<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
DATUM, 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
DATUM INC.
[LOGO]
9975 TOLEDO
IRVINE, CALIFORNIA 92618
--------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 2000
--------
To the Stockholders of Datum Inc.:
Please take notice that the Annual Meeting of Stockholders of Datum Inc.
(the "Company") will be held at the DoubleTree Hotel, Irvine Spectrum, 90
Pacifica Avenue, Irvine, California, on Thursday, June 8, 2000, at 10:00 a.m.
local time, for the following purposes:
1. To elect two directors to Class I of the Company's Board of Directors
to serve until the 2003 Annual Meeting of Stockholders; and
2. To consider and vote upon a proposal to approve and adopt an
amendment to the Company's 1994 Stock Incentive Plan to increase the number of
shares issuable thereunder by 200,000 shares; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
At the Annual Meeting, the Board of Directors intends to present R.
David Hoover and Elizabeth A. Fetter as the nominees for election to the Board
of Directors.
Only stockholders of record on the books of the Company at the close of
business on April 21, 2000 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. A majority of the outstanding shares must be represented at the Annual
Meeting in order to transact business. Consequently, if you are unable to attend
in person, please execute the enclosed proxy and return it in the enclosed
addressed envelope. Your promptness in returning the proxy will assist in the
expeditious and orderly processing of the proxies.
If you return your proxy, you may nevertheless attend the Annual Meeting
and, if you wish, vote your shares in person.
By Order of the Board of Directors,
DATUM INC.
David A. Young
Secretary
Irvine, California
April 28, 2000
<PAGE> 3
DATUM INC.
[LOGO]
9975 TOLEDO
IRVINE, CALIFORNIA 92618
--------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 2000
--------
PROXY STATEMENT
--------
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Datum
Inc. (the "Company") for use at the Company's Annual Meeting of Stockholders to
be held at the DoubleTree Hotel, Irvine Spectrum, 90 Pacifica Avenue, Irvine,
California, on Thursday, June 8, 2000 at 10:00 a.m. local time, and at any and
all adjournments or postponements thereof. All shares represented by each
properly executed, unrevoked proxy received in time for the Annual Meeting will
be voted in the manner specified therein. If the manner of voting is not
specified in an executed proxy received by the Company, the proxy will be voted
FOR the election of the nominees to the Board of Directors listed in the proxy.
Any stockholder has the power to revoke his proxy at any time before it is
voted. A proxy may be revoked by delivering a written notice of revocation to
the Secretary of the Company, by presenting at the Annual Meeting a later-dated
proxy executed by the person who executed the prior proxy, or by attendance at
the Annual Meeting and voting in person by the person who executed the proxy.
This Proxy Statement is being mailed to the Company's stockholders on or
about April 30, 2000. The solicitation will be by mail and the cost will be
borne by the Company. Expenses will also include reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. Further solicitation of proxies may be made by telephone
or oral communication with some stockholders by the Company's regular employees
who will not receive additional compensation for the solicitation.
<PAGE> 4
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 5,885,932 shares of the Company's Common
Stock outstanding at the close of business on April 21, 2000 will be entitled to
notice of and to vote at the Annual Meeting or any adjournment or postponement
thereof. On each matter to be considered at the Annual Meeting, stockholders
will be entitled to cast one vote for each share held of record on April 21,
2000.
An automated system administered by the Company's transfer agent will
tabulate votes cast at the Annual Meeting. A majority of the shares entitled to
vote, represented in person or by proxy, will constitute a quorum at the Annual
Meeting. Abstentions and broker non-votes are each included in the determination
of the number of shares present and voting for the purpose of determining
whether a quorum is present, and each is tabulated separately. Abstentions will
be treated as shares present and entitled to vote for purposes of any matter
requiring the affirmative vote of a majority or other proportion of the shares
present and entitled to vote. With respect to shares relating to any proxy as to
which a broker non-vote is indicated on a proposal, those shares will not be
considered present and entitled to vote with respect to any such proposal.
Abstentions or broker non-votes or other failures to vote will have no such
effect in the election of directors, who will be elected by a plurality of the
affirmative votes cast.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 21, 2000, (i) by each person
(or group of affiliated persons) who is known by the Company to own beneficially
more than five percent of the Company's Common Stock; (ii) by each of the
Company's directors, including the Company's Chief Executive Officer (the
"CEO"); (iii) by each of the four other most highly compensated executive
officers, other than the CEO (collectively the "Named Executive Officers"); and
(iv) by all directors and executive officers as a group. Except as indicated in
the footnotes to this table, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS (1) OWNED OWNED
- -------------------- ------------ -------------
<S> <C> <C>
State of Wisconsin Investment Board 587,600(2) 10.0%
121 East Wilson Street
Madison, WI 53707
Dimensional Fund Advisors Inc. 422,700(3) 7.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
G. Tilton Gardner, Director 28,500(4) *
R. David Hoover, Director 16,000(4) *
Louis B. Horwitz, Director 241,219(4)(5) 4.1%
Michael M. Mann, Director 59,500(4)(6) 1.0%
Dan L. McGurk, Director 51,500(4) *
Edward A. Money, Director 53,500(4) *
Elizabeth A. Fetter, Director 0 *
Erik H. van der Kaay, Chief Executive Officer, 112,998(4)(7)(8)(9) 1.9%
President and Chairman of the Board
Michael J. Patrick, Vice President 4,574(4)(9) *
John (Jack) R. Rice, Vice President 36,429(4)(9) *
Raymond L. Waguespack, Vice President 24,870(4)(9) *
David A. Young, Vice President 34,748(4)(9) *
and Chief Financial Officer
All Officers and Directors 766,763(10) 12.3%
as a Group (13 persons)
</TABLE>
- ------------------
*Less than 1%
<PAGE> 6
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of April
21, 2000 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of
each other person. To the Company's knowledge, except as set forth in
the footnotes to this table and subject to applicable community property
laws, each person named in the table has sole voting and investment
power with respect to the shares set forth opposite such person's name.
Information with respect to beneficial ownership is based upon the
Company's stock records and data supplied to the Company by the holders.
(2) Based upon Schedule 13G filed with the Securities and Exchange
Commission on February 10, 2000.
(3) Based upon Schedule 13G filed with the Securities and Exchange
Commission on February 4, 2000.
(4) Included in the total number of shares listed are 10,500 shares for Mr.
Gardner, 12,000 shares for Mr. Hoover, 77,500 shares for Mr. Horwitz,
18,500 shares for Dr. Mann, 26,500 shares for Mr. McGurk, 24,000 for Mr.
Money, 72,500 shares for Mr. van der Kaay, 3,750 shares for Mr. Patrick,
33,875 shares for Mr. Rice, 17,624 shares for Mr. Waguespack, and 27,500
shares for Mr. Young which may be acquired within sixty days of April
21, 2000 upon exercise of outstanding options.
(5) Includes 5,195 shares held for the account of Mr. Horwitz in the
Company's Savings and Retirement Plan. Does not include 26,000 shares
owned by an adult child of Mr. Horwitz.
(6) Includes 33,000 shares that are subject to shared voting and investment
powers. These shares are owned by Blue Marble Development Group, Inc.
Defined Benefit Pension Plan and Trust, of which Dr. Mann and his spouse
are co-trustees.
(7) Mr. van der Kaay was elected Chairman of the Board of Directors
effective January 1, 2000.
(8) Includes 30,000 shares of restricted Common Stock granted upon
employment. (See "Executive Compensation - Severance and Consulting
Agreements")
(9) Included in the total number of shares listed are 498 shares held for
the account of Mr. Van der Kaay in the Company's Savings and Retirement
Plan, 423 shares held for the account of Mr. Patrick, 2,555 shares held
for the account of Mr. Rice, 3,929 shares held for the account of Mr.
Waguespack, and 2,085 shares held for the account of Mr. Young. Also
includes 498 shares to which Mr. Young has shared voting or investment
powers.
(10) Includes 349,424 shares which may be acquired within sixty days after
April 21, 2000, upon exercise of outstanding options. Also includes
16,284 shares held for the account of officers and directors in the
Company's Savings and Retirement Plan.
4
<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a classified
Board of Directors. The Board is divided into three classes designated Class I,
Class II and Class III. The term of each director included in Class I expires at
this Annual Meeting and, consequently, the nominees listed below under the
heading "Class I" are being presented for election as directors to hold office
until the Annual Meeting of Stockholders in 2003. The term of office of each
director included in Class II will continue until the Annual Meeting of
Stockholders in 2001. The term of office of each director in Class III will
continue until the Annual Meeting of Stockholders in 2002.
Mr. Hoover and Ms. Fetter are being presented by the Board for election
as directors to serve as members of Class I until the Annual Meeting of
Stockholders in 2003. Mr. Hoover and Ms. Fetter are presently serving as
directors of the Company, Ms. Fetter having been appointed to the Board at a
Board meeting held on March 9, 2000. Mr. Edward Money, who has been serving as a
Class I director, is not standing for re-election to the Board of Directors this
year, and will cease being a director on June 8, 2000. Unless instructed to the
contrary, the shares represented by the proxies will be voted in favor of the
election of Mr. Hoover and Ms. Fetter as directors. Although it is anticipated
that each nominee will be able to serve as a director, should any nominee become
unavailable to serve, the proxies will be voted for such other person or persons
as may be designated by the Company's Board of Directors. The persons receiving
the highest number of votes will be elected as directors. Stockholders do not
have the right to cumulate votes in the election of directors.
Certain information as of April 21, 2000 with respect to the two
nominees for election as directors and with respect to each director whose term
of office continues is set forth below.
<TABLE>
<CAPTION>
Name of Individual Age Positions Held
------------------ --- --------------
<S> <C> <C>
CLASS I
R. David Hoover 54 Director
Elizabeth A. Fetter 41 Director
CLASS II
Erik H. van der Kaay 59 Chief Executive Officer, President and
Chairman of the Board
Louis B. Horwitz 72 Director
Dan L. McGurk 73 Director
CLASS III
G. Tilton Gardner 64 Director
Michael M. Mann 60 Director
</TABLE>
R. David Hoover has been a director of the Company since 1995. Mr.
Hoover is currently President, Vice Chairman and Chief Financial Officer of Ball
Corporation. From 1998 through 1999, Mr. Hoover was Vice Chairman and Chief
Financial Officer of Ball Corporation. From 1995 to 1998, he was Executive Vice
President and Chief Financial Officer of Ball Corporation. From 1993 to 1995, he
was Senior Vice President and Chief Financial Officer of Ball Corporation. Mr.
Hoover is currently a director of Ball Corporation and of Energizer Holdings,
Inc.
5
<PAGE> 8
Elizabeth A. Fetter has been a director of the Company since March,
2000. She is currently serving as Chief Executive Officer and President of
NorthPoint Communications. Formerly, she was Vice President and General Manager,
Consumer Services Group, for U.S. West. Ms. Fetter is currently a director of
NorthPoint Communications, Andrew Corporation, General Magic Inc. and Berbee.
Erik H. van der Kaay is President and Chief Executive Officer of Datum
Inc., and, since January, 2000, Chairman of the Board. He has been a director of
the Company since his arrival at Datum in 1998. From 1990 to 1998, he held
various positions within Allen Telecom, most recently as Executive Vice
President. Mr. van der Kaay is currently a director of RF MicroDevices and
TranSwitch Corporation.
Louis B. Horwitz was Chairman of the Board from 1976 through 1999. Upon
joining the Company in October 1976, through April 1998, Mr. Horwitz served as
President and Chief Executive Officer. Prior to joining the Company, he was an
independent management consultant and an Executive Vice President of Xerox Data
Systems. Mr. Horwitz became a member of the Datum Board of Directors in 1975.
Dan L. McGurk is Chairman of the Board of Southland Title Corporation.
Formerly, he was President of Xerox Data Systems and prior to that Associate
Director of the Office of Management and Budget, Executive Office of the
President of the United States. Mr. McGurk joined the Datum Board of Directors
in 1977.
G. Tilton Gardner has been a director of the Company since 1976. Mr.
Gardner is currently a Managing Director of Roth Capital Partners. From February
1993 until January 1998, he was Executive Vice President of Van Kasper & Company
Investment Bankers. From 1965 until 1988, he was associated with Morgan,
Olmstead, Kennedy & Gardner Incorporated, an investment banking firm, serving as
Chief Executive Officer and Chairman of the Board from 1976. In 1988, that
company was combined with Wedbush Securities to form Wedbush Morgan Securities,
for which Mr. Gardner served as Executive Vice President until February 1993.
Michael M. Mann is the President of Blue Marble Development Group, Inc.,
the Chairman of Management Technology, Inc., and an outside director of several
closely held companies in the technology, health services and consumer goods
sectors. Dr. Mann is an adjunct professor of Industrial and Systems Engineering
at the University of Southern California, serves as a chair with the TEC, and is
a member of the Board of Examiners of the Malcolm Baldridge National Quality
Award. He joined the Datum Board of Directors in 1989.
The Board of Directors held nine meetings during the fiscal year ended
December 31, 1999. Each director attended all meetings of the Board of Directors
and each committee on which that director served. Each member of the Board of
Directors received $1,000 per month during the fiscal year ended December 31,
1999 for his services as a director, except that from August 1, 1998 to December
31, 1999, Mr. Horwitz received $4,166.67 per month for his services as a
non-employee Chairman of the Board. In addition, each other non-employee member
of the Board of Directors received $1,000 for each meeting attended and $500 for
each meeting of a committee of the Board attended by that director, other than
committee meetings held in conjunction with meetings of the Board of Directors.
In addition, under the Company's 1994 Stock Incentive Plan, each incumbent
director who was not an employee of the Company was automatically granted a
non-qualified option to purchase 2,500 shares of the Company's Common Stock on
the first business day of calendar year
6
<PAGE> 9
1999. Such options (i) have an exercise price equal to the fair market value of
the Common Stock on the date of grant, (ii) vest in full one year from the date
of grant and (iii) have a ten year term.
The Board of Directors has an Audit Committee, a Compensation Committee,
a Nominating Committee, and an Executive Committee.
The principal duties of the Audit Committee are (i) to recommend to the
Board of Directors the selection of the Company's independent accountants, (ii)
to discuss and review with the Company's independent accountants the audit plan,
the auditors' report and management letter and the Company's accounting policies
and (iii) to review the accounting procedures and internal control procedures
recommended by the Company's independent accountants. The Audit Committee held
two meetings during the year ended December 31, 1999. The Audit Committee is
comprised of Messrs. Gardner, McGurk, and Mann. In April, 2000, the Company
adopted a new charter for the Audit Committee, in accordance with recently
released SEC and NASDAQ rules.
The principal duties of the Compensation Committee are (i) to administer
and approve the annual compensation rates of all officers and key employees of
the Company, (ii) to administer the incentive compensation, stock award, stock
option and other compensation plans of the Company and (iii) to make
recommendations to the Board in connection with such plans. The Compensation
Committee held two meetings during the year ended December 31, 1999. The
Compensation Committee is comprised of Messrs. McGurk, Gardner and Mann.
The principal duties of the Nominating Committee are (i) to conduct
reviews of the qualifications of candidates proposed for membership on the
Company's Board of Directors, and (ii) to make recommendations to the Board of
Directors based on such reviews. The Nominating Committee was formed following
the June 1998 meeting of the Board of Directors. The Nominating Committee held
one meeting during the year ended December 31, 1999. The Nominating Committee is
comprised of Messrs. Hoover, van der Kaay and Mann.
The principal duty of the Executive Committee is to serve as an advisory
board to assist the Company's Chief Executive Officer. The Executive Committee
was formed during the third quarter of 1999, and meet twice during the year
ending December 31, 1999. The Executive Committee is comprised of Messrs. Mann,
McGurk, Horwitz, and van der Kaay.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning
compensation of the Chief Executive Officer and the Named Executive Officers for
services rendered to the Company in all capacities during the three fiscal years
ended December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
---------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL OTHER
---------------------- STOCK AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (1) OPTION(#) ($) (2)
--------------------------- ---- --------- -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Erik H. van der Kaay (3) 1999 325,563 -0- 50,000 8,907
President, Chief Executive Officer and 1998 243,750 100,000 412,500 120,000 90,535
Chairman of the Board
Louis B. Horwitz (4) 1999 -0- -0- 2,500 150,000
President, Chief Executive Officer and 1998 188,781 -0- 30,000 139,889
Chairman of the Board
1997 275,000 172,000 -0- 3,756
John (Jack) R. Rice 1999 199592 77,580 10,000 4,800
Vice President of Datum Inc. 1998 180,000 96,500 10,500 5,863
and President of Datum - Austin 1997 160,000 28,500 10,000 2,923
Michael J. Patrick (5) 1999 149,540 32,000 10,000 4,800
Vice President of Datum Inc. 1998 85,565 30,000 15,000 50,559
and President of Datum - Irvine
Raymond L. Waguespack 1999 140,176 36,500 -0- 4,779
Vice President of Datum Inc. 1998 135,000 24,300 5,000 4,867
and President of International Sales 1997 125,000 48,500 6,750 4,324
David A. Young 1999 170,409 16,000 10,000 5,564
Vice President of Datum Inc. 1998 160,000 16,000 5,000 4,804
and Chief Financial Officer 1997 145,000 50,100 10,000 4,356
</TABLE>
- -----------------
(1) Amount shown represents 30,000 shares of Restricted Stock granted April
6, 1998, with a market valued of $13.75 per share. The Restricted Stock
vests over seven years with provisions for accelerated vesting if
certain financial conditions are met.
(2) Amounts shown represent Company contributions under the Company's
Savings and Retirement Plan for the listed executives. The amount for
Mr. van der Kaay for 1998 includes $87,160 for reimbursed relocation
expenses. The amount for Mr. Patrick for 1998 includes $48,150 for
reimbursed relocation expenses.
(3) Mr. van der Kaay was elected Chief Executive Officer, President and
Director effective April 6, 1998. Mr. van der Kaay was elected Chairman
of the Board January 1, 2000.
(4) Salary amounts for Mr. Horwitz include director's fees of $7,000 and
$12,000 for the years 1998 and 1997, respectively. Mr. Horwitz resigned
as President and Chief Executive Officer on July 31, 1998. The amounts
shown for Mr. Horwitz also include non-employee director's fees of
$50,000 and $20,833 for the years 1999 and 1998, respectively, and
management fees of $100,000 and $41,667 earned after retirement for the
years 1999 and 1998, respectively.
(5) Mr. Patrick began his employment with the Company May 4, 1998.
8
<PAGE> 11
OPTION MATTERS
Option Grants. The following table sets forth certain information
concerning grants of options to each of the Company's Named Executive Officers
during the fiscal year ended December 31, 1999. In addition, in accordance with
the rules and regulations of the Securities and Exchange Commission, the
following table sets forth the hypothetical gains or "option spreads" that would
exist for the options. Such gains are based on assumed rates of annual compound
stock appreciation of 5% and 10% from the date on which the options were granted
over the full term of the options. The rates do not represent the Company's
estimate or projection of future Common Stock prices and no assurance can be
given that the rates of annual compound stock appreciation assumed for the
purposes of the following table will be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION OPTION TERM
NAME GRANTED (#) FISCAL YEAR (1) PRICE ($/SH) DATE (2) 5% ($) 10% ($)
- ---- ----------- --------------- ------------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Erik H. van der Kaay 50,000 15.8 6.75 2/25/2009 212,252 875,388
Michael J. Patrick 10,000 3.2 7.00 10/1/2009 44,023 181,562
John (Jack) R. Rice 10,000 3.2 7.56 2/10/2009 47,544 196,087
Raymond L. Waguespack -0- 0.0 N/A N/A N/A N/A
David A. Young 10,000 3.2 7.56 2/10/2009 47,544 196,087
</TABLE>
- -------------------
(1) Options to purchase an aggregate of 316,500 shares of Common Stock were
granted to employees, including the Named Executive Officers during the
fiscal year ended December 31, 1999.
(2) Options granted have a term of 10 years, subject to earlier termination
in certain events related to termination of employment. Options become
exercisable in four equal annual installments from date of grant.
9
<PAGE> 12
Option Exercises. The following table sets forth certain information
concerning the exercise of options by each of the Company's Named Executive
Officers during the fiscal year ended December 31, 1999, including the aggregate
value of gains on the date of exercise. In addition, the table includes the
number of shares covered by both exercisable and unexercisable stock options as
of December 31, 1999. Also reported are the values for "in the money" options
which represent the positive spread between the exercise prices of any such
existing stock options and the fiscal year end price of the Company's Common
Stock ($6.5625 per share).
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)
SHARES ACQUIRED VALUE ------------------------------- --------------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Erik H. van der Kaay -0- -0- 30,000 140,000 -0- 143,750
Michael J. Patrick -0- -0- 3,750 21,250 -0- 26,250
John (Jack) R. Rice -0- -0- 26,375 24,125 80,625 20,620
Raymond L. Waguespack -0- -0- 14,687 7,125 29,982 -0-
David A. Young -0- -0- 20,000 20,000 46,250 20,620
</TABLE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has the
responsibility for administering and approving compensation programs involving
the Company's senior executives, including the Named Executive Officers.
Compensation may include a base salary, a variable incentive bonus, stock
options and/or stock grants. The Committee is composed of three independent,
non-employee directors.
The Company's executive compensation program is based upon the following
principles:
- There must be an appropriate correlation that provides a direct
tie between each executive's compensation and long-term
stockholder value.
- Compensation in all forms must be related to both the Company's
overall results and the individual's performance in the execution
of his or her responsibilities.
- There must be a balance between cash incentive and equity
compensation.
- Compensation is designed to fall in the median to high range of
that paid to comparable executives in other similarly-sized
corporations, with particular dependence placed upon salaries
listed in the surveys annually published by the American
Electronics Association (the "Surveys"). Some, but not all, of the
companies included in the Surveys are included in the Performance
Graph on page 13 of this Proxy Statement.
- Each compensation package must be designed to attract, retain and
motivate appropriate executives.
In applying the above principles to its review of an executive officer's
compensation, the Committee subjectively reviews the performance of each
executive officer but does not assign relative weights to any of the principles.
10
<PAGE> 13
The Company has not, and does not expect to, pay any compensation
for which an expense deduction would be disallowed under Section 162(m) of the
Internal Revenue Code of 1986, as amended, relating to the limitation of the
deduction of compensation in excess of $1,000,000 to certain executive officers
of publicly held companies. Any award under the Company's 1994 Stock Incentive
Plan should be deemed performance-based compensation and, accordingly, should
not be included in the calculation of an executive officer's compensation in
determining the applicability of Section 162(m).
The process of determining executive officer compensation for 1999,
including the Chief Executive officer's compensation to the extent not set
contractually, was based upon the Company's 1999 results after consideration of
the factors described above, and may be summarized as follows:
- In March 2000 the Company's Chief Executive Officer presented a
detailed analysis of the Company's performance for 1999 including
a review of each of the operating divisions, and an analysis of
each executive officer's performance in affecting the overall
results. Consideration was given to net operating income, economic
value added, growth, and development of new products. In addition,
actual operating results, for each executive, were compared to
specific assigned objectives which had been provided to them in
written form early in 1999.
- Using this information as a basis of performance, and considering
the available comparable compensation information in the Surveys,
the Chief Executive Officer prepared recommendations for
modification to each subordinate executive officer's compensation
package.
- On January 6, 2000, and March 8, 2000, the Compensation Committee
met to analyze the information prepared for its review and
considered the recommendations of the Chief Executive Officer with
regard to all executive officer salaries, except that of the Chief
Executive Officer.
- After in-depth discussion and consideration of the information,
the Committee examined three aspects of each executive officer's
compensation:
- Base pay and modification, if any.
- Incentive consideration, if any.
- Stock options and stock awards, if any.
- After review of the available data and comparable incentive
packages, the Compensation Committee adjusted salaries for the
Company's officers, awarded a bonus for 1999 based upon individual
performance to each of the officers, and granted additional stock
options to the officers, consistent with the Company's desire to
provide a balance of current income and long-term
performance-based incentive.
- The Committee then considered these matters for the Chief
Executive Officer in his absence. Consistent with the fiscal year
1998, Mr. van der Kaay requested that, in light of the Company's
financial performance and share valuation, he not receive any
increase in salary, nor be granted a bonus but, instead, be given
additional stock options. Mr. van der Kaay felt that this would
continue to align his interest with all other Datum shareholders.
After discussion and consideration of both the Company's
performance and Mr. van der Kaay's request, the Compensation
Committee awarded him 30,000 shares in options.
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<PAGE> 14
- The Committee then discussed the requirement to again establish
clear and defined objectives for 2000 for each of the Company's
officers. The Chairman stated that these objectives would be
submitted in written form for review by the Compensation
Committee.
The members of the Compensation Committee believe the Company's
compensation programs are consistent with the Company goals and have been
applied in a fair and even-handed manner in the best interests of the Company
and its stockholders.
Members of the Compensation Committee:
Dan L. McGurk, Chairman
G. Tilton Gardner
Michael M. Mann
Notwithstanding anything to the contrary set forth in the Company's previous
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the foregoing Report and the performance
graph on page 13 shall not be incorporated by reference into any such filings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1999, the Company's Board of
Directors, based upon the recommendations of the Compensation Committee,
established the levels of compensation for the Company's executive officers,
provided, however, the Company's Chairman of the Board, Chief Executive Officer
and President, Erik H. van der Kaay, has an employment agreement with the
Company and his compensation is primarily determined in accordance with the
terms and conditions of such agreement. The Compensation Committee consists of
Messrs. McGurk, Gardner and Mann.
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<PAGE> 15
PERFORMANCE GRAPH
This graph compares the Company's cumulative total return to
stockholders during the past five years with that of the NASDAQ Market Index and
the S&P Communications Equipment Index published by Media General Financial
Services, Inc. (a list of the companies comprising the S&P Communications
Equipment Index will be sent to any shareholder upon request).
COMPARE 5 YEAR CUMULATIVE TOTAL, RETURN AMONG DATUM INC.,
NASDAQ MARKET INDEX AND S&P GROUP INDEX (1)
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPANY/INDEX/MARKET 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
Datum Inc. 100.00 100.00 164.63 139.63 64.02 93.90
Communications Equipment 100.00 149.66 175.28 228.36 402.25 883.35
NASDAQ Market Index 100.00 129.71 161.18 197.16 278.08 490.46
</TABLE>
(1) Assumes $100 invested on January 1, 1995 and assumes dividends
reinvested.
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<PAGE> 16
EMPLOYMENT, SEVERANCE AND CONSULTING AGREEMENTS
In connection with the appointment of Erik H. Van der Kaay as President
and Chief Executive Officer of the Company, the Company entered into an
employment agreement (the "Employment Agreement") with Mr. Van der Kaay
effective April 6, 1998. The Employment Agreement provides that Mr. Van der Kaay
will serve as President and Chief Executive Officer and, so long as he is
employed under the Employment Agreement, the Company will nominate and recommend
his election as a member of the Board of Directors. The Employment Agreement
provides for an annual base salary of $325,000, which shall be reviewed annually
by the Compensation Committee. Mr. Van der Kaay is also entitled to participate
in other management incentive compensation plans. In connection with his
employment, Mr. Van der Kaay was granted options to purchase 120,000 shares of
Common Stock under the Company's 1994 Stock Incentive Plan. The options have an
exercise price of $13.75, the fair market value on April 6, 1998, and vest in
four equal annual installments. In addition, Mr. Van der Kaay was granted 30,000
shares of Common Stock under the 1994 Stock Incentive Plan which are subject to
forfeiture in the event his employment with the Company is terminated. Such
shares will vest, and become non-forfeitable, over seven years, with vesting
accelerated upon certain events. In the event Mr. Van der Kaay is terminated by
the Company without cause within the first twelve months, he is entitled to
severance pay equal to his then current monthly salary times the number of
months from the date of termination to the end of twenty-four months following
April 6, 1998. In the event such termination is twelve or more months following
April 6, 1998, the severance amount equals his monthly salary times twelve.
On October 9, 1992, the Company entered into a consulting agreement with
Mr. Horwitz (the "Consulting Agreement"). The Consulting Agreement provides for
consulting services to be provided commencing on the retirement of Mr. Horwitz
as an officer and employee of the Company and continues for twelve months
thereafter and may be renewed at the Company's option for successive additional
twelve month periods or any portion thereof. The initial term of the Consulting
Agreement commenced in August 1998. In the event of a "change of control" of the
Company (as defined in the Executive Agreement) while the Consulting Agreement
is in force, the term will be extended for a period of ten years from
commencement. Under the Consulting Agreement, Mr. Horwitz is to provide such
advice and consultation as the Company requests, including with respect to
strategic planning, management, financial analysis, product planning and other
corporate matters. As compensation, Mr. Horwitz will be paid $8,333.33 per day,
plus travel expenses, and will be guaranteed a minimum of twelve days of service
per year. In the event of death or disability prior to the end of the term of
the Consulting Agreement, or any renewal term, and prior to a change of control
of the Company, Mr. Horwitz, or his estate, shall be entitled to an amount equal
to the fee for twelve days of consulting. In the event of death or disability
after a change of control which results in an extension of the term, Mr.
Horwitz, or his estate, will be entitled to the minimum annual payments for the
balance of the term. The Consulting Agreement provides that it will be binding
on successors on the Company's business.
On July 29, 1999, in connection with the acquisition by merger of
Digital Delivery, Inc., the Company and Thomas Mark Hastings entered into an
Employment Agreement. The Employment Agreement provides that Mr. Hastings will
serve as a Vice President of the Company and as President of its E-Business
Solutions Division, and has a three year term. The Employment Agreement provides
for a base salary of $150,000 (subject to increase in the discretion of the
Board of Directors) and a bonus, to be determined annually by the Board of
Directors, not to exceed 40% of the base salary. In the event Mr. Hastings is
terminated without "cause" or resigns for "good reason" (both terms as defined)
prior to the expiration of the term of the Employment Agreement, Mr. Hastings
shall receive a severance payment equal his then-current base salary for one
year.
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<PAGE> 17
Effective October 29, 1999, the Company entered into Severance
Compensation Agreements with Erik van der Kaay, David Young, Paul Baia, Michael
Patrick, Jack Rice and Raymond Waguespack, the Company's executive officers. The
Severance Compensation Agreements are intended to encourage the Company's
executive officers to continue to provide the Company with their best efforts in
the circumstance that a change in control of the Company is proposed. Each of
the Severance Compensation Agreements have a three year term commencing upon a
"change in control" (as defined) of the Company, and provide that if the
executive is terminated within two years of a change in control (other than
through the executive's death, disability, retirement, termination for "cause"
or resignation without "good reason" (both terms as defined)), the executive
shall be entitled to a severance payment equal to the sum of (a) the executive's
highest base salary in effect during the twelve months leading up to the change
in control; and (b) the executive's incentive compensation bonus for the year in
which the termination takes place, calculated as though all performance criteria
with respect thereto had been meant; such sum to be multiplied by (i) in the
case of Mr. van der Kaay, 2.99; (ii) in the case of Mr. Young, 2.0; and (iii) in
the case of Messrs. Baia, Patrick, Rice and Waguespack, 1.0. The Severance
Compensation Agreements also provide that all unvested options or restricted
stock held by the executive shall vest as of such termination, and that the
executive shall continue to be eligible to receive the health and insurance
benefits he was receiving as of such termination until the earlier to occur of
one year and the date the executive is covered by benefits offered by a new
employer.
On February 17, 2000, the Company and Mr. Waguespack entered into a
Consulting Agreement, pursuant to which Mr. Waguespack would provide consulting
services to the Company with respect to its international sales efforts for a
three year term following Mr. Waguespack's retirement on May 1, 2000. The
Consulting Agreement provides for monthly compensation of $3,000 plus $1,000 per
day that Mr. Waguespack is required to travel in connection with providing such
consulting services. The Consulting Agreement also provides that, through the
term of the Consulting Agreement, the Company will continue to extend to Mr.
Waguespack and his spouse substantially the same health and insurance benefits
they received prior to Mr. Waguespack's retirement, and that Mr. Waguespack's
unvested stock options shall continue to vest during the term of the Consulting
Agreement on the same schedule as if Mr. Waguespack was still an employee of the
Company.
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<PAGE> 18
PROPOSAL 2
AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN TO INCREASE
THE TOTAL NUMBER OF SHARES ISSUABLE THEREUNDER
Subject to approval by the Company's stockholders, the Board of
Directors has amended the 1994 Stock Incentive Plan to increase the number of
shares of Common Stock issuable thereunder by 200,000 shares of Common Stock,
bringing the total number of shares of Common Stock subject to the 1994 Stock
Incentive Plan to 1,477,217 as of the date of the Annual Meeting, subject to the
annual share increases thereafter as provided in the 1994 Stock Incentive Plan.
All employees of the Company are currently eligible to participate in the 1994
Stock Incentive Plan. The additional shares available for issuance under the
1994 Stock Incentive Plan will give the Company increased flexibility in its
continued use of equity incentives to attract, retain and motivate its officers,
directors and key employees.
The essential features of the 1994 Stock Incentive Plan are summarized
below. The summary does not purport to be a complete description of the 1994
Stock Incentive Plan. The Company's stockholders may obtain a copy of the 1994
Stock Incentive Plan upon written request to the Secretary of the Company.
General Nature and Purposes
In June 1994, the stockholders of the Company approved the 1994
Incentive Stock Plan. This plan provides for the granting of incentive or
nonqualified options or restricted shares of the Company's common stock to the
Company's officers, directors and employees and also to consultants, business
associates and others with important business relationships with the Company.
The exercise price of the shares covered by each nonqualified option granted and
purchase price of restricted shares is determined by the Administrator. The
exercise price of common stock covered by each incentive option cannot be less
than the fair market value of such shares on the date of grant. As of December
31, 1998 there have been no nonqualified options issued less than the market
value on the date of grant and there have been no incentive options granted.
Generally, options vest in 25% increments over four years and have a 10-year
term. The initial shares available under the Plan for issuance was 250,000 with
annual increases of 50,000 on the last day of each calendar year. The
stockholders of the Company approved amendments of the Plan, providing for
200,000 additional option shares in March 1995, June 1997, and June 1998, to be
reserved for issuance thereunder. In June 1998, the stockholders also approved
an amendment to change the annual increase from 50,000 to 2% of the number of
shares of common stock outstanding as of the Company's fiscal year-end. As of
April 21, 2000, an aggregate of 1,124,550 shares of Common Stock were issued or
committed for issuance upon exercise of granted options under the 1994 Stock
Incentive Plan, leaving 152,667 remaining available for grant. In addition,
options for an additional 71,487 shares of Common Stock remain outstanding under
the Company's 1984 Stock Option Plan, which has terminated.
The purposes of the 1994 Stock Incentive Plan are to ensure the
retention of the services of existing executive personnel, key employees and
non-employee directors of the Company or its affiliates, to attract and retain
competent new executive personnel and key employees, to provide incentive to all
such personnel, employees and non-employee directors to devote their utmost
effort
16
<PAGE> 19
and skill to the advancement and betterment of the Company by permitting them to
participate in the ownership of the Company and thereby in the success and
increased value of the Company and to allow consultants, business associates and
others with important business relationships with the Company the opportunity to
participate in the ownership of the Company and thereby have an interest in the
success and increased value of the Company. As of the record date for the Annual
Meeting, 13 officers and directors and approximately 543 employees were eligible
to participate.
As discussed in more detail below, in general, the granting of future
stock options or rights to purchase shares under the 1994 Stock Incentive Plan
are not determinable at this time. However, the 1994 Stock Incentive Plan does
provide that non-employee directors shall be granted, on the first day of each
calendar year commencing in 1995, options to purchase 2,000 shares of Common
Stock and, commencing in 1999, options to purchase 2,500 shares of Common Stock.
Therefore, Messrs. McGurk, Gardner, Mann and Money received on January 1 of
1995, 1996, 1997 and 1998, options to purchase 2,000 shares of Common Stock and
on January 1 of 1999 and 2000, received options to purchase 2,500 shares of
Common Stock. Mr. Hoover received options to purchase 2,000 shares of Common
Stock on January 1, 1998 and on January 1 of 1999 and 2000 received options to
purchase 2,500 shares of Common Stock. As of the record date for the Annual
Meeting, options to purchase or grants of restricted stock in an aggregate
amount of 1,124,550 shares (net of cancelled options) have been granted under
the 1994 Plan to the following persons or groups: (i) Erik van der Kaay, 170,000
shares; (ii) Louis B. Horwitz, 100,000 shares; (iii) Michael J. Patrick, 25,000
shares; (iv) John (Jack) R. Rice, 50,500 shares, (v) Raymond L. Waguespack,
24,250 shares; (vi) David A. Young, 45,000 shares; and (vii) all current
executive officers as a group, 321,650, all current directors who are not
executive officers, 227,000 shares and all employees, including all current
officers who are not executive officers, as a group, 575,900 shares.
The 1994 Stock Incentive Plan is not subject to any of the provisions ERISA and
is not a qualified deferred compensation plan under Section 401(a) of the Code.
ADMINISTRATION
The 1994 Stock Incentive Plan may be administered by the Board of
Directors or by a Committee, at least two persons of which shall be directors of
the Company who shall be appointed by, and serve at the pleasure of, the Board
of Directors.
Subject to the limitations on eligibility discussed below and the
specific provisions of the 1994 Stock Incentive Plan, the Board of Directors or
the Committee, as the case may be (hereinafter the administering body is
referred to as the "Administrator"), has the full and final authority to
determine the persons to whom, and the time or times at which, incentive options
or nonqualified options shall be granted and restricted shares issued, the
number of shares to be represented by each incentive option or nonqualified
option and the number of restricted shares and the consideration to be received
by the Company upon the exercise or issuance and other terms and conditions
thereof. Determinations of the Administrator as to all matters of interpretation
of the 1994 Stock Incentive Plan are final and binding upon all participants and
prospective participants of the 1994 Stock Incentive Plan.
AMENDMENT AND TERMINATION OF THE 1994 STOCK INCENTIVE PLAN
The Board of Directors may from time to time alter, amend, suspend or
terminate the 1994 Stock Incentive Plan in such respects as the Board of
Directors may deem advisable; provided,
17
<PAGE> 20
however, that no such alteration, amendment, suspension or termination shall be
made that would substantially effect or impair the rights of any person under
any incentive option, nonqualified option or restricted share theretofore
granted to such person without his or her consent.
Unless previously terminated by the Board of Directors, the 1994 Stock
Incentive Plan will terminate on March 10, 2004.
ELIGIBILITY
Incentive Options. Officers and other key employees of the Company
(including directors if they also are employees of the Company), as may be
determined by the Administrator, who qualify for incentive stock options under
the applicable provisions of the Code, will be eligible for selection to receive
incentive options under the 1994 Stock Incentive Plan.
Nonqualified Options or Restricted Shares. Officers and other key
employees of the Company, any member of the Board of Directors, whether or not
he or she is employed by the Company, or consultants, business associates or
others with important business relationships with he Company will be eligible to
receive nonqualified options or restricted shares.
TERMS AND CONDITIONS OF OPTIONS AND RESTRICTED SHARES
Exercise and Purchase Price. The exercise price of the shares of Common
Stock covered by each nonqualified option granted and the purchase price of
restricted shares under the 1994 Stock Incentive Plan shall be determined by the
Administrator; provided, that the exercise price of the shares of Common Stock
covered by each incentive option granted under the 1994 Stock Incentive Plan
shall not be less than the fair market value of such shares on the date on which
the incentive option is granted; and provided further, that the exercise price
with respect to incentive options shall not be less than 110% of the fair market
value if the person to whom shares are granted owns 10% or more of the
outstanding stock of the Company.
Payment. Payment for shares upon exercise of an option or upon issuance
of restricted shares must be made in full at the time of exercise, or issuance
with respect to restricted shares. The consideration payable upon exercise of an
option shall, at the discretion of the Administrator, be paid: (i) in United
States dollars payable in cash, check, or bank draft; (ii) subject to any legal
restrictions on acquisition or purchase of its shares by the Company, by the
delivery of shares of Common Stock which shall be deemed to have a value of the
Company equal to the aggregate fair market value of such shares determined at
the date of such exercise; (iii) by the issuance of a promissory note in a form
acceptable to the Administrator; (iv) by cancellation of indebtedness of the
Company to the optionee; (v) by waiver of compensation due or accrued to the
optionee for services rendered; (vi) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the optionee irrevocably elects to exercise
his option and to sell a portion of the shares so purchased to pay for the
exercise price and whereby the NASD Dealer irrevocably commits upon receipt of
such shares to forward the exercise price directly to the Company; (vii)
provided that a public market for the Company's stock exists, through a "margin"
commitment from the optionee and a NASD Dealer whereby the optionee irrevocably
elects to exercise his option and to pledge the shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD Dealer in the
amount of exercise price, and whereby the NASD Dealer irrevocably commits upon
receipt of such shares to forward the exercise
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<PAGE> 21
price directly to the Company; or (viii) by any combination of the foregoing
methods of payment or any other consideration or method of payment as shall be
permitted by applicable corporate law, all as the Administrator shall in its
discretion determine. The consideration payable upon purchase of restricted
shares shall, at the discretion of the Administrator, be paid by any of the
methods set forth in clauses (i), (iii), (iv) or (v) above or any combination of
such methods of payment or any other consideration or method of payment as shall
be permitted by applicable law.
Term of Options. The term of each option granted under the 1994 Stock
Incentive Plan is determined by the Administrator at the time the option is
granted; provided, however, that no option granted under the 1994 Stock
Incentive Plan may have a term in excess of ten years; and provided further,
that incentive options shall expire within a period of not more than five years
if granted to a person who is the beneficial owner of 10% or more of the
outstanding stock of the Company.
Termination of Employment. In the event that an optionee who is an
employee of the Company shall cease to be employed by the Company for any
reason, including, without limitation, as a result of his or her death or
disability, (i) all incentive and nonqualified options granted to any such
optionee pursuant to the 1994 Stock Incentive Plan which are not exercisable at
the date of such cessation shall terminate immediately and become void and of no
effect, (ii) all incentive options granted to any such optionee pursuant to the
1994 Stock Incentive Plan which are exercisable at the date of such cessation
may be exercised at any time within such period to be determined by the
Administrator at the time of grant (which in the case of death or a disability
may be a different period), but in any event no later than the date of
expiration of the incentive option period, and if not so exercised within such
time shall become void and of no effect at the end of such time; provided,
however, that if any such incentive option is in fact exercised at any time
after three (3) months following the date of such cessation (or one year in the
case of death or disability), such option shall be a nonqualified option and not
an incentive option and (iii) all nonqualified options granted to any such
optionee pursuant to the 1994 Stock Incentive Plan which are exercisable at the
date of such cessation may be exercised at any time within such period to be
determined by the Administrator at the time of grant, but in any event no later
than the date of expiration of the nonqualified option period, and if not so
exercised within such time shall become void and of no effect at the end of such
time.
Limitation on Incentive Options. To the extent the aggregate fair market
value of the shares of Common Stock with respect to which incentive stock
options are exercisable for the first time by the optionee during any calendar
year exceeds $100,000, such options representing such excess shall be
nonqualified stock options.
AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS
Commencing in 1995, under the 1994 Stock Incentive Plan, each director
of the Company who is not an employee of the Company (a "non-employee director")
is automatically granted nonqualified options to purchase 2,000 shares of Common
Stock on the first business day of each calendar year, and commencing in 1999,
options to purchase 2,500 shares of Common Stock. The options granted to
non-employee directors (i) have an exercise price equal to the fair market value
of the Common Stock on the date the options are granted; (ii) have a term of ten
(10) years; (iii) vest in full one year from the date of the grant; and (iv)
otherwise be subject to the terms and provisions of the 1994 Stock Incentive
Plan. Notwithstanding any other term or provision contained in the 1994 Stock
Incentive Plan, neither the Boar of Directors no the Committee may amend the
amount, price or timing of the options granted under this provision more
frequently than every six (6) months
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<PAGE> 22
except to comport with changes in the Code or ERISA, or the rules thereunder, or
Rule 16b-3 promulgated under the Securities Exchange Act.
ADJUSTMENTS UPON CHANGES OF CAPITALIZATION AND REORGANIZATIONS
In the event that the outstanding shares of Common Stock are increased
or decreased or changed into or exchanged for a different number or kind of
shares or other securities of the Company by reasons of merger, consolidation or
reorganization in which the Company is the surviving corporation, or of a
recapitalization, stock split, combination of shares, reclassification,
reincorporation, stock dividend (in excess of 2%) or other change in the
corporate structure of the Company while the 1994 Stock Incentive Plan is in
effect, appropriate adjustments shall be made by the Board of Directors to the
aggregate number and kind of shares subject to the 1994 Stock Incentive Plan,
and the number and kind of share and the price per share subject to outstanding
incentive options, nonqualified options and restricted shares in order to
preserve, but not to increase, the benefits to persons then holding incentive
options, nonqualified options or restricted shares.
In the event that the Company at any time proposes to sell substantially
all of its assets, merge into, consolidate with or to enter into any other
reorganization in which the Company is not the surviving corporation, or if the
Company is the surviving corporation and the ownership of the outstanding
capital stock of the Company following the transaction changes by 50% or more as
a result of such transaction, the 1994 Stock Incentive Plan and all unexercised
incentive options or nonqualified options granted thereunder and all offers to
purchase restricted shares shall terminate, unless provision is made in writing
in connection with such transaction for (i) the continuance of the 1994 Stock
Incentive Plan and for the assumption of incentive options and nonqualified
options theretofore granted, and all outstanding offers to purchase restricted
shares, or the substitution for such incentive options, nonqualified options and
offers to purchase restricted shares of new options covering, and new offers to
purchase, shares of a successor corporation, with appropriate adjustments as to
number and kind of shares and prices, in which event the 1994 Stock Incentive
Plan and the incentive options, nonqualified options and offers to purchase
restricted shares theretofore granted or the new incentive options, nonqualified
options and new offers to purchase restricted shares substitutes therefore,
shall continue in the manner and under the terms so provided or (ii) the
substitution for the 1994 Stock Incentive Plan and all outstanding incentive
options and nonqualified options of a program or plan to provide rights to the
holders of such options to receive on exercise of such rights, the type and
amount of consideration they would have received had they exercise all options
prior to such transaction and less the aggregate exercise price of such options
(which rights shall vest and be generally subject to the terms of such options
in the case of unvested options). If such provision is not made in such
transaction, then the Administrator shall cause written notice of the proposed
transaction to be given to the persons holding incentive options, nonqualified
options or rights of purchase not less than thirty (30) days prior to the
anticipated effective date of the proposed transaction, and all incentive
options, nonqualified options and rights of purchase shall be accelerated and,
concurrent with the effective date of the proposed transaction, such persons
shall have the right to exercise incentive options, nonqualified options and
accept rights of purchase with respect to any or all shares then subject
thereto. The Administrator shall have the right, with respect to any specific
incentive option, nonqualified option or rights of purchase granted under the
1994 Stock Incentive Plan, to provide that all incentive options, nonqualified
options, or rights of purchase shall be accelerated in any event upon the
effective date of the proposed transaction.
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<PAGE> 23
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
participation in the 1994 Stock Incentive Plan.
INCENTIVE OPTIONS.
No taxable income will be recognized by an optionee under the 1994 Stock
Incentive Plan upon either the grant or the exercise of an incentive option.
Instead, a taxable event will occur upon the sale or other disposition of the
share acquired upon exercise of an incentive option, and the tax treatment of
the gain or loss realized will depend upon how long the shares were held before
their sale or disposition. As is discussed below, the exercise of an incentive
option and the subsequence disposition of the shares acquired also may result in
items of "tax preference" for purposes of the "alternative minimum tax."
If a sale or other disposition of the shares received upon the exercise
of an incentive option occurs more than (i) one year after the date of exercise
of the option and (ii) two years after the date of grant of the option, the
holder will recognize long-term capital gain or loss at such time equal to the
full amount of the difference between the proceeds realized and the exercise
price paid. However, a sale, exchange, gift or certain other transfers of legal
title of such stock before the expiration of either the one-year or two-year
period described above will constitute a "disqualifying disposition" and be
treated as a nonqualified option.
Section 55 of the Code imposes an "alternative minimum tax" on an
individual's income to the extent the amount of the alternative minimum tax
exceeds the individual's regular tax for the year. For purposes of computing the
alternative minimum tax, the excess of the fair market value (on the date of
exercise) of the shares received upon the exercise of an incentive option over
the exercise price paid is included in alternative minimum taxable income in the
year the option is exercise. If the shares are sold in the same year that the
option is exercised, the regular tax treatment and the alternative tax treatment
will be the same. If the shares are sold during a year subsequent to that in
which the option was exercised, the basis of the stock acquired will equal its
fair market value on the date of exercise for purposes of computing alternative
minimum taxable income in the year of sale. For example, assume that an
individual pays an exercise price of $10 to purchase stock having a fair market
value of $15 on the date of exercise. The amount included in alternative minimum
taxable income is $5, and the stock has a basis of $10 for regular tax purposes
and $15 for alternative minimum tax purposes. If the individual sells the stock
in a subsequent year for $20, the gain recognized is $10 for regular tax
purposes and $5 for alternative minimum tax purposes.
NONQUALIFIED OPTIONS
No taxable income is recognized by an optionee upon the grant of a
nonqualified option. Upon exercise, however, the optionee will recognize
ordinary income in the amount by which the fair market value of the shares
purchased exceeds, on the date of exercise, the exercise price paid for such
shares. The income recognized by the optionee will be subject to income tax
withholding by the Company out of the optionee's current compensation. Is such
compensation is insufficient to pay the taxes due, the optionee will be required
to make a direct payment to the Company for the balance of the tax withholding
obligation. The Company will be entitled to a tax deduction equal to the amount
of ordinary income recognized by the optionee, provided certain reporting
requirements are satisfied.
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<PAGE> 24
If the exercise price of a nonqualified option is paid by the optionee
in cash, the tax basis of the shares acquired will be equal to the cash paid
plus the amount of income recognized by the optionee as a result of such
exercise. If the exercise price is paid by delivering shares of Common Stock of
the Company already owned by the optionee or by a combination of cash and
already-owned shares, there will be no current taxable gain or loss recognized
by the optionee on the already-owned shares exchanged (however, the optionee
will nevertheless recognize ordinary income to the extent that the fair market
value of the shares purchased on the date of exercise exceeds the price paid, as
described above). The new shares received by the optionee equal in number to the
old shares exchanged will have the same tax basis and holding period as the
optionee's basis and holding period in the old shares. The balance of the shares
received will have a tax basis equal to any cash paid by the optionee plus the
amount of income recognized by the optionee as a result of such exercise, and
will have a holding period commending with the date of exercise.
Upon the sale or disposition of shares acquired pursuant to the exercise
of a nonqualified option. The difference between the proceeds realized and the
optionee's basis in the shares will be a capital gain or loss and will qualify
for long-term capital gain or loss treatment if the shares have been held for
more than the applicable statutory holding period.
RESTRICTED STOCK
The receipt of restricted stock will not result in a taxable event to
the Participant until the expiration of any repurchase rights retained by the
Company with respect to such stock, unless the participant makes an election
under Section 83(b) of the Code to be taxed as of the date of purchase. If no
repurchase rights are retained, or if a Section 83(b) election is made, the
participant will recognize ordinary income in an amount equal to the excess of
the fair market value of such shares on the date of purchase over the purchase
price paid for such shares. Even if the purchase price and the fair market value
of the shares are the same (in which case there would be no ordinary income), a
Section 83(b) election must be made to avoid deferral of the date ordinary
income is recognized. The election must be filed with the Internal Revenue
Service not later than thirty (30) days after the date of transfer.
If no Section 83(b) election is made or if no repurchase rights are
retained, a taxable event will occur on each date the participant's ownership
rights vest (e.g., when the Company's repurchase rights expire) as to the number
of shares that vest on that date, and the holding period for a long-term capital
gain purposes will not commence until the date the shares vest. The participant
will recognize ordinary income on each date shares vest in an amount equal to
the excess of the fair market value of such shares on that date over the amount
paid for such shares.
VOTE REQUIRED; BOARD OF DIRECTORS' RECOMMENDATION
Approval of the proposed amendment to the 1994 Stock Incentive Plan to
increase the total number of shares issuable thereunder will require the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present or represented and voting at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE PROPOSAL TO AMEND THE 1994 STOCK
22
<PAGE> 25
INCENTIVE PLANE TO INCREASE THE TOTAL NUMBER OF SHARES ISSUABLE THEREUNDER.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, based solely on review of copies of reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 1999, all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were satisfied.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, the Company's independent
accountants for the fiscal year ended December 31, 1999, was selected by the
Board of Directors, upon recommendation of the Audit Committee of the Board of
Directors, to act in the same capacity for the fiscal year ending December 31,
2000.
Representatives of PricewaterhouseCoopers LLP are expected to be present
at the Annual Meeting and they will be given an opportunity to make a statement
if they so desire and respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
All proposals of stockholders intended to be presented at the Company's
2000 Annual Meeting of Stockholders must be directed to the attention of the
Secretary of the Company, at the address of the Company set forth on the first
page of this Proxy Statement before January 1, 2001, if they are to be
considered for possible inclusion in the Proxy Statement and form of proxy used
in connection with the meeting.
On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934, as amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of
its discretionary proxy voting authority with respect to a stockholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the current year's anniversary of the date of mailing of the
prior year's proxy statement, then the Company will be allowed to use its
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
With respect to the Company's 2001 Annual Meeting of Stockholders, if
the Company was not provided notice of a stockholder proposal, which the
stockholder has not previously sought to include in the Company's proxy
statement, by January 1, 2001, the Company will be allowed to use its voting
authority as outlined.
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited balance
sheets as of the years ended December 31, 1999, and 1998, and audited statements
of operations and changes of cash flows for the three years ended December 31,
1999, accompanies this Proxy Statement. The Annual
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<PAGE> 26
Report is not to be regarded as proxy soliciting material or as a communication
by means of which any solicitation is to be made.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matter which will be acted upon at the Annual
Meeting. If any other matters are properly presented properly for action at the
Annual Meeting or at any adjournment or postponement thereof, the persons named
in the enclosed form of proxy will have discretion to vote on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
DATUM INC.
David A. Young
Secretary
Irvine, California
April 28, 2000
COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 WILL BE PROVIDED TO
STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY, DATUM INC.,
9975 TOLEDO WAY, IRVINE, CALIFORNIA 92618.
24
<PAGE> 27
PROXY
DATUM INC.
[Datum Logo]
9975 TOLEDO WAY
IRVINE, CALIFORNIA 92618
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Erik H. van der Kaay and David A. Young as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated on the reverse side, all
the shares of Common Stock of Datum Inc. held of record by the undersigned on
April 21, 2000, at the Annual Meeting of Stockholders to be held on June 8,
2000 and at any adjournment or postponement thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
/ FOLD AND DETACH HERE /
<PAGE> 28
Please mark [X]
your votes as
indicated in
this example
COMMON STOCK
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES LISTED BELOW.
<TABLE>
<CAPTION>
FOR ALL
nominees
listed
(except as WITHHOLD
indicated AUTHORITY
to the to vote for
contrary all nominees
hereon) listed FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C>
1. Election of Directors to Class I: [ ] [ ] 2. Approval of the Amendment of the [ ] [ ] [ ]
1994 Stock Incentive Plan to increase the total
number of shares issuable thereunder:
R. David Hoover and Elizabeth A. Fetter
INSTRUCTION: To withhold authority to vote for 3. In their discretion, the Proxies are authorized to vote
an individual nominee, write that nominee's name upon such other business as may properly come before the
in the space provided below: meeting or any adjournment or postponement thereof.
Please date this Proxy and sign it exactly as your name or
------------------------------------------------ names appear below. When shares are held by joint tenants,
both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as
such. If shares are held by a corporation, please sign in full
corporate name by the President or other authorized director.
If shares are held by a partnership, please sign in
partnership name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY
SHOWN, PLEASE PRINT CHANGES.
All other proxies heretofore given by the undersigned to vote
shares of stock of Datum Inc., which the undersigned would be
entitled to vote if personally present at the Annual Meeting
or any adjournment or postponement thereof, are hereby
expressly revoked.
Signature: Signature if held jointly Dated: , 2000
--------------------------------------- ---------------------------- ---------
- --------------------------------------------------------------------------------------------------------------------------------
/ FOLD AND DETACH HERE /
</TABLE>
