SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant /x/
Filed by a party other than the registrant / /
/ / Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
VASCO DATA SECURITY INTERNATIONAL, INC.
- --------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than
the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(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 0-11:1
- ---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ---------------------------------------------------------------
(5) Total Fee Paid
_____________________________________________________
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form
or schedule and the date of its filing.
(1) Amount previously paid:
- ---------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- ---------------------------------------------------------------
(3) Filing party:
- ---------------------------------------------------------------
(4) Date filed:
- ---------------------------------------------------------------
<PAGE>
VASCO DATA SECURITY INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 15, 1999
To the Stockholders of
VASCO Data Security International, Inc.:
The Annual Meeting of Stockholders of VASCO Data Security
International, Inc., a Delaware corporation (the "Company"), will
be held on Tuesday, June 15, 1999 at 10:00 a.m., local time, at
1901 South Meyers Road, Suite 130, Oakbrook Terrace, Illinois
60181 for the following purposes, as described in the Proxy
Statement accompanying this Notice:
1. To elect seven (7) individuals to the Company's Board of
Directors;
2. To ratify the action of the Board of Directors in
appointing KPMG LLP as the Company's independent auditors for the
fiscal year ending December 31, 1999;
3. To approve the Amended and Restated 1997 Stock
Compensation Plan; and
4. To transact such other business as may properly come
before the Annual Meeting. The Board of Directors has no
knowledge of any other business to be presented or transacted at
the meeting. Only stockholders of record on April 23, 1999 are
entitled to notice of and to vote at the Annual Meeting. Further
information as to the matters to be considered and acted upon at
the Annual Meeting can be found in the accompanying Proxy
Statement.
By Order of the Board of Directors,
Forrest D. Laidley
Secretary
April 30, 1999
YOU ARE CORDIALLY INVITED AND URGED TO ATTEND THE ANNUAL MEETING
IN PERSON. TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WHETHER OR NOT YOU
EXPECT TO ATTEND IN PERSON. STOCKHOLDERS WHO ATTEND THE MEETING
MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY DESIRE.
<PAGE>
VASCO DATA SECURITY INTERNATIONAL, INC.
1901 South Meyers Road, Suite 210
Oakbrook Terrace, Illinois 60181
----------------------
PROXY STATEMENT
for Annual Meeting of Stockholders
To be Held June 15, 1999
----------------------
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of VASCO Data Security
International, Inc., a Delaware corporation (the "Company"), of
proxies for use at the annual meeting of stockholders of the
Company to be held on Tuesday, June 15, 1999 at 10:00 a.m., local
time, at 1901 South Meyers Road, Suite 130, Oakbrook Terrace,
Illinois 60181, and at any postponement or adjournment thereof
(the "Annual Meeting"). This Proxy Statement, the foregoing
Notice of Annual Meeting of Stockholders and the accompanying
form of proxy are being mailed to stockholders of the Company
commencing on or about May 1, 1999. The mailing address of the
principal executive offices of the Company is 1901 South Meyers
Road, Suite 210, Oakbrook Terrace, Illinois 60181.
The presence in person or by proxy of holders of record of a
majority of the outstanding shares of Company common stock, par
value $.001 per share, (the "Common Stock") is required to
constitute a quorum for the transaction of business at the Annual
Meeting. If the accompanying form of proxy is properly executed
and returned, the shares represented thereby will be voted in
accordance with the instructions specified therein. In the
absence of instructions to the contrary, such shares will be
voted "FOR" each of the proposals set forth herein. Any
stockholder executing a proxy has the power to revoke it at any
time prior to the voting thereof on any matter (without, however,
affecting any vote taken prior to such revocation) by delivering
written notice to the Secretary of the Company, by executing
another proxy dated as of a later date or by voting in person at
the Annual Meeting.
The date of this Proxy Statement is April 29, 1999.
<PAGE>
THE ANNUAL MEETING
Introduction
The Company was organized in July 1997 as a subsidiary of
VASCO Corp., a Delaware corporation ("VASCO Corp."). Pursuant to
an exchange offer (the "Exchange Offer") by the Company for
securities of VASCO Corp. that was completed on March 11, 1998,
the Company acquired 97.7% of the common stock of VASCO Corp.
Consequently, VASCO Corp. became a subsidiary of the Company. On
March 20, 1998, the Company's Common Stock, $.001 par value per
share (the "Common Stock") was approved for trading on the
Over-the-Counter Bulletin Board system under the symbol "VDSI."
On October 28, 1998, VASCO Corp. was merged with and into the
Company and VASCO Corp. ceased to exist.
Matters to be Considered
The Annual Meeting has been called to (i) elect seven (7)
individuals to the Company's Board of Directors; (ii) ratify the
action of the Board of Directors in appointing KPMG LLP as the
Company's independent auditors for the fiscal year ending
December 31, 1999; (iii) approve the Amended and Restated 1997
Stock Compensation Plan (the "Amended Plan"); and (iv) transact
such other business as may properly come before the Annual
Meeting.
Record Date and Shares Outstanding
Holders of record of the Company's Common Stock at the close
of business on April 23, 1999 are entitled to notice of and to
vote at the Annual Meeting. As of April 23, 1999, there were
24,640,379 shares of Common Stock outstanding and entitled to
vote at the Annual Meeting, each such share being entitled to
cast one vote.
Voting and Quorum
All properly executed, unrevoked proxy cards received by the
Secretary of the Company pursuant to this solicitation prior to
the close of voting will be voted as directed therein. Any
stockholder who has given a proxy may revoke it at any time prior
to its use at the Annual Meeting by executing and delivering to
the Secretary of the Company a proxy bearing a later date, by
giving a written notice of revocation to the Secretary of the
Company, or by attending the Annual Meeting and voting in person.
Any written notice of revocation or subsequent proxy should be
delivered to VASCO Data Security International, Inc., 1901 South
Meyers Road, Suite 210, Oakbrook Terrace, Illinois 60181,
Attention: Secretary, or hand delivered to the Secretary, before
the closing of the polls at the Annual Meeting.
The holders of a majority of the outstanding shares of
Common Stock as of April 23, 1999, present at the Annual Meeting
in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. Assuming the
presence of a quorum, the affirmative vote of a plurality of the
votes cast and entitled to vote in the election at the Annual
Meeting will be required for the election of directors, and the
affirmative vote of a majority of the votes cast and entitled to
vote thereon will be required to act on all other matters to come
before the Annual Meeting.
Stockholders may vote in favor of or withhold authority to
vote for the nominees for election as directors listed herein.
Similarly, stockholders may vote in favor of, against or abstain
from voting with respect to the proposal to ratify the
appointment of the Company's independent auditors and the
proposal to approve the Amended Plan. Directions to withhold
authority, abstentions and broker non-votes (which occur when a
nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not
received instructions from the beneficial owner) will be counted
in determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. Directions to
withhold authority, because directors are elected by a plurality
of votes cast, will have no effect on the election of directors.
Broker non-votes, because they are not considered "votes cast,"
are not counted in the vote totals and will have no effect on any
proposal scheduled for consideration at the Annual Meeting.
Abstentions will have the effect of a vote against the proposal
being considered.
If a properly executed, unrevoked proxy does not
specifically direct the voting of the shares covered by such
proxy, the proxy will be voted (a) FOR the election of all
nominees for election as director as listed herein, (b) FOR the
ratification of the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ending December 31,
1999, (c) FOR the approval of the Amended Plan, and (d) in
accordance with the judgment of the persons named in the proxy as
to such other matters as may properly come before the Annual
Meeting.
ANNUAL REPORT
The Company's annual report to stockholders for the fiscal
year ended December 31, 1998 has been included in the mailing of
this Proxy Statement. Stockholders are referred to the report for
financial and other information about the Company, but such
report is not incorporated in this Proxy Statement and is not to
be deemed a part of the proxy soliciting material. The annual
report includes, among other information, the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998;
additional copies of the Form 10-K will be provided to
stockholders without charge upon written request to VASCO Data
Security International, Inc., 1901 South Meyers Road, Suite 210,
Oakbrook Terrace, Illinois 60181, Attention: Secretary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information with
respect to the beneficial ownership of Common Stock of the
Company as of April 23, 1999 for (i) each person or entity who is
known to the Company to beneficially own five percent or more of
the Company's Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Executive Officers, and (iv) all
directors and executive officers as a group. The persons named in
the table have sole voting and investment power with respect to
all shares of Company Common Stock shown as beneficially owned by
them unless otherwise indicated. For purposes of the table, a
person or group of persons is deemed to have beneficial ownership
of any shares as of a given date which such person has the right
to acquire within 60 days after such date.
Amount and
Nature of
Name and Address Class of Beneficial Percent of
of Beneficial Owner Stock Ownership(1) Class
- --------------------- -------- ------------ ----------
T. Kendall Hunt Common 10,175,225(2) 41.16%
1901 S. Meyers Road
Suite 210
Oakbrook Terrace, IL 60181
Robert E. Anderson* Common 363,507(3) 1.47%
1901 S. Meyers Road
Suite 210
Oakbrook Terrace, IL 60181
Michael P. Cullinane Common 10,000(4) 0.04%
1815 S. Meyers Road
Oakbrook Terrace, IL 60181
Christian Dumolin Common - -
Ter Bede Business Center
B-8500 Kortrijk, Belgium
Pol Hauspie Common 2,000(5) -
Hellegatstraat, 8
B-8954 Westouter, Belgium
Mario R. Houthooft Common 527,787(6) 2.12%
Chaussee de Courcelles, 113
B-6041 Charleroi, Belgium
Forrest D. Laidley Common 607,403(7) 2.45%
185 Milwaukee Ave.
Suite 240
Lincolnshire, IL 60069
Michael A. Mulshine Common 250,000(8) 1.01%
2517 Route 35
Manasquan, NJ 08736
John C. Haggard Common 267,725(9) 1.08%
1901 S. Meyers Road
Suite 210
Oakbrook Terrace, IL 60181
All Executive Officers Common 12,124,847(10) 58.27%
and Directors as a
Group (8 persons)
Other 5% Stockholders
L&H Investment
Company N.V. Common 1,428,572 5.80%
Flanders Language Valley 50
8900 Ieper, Belgium
Barbara J. Hunt Common 1,111,300 5.47%
1901 S. Meyers Road
Suite 210
Oakbrook Terrace, IL 60181
- --------------------
* Resigned from the Board of Directors effective April 23, 1999.
(1) The number of shares beneficially owned by each director
and executive officer is determined under rules promulgated by
the Securities and Exchange Commission, 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 has sole or shared voting power
or investment power and also any shares which the individual has
the right to acquire within 60 days after April 23, 1999 through
the exercise of any stock option or other right. The inclusion
herein of such shares, however, does not constitute an admission
that the named stockholder is a direct or indirect beneficial
owner of such shares. Unless otherwise indicated, each person or
entity named in the table has sole voting power and investment
power (or shares such power with his or her spouse) with respect
to all shares of capital stock listed as owned by such person or
entity.
(2) Includes 93,750 shares underlying stock options held by
Mr. Hunt exercisable within 60 days of April 23, 1999, and
1,111,300 shares held by Barbara J. Hunt, Mr. Hunt's spouse. Mr.
Hunt disclaims beneficial ownership of any portion of his
spouse's holdings. Mr. Hunt also holds 1 share of capital stock
in each of VASCO Data Security Europe SA and VASCO Data Security
NV/SA, both indirect subsidiaries of the Company, in each case
representing less than 1% of the shares of capital stock of such
company.
(3) Includes 30,000 shares underlying stock options
exercisable within 60 days of April 23, 1999.
(4) Includes 10,000 shares underlying stock options
exercisable within 60 days of April 23, 1999.
(5) Includes 2,000 shares underlying stock options
exercisable within 60 days of April 23, 1999.
(6) Includes 151,000 shares underlying stock options
exercisable within 60 days of April 23, 1999 and 162,500 shares
underlying warrants exercisable within 60 days of April 23, 1999.
(7) Includes 110,000 shares underlying stock options
exercisable within 60 days of April 23, 1999, 5,883 shares
underlying warrants exercisable within 60 days of April 23, 1999
and 250,000 shares held by Mr. Laidley and his spouse as joint
tenants. See "Compensation Committee Interlocks and Insider
Participation."
(8) Includes 45,000 shares underlying stock options held by
Mr. Mulshine which are exercisable within 60 days of April 23,
1999, and 200,000 shares held by his spouse. See "Compensation
Committee Interlocks and Insider Participation."
(9) Includes 231,500 shares underlying stock options
exercisable within 60 days of April 23, 1999.
(10) Includes 728,750 shares underlying stock options and
168,383 shares underlying warrants exercisable within 60 days of
April 23, 1999, including those referred to in footnotes (2)
through (9) above, as well as the shares held by Mr. Hunt's
spouse.
(11) Includes 80,000 shares underlying stock options
exercisable within 60 days of April 23, 1999.
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Bylaws, as amended (the "Bylaws") set the
number of directors of the Company at not less than four nor more
than twenty, which number may be changed from time to time by the
Board of Directors. The Board of Directors increased the number
of directors of the Company to seven (7) by a Consent of
Directors, effective January 27, 1999. An additional director was
elected by the Board at that time for an interim period from
January 27, 1999 until the Annual Meeting of Stockholders. All of
the directors of the Company will be elected at the Company's
Annual Meeting of Stockholders and will hold office until their
respective successors have been duly elected and qualified, or
until their earlier resignation or removal.
The Board of Directors has nominated the following
individuals for election as directors of the Company at the
Annual Meeting: Michael P. Cullinane, Christian Dumolin, Pol
Hauspie, Mario R. Houthooft, T. Kendall Hunt, Forrest D. Laidley
and Michael A. Mulshine, each of whom is a current director of
the Company.
While the Board of Directors does not contemplate that any
nominee for election as a director will not be able to serve, if
any of the nominees for election shall be unable to or for good
cause will not serve as a director, the persons listed in the
enclosed proxy shall vote such proxy, if properly executed and
returned and unrevoked, for such other person or persons as shall
be recommended by the Board of Directors or the Board of
Directors may, in its discretion, reduce the number of directors
to be elected. The affirmative vote of a plurality of the votes
cast and entitled to vote at the Annual Meeting is required for
the election of directors.
The Board of Directors recommends that the stockholders vote
"FOR" each of the nominees listed herein.
The name of and certain information regarding each nominee
for election as a director of the Company at the Annual Meeting
appears below.
T. Kendall "Ken" Hunt -- Mr. Hunt is Chairman of the Board,
Chief Executive Officer and President of the Company. He has been
a director of the Company since July 1997. He also served, from
1990 to 1998, as a director, the Chairman of the Board and
President of VASCO Corp. and prior thereto served in similar
capacities during certain periods from 1984 with VASCO Corp.'s
predecessors. Mr. Hunt also served as VASCO Corp.'s Chief
Executive Officer. Mr. Hunt is 56 years old.
Michael P. Cullinane -- Mr. Cullinane has been a director of
the Company since April 10, 1998. He is the Chairman of the
Company's Compensation Committee and a member of the Company's
Audit Committee. Mr. Cullinane has served as Executive Vice
President, Chief Financial Officer and Treasurer of PLATINUM
technology, inc. since 1988. PLATINUM technology provides
software products and consulting services that help Global 10,000
IT organizations manage and improve their IT infrastructure,
which consists of data, systems, and applications. Mr. Cullinane
is also a director of PLATINUM Entertainment, Inc. and
Made2Manage Systems, Inc. Mr. Cullinane is 49 years old.
Christian Dumolin -- Mr. Dumolin has been a director of the
Company since April 23, 1999. He is a member of the Company's
Audit Committee. Mr. Dumolin is President and CEO of Koceram N.V.
since 1980. Koceram is a producer of building products,
developing business through several subsidiaries, including
Koramic Building Products N.V. and TrustCapital N.V., both quoted
on the Brussels' (Belgium) Stock Exchange. In addition, Koceram
is also involved in financial activities (development and venture
capital) and real estate activities. Mr. Dumolin is also a member
of the Council of Regency of the National Bank of Belgium. Mr.
Dumolin is 53 years old.
Pol Hauspie -- Mr. Hauspie has been a director of the
Company since January 27, 1999. Mr. Hauspie, a co-founder of
Lernout & Hauspie Speech Products NV ("L&H"), has served as a
Managing Director, President, Co-Chairman of the Board and
Co-Chairman in the office of the Chief Executive since the
incorporation of L&H. In 1977 Mr. Hauspie founded HPP Computer
Center ("HPP"), a developer and marketer of software for
accountants and financial advisors, and served as its president
until selling HPP in 1987 to finance the start-up of L&H. Mr.
Hauspie further serves on the board of several private and public
companies. Mr. Hauspie is 47 years old.
Mario R. Houthooft -- Mr. Houthooft has been a director of
the Company since April 10, 1998. Mr. Houthooft has served as the
Managing Director of VASCO Data Security NV/SA, the European
operating subsidiary of the Company, since January 1, 1997
pursuant to a consulting agreement. From 1992 until joining VDS
NV/SA, he served in various management positions with Lintel
Security. Prior thereto, he was with Cryptech Company from 1986
where he served in various positions. Mr. Houthooft is 46 years
old.
Forrest D. Laidley -- Mr. Laidley is Secretary of the
Company. He has been a director of the Company since July 1997.
He also serves, since 1990, as a director, Secretary and General
Counsel of VASCO Corp. He has been involved with VASCO Corp. and
its predecessors for certain periods in these capacities since
1984. He is currently and has been a partner in the law firm of
Laidley & Porter (and predecessor firm) in Libertyville, Illinois
since 1985. He serves on the Advisory Council on Main Street
Libertyville and is a director of Harris Bank Libertyville, an
Illinois chartered banking institution, and Carmel High School,
Mundelein, Illinois. Mr. Laidley is 53 years old.
Michael A. Mulshine -- Mr. Mulshine has been a director of
the Company since July 1997. He also serves, since 1992, as a
director of VASCO Corp. He is a member of the Company's Audit
Committee and the Company's Compensation Committee. He is, and
since 1977 has been, a principal of Osprey Partners, a management
consulting firm. Since 1985 he has been a director and Secretary
of Sedona Corporation (formerly known as Scangraphics, Inc.), a
provider of Geographic Information Systems database management
software products and a leader in large format color scanning and
image processing technology. Additionally, Mr. Mulshine is a
director of Prediction Systems, Inc., a software engineering
company specializing in the technology of modeling and
simulation, and a director of Inresco, Inc., a manufacturer of
high-performance circuit protection devices. Mr. Mulshine is 58
years old.
Committees and Meetings of the Board of Directors
The Board of Directors of the Company met five times during
1998. In addition, the Board of Directors took action by
unanimous written consent four times during 1998. The Board of
Directors presently has two standing committees -- an Audit
Committee and a Compensation Committee. During 1998, the
Compensation Committee met one time and the Audit Committee met
one time.
The Audit Committee recommends the Company's independent
auditors and consults with them regarding the scope, timing and
results of their audit and the Company's internal accounting
controls. Further, the Audit Committee reviews related party
transactions in accordance with the rules promulgated by the
National Association of Securities Dealers, Inc. The members of
the Audit Committee for 1998 were: Robert E. Anderson, Michael P.
Cullinane and Michael A. Mulshine. For 1999, the committee
consists of the following members: Michael P. Cullinane,
Christian Dumolin and Michael A. Mulshine.
The Compensation Committee reviews and sets the salaries and
incentive compensation for the executive officers, the directors
and other key personnel of the Company. The Compensation
Committee also administers the Company's stock option plan. In
its capacity as administrator of the Company's stock option plan,
the Compensation Committee has authority to grant stock options
and determine the terms thereof. The members of the Compensation
Committee for 1998 were: Robert E. Anderson, Michael P. Cullinane
and Michael A. Mulshine. For 1999, the committee consists of the
following members: Michael P. Cullinane, Pol Hauspie and Forrest
D. Laidley.
T. Kendall Hunt, Forrest D. Laidley, Mario R. Houthooft and
Michael A. Mulshine each attended all of the meetings of the
Company's Board of Directors during 1998. Michael P. Cullinane
and Robert E. Anderson each attended four of the five meetings
held during 1998.
A stockholder of the Company may nominate persons for
election to the Board of Directors of the Company if the
stockholder submits such nomination, together with certain
related information required by the Company's By-Laws, in writing
so as to be received by the Secretary of the Company not less
than 60 nor more than 90 days prior to the date of the annual
meeting of stockholders at which the nomination is to be made.
Compensation of Directors
Directors are reimbursed for expenses incurred in connection
with their attendance at periodic Board meetings. Directors
receive no cash compensation for their services; however,
non-employee directors are eligible to receive stock option
grants from time to time. During 1998, each of the directors of
the Company received a grant of 8,000 options at an exercise
price of $5 9/16 that vested based upon each directors'
attendance at Board of Directors' meetings from the second
quarter of 1998 through the first quarter of 1999. Similarly,
during 1999, each director received a grant of 8,000 options at
an exercise price of $3 1/8 which will vest based upon each
directors' attendance at Board of Directors' meetings from the
second quarter of 1999 through the first quarter of 2000.
Compensation Committee Interlocks and Insider Participation
For 1998, the Company's Compensation Committee was comprised
of Messrs. Anderson, Cullinane and Mulshine. Mr. Anderson served
as VASCO Corp.'s Chief Financial Officer and Executive Vice
President from 1987 through 1989 and served VASCO Corp. as a
consultant from January 1996 through March 1997.
Forrest D. Laidley, although not an employee, served as the
Company's Secretary since July 1997 and as VASCO Corp.'s
Secretary and General Counsel during 1997. Mr. Laidley is also a
partner in the law firm of Laidley & Porter which had, in the
past, performed various legal services for VASCO Corp. since its
inception. Mr. Laidley and his partners had made equity
investments in VASCO Corp. from time to time through various
private placements and are currently stockholders and warrant
holders. Mr. Laidley's firm is currently performing legal
services for the Company. Mr. Laidley's services currently are,
and during 1998 were, on a non-compensation basis, although his
firm is compensated for services rendered to the Company by
attorneys other than Mr. Laidley. Mr. Laidley's firm was paid
approximately $180 in 1998.
From January 1996 until March 1997, pursuant to an oral
arrangement, Robert Anderson served as a consultant to VASCO
Corp. Pursuant to this arrangement, Mr. Anderson was compensated
in the amount of $50,000 in 1996 and $15,000 in 1997. The oral
arrangement between VASCO Corp. and Mr. Anderson called for
compensation in the amount of $5,000 per month, and is no longer
in effect.
On June 2, 1992, VASCO Corp. entered into an Investment
Banking and Management Consulting Agreement with Osprey Partners
("Osprey"), pursuant to which, among other things, VASCO Corp.
agreed to appoint Michael A. Mulshine as a member of VASCO
Corp.'s Board of Directors. Mr. Mulshine, a director of the
Company, is a principal of Osprey. In 1993 and 1994 Osprey
provided services to VASCO Corp. in connection with obtaining
financing for VASCO Corp. and, pursuant to the Agreement, Osprey
was paid fees aggregating $60,000 during 1993, 1994 and 1995. The
Agreement also granted Osprey a warrant to purchase 400,000
shares of VASCO Corp.'s common stock at a price of $.25 per
share. On January 20, 1996 VASCO Corp. exercised its election to
terminate the Agreement and deemed that 200,000 of the 400,000
shares of VASCO Corp. common stock underlying the warrant were
earned and vested as of that date. Pursuant to the Exchange Offer
the warrant for VASCO Corp. common shares was exchanged for a
warrant for the Company's Common Stock. Accordingly, the shares
underlying the Warrant are now for shares of the Company's Common
Stock. In February 1999, Ms. Carol Mulshine, wife of Michael A.
Mulshine, exercised these warrants, resulting in the issuance of
200,000 shares of the Company's Common Stock.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Exchange Act requires the Company's
directors and executive officers, and persons who beneficially
own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership
with the Commission and The Nasdaq Stock Market, Inc. Directors,
executive officers and beneficial owners of more than 10% of the
outstanding shares of Common Stock are required by Commission
regulations to furnish the Company with copies of all Section
16(a) forms that they file. Based solely on review of the copies
of such forms or written representations that no reports on Form
5 were required, the Company believes that for the year period
ended December 31, 1998, all of its directors, executive officers
and greater than 10% beneficial owners complied with Section
16(a) filing requirements applicable to them, except for Mr. Hunt
who missed three (3) Form 4 filings covering four (4)
transactions and Mr. Andersen who missed three (3) Form 4 filings
covering ninety-four (94) transactions.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to,
earned by, or paid for services rendered to the Company and its
subsidiaries in all capacities during the year ended December 31,
1998 for the Company's Chief Executive Officer and President and
the Chief Technology Officer, who are the only executive officers
of the Company and its subsidiaries whose salary and bonus for
such year exceeded $100,000 (collectively, Messrs. Hunt and
Haggard are referred to herein as the "Named Executive
Officers").
Summary Compensation Table
Long-term All other
Compensation Awards Compensa-
Name and Annual Compensation Securities Underlying tion ($)
Principal -------------------- Options/SARs (#)
Position Year Salary Bonus
- --------- ---- -------- ----- --------------------- ---------
T.K. Hunt 1998 155,000 -0- -0- -0-
President 1997 150,000 -0- 125,000 -0-
and CEO 1996 116,457 -0- -0- -0-
Chairman of
the Board
and Director
J. Haggard 1998 128,333 -0- 20,000 -0-
Chief 1997 125,000 -0- 40,000 -0-
Technology 1996 105,750 -0- 40,000 -0-
Option Grants In Last Fiscal Year
The following table sets forth all options granted to the
Named Executive Officers during 1998.
Number Potential Real-
of Sec- Percentage lized Value at
urities of Total Annual Rates of
Under- Options/ Stock Price
lying Warrants Appreciation
Options/ Granted to for Options/
Warrants Employees Exercise Expir- Warrant Term
Granted in Fiscal Price ation -----------------
Name (shares) Year 1997 ($/Sh) Date 5%($) 10%($)
- --------- -------- --------- ------- ------ -----------------
T.K. Hunt -0- - - - - -
J. Haggard 20,000 8.2% 5.5625 4/21/08 69,965 177,304
- ----------------
(1) The options vest as follows: 0% at date of grant; 20% on
each subsequent anniversary of the grant.
(2) The potential realizable value amounts shown illustrate
the values that might be realized upon exercise immediately prior
to the expiration of their term using five percent and ten
percent appreciation rates as required to be used in this table
by the Securities and Exchange Commission, compounded annually,
and are not intended to forecast possible future appreciation, if
any, of the Company's Common Stock price. Additionally, these
values do not take into consideration the provisions of the
options providing for nontransferability or termination of the
options following termination of employment. Therefore, the
actual values realized may be greater or less than the potential
realizable values set forth in the table.
Year-End Option Values
The following table sets forth the aggregate value as of
December 31, 1998 of unexercised stock options held by the Named
Executive Officers. The Named Executive Officers did not exercise
any stock options during 1998 and the relevant columns have
therefore been omitted.
Number of
Securities Value(1) of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End(#) Year-End($)
Exercisable/ Exercisable/
Name Unexercisable UnExercisable(2)
- ------------------- ------------- ----------------
T. Kendall Hunt 62,500/62,500 -/-
John C. Haggard 207,500/50,000 436,078/-
- -----------
(1) Market value of underlying securities is based on the
average of the bid and asked price per share ($2.96875) of the
Company's Common Stock as reported on the OTC BB on December 31,
1998 minus the exercise price.
(2) Options vest as follows: (1) For options granted before
1998: 25% at the time of the grant, and 25% on each subsequent
anniversary of the grant; (2) For options granted during 1998: 0%
at date of grant; 20% on each subsequent anniversary of the
grant. Options indicated as exercisable are those options which
were vested as of December 31, 1998. All options which had not
vested as of December 31, 1998 are indicated to be unexercisable.
Certain Transactions
Loans from Principal Stockholder. Since its inception, VASCO
Corp. and its predecessors have relied from time to time on T.
Kendall Hunt, the Chief Executive Officer, President and Chairman
of the Board of the Company, to provide various forms of working
capital. In September 1994 Mr. Hunt surrendered a VASCO Corp.
note in the principal amount of $150,000 in exchange for 1,000
shares of VASCO Corp. Series B Preferred Stock and 250,000 shares
of VASCO Corp. common stock. Effective September 17, 1997, Mr.
Hunt converted his 1,000 shares of VASCO Corp. Series B Preferred
Stock into shares of VASCO Corp. common stock. Pursuant to the
Exchange Offer, Mr. Hunt exchanged these shares for shares of the
Company's Common Stock.
Additionally, during 1994 Mr. Hunt loaned VASCO Corp.
$60,000 which remained outstanding at December 31, 1994. In 1995
Mr. Hunt made additional loans of $130,000 to VASCO Corp. The
aggregate principal amount of the outstanding loans due to Mr.
Hunt, $190,000, remained outstanding at December 31, 1995. During
1996 VASCO Corp. repaid Mr. Hunt the principal balance of
$190,000 together with accrued interest.
Pledge of Common Stock by Principal Stockholder. In August
1997, VASCO Data Security Europe SA, a subsidiary of the Company
("VDSE"), completed the restructuring of an existing obligation
of $3.4 million, which was incurred in connection with an
acquisition and was to have matured in December 1997. In the
restructuring, Banque Paribas Belgique S.A., which had issued a
guarantee of the obligation, paid the obligation and received a
$3.4 million convertible note due 2002 from VDSE. As part of the
restructuring, Mr. Hunt entered into a pledge agreement with
Banque Paribas Belgique S.A. pursuant to which he pledged, as
collateral for the VDSE convertible note, 1,416,666 of his shares
of VASCO Corp. common stock, which number of shares is subject to
adjustment based on the market value of the shares. In connection
with the Exchange Offer, the shares of VASCO Corp. common stock
pledged by Mr. Hunt were replaced by the same number of shares of
Common Stock of the Company.
The Report of the Compensation Committee on Executive
Compensation shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement
or any portion hereof into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and shall not otherwise be deemed
filed under such acts.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Overview
The Board of Directors of the Company established a
Compensation Committee upon the completion of the Exchange Offer.
For 1998, the Compensation Committee consisted of Messrs.
Anderson, Cullinane and Mulshine, none of whom is employed by the
Company, and none of whom has any "interlocking" relationships as
defined for proxy statement disclosure purposes. For 1999, the
members of the Compensation Committee are Messrs. Cullinane,
Hauspie and Laidley.
The Compensation Committee is responsible for determining
the compensation for the Company's officers and employees,
subject to the right of the Committee to delegate to the
Company's Chief Executive Officer the fixing of salaries below
certain levels designated by the Committee. The Compensation
Committee also administers the 1997 Stock Option Plan ("Option
Plan") and the Executive Incentive Compensation Plan ("Incentive
Plan"), including the designation of which officers, key
employees and directors shall receive options under the Option
Plan and the amount, terms, pricing, and vesting provisions of
options granted pursuant to the Option Plan.
Executive Compensation Philosophy
The Company operates in the competitive technology industry
and views its ability to attract and retain highly qualified and
dedicated executives and key employees as a critical component of
its future success. The Company strives to maintain an
entrepreneurial atmosphere and to maintain a low cost operating
structure. Consequently, the Company employs a combination of
salary, bonuses and stock options to reward and provide incentive
its executives and key employees. In the past, VASCO Corp.
particularly relied on stock options in this regard, believing
that granting executives and key employees a vested interest in
the success of the enterprise will enhance stockholder value.
Pursuant to the Exchange Offer, the Company exchanged these VASCO
Corp. stock options for options in its Option Plan. The
determination of executive compensation by the Compensation
Committee of VASCO Corp. was subjective in nature and was not
based upon any particular structure or formula. While personal
performance was of primary importance, none of the factors
considered by the Compensation Committee of VASCO Corp. when
evaluating executive compensation was weighted in any readily
measurable fashion.
1998 Chief Executive Officer Compensation
The Compensation Committee believes that the Company
compensated Mr. Hunt, the Chief Executive Officer of the Company,
below the market value for his services in 1998. Mr. Hunt's cash
compensation was set at this level to provide an example for the
balance of the Company's management team. Given this and the
relative performance of the Company during 1998, the Compensation
Committee of the Company believes that Mr. Hunt's compensation is
appropriate.
1998 Compensation of Other Executive Officers
Although the Company strove to maintain a low cost operating
structure, its Compensation Committee aimed to set other
executives' and key employees' salaries at a competitive level.
The base salary for each executive officer is set on the basis of
personal performance and the salary level in effect for
comparable positions at companies that compete for executive
talent.
In July 1997, the Board approved the Option Plan. The Option
Plan was designed to serve as a performance incentive to
encourage its executives, key employees and others to acquire or
increase a proprietary interest in the success of the Company.
Pursuant to the Exchange Offer, the Company exchanged VASCO Corp.
stock options for options in the Option Plan. The Compensation
Committee believes that, over a period of time, the Company's
share performance will, to a great extent, reflect executive and
key employee performance.
The Option Plan provides that options may be granted at the
discretion of the Compensation Committee, in such amounts and
subject to such conditions as the Compensation Committee may
determine in accordance with the terms thereof. Options granted
to employees are priced at market, are generally fully vested
after five years and expire at the end of ten years.
The Compensation Committee previously adopted an Executive
Incentive Compensation Plan, which covers the Company's eligible
executives and key employees (each a "participant"), with such
eligibility determined at the end of each year at the sole
discretion of the Compensation Committee. Awards are based on
prior year operating results, such results being subject to audit
by the Company's independent accountants, and are distributed
following the completion of such audit. The Incentive Plan
allows for the creation of a cash pool ("Pool") in the amount of
10% of the Company's annual pre-tax earnings. Fifty percent (50%)
of the Pool is awarded to the participants based on each
participant's earned salary as a percentage of all participants'
salaries. The remaining fifty percent (50%) is awarded at the
sole discretion of the Compensation Committee. Based on this
formula, no awards were made under the Incentive Plan during
1998.
Awards, in whole or in part, may be offered in the form of
shares of the Company's Common Stock or cash at the sole
discretion of the Compensation Committee and the Compensation
Committee also may elect to delegate the choice of cash or stock
to the individual participants. To the extent that shares of
stock are awarded in lieu of cash, the number of shares is based
on the market value of the Company's Common Stock on the date the
award is determined, and are taxable to the participant in the
year the award is granted. Such shares are restricted and cannot
be sold or transferred except pursuant to registration under the
Securities Act or an exemption from such registration.
Respectfully submitted, Michael P. Cullinane, Chairman Robert E.
Anderson Michael A. Mulshine
PERFORMANCE GRAPH
[graphic omitted]
QUARTER ENDED
------------------------------------------------
COMPANY/INDEX 3/23/98 4/30/98 6/30/98 9/30/98 12/31/98
- ------------- ------- ------- ------- ------- --------
VASCO Data
Security
International 100.00 122.50 127.50 70.00 59.40
Computer
Peripheral
Equip. NEC 100.00 104.28 118.77 115.32 167.50
Nasdaq Market
Index 100.00 102.21 103.46 93.25 121.11
PROPOSAL II
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP as the
independent auditors of the Company's books and records for the
fiscal year ending December 31, 1999 and has determined that it
would be desirable to ask the stockholders to ratify this
appointment at the Annual Meeting.
KPMG LLP served as independent auditors of the Company's
books and records for the fiscal year ended December 31, 1998 and
has acted as auditors for VASCO Corp. beginning with VASCO
Corp.'s 1994 fiscal year. Representatives of KPMG LLP are
expected to be present at the Annual Meeting with the opportunity
to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" ratification
of the appointment of KPMG LLP as independent auditors of the
Company's books and records for the fiscal year ending December
31, 1999.
The affirmative vote of the majority of the votes cast and
entitled to vote at the Annual Meeting is required for
ratification of the appointment of KPMG LLP as described herein.
No determination has been made as to what action the Board of
Directors would take if the appointment is not ratified.
PROPOSAL III
APPROVAL OF AMENDMENT AND RESTATEMENT OF
1997 STOCK COMPENSATION PLAN
General
As discussed above in the "Compensation Committee Report on
Executive Compensation," the Company's stock option plan has been
an important means by which the Company ties the compensation of
executive officers to the performance of the Company. At the 1999
Annual Meeting, the Company's stockholders will be asked to
approve an amendment and restatement of the 1997 Stock
Compensation Plan (the "Amended Plan"). The changes being made
include changing the name of the plan as currently in effect (the
"Current Plan") from the "1997 Stock Option Plan," to reflect the
fact that the Amended Plan will authorize grants of a broad range
of awards in addition to options. In addition, significant
changes will include
- Reserving 20% of the outstanding shares for awards that
may be outstanding at any one time, rather than the 5
million currently set aside for issuance throughout the life
of the current Plan
- To authorize restricted stock, deferred stock, stock
appreciation rights ("SARs"), performance awards settleable
in cash or stock, and other types of awards based on stock
or factors influencing the value of stock
- To add provisions to the Plan so that options, SARs,
and performance-based awards will qualify under Section
162(m) of the Internal Revenue Code (the "Code"), so that
the Company will not lose its ability to take a tax
deduction for such awards
- To specify obligations relating to non-competition and
proprietary information that may be imposed on optionees.
The Board of Directors and the Compensation Committee (the
"Committee") believe that attracting and retaining high quality
executives and others who provide services to the Company is
essential to the Company's progress and success. The Company
gains important advantages from a comprehensive compensation
program which includes different types of incentives for
motivating employees and other service providers and rewards for
outstanding service. In particular, stock options have been and
will continue to be an important element of the compensation
program, because such awards enable executives to acquire or
increase their proprietary interest in the Company, thereby
promoting a closer identity of interests between them and the
Company's stockholders. Such awards also provide an increased
incentive for the recipient to put forth his or her maximum
efforts for the success of the Company's business.
The Board and the Committee also intend that the Company's
ability to claim tax deductions for compensation paid should be
preserved to the greatest extent practicable. Therefore, the
Company is seeking stockholder approval of the material terms of
performance awards to named executives under the Amended Plan, in
order to meet a key requirement for such awards to qualify as
"performance-based" compensation under Section 162(m) of the
Code. Section 162(m) limits the deductions a publicly held
company can claim for compensation in excess of $1,000,000 paid
in a given year to certain individual executive officers
(generally, the officers who are "named executive officers" in
the summary compensation table in the Company's proxy statement).
"Performance-based" compensation is not counted against the $1
million deductibility cap. If the Amended Plan is approved by
stockholders, performance awards intended by the Committee to
qualify as "performance-based" compensation granted under the
Amended Plan will be payable only upon achievement of
pre-established performance goals (subject to such additional
requirements and terms as the Committee may establish). Such
performance awards can be used to place strong emphasis on the
building of value for all stockholders.
For purposes of Code Section 162(m), approval of the Amended
Plan will be deemed also to include approval of the eligibility
of executive officers and other employees to participate, the
per-person limitations described below under the caption "Shares
Available and Award Limitations," and the general business
criteria upon which performance objectives for performance awards
are based, described below under the caption "Performance-Based
Awards." Stockholder approval of general business criteria will
enable performance awards to qualify under Section 162(m) until
2004. Stock options and SARs are not subject to a similar time
limit under Section 162(m). The Amended Plan will, however,
permit awards to be granted that do not qualify under Section
162(m), including after 2004.
Description of the Amended Plan
The following is a brief description of the material
features of the Amended Plan. Such description is qualified in
its entirety by reference to the full text of the Plan, a copy of
which is attached to this Proxy Statement as Exhibit A.
Shares Available and Award Limitations. The Amended Plan
imposes a limit on the number of shares of Company common stock
that may be subject to awards. An award relating to shares may be
granted if the aggregate number of shares subject to
then-outstanding awards plus the number of shares subject to the
award being granted do not exceed 20% of the number of shares
issued and outstanding immediately prior to the grant. For this
purpose, an option is "outstanding" until it is exercised and any
other award is "outstanding" in the calendar year in which it is
granted and for so long thereafter as it remains subject to any
vesting condition requiring continued employment. Regardless of
this aggregate share limitation, the maximum number of shares
that may be subject to tax-favored incentive stock options will
be 5 million (subject to adjustment for extraordinary corporate
events). Some types of awards, such as restricted stock, are
potentially more costly to the Company than options and SARs, so
the Amended Plan limits awards other than options and SARs that
may be outstanding at any time to one-third of the total number
of awards that may be outstanding. Under the Amended Plan, shares
subject to an award granted in substitution for an award of a
company or business acquired by the Company or a subsidiary will
not count against the number of shares reserved and available.
Under the Current Plan, 3,308,000 shares remained available
for issuance at April 23, 1999. A total of 1,532,000 shares were
subject to outstanding options at that date, under the Current
Plan and prior plans and arrangements. If the Amended Plan were
in effect at that date, the shares remaining available under the
Plan plus the shares subject to outstanding options would, when
issued, represent 19% of the outstanding common stock. On April
23, 1998, the average of the closing bid and asked price of the
Company's common stock on the OTC-BB was $3.875 per share.
In addition, the Amended Plan includes a limitation on the
amount of awards that may be granted to any one participant in a
given calendar year in order to qualify awards as
"performance-based" compensation not subject to the limitation on
deductibility under Section 162(m) of the Code. Under this annual
per-person limitation, no participant may in any year be granted
share-denominated awards under the Amended Plan relating to more
than his or her "Annual Limit" for each type of award. The Annual
Limit equals 1.5 million shares plus the amount of the
Participant's unused Annual Limit relating to the same type of
award as of the close of the previous year, subject to adjustment
for splits and other extraordinary corporate events. For purposes
of this limitation, options, SARs, restricted stock, deferred
stock, and other stock-based awards are separate types of awards
subject to a separate limitation. In the case of awards not
relating to shares in a way in which the share limitation can
apply, no Participant may be granted awards authorizing payment
during any calendar year of an amount that exceeds his or her
Annual Limit, which for this purpose equals $1 million plus the
amount of any unused Annual Limit from the previous year.
Adjustments to the number and kind of shares subject to the
share limitations and specified in the Annual Limits are
authorized in the event of a special dividend or distribution,
recapitalization, stock split, reorganization, business
combination, or other similar corporate transaction or event
affecting the Common Stock. The Committee is also authorized to
adjust performance conditions and other terms of awards in
response to these kinds of events or to changes in applicable
laws, regulations, or accounting principles, except that any
adjustments to awards intended to qualify as "performance-based"
must conform to requirements under Section 162(m).
Eligibility. Executive officers and other employees of the
Company and its subsidiaries, and non-employee directors,
consultants and others who provide substantial services to the
Company and its subsidiaries are eligible to be granted awards
under the Amended Plan. In addition, any person who has been
offered employment by the Company or a subsidiary may be granted
awards, but such prospective employee may not receive any payment
or exercise any right relating to the award until he or she
commences employment. At present, approximately 60 persons would
be eligible for awards if the Amended Plan were in effect.
Administration. The Amended Plan will be administered by the
Committee, except that the Board may appoint any other committee
to administer the Amended Plan and may itself act to administer
the Amended Plan. The Board must perform the functions of the
Committee for purposes of granting awards to non-employee
directors. (References to the "Committee" below mean the
committee or full Board exercising authority with respect to a
given award.) Subject to the terms and conditions of the Amended
Plan, the Committee is authorized to select participants,
determine the type and number of awards to be granted and the
number of Shares to which awards will relate or the amount of an
performance award, specify times at which awards will be
exercisable or settled, including performance conditions that may
be required as a condition thereof, set other terms and
conditions of such awards, prescribe forms of award agreements,
interpret and specify rules and regulations relating to the
Amended Plan, and make all other determinations which may be
necessary or advisable for the administration of the Amended
Plan. Nothing in the Amended Plan precludes the Committee from
authorizing payment of other compensation, including bonuses
based upon performance, to executive officers, employees and
directors. The Amended Plan provides that Committee members shall
not be personally liable, and shall be fully indemnified, in
connection with any action, determination, or interpretation
taken or made in good faith under the Amended Plan.
Stock Options and SARs. The Committee may grant stock
options, including both incentive stock options (ISOs), which can
result in potentially favorable tax treatment to the participant,
and non- qualified stock options. The Committee also may grant
SARs entitling the participant to receive the excess of the fair
market value of a share on the date of exercise or other
specified date over the grant price of the SAR. The exercise
price of an option and the grant price of an SAR is determined by
the Committee, but generally may not be less than the fair market
value of the stock on the date of grant (except as described
below). The maximum term of each option or SAR, the times at
which each option or SAR will be exercisable, and provisions
requiring forfeiture of unexercised options at or following
termination of employment generally are fixed by the Committee,
subject to a restriction that no option may have a term exceeding
ten years. Options may be exercised by payment of the exercise
price in cash, stock or other property (possibly including notes
or obligations to make payment on a deferred basis, or through
broker-assisted cashless exercise procedures) or by surrender of
other outstanding awards having a fair market value equal to the
exercise price. Methods of exercise and settlement and other
terms of SARs will be determined by the Committee. "Limited SARs
exercisable for a stated period of time following a change in
control of the Company may be granted.
Restricted and Deferred Stock. The Committee may grant
awards of restricted stock and deferred stock. Prior to the end
of the restricted period, shares received as restricted stock may
not be sold or disposed of by participants, and may be forfeited
in the event of termination of employment. The restricted period
generally is established by the Committee. An award of restricted
stock entitles the participant to all of the rights of a
stockholder of the Company, including the right to vote the
shares and the right to receive any dividends thereon, unless
otherwise determined by the Committee. Deferred stock gives
participants the right to receive shares at the end of a
specified deferral period, subject to forfeiture of the award in
the event of termination of employment under certain
circumstances prior to the end of a specified restricted period
(which need not be the same as the deferral period). Prior to
settlement, deferred stock awards carry no voting or dividend
rights or other rights associated with stock ownership, but
dividend equivalents may be paid on such deferred stock.
Other Stock-Based Awards, Bonus Stock, and Awards in lieu of
Cash Obligations. The Amended Plan authorizes the Committee to
grant awards that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on or related to
Common Stock or factors that influence the value of stock. The
Committee will determine the terms and conditions of such awards,
including the consideration to be paid to exercise awards in the
nature of purchase rights, the periods during which awards will
be outstanding, and any forfeiture conditions and restrictions on
awards. In addition, the Committee is authorized to grant shares
as a bonus free of restrictions, or to grant shares or other
awards in lieu of the Company's obligations under other plans or
compensatory arrangements, subject to such terms as the Committee
may specify. The number of shares granted to an executive officer
or non-employee director in place of salary, fees or other cash
compensation must be reasonable, as determined by the Committee.
Performance-Based Awards. The Committee may require
satisfaction of pre-established performance goals, consisting of
one or more business criteria and a targeted performance level
with respect to such criteria, as a condition of awards being
granted or becoming exercisable or settleable under the Amended
Plan, or as a condition to accelerating the timing of such
events. If so determined by the Committee, in order to avoid the
limitations on deductibility under Section 162(m) of the Code,
the business criteria used by the Committee in establishing
performance goals applicable to performance awards to named
executives will be selected from among the following: (1)
earnings per share; (2) revenues; (3) cash flow, free cash flow,
or cash flow return on investment; (4) return on net assets,
return on assets, return on investment, return on investment
capital, or return on equity; (5) value created; (6) operating
margin; (7) net income before or after taxes, pretax earnings,
pretax earnings before interest, depreciation and amortization,
pretax operating earnings after interest expense and before
incentives, service fees, and extraordinary or special items,
operating earnings, or net cash provided by operations; (8) stock
price or total stockholder return; (9) sales above a specified
threshold or in relation to prior periods; and (10) strategic
business criteria, consisting of one or more objectives based on
meeting specified market penetration, geographic business
expansion goals, cost targets, and goals relating to acquisitions
or divestitures. The Committee may specify that any such criteria
will be measured before or after extraordinary or non-recurring
items, before or after service fees, or before or after payments
of awards under the Plan. The Committee may set the levels of
performance required in connection with performance awards as
fixed amounts, goals relative to performance in prior periods, as
goals compared to the performance of one or more comparable
companies or an index covering multiple companies, or in any
other way the Committee may determine.
Other Restrictions on Awards. The Amended Plan would impose
restrictions on awards under which forfeiture is triggered by
competition with the Company, disclosure or misuse of proprietary
information, or failure to assist the Company in litigation. Such
forfeitures would apply to outstanding awards and any gains
realized by exercise of options during the six months before the
triggering event or, if the participant's employment has
terminated, during the last six months of employment and up to 18
months following employment.
Other Terms of Awards. Awards may be settled in cash,
shares, other awards or other property, in the discretion of the
Committee. The Committee may require or permit participants to
defer the settlement of all or part of an award in accordance
with such terms and conditions as the Committee may establish,
including payment or crediting of interest or dividend
equivalents on any deferred amounts. The Committee is authorized
to place cash, shares or other property in trusts or make other
arrangements to provide for payment of the Company's obligations
under the Amended Plan. The Committee may condition awards on the
payment of taxes such as by withholding a portion of the shares
or other property to be distributed (or receiving previously
acquired shares or other property surrendered by the participant)
in order to satisfy mandatory tax withholding obligations. Awards
granted under the Amended Plan generally may not be pledged or
otherwise encumbered and are not transferable except by will or
by the laws of descent and distribution, or to a designated
beneficiary upon the participant's death, except that the
Committee may permit transfers in individual cases, including for
estate planning purposes.
Awards under the Amended Plan are generally granted without
a requirement that the participant pay consideration in the form
of cash or property for the grant (as distinguished from the
exercise), except to the extent required by law. The Committee
may, however, grant awards in substitution for awards under the
Amended Plan or other Company plans, or other rights to payment
from the Company, and may buy out outstanding awards for cash or
other property. The Committee also may grant awards in addition
to and in tandem with other awards or rights.
Vesting, Forfeitures, and Acceleration Thereof. The
Committee may, in its discretion determine the vesting schedule
of options and other awards, the circumstances that will result
in forfeiture of the awards, the post-termination exercise
periods of options and similar awards, and the events that will
result in acceleration of the ability to exercise and the lapse
of restrictions, or the expiration of any deferral period, on any
award.
In addition, the Amended Plan provides that, in the event of
a change in control of the Company, outstanding awards will
immediately vest and be fully exercisable and any restrictions,
deferral of settlement and forfeiture conditions (other than
those tied to performance) of such awards will lapse, and
performance goals and conditions will be deemed met to the extent
provided in any agreement with the participant. A change in
control means an event in which (1) any person becomes a
beneficial owner of more than 20% of the outstanding common stock
or voting securities, except limited acquisitions by any current
20%-beneficial owner will not trigger a change in control; (2)
changes to the membership of the board of directors occur such
that incumbent members cease to be a majority; for this purpose,
incumbent members mean current members and new members whose
election or appointment was approved by the then-incumbent
members; (3) consummation of a merger, reorganization or similar
transaction if it represents a substantial change in the control
of the Company; and (4) approval by stockholders of a complete
dissolution or liquidation of the Company.
Amendment and Termination of the Amended Plan. The Board of
Directors may amend, alter, suspend, discontinue, or terminate
the Amended Plan or the Committee's authority to grant awards
thereunder without stockholder approval unless stockholder
approval is required by law, regulation, or a Nasdaq or stock
exchange rule. The Board may in its discretion submit other
amendments to stockholders for approval. Stockholder approval
will not necessarily be required for amendments which might
increase the cost of the Amended Plan. Unless earlier terminated,
the Amended Plan will terminate at such time as may be determined
by the Board.
Effect of Stockholder Approval on Awards. All awards granted
to date have been granted under the Current Plan, and so will be
unaffected by the action of stockholders relating to the Amended
Plan at the Annual Meeting. Awards to be granted under the
Amended Plan will be within the discretion of the Committee, and
therefore cannot be ascertained at this time. If stockholders
decline to approve the Amended Plan, future awards will not be
granted to the extent necessary so that stockholder approval
would have met the requirements of Treasury Regulation
1.162-27(e)(4), although this may not preclude continued granting
of awards under the terms of the Current Plan.
Federal Income Tax Implications of the Plan
The following briefly describes the federal income tax
consequences arising with respect to awards that may be granted
under the Plan. The grant of an option (including a stock-based
award in the nature of a purchase right) or an SAR will create no
immediate federal income tax consequence for the participant or
the Company. Nor will a participant receive taxable income upon
exercising an option which is an ISO (except that the alternative
minimum tax may apply). Upon exercising an option which is not an
ISO, the participant generally must recognize ordinary income
equal to the difference between the exercise price and the fair
market value of the freely transferable and nonforfeitable shares
acquired on the date of exercise. Upon exercising an SAR, the
participant generally must recognize ordinary income equal to the
cash or fair market value of shares received.
When a participant disposes of ISO shares before the end of
the applicable ISO holding periods, he or she must generally
recognize ordinary income equal to the lesser of (i) the fair
market value of the shares at the date of exercise minus the
exercise price or (ii) the amount realized upon the disposition
of the ISO shares minus the exercise price. Otherwise, a
participant's disposition of shares acquired upon the exercise of
an option generally will result in short-, medium- or long-term
capital gain or loss measured by the difference between the sale
price and the participant's tax basis in such shares (generally,
the exercise price plus any amount previously recognized as
ordinary income in connection with the exercise of the option).
The Company generally will be entitled to a tax deduction
equal to the amount recognized as ordinary income by the
participant in connection with options and SARs. The Company
generally is not entitled to a tax deduction relating to amounts
that represent a capital gain to a participant. Accordingly, the
Company will not be entitled to a tax deduction with respect to
an ISO if the participant holds the shares for the applicable ISO
holding periods prior to disposing of the shares.
With respect to other awards granted under the Amended Plan
that result in a transfer to the participant of cash or shares or
other property, if the shares or other property is either not
restricted as to transferability or not subject to a substantial
risk of forfeiture the participant generally must recognize
ordinary income equal to the cash or the fair market value of
shares or other property actually received. If the shares or
other property are restricted as to transferability and subject
to a substantial risk of forfeiture, the participant generally
must recognize ordinary income equal to the fair market value of
the shares or other property received at the earliest time the
shares or other property become transferable or not subject to a
substantial risk of forfeiture. In either case, the Company
should be entitled to a deduction for the same amount recognized
as income by the participant, except if deductibility is cut back
under Section 162(m), as discussed below. A participant may elect
to be taxed at the time of receipt of shares or other property
rather than upon lapse of restrictions on transferability or the
substantial risk of forfeiture, but if the participant
subsequently forfeits such shares or property he or she would not
be entitled to any tax deduction, including as a capital loss,
for the value of the shares or property on which he previously
paid tax.
As discussed above, compensation that qualifies as
"performance-based" compensation is excluded from the $1 million
deductibility cap of Code Section 162(m), and therefore remains
fully deductible by the company that pays it. Under the Amended
Plan, options granted with an exercise price or grant price at
least equal to 100% of fair market value of the underlying shares
at the date of grant will be, and awards which are conditioned
upon achievement of performance goals may be, intended to qualify
as such "performance-based" compensation. A number of
requirements must be met in order for particular compensation to
so qualify, however, so there can be no assurance that such
compensation under the Amended Plan will be fully deductible
under all circumstances. In addition, other awards under the
Amended Plan generally will not so qualify, so that compensation
paid to certain executives in connection with such awards may, to
the extent it and other compensation subject to Section 162(m)'s
deductibility cap exceed $1 million in a given year, be subject
to the limitation of Section 162(m).
The foregoing provides only a general description of the
application of federal income tax laws to certain types of awards
under the Amended Plan. This discussion is intended for the
information of stockholders considering how to vote at the Annual
Meeting and not as tax guidance to participants in the Amended
Plan, as the consequences may vary with the types of awards made,
the identity of the recipients and the method of payment or
settlement. Different tax rules may apply, including in the case
of variations in transactions that are permitted under the
Amended Plan (such as payment of the exercise price of an option
by surrender of previously acquired shares). The summary does not
address the effects of other federal taxes (including possible
"golden parachute" excise taxes) or taxes imposed under state,
local, or foreign tax laws.
Vote Required for Approval
Approval of the amendment and restatement of the 1997 Stock
Compensation Plan will require the affirmative vote of holders of
a majority of the voting power of the issued and outstanding
voting securities present in person or represented by proxy and
entitled to vote.
The Board of Directors considers the Amended Plan to be in
the best interests of the Company and its stockholders and
recommends that the stockholders vote FOR approval.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders
may present proper proposals for consideration at and for
inclusion in the Company's proxy statement relating to the next
annual meeting of stockholders by submitting their proposals to
the Company in a timely manner. In order to be considered for
inclusion in the proxy statement and proxy relating to the
Company's 2000 annual meeting of stockholders, stockholder
proposals must be received by the Company at its principal
executive offices not later than January 31, 2000 and must
otherwise comply with the requirements of Rule 14a-8.
PROXY SOLICITATION
Proxies will be solicited by mail. Proxies may also be
solicited by directors, officers and a small number of regular
employees of the Company personally or by mail, telephone or
telegraph, but such persons will not be specially compensated for
such services. Brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the soliciting material
to the beneficial owners of Common Stock held of record by such
persons, and the Company will reimburse them for their expenses
in doing so. The full cost of the preparation and mailing of the
Proxy Statement and accompanying materials and the related proxy
solicitations will be borne by the Company.
OTHER MATTERS
Management does not intend to present, and does not have any
reason to believe that others will present, any item of business
at the Annual Meeting other than those specifically set forth in
the notice of the Annual Meeting. However, if other matters are
properly presented for a vote at the Annual Meeting, the persons
named in the enclosed proxy and acting thereunder will have
discretion to vote on those matters in accordance with their
judgment to the same extent as the person who signed the proxy
would be entitled to vote.
<PAGE>
Exhibit A
VASCO DATA SECURITY INTERNATIONAL, INC.
1997 Stock Compensation Plan, As Amended and Restated
1. Purpose. The purpose of this 1997 Stock Compensation Plan
(the "Plan") of VASCO Data Security International, Inc., a
Delaware corporation (the "Company"), is to advance the interests
of the Company and its stockholders by providing a means to
attract, retain, and reward employees of the Company and its
subsidiaries, non-employee directors of the Company, and
consultants and other persons who provide substantial services to
the Company or its subsidiaries, to link compensation to measures
of the Company's performance in order to provide additional
incentives to such persons for the creation of stockholder value,
and to enable such persons to acquire or increase a proprietary
interest in the Company in order to promote a closer identity of
interests between such persons and the Company's stockholders.
The Plan is an amendment and restatement of the Company's 1997
Stock Option Plan.
2. Definitions. For purposes of the Plan, terms shall be
defined as set forth below, in addition to the terms defined in
Section 1 and elsewhere in the Plan:
(a) "Award" means any Option, SAR, Restricted Stock,
Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, or
Performance Award, together with any related right or interest,
granted to a Participant under the Plan.
(b) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most
recent written beneficiary designation filed with the Committee
to receive the benefits specified under the Plan upon such
Participant's death. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then
the term Beneficiary means the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to
receive such benefits.
(c) "Board" means the Company's Board of Directors.
(d) "Change in Control" and related terms have the meanings
specified in Section 9.
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, including regulations thereunder and
successor provisions and regulations thereto.
(f) "Committee" means a committee of two or more directors
designated by the Board to administer the Plan; provided,
however, that directors appointed as members of the Committee
shall not be employees of the Company or any subsidiary. In
appointing members of the Committee, the Board will consider
whether a member is or will be a Qualified Member, but such
members are not required to be Qualified Members at the time of
appointment or during their term of service on the Committee.
Initially, the Compensation Committee of the Board shall be the
Committee hereunder. The foregoing notwithstanding, the term
"Committee" shall refer to the full Board in any case in which it
is performing any function of the Committee under the Plan.
(g) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 11(j) of the Plan.
(h) "Deferred Stock" means a right, granted to a Participant
under Section 6(e), to receive Stock, cash or a combination
thereof at the end of a specified deferral period.
(i) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g), to receive cash, Stock, other
Awards or other property equal in value to dividends paid with
respect to a specified number of shares of Stock, or other
periodic payments.
(j) "Effective Date" means the effective date specified in
Section 11(o).
(k) "Eligible Person" has the meaning specified in Section
5.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder
and successor provisions and rules thereto.
(m) "Fair Market Value" means the fair market value of
Stock, Awards or other property as determined by the Committee or
under procedures established by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of Stock on a
given date shall be the average of the highest closing bid and
the lowest closing asked quotation for that date on the Over-the-
Counter Bulletin Board or, if the Stock is then designated for
quotation in the Nasdaq Stock Market or on a national securities
exchange, the average of the highest and lowest sales prices in
composite trading for such date or, if there was no trade
reported for such date, on the latest date for which a trade was
reported.
(n) "Incentive Stock Option" or "ISO" means any Option
intended to be and designated as an incentive stock option within
the meaning of Code Section 422 or any successor provision
thereto.
(o) "Option" means a right, granted to a Participant under
Section 6(b), to purchase Stock or other Awards at a specified
price during specified time periods.
(p) "Other Stock Based Awards" means Awards granted to a
Participant under Section 6(h).
(q) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a
person who is no longer an Eligible Person.
(r) "Performance Award" means a right, granted to a
Participant under Section 8, to receive Awards or payments based
upon performance criteria specified by the Committee.
(s) "Qualified Member" means a member of the Committee who
is a "Non-Employee Director" within the meaning of Rule
16b-3(b)(3) and an "outside director" within the meaning of
Regulation 1.162- 27 under Code Section 162(m).
(t) "Restricted Stock" means Stock granted to a Participant
under Section 6(d) which is subject to certain restrictions and
to a risk of forfeiture.
(u) "Rule 16b-3" means Rule 16b-3, as from time to time in
effect and applicable to the Plan and Participants, promulgated
by the Securities and Exchange Commission under Section 16 of the
Exchange Act.
(v) "Stock" means the Company's Common Stock, $.001 par
value per share, and such other securities as may be substituted
(or resubstituted) for Stock pursuant to Section 11(c).
(w) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c).
3. Administration.
(a) Authority of the Committee. The Plan shall be
administered by the Committee, which shall have full and final
authority, in each case subject to and consistent with the
provisions of the Plan, to select Eligible Persons to become
Participants; to grant Awards; to determine the type and number
of Awards, the dates on which Awards may be exercised and on
which the risk of forfeiture or deferral period relating to
Awards shall lapse or terminate, the acceleration of any such
dates, the expiration date of any Award, whether, to what extent,
and under what circumstances an Award may be settled, or the
exercise price of an Award may be paid, in cash, Shares, other
Awards, or other property, and other terms and conditions of, and
all other matters relating to, Awards; to prescribe documents
evidencing or setting terms of Awards (such Award documents need
not be identical for each Participant) and rules and regulations
for the administration of the Plan; to construe and interpret the
Plan and Award documents and correct defects, supply omissions or
reconcile inconsistencies therein; and to make all other
decisions and determinations as the Committee may deem necessary
or advisable for the administration of the Plan. Decisions of the
Committee with respect to the administration and interpretation
of the Plan shall be final, conclusive, and binding upon all
persons interested in the Plan, including Participants,
Beneficiaries, transferees under Section 11(b) and other persons
claiming rights from or through a Participant, and stockholders.
The foregoing notwithstanding, the Board shall perform the
functions of the Committee for purposes of granting Awards under
the Plan to non-employee directors, and the Board otherwise may
perform any function of the Committee under the Plan, including
for the purpose of ensuring that transactions under the Plan by
Participants who are then subject to Section 16 of the Exchange
Act in respect of the Company are exempt under Rule 16b-3.
(b) Manner of Exercise of Committee Authority. At any time
that a member of the Committee is not a Qualified Member, (A) any
action of the Committee relating to an Award intended by the
Committee to qualify as "performance-based compensation" within
the meaning of Code Section 162(m) and regulations thereunder may
be taken by a subcommittee, designated by the Committee, composed
solely of two or more Qualified Members, and (B) any action
relating to an Award granted or to be granted to a Participant
who is then subject to Section 16 of the Exchange Act in respect
of the Company may be taken either by such a subcommittee or by
the Committee but with each such member who is not a Qualified
Member abstaining or recusing himself or herself from such
action, provided that, upon such abstention or recusal, the
Committee remains composed of two or more Qualified Members. Such
action, authorized by such a subcommittee or by the Committee
upon the abstention or recusal of such non-Qualified Member(s),
shall be the action of the Committee for purposes of the Plan.
The express grant of any specific power to the Committee, and the
taking of any action by the Committee, shall not be construed as
limiting any power or authority of the Committee. The Committee
may delegate to officers or managers of the Company or any
subsidiary, or committees thereof, the authority, subject to such
terms as the Committee shall determine, to perform such
functions, including administrative functions, as the Committee
may determine, to the extent that such delegation will not result
in the loss of an exemption under Rule 16b-3(d) for Awards
granted to Participants subject to Section 16 of the Exchange Act
in respect of the Company and will not cause Awards intended to
qualify as "performance-based compensation" under Code Section
162(m) to fail to so qualify. The Committee may appoint agents to
assist it in administering the Plan.
(c) Limitation of Liability. The Committee and each member
thereof shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any
executive officer, other officer or employee of the Company or a
subsidiary, the Company's independent auditors, consultants or
any other agents assisting in the administration of the Plan.
Members of the Committee and any officer or employee of the
Company or a subsidiary acting at the direction or on behalf of
the Committee shall not be personally liable for any action or
determination taken or made in good faith with respect to the
Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such
action or determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Awards
relating to Stock may be granted if, at the time of grant of each
Award, the aggregate number of shares subject to outstanding
Awards plus the number of shares subject to the Award being
granted do not exceed 20% of the number of Shares issued and
outstanding immediately prior to the grant of such Award. For
purposes of this Section 4(a), an Option is "outstanding" until
it is exercised and any other Award is "outstanding" in the
calendar year in which it is granted and for so long thereafter
as it remains subject to any vesting condition requiring
continued employment. The foregoing notwithstanding, the maximum
number of shares that may be subject to ISOs granted under the
Plan shall be 5 million (subject to adjustment as provided in
Section 11(c)), and not more than one-third of the share-related
Awards outstanding at any one time shall be Awards other than
Options and SARs. The shares of Stock delivered in connection
with Awards may consist, in whole or in part, of authorized and
unissued shares, treasury shares or shares acquired in the market
for the account of a Participant.
(b) Share Counting Rules. The Committee may adopt reasonable
counting procedures to ensure appropriate counting and avoid
double counting (as, for example, in the case of tandem or
substitute awards). In the case of any Award granted in
substitution for an award of a company or business acquired by
the Company or a subsidiary, shares issued or issuable in
connection with such substitute Award shall not be counted
against the number of shares reserved under the Plan, but shall
be deemed to be available under the Plan by virtue of the
Company's assumption of the plan or arrangement of the acquired
company or business. The provisions of this Section 4(b) shall
apply to the number of shares reserved and available for ISOs
only to the extent consistent with applicable regulations
relating to ISOs under the Code.
5. Eligibility; Per-Person Award Limitations. Awards may be
granted under the Plan only to Eligible Persons. For purposes of
the Plan, an "Eligible Person" means an executive officer of the
Company, an employee of the Company or any subsidiary, a
non-employee director of the Company, a consultant or other
person who provides substantial services to the Company or a
subsidiary, and any person who has been offered employment by the
Company or a subsidiary, provided that such prospective employee
may not receive any payment or exercise any right relating to an
Award until such person has commenced employment with the Company
or a subsidiary. An employee on leave of absence may be
considered as still in the employ of the Company or a subsidiary
for purposes of eligibility for participation in the Plan. In
each calendar year during any part of which the Plan is in
effect, beginning in 1999, an Eligible Person may be granted
Awards intended to qualify as "performance-based compensation"
under Code Section 162(m) under each of Section 6(b), 6(c), 6(d),
6(e), 6(f), 6(g) or 6(h) relating to up to his or her Annual
Limit (such Annual Limit to apply separately to Awards under each
subsection). A Participant's Annual Limit, in any year during any
part of which the Participant is then eligible under the Plan,
shall equal 1.5 million shares plus the amount of the
Participant's unused Annual Limit relating to the same type of
Award as of the close of the previous year, subject to adjustment
as provided in Section 11(c). In the case of an Award which is
not valued in a way in which the limitation set forth in the
preceding sentence would operate as an effective limitation
satisfying Treasury Regulation 1.162-27(e)(4) (including a
Performance Award under Section 8 not related to an Award
specified in Section 6), an Eligible Person may not be granted
such Awards authorizing payment during any calendar year of an
amount that exceeds the Participant's Annual Limit, which for
this purpose shall equal $1 million plus the amount of the
Participant's unused cash Annual Limit as of the close of the
previous year (this limitation is separate and not affected by
the number of Awards granted during such calendar year subject to
the limitation in the preceding sentence). For purposes of this
Section 5, a Participant's Annual Limit is used if it may be
potentially earned or paid under a Performance Award, regardless
of whether it is in fact earned or paid.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and
conditions set forth in this Section 6. In addition, the
Committee may impose on any Award or the exercise thereof, at the
date of grant or thereafter (subject to Section 11(e)), such
additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine,
including terms requiring forfeiture of Awards in the event of
termination of employment or service by the Participant and terms
permitting a Participant to make elections relating to his or her
Award. The Committee shall retain full power and discretion with
respect to any term or condition of an Award that is not
mandatory under the Plan. Except in cases in which the Committee
is authorized to require other forms of consideration under the
Plan, or to the extent other forms of consideration must by paid
to satisfy the requirements of the Delaware General Corporation
Law, no consideration other than services may be required for the
grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of
Stock purchasable under an Option (including both ISOs and non-
qualified Options) shall be determined by the Committee, provided
that such exercise price shall be not less than the Fair Market
Value of a share of Stock on the date of grant of such Option.
(ii) Option Term; Time and Method of Exercise. The
Committee shall determine the term of each Option, provided that
in no event shall the term exceed a period of ten years from the
date of grant. The Committee shall determine the time or times at
which or the circumstances under which an Option may be exercised
in whole or in part (including based on achievement of
performance goals and/or future service requirements), the
methods by which such exercise price may be paid or deemed to be
paid, the form of such payment, including, without limitation,
cash, Stock, other Awards or awards granted under other plans of
the Company or any subsidiary, or other property (including notes
or other contractual obligations of Participants to make payment
on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law), and the
methods by or forms in which Stock will be delivered or deemed to
be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the Plan
shall comply in all respects with the provisions of Code Section
422, including but not limited to the requirement that no ISO
shall be granted more than ten years after the Effective Date.
Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to ISOs (including any SAR in tandem therewith)
shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so
as to disqualify either the Plan or any ISO under Code Section
422, unless the Participant has first requested the change that
will result in such disqualification.
(c) Stock Appreciation Rights. The Committee is authorized
to grant SAR's to Participants on the following terms and
conditions:
(i) Right to Payment. An SAR shall confer on the
Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one
share of Stock on the date of exercise over (B) the grant price
of the SAR as determined by the Committee.
(ii) Other Terms. The Committee shall determine at the
date of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in
part (including based on achievement of performance goals and/or
future service requirements), the method of exercise, method of
settlement, form of consideration payable in settlement, method
by or forms in which Stock will be delivered or deemed to be
delivered to Participants, whether or not a SAR shall be in
tandem or in combination with any other Award, and any other
terms and conditions of any SAR. Limited SARs that may only be
exercised in connection with a Change in Control or other event
as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may
determine. SARs may be either freestanding or in tandem with
other Awards.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and
conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee may
impose, which restrictions may lapse separately or in combination
at such times, under such circumstances (including based on
achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the
Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and
any Award document relating to the Restricted Stock, a
Participant granted Restricted Stock shall have all of the rights
of a stockholder, including the right to vote the Restricted
Stock and the right to receive dividends thereon (subject to any
mandatory reinvestment or other requirement imposed by the
Committee). During the restricted period applicable to the
Restricted Stock, subject to Section 11(b) below, the Restricted
Stock may not be sold, transferred, pledged, hypothecated,
margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment or service during the
applicable restriction period, Restricted Stock that is at that
time subject to restrictions shall be forfeited and reacquired by
the Company; provided that the Committee may provide, by rule or
regulation or in any Award document, or may determine in any
individual case, that restrictions or forfeiture conditions
relating to Restricted Stock will lapse in whole or in part,
including in the event of terminations resulting from specified
causes.
(iii) Certificates for Stock. Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee
shall determine. If certificates representing Restricted Stock
are registered in the name of the Participant, the Committee may
require that such certificates bear an appropriate legend
referring to the terms, conditions and restrictions applicable to
such Restricted Stock, that the Company retain physical
possession of the certificates, and that the Participant deliver
a stock power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant
of an Award of Restricted Stock, the Committee may require that
any cash dividends paid on a share of Restricted Stock be
automatically reinvested in additional shares of Restricted Stock
or applied to the purchase of additional Awards under the Plan.
Unless otherwise determined by the Committee, Stock distributed
in connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other
property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant
Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified
deferral period, subject to the following terms and conditions:
(i) Award and Restrictions. Issuance of Stock will
occur upon expiration of the deferral period specified for an
Award of Deferred Stock by the Committee (or, if permitted by the
Committee, as elected by the Participant). In addition, Deferred
Stock shall be subject to such restrictions (which may include a
risk of forfeiture) as the Committee may impose, if any, which
restrictions may lapse at the expiration of the deferral period
or at earlier specified times (including based on achievement of
performance goals and/or future service requirements), separately
or in combination, in installments or otherwise, and under such
other circumstances as the Committee may determine. Deferred
Stock may be satisfied by delivery of Stock, cash equal to the
Fair Market Value of the specified number of shares of Stock
covered by the Deferred Stock, or a combination thereof, as
determined by the Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment or service during the
applicable deferral period or portion thereof to which forfeiture
conditions apply (as provided in the Award document evidencing
the Deferred Stock), all Deferred Stock that is at that time
subject to deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee may
provide, by rule or regulation or in any Award document, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Deferred Stock will lapse in whole or in
part, including in the event of terminations resulting from
specified causes.
(iii) Dividend Equivalents. Unless otherwise determined
by the Committee at date of grant, Dividend Equivalents on the
specified number of shares of Stock covered by an Award of
Deferred Stock shall be either (A) paid with respect to such
Deferred Stock at the dividend payment date in cash or in shares
of unrestricted Stock having a Fair Market Value equal to the
amount of such dividends, or (B) deferred with respect to such
Deferred Stock and the amount or value thereof automatically
deemed reinvested in additional Deferred Stock, other Awards or
other investment vehicles, as the Committee shall determine;
provided, however, that the Committee may permit a Participant to
make elections relating to Dividend Equivalents if and to the
extent that such elections will not result in the Participant
being in constructive receipt of amounts otherwise intended to be
subject to deferral for tax purposes.
(f) Bonus Stock and Awards in Lieu of Obligations. The
Committee is authorized to grant Stock as a bonus, or to grant
Stock or other Awards in lieu of obligations of the Company or a
subsidiary to pay cash or deliver other property under the Plan
or under other plans or compensatory arrangements. Stock or
Awards granted hereunder shall be subject to such other terms as
shall be determined by the Committee. In the case of any grant of
Stock to an officer or non-employee director of the Company in
lieu of salary, fees or other cash compensation, the number of
shares granted in place of such compensation shall be reasonable,
as determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to
grant Dividend Equivalents to a Participant, entitling the
Participant to receive cash, Stock, other Awards, or other
property equal in value to dividends paid with respect to a
specified number of shares of Stock, or other periodic payments.
Dividend Equivalents may be awarded on a free-standing basis or
in connection with another Award. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or
shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the
Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable
in, valued in whole or in part by reference to, or otherwise
based on, or related to, Stock or factors that may influence the
value of Stock, as deemed by the Committee to be consistent with
the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for
Stock, Awards with value and payment contingent upon performance
of the Company or any other factors designated by the Committee,
and Awards valued by reference to the book value of Stock or the
value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and
conditions of such Awards. Stock delivered pursuant to an Award
in the nature of a purchase right granted under this Section 6(h)
shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards, or other property, as the
Committee shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted
pursuant to this Section 6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem
with, or in substitution or exchange for, any other Award or any
award granted under another plan of the Company, any subsidiary,
or any business entity to be acquired by the Company or a
subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Awards granted in
addition to or in tandem with other Awards or awards may be
granted either as of the same time as or a different time from
the grant of such other Awards or awards. The in-the-money value
of any surrendered Award or award may be applied to reduce the
exercise price of any Option, grant price of any SAR, or purchase
price of any other Award conferring a right to purchase Stock, at
the time of grant or exercise.
(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee, subject to the
express limitations set forth in Section 6(b)(ii) and elsewhere
in the Plan.
(c) Form and Timing of Payment under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award
document, payments to be made by the Company or a subsidiary upon
the exercise of an Option or other Award or settlement of an
Award may be made in such forms as the Committee shall determine,
including, without limitation, cash, Stock, other Awards or other
property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award
may be accelerated, and cash paid in lieu of Stock in connection
with such settlement, in the discretion of the Committee or upon
occurrence of one or more specified events (such as a Change in
Control). Installment or deferred payments may be required by the
Committee (subject to Section 11(e) of the Plan, including the
consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award
document) or permitted at the election of the Participant on
terms and conditions established by the Committee. Payments may
include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents or
other amounts in respect of installment or deferred payments
denominated in Stock.
(d) Exemptions from Section 16(b) Liability. With respect to
a Participant who is then subject to the reporting requirements
of Section 16(a) of the Exchange Act in respect of the Company,
the Committee shall implement transactions under the Plan and
administer the Plan in a manner that will ensure that each
transaction by such a Participant is exempt from liability under
Rule 16b-3, except that this provision shall not limit sales by
such a Participant, and such a Participant may engage in other
non-exempt transactions under the Plan. The Committee may
authorize the Company to repurchase any Award or shares of Stock
resulting from any Award in order to prevent a Participant who is
subject to Section 16 of the Exchange Act from incurring
liability under Section 16(b). Unless otherwise specified by the
Participant, equity securities or derivative securities acquired
under the Plan which are disposed of by a Participant shall be
deemed to be disposed of in the order acquired by the
Participant.
(e) Loan Provisions. With the consent of the Committee, and
subject at all times to, and only to the extent, if any,
permitted under and in accordance with, laws and regulations and
other binding obligations or provisions applicable to the
Company, the Company may make, guarantee, or arrange for a loan
or loans to a Participant with respect to the exercise of any
Option or other payment in connection with any Award, including
the payment by a Participant of any or all federal, state, or
local income or other taxes due in connection with any Award.
Subject to such limitations, the Committee shall have full
authority to decide whether to make a loan or loans hereunder and
to determine the amount, terms, and provisions of any such loan
or loans, including the interest rate to be charged in respect of
any such loan or loans, whether the loan or loans are to be with
or without recourse against the borrower, the terms on which the
loan is to be repaid and conditions, if any, under which the loan
or loans may be forgiven.
8. Performance Awards.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the
timing thereof, may be subject to such performance conditions as
may be specified by the Committee. The Committee may use such
business criteria and other measures of performance as it may
deem appropriate in establishing any performance conditions, and
may exercise its discretion to reduce or increase the amounts
payable under any Award subject to performance conditions, except
as limited under Section 8(b) in the case of a Performance Award
intended to qualify under Code Section 162(m).
(b) Performance Awards Granted to Designated Covered
Employees. If the Committee determines that a Performance Award
to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance
Award shall be contingent upon achievement of pre-established
performance goals and other terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals
for such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee
consistent with this Section 8(b). Performance goals shall be
objective and shall otherwise meet the requirements of Code
Section 162(m) and regulations thereunder (including Regulation
1.162-27 and successor regulations thereto), including the
requirement that the level or levels of performance targeted by
the Committee result in the achievement of performance goals
being "substantially uncertain." The Committee may determine that
such Performance Awards shall be granted, exercised and/or
settled upon achievement of any one performance goal or that two
or more of the performance goals must be achieved as a condition
to grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or for specified subsidiaries or business units of the
Company (except with respect to the total stockholder return and
similar measures applicable to the Company as a whole), shall be
used by the Committee in establishing performance goals for such
Performance Awards: (1) earnings per share; (2) revenues; (3)
cash flow, free cash flow, or cash flow return on investment; (4)
return on net assets, return on assets, return on investment,
return on investment capital, or return on equity; (5) value
created; (6) operating margin; (7) net income before or after
taxes, pretax earnings, pretax earnings before interest,
depreciation and amortization, pretax operating earnings after
interest expense, operating earnings, or net cash provided by
operations; (8) stock price or total stockholder return; (9)
sales above a specified threshold or in relation to prior
periods; and (10) strategic business criteria, consisting of one
or more objectives based on meeting specified market penetration,
geographic business expansion goals, cost targets, and goals
relating to acquisitions or divestitures. If so specified by the
Committee, performance with respect to these business criteria
may be measured before or after payment of incentives or Awards
under the Plan, service fees, and extraordinary, special or
non-recurring items. The targeted level or levels of performance
with respect to such business criteria may be established at such
levels and in such terms as the Committee may determine, in its
discretion, including in absolute terms, as a goal relative to
performance in prior periods, or as a goal compared to the
performance of one or more comparable companies or an index
covering multiple companies.
(iii) Performance Period; Timing for Establishing
Performance Goals. Achievement of performance goals in respect of
such Performance Awards shall be measured over a performance
period of up to ten years, as specified by the Committee.
Performance goals shall be established not later than 90 days
after the beginning of any performance period applicable to such
Performance Awards, or at such earlier date as may be required or
permitted for "performance-based compensation" under Code Section
162(m). Annual incentive Performance Awards relating to an annual
performance period are specifically authorized.
(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring performance of the Company in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business
criteria set forth in Section 8(b)(ii) during the given
performance period, as specified by the Committee in accordance
with Section 8(b)(iii) . The Committee may specify the amount of
the Performance Award pool as a percentage of any of such
business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards, but may not exercise discretion to
increase any such amount payable to a Covered Employee in respect
of a Performance Award subject to this Section 8(b). The
Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant or other event (such
as a Change in Control) prior to the end of a performance period
or settlement of Performance Awards.
(c) Written Determinations. Determinations by the Committee
as to the establishment of performance goals, the amount
potentially payable in respect of Performance Awards, the
achievement of performance goals relating to Performance Awards,
and the amount of any final Performance Award shall be recorded
in writing, except in the case of Performance Awards not intended
to qualify under Section 162(m). Specifically, the Committee
shall certify in writing, in a manner conforming to applicable
regulations under Section 162(m), prior to settlement of each
such Award granted to a Covered Employee, that the performance
objective relating to operating profits and other material terms
of the Award upon which settlement of the Award was conditioned
have been satisfied. The Committee may not delegate any
responsibility relating to such Performance Awards, and the Board
shall not perform such functions at any time that the Committee
is composed solely of members who qualify as "outside directors"
under the Section 162(m) regulations.
9. Change in Control Provisions
(a) Effect of "Change in Control." In the event of a "Change
in Control," the following provisions shall apply unless
otherwise provided in the Award document:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable
and vested as of the time of the Change in Control;
(ii) The restrictions, deferral of settlement, and
forfeiture conditions, other than those relating to performance
goals and conditions, applicable to any other Award shall lapse
and such Awards shall be deemed fully vested as of the time of
the Change in Control, except to the extent of any waiver by the
Participant; and
(iii) With respect to any outstanding Award subject to
achievement of performance goals and conditions, such performance
goals and other conditions will be deemed to be met if and to the
extent so provided in the Award document relating to such Award
or other agreement with the Participant.
(b) For purposes of this Plan, a "Change in Control" shall
be deemed to have occurred on the first date, after April 1,
1999, on which any of the following has occurred:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act)(a "Person") of securities after which such Person
is the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A)
the then-outstanding shares of common stock of the Company (the
"Outstanding Common Stock") or (B) the combined voting power of
the then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not trigger a
Change in Control: (A) any acquisition directly from the Company
other than in connection with the acquisition by the Company or
its affiliates of a business, (B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (D) any acquisition by a lender to the
Company pursuant to a debt restructuring of the Company, (E) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of
this Section 9(b), and (F) an acquisition by a Person who was a
beneficial owner of more than 20% of the Outstanding Common Stock
at April 1, 1999 such acquisition, together with all other
acquisitions of such person, does not constitute more than five
percent of the then Outstanding Common Stock or does not result
in such Person's beneficial ownership exceeding his or her
percentage of the Outstanding Common Stock beneficially owned at
April 1, 1999;
(ii) Individuals who, as of April 1, 1999, constitute
the Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board;
(iii) Consummation of a reorganization, merger or
consolidation of the Company or any direct or indirect subsidiary
of the Company or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination (which
shall include for these purposes, without limitation, a
corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Common Stock and Outstanding Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination and any Person beneficially owning,
immediately prior to such Business Combination, directly or
indirectly, 20% or more of the Outstanding Common Stock or
Outstanding Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined voting
power of the then-outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or (iv) Approval
by the stockholders of the Company of a complete liquidation or
dissolution of the Company other than to a corporation which
would satisfy the requirements of clauses (A), (B) and (C) of
subsection (iii) of this Section 9(b), assuming for this purpose
that such liquidation or dissolution was a Business Combination.
10. Additional Award Forfeiture Provisions
(a) Forfeiture of Options and Other Awards and Gains
Realized Upon Prior Option Exercises. Unless otherwise determined
by the Committee, each Award granted hereunder after the
Company's 1999 Annual Meeting of Stockholders (or prior thereto
if the applicable Award agreement is amended to so provide) shall
be subject to the following additional forfeiture conditions, to
which each Participant who accepts an Award hereunder shall
agree. If any of the events specified in Section 10(b)(i), (ii),
or (iii) occurs (a "Forfeiture Event"), all of the following
forfeitures will result:
(i) The unexercised portion of the Option, whether or
not vested, and any other Award not then settled (except for an
Award that has not been settled solely due to an elective
deferral by the Participant) will be immediately forfeited and
cancelled upon the occurrence of the Forfeiture Event; and
(ii) The Participant will be obligated to repay to the
Company, in cash, within five business days after demand is made
therefor by the Company, the total amount of Option Gain (as
defined herein) realized by Participant upon each exercise of an
Option that occurred on or after (A) the date that is six months
prior to the occurrence of the Forfeiture Event, if the
Forfeiture Event occurred while Participant was employed by the
Company or a subsidiary, or (B) the date that is six months prior
to the date Participant's employment by the Company or a
subsidiary terminated, if the Forfeiture Event occurred after
Participant ceased to be so employed. For purposes of this
Section, the term "Option Gain" in respect of a given exercise
shall mean the product of (X) the Fair Market Value per share of
Stock at the date of such exercise (without regard to any
subsequent change in the market price of shares) minus the
exercise price times (Y) the number of shares as to which the
Option was exercised at that date.
(b) Events Triggering Forfeiture. The forfeitures specified
in Section 10(a) will be triggered upon the occurrence of any one
of the following Forfeiture Events at any time during
Participant's employment by the Company or a subsidiary or during
the one-year period following termination of such employment (but
not later than 18 months after the Award terminates or, in the
case of an Option, is fully exercised):
(i) Participant, acting alone or with others, directly
or indirectly, (A) engages, either as employee, employer,
consultant, advisor, or director, or as an owner, investor,
partner, or stockholder unless the Participant's interest is
insubstantial, in any business in an area or region in which the
Company conducts business at the date the event occurs, which is
directly in competition with a business then conducted by the
Company or a subsidiary, except for such participation both after
termination of employment with or service to the Company and
after a Change in Control; (B) induces any customer or supplier
of the Company or a subsidiary with whom Participant has had
contacts or relationships, directly or indirectly, during and
within the scope of his employment with the Company or any
subsidiary, to curtail, cancel, not renew, or not continue his or
her or its business with the Company or any subsidiary; or (C)
induces, or attempts to influence, any employee of or service
provider to the Company or a subsidiary to terminate such
employment or service. The Committee shall, in its discretion,
determine which lines of business the Company conducts on any
particular date and which third parties may reasonably be deemed
to be in competition with the Company. For purposes of this
Section 10(b)(i), a Participant's interest as a stockholder is
insubstantial if it represents beneficial ownership of less than
five percent of the outstanding class of stock, and a
Participant's interest as an owner, investor, or partner is
insubstantial if it represents ownership, as determined by the
Committee it its discretion, of less than five percent of the
outstanding equity of the entity;
(ii) Participant discloses, uses, sells, or otherwise
transfers, except in the course of employment with or other
service to the Company or any subsidiary, any proprietary
information of the Company or any subsidiary so long as such
information has not otherwise been disclosed to the public or is
not otherwise in the public domain, except as required by law or
pursuant to legal process, or Participant makes statements or
representations, or otherwise communicates, directly or
indirectly, in writing, orally, or otherwise, or takes any other
action which may, directly or indirectly, disparage or be
damaging to the Company or any of its subsidiaries or affiliates
or their respective officers, directors, employees, advisors,
businesses or reputations, except as required by law or pursuant
to legal process; or
(iii) Participant fails to cooperate with the Company
or any subsidiary by making himself or herself available to
testify on behalf of the Company or such subsidiary in any
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, or otherwise fails to assist
the Company or any subsidiary in any such action, suit, or
proceeding by providing information and meeting and consulting
with members of management of, other representatives of, or
counsel to, the Company or such subsidiary, as reasonably
requested.
(c) Agreement Does Not Prohibit Competition or Other
Participant Activities. Although the conditions set forth in this
Section 10 are deemed to be incorporated into an Award, a
Participant is not thereby prohibited from engaging in any
activity, including but not limited to competition with the
Company and its subsidiaries. Rather, the non-occurrence of the
Forfeiture Events set forth in Section 10(b) is a condition to
Participant's right to realize and retain value from his or her
compensatory Options and Awards, and the consequence under the
Plan if Participant engages in an activity giving rise to any
such Forfeiture Event, which Forfeiture Events and activities are
hereby acknowledged to be harmful to the Company, are the
forfeitures specified herein. The Company and Participant shall
not be precluded by this provision or otherwise from entering
into other agreements concerning the subject matter of Section
10(a) and 10(b).
(d) Right of Setoff. Participant agrees that the Company or
any subsidiary may, to the extent permitted by applicable law,
deduct from and set off against any amounts the Company or a
subsidiary may owe to Participant from time to time, including
amounts owed as wages or other compensation, fringe benefits, or
other amounts owed to Participant, such amounts as may be owed by
Participant to the Company under Section 10(a), although
Participant shall remain liable for any part of Participant's
payment obligation under Section 10(a) not satisfied through such
deduction and setoff.
(e) Committee Discretion. The Committee may, in its
discretion, waive in whole or in part the Company's right to
forfeiture under this Section, but no such waiver shall be
effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may
impose additional conditions on Awards, by inclusion of
appropriate provisions in the document evidencing any such Award.
11. General Provisions.
(a) Compliance with Legal and Other Requirements. The
Company may, to the extent deemed necessary or advisable by the
Committee, postpone the issuance or delivery of Stock or payment
of other benefits under any Award until completion of such
registration or qualification of such Stock or other required
action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock
exchange or automated quotation system upon which the Stock or
other securities of the Company are listed or quoted, or
compliance with any other obligation of the Company, as the
Committee may consider appropriate, and may require any
Participant to make such representations, furnish such
information and comply with or be subject to such other
conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in
compliance with applicable laws, rules, and regulations, listing
requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the
Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation
that results or would result in any postponement of the issuance
or delivery of Stock or payment of benefits under any Award or
the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than
theretofore existed.
(b) Limits on Transferability; Beneficiaries. No Award or
other right or interest of a Participant under the Plan shall be
pledged, hypothecated or otherwise encumbered or subject to any
lien, obligation or liability of such Participant to any party
(other than the Company or a subsidiary), or assigned or
transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the
death of a Participant, and such Awards or rights that may be
exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights (other
than ISOs and SARs in tandem therewith) may be transferred to one
or more transferees during the lifetime of the Participant, and
may be exercised by such transferees in accordance with the terms
of such Award, but only if and to the extent such transfers are
permitted by the Committee pursuant to the express terms of an
Award document (subject to any terms and conditions which the
Committee may impose thereon). A Beneficiary, transferee, or
other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of
the Plan and any Award document applicable to such Participant,
except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate
by the Committee.
(c) Adjustments. In the event that any large, special and
non-recurring dividend or other distribution (whether in the form
of cash, Stock, or other property), recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution
or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Committee to be
appropriate under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in
connection with Awards granted thereafter, (ii) the number and
kind of shares of Stock by which annual per-person Award
limitations are measured under Section 5, (iii) the number and
kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or
purchase price relating to any Award or, if deemed appropriate,
the Committee may make provision for a cash payment to the holder
of an outstanding Award. In addition, the Committee is authorized
to make adjustments in the terms and conditions of, and the
criteria included in, Awards (including Performance Awards and
performance goals) in recognition of unusual or nonrecurring
events (including, without limitation, events described in the
preceding sentence, as well as acquisitions and dispositions of
businesses and assets) affecting the Company, any subsidiary or
any business unit, or the financial statements of the Company or
any subsidiary, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or
business conditions or in view of the Committee's assessment of
the business strategy of the Company, any subsidiary or business
unit thereof, performance of comparable organizations, economic
and business conditions, personal performance of a Participant,
and any other circumstances deemed relevant; provided that no
such adjustment shall be authorized or made if and to the extent
that such authority or the making of such adjustment would cause
Options, SARs, Performance Awards granted under Section 8(b) to
Participants designated by the Committee as Covered Employees and
intended to qualify as "performance-based compensation" under
Code Section 162(m) and regulations thereunder to otherwise fail
to qualify as "performance-based compensation" under Code Section
162(m) and regulations thereunder. No authority to make
adjustments is conferred under the Plan to the extent that,
solely due to such authority, an Award would be accounted for as
a "variable" award under APB 25.
(d) Taxes. The Company and any subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Stock, or any
payroll or other payment to a Participant, amounts of withholding
and other taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as
the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in
respect thereof in satisfaction of a Participant's mandatory
withholding obligations, either on a mandatory or elective basis
in the discretion of the Committee; provided, however, that the
number of shares withheld shall be rounded down if rounding up
would result in withholding of a greater value than the mandatory
tax withholding amount. No authority to withhold is conferred
under the Plan to the extent that, solely due to such authority,
an Award would be accounted for as a "variable" award under APB
25.
(e) Changes to the Plan. The Board may amend, suspend, or
terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or
Participants; provided, however, that, except in the case of
adjustments authorized under Section 11(c); and provided further,
that any amendment to the Plan shall be subject to the approval
of the Company's stockholders not later than the annual meeting
for which the record date is after the date of such Board action
if such stockholder approval is required by any federal or state
law or regulation or the rules of any stock exchange or automated
quotation system on which the Stock may then be listed or quoted,
and the Board may otherwise, in its discretion, determine to
submit other amendments to the Plan to stockholders for approval;
and provided further that, without the consent of an affected
Participant, no such Board action may materially and adversely
affect the rights of such Participant under any outstanding
Award. Anything in the Plan to the contrary notwithstanding, if
any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for
the right hereunder, be eligible for such accounting treatment,
the Committee may modify or adjust the right so that pooling of
interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the
cash otherwise payable hereunder for the right which caused the
transaction to be ineligible for pooling of interest accounting.
(f) Limitation on Rights Conferred under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i)
giving any Eligible Person or Participant the right to continue
as an Eligible Person or Participant or in the employ or service
of the Company or a subsidiary, (ii) interfering in any way with
the right of the Company or a subsidiary to terminate any
Eligible Person's or Participant's employment or service at any
time, (iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly
with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company
unless and until the Participant is duly issued or transferred
shares of Stock in accordance with the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan
is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made
to a Participant or obligation to deliver Stock pursuant to an
Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a
general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock,
other Awards or other property, or make other arrangements to
meet the Company's obligations under the Plan. Such trusts or
other arrangements shall be consistent with the "unfunded" status
of the Plan unless the Committee otherwise determines with the
consent of each affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the
Company for approval shall be construed as creating any
limitations on the power of the Board or a committee thereof to
adopt such other incentive arrangements as it may deem desirable,
including incentive arrangements and awards which do not qualify
under Code Section 162(m) and including the granting of awards
otherwise than under the Plan, and such arrangements may be
either applicable generally or only in specific cases.
(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee, in the event of a
forfeiture of an Award with respect to which a Participant paid
cash consideration, the Participant shall be repaid the amount of
such cash consideration. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of
the Company that Options and SARs granted to Covered Employees
and other Awards designated as Awards to Covered Employees
subject to Section 8 shall constitute qualified
"performance-based compensation" within the meaning of Code
Section 162(m) and regulations thereunder (including Proposed
Regulation 1.162-27). Accordingly, the terms of Sections 8(b),
(c), and (d), including the definitions of Covered Employee and
other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder.
The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet
been completed, the term Covered Employee as used herein shall
mean only a person designated by the Committee, at the time of
grant of a Performance Award, as likely to be a Covered Employee
at the time compensation may be received by the Participant in
respect of such Award. If any provision of the Plan or any Award
document relating to a Performance Award that is designated as
intended to comply with Code Section 162(m) does not comply or is
inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such
requirements, and no provision shall be deemed to confer upon the
Committee or any other person discretion to increase the amount
of compensation otherwise payable in connection with any such
Award upon attainment of the applicable performance objectives.
(k) Governing Law. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award
document shall be determined in accordance with the laws of the
state of Delaware and applicable federal law.
(l) Other Company Benefit and Compensation Plans. Unless
otherwise specifically determined by the Committee, compensation
received by a Participant in connection with any Award shall not
be deemed a part of the Participant's regular compensation for
purposes of calculating payments or benefits from any benefit
plan, severance program or severance pay law of any country.
(m) Awards to Participants Outside the United States. The
Committee may modify the terms of any Award under the Plan made
to or held by a Participant who is then resident or primarily
employed outside of the United States in any manner deemed by the
Committee to be necessary or appropriate in order that such Award
shall conform to laws, regulations, and customs of the country in
which the Participant is then resident or primarily employed, or
so that the value and other benefits of the Award to the
Participant, as affected by foreign tax laws and other
restrictions applicable as a result of the Participant's
residence or employment abroad, shall be comparable to the value
of such an Award to a Participant who is resident or primarily
employed in the United States. An Award may be modified under
this Section 11(m) in a manner that is inconsistent with the
express terms of the Plan, so long as such modifications will not
contravene any applicable law or regulation or result in actual
liability under Exchange Act Section 16(b) for the Participant
whose Award is modified.
(n) Awards Granted Prior to Amendment and Restatement. An
Award granted under the Plan prior to the effectiveness of the
amendment and restatement of the Plan in 1999 shall be governed
by the express terms of the agreement evidencing such Award and
by the terms of the Plan as applicable to such Award prior to the
amendment and restatement of the Plan, except that Section
8.1.3.5 of the Plan as previously in effect shall not be deemed
to authorize sales of any Option shares to the Company to pay the
exercise price of an Option, and the provisions of Section 11(b)
of the Plan (as amended and restated) shall govern Options in
lieu of any restriction on transferability imposed under the Plan
as previously in effect.
(o) Effective Date, Stockholder Approval, and Plan
Termination. The Effective Date of the amendment and restatement
of the Plan shall be the date upon which the stockholders of the
Company have approved the amended and restated Plan by the
affirmative votes of the holders of a majority of the voting
securities of the Company present, or represented, and entitled
to vote on the subject matter at a duly held meeting of
stockholders. Unless earlier terminated by action of the Board of
Directors, the Plan will remain in effect until such time as it
is terminated by the Board.
<PAGE>
Form of Proxy Card
VASCO Data Security International, Inc.
1901 S. Meyers Road, Suite 210
Oakbrook Terrace, IL 60181
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints T. Kendall Hunt and Gregory T.
Apple, and each of them, with or without the other, as the true
and lawful proxies of the undersigned, with full power of
substitution, to vote as designated below, all shares of Common
Stock, $.001 par value per share, of VASCO Data Security
International, Inc. (the "Company") that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the
Company (the "Annual Meeting"), to be held at 1901 South Meyers
Road, Suite 130, Oakbrook Terrace, Illinois 60181 on Tuesday,
June 15, 1999 at 10:00am, local time, and all adjournments
thereof, all in accordance with and as more fully described in
the Notice and accompanying Proxy Statement for such meeting,
receipt of which is hereby acknowledged.
The shares represented by this proxy, when this proxy is
properly executed, will be voted in the manner directed herein by
the undersigned, if no direction is made, the shares represented
by this proxy will be voted "FOR" the election of the nominees
herein listed, and "FOR" the ratification of KPMG LLP as the
Company's independent auditors for the fiscal year ending
December 31, 1999 and "FOR" the approval of the Amended and
Restated 1997 Stock Compensation Plan.
PLEASE MARK VOTES IN BOXES BELOW USING DARK INK ONLY
For Withheld For All All All Except For Against Abstain
1. Election of Directors
Director Nominees: Michael P. Cullinane, Christian Dumolin, Pol
Hauspie, Mario R. Houthooft, T. Kendall Hunt, Forrest D. Laidley
and Michael A. Mulshine.
For All / / Withheld All / / For All Except / /
- ----------------------
Nominee Exceptions
2. To ratify the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ending December 31,
1999.
3. To approve the Amended and Restated 1997 Stock
Compensation Plan.
4. In discretion, the proxies are authorized to vote on such
other matters as may properly come before the Annual Meeting or
any adjournments thereof.
Comments/ Date: , 1999
Change Of Signature(s)
Address Signature(s)
Note: Please sign exactly as name appears on this proxy. When
Shares are held by joint tenants, both should sign. When signing
As attorney, executor, administrator, trustee, guardian,
corporate officer or partner, give full title as such. If a
corporation, please sign in corporate name by an authorized
officer. If a partnership, please sign in partnership name by an
authorized person.
PLEASE VOTE, SIGN EXACTLY AS NAME APPEARS ABOVE, DATE AND RETURN
THIS PROXY FORM PROMPTLY USING THE ENCLOSED POSTPAID ENVELOPE
