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 pursuant to Rule 14a-12
VASCO DATA SECURITY INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[VASCO LOGO]
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 9, 2003
To the Stockholders of
VASCO Data Security International, Inc.:
The Annual Meeting of Stockholders of VASCO Data Security International, Inc., a
Delaware corporation (the "Company"), will be held on Wednesday, July 9, 2003 at
10:00 a.m., local time, at 1901 South Meyers Road, Oakbrook Terrace, Illinois
60181 for the following purposes, as described in the Proxy Statement
accompanying this Notice:
1. To elect five (5) directors to serve on the Company's Board of Directors,
and;
2. To transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has no knowledge of any other business to be presented or
transacted at the meeting. The Company is not required under its charter or
bylaws to submit the selection of auditors to a vote of the Company's
stockholders.
Only stockholders of record on May 16, 2003 are entitled to notice of and to
vote at the Annual Meeting. Further information as to the matters to be
considered and acted upon at the Annual Meeting can be found in the accompanying
Proxy Statement.
By Order of the Board of Directors,
/s/ Clifford K. Bown
--------------------------
Clifford K. Bown
Secretary
Oakbrook Terrace, Illinois
May 23, 2003
YOU ARE CORDIALLY INVITED AND URGED TO ATTEND THE ANNUAL MEETING IN PERSON. TO
ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD, WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON. STOCKHOLDERS
WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY
DESIRE.
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[VASCO LOGO]
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 9, 2003
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SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is furnished by the Board of Directors of VASCO Data
Security International, Inc., 1901 South Meyers Road, Suite 210, Oakbrook
Terrace, Illinois 60181 (the "Company"), in connection with the solicitation of
proxies for use at the annual meeting of stockholders of the Company to be held
on Wednesday, July 9, 2003 at 10:00 a.m., local time, at 1901 South Meyers Road,
Oakbrook Terrace, Illinois 60181, and at any postponement or adjournment thereof
(the "Annual Meeting"). This Proxy Statement, the foregoing Notice of Annual
Meeting of Stockholders and the accompanying form of proxy are being mailed to
stockholders of the Company commencing on or about May 23, 2003. Holders of
record of the Company's common stock (the "Common Stock") at the close of
business on May 16, 2003 will be entitled to one vote for each share held on all
matters to come before the Annual Meeting.
If the accompanying form of proxy is properly executed and returned, the shares
represented by the proxy will be voted in accordance with the instructions
specified therein. In the absence of instructions to the contrary, such shares
will be voted "FOR" each of the proposals set forth in this Proxy Statement. Any
stockholder executing a proxy has the power to revoke it at any time before it
has been voted at the Annual Meeting by delivering written notice to the
Secretary of the Company, by executing another proxy dated as of a later date or
by voting in person at the Annual Meeting. Any written notice of revocation or
subsequent proxy should be delivered to:
VASCO Data Security International, Inc.
1901 South Meyers Road, Suite 210
Oakbrook Terrace, Illinois 60181
Attention: Secretary, or hand delivered to the Secretary,
before the closing of the polls at the Annual Meeting.
THE ANNUAL MEETING
MATTERS TO BE CONSIDERED
The Annual Meeting has been called to (i) elect five (5) directors to serve on
the Company's Board of Directors; and (ii) transact such other business as may
properly come before the Annual Meeting.
VOTING AT THE ANNUAL MEETING
A majority of the votes entitled to be cast on matters to be considered at the
Annual Meeting will constitute a quorum for the transaction of business at the
Annual Meeting. If a share is represented for any purpose at the meeting, it is
deemed to be present for all other matters. Holders of record of the Common
Stock at the close of business on May 16, 2003 are entitled to
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notice of and to vote at the Annual Meeting. As of May 16, 2003, there were
28,389,484 shares of Common Stock outstanding and entitled to vote at the Annual
Meeting, each such share being entitled to cast one vote. Assuming the presence
of a quorum, the affirmative vote of a plurality of the votes cast and entitled
to vote in the election at the Annual Meeting will be required for the election
of directors, and the affirmative vote of a majority of the votes cast and
entitled to vote thereon will be required to act on all other matters to come
before the Annual Meeting.
Stockholders may vote in favor of or withhold authority to vote for the nominees
for election as directors listed herein. Directions to withhold authority,
abstentions and broker non-votes (which occur when a nominee holding shares for
a beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner) will be counted in determining
the presence or absence of a quorum for the transaction of business at the
Annual Meeting. Directions to withhold authority, because directors are elected
by a plurality of votes cast, will have no effect on the election of directors.
Broker non-votes, because they are not considered "votes cast," are not counted
in the vote totals and will have no effect on any proposal scheduled for
consideration at the Annual Meeting. Abstentions will have the effect of a vote
against the proposal being considered.
If a properly executed, unrevoked proxy does not specifically direct the voting
of the shares covered by such proxy, the proxy will be voted (a) FOR the
election of all nominees for election as director as listed herein, and (b) in
accordance with the judgment of the persons named in the proxy as to such other
matters as may properly come before the Annual Meeting.
ANNUAL REPORT
The Company's annual report to stockholders for the fiscal year ended December
31, 2002 has been included in the mailing of this Proxy Statement. Stockholders
are referred to the report for financial and other information about the
Company, but such report is not incorporated in this Proxy Statement and is not
to be deemed a part of the proxy soliciting material. THE ANNUAL REPORT
INCLUDES, AMONG OTHER INFORMATION, THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2002. ADDITIONAL COPIES OF THE FORM 10-K WILL
BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO VASCO DATA
SECURITY INTERNATIONAL, INC., 1901 SOUTH MEYERS ROAD, SUITE 210, OAKBROOK
TERRACE, ILLINOIS 60181, ATTENTION: CLIFFORD K. BOWN.
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Bylaws, as amended (the "Bylaws"), set the number of directors of
the Company at not less than four nor more than twenty, which number may be
changed from time to time by the Board of Directors. The Board of Directors
decreased the number of directors of the Company to five (5) by a Resolution of
the Board of Directors, effective December 9, 2002. All of the directors of the
Company will be elected at the Company's Annual Meeting and will hold office
until their respective successors have been duly elected and qualified, or until
their earlier resignation or removal.
5
The Board of Directors has nominated the following individuals for election as
directors of the Company at the Annual Meeting: Michael P. Cullinane, T. Kendall
Hunt, Forrest D. Laidley, Michael A. Mulshine and John R. Walter, all of whom
are current directors of the Company.
While the Board of Directors does not contemplate that any nominee for election
as a director will not be able to serve, if any of the nominees for election
shall be unable to or for good cause will not serve as a director, the persons
listed in the enclosed proxy shall vote such proxy, if properly executed and
returned and unrevoked, for such other person or persons as shall be recommended
by the Board of Directors or the Board of Directors may, in its discretion,
reduce the number of directors to be elected. The affirmative vote of a
plurality of the votes cast and entitled to vote at the Annual Meeting is
required for the election of directors. THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS VOTE "FOR" EACH OF THE NOMINEES LISTED HEREIN.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of our Common Stock as of March 31, 2003 for each person or
entity who is known to us to beneficially own five percent or more of the Common
Stock. For purposes of the table, a person or group of persons is deemed to have
beneficial ownership of any shares as of a given date which such person has the
right to acquire within 60 days after such date.
NAME AND AMOUNT AND
CLASS OF ADDRESS OF NATURE OF PERCENT OF
-------- BENEFICIAL BENEFICIAL ----------
SECURITIES ---------- OWNERSHIP CLASS
---------- OWNER ---------- -----
-----
Common T. Kendall Hunt 10,369,306(1) 35.683%
1901 S. Meyers Road
Ste. 210
Oakbrook Terrace, IL
60181
(1) Includes 200,000 shares held in the T. Kendall Hunt Charitable
Remainder Trust and 1,111,300 shares held by Barbara J. Hunt, Mr.
Hunt's spouse, as to which shares Mr. Hunt disclaims beneficial
ownership.
The following table sets forth certain information with respect to the
beneficial ownership of our Common Stock as of March 31, 2003 for (i) each of
our directors, (ii) each of our named executive officers, and (iii) all
directors and executive officers as a group. The persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them unless otherwise indicated. For purposes of
the table, a person or group of persons is deemed to have beneficial ownership
of any shares as of a given date which such person has the right to acquire
within 60 days after such date.
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AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL
CLASS OF SECURITIES BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS
------------------- ---------------- ----------- ----------------
Common T. Kendall Hunt 10,369,306(2) 35.683%
1901 S. Meyers Road
Ste. 210
Oakbrook Terrace, IL 60181
Common Forrest D. Laidley 644,403 2.218%
552 Stevenson Drive
Libertyville, IL 60048
Common Michael P. Cullinane 57,000 0.196%
2233 Edgebrook Drive
Lisle, IL 60532
Common Michael A. Mulshine 95,900 0.330%
2517 Route 35, Suite D-201
Manasquan, NJ 08736
Common Jan Valcke 154,235 0.531%
Koningin Astridlaan 164
B-1780 Wemmel, Belgium
Common Clifford K. Bown 23,750 0.081%
1901 S. Meyers Road
Ste. 210
Oakbrook Terrace, IL 60181
Common All Executive Officers 11,344,594 39.039%
and Directors as a Group
(6 persons) (3)
(1) The number of shares beneficially owned by each director and
executive officer is determined under rules promulgated by the
Securities and Exchange Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which
the individual has sole or shared voting power or investment power and
also any shares which the individual has the right to acquire within 60
days after March 31, 2003 through the exercise of any stock option or
other right. The inclusion herein of such shares, however, does not
constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated,
each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with
respect to all shares of capital stock listed as owned by such person
or entity.
(2) Includes 200,000 shares held in the T. Kendall Hunt Charitable
Remainder Trust and 1,111,300 shares held by Barbara J. Hunt, Mr.
Hunt's spouse, as to which shares Mr. Hunt disclaims beneficial
ownership.
(3) John R. Walter, a current director of the Company, is not listed in
this table, either individually or as part of All Executive Officers
and Directors as a Group, as Mr. Walter did not begin his service on
the Company's Board of Directors until April 2003.
The names of and certain information regarding our current directors, each of
whom is a nominee for election as a director of the Company at the Annual
Meeting, appears below.
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T. KENDALL "KEN" HUNT -- Mr. Hunt is Chairman of the Board and Chief Executive
Officer. He served as our Chief Executive Officer through June 1999. He has been
a director since July 1997 and currently serves a one-year term. He served since
1990 as Chairman and President of our predecessor, VASCO Corp. Mr. Hunt is a
director of Dolfin.com, Inc. and SecureD Services, Inc., both privately held
companies. Mr. Hunt received a B.B.A. from the University of Miami, Miami,
Florida and an M.B.A. from Pepperdine University, Malibu, California. Mr. Hunt
is 59 years old.
MICHAEL P. CULLINANE -- Mr. Cullinane has been a director since April 10, 1998
and currently serves a one-year term. He is the Chairman of our Audit Committee,
serving as the audit committee's financial expert, and a member of our
Compensation Committee. Mr. Cullinane is currently the Executive Vice President
and Chief Financial Officer of Divine, Inc. From 1988 to June 1999 he served as
Executive Vice President, Chief Financial Officer and a director of PLATINUM
Technology International, Inc. Mr. Cullinane is a director of Divine, Inc. and
Made 2 Manage Systems, Inc., both of which are public companies. On February 25,
2003, Divine, Inc. filed for protection under the federal bankruptcy laws. Mr.
Cullinane received a B.B.A. from the University of Notre Dame, South Bend,
Indiana. Mr. Cullinane is 53 years old.
FORREST D. LAIDLEY -- Mr. Laidley has been a director since July 1997 and
currently serves a one-year term. Mr. Laidley was our Secretary from our
inception through September 2000. He has been involved with us and our
predecessor, VASCO Corp., for certain periods since 1984 in similar capacities
and currently serves as Chairman of our Compensation Committee and a member of
the Audit Committee. Mr. Laidley is a partner in the law firm of Tressler,
Soderstrom, Maloney & Priess, where he has practiced since 1999. Prior to that
he was a partner in the law firm of Laidley & Porter (a predecessor firm) in
Libertyville, Illinois since 1985. He serves on the Advisory Council on Main
Street Libertyville and is President and sole stockholder of Forrest Properties,
Inc., an Illinois real estate development corporation. Mr. Laidley received a
B.A. in History from Yale University, New Haven, Connecticut and a J.D. from
DePaul University, Chicago, Illinois. Mr. Laidley is 59 years old.
MICHAEL A. MULSHINE -- Mr. Mulshine has been a director since July 1997 and
currently serves a one-year term. He served since 1992 as a director of our
predecessor, VASCO Corp. He is a member of our Audit Committee and Compensation
Committee. He is, and since 1977 has been, a principal of Osprey Partners, a
management consulting firm. Since 1985 he has been a director and Secretary of
SEDONA Corporation, a developer and marketer of enterprise scale Internet
solutions. Mr. Mulshine received a B.S. in Electrical Engineering from Newark
College of Engineering, Newark, New Jersey. Mr. Mulshine is 63 years old.
JOHN R. WALTER -- Mr. Walter has been a director since April 2003. He is the
retired President and Chief Operating Officer of AT&T. Prior to AT&T, Mr. Walter
served as the Chairman, President, and Chief Executive Officer, of R.R.
Donnelley & Sons, a world leader in the print industry. Mr. Walter currently
serves on the Board of Directors of Abbott Laboratories, Deere & Company,
Manpower, Inc., Applied Graphics Technologies and SNP Corporation of Singapore.
He holds a B.S. degree in Business Administration from Miami University of Ohio.
Mr. Walter is 56 years old.
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EXECUTIVE OFFICERS
Following is information with respect to those individuals currently serving as
executive officers of the Company:
T. KENDALL "KEN" HUNT -- Mr. Hunt is Chairman of the Board and Chief Executive
Officer . He served as our Chief Executive Officer through June 1999. He has
returned as CEO in November 2002. He has been a director since July 1997. He
served since 1990 as Chairman and President of our predecessor, VASCO Corp. Mr.
Hunt received a B.B.A. from the University of Miami, Miami, Florida and an
M.B.A. from Pepperdine University, Malibu, California. Mr. Hunt is 59 years old.
JAN VALCKE -- Mr. Valcke is President & Chief Operating Officer. Mr. Valcke has
been an officer of the Company since 1996. From 1992 to 1996, he was Vice
President of Sales and Marketing of Digipass NV/SA, a member of the Digiline
group. He co-founded Digiline in 1988 and was a member of the Board of Directors
of Digiline. Mr. Valcke received a degree in Science from Kortrijk High School
in Kortrijk, Belgium. Mr. Valcke is 49 years old.
CLIFFORD K. BOWN -- Mr. Bown is Executive Vice President & Chief Financial
Officer. Mr. Bown started his career with KPMG where he directed the audits for
several publicly held companies, including a global leader that provides
integrated and embedded communications solutions. He was CFO for publicly held
XL/Datacomp, a $300 million provider of midrange computer systems and support
services in the U. S. and U. K. Mr. Bown also held CFO positions in two other
companies focused on insurance and healthcare. Mr. Bown received his MBA from
the University of Chicago, a B.S. in Accountancy from the University of Illinois
and he has a CPA certificate. Mr. Bown is 52 years old.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met eleven (11) times during 2002. Messrs.
Hunt, Laidley and Mulshine each attended all of the meetings of the Company's
Board of Directors during 2002. Mr. Cullinane attended nine (9) of the meetings.
A stockholder of the Company may nominate persons for election to the Board of
Directors if the stockholder submits such nomination, together with certain
related information required by the Company's ByLaws, in writing so as to be
received by the Secretary of the Company not less than 60 nor more than 90 days
prior to the date of the annual meeting of stockholders at which the nomination
is to be made.
The Board of Directors presently has two standing committees, an Audit Committee
and a Compensation Committee, each of which is described more fully below.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors of the Company is composed of
three independent directors, as required by Nasdaq listing standards. The Audit
Committee operates under a written charter adopted by the Board of Directors and
is responsible for overseeing the Company's financial reporting process on
behalf of the Board of Directors. The members of the
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Audit Committee are Michael P. Cullinane, Forrest D. Laidley and Michael A.
Mulshine all of whom are independent (as independence is defined in Rule
4200(a)(14) of the National Association of Securities Dealers' listing
standards). Each year, the Audit Committee recommends to the Board of Directors
the selection of the Company's independent auditors. The Company is not required
under its charter or Bylaws to submit the selection of auditors to a vote of the
Company's stockholders.
The Audit Committee has implemented policies and procedures for the pre-approval
of all audit, audit-related, tax and permitted non-audit services for the
Company. The Audit Committee has pre-approved certain audit, audit-related and
tax services to be performed by our independent auditors, KPMG LLP. These
pre-approved services include the annual audit and quarterly reviews of our
consolidated financial statements of the Company's periodic filings with the
SEC, tax compliance services for the United States and other incidental tax
advisory services. Additionally, the Audit Committee has directed KPMG LLP not
to perform any services for the Company that are specifically prohibited by the
Sarbanes-Oxley Act of 2002.
The following table shows the fees billed to the Company for the audit and other
services provided by KPMG LLP for fiscal years 2002 and 2001.
2002 2001
----------- -----------
Audit Fees $ 123,786 $ 171,400
Audit-Related Fees -- --
Tax Fees 158,982 73,880
All Other Fees 3,519 --
----------- -----------
Total $ 286,287 $ 245,280
=========== ===========
AUDIT FEES ($123,786 and $ 171,400 for 2002 and 2001 respectively). This
category includes the audit of the Company's annual financial statements, review
of financial statements included in the Company's Form 10-Q Quarterly Reports,
and services that are normally provided by the independent auditors in
connection with regulatory filings or engagements for those fiscal years. This
category also includes advice on audit and accounting matters that arose during,
or as a result of, the audit or the review of interim financial statements, and
the preparation of an annual "management letter" on internal control matters.
AUDIT-RELATED FEES. VASCO incurred no such fees during 2002 and 2001.
TAX FEES ($158,982 and $73,880 for 2002 and 2001 respectively). This category
consists of professional services rendered by KPMG LLP for tax compliance and
tax advice. The services for the fees disclosed under this category include tax
return preparation and technical tax advice.
ALL OTHER FEES ($3,519 for 2002). This category consists of service rendered by
KPMG LLP in relation to a review of specific expense categories as directed by
the Board.
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The Audit Committee has determined that the rendering of tax services by KPMG
LLP is compatible with maintaining their independence.
Management is responsible for the Company's financial statements and the
financial reporting process, including internal controls. The independent
auditors are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with auditing standards
generally accepted in the United States of America and for issuing a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes.
In this context, the Audit Committee met five times in 2002 and held discussions
with management and KPMG LLP, the Company's independent auditors. Management
represented to the Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee has reviewed and discussed the consolidated
financial statements with management and the independent auditors. The Audit
Committee discussed with KPMG LLP the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
These matters included a discussion of KPMG LLP's judgments about the quality
(not just the acceptability) of the Company's accounting principles as applied
to financial reporting.
KPMG LLP also provided the Audit Committee with the written disclosures and
letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Audit Committee discussed with KPMG
LLP that firm's independence. The Audit Committee further considered whether the
provision by KPMG LLP of the non-audit services described elsewhere in this
Proxy Statement is compatible with maintaining the auditors' independence.
Based upon the Audit Committee's discussion with management and the independent
auditors and the Audit Committee's review of the representation of management
and the disclosures by the independent auditors to the Audit Committee, the
Audit Committee ratified the inclusion of the Company's audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2002, for filing with the Securities and Exchange Commission.
Respectfully submitted,
Michael P. Cullinane, Chairman
Forrest D. Laidley, Member
Michael A. Mulshine, Member
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For 2002, our Compensation Committee was composed of Messrs. Laidley,
Cullinane and Mulshine. Forrest D. Laidley serves as a Director and was
previously our Secretary. Mr. Laidley was a partner in the law firm of Laidley &
Porter that previously performed various legal services for us. Since 1999, Mr.
Laidley has been a partner in the law firm of Tressler, Soderstrom, Maloney and
Priess. Tressler, Soderstrom, Maloney and Priess has not provided any services
to the Company. Mr. Laidley and his former partners have made equity investments
in the Company from time to time through various private placements and are
currently stockholders.
COMPENSATION OF DIRECTORS
Each of our non-employee directors received a quarterly cash payment of
$3,750 in connection with his service on the Board of Directors in 2002. Our
directors are also reimbursed for expenses incurred in connection with their
attendance at periodic Board meetings. In addition, non-employee directors are
eligible to receive stock option grants from time to time. In 2002, options to
purchase 18,000 shares of our Common Stock, at a per share exercise price of
$2.27, were issued to each of Messrs. Cullinane, Laidley, and Mulshine.
EMPLOYMENT AGREEMENTS
Mr. Hunt's salary and bonus are determined pursuant to his employment
agreement dated November 20, 2002. Mr. Hunt's annual salary, any discretionary
bonus and stock options will be determined by the Compensation Committee for
each fiscal year of the Company during the employment period. In 2002, Mr. Hunt
received a base salary of $152,627, a cash bonus of $42,500 and 120,000 stock
options. In the event Mr. Hunt is terminated Without Cause, he quits for Good
Reason, or he is Terminated or quits for Good Reason after a Change in Control,
Mr. Hunt will continue to receive his base pay and any applicable Incentive
Compensation over a 24 month period. In the event of such termination, Mr. Hunt
has agreed to various terms of non-compete. Effective April 1, 2003, Mr. Hunt's
2003 annual base salary was increased to $185,000, and can be adjusted further
by the Compensation Committee based on the Company's performance in 2003. There
is no bonus plan for 2003; however, the Compensation Committee has the
discretion to award merit bonuses based on the Company's performance in 2003.
Mr. Valcke's salary and bonus are determined pursuant to an Independent
Contractor Employment Agreement dated November 20, 2002. Mr. Valcke's annual
salary, his bonus and stock options will be determined by the Compensation
Committee for each fiscal year of the Company during the employment period. In
2002, Mr. Valcke received $201,556 in base compensation, including
employment-related expenses billed as an independent contractor, cash bonuses
totaling $40,000 and 50,000 stock options. Either Party shall have the option to
terminate Executive's Employment with or without cause, for any reason
whatsoever, without any breach of this Agreement by giving six (6) month's
written notice. In the event of such termination, Mr. Valcke has agreed to abide
by various non-compete and non-solicitation restrictions for up to 12 months.
Mr. Valcke's 2003 base compensation is $260,000. There is no
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bonus plan for 2003; however, the Compensation Committee has the discretion to
award merit bonuses based on the Company's performance in 2003.
Mr. Bown's salary and bonus are determined pursuant to his employment agreement
dated January 1, 2003. Mr. Bown's annual salary, any discretionary bonus and
stock options will be determined by the Compensation Committee for each fiscal
year of the Company during the employment period. In 2002, Mr. Bown received a
base salary of $50,600, no cash bonus and 75,000 stock options. In the event Mr.
Bown is terminated Without Cause, he quits for Good Reason, or he is terminated
or quits for Good Reason after a Change in Control (as the foregoing terms are
defined in his employment agreement), Mr. Bown will continue to receive his base
pay and any applicable Incentive Compensation over a 12-month period. In the
event of such termination, Mr. Bown has agreed to abide by various non-compete
and restrictions. Mr. Bown's 2003 annual base salary is $150,000. There is no
bonus plan for 2003; however, the Compensation Committee has the discretion to
award merit bonuses based on the Company's performance in 2003.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and executive
officers, and persons who beneficially own more than 10% of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Commission and The Nasdaq Stock Market, Inc. Directors, executive
officers and beneficial owners of more than 10% of the outstanding shares of
Common Stock are required by Commission regulations to furnish us with copies of
all Section 16(a) forms that they file. Except as provided in the paragraphs
below, to our knowledge, based solely on review of the copies of such reports
furnished to us, all reporting persons complied on a timely basis with all
filing requirements applicable to them.
Michael Cullinane did not file timely Form 4 reports with respect to
the receipt of Common Stock options. Mr. Cullinane received the following option
grants: 8,000 shares on January 11, 1999; 8,000 shares on January 11, 2000;
10,000 shares on November 30, 2001; 18,000 shares on January 9, 2002 and 20,000
shares on January 9, 2003. A Form 4 reporting these transactions has been filed
on or about May 19, 2003.
Forrest D. Laidley did not file timely Form 4 reports with respect to
the purchase of the Company's Common Stock and the receipt of Common Stock
options. Mr. Laidley purchased 30,000 shares of Common Stock on January 24,
2000, 5,883 shares of Common Stock on November 2, 2000 and 20,000 shares of
Common Stock on January 3, 2001. He received stock option grants for 8,000
shares on January 11, 1999, 8,000 shares on January 11, 2000, 10,000 shares on
November 30, 2001, 18,000 shares on January 9, 2002 and 20,000 shares on January
9, 2003. A Form 4 reporting these transactions has been filed on or about
May 19, 2003.
Michael Mulshine did not file timely Form 4 reports with respect to
purchases and sales of the Company's Common Stock and the receipt of Common
Stock options. Mr. Mulshine purchased 220,000 shares of Common Stock on various
dates from February 1999 through November 2000. He sold 201,100 shares of Common
Stock on various dates from June 2001 through February 2003. He received stock
option grants for 8,000 shares on January 11, 1999, 8,000 shares on January 11,
2000, 10,000 shares on November 30, 2001, 18,000 shares on January 9, 2002 and
20,000 shares on January 9, 2003. The detail of these transaction can be found
on a Form 4 which has been filed on or about May 19, 2003.
13
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by,
or paid for services rendered to VASCO and our subsidiaries in all capacities
during the three years ended December 31, 2000, 2001 and 2002 for our Chief
Executive Officer and President and Executive Vice Presidents, who are the only
executive officers of VASCO and our subsidiaries whose salary and bonus for such
year exceeded $100,000 (collectively, the "Named Executive Officers").
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------------
AWARDS PAYOUTS
----------------------------------------------------------------------
OTHER RESTRICTED SECURITIES
NAME AND PRINCIPAL ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
($) ($) ($) ($) (#) ($) ($)
T. KENDALL HUNT (1) 2002 152,627 42,500 -- -- 120,000 -- --
Chief Executive 2001 165,000 25,000 -- -- 90,000 -- --
Officer and Chairman 2000 165,000 -- -- -- 30,000 -- --
of the Board
JAN VALCKE (2) 2002 166,667 40,000 34,889 -- 50,000 -- --
President and Chief 2001 155,000 36,600 8,597 -- 50,000 -- --
Operating Officer 2000 107,895 29,288 -- -- -- -- --
CLIFFORD K. BOWN (3) 2002 50,600 -- -- -- 75,000 -- --
Executive Vice 2001 -- -- -- -- -- -- --
President, Chief 2000 -- -- -- -- -- -- --
Financial Officer
and Secretary
MARIO R. HOUTHOOFT (4) 2002 186,875 81,250 103,372 -- 120,000 -- 75,113
Chief Executive 2001 225,000 110,000 99,337 -- 120,000 -- --
Officer, President and 2000 180,000 -- 103,793 -- -- -- --
Director
DENNIS D. WILSON (5) 2002 100,347 40,000 -- -- 150,000 -- --
Executive Vice 2001 155,000 45,000 -- -- 50,000 -- --
President, Chief 2000 94,167 15,000 -- -- 100,000 -- --
Financial Officer
and Secretary
(1) Mr. Hunt returned as Chief Executive Officer of VASCO on November 20,
2002.
(2) Mr. Valcke became President and Chief Operating Officer of VASCO on
November 20, 2002.
(3) Mr. Bown joined VASCO as Executive Vice President and Chief Financial
Officer on August 19, 2002. He was appointed Secretary of VASCO on
October 21, 2002. He was not an employee of VASCO during 2001 or 2000.
(4) Mr. Houthooft was terminated from the Company as its President and CEO
on November 20, 2002.
(5) Mr. Wilson resigned as the Company's Executive Vice President and CFO
on August 21, 2002.
14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth all options granted to the Named
Executive Officers during 2002.
- ------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
PERCENT OF STOCK PRICE APPRECIATION FOR
NUMBER OF TOTAL OPTION TERM(2)
SECURITIES OPTIONS/
UNDERLYING SARS EXERCISE OF ------------------------------
OPTIONS/ GRANTED TO BASE PRICE EXPIRATION
SARS GRANTED EMPLOYEES IN ($/SH) DATE 5% ($) 10% ($)
NAME (1) FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------
T. Kendall Hunt 120,000 7.3% 2.27 01/09/2012 171,310 434,135
Jan Valcke 50,000 3.0% 2.27 01/09/2012 71,380 180,890
Clifford K. Bown 75,000 4.6% 1.20 08/19/2012 56,600 143,440
Mario R. Houthooft 120,000 7.3% 2.27
(3)
Dennis D. Wilson (3) 150,000 9.1% 2.27
(1) Vesting schedule is based on a time period of 36 months, with
6/36th of the options vesting at the end of the first six months and
1/36th of the options vesting each month thereafter on the last day of
each month.
(2) The potential realizable value amounts shown illustrate the values
that might be realized upon exercise immediately prior to the
expiration of their term using five percent and ten percent
appreciation rates as required to be used in this table by the
Securities and Exchange Commission, compounded annually, and are not
intended to forecast future appreciation, if any, of our stock price.
Additionally, these values do not take into consideration the
provisions of the options providing for nontransferability or
termination of the options following termination of employment.
Therefore, the actual values realized may be greater or less than the
potential realizable values set forth in the table.
(3) All of the options granted to Mr. Houthooft and Mr. Wilson lapsed
ninety (90) days after their separation from the Company.
15
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth the aggregate value as of December 31,
2002 of unexercised stock options held by the Named Executive Officers. The
Named Executive Officers did not exercise any stock options during 2002 and the
relevant columns have, therefore, been omitted.
NAME NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS/SARS AT
OPTIONS/SARS AT FISCAL YEAR- FISCAL YEAR-END
END ($)(1)
- ----------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------
T. Kendall Hunt 227,164 167,836 0 0
Jan Valcke 134,582 99,168 0 0
Clifford K. Bown -- 75,000 0 0
Mario R. Houthooft 566,999 278,001 0 0
Dennis D. Wilson(2) -- -- 0 0
(1) Market value of underlying securities is based on the closing price
of the Common Stock as reported on the Nasdaq National market on
December 31, 2002 ($0.97) minus the exercise price.
(2) All of the options granted to Mr. Wilson lapsed prior to the end of
the year.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
OVERVIEW
Our Board of Directors established a Compensation Committee in March of
1998. For 2002, the Compensation Committee consisted of Messrs. Laidley,
Cullinane and Mulshine, none of whom is employed by the Company, and none of
whom has any "interlocking" relationships as defined for proxy statement
disclosure purposes. The Compensation Committee met 7 times during 2002.
The Compensation Committee is responsible for determining the
compensation for our officers and employees. In accordance with its right to do
so, the Committee has elected to delegate the fixing of salaries below certain
levels to VASCO's Chief Executive Officer. The Compensation Committee also
administers our Amended and Restated 1997 Stock Option Plan ("Amended and
Restated Option Plan") and the Executive Incentive Compensation Plan ("Incentive
Plan"), including the designation of which officers, key employees and directors
shall receive options under the Option Plan and the amount, terms, pricing, and
vesting provisions of options granted pursuant to the Option Plan.
16
EXECUTIVE COMPENSATION PHILOSOPHY
We operate in the competitive technology industry and view our ability
to attract and retain highly qualified and dedicated executives and key
employees as a critical component of our future success. We strive to maintain
an entrepreneurial atmosphere and to maintain a low cost operating structure.
Consequently, we employ a combination of salary, bonuses and stock options to
reward, retain and provide incentives to our executives and key employees.
2002 CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee believes that the salary approved for Mr.
Houthooft, the former Chief Executive Officer of the Company, reflected market
value for his services in 2002. Given this and the relative performance of the
Company during 2002, the Compensation Committee of the Company believes that Mr.
Houthooft's approved compensation was appropriate. Mr. Houthooft was terminated
as of November 20, 2002.
Mr. Hunt, the Company's current CEO, is being paid below market and is
expected to be adjusted based on the performance of the Company.
2002 COMPENSATION OF OTHER EXECUTIVE OFFICERS
Although we strive to maintain a low cost operating structure, our
Compensation Committee aims to set other executives' and key employees' salaries
at a competitive level. The base salary for each executive officer is set on the
basis of personal performance and the salary level in effect for comparable
positions at companies that compete for executive talent.
At our 1999 Annual Meeting of Stockholders, VASCO's stockholders
approved the Amended and Restated Option Plan. The Amended and Restated Option
Plan was designed to serve as a performance incentive to encourage our
executives, key employees and others to acquire or increase a proprietary
interest in the success of VASCO. The Compensation Committee believes that, over
a period of time, our share performance will, to a great extent, reflect
executive and key employee performance.
The Amended and Restated Option Plan provides that options may be
granted at the discretion of the Compensation Committee, in such amounts and
subject to such conditions as the Compensation Committee may determine in
accordance with the terms thereof. Options granted to employees are priced at
market, are generally fully vested after five years and expire at the end of ten
years.
The Executive Incentive Compensation Plan covers our eligible
executives and key employees (each a "participant"), with such eligibility
determined at the end of each year at the sole discretion of the Compensation
Committee. Awards are based on prior year operating results, such results being
subject to audit by our independent accountants, and are distributed following
the completion of such audit.
The Compensation Committee approved a quarterly bonus program for its
executives at the beginning of 2002. This program was designed to reward the
executive team for achieving its revenue and operating income business plan
targets for each quarter in 2002. As was the case in determining the annual 2002
salaries for each executive, the quarterly bonuses were determined by analyzing
the actual 2000 compensation for other executives in our industry. It was the
17
Compensation Committee's goal to target these quarterly bonuses at a level
commensurate with "market" compensation for comparable executives.
Awards, in whole or in part, may be offered in the form of shares of
the Common Stock or cash at the sole discretion of the Compensation Committee
and the Compensation Committee also may elect to delegate the choice of cash or
Common Stock to the individual participants. To the extent that shares of Common
Stock are awarded in lieu of cash, the number of shares is based on the market
value of the Common Stock on the date the award is determined, and is taxable to
the participant in the year the award is granted. Such shares are restricted and
cannot be sold or transferred except pursuant to registration under the
Securities Act of 1933 or an exemption from such registration.
Respectfully submitted,
Forrest D. Laidley, Chairman
Michael P. Cullinane
Michael A. Mulshine
18
STOCK PERFORMANCE GRAPH
The Common Stock commenced trading on the NASD Electronic Bulletin Board on
March 28, 1998 and currently trades on Nasdaq SC. The Stock Performance Graph
below compares the cumulative total return through December 31, 2002, assuming
reinvestment of dividends, by an investor who invested $100.00 on March 28, 1998
in each of (i) the Common Stock, (ii) the Russell 2000 index, (iii) the Standard
Industrial Code (SIC) Index 3577 -- Computer Peripheral Equipment, NEC and (iv)
a comparable industry (the "Peer Group") index selected by VASCO as described
below. The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
[LINE GRAPH]
3/23/98 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
VASCO DATA SECURITY
INTERNATIONAL,INC. 100.00 59.40 159.38 107.50 42.00 19.40
SIC CODE INDEX 100.00 167.36 358.96 276.24 131.36 91.24
RUSSELL 2000 INDEX 100.00 88.31 105.62 101.06 102.09 80.06
PEER GROUP INDEX 100.00 68.68 208.23 164.31 92.86 38.39
The Peer Group reflected above is made up of the following companies: ActivCard
S.A., Netegrity Inc., RSA Security Inc. and Secure Computing.
19
INDEPENDENT AUDITORS
KPMG LLP served as independent auditors of the Company's books and records for
the fiscal year ended December 31, 2002 and has acted as auditors for the
Company and its predecessor, VASCO Corp., since the 1994 fiscal year.
Representatives of KPMG LLP are expected to be present at the Annual Meeting,
and such representatives will have an opportunity at the Annual Meeting to make
a statement, if they desire to do so, and are expected to be available to
respond to appropriate questions.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper
proposals for consideration at and for inclusion in the Company's proxy
statement relating to the next annual meeting of stockholders by submitting
their proposals to the Company in a timely manner. In order to be considered for
inclusion in the proxy statement and proxy relating to the Company's 2004 annual
meeting of stockholders, stockholder proposals must be received by the Company
at its principal executive offices not later than January 31, 2004 and must
otherwise comply with the requirements of Rule 14a-8.
20
PROXY SOLICITATION
Proxies will be solicited by mail. Proxies may also be solicited by directors,
officers and a small number of regular employees of the Company personally or by
mail, telephone or telegraph, but such persons will not be specially compensated
for such services. Brokerage houses, custodians, nominees and fiduciaries will
be requested to forward the soliciting material to the beneficial owners of
Common Stock held of record by such persons, and the Company will reimburse them
for their expenses in doing so. The full cost of the preparation and mailing of
the Proxy Statement and accompanying materials and the related proxy
solicitations will be borne by the Company.
OTHER MATTERS
Management does not intend to present, and does not have any reason to believe
that others will present, any item of business at the Annual Meeting other than
those specifically set forth in the Notice of the Annual Meeting. However, if
other matters are properly presented for a vote at the Annual Meeting, the
persons named in the enclosed proxy and acting thereunder will have discretion
to vote on those matters in accordance with their judgment to the same extent as
the person who signed the proxy would be entitled to vote.
By Order of the Board of Directors,
/s/ Clifford K. Bown
--------------------------------
Clifford K. Bown
Secretary
Oakbrook Terrace, Illinois
May 23, 2003
21
VASCO DATA SECURITY INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS--JULY 09, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints T. Kendall Hunt, with full power of
substitution, proxy to vote all the shares of common stock of VASCO Data
Security International, Inc., a Delaware corporation, that the undersigned may
be entitled to vote at the Annual Meeting of Stockholders to be held on July 09,
2003 and at any adjournment thereof, as designated for the items set forth and
in the Notice of Annual Meeting of Stockholders and the Proxy Statement dated
May 23, 2003.
IF PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN OR,
IF NOT SPECIFIED, FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED IN ITEM 1.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. AT THIS
TIME, MANAGEMENT KNOWS OF NO SUCH OTHER BUSINESS.
PLEASE MARK, DATE, AND SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
The Board of Directors recommends a vote FOR the election of the
Directors set forth below.
1. Election of Directors
Nominees: 01 -- T. Kendall Hunt, 02 -- Michael P. Cullinane , 03 -- Forrest D. Laidley
04 -- Michael A. Mulshine -- 05 -- John R. Walter
For Withhold For All
All All Except
O O O
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
--------------------------------
Date: ___________________________
Signature: ______________________
Signature: ______________________
(If Held Jointly)
IMPORTANT: Please date and sign exactly as
the name appears herein and return this
proxy in the enclosed envelope. Persons
signing as executors, administrators,
trustees, etc. should so indicate. If shares
are held jointly, each joint owner should
sign. In the case of a corporation or
partnership, the full name of the
organization should be that of a duly
authorized officer or partner.
22