security Agency, Assistant Chief of Staff for
Intelligence and Military Assistant to the National Security Advisor during the
Carter Administration. He is the Chairman of the Board of American Science &
Engineering and is also a board member of American Technologies Group. General
Odom holds an M.A. and Ph.D. from Columbia University and a B.S. from the United
States Military Academy at West Point.
COMPENSATION OF DIRECTORS
Effective July 1998, the Company pays $500 per meeting, and issues
10,000 options and or warrants to purchase Common Stock annually to each
independent director. The Company also reimburses directors for travel expenses
incurred in connection with their attendance at meetings of the Board and its
committees.
James Chen received $60,000 in 1999 in consulting fees from the
Company, pursuant to his amended employment agreement dated January 1, 1999, and
he was covered by the Company's health plan during 1999 as well.
BOARD OF DIRECTORS AND COMMITTEES
Meetings of the Board are held regularly each quarter and as required.
During 1999, the Board held five meetings. The following are the committees of
the Board:
The Board has established an Audit Committee ("Audit Committee") to
recommend the firm to be appointed as independent accountants to audit the
Company's financial statements and to perform services related to the audit,
review the scope and results of the audit with the independent accountants,
review with management and the independent accountants the Company's year-end
operating results and consider the adequacy of the internal accounting
procedures. The Audit Committee consists of two directors, General Odom and Mr.
Giannopoulos, neither of which is an employee of the Company. Mr. Giannopoulos
replaced Mr. Frank Chen who served on the Audit Committee until his resignation
from the Board on September 24, 1999. The Audit Committee met in conjunction
with the full board in 1999.
The Board has also established a Compensation Committee ("Compensation
Committee") The Compensation Committee, which consisted of two directors until
Hai Hua Cheng resigned on November 7, 1997, reviewed and recommended the
compensation arrangements for all directors and officers, approved such
arrangements for other senior level employees and administered and took such
other action as may have been required in connection with certain compensation
and incentive plans of the Company. On March 4, 1999, the Compensation Committee
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was reconstituted, consisting of two independent directors, General Odom and Mr.
Giannopoulos. The Compensation Committee did not meet in 1999.
The Company currently has no standing nominating committee. A director
can be nominated by a member of the Board or by written notice to the Board not
less than 120 calendar days in advance of the anniversary date of the Company's
previous year's annual meeting of shareholders.
No current member of the Board attended fewer than seventy-five percent
(75%) of the aggregate of the total number of meetings of the Board and the
total number of meetings held by all committees of the Board on which he served
during 1999.
INFORMATION CONCERNING EXECUTIVE OFFICERS
The Company's executive officers are elected each year by the Board, unless the
Board determines, upon appointing an officer, that he or she shall serve for a
different term. Any executive officer may be removed at any time, with or
without cause, by the Board. Biographical information with respect to David D.
Dawson and Margaret E. Grayson is provided above. See "Information Concerning
the Board of Directors." Biographical information regarding the other executive
officers of the Company is as follows:
TEDD BENNETT, 47, joined the Company in August 1999 and has served as
Vice President of Sales for the Company since September 1999. Prior to that, Mr.
Bennett was Director of Federal and Commercial Sales for Olicom, Inc. from May
1997 to July 1999. From July 1996 to May 1997, Mr. Bennett was Director of Cisco
Sales/Federal Government Sales for Comstor/GE Capital IT. Mr. Bennett was with
Microdyne Corporation from January 1991 to July 1996, where he held several
positions, the most recent being Director of Sales for the Asia and Pacific Rim.
JAMES BOYLE, Ph.D., 58, has served as the Company's Vice President of
Engineering since October 1999. From October 1995 to March 1998 he served as
Vice President and General Manager of the Advanced Technology Division of Secure
Computing Corporation. From 1993 to 1995 Dr. Boyle was retired from business.
From 1991 to 1993, Dr. Boyle was a self-employed consultant to high technology
companies. Prior to that, he was employed by Convex Computer Corporation,
Computer Design Associates and Unisys (Sperry Corporation). Dr. Boyle holds
Ph.D. and M.C.S. degrees in Computer Science from Texas A&M University and a
B.S.E.E. degree in Electrical Engineering from the New Jersey Institute of
Technology.
STEVEN MOGUL, 42, has served as the Company's Vice President of
Business Development from February 1999, and as acting Vice President of Sales
from June through September 1999. Mr. Mogul joined the Company in May 1998 as
Vice President of Sales, a position he held until February 1999. Before joining
V-ONE, Mr. Mogul was Director of Sales at Ark Research from October 1997 to May
1998. From April 1995 to October 1997, Mr. Mogul was an Area Manager for Ascend
Communications Inc and Director of Sales at Morning Star Technologies. Mr. Mogul
holds a B.B.A. in Marketing from the University of Cincinnati.
WILLIAM E. TAYLOR, 56, has served as the Company's Vice President of
Marketing since October 1999. From December 1998 to May 1999, Mr. Taylor was
Director of Worldwide Product Management at 3COM Corporation. From February 1997
to December 1998, Mr. Taylor was first Director of Marketing and then Vice
President of Marketing for Hayes/Access Beyond, a company that filed a petition
for Reorganization under Chapter 11 of the U.S. Bankruptcy Code on November 9,
1998. From 1992 to 1997, Mr. Taylor was Manager of Network Products for
Multi-Tech Systems. Mr. Taylor holds a B.A. in Computer Science from Augsburg
College.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company for
the last three fiscal years to its Chief Executive Officer and the Company's
three other most highly compensated executive officers of the Company whose
salary plus bonus exceeded $100,000 during the year ended December 31, 1999
("Named Executives").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS
Securities
Name and Principal Salary Other Annual Underlying Options All Other
Position Year ------ Bonus($) Compensation ------------------ Compensation ($)
- ------------------ ---- ($) -------- ------------ (#) ----------------
------ ($)(1) ---
------
<S> <C> <C> <C> <C> <C> <C>
David D. Dawson 1999 $226,923 200,000(2)
Chief Executive Officer 1998 $200,000 -- $22,006(9) $54,824(10)
1997 $21,282 -- -- 800,000(3) --
Robert E. Kelley(12) 1999 $143,325 -- 10,000(4)
Former Vice President 1998 $55,731 $20,000 90,000(5) $35,856(11)
Engineering 1997 - -
Steven Mogul 1999 $186,792 50,000(6)
Vice President of 1998 $111,029 40,000(7)
Business Development 1997 -- -- -
Margaret E. Grayson 1999 $81,250 $17,600 250,000(8)
Senior Vice President 1998 -- --
and CFO 1997 -- --
</TABLE>
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(1) Except as indicated, the aggregate amount of perquisites and other
personal benefits, securities or property for each Named Executive is
not reportable under SEC rules because such amount is the lesser of
either $50,000 or 10% of total annual salary and bonus for each Named
Executive.
(2) Represents options to purchase 200,000 shares of Common Stock at an
exercise price of $2.156 per share under the 1998 Incentive Stock Plan
(the "1998 Plan"). These options vest as to 25% of the shares on the
first anniversary of the date of grant and as to an additional 25% of
the shares on the second, third and fourth anniversaries of the date of
grant. The options and warrants become fully vested in the event of a
change in control of the Company
(3) Represents options to purchase 500,000 shares of Common Stock at an
exercise price of $3.125 per share granted under the 1996 Plan and
warrants to purchase 300,000 shares of Common Stock at an exercise
price of $3.125 per share. These options and warrants vest as to 25% of
the shares on the first anniversary of the date of grant and as to an
additional 25% of the shares on the second, third and fourth
anniversaries of the date of grant. The options and warrants become
fully vested in the event of a change in control of the Company.
(4) Represents option to purchase 10,000 shares of Common Stock at an
exercise price of $2.125 per share granted under the 1998 Plan. These
options vest as to 25% of the shares on the first anniversary of the
date of grant and as to an additional 25% of the shares on the second,
third and fourth anniversaries of the date of grant. The options become
fully vested in the event of a change in control of the Company.
(5) Represents option to purchase 90,000 shares of Common Stock at an
exercise price of $2.125 per share granted under the 1998 Plan. These
options vest as to 25% of the shares on the first anniversary of the
date of grant and as to an additional 25% of the shares on the second,
third and fourth anniversaries of the date of grant. The options become
fully vested in the event of a change in control of the Company.
(6) Represents option to purchase 30,000 shares of Common Stock at an
exercise price of $2.125 per share granted under the 1998 Plan, and
20,000 shares of Common Stock at an exercise price of $2.156 per share
granted under the 1998 Plan. These options vest as to 25% of the shares
on the first anniversary of the date of grant and as to an additional
25% of the shares on the second, third and fourth anniversaries of the
date of grant. The options become fully vested in the event of a change
in control of the Company.
(7) Represents option to purchase 40,000 shares of Common Stock at an
exercise price of $2.875 per share granted under the 1998 Plan. These
options vest as to 25% of the shares on the first anniversary of the
date of grant and as to an additional 25% of the shares on the second,
third and fourth anniversaries of the date of grant. The options become
fully vested in the event of a change in control of the Company.
(8) Represents option to purchase 220,000 shares of Common Stock at an
exercise price of $2.156 per share granted under the 1998 Plan. These
options vest as to 25% of the shares on April 23, 2000, and as to an
additional 25% of the shares on the April 23, 2001, April 23, 2002 and
April 23, 2003. The options become fully vested in the event of a
change in control of the Company. Also represents option to purchase
30,000 shares of Common Stock at an exercise price of $2.156 per share
granted under the 1998 Plan. These options are immediately exercisable.
(9) Represents taxes paid by the Company on behalf of Mr. Dawson.
(10) Represents payments made by the Company for Mr. Dawson's relocation.
(11) Represents payments made by the Company for Mr. Kelley's relocation.
(12) This individual ceased being an executive officer in October 1999.
9
<PAGE>
STOCK OPTIONS
The following tables set forth further information regarding the grant
of options and warrants to the Named Executives of the Company in 1999. No stock
appreciation rights ("SARs") were granted to any Named Executive during 1999.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------------------------------------------
% of Total Potential Realizable Value at
Number of Options Assumed Annual Rates of
Securities Granted to Stock Price Appreciation for
Underlying Employees Exercise or Option Term
Name Options Granted in Fiscal Base Price Expiration --------------------------------
(#) Year ($/Sh) (1) Date 5% 10%
- ------------------------- ----------------- ---------- ----------- -------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
David D. Dawson 200,000 12.49% $2.156 6/16/2009 $271,261 $687,351
Steven Mogul 30,000 1.87% $2.125 4/27/2009 $40,092 $101,601
20,000 1.25% $2.156 6/16/2009 $27,126 $68,735
Robert E. Kelley 10,000 0.62% $2.125 4/26/2009 $13,364 $33,867
Margaret Grayson 220,000 13.74% $2.156 6/16/2009 $298,387 $756,087
30,000 1.80% $2.156 6/16/2009 $40,682 $103,095
- -------------------------
(1) Represents fair market value on date of grant.
</TABLE>
The following table summarizes the value realized upon exercise of
outstanding stock options and the value of the outstanding options held by the
Named Executives at December 31, 1999.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of
Unexercised Unexercised
Options at In-the-Money
December 31, Options at
Shared 1999 (#) December 31,
Acquired ------------- 1999 ($)(1)
on Value Exercisable/ --------------
Name Exercise(#) Realized ($) Unexercisable Exercisable/
---- ----------- ------------- ------------- Unexercisable
--------------
<S> <C> <C> <C> <C>
David D. Dawson
25,000 $94,531 225,000/450,000 $618,750/$1,431,300
Steven Mogul
5,000 $53,125 5,000/80,000 $15,000/$276,880
Robert Kelley
22,500 $243,270 0/77,500 $0/$252,623
Margaret Grayson
25,000 $118,750 5,000/220,000 $18,594/$818,180
- -----------------------------
</TABLE>
(1) Based on the closing sales price of $5.875 on December 31, 1999.
10
<PAGE>
RELATED TRANSACTIONS
James Chen is the founder and CEO of Dr.First.com, Inc. and owns
approximately 25% of its Common stock. Dr.First.com, Inc. and the Company have
agreed in principal to an OEM agreement and an ASP agreement. Targeted sales
under the OEM agreement are $300,000 annually.
Progressive Systems, Inc. ("Progressive") and the Company have entered
into an agreement that allows Progressive to supply SmartGate Software
integrated with Progressive's Phoenix Firewall Server. The Company has also
purchased a limited number of Progressive devices for market research purposes
for $90,000. David Dawson's son, Matthew Dawson, is CEO of Progressive. Margaret
Dawson, David Dawson's wife, owns 55 % of Progressive Systems, Inc. Effective
January 2, 1998, David Dawson resigned as a director of Progressive and
relinquished all ownership rights to Progressive. David Dawson has not
participated in any negotiations between the Company and Progressive.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
In June 1996, the Board established the Compensation Committee, which
made recommendations concerning the compensation arrangements for all directors
and executive officers. From January 1 through November 7, 1997, members of the
Compensation Committee were Hai Hua Cheng and William Odom. Mr. Cheng resigned
from Board on November 7, 1997, and from that date until March 1999,
compensation matters were handled by the Board as a whole. In March, 1999, the
Board reconstituted the Compensation Committee with General Odom and Mr.
Giannopoulos as members.
Consistent with the Company's growth, in April 1997, the Compensation
Committee began to adjust the compensation paid to its executive officers to be
competitive within the high technology industry. As a result, compensation for
executive officers currently consists primarily of base salary, cash and stock
bonuses and grants of stock options pursuant to the Company's plans. Base
salaries were initially determined by evaluating the responsibilities of the
position and the experience and knowledge of the individual. Bonuses and annual
salary adjustments, if any, were determined by evaluating performance taking
into account such factors as achievement of the Company's strategic goals,
assumption of additional responsibilities, attainment of specific individual
objectives, and the compensation paid to other senior executives in the
Company's industry. The Board believes that stock ownership by management is
especially beneficial in aligning the interest of management and shareholders in
the Company.
From the inception of the Company until 1996, James F. Chen received a
significant number of shares of the Company in lieu of receiving a salary. In
June 1996, Mr. Chen entered into an employment agreement with the Company that
provided for a base salary of $125,000 per annum. In April 1997, the
Compensation Committee determined to increase Mr. Chen's base salary to $185,000
per annum in order to align his compensation with that paid to other senior
executives in the Company's industry. On November 21, 1997, Mr. Chen was
appointed Chairman of the Board of the Company and ceased to serve as its
President and Chief Executive Officer in connection with the Company's retention
of David D. Dawson. On July 22, 1998, Mr. Chen ceased to serve as Chairman of
the Board. See "-- Employment Agreements" for more information regarding Mr.
Chen's employment agreement.
On November 21, 1997, the Company retained Mr. Dawson as its President
and Chief Executive Officer. On that date, the Company entered into an
employment agreement with Mr. Dawson, the terms of which were approved by the
Board. Pursuant to such employment agreement, Mr. Dawson's base salary was set
at $200,000 per annum and he received options and warrants to purchase 800,000
shares of Common Stock at an exercise price of $3.125 per share. The amount of
Mr. Dawson's initial annual salary and the number of options and warrants were
determined after consulting with the executive search firm retained by the
Company to attract candidates for the position of President and Chief Executive
Officer. On July 22, 1998, Mr. Dawson was appointed Chairman of the Board. See
"-- Employment Agreements" for more information regarding Mr. Dawson's
employment agreement.
11
<PAGE>
Also in June 1996, the Company entered into an employment agreement
with Jieh-Shan Wang, who then held the position of Senior Vice President and
Chief Technical Officer. Mr. Wang's agreement provided for a base salary of
$100,000 per annum. In April 1997, the Compensation Committee determined to
increase Mr. Wang's base salary to $140,000 per annum in order to align his
compensation with that paid to other senior executives in the Company's
industry. In 1998, Mr. Wang received a salary of $110,000 (as from October 1998
to December 1998 Mr. Wang took an unpaid sabbatical) and a performance based
bonus of $35,000. See "-- Employment Agreements" for more information regarding
Mr. Wang's employment agreement.
On August 1, 1998, the Company entered into an employment agreement
with Robert F. Kelly, its Vice President of Engineering. Mr. Kelley's base
salary was set at $140,00 per annum, and he received options to purchase 90,000
shares of Common Stock at an exercise price of $2.125, and a sign-on bonus of
$20,000. Mr. Kelley's position was changed to Vice President Business
Development in October, 1999. See "--Employment Agreements" for more information
regarding Mr. Kelley's employment agreement.
On July 1, 1999, the Company entered into an employment agreement with
Margaret E. Grayson, its Senior Vice President and Chief Financial Officer, the
terms of which were approved by the Board. Pursuant to such employment
agreement, Ms. Grayson's base salary was set at $150,000 per annum and she
received options to purchase 220,000 shares of Common Stock at an exercise price
of $2.156 per share. On August 20, 1999 Ms. Grayson was elected to fill a
vacancy on the Board of Directors of the Company. See "-- Employment Agreements"
for more information regarding Ms. Grayson's employment agreement.
The Compensation Committee increased the salaries of the following
executive officers in 1999:David Dawson from $200,000 to $250,000, Margaret
Grayson from $150,000 to $175,000, Steven Mogul from $95,000 to $120,000 and
Robert Kelley from $140,000 to $144,200.
For 1999, Ms. Grayson received a bonus of $17,600 paid in cash in
October, 1999.
Grants of Company stock options are intended to align the interest of
executives, key employees and others with the long-term interests of the
Company's shareholders and to encourage executives and key employees to remain
with the Company. The Board initially authorized the Compensation Committee to
grant stock options to key employees and others under the Company's stock option
plans. Currently, the Board is administering the Company's stock option plans.
In the past, Mr. Chen has recommended, and currently Mr. Dawson recommends, to
the Compensation Committee or the Board levels of stock option grants based upon
the same factors as used for bonus and salary adjustments. Mr. Chen does not
currently hold, nor has he ever been granted, options to purchase the Company's
Common Stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Code"), imposes a limitation on the deductibility of nonperformance-based
compensation in excess of $1 million paid to the Named Executives. Currently, no
executive officer of the Company is paid compensation in excess of $1 million
per year and it is not anticipated that any executive officer will be paid in
excess of $1 million in 2000. As the Company's Compensation Committee is now
reconstituted, the Company's 1998 Incentive Stock Plan and 1996 Incentive Stock
Plan can now provide for awards that can be made in compliance with Section
162(m).
James F. Chen
David D. Dawson
A.L. Giannopoulos
Margaret E. Grayson
William E. Odom
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of March 1999, the members of the Company's Compensation Committee
are A.L. Giannopoulos and William E. Odom.
The Company has adopted a policy providing that all material
transactions (other than compensation arrangements that must be approved by the
Compensation Committee) between the Company and its officers, directors and
other affiliates (i) must be approved by a majority of the disinterested members
of the Board or a committee thereof (following disclosure to the Board of the
material facts of the relationship and the transaction), and (ii) must be on
terms no less favorable to the Company than can be obtained from unaffiliated
third parties.
STOCK PERFORMANCE GRAPH
The following graph compares the change from the date the Company's
Common Stock began trading on the Nasdaq National Market in the Company's total
return on its Common Stock with (a) the change in the total return on the stocks
included in the CRSP Total Return Index for the Nasdaq Stock Market (U.S.) and
(b) the change in the total return on the stocks included in the Company's peer
group (4 companies) assuming an initial investment of $100 on October 24, 1996,
the date the Common Stock began trading on Nasdaq. All of these total returns
are computed assuming the reinvestment of dividends at the frequency with which
dividends were paid during the period. The Common Stock price performance shown
below should not be viewed as being indicative of future performance. The
companies currently in the peer group are Check Point Software Technologies
Ltd., RSA Security, Inc., Cylink Corp., and AXENT Technologies, Inc. Security
Dynamics Technologies changed its name to RSA Security Inc. in 1999.
<TABLE>
<CAPTION>
SOURCES: NASDAQ 10/24/96 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C>
V-ONE CORP $100.00 $145.00 $70.00 $59.38 $117.50
NASDAQ TOTAL RETURN INDEX $100.00 $105.63 $129.43 $182.38 $329.49
PEER GROUP (4 COMPANIES) $100.00 $84.34 $99.62 $95.99 $253.33
</TABLE>
[GRAPH APPEARS HERE]
13
<PAGE>
EMPLOYMENT AGREEMENTS
On November 21, 1997, the Company entered into an employment agreement
with David D. Dawson, its Chairman, President and Chief Executive Officer. The
employment agreement has a two-year term and is automatically renewed for an
additional one-year term on such second anniversary date and each successive
anniversary date thereafter. However, either the Company or Mr. Dawson may serve
written notice of its or his intention not to renew not less than 90 days prior
to the then current termination date of the agreement, in which case the
employment agreement terminates on such termination date.
Mr. Dawson's salary was initially set at $200,000 per year, subject to
increase by the Board. The employment agreement also provides that Mr. Dawson is
eligible for a cash bonus in the amount of 40% of his base salary if he meets
certain performance objectives; the bonus may be increased if the objectives are
exceeded.
If the Company terminates Mr. Dawson's employment for cause, he is not
entitled to any severance payment. Mr. Dawson is deemed to be terminated for
cause if, in the reasonable determination of the Board, he, among other things,
is convicted of a felony or a crime involving moral turpitude, participates in a
fraud against the Company, or willfully discloses the Company's trade secrets or
other confidential information to any of its competitors. If the Company
terminates Mr. Dawson's employment other than for cause (or fails to renew the
employment agreement other than for cause), Mr. Dawson's agreement, as amended
on July 1, 1999 includes in his severance package any projected bonus he would
receive in addition to a severance payment equal to one year's salary, as
adjusted, for the period beginning on the termination date. In addition, all
options and warrants previously granted become immediately exercisable if his
employment is terminated other than for cause. If Mr. Dawson's employment with
the Company terminates, he has agreed to resign as a director.
On August 1, 1998, the Company entered into an employment agreement
with Robert F. Kelly, its Vice President of Engineering. Mr. Kelly's employment
agreement had an initial term of two years, subject to automatic renewal for
additional two-year periods. Mr. Kelly's salary was initially set at $140,000
per year and he was also eligible to receive a cash bonus in the amount of 20%
of his base salary if he met certain performance objectives. If the Company
terminates Mr. Kelley's employment other than for cause, or fails to renew other
than for cause, Mr. Kelley is entitled to severance of 6 months base pay plus
any projected bonus he would receive. If Mr. Kelley is terminated without cause,
the option for the year in which such termination occurs shall fully vest. In
October, 1999, Mr. Kelley's position was changed to Vice President Business
Development. Mr. Kelley is no longer an executive officer of the Company.
On July 1, 1999, the Company entered into an employment agreement with
Margaret E. Grayson, its Senior Vice President and Chief Financial Officer. The
employment agreement has a one-year term and is automatically renewed for an
additional one-year term on the anniversary date and each successive anniversary
date thereafter. However, either the Company or Ms. Grayson may serve written
notice of its or her intention not to renew not less than 90 days prior to the
expiration of the then current term,, in which case the employment agreement
terminates on such termination date.
Ms. Grayson's salary was initially set at $150,000 per year, subject to
increase by the Board. The employment agreement also provides that Ms. Grayson
is eligible for a cash bonus in the amount of 40% of her base salary if she
meets certain performance objectives; the bonus may be increased if the
objectives are exceeded.
If the Company terminates Ms. Grayson's employment for cause, she is
not entitled to any severance payment. Ms. Grayson is deemed to be terminated
for cause if, in the reasonable determination of the Board, she, among other
things, is convicted of a felony or a crime involving moral turpitude,
participates in a fraud against the Company, or willfully discloses the
Company's trade secrets or other confidential information to any of its
competitors. If the Company terminates Ms. Grayson's employment other than for
cause (or fails to renew the employment agreement other than for cause), Ms.
Grayson receives a severance payment equal to one year's salary plus any
projected bonus that would have been paid during that year, and all options
previously granted become immediately exercisable.
14
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the SEC and the Nasdaq, the exchange on which the
Company's Common Stock is listed for trading. Executive officers, directors and
greater than ten-percent shareholders (collectively, the "Reporting Persons")
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such forms to the Company, and
written representations by the Reporting Persons, the Company believes that, for
the year ended December 31, 1999, all Section 16(a) filing requirements
applicable to the Reporting Persons were met, with the following exceptions:
David Dawson had one late Form 4 filing and Margaret E. Grayson had one late
Form 4 filing.
APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 2)
The Audit Committee recommended and the Board approved the appointment
of Ernst & Young LLP ("E & Y") as independent public accountants for the year
2000, subject to shareholder ratification.
Effective September 30, 1999, the Company dismissed the accounting firm
of PricewaterhouseCoopers LLP ("PWC") as the Company's independent accountants.
On September 30, 1999, the Audit Committee of the Company's board of
directors recommended and the full board of directors approved the appointment
of E & Y to act as its auditors for the fiscal year ended December 31, 1999. The
Company did not consult E & Y regarding the application of accounting principals
to a specified transaction, whether contemplated or proposed, or the type of
audit opinion that might be rendered on the Company's financial statements, or
any matter that was the subject of a disagreement or a reportable event (as
contemplated by Item 304 of regulation S-K).
The reports of PWC on the financial statements of the Company for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principle except that (i) its report on the financial statements for the year
ended December 31, 1998 included an explanatory paragraph regarding the
Company's ability to continue as a going concern and (ii) its report on the
financial statements for the year ended December 31, 1998 included an
explanatory paragraph regarding the restatement of the financial statements as
discussed in the notes thereto.
The decision to change auditors was recommended by the Audit Committee
of the Board and was approved by unanimous written consent of the Board on
September 30, 1999.
During the Company's two most recent fiscal years there were no
disagreements with PWC on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PWC, would have caused it
to make a reference to the subject matter of the disagreements in connection
with its report on the financial statements. There is no information or event
required to be reported herein pursuant to Subsection (a) (1) (v) of Rule 304 of
Regulation S-K.
The Company has requested, and PWC has provided a letter addressed to
the Securities and Exchange Commission stating whether it agrees with the
statements made by the Company in this filing, a copy of which is attached as
Exhibit 16 to the Company's Form 8-K dated October 7, 1999. PWC's letter
indicates that they are in agreement with the statements contained in this
filing insofar as such statements concern PWC.
15
<PAGE>
Representatives of E & Y will be present at the Annual Meeting where
they will have the opportunity to make a statement if they desire to do so and
where they will be available to respond to any appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR ENDING DECEMBER
31, 2000.
APPROVAL OF INCREASE IN AUTHORIZED SHARES
OF COMMON STOCK
FROM 33,333,333 TO 50,000,000 SHARES
(PROPOSAL 3)
The Board of Directors has unanimously adopted and recommends that you
consider and approve an amendment to Article IV of our Amended and Restated
Certificate of Incorporation. This amendment would increase the total number of
shares of authorized Common Stock from 33,333.333 to 50,000,000. We consider it
desirable to have the flexibility to authorize and issue an additional amount of
Common Stock without further shareholder action, unless we are required to
obtain shareholder approval by applicable law or stock exchange regulations.
This will enable us to act quickly, if we have the opportunity to make an
acquisition or raise capital on terms that we deem to be in the best interest of
the Company and its shareholders. If the shareholders approve the amendment, the
first paragraph of Article IV of the Certificate would be replaced in its
entirety by the following:
The Corporation is authorized to issue two classes of
shares to be designated Common Stock and Preferred Stock,
respectively. The total number of shares of stock the
Corporation shall have authority to issue is sixty-three
million three hundred thirty three thousand three hundred and
thirty-three shares; fifty million (50,000,000) shares of
Common Stock with par value of $0.001 per share, and thirteen
million three hundred thirty-three thousand three hundred
thirty-three (13,333,333) shares of Preferred Stock with par
value of $0.001 per share.
THE BOARD RECOMMENDS THAT YOU APPROVE AN AMENDMENT TO ARTICLE IV OF OUR
RESTATED CERTIFICATE OF INCORPORATION.
APPROVAL OF AMENDMENT TO 1998 INCENTIVE STOCK PLAN
(PROPOSAL 4)
At the February 18, 2000 meeting of the Board, the Board approved an
amendment to the Company's 1998 Plan to increase the maximum number of shares of
Common Stock reserved for issuance under the 1998 Plan from 2.5 million to 5
million. The Board approved this amendment to increase the number of shares
subject to the 1998 Plan in order to allow it to continue to provide long-term
incentives to employees and consultants to the Company. A summary of the 1998
Plan follows.
SUMMARY
The Board adopted the 1998 Plan on February 2, 1998. The Company is
soliciting shareholder approval of the amendment to the 1998 Plan so that, among
other reasons, the 1998 Plan complies with the requirements of Section 162(m) of
the Code and the Company's ability to deduct compensation paid to executive
officers under the 1998 Plan is preserved. The amendment to the 1998 Plan will
not be effective unless and until it is approved by the Company's shareholders.
PURPOSE
The purpose of the 1998 Plan is to advance the interest of the Company
and its subsidiaries by encouraging and providing for the acquisition of an
equity interest in the Company by non-employee directors, officers, key
16
<PAGE>
employees and consultants through the grant of awards with respect to shares of
Common Stock. The 1998 Plan enables the Company to retain the services of
non-employee directors, officers, key employees and consultants upon whose
judgment, interest, and special effort the successful conduct of its operations
are largely dependent and to complete effectively with other enterprises for the
services of non-employee directors, officers, key employees and consultants as
may be needed for the continued improvement of its business. The consideration
for issuance of the awards is the continued services of the non-employee
directors, officers, key employees and consultants to the Company and its
subsidiaries. The 1998 Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
AWARDS AVAILABLE UNDER THE 1998 PLAN
Pursuant to the 1998 Plan, 2,500,000 shares of Common Stock were
reserved for future issuance by the Company to non-employee directors, officers,
key employees and consultants through the grant of incentive stock options and
non-qualified stock options to purchase Common Stock of the Company and
restricted share awards. Such shares of Common Stock may be newly issued or
Treasury shares and have an aggregate market value of approximately $14.375
million based on the price per share as of February 29, 2000 of $5.75. As of
February 29, 2000, 2,405,500 options were granted under the 1998 Plan.
In the event the purchase price of an option is paid or tax or
withholding payments relating to an award are satisfied, in whole or in part
through the delivery of shares of Common Stock, a participant is deemed to have
received an award with respect to those shares of Common Stock. The Common Stock
covered by any unexercised portions of terminated options, shares of Common
Stock forfeited and shares of Common Stock subject to awards that are otherwise
surrendered by a participant without receiving any payment or other benefit with
respect thereto may again be subject to new awards under the 1998 Plan.
Awards to officers, key employees and consultants under the 1998 Plan
may take the form of both stock options and restricted share awards; however, no
employee may receive awards with respect to more than 500,000 shares of Common
Stock under the 1998 Plan. As of As of February 29, 2000, approximately 69
officers and employees and two consultants were eligible to receive awards under
the 1998 Plan. Awards under the 1998 Plan may be granted alone or in combination
with other awards. Non-employee directors may only receive non-discretionary
stock option awards (described in more detail below) under the 1998 Plan.
1998 PLAN ADMINISTRATION
The 1998 Plan may be administered by a committee of the Board
("Committee") or the Board. If the Committee administers the 1998 Plan, the
Committee must be composed of at least two directors of the Company, each of
whom is a "non-employee director" as defined in Rule 16b-3, as promulgated by
the SEC under the Exchange Act, and an "outside director" within the meaning of
Section 162(m) of the Code. If, however, at least two of the Company's directors
are not both "non-employee directors" and "outside directors," the Plan is
administered by the Board. The 1998 Plan is currently administered by the Board.
The Committee or the Board determines, among other things, the
officers, key employees and consultants who are eligible for and granted awards,
determines the amount and type of awards, determines the duration of the options
(which may not exceed ten years), establishes rules and guidelines relating to
the 1998 Plan, establishes, modifies and terminates terms and conditions of
awards and takes such other action as may be necessary for the proper
administration of the 1998 Plan.
STOCK OPTIONS
Stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Code and stock options that do not meet such requirements
("Non-Qualified Options") are both available for grant under the 1998 Plan. The
term of each option is determined by the Committee or the Board, but no option
may be exercisable more than ten years after the date of grant. Options are
subject to restrictions on exercise, such as exercise in periodic installments,
as determined by the Committee or the Board. The exercise price for an Incentive
Stock Option must be at least 100% of the fair market value of a share of Common
17
<PAGE>
Stock on the date of grant of such option (110% in the case of Incentive Stock
Options granted to a shareholder who owns in excess of 10% of the Company's
voting stock). There is no minimum exercise price for Non-Qualified Options
(other than par value per share). The exercise price is payable in cash, in
shares of Common Stock owned by a participant for at least six months, with
respect to Non-Qualified Options only, a promissory note payable to the Company,
or by cashless exercise with a participant's broker, as determined by the
Committee or the Board.
Stock options granted under the 1998 Plan are not transferable except
by will or the laws of descent and distribution. Unless otherwise provided in
the relevant option agreement, options may only be exercisable within three
months of any termination of employment (and then only to the extent the option
was exercisable on the date of termination of employment) other than termination
for "cause" or termination due to death or disability. Unless otherwise provided
in the relevant option agreement, options may be exercisable in full (unless
previously exercised) by a participant or beneficiary, as the case may be,
within one year of a termination of employment by reason of death or disability.
If a participant's employment is terminated for "cause," his or her options will
no longer be exercisable after the date of such termination of employment unless
the option agreement provides otherwise. In no event, however, may an option be
exercised after the end of its term.
The Committee or the Board may provide that, if a participant
surrenders already owned shares of Common Stock in full or partial payment of an
option, then, concurrent with such surrender, the participant, subject to the
availability of shares of Common Stock under the 1998 Plan, will be granted a
new Non-Qualified Option (a "Reload Option") covering a number of shares of
Common Stock equal to the number so surrendered. A Reload Option may be granted
in connection with the exercise of an option that is itself a Reload Option.
Each Reload Option will have the same expiration date as the original option and
an exercise price equal to the fair market value of the Company's shares of
Common Stock on the date of grant of the Reload Option. A Reload Option is
exercisable immediately or at such time or times as the Committee or Board
determines and will be subject to such other terms and conditions as the
Committee or the Board may prescribe.
RESTRICTED SHARES
The Committee or the Board may award restricted shares to a
participant. Such a grant gives a participant the right to receive shares of
Common Stock subject to a risk of forfeiture based upon certain conditions. The
forfeiture restrictions on the shares of Common Stock may be based upon
performance standards, length of service, or other criteria as the Committee or
the Board may determine. Until all restrictions are satisfied, lapsed, or
waived, the Company will maintain control over the restricted shares but the
participant will be able to vote the shares of Common Stock and generally will
be entitled to dividends on the shares of Common Stock. Upon termination of
employment, the participant generally forfeits the right to the shares of Common
Stock to the extent the applicable performance standards, length of service
requirements or other measurement criteria have not been met.
NON-EMPLOYEE DIRECTOR OPTIONS
The 1998 Plan provides for the automatic grant of a Non-Qualified
Option to purchase 10,000 shares of Common Stock to each non-employee director
on the earlier of (a) the first date he or she is elected as such by the
Company's shareholders and (b) the date the 1998 Plan is approved by the holders
of Common Stock. In addition, if a non-employee director receives, after the
effective date of the 1998 Plan, an option ("1996 Plan Option") to purchase
shares of Common Stock under the 1996 Plan, the number of shares subject to the
option granted under the 1998 Plan will be reduced by the number of shares
covered by the 1996 Plan Option.
The option price of a non-employee director option granted under the
1998 Plan is the fair market value of a share of Common Stock on the date of
grant of such option. All such options have a five-year term and are exercisable
in full on the date of grant.
If a non-employee director's service with the Company terminates by
reason of death, his or her option may be exercised for a period of one year
from the date of death or until the expiration of the option, whichever is
shorter. If a non-employee director's service with the Company terminates other
than by reason of death, his or her option may be exercised for a period of
three months from the date of such termination, or until the expiration of the
stated term of the option, whichever is shorter.
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CHANGE IN CONTROL
Upon the occurrence of a change in control of the Company, all options
become immediately exercisable, to the extent not previously exercised, and all
restrictions on restricted shares lapse. A change in control includes:
(1) approval of the Company's shareholders of a consolidation or merger
of the Company with any third party, unless the Company is the entity surviving
such merger or consolidation;
(2) approval of the Company's shareholders of a transfer of all or
substantially all of the assets of the Company to a third party or a complete
liquidation or dissolution of the Company;
(3) a third party (other than James F. Chen and his affiliates or
Advantage Fund Limited, Advantage Fund II Ltd. and/or their affiliates),
directly or indirectly, through one or more subsidiaries or transactions or
acting in concert with one or more persons or entities: (a) acquiring any
combination of beneficial ownership of the Company's voting stock and
irrevocable proxies representing more than 20% of the Company's voting stock,
(b) acquiring the ability to control in any manner the election of a majority of
the directors of the Company or (c) acquiring the ability to directly or
indirectly exercise a controlling influence over the management or policies of
the Company;
(4) any election has occurred of persons to the Board that causes a
majority of such Board to consist of persons other than (a) persons who were
members of the Board on February 2, 1998 ("Effective Date") and/or (b) persons
who were nominated for election as members of the Board by the Board (or a
committee of the Board) at a time when the majority of the Board (or of such
committee) consisted of persons who were members of the Board on the Effective
Date; or
(5) a determination made by the SEC or any similar agency having
regulatory control over the Company that a change in control, as defined in the
securities laws or regulations then applicable to the Company, has occurred.
TERMINATION AND AMENDMENT
The 1998 Plan will remain in effect until February 2, 2008 unless
terminated earlier by the Board. The Board may amend or terminate the 1998 Plan
and the Committee or the Board may amend or alter the terms of awards under the
1998 Plan but no such action shall affect or in any way impair the rights of a
participant under any award previously granted without such participant's
consent. No amendment may be made, without shareholder approval, that would
require shareholder approval under any applicable law or rule unless the Board
determines that compliance with such law or rule is no longer desired.
ANTIDILUTION PROVISIONS
The number of shares of Common Stock authorized to be issued under the
1998 Plan and subject to outstanding awards (and the purchase or exercise price
thereof), the number of non-employee director options and the per employee limit
on awards will be adjusted to prevent dilution or enlargement of rights in the
event of any stock dividend, stock split, combination or exchange of shares,
merger, consolidation or other change in capitalization with a similar
substantive effect upon the 1998 Plan or the awards.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of awards under the 1998 Plan based upon current federal income tax
laws.
A participant is not generally subject to federal income tax either at
the time of grant or at the time of exercise of an Incentive Stock Option.
However, upon exercise, the difference between the fair market value of the
shares of Common Stock and the exercise price may be includable in the
participant's alternative minimum taxable income. If a participant does not
dispose of shares of Common Stock acquired through the exercise of an Incentive
Stock Option within one year after their receipt and within two years after the
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date of the option's grant, any gain or loss upon the disposition will be taxed
as long-term capital gain or loss.
The Company will not receive any tax deduction on the exercise of an
Incentive Stock Option or, if the holding requirements are met, on the sale of
the underlying shares of Common Stock. If a disqualifying disposition occurs
(I.E., one of the holding requirements is not met), the participant will be
treated as receiving compensation subject to ordinary income tax in the year of
the disqualifying disposition, and the Company will be entitled to a deduction
for compensation expense in an amount equal to the amount the participant
includes in income. In such event, the amount includable in the participant's
income (and deductible by the Company) generally will be equal to the difference
between the fair market value of the shares of Common Stock at the time of
exercise and the exercise price or, if less, the gain the participant realized
on the sale of the shares. Any appreciation in value after the time of exercise
will be taxed as long-term or short-term capital gain (depending on how long the
shares are held after exercise) and will not result in any additional deduction
by the Company.
There are no federal income tax consequences to participants at the
time of grant of a Non-Qualified Option. Upon exercise of the option, the
participant must pay tax on ordinary income equal to the difference between the
exercise price and the fair market value of the underlying shares on the date of
exercise. The Company will receive a commensurate tax deduction at the time of
exercise. Any appreciation in value after the time of exercise will be taxed
upon the disposition of the shares as long-term or short-term capital gain
(depending on how long the shares are held after exercise), and will not result
in any additional deduction by the Company. Non-employee director options will
receive the same federal income tax treatment as other Non-Qualified Options.
Except as described below, a grant of restricted shares does not
constitute a taxable event for either a participant or the Company. However, the
participant will be subject to tax, at ordinary income rates, when any
restrictions on ownership of the shares of Common Stock lapse. The amount
subject to tax will be equal to the fair market value of the shares at the time
the restrictions lapse reduced by the amount (if any) paid for such shares by
the participant. The Company will be entitled to take a commensurate deduction
at that time.
A participant may elect to recognize taxable ordinary income at the
time restricted shares are awarded in an amount equal to the fair market value
of the shares of Common Stock at the time of grant, determined without regard to
any forfeiture restrictions. If such an election is made, the Company will be
entitled to a deduction at that time in the same amount. Future appreciation on
the shares of Common Stock will be taxed when the shares are sold as short-term
or long-term capital gain (depending on how long the shares are held after
exercise) and will not result in any additional deduction by the Company. If,
after making such an election, the shares of Common Stock are forfeited, the
participant will be unable to claim a deduction.
APPROVAL OF THE AMENDMENT OF THE 1998 INCENTIVE STOCK PLAN REQUIRES THE
AFFIRMATIVE VOTE OF THE MAJORITY OF THE COMPANY'S SHARES PRESENT, OR
REPRESENTED, AND ENTITLED TO VOTE. CONTINUATION OF THE 1998 INCENTIVE STOCK
PLAN, AS AMENDED, WILL BE SUBJECT TO THE APPROVAL OF THE SHAREHOLDERS OF THIS
PROPOSAL 4.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE 1998 INCENTIVE STOCK PLAN.
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ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, WITHOUT EXHIBITS,
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 ACCOMPANIES THIS PROXY STATEMENT.
UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE TO ANY SHAREHOLDER, FREE OF
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K, WITHOUT EXHIBITS, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS FOR COPIES OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K SHOULD BE DIRECTED TO MARGARET E. GRAYSON,
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, V-ONE CORPORATION, 20251
CENTURY BOULEVARD, SUITE 300, GERMANTOWN, MARYLAND 20874.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 2001 Annual
Meeting of Shareholders must be received by the Company no later than December
7, 2000 to be considered for inclusion in the Company's Proxy Statement and form
of proxy relating to such meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no
business other than that described herein that will be presented for
consideration at the Annual Meeting. If, however, any other business shall
properly come before the Annual Meeting, the proxy holders intend to vote the
proxies as determined by a majority of the Board.
By Order of the Board of Directors
/s/ Joseph D. Gallagher
JOSEPH D. GALLAGHER
SECRETARY
April 7, 2000
APPENDIX A - 1998 Amended Incentive Stock Plan
APPENDIX B - Form of Proxy
<PAGE>
Appendix A
V-ONE CORPORATION
1998 AMENDED INCENTIVE STOCK PLAN
ARTICLE I. PURPOSE, ADOPTION AND TERM OF THE PLAN
1.01 PURPOSE. The purpose of the V-ONE Corporation 1998 Amended Incentive
Stock Plan (hereinafter referred to as the "Plan") is to advance the interests
of the Company (as hereinafter defined) and its Subsidiaries (as hereinafter
defined), if any, by encouraging and providing for the acquisition of an equity
interest in the Company by non-employee directors, officers, key employees and
consultants through the grant of awards with respect to shares of Common Stock
(as hereinafter defined). The Plan will enable the Company to retain the
services of non-employee directors, officers, key employees and consultants upon
whose judgment, interest, and special effort the successful conduct of its
operations is largely dependent and to compete effectively with other
enterprises for the services of non-employee directors, officers, key employees
and consultants as may be needed for the continued improvement of its business.
1.02 ADOPTION AND TERM. The Plan shall become effective on February 2,
1998 ("Effective Date"), subject to the approval of a simple majority of the
holders of Voting Stock (as hereinafter defined) represented, by person or by
proxy, and entitled to vote at an annual or special meeting of the holders of
Voting Stock. The Plan shall terminate on February 2, 2008, or such earlier date
as shall be determined by the Board (as hereinafter defined); PROVIDED, HOWEVER,
that, in the event the Plan is not approved by a simple majority of the holders
of Voting Stock at or before the Company's 1998 annual meeting of holders of
Voting Stock, the Plan shall terminate on such date and any Awards (as
hereinafter defined) made under the Plan prior to such date shall be void and of
no force and effect.
ARTICLE II. DEFINITIONS
For purposes of the Plan, capitalized terms shall have the following
meanings:
2.01 "Award" means (a) any grant to an Employee or a Consultant
Participant of any one or a combination of Non-Qualified Stock Options or
Incentive Stock Options described in Article VI, or Restricted Shares described
in Article VII, or (b) any grant to a Non-Employee Director of a Non-Employee
Director Option described in Article VIII.
2.02 "Award Agreement" means a written agreement between the Company and a
Participant or a written acknowledgment from the Company specifically setting
forth the terms and conditions of an Award granted to a Participant under the
Plan.
2.03 "Beneficiary" means an individual, trust or estate who or that, by
will or the laws of descent and distribution, succeeds to the rights and
obligations of the Participant under the Plan and an Award Agreement upon the
Participant's death.
2.04 "Board" means the Board of Directors of the Company.
2.05 "Cause" means, with respect to an Employee Participant or a
Consultant Participant, termination for, as determined by the Committee in its
sole and absolute discretion, (i) dishonest or fraudulent conduct relating to
the Company or any of its Subsidiaries or their businesses; (ii) conviction of
any felony that involves moral turpitude or otherwise reflects on the Company or
any of its Subsidiaries in a significantly adverse way; or (iii) gross neglect
by the Participant in the performance of his or her duties as an employee or a
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consultant, or any material breach by a Participant under any employment
agreement or consulting agreement with the Company or any of its Subsidiaries.
2.06 "Change in Control" means the occurrence, after the Effective Date,
of any of the following events, directly or indirectly or in one or more series
of transactions:
(i) Approval of the Company's shareholders of a consolidation or
merger of the Company with any Third Party, unless the Company is the
entity surviving such merger or consolidation;
(ii) Approval of the Company's shareholders of a transfer of all or
substantially all of the assets of the Company to a Third Party or a
complete liquidation or dissolution of the Company;
(iii) A Third Party (other than James F. Chen and his affiliates or
Advantage Fund Limited, Advantage Fund II Ltd. and/or their affiliates),
directly or indirectly, through one or more subsidiaries or transactions
or acting in concert with one or more persons or entities:
(A) acquires beneficial ownership of more than 20% of the
Voting Stock;
(B) acquires irrevocable proxies representing more than 20% of
the Voting Stock;
(C) acquires any combination of beneficial ownership of Voting
Stock and irrevocable proxies representing more than 20% of the
Voting Stock;
(D) acquires the ability to control in any manner the election
of a majority of the directors of the Company; or
(E) acquires the ability to directly or indirectly exercise a
controlling influence over the management or policies of the
Company;
(iv) any election has occurred of persons to the Board that causes a
majority of the Board to consist of persons other than (A) persons who
were members of the Board on the Effective Date and/or (B) persons who
were nominated for election as members of the Board by the Board (or a
committee of the Board) at a time when the majority of the Board (or of
such committee) consisted of persons who were members of the Board on the
Effective Date; PROVIDED, HOWEVER, that any persons nominated for election
by the Board (or a committee of the Board), a majority of whom are persons
described in clauses (A) and/or (B), or are persons who were themselves
nominated by such Board (or a committee of such Board), shall for this
purpose be deemed to have been nominated by a Board composed of persons
described in clause (A); or
(v) A determination is made by the SEC or any similar agency having
regulatory control over the Company that a change in control, as defined
in the securities laws or regulations then applicable to the Company, has
occurred.
Notwithstanding any provision contained herein, a Change in Control shall not
include any of the above described events if they are the result of a Third
Party's inadvertently acquiring beneficial ownership or irrevocable proxies or a
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combination of both for more than 20% of the Voting Stock, and the Third Party
as promptly as practicable thereafter divests itself of beneficial ownership or
irrevocable proxies for a sufficient number of shares so that the Third Party no
longer has beneficial ownership or irrevocable proxies or a combination of both
for more than 20% of the Voting Stock.
2.07 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto. References to a section of the Code shall
include that section and any comparable section or sections of any future
legislation that amends, supplements, or supersedes said section.
2.08 "Committee" means a committee of the Board as may be appointed, from
time to time, by the Board. The Board may, from time to time, appoint members of
the Committee in substitution for those members who were previously appointed
and may fill vacancies, however caused, in the Committee. The Committee shall be
composed of at least two directors of the Company, each of whom is a
"non-employee director" as defined in Rule 16b-3, as promulgated by the SEC
under the Exchange Act, and an "outside director" within the meaning of Section
162(m). The Committee shall have the power and authority to administer the Plan
in accordance with Article III. If, however, at least two of the Company's
directors are not both "non-employee directors" and "outside directors," the
Plan shall be administered by the Board and the term "Committee" as used herein
shall mean the Board.
2.09 "Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
2.10 "Company" means V-ONE Corporation, a corporation organized under the
laws of the State of Delaware, and its successors.
2.11 "Consultant Participant" means a Participant who is a consultant to
the Company or one of its Subsidiaries.
2.12 "Date of Grant" means the date designated by the Plan or the
Committee as the date as of which an Award is granted, which shall not be
earlier than the date on which the Committee approves the granting of such
Award.
2.13 "Disability" means any physical or mental injury or disease of a
permanent nature that renders an Employee or a Consultant Participant incapable
of meeting the requirements of the employment or other work that the Employee or
Consultant Participant performed immediately before that disability commenced.
The determination of whether an Employee or a Consultant Participant is disabled
and when an Employee or a Consultant Participant becomes disabled shall be made
by the Committee in its sole and absolute discretion.
2.14 "Disability Date" means the date which is six months after the date
on which an Employee or a Consultant Participant is first absent from active
employment or work with the Company due to a Disability.
2.15 "Employee Participant" means a Participant who is an employee of the
Company or one of its Subsidiaries.
2.16 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
2.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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2.18 "Fair Market Value" of a share of Common Stock means, as of any given
date, the closing sales price of a share of Common Stock on such date on the
principal national securities exchange on which the Common Stock is then traded
or, if the Common Stock is not then traded on a national securities exchange,
the closing sales price or, if none, the average of the bid and asked prices of
the Common Stock on such date as reported on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq"); PROVIDED, HOWEVER,
that, if there were no sales reported as of such date, Fair Market Value shall
be computed as of the last date preceding such date on which a sale was
reported; PROVIDED, FURTHER, that, if any such exchange or quotation system is
closed on any day on which Fair Market Value is to be determined, Fair Market
Value shall be determined as of the first date immediately preceding such date
on which such exchange or quotation system was open for trading. In the event
the Common Stock is not admitted to trade on a securities exchange or quoted on
Nasdaq, the Fair Market Value of a share of Common Stock as of any given date
shall be as determined by the Committee in its sole and absolute discretion,
which determination may be based on, among other things, the opinion of one or
more independent and reputable appraisers qualified to value companies in the
Company's line of business.
2.19 "Incentive Stock Option" means an Option designated as an incentive
stock option and that meets the requirements of Section 422 of the Code.
2.20 "Non-Employee Director" means each member of the Board who is not an
employee of the Company or of any of its Subsidiaries.
2.21 "Non-Employee Director Option" means an Option granted in accordance
with Article VIII.
2.22 "Non-Qualified Stock Option" means an Option that is not an Incentive
Stock Option.
2.23 "Option" means any option to purchase Common Stock granted to a
Participant pursuant to Article VI or to a Non-Employee Director pursuant to
Article VIII.
2.24 "Participant" means any employee of or consultant to the Company or
any of its Subsidiaries selected by the Committee to receive an Option under the
Plan in accordance with Article VI and/or Restricted Shares under the Plan in
accordance with Article VII and, solely to the extent provided in Article VIII,
any Non-Employee Director.
2.25 "Plan" means the V-ONE Corporation 1998 Incentive Stock Plan as set
forth herein, and as the same may be amended from time to time.
2.26 "Reload Option" shall have the meaning set forth in Section 6.03(e)
of the Plan.
2.27 "Restricted Shares" means shares of Common Stock subject to
restrictions imposed in connection with Awards granted under Article VII.
2.28 "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under Section 16
of the Exchange Act and any successor rule.
2.29 "SEC" means the Securities and Exchange Commission.
2.30 "Section 162(m)" means Section 162(m) of the Code and the regulations
thereunder.
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2.31 "Subsidiary" means a company more than 50% of the equity interests of
which are beneficially owned, directly or indirectly, by the Company.
2.32 "Ten Percent Shareholder" means a Participant who, at the time of
grant of an Option, owns (or is deemed to own under Section 424(d) of the Code)
more than 10% of the Voting Stock.
2.33 "Termination of Employment" means, with respect to an Employee
Participant, the voluntary or involuntary termination of a Participant's
employment with the Company or any of its Subsidiaries for any reason,
including, without limitation, death, Disability, retirement or as the result of
the sale or other divestiture of the Participant's employer or any similar
transaction in which the Participant's employer ceases to be the Company or one
of its Subsidiaries. Whether entering military or other government service shall
constitute Termination of Employment, and whether a Termination of Employment is
a result of Disability, shall be determined in each case by the Committee in its
sole and absolute discretion. Termination of Employment means, with respect to a
consultant, termination of his or her services as a consultant to the Company or
one of its Subsidiaries.
2.34 "Third Party" includes a single person or a group of persons or
entities acting in concert not wholly owned directly or indirectly by the
Company.
2.35 "Voting Stock" means the classes of stock of the Company entitled to
vote generally in the election of directors of the Company.
ARTICLE III. ADMINISTRATION
3.01 COMMITTEE. The Plan shall be administered by the Committee, which
shall have exclusive and final authority in each determination, interpretation,
or other action affecting the Plan and its Participants. The Committee shall
have the sole and absolute discretion to interpret the Plan, to establish and
modify administrative rules for the Plan, to select the officers, other key
employees and consultants to whom Awards may be granted, to determine the terms
and provisions of the respective Award Agreements (which need not be identical),
to determine all claims for benefits under the Plan, to impose such conditions
and restrictions on Awards as it determines appropriate, to determine whether
the shares offered with respect to an Award will be treasury shares or will be
authorized but previously unissued shares, and to take such steps in connection
with the Plan and Awards granted hereunder as it may deem necessary or
advisable. No action of the Committee will be effective if it contravenes or
amends the Plan in any respect.
3.02 ACTIONS OF THE COMMITTEE. Except when the "Committee" is the "Board"
in the circumstance described on the last sentence of Section 2.08, all
determinations of the Committee shall be made by a majority vote of its members.
Any decision or determination reduced to writing and signed by all of the
members shall be fully as effective as if it had been made at a meeting duly
called and held. The Committee shall also have express authorization to hold
Committee meetings by conference telephone, or similar communication equipment
by means of which all persons participating in the meeting can hear each other.
ARTICLE IV. SHARES OF COMMON STOCK
4.01 NUMBER OF SHARES OF COMMON STOCK ISSUABLE. Subject to adjustments as
provided in Section 9.05, 5,000,000 shares of Common Stock shall be available
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for Awards granted under the Plan. The Common Stock to be offered under the Plan
shall be authorized and unissued Common Stock, or issued Common Stock that shall
have been reacquired by the Company and held in its treasury.
4.02 CALCULATION OF NUMBER OF SHARES OF COMMON STOCK AWARDED TO ANY
PARTICIPANT. In the event the purchase price of an Option is paid, or tax or
withholding payments relating to an Award are satisfied, in whole or in part
through the delivery of shares of Common Stock, a Participant will be deemed to
have received an Award with respect to those shares of Common Stock.
4.03 SHARES OF COMMON STOCK SUBJECT TO TERMINATED AWARDS. The Common Stock
covered by any unexercised portions of terminated Options, shares of Common
Stock forfeited as provided in Section 7.02(a) and shares of Common Stock
subject to Awards that are otherwise surrendered by the Participant without
receiving any payment or other benefit with respect thereto may again be subject
to new Awards under the Plan.
ARTICLE V. PARTICIPATION
5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall include such
officers, other key employees of and consultants to the Company or its
Subsidiaries, whether or not directors of the Company, as the Committee, in its
sole and absolute discretion, may designate from time to time. In making such
designation, the Committee may take into account the nature of the services
rendered by the officers, key employees and consultants, their present and
potential contributions to the success of the Company, and such other factors as
the Committee, in its sole and absolute discretion, may deem relevant. The
Committee's designation of a Participant in any year shall not require the
Committee to designate such person to receive Awards in any other year. The
Committee shall consider such factors as it deems pertinent in selecting
Participants and in determining the type and amount of their respective Awards.
A Participant may hold more than one Award granted under the Plan. During the
term of the Plan, no Employee Participant may receive Awards with respect to
more than 500,000 shares of Common Stock.
Non-Employee Directors shall receive Non-Employee Director Options in
accordance with Article VIII, the provisions of which are automatic and
non-discretionary in operation. Non-Employee Directors shall not be eligible to
receive any other Awards under the Plan unless they are no longer Non-Employee
Directors on the Date of Grant of such Awards.
ARTICLE VI. STOCK OPTIONS
6.01 GRANT OF OPTION. Any Option granted under this Article VI shall have
such terms as the Committee may, from time to time, approve, and the terms and
conditions of Options need not be the same with respect to each Participant.
Under this Article VI, the Committee may grant to any Employee or Consultant
Participant one or more Incentive Stock Options, Non-Qualified Stock Options or
both types of Options; PROVIDED, HOWEVER, that Incentive Stock Options may only
be granted to Employee Participants. To the extent any Option does not qualify
as an Incentive Stock Option (whether because of its provisions, the time or
manner of its exercise or otherwise), that Option or the portion thereof that
does not so qualify shall constitute a separate Non-Qualified Stock Option.
6.02 INCENTIVE STOCK OPTIONS. In the case of any grant of an Incentive
Stock Option, whenever possible, each provision hereof and in any Award
Agreement relating to such Option shall be interpreted to entitle the holder
thereof to the tax treatment afforded by Section 422 of the Code, except (a) in
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connection with the exercise of Options following a Participant's Termination of
Employment, (b) in accordance with a specific determination of the Committee
with the consent of the affected Participant and (c) to the extent that the
operation of Section 9.05 would cause an Option to no longer be entitled to such
treatment. If any provision hereof or that Award Agreement is held not to comply
with requirements necessary to entitle that Option to that tax treatment, then
except as otherwise provided in the preceding sentence: (i) that provision shall
be deemed to have contained from the outset such language as is necessary to
entitle the Option to the tax treatment afforded under Section 422 of the Code;
and (ii) all other provisions hereof and of that Award Agreement remain in full
force and effect. Except as otherwise specified in the first sentence of this
Section 6.02, if any Award Agreement covering an Option the Committee designates
to be an Incentive Stock Option hereunder does not explicitly include any term
required to entitle that Incentive Stock Option to the tax treatment afforded by
Section 422 of the Code, all such terms shall be deemed implicit in the
designation of that Option, and that Option shall be deemed to have been granted
subject to all such terms.
6.03 TERMS OF OPTIONS. Options granted under this Article VI shall be
subject to the following terms and conditions and shall be in such form and
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Common Stock
purchasable under an Option shall be determined by the Committee at the
time of grant but, if the Option is an Incentive Stock Option, the option
price per share shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the Date of Grant; PROVIDED, HOWEVER, that, if an
Incentive Stock Option is granted to a Ten Percent Shareholder, the option
price per share shall be at least 110% of the Fair Market Value of a share
of Common Stock on the Date of Grant and PROVIDED, FURTHER, that, except
as otherwise required under the Code with respect to Incentive Stock
Options and as required by Rule 16b-3 with respect to Options granted to
persons subject to Section 16 of the Exchange Act, no amendment of an
Option shall be deemed to be the grant of a new Option for purposes of
this Section 6.03(a). Notwithstanding the foregoing, the option price per
share of Common Stock of an Option shall never be less than par value per
share.
(b) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after
its Date of Grant; PROVIDED, HOWEVER, that, if an Incentive Stock Option
is granted to a Ten Percent Shareholder, the Option shall not be
exercisable more than five years after its Date of Grant.
(c) EXERCISABILITY. An Award Agreement with respect to Options may
contain such performance targets, waiting periods, exercise dates,
restrictions on exercise (including, but not limited to, a requirement
that an Option is exercisable in periodic installments), and restrictions
on the transfer of the underlying shares of Common Stock, if any, as may
be determined by the Committee at the time of grant. To the extent not
exercised, installments shall cumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, subject to the limitations
set forth in Sections 6.03(b), (g) and (h). If an Option is an Incentive
Stock Option and if required by Section 422 of the Code, the aggregate
Fair Market Value of the shares of Common Stock underlying such Option and
all other incentive stock options granted to the Employee Participant
(determined at the time the Option is granted) that become exercisable in
any one calendar year shall not exceed $100,000.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions that apply under Section 6.03(c) above, Options
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may be exercised in whole or in part at any time during the term of the
Option, by giving written notice of exercise to the Company specifying the
number of shares of Common Stock to be purchased. Such notice shall be
accompanied by payment in full of the purchase price in such form as the
Committee may accept (including payment in accordance with a cashless
exercise program approved by the Committee). If and to the extent the
Committee determines in its sole and absolute discretion at or after
grant, payment in full or in part may also be made in the form of shares
of Common Stock already owned by the Participant (and for which the
Participant has good title, free and clear of any liens or encumbrances)
based on the Fair Market Value of the shares of Common Stock on the date
the Option is exercised; PROVIDED, HOWEVER, that any already owned Common
Stock used for payment must have been held by the Participant for at least
six months. No Common Stock shall be issued on exercise of an Option until
payment, as provided herein, therefor has been made. A Participant shall
generally have the right to dividends or other rights of a stockholder
with respect to Common Stock subject to the Option only when certificates
for shares of Common Stock are issued to the Participant.
(e) RELOAD OPTIONS. The Committee shall have the authority to
specify, at the time of grant or, with respect to Non-Qualified Stock
Options, at or after the time of grant, that an Employee or a Consultant
Participant shall be granted a Non-Qualified Stock Option (a "Reload
Option") in the event such Participant exercises all or a part of an
Option (an "Original Option") by surrendering in accordance with Section
6.03(d) of the Plan already owned shares of Common Stock in full or
partial payment of the purchase price under the Original Option, subject
to the availability of shares of Common Stock under the Plan at the time
of such exercise; PROVIDED, HOWEVER, that no Reload Option shall be
granted to a Non-Employee Director. Each Reload Option shall cover a
number of shares of Common Stock equal to the number of shares of Common
Stock surrendered in payment of the purchase price under such Original
Option, shall have a purchase price per share of Common Stock equal to the
100% of the Fair Market Value of a share of Common Stock on the Date of
Grant of such Reload Option, and shall expire on the stated expiration
date of the Original Option. A Reload Option shall be exercisable at any
time and from time to time after the Date of Grant of such Reload Option
(or, as the Committee in its sole and absolute discretion shall determine,
at or after the Date of Grant, at such time or times as shall be specified
in the Reload Option). Any Reload Option may provide for the grant, when
exercised, of subsequent Reload Options to the extent and upon such terms
and conditions, consistent with this Section 6.03(e), as the Committee in
its sole and absolute discretion shall specify at or after the Date of
Grant of such Reload Option. A Reload Option shall contain such other
terms and conditions, which may include a restriction on the
transferability of the shares of Common Stock received upon exercise of
the Original Option representing at least the after-tax profit received
upon exercise of the Original Option, as the Committee in its sole and
absolute discretion shall deem desirable, and which may be set forth in
rules or guidelines adopted by the Committee or in the Award Agreements
evidencing the Reload Options.
(f) NON-TRANSFERABILITY OF OPTIONS. No Option shall be transferable
by the Participant otherwise than by will or the laws of descent and
distribution.
(g) ACCELERATION OR EXTENSION OF EXERCISE TIME. The Committee, in
its sole and absolute discretion, shall have the right (but shall not in
any case be obligated) to permit purchase of Common Stock subject to any
Option granted to an Employee or a Consultant Participant prior to the
time such Option would otherwise become exercisable under the terms of the
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Award Agreement. In addition, the Committee, in its sole and absolute
discretion, shall have the right (but shall not in any case be obligated)
to permit any Option granted to an Employee or a Consultant Participant to
be exercised after its expiration date, subject, however to the limitation
set forth in Section 6.03(b).
(h) EXERCISE OF OPTIONS UPON TERMINATION OF EMPLOYMENT. The
following provisions apply to Options granted to Employee and Consultant
Participants:
(i) EXERCISE OF VESTED OPTIONS UPON TERMINATION OF
EMPLOYMENT.
(A) TERMINATION. Unless the Committee, in its sole and
absolute discretion, provides for a shorter or longer period
of time in the Award Agreement or a longer period of time in
accordance with Section 6.03(g), upon an Employee or a
Consultant Participant's Termination of Employment other than
by reason of death or Disability, an Employee or a Consultant
Participant may, within three months from the date of such
Termination of Employment, exercise all or any part of his or
her Options as were exercisable on the date of Termination of
Employment if such Termination of Employment is not for Cause.
If such Termination of Employment is for Cause, the right of
the Employee or Consultant Participant to exercise such
Options shall terminate on the date of Termination of
Employment. In no event, however, may any Option be exercised
later than the date determined pursuant to Section 6.03(b).
(B) DISABILITY. Unless the Committee, in its sole and
absolute discretion, provides for a shorter or longer period
of time in the Award Agreement or a longer period of time in
accordance with Section 6.03(g), upon an Employee or a
Consultant Participant's Disability Date, the Employee or
Consultant Participant may, within one year after the
Disability Date, exercise all or a part of his or her Options,
whether or not such Option was exercisable on the Disability
Date, but only to the extent not previously exercised. In no
event, however, may any Option be exercised later than the
date determined pursuant to Section 6.03(b).
(C) DEATH. Unless the Committee, in its sole and
absolute discretion, provides for a shorter or longer period
of time in the Award Agreement or a longer period of time in
accordance with Section 6.03(g), in the event of the death of
an Employee or a Consultant Participant while employed by the
Company or a Subsidiary, the right of the Employee or
Consultant Participant's Beneficiary to exercise the Option in
full (whether or not all or any part of the Option was
exercisable as of the date of death of the Employee or
Consultant Participant, but only to the extent not previously
exercised) shall expire upon the expiration of one year from
the date of the Employee or Consultant Participant's death or
on the date of expiration of the Option determined pursuant to
Section 6.03(b), whichever is earlier.
(ii) EXPIRATION OF UNVESTED OPTIONS UPON TERMINATION OF
EMPLOYMENT. Subject to Sections 6.03(g) and 6.03(h)(i)(B) and (C),
to the extent all or any part of an Option granted to an Employee or
a Consultant Participant was not exercisable as of the date of
Termination of Employment, such right shall expire at the date of
such Termination of Employment. Notwithstanding the foregoing, the
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Committee, in its sole and absolute discretion and under such terms
as it deems appropriate, may permit an Employee or a Consultant
Participant who will continue to render significant services to the
Company or a Subsidiary after his or her Termination of Employment
to continue to accrue service with respect to the right to exercise
his or her Options during the period in which the individual
continues to render such services.
ARTICLE VII. RESTRICTED SHARES
7.01 RESTRICTED SHARE AWARDS. Restricted Shares may be issued either alone
or in addition to other Awards granted under the Plan. The Committee may grant
to any Employee or Consultant Participant an Award of shares of Common Stock in
such number, and subject to such terms and conditions relating to forfeitability
and restrictions on delivery and transfer (whether based on performance
standards, periods of service or otherwise) as the Committee shall establish.
The terms of any Restricted Share Award granted under the Plan shall be set
forth in an Award Agreement, which shall contain provisions determined by the
Committee and not inconsistent with the Plan. The provisions of Restricted Share
Awards need not be the same for each Participant receiving such Awards.
(a) ISSUANCE OF RESTRICTED SHARES. As soon as practicable after the
Date of Grant of a Restricted Share Award by the Committee, the Company
shall cause to be transferred on the books of the Company shares of Common
Stock, registered on behalf of the Participant in nominee form, evidencing
the Restricted Shares covered by the Award, but subject to forfeiture to
the Company retroactive to the Date of Grant if an Award Agreement
delivered to the Participant by the Company with respect to the Restricted
Shares covered by the Award is not duly executed by the Participant and
timely returned to the Company. Each Participant, as a condition to the
receipt of a Restricted Share Award, shall pay to the Company in cash the
par value of a share of Common Stock multiplied by the number of shares of
Common Stock covered by such Restricted Share Award. All shares of Common
Stock covered by Awards under this Article VII shall be subject to the
restrictions, terms and conditions contained in the Plan and the Award
Agreement entered into by and between the Company and the Participant.
Until the lapse or release of all restrictions applicable to an Award of
Restricted Shares, the stock certificates representing such Restricted
Shares shall be held in custody by the Company or its designee. Upon the
lapse or release of all restrictions with respect to an Award as described
in Section 7.01(d), one or more stock certificates, registered in the name
of the Participant, for an appropriate number of shares of Common Stock as
provided in Section 7.01(d), free of any restrictions set forth in the
Plan and the Award Agreement, shall be delivered to the Participant.
(b) SHAREHOLDER RIGHTS. Beginning on the Date of Grant of the
Restricted Share Award and subject to execution of the Award Agreement as
provided in Section 7.01(a), the Participant shall become a shareholder of
the Company with respect to all shares of Common Stock subject to the
Award Agreement and shall have all of the rights of a shareholder,
including, but not limited to, the right to vote such shares of Common
Stock and, except as otherwise determined by the Committee and specified
in the applicable Award Agreement, the right to receive dividends (or
dividend equivalents); PROVIDED, HOWEVER, that any shares of Common Stock
distributed as a dividend or otherwise with respect to any Restricted
Shares as to which the restrictions have not yet lapsed shall be subject
to the same restrictions as such Restricted Shares and shall be held in
custody by the Company as prescribed in Section 7.01(a).
(c) RESTRICTION ON TRANSFERABILITY. None of the Restricted Shares
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may be assigned or transferred (other than by will or the laws of descent
and distribution), pledged or sold prior to lapse or release of the
restrictions applicable thereto.
(d) DELIVERY OF SHARES OF COMMON STOCK UPON RELEASE OF RESTRICTIONS.
Upon expiration or earlier termination of the forfeiture period without a
forfeiture and the satisfaction of or release from any other conditions
prescribed by the Committee, the restrictions applicable to the Restricted
Shares shall lapse. As promptly as administratively feasible thereafter,
subject to the requirements of Section 9.04, the Company shall deliver to
the Participant or, in case of the Participant's death, to the
Participant's Beneficiary, one or more stock certificates for the
appropriate number of shares of Common Stock, free of all such
restrictions, except for any restrictions that may be imposed by law.
7.02 TERMS OF RESTRICTED SHARES.
(a) FORFEITURE OF RESTRICTED SHARES. Subject to Section 7.02(b), all
Restricted Shares shall be forfeited and returned to the Company and all
rights of the Participant with respect to such Restricted Shares shall
terminate unless the Participant continues in the service of the Company
or any Subsidiary of the Company as an employee or consultant, as the case
may be, until the expiration of the forfeiture period for such Restricted
Shares and satisfies any and all other conditions set forth in the Award
Agreement. The Committee, in its sole and absolute discretion, shall
determine the forfeiture period (which may, but need not, lapse in
installments) and any other terms and conditions applicable with respect
to any Restricted Share Award.
(b) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything contained
in this Article VII to the contrary, the Committee may, in its sole and
absolute discretion, waive the forfeiture period and any other conditions
set forth in any Award Agreement under appropriate circumstances
(including the death, Disability or retirement of the Participant or a
material change in circumstances arising after the Date of Grant of an
Award) and subject to such terms and conditions (including forfeiture of a
proportionate number of Restricted Shares) as the Committee shall deem
appropriate, provided that the Participant shall at that time have
completed at least one year of employment or service as a consultant after
the Date of Grant.
ARTICLE VIII. NON-EMPLOYEE DIRECTOR OPTIONS
8.01 GRANT OF NON-EMPLOYEE DIRECTOR OPTIONS. On the earlier to occur of
(a) the date a Non-Employee Director is elected as such for the first time by
the holders of Voting Stock and (b) the date this Plan is approved by a simple
majority of the holders of Voting Stock, each Non-Employee Director shall be
granted a Non-Employee Director Option consisting of an Option to purchase
10,000 shares of Common Stock; PROVIDED, HOWEVER, that (i) directors Charles C.
Chen, Harry S. Gruner and William E. Odom shall each not be eligible to receive
an Option under this Section 8.01, and (ii) if a Non-Employee Director receives,
after the Effective Date of this Plan, an option ("1996 Plan Option") to
purchase shares of Common Stock under the Virtual Open Network Environment
Corporation 1996 Incentive Stock Plan ("1996 Plan"), the number of shares
subject to the Option granted under this Section 8.01 shall be reduced by the
number of shares covered by the 1996 Plan Option. The option price for such
Non-Employee Director Options shall be the Fair Market Value of a share of
Common Stock on the Date of Grant. All such Options shall be designated as
Non-Qualified Stock Options and shall have a five year term. Each such Option
shall be exercisable in full on the Date of Grant of such Option.
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If a Non-Employee Director's service with the Company terminates by reason
of death, any Option held by such Non-Employee Director may be exercised for a
period of one year from the date of death or until the expiration of the Option,
whichever is shorter. If a Non-Employee Director's service with the Company
terminates other than by reason of death, any Option held by such Non-Employee
Director may be exercised for a period of three months from the date of such
termination, or until the expiration of the stated term of the Option, whichever
is shorter. All applicable provisions of the Plan (other than Sections 6.03(g)
and (h)) not inconsistent with this Section 8.01 shall apply to Options granted
to Non-Employee Directors.
ARTICLE IX. TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
9.01 AWARD AGREEMENT. No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement authorized by the Committee expressly granting the Award to such
person and containing provisions setting forth the terms of the Award.
9.02 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the Committee
have the power to grant to a Participant any Award under the Plan that is
contrary to any provisions of the Plan. If any provision of any Award shall
conflict with any of the terms in the Plan as constituted on the Date of Grant
of such Award, the terms in the Plan as constituted on the Date of Grant of such
Award shall control.
9.03 MODIFICATION OF AWARD AFTER GRANT. Except as provided by the
Committee, in its sole and absolute discretion, in the Award Agreement or as
provided in Section 9.05, no Award granted under the Plan to a Participant may
be modified (unless such modification does not materially decrease the value of
the Award) after the Date of Grant except by express written agreement between
the Company and the Participant, provided that any such change (a) shall not be
inconsistent with the terms of the Plan, and (b) shall be approved by the
Committee.
9.04 TAXES. The Company shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any Award. The Company may
defer issuance of Common Stock under an Award unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee or its delegate
and shall be payable by the Participant at such time as the Committee
determines. A Participant shall be permitted to satisfy his or her tax or
withholding obligation by (a) having cash withheld from the Participant's salary
or other compensation payable by the Company or a Subsidiary, (b) the payment of
cash by the Participant to the Company, (c) the payment in shares of Common
Stock already owned by the Participant valued at Fair Market Value, and/or (d)
the withholding from the Award, at the appropriate time, of a number of shares
of Common Stock sufficient, based upon the Fair Market Value of such Common
Stock, to satisfy such tax or withholding requirements. The Committee shall be
authorized, in its sole and absolute discretion, to establish rules and
procedures relating to any such withholding methods it deems necessary or
appropriate (including, without limitation, rules and procedures relating to
elections by Participants who are subject to the provisions of Section 16 of the
Exchange Act to have shares of Common Stock withheld from an Award to meet those
withholding obligations).
9.05 ADJUSTMENTS TO REFLECT CAPITAL CHANGES; CHANGE IN CONTROL.
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(a) RECAPITALIZATION. The number and kind of shares subject to
outstanding Awards, the purchase price or exercise price of such Awards,
the amount of Non-Employee Director Options to be granted on any date
under Article VIII, the limit set forth in the last sentence of the first
paragraph of Section 5.01 of the Plan, and the number and kind of shares
available for Awards subsequently granted under the Plan shall be
appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change
in capitalization with a similar substantive effect upon the Plan or the
Awards granted under the Plan. The Committee shall have the power and sole
and absolute discretion to determine the nature and amount of the
adjustment to be made in each case. In no event shall any adjustments be
made under the provisions of this Section 9.05(a) to any outstanding
Restricted Share Award if an adjustment has been or will be made to the
shares of Common Stock awarded to a Participant in such person's capacity
as a stockholder.
(b) SALE OR REORGANIZATION. After any reorganization, merger, or
consolidation in which the Company is or is not the surviving entity, each
Participant shall, at no additional cost, be entitled upon the exercise of
an Option outstanding prior to such event to receive (subject to any
required action by stockholders), in lieu of the number of shares of
Common Stock receivable on exercise pursuant to such Option, the number
and class of shares of stock or other securities to which such Participant
would have been entitled pursuant to the terms of the reorganization,
merger, or consolidation if, at the time of such reorganization, merger,
or consolidation, such Participant had been the holder of record of a
number of shares of Common Stock equal to the number of shares of Common
Stock receivable on exercise of such Option. Comparable rights shall
accrue to each Participant in the event of successive reorganizations,
mergers, or consolidations of the character described above.
(c) OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After any
reorganization, merger, or consolidation in which the Company shall be a
surviving entity, the Committee may grant substituted Options under the
provisions of the Plan, replacing old options granted under a plan of
another party to the reorganization, merger, or consolidation whose stock
subject to the old options may no longer be issued following such
reorganization, merger, or consolidation. The foregoing adjustments and
manner of application of the foregoing provisions shall be determined by
the Committee in its sole and absolute discretion. Any such adjustments
may provide for the elimination of any fractional shares of Common Stock
that might otherwise become subject to any Options.
(d) CHANGE IN CONTROL. Upon a Change in Control, unless otherwise
specifically prohibited by Rule 16b-3:
(1) Any and all Options shall become exercisable in full, to
the extent not previously exercised, as of the date of the Change in
Control; and
(2) The restrictions on vesting on all Restricted Share Awards
shall be deemed to have satisfied as of the date of the Change in
Control.
(e) EXISTENCE OF AWARDS. The existence of outstanding Awards shall
not affect the right of the Company or its stockholders to make or
authorize any and all adjustments, recapitalizations, reclassifications,
reorganizations and other changes in the Company's capital structure, the
Company's business, any merger or consolidation of the Company, any issue
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of bonds, debentures or preferred stock of the Company, the Company's
liquidation or dissolution, any sale or transfer of all or any part of the
Company's assets or business, or any other corporate act or proceeding,
whether of a similar nature or otherwise.
9.06 SURRENDER OF AWARDS. Any Award granted to a Participant under the
Plan may be surrendered to the Company for cancellation on such terms as the
Committee and holder approve.
9.07 NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT. Except as provided in
Article VIII, no director, employee, consultant or other person shall have any
claim or right to be granted an Award. Neither the Plan nor any action taken
hereunder shall be construed as giving any director, employee or consultant any
right to be retained by the Company or any of its Subsidiaries.
9.08 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Income recognized by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any employee pension benefit plan (as such term
is defined in Section 3(2) of ERISA) or group insurance or other benefit plans
applicable to the Participant that are maintained by the Company or any of its
Subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.
9.09 GOVERNING LAW. The Plan and all determinations made and actions taken
pursuant to the Plan shall be governed by the laws of the State of Delaware
other than the conflict of laws provisions of such laws, and shall be construed
in accordance therewith.
9.10 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Committee.
9.11 COMPLIANCE WITH RULE 16B-3 AND SECTION 162(M). It is intended that
the Plan be applied and administered in compliance with Rule 16b-3 and with
Section 162(m). If any provision of the Plan would be in violation of Section
162(m) if applied as written, such provision shall not have effect as written
and shall be given effect so as to comply with Section 162(m) as determined by
the Committee in its sole and absolute discretion. The Board is authorized to
amend the Plan and the Committee is authorized to make any such modifications to
Award Agreements to comply with Rule 16b-3 and Section 162(m), as they may be
amended from time to time, and to make any other such amendments or
modifications deemed necessary or appropriate to better accomplish the purposes
of the Plan in light of any amendments made to Rule 16b-3 or Section 162(m).
Notwithstanding the foregoing, the Board may amend the Plan so that it (or
certain of its provisions) no longer comply with either or both of Rule 16b-3 or
Section 162(m) if the Board specifically determines that such compliance is no
longer desired and the Committee may grant Awards that do not comply with Rule
16b-3 and/or Section 162(m) if the Committee determines, in its sole and
absolute discretion, that it is in the interest of the Company to do so.
9.12 CAPTIONS. The captions (I.E., all Article and Section headings) used
in the Plan are for convenience only, do not constitute a part of the Plan, and
shall not be deemed to limit, characterize, or affect in any way any provisions
of the Plan, and all provisions of the Plan shall be construed as if no captions
have been used in the Plan.
9.13 SEVERABILITY. Whenever possible, each provision in the Plan and every
Award at any time granted under the Plan shall be interpreted in such manner as
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to be effective and valid under applicable law, but if any provision of the Plan
or any Award at any time granted under the Plan shall be held to be prohibited
by or invalid under applicable law, then (a) such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law, and (b) all other provisions of the Plan
and every other Award at any time granted under the Plan shall remain in full
force and effect.
9.14 LEGENDS. All certificates for Common Stock delivered under the Plan
shall be subject to such transfer restrictions, if any, set forth in the Plan
and such other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the SEC, any stock exchange upon which
the Common Stock is then listed, and any applicable federal or state securities
law. The Committee may cause a legend or legends to be put on any such
certificates to make appropriate references to such restrictions.
9.15 INVESTMENT REPRESENTATION. The Committee may, in its sole and
absolute discretion, demand that any Participant awarded an Award deliver to the
Committee at the time of grant or exercise of such Award a written
representation that the shares of Common Stock subject to such Award are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such written representation by the
Participant prior to the delivery of any shares of Common Stock pursuant to the
grant or exercise of his or her Award shall be a condition precedent to the
Participant's right to purchase or otherwise acquire such shares of Common Stock
by such grant or exercise. The Company is not legally obliged hereunder if
fulfillment of its obligations under the Plan would violate federal or state
securities laws.
9.16 AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Board shall have complete power and authority to
amend the Plan at any time it is deemed necessary or appropriate;
PROVIDED, HOWEVER, that the Board shall not, without the affirmative
approval of a simple majority of the holders of Voting Stock, represented,
by person or by proxy, and entitled to vote at an annual or special
meeting of the holders of Voting Stock, make any amendment that requires
stockholder approval under any applicable law or rule, unless the Board
determines that compliance with such law or rule is no longer desired with
respect to the Plan as a whole or the provision to be amended. No
termination or amendment of the Plan may, without the consent of the
Participant to whom any Award shall theretofore have been granted under
the Plan, adversely affect the right of such individual under such Award;
PROVIDED, HOWEVER, that the Committee may, in its sole and absolute
discretion, make provision in an Award Agreement for such amendments that,
in its sole and absolute discretion, it deems appropriate.
(b) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. No Award shall be granted under the Plan
after the termination of the Plan, but the termination of the Plan shall
not have any other effect and any Award outstanding at the time of the
termination of the Plan may be amended and exercised and may vest after
termination of the Plan at any time prior to the expiration date of such
Award to the same extent such Award could have been amended or would have
been exercisable or vest had the Plan not terminated.
9.17 COSTS AND EXPENSES. All costs and expenses incurred in administering
the Plan shall be borne by the Company.
9.18 UNFUNDED PLAN. The Plan shall be unfunded. The Company shall not be
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required to establish any special or separate fund or make any other segregation
of assets to assure the payment of any Award under the Plan.
9.19 LOANS. The Committee shall be entitled to grant to Participants
granted Non-Qualified Stock Options (other than Non-Employee Director Options)
the right to pay the exercise price of such Options by delivery to the Company
of an amount of cash equal to the par value per share of Common Stock purchased
on exercise and a recourse promissory note. Each such recourse promissory note
shall have the following terms and conditions: (a) such promissory note shall
bear interest at 2% over the prime rate of Citibank on the date the promissory
note is issued, (b) interest shall be due and payable quarterly in arrears, (c)
the principal amount shall be due in full on the second anniversary date, (d)
principal and accrued interest may be prepaid at any time, in whole or in part,
without penalty, (e) in the event of a default in the payment of principal or
interest when due and the continuance of such default for ten (10) days, the
full principal amount of the promissory note plus accrued and unpaid interest
shall become immediately due and payable, and (vi) the promissory note shall be
secured by a pledge to the Corporation of shares of Common Stock having a Fair
Market Value at all times at least equal to 110% of the principal amount of the
promissory note.
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Appendix B
Please date, sign and mail your
Proxy card as soon as possible!
Annual Meeting of Shareholders
V-ONE Corporation
May 11, 2000
/-/ Please mark your votes as
in this example. Note to Preferred C Shareholders:
You may Vote on Proposals 2, 3
and 4 only.
1. Proposal One: Election of two directors: For Withold Authority
Nominees: A.L. Giannopoulos / / / /
Margaret E. Grayson
For, except vote withheld from
the following nominee(s)
_________________________________
2. Proposal Two: To Ratify
For Against Abstain election of Ernst & Young LLP as
/ / / / / / independent auditors for fiscal
year ending December 31, 2000.
For Against Abstain 3. Proposal Three: To Approve an
/ / / / / / amendment to Company's Amended
and Restated Certificate of
Incorporation, increasing the
number of shares of common stock
which the Company is authorized
to issue from 33,333,333 to
50,000,000 shares.
For Against Abstain 4. Proposal Four: To Approve an
/ / / / / /
amendment to the Company's 1998
Incentive Stock Plan increasing
shares of common stock
authorized and reserved for
issuance from 2.5 million to 5
million.
5. In their discretion on such
other business as may properly
come before the meeting or any
adjournment thereof.
Change of Address or / /
Comments, mark here: / /
__________________________________________________________________
Signature of Shareholder Signature of Additional Shareholder Dated
<PAGE>
V-ONE CORPORATION
This Proxy is solicited on Behalf of the Board of Directors
The undersigned hereby appoints David D. Dawson and Margaret E. Grayson,
or either of them each with full power of substitution, as the lawful proxies of
the undersigned and hereby authorizes them to represent and to vote as
designated on the reverse all shares of common stock of V-ONE Corporation
("Company") that the undersigned would be entitled to vote if personally present
at the annual Meeting of Shareholders of the Company to be held on May 11, 2000
and at any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy will
be voted FOR the matters listed on the reverse.
Whether or not you plan to attend the meeting , you are urged to execute
and return this proxy which may be revoked at any time prior to its use.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
