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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): May 21, 1996
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Security Dynamics Technologies, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-25120 04-2916506
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(Commission File Number) (I.R.S. Employer Identification No.)
One Alewife Center, Cambridge, Massachusetts 02140
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(Address of Principal Executive Offices) (Zip Code)
(617) 547-7820
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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This Amendment No. 1 on Form 8-K/A amends and restates Items 6 and 7 of the
Current Report on Form 8-K filed with the Securities and Exchange Commission on
May 23, 1996 by Security Dynamics Technologies, Inc., a Delaware corporation
(the "Company").
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
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On May 21, 1996, Kenneth P. Weiss announced his immediate resignation as a
director and as Chairman of the Board and Chief Technical Officer of the
Company, citing material disagreements with the operations, policy and practices
of the Company and certain directors of the Company. The reasons for Mr. Weiss's
resignation are more fully outlined in his letters to the Company dated May 21,
1996 and May 30, 1996, copies of which are filed as Exhibits 17.1 and 17.2,
respectively, to this Amendment No. 1 on Form 8-K/A.
The Company responded to Mr. Weiss's letters by a letter dated June 3,
1996, a copy of which is filed as Exhibit 17.3 to this Amendment No. 1 on Form
8-K/A. In its response, the Company noted that Mr. Weiss's second letter
contained misstatements and omissions which the Company's Board of Directors
deemed were without merit or worthy of individual comment or response.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
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(c) Exhibits
Exhibit 17.1 - Letter, dated May 21, 1996, of Kenneth P. Weiss.
Exhibit 17.2 - Letter, dated May 30, 1996, of Kenneth P. Weiss.
Exhibit 17.3 - Letter, dated June 3, 1996, of Security Dynamics
Technologies, Inc. to Kenneth P. Weiss.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 4, 1996 SECURITY DYNAMICS TECHNOLOGIES, INC.
(Registrant)
/s/ Charles R. Stuckey, Jr.
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By: Charles R. Stuckey, Jr.
President and Chief
Executive Officer
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<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Exhibit
Number
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<S> <C>
17.1 Letter, dated May 21, 1996, of Kenneth P. Weiss.
17.2 Letter, dated May 30, 1996, of Kenneth P. Weiss.
17.3 Letter, dated June 3, 1996, of Security Dynamics
Technologies, Inc. to Kenneth P. Weiss.
</TABLE>
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Exhibit 17.1
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May 21, 1996
Dear Chuck:
As we discussed earlier today I am resigning, effective immediately, my
positions at SDI as chairman, director, and CTO. This resignation is a result of
material disagreements and in protest associated with operations, policy and
practices of the company and certain directors.
We have agreed that your request for this brief letter today will not preclude
my right and intention to follow up with a more formal and detailed letter of
resignation with exhibits.
Furthermore I formally request that the forthcoming letter be disclosed.
Yours truly,
/s/ Kenneth P. Weiss
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Kenneth P. Weiss
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Exhibit 17.2
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Kenneth P. Weiss
59 Sargent Street
Newton, MA 02158
May 30, 1996
Board of Directors
Security Dynamics Technologies, Inc.
c/o Mr. Charles Stuckey, Jr.
President and Chief Executive Officer
One Alewife Center
Cambridge, MA 02140-2312
Dear Chuck:
I regretfully formally resign from my positions as Chairman of the Board of
Directors, a Director, Chief Technology Officer and as an employee of Security
Dynamics. Confirming my earlier request and your earlier agreement to do so,
please disclose the matters described in this letter in a Form 8-K.
I am resigning because of my disagreement with various practices of the
company, your relationship with the Board of Directors and the relationships
among directors. I am also particularly critical of certain of its directors and
the continuing service of those directors, who I believe have and will continue
to damage the Company. Although you asked me to reconsider my decision to
resign, I cannot in good conscience be a part of a Board with several
dishonorable directors.
In my opinion, you have surrounded yourself with a Board of Directors that
does not, and perhaps is incapable, of providing you with independent objective
guidance. To the contrary, from all of the actions that I have seen, these
directors appear to be working for you, rather than you working for them. I have
seen this time and time again under many circumstances. Illustrative is the way
in which you are able to influence the Compensation Committee to pay you what
you demand and to make decisions based upon on what you want, rather than on any
objective policy. Recent events in this area have been consistent with a pattern
of conduct that I have observed over the years.
For example, contrary to the compensation consultant's recommendation for a
consistent policy, you recently recommended
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that the vast majority of your bonus be calculated at "threshold" plan while the
other executives had the majority of their bonus awarded at "stretch" plan. The
Compensation Committee approved this unfair inconsistent treatment.
Another serious example relates to the Compensation Committee's recent
grant of stock options to you. After the Compensation Committee decided on
February 6, 1995 "to develop, WITH THE BOARD [emphasis added]" a long-term
compensation plan, the Compensation Committee reported on July 20, 1995 that an
outside independent compensation consultant would be retained and then the
"Compensation Committee would discuss compensation options with its consultant
and then MAKE A RECOMMENDATION TO THE BOARD OF DIRECTORS RELATING TO EXECUTIVE
COMPENSATION [emphasis added]." On October 18, 1995, the Board was also told
that the consultant would meet with "management prior to the end of October AND
THEN AGAIN WITH MEMBERS OF THE BOARD IN EARLY NOVEMBER PRIOR TO MAKING A FORMAL
RECOMMENDATION REGARDING A LONG-TERM COMPENSATION PLAN. [emphasis added]" In
January 1996 you recommended stock option grants for a number of individuals,
including yet another 100,000 shares for yourself. On January 24, 1996, in part
because the repeatedly requested consultant's report had been withheld, the
Board again agreed that your and other officer options would be considered in a
telephonic Board meeting to be held on February 7, 1996, after you circulated
the full consultant's report, which in fact you never circulated.
Notwithstanding this quite explicit series of agreements and understandings, the
Compensation Committee (as at unscheduled meeting held in your office)
apparently voted to grant you stock options immediately following that January
24 meeting. It was only on February 7, 1996, when the options to you were to be
considered, that we were told by the Compensation Committee that there would be
no discussion and that the matter had already been resolved (although the
Compensation Committee refused to say when). While the Compensation Committee
meeting, in fact, may have occurred on January 24, 1996, it was clearly
unauthorized because it was contrary to the Board's stated intentions and
previous commitments. Only after the Chairman of the Audit Committee and I
complained did the full Board, on March 22, 1996, ratify the inappropriate and
egregious actions of the Compensation Committee in order to clean up the mess,
which locked in a lower price than you would have had if it were done in
accordance with the Board's stated wishes (gaining you approximately $1,000,000
in the process).
While this ratification may have "legalized" the action, it certainly
reflects poorly on the Board of Directors and, in my view, constitutes unfair
dealing by the Compensation Committee and most of the other directors. Only the
Chairman of the Audit Committee and I voted against that ratification because we
believed that the Compensation Committee had not fulfilled its long standing
obligation to the Board or dealt fairly with the
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Board. What caused them to be persuaded to change their mind after statements
(recorded in the Board minutes quoted above) and a course of conduct of more
than one year which required a complete policy prior to the granting of stock
options? Did you promise them anything? Contrary to what you have assured me, is
it your intention to accelerate the vesting of options when any of these
directors leaves the Board? Perhaps you merely promised to keep them on the
Board.
For his role in exercising his fiduciary duty and raising questions of you
and the other directors on this dysfunctional and egregious behavior, which in
my opinion is clearly bad faith, no matter what the legal definition, you
schemed with the other directors to reduce the size of the Board and to vote
against the renomination of the Chairman of the Audit Committee for an
additional term. This is outrageous, given his acknowledged professionalism and
experience, which is greater than all of the other directors in the aggregate.
Your relationship with Hale & Dorr and corporate counsel, Mr. Leibowitz,
parallels your relationship with these directors in many respects. It appears to
me that you are not seeking the most independent advice, but, rather, are merely
seeking confirmation of your intentions. Their response to the foregoing facts
and circumstances relating to the grant of options to you was, in my opinion,
defensive to a fault, failing to give adequate recognition to the corporate
governance issues and poor corporate practice issues involved. Their
insensitivity to these issues is also found in Mr. Leibowitz's draft minutes
(see the enclosed two versions of draft minutes of the meetings held on January
24 and February 7, 1996, one set by Mr. Leibowitz and one set by our corporate
Secretary) and the inaccurate guidance given to the Compensation Committee on
January 24 as to its authority.
On an individual basis, certain of these directors have performed
particularly poorly for the company. In my opinion, one of them frequently
disrupts meetings and appears to be motivated principally by self-aggrandizement
and another appears to be inept and make little or no positive contribution to
the Board. Their continued participation on the Board is particularly glaring,
especially in the light of your engineered forced departure of the most
experienced director.
Perhaps these directors are behaving in this manner because they feel
beholden to you due to the number of shares that have been granted to them as
compensation for their acting as directors, which has made them all
millionaires. Notwithstanding the fact that they have been made wealthy as the
result of being a director, I would have expected that they would have been able
to objectively carry out their fiduciary responsibilities and contribute the way
directors should, rather than be your rubber stamp or act only to curry favor
with you. Now they can help you
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realize your goal of being both Chairman and Chief Executive Officer. But what
is the effect of this relationship on the company and its stockholders?
As the largest individual stockholder of Security Dynamics, I formally
request that you respond to my request that I be involved and have input into
the process of interviewing any prospective candidates for directorship. It is
essential that each of these candidates show the necessary independence,
experience and quality that is so often lacking from several of the current
members of the Board of Directors. If you do not respond favorable to this
request, I maybe forced to take other actions to protect the stockholders and my
significant investment.
Very truly yours,
/s/ Kenneth P. Weiss
Kenneth P. Weiss
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Exhibit 17.3
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Security Dynamics Technologies, Inc.
One Alewife Center
Cambridge, MA 02140-2312
(617) 547-7820
June 3, 1996
Mr. Kenneth P. Weiss
59 Sargent Street
Newton, MA 02158
Dear Ken:
I have been asked by the Board of Directors to provide the following
response to your letter dated May 30, 1996, relating to your resignation from
various positions with Security Dynamics. Please note that this response is
being provided on behalf of the Company, and that certain directors and other
third parties may elect to respond on an individual basis in connection with
your correspondence.
The Board believes that your letter contains reprehensible and
irresponsible misstatements and omissions, the effect of which is to portray
facts and events in a light which are both without merit and not worthy of
individual comment or response.
The Board did note with interest your comments regarding the increase in
value associated with the shares and options held by certain of the Company's
directors. As you will recall, the stock and option grants to these directors
were all made with your approval and, in many cases, at your insistence. It is
also worth noting that you are the largest single beneficiary of the
appreciation in the value of the Company's stock, which took place during the
tenure of the current Board and management.
With respect to your request to be involved in the process of selecting
prospective directors, I am sure that you have been advised that you would have
had such an opportunity had you continued to serve on the Board, and that you
are not entitled to any such opportunity in your capacity as a stockholder of
the Company. However, as is the case with every stockholder, you are entitled to
submit nominations for directorships in accordance with the procedures set forth
in the Company's charter and By-laws. The Board believes that it would be
inappropriate to provide you with an opportunity to participate in the
nominating process without providing other stockholders, including both
individual and institutional stockholders with interests as large as or larger
than yours, with a comparable opportunity. Please be assured that the Board will
take into account the interests of all of the
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Company's stockholders in seeking to identify and retain the services of
experienced and qualified directors.
Finally, I urge you to remember your continuing responsibilities to the
stockholders of the Company as a former director, including your duty of
confidentiality, as well as your obligation to refrain from trading in the
Company's securities during the pooling blackout period resulting from the
pending acquisition of RSA Data Security, Inc. or while you are in the
possession of material inside information.
Very truly yours,
/s/ Charles R. Stuckey, Jr.
Charles R. Stuckey, Jr.
President and Chief Executive Officer
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