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VERISIGN, INC.
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[LOGO] VERISIGN
VeriSign, Inc.
487 East Middlefield Road
Mountain View, California 94043-4047
April 10, 2002
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
of VeriSign, Inc. to be held at our corporate offices, located at 487 East
Middlefield Road, Mountain View, California on Tuesday, May 21, 2002 at 10:00
a.m., Pacific time.
The matters expected to be acted upon at the meeting are described in detail
in the following Notice of the 2002 Annual Meeting of Stockholders and Proxy
Statement.
It is important that you use this opportunity to take part in the affairs of
VeriSign, Inc. by voting on the business to come before this meeting. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does
not deprive you of your right to attend the meeting and to vote your shares in
person.
We look forward to seeing you at our 2002 Annual Meeting of Stockholders.
Sincerely,
/s/ STRATTON D. SCALVOS
Stratton D. Sclavos
President, Chief Executive Officer
and Chairman of the Board
[LOGO] VERISIGN
VERISIGN, INC.
487 East Middlefield Road
Mountain View, California 94043-4047
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Notice Of The 2002 Annual Meeting Of Stockholders
-----------------
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders of
VeriSign, Inc. will be held at our corporate offices, located at 487 East
Middlefield Road, Mountain View, California on Tuesday, May 21, 2002 at 10:00
a.m., Pacific time. The 2002 Annual Meeting of Stockholders is being held for
the following purposes:
1. To elect two Class I directors of VeriSign, each to serve a three-year
term, or until his successor has been elected and qualified or until his
earlier resignation or removal.
2. To approve amendments to VeriSign's 1998 Equity Incentive Plan to
increase the number of shares issuable thereunder by an aggregate of
10,000,000 shares, increase the annual grant limit thereunder, and prohibit
repricing of options without stockholder approval.
3. To ratify the selection of KPMG LLP as independent auditors for
VeriSign for the year ending December 31, 2002.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this Notice.
Only stockholders of record at the close of business on March 22, 2002 are
entitled to notice of and to vote at the 2002 Annual Meeting of Stockholders or
any adjournment thereof.
By Order of the Board of Directors,
/s/ JAMES M. ULAM
James M. Ulam
Secretary
Mountain View, California
April 10, 2002
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-
PAID ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
TABLE OF CONTENTS
Page
----
Proxy Statement for the 2002 Annual Meeting of Stockholders:
Proposal No. 1--Election of Directors............................................ 3
Proposal No. 2--Amendments to the 1998 Equity Incentive Plan..................... 7
Proposal No. 3--Ratification of Selection of Independent Auditors................ 13
Security Ownership of Certain Beneficial Owners and Management................... 14
Executive Compensation........................................................... 17
Summary Compensation Table....................................................... 17
Option Grants in Fiscal Year 2001................................................ 19
Aggregate Option Exercises in Fiscal Year 2001 and Fiscal Year-End Option Values. 20
Compensation Arrangements with Executive Officers................................ 20
Report of the Compensation Committee............................................. 21
Stock Price Performance Graph.................................................... 24
Report of the Audit Committee.................................................... 24
Audit and Non-Audit Fees......................................................... 26
Certain Relationships and Related Transactions................................... 27
Stockholder Proposals for the 2003 Annual Meeting of Stockholders................ 28
Section 16(a) Beneficial Ownership Reporting Compliance.......................... 28
Other Business................................................................... 29
Communicating with VeriSign......................................................... 30
[LOGO] VERISIGN
VERISIGN, INC.
487 East Middlefield Road
Mountain View, California 94043-4047
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PROXY STATEMENT
FOR THE 2002 ANNUAL MEETING OF STOCKHOLDERS
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April 10, 2002
The accompanying proxy is solicited on behalf of the Board of Directors of
VeriSign, Inc., a Delaware corporation, for use at the 2002 Annual Meeting of
Stockholders (the "Meeting") to be held at its corporate offices located at 487
East Middlefield Road, Mountain View, California on Tuesday, May 21, 2002 at
10:00 a.m., Pacific time. Only holders of record of our common stock at the
close of business on March 22, 2002, which is the record date, will be entitled
to vote at the Meeting. At the close of business on the record date, we had
237,944,676 shares of common stock outstanding and entitled to vote. All
proxies will be voted in accordance with the instructions contained therein
and, if no choice is specified, the proxies will be voted in favor of the
nominees and the proposals set forth in the accompanying Notice of the Meeting
and this proxy statement. This proxy statement and the accompanying form of
proxy were first mailed to stockholders on or about April 10, 2002. An annual
report for the year ended December 31, 2001 is enclosed with this proxy
statement.
Voting Rights
Holders of VeriSign's common stock are entitled to one vote for each share
held as of the record date.
Vote Required to Approve the Proposals
With respect to Proposal No. 1, two (2) directors will be elected by a
plurality of the votes of the shares of common stock present in person or
represented by proxy at the Meeting and voting on the election of directors.
Proposal No. 2 requires for approval the affirmative vote of a majority of the
shares of common stock present in person or represented by proxy at the Meeting.
None of the proposals are conditional upon the approval of any of the other
proposals by the stockholders.
1
Votes Needed for a Quorum, Effect of Abstentions and Broker Non-Votes
A majority of the shares of common stock outstanding on the record date will
constitute a quorum for the transaction of business at the Meeting. For
purposes of the quorum and the discussion above regarding the vote necessary to
take stockholder action, stockholders of record who are present at the meeting
in person or by proxy and who abstain, including brokers holding customers'
shares of record who cause abstentions to be recorded at the Meeting, are
considered stockholders who are present and entitled to vote and they count
toward the quorum.
Brokers holding shares of record for customers generally are not entitled to
vote on certain matters unless they receive voting instructions from their
customers. "Broker non-votes" means the votes that could have been cast on the
matter in question if the brokers had received their customers' instructions,
and as to which the broker has notified VeriSign on a proxy form in accordance
with industry practice or has otherwise advised VeriSign that it lacks voting
authority.
Abstentions and broker non-votes will not be taken into account in
determining the outcome of the election of directors. Abstentions are
considered shares entitled to vote on the amendments to VeriSign's 1998 Equity
Incentive Plan and therefore will have the effect of a vote against this
proposal. Broker non-votes are not considered shares entitled to vote on the
amendments to VeriSign's 1998 Equity Incentive Plan and therefore will not be
taken into account in determining the outcome of the vote on this proposal.
Adjournment of Meeting
In the event that sufficient votes in favor of the Proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the
majority of the outstanding shares present in person or represented by proxy at
the Meeting.
Expenses of Soliciting Proxies
VeriSign will pay the expenses of soliciting proxies to be voted at the
Meeting. Following the original mailing of the proxies and other soliciting
materials, we and/or our agents may also solicit proxies by mail, telephone,
telegraph or in person. Following the original mailing of the proxies and other
soliciting materials, we will request that brokers, custodians, nominees and
other record holders of our shares forward copies of the proxy and other
soliciting materials to persons for whom they hold shares and request authority
for the exercise of proxies. In such cases, we will reimburse the record
holders for their reasonable expenses if they ask us to do so.
Revocability of Proxies
Any person signing a proxy in the form accompanying this proxy statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the vote
pursuant to the proxy. A proxy may be revoked by any of the following methods:
. a written instrument delivered to VeriSign stating that the proxy is
revoked;
. a subsequent proxy that is signed by the person who signed the earlier
proxy and is presented at the Meeting; or
. attendance at the Meeting and voting in person.
Please note, however, that if a stockholder's shares are held of record by a
broker, bank or other nominee and that stockholder wishes to vote at the
Meeting, the stockholder must bring to the Meeting a letter from the broker,
bank or other nominee confirming that stockholder's beneficial ownership of the
shares.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
VeriSign's Amended and Restated Bylaws currently authorize no fewer than six
and no more than nine directors. VeriSign's Board of Directors is currently
comprised of eight directors. The Bylaws divide the Board of Directors into
three classes, Class I, Class II and Class III, with members of each class
serving staggered three-year terms. One class of directors is elected by the
stockholders at each annual meeting to serve a three-year term or until their
successors are duly elected and qualified. The Class I directors, Mr. Kriens
and Mr. Sclavos, will stand for reelection at the Meeting. The Class II
directors, Mr. Compton, Mr. Cowan and Mr. Moore, will stand for reelection at
the 2003 annual meeting and the Class III directors, Mr. Bidzos, Mr. Chenevich
and Mr. Reyes, will stand for election or reelection at the 2004 annual
meeting. If any nominee for any reason is unable to serve, or for good cause
will not serve, as a director, the proxies may be voted for such substitute
nominee as the proxy holder may determine. We are not aware of any nominee who
will be unable to serve, or for good cause will not serve, as a director.
Directors/Nominees
The names of the nominees for election as Class I directors at the Meeting
and of the incumbent Class II and Class III directors, and certain information
about them, are included below.
Name Age Position
---- --- --------
Nominees for election as Class I directors
for a term expiring in 2005:
Scott G. Kriens(1) 44 Director
Stratton D. Sclavos 40 President, Chief Executive Officer and Chairman
of the Board
Incumbent Class II directors
with terms expiring in 2003:
Kevin R. Compton(1) 43 Director
David J. Cowan(2) 36 Director
Roger H. Moore 60 Director
Incumbent Class III directors
with terms expiring in 2004:
D. James Bidzos(2) 47 Vice Chairman of the Board
William L. Chenevich(1) 58 Director
Gregory L. Reyes(2) 39 Director
--------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Scott G. Kriens has been a Director of VeriSign since January 2001. Mr.
Kriens has served as President, Chief Executive Officer and Chairman of the
Board of Directors of Juniper Networks, a leading provider of Internet hardware
and software systems, since October 1996. From April 1986 to January 1996, Mr.
Kriens served as Vice President of Operation at StrataCom, Inc., a
telecommunications equipment company, which he co-founded in 1986. Mr. Kriens
received a B.A. in Economics from California State University, Hayward.
Stratton D. Sclavos has served as President and Chief Executive Officer and
as a director of VeriSign since he joined VeriSign in July 1995. In December
2001, he was named Chairman of the Board of Directors. From October 1993 to
June 1995, he was Vice President, Worldwide Marketing and Sales of Taligent,
Inc., a software development company that was a joint venture among Apple
Computer, Inc., IBM and Hewlett-Packard. From May 1992 to September 1993, Mr.
Sclavos was Vice President of Worldwide Sales and Business Development
3
of GO Corporation, a pen-based computer company. Prior to that time, he served
in various sales and marketing capacities for MIPS Computer Systems, Inc. and
Megatest Corporation. Mr. Sclavos is a director of Intuit, Inc., Juniper
Networks, Inc., Keynote Systems, Inc. and Marimba, Inc. Mr. Sclavos holds a
B.S. degree in Electrical and Computer Engineering from the University of
California at Davis.
Kevin R. Compton has been a director of VeriSign since February 1996. He has
been a general partner of Kleiner Perkins Caufield & Byers, a venture capital
firm, since January 1990. Mr. Compton is a director of Citrix Systems, Inc. and
ONI Systems Corp. Mr. Compton holds a B.S. degree in Business Management from
the University of Missouri.
David J. Cowan has been a director of VeriSign since its founding in April
1995. He has been a general partner of Bessemer Venture Partners, a venture
capital investment firm, since August 1996. Previously, he was an associate
with Bessemer Venture Partners from August 1992 to August 1996. He has also
been a manager of Deer IV & Co. LLC, a venture capital investment firm, since
August 1996. Mr. Cowan is a director of Keynote Systems, Inc. Mr. Cowan holds
an A.B. degree in Mathematics and Computer Science and a M.B.A. degree from
Harvard University.
Roger H. Moore has been a Director of VeriSign since February 2002. He was
President and Chief Executive Officer of Illuminet Holdings, Inc. from December
1995 until December 2001 when Illuminet was acquired by VeriSign. He was a
member of the Board of Directors of Illuminet from July 1998 until December
2001. Mr. Moore is a director of Tut Systems, Inc. and Western Digital
Corporation. Mr. Moore holds a B.S. degree in General Science from Virginia
Polytechnic Institute and State University.
D. James Bidzos has served as Vice Chairman of the Board of VeriSign since
December 2001. He served as Chairman of the Board of VeriSign from April 1995
until December 2001 and served as Chief Executive Officer of VeriSign from
April 1995 to July 1995. He served as President and Chief Executive Officer of
RSA Data Security from 1986 to 1999. RSA, an encryption software company, was
acquired by Security Dynamics Technologies, Inc. in July 1996 and has been a
wholly-owned subsidiary of Security Dynamics since that time. Mr. Bidzos has
been Vice Chairman of the Board of Directors of RSA since March 1999.
William L. Chenevich has been a director of VeriSign since its founding in
April 1995. Since February 2001, Mr. Chenevich has served as Vice Chairman of
Technology and Operations for U.S. Bancorp. Prior to joining Firstar in April
1999, which recently acquired and assumed the name of US Bank, he was Group
Executive Vice President of VISA International, a financial services company,
from 1993 to February 1999. Mr. Chenevich is a director of Longs Drug Stores
Corporation. Mr. Chenevich holds a B.B.A. degree in Business from City College
of New York and a M.B.A. degree in Management from the City University of New
York.
Gregory L. Reyes has been a Director of VeriSign since April 2001. Since May
2001, Mr. Reyes has served as Chairman of the Board of Directors and Chief
Executive Officer of Brocade Communications Systems, Inc. From July 1998 to May
2001, Mr. Reyes served as President and Chief Executive Officer and was a
member of the Board of Directors of Brocade. From January 1995 to June 1998,
Mr. Reyes was President and Chief Executive Officer of Wireless Access, Inc., a
wireless data communications products company. From January 1995 to November
1997, Mr. Reyes served as Chairman of the Board of Directors of Wireless
Access. Mr. Reyes holds a B.S. degree in Economics and Business Administration
from Saint Mary's College, Moraga, California.
Board of Directors' Meetings and Committees
The Board of Directors met eight (8) times, including telephone conference
meetings, and took five (5) actions by written consent during 2001. No director
attended fewer than 75% of the aggregate of the total
4
number of meetings of the Board of Directors held during the period for which
such director was a director and the total number of meetings held by all
committees of the Board of Directors on which such director served during the
period that such director served, except for Mr. Reyes who attended five of
seven regular and special meetings of the Board of Directors held during his
tenure on the Board of Directors in 2001.
The Board of Directors has established an audit committee to meet with and
consider suggestions from members of management, as well as VeriSign's
independent auditors, concerning the financial operations of VeriSign. The
audit committee also has the responsibility to review audited financial
statements of VeriSign and consider and recommend the employment of, and
approve the fee arrangements with, independent auditors for both audit
functions and for advisory and other consulting services. The audit committee
is currently comprised of Mr. Chenevich, Mr. Compton and Mr. Kriens. The audit
committee met three (3) times during 2001.
The Board of Directors has also established a compensation committee to
review and approve the compensation and benefits for VeriSign's key executive
officers. The compensation committee also administers VeriSign's stock
purchase, equity incentive and stock option plans and makes recommendations to
the Board of Directors regarding such matters. The compensation committee is
currently comprised of Mr. Bidzos, Mr. Cowan and Mr. Reyes. The compensation
committee met two (2) times during 2001.
Director Compensation
Directors do not receive any cash fees for their service on the Board of
Directors or any committee, but they are entitled to reimbursement of all
reasonable out-of-pocket expenses incurred in connection with their attendance
at Board of Directors and committee meetings. All board members are eligible to
receive stock options under VeriSign's stock option plans, and outside
directors receive stock options pursuant to automatic grants of stock options
under the 1998 Directors Stock Option Plan. In 2001, VeriSign granted under the
Directors Plan to each of Messrs. Bidzos, Chenevich, Compton and Cowan options
to purchase 17,500 shares of its common stock with a weighted average exercise
price of $55.48 per share, and to each of Mr. Kriens and Mr. Reyes an option to
purchase 25,000 shares of its common stock with an exercise price of $61.81 and
$34.44, respectively, per share.
In October 1997, the Board of Directors adopted, and in January 1998 the
stockholders approved, the 1998 Directors Stock Option Plan and reserved a
total of 500,000 shares, as adjusted for stock splits, of VeriSign's common
stock for issuance under that plan. In June 2000, the Board of Directors
adopted and the stockholders approved to increase the number of shares reserved
for issuance under the Directors Stock Option Plan by an additional 250,000
shares. As of December 31, 2001, options to purchase 475,000 shares of common
stock had been granted under the Directors Stock Option Plan and 275,000 shares
remained available for future grant. Members of the Board of Directors who are
not employees of VeriSign, or any parent, subsidiary or affiliate of VeriSign,
are eligible to participate in the Directors Stock Option Plan. The option
grants under the Directors Stock Option Plan are automatic and
nondiscretionary, and the exercise price of the options is 100% of the fair
market value of the common stock on the date of grant. Each new director who is
eligible to participate will initially be granted an option to purchase 25,000
shares on the date such director first becomes a director. These grants are
referred to as "Initial Grants." On each anniversary of a director's Initial
Grant or most recent grant if such director did not receive an Initial Grant,
each eligible director will automatically be granted an additional option to
purchase 12,500 shares if such director has served continuously as a member of
the Board of Directors since the date of such director's Initial Grant or most
recent grant if such director did not receive an Initial Grant. The term of
such options is ten years. They will terminate seven months following the date
the director ceases to be a director or, if VeriSign so specifies in the grant,
a consultant of VeriSign (twelve months if the termination is due to death or
disability). All options granted under the Directors Stock Option Plan will
vest as to 6.25% of the shares each quarter after the date of grant, provided
the optionee continues as a director or, if VeriSign so specifies in the grant,
as a consultant of VeriSign. Additionally, immediately prior to the dissolution
or liquidation of VeriSign or a "change in control" transaction, all options
granted pursuant to the Directors Stock
5
Option Plan will accelerate and will be exercisable for a period of up to six
months following the transaction, after which period any unexercised options
will expire.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between the Board of Directors or
compensation committee and the board of directors or compensation committee of
any other company.
The Board Recommends a Vote "FOR" the Election of Each of the Nominated
Directors.
6
PROPOSAL NO. 2
AMENDMENTS TO THE 1998 EQUITY INCENTIVE PLAN
The following is a summary of the principal provisions of VeriSign's 1998
Equity Incentive Plan, or Equity Incentive Plan. This summary is qualified in
its entirety by reference to the full text of the plan.
Stockholders are being asked to approve amendments to the Equity Incentive
Plan that would (i) increase the number of shares reserved and authorized for
issuance thereunder by 10,000,000 shares to 44,000,000 shares, excluding any
shares transferred from VeriSign's two predecessor plans, the 1995 Stock Option
Plan and 1997 Stock Option Plan, (ii) approve an amendment to increase the
maximum number of shares a person is eligible to receive in a calendar year
pursuant to an award granted under the plan to 1,500,000 shares in the
aggregate in any calendar year and (iii) eliminate the provision of the Equity
Incentive Plan which permits the compensation committee to reprice outstanding
options. These amendments are discussed more fully below.
Plan History
In October 1997, the Board of Directors adopted, and in January 1998 the
stockholders approved, the Equity Incentive Plan. In addition to the 8,000,000
shares reserved for issuance under the Equity Incentive Plan, all shares
remaining available under two predecessor plans, the 1995 Stock Option Plan and
the 1997 Stock Option Plan, were transferred to the Equity Incentive Plan. In
March 1999, the Board of Directors approved, and in May 1999, the stockholders
approved, an amendment to the Equity Incentive Plan to increase the number of
shares reserved for issuance under the plan by 8,000,000 shares. In March 2000,
the Board of Directors approved, and in June 2000, the stockholders approved,
an amendment to the Equity Incentive Plan to increase the number of shares
reserved for issuance under the plan by 10,000,000 shares. In April 2001, the
Board of Directors approved, and in May 2001, the stockholders approved, an
amendment to the Equity Incentive Plan to increase the number of shares
reserved for issuance under the plan by 8,000,000 shares. As of December 31,
2001, options to purchase 24,803,136 shares of common stock had been granted
under the Equity Incentive Plan and 7,820,417 shares (prior to amendment of the
Equity Incentive Plan as described below) remained available for future grant.
The Equity Incentive Plan authorizes the award of options, restricted stock
awards and stock bonuses. Each of these is referred to as an Award.
Proposed Amendments to the Equity Incentive Plan
In February 2002, the Board of Directors approved an amendment to the Equity
Incentive Plan to increase the number of shares reserved and authorized for
issuance thereunder by 10,000,000 shares. After amending the Equity Incentive
Plan to increase by an aggregate of 10,000,000 shares the number of shares
reserved and authorized for issuance under the plan, a total of 44,000,000
shares would be reserved and authorized for issuance, excluding any shares
transferred from VeriSign's two predecessor plans, the 1995 Stock Option Plan
and 1997 Stock Option Plan. The Board of Directors believes that the increase
in the number of shares reserved under the Equity Incentive Plan proposed by
this amendment is necessary in order to enable VeriSign to continue to use the
grant of stock options and other Awards to retain and attract qualified
employees and also to encourage stock ownership by Equity Incentive Plan
participants, thereby aligning their interests with those of VeriSign's
stockholders. VeriSign has no current plans or proposals to award any specific
portion of the additional options authorized under this proposal to any
specific person or class of persons.
The Board of Directors also approved amending the Equity Incentive Plan to
increase the maximum number of shares a person is eligible to receive in a
calendar year pursuant to an Award grant under the plan. The Equity Incentive
Plan currently provides that no person may receive Award grants of more than
400,000 shares in the aggregate in any year, other than new employees
(including new employees who are also officers and directors) of VeriSign or
any parent or subsidiary of VeriSign, who may receive Award grants up to a
maximum of 1,000,000 shares in the aggregate in the calendar year in which they
commence their employment. The Board of Directors approved increasing the limit
for all persons to 1,500,000 shares. If the Proposal is approved by
7
stockholders, no person may receive Award grants of more than 1,500,000 shares
in the aggregate in any calendar year. The Board of Directors believes that
this increase in the maximum number of shares a person is eligible to receive
in a calendar year pursuant to an Award grant under the plan is necessary to
enable VeriSign to continue to use the grant of stock options and other Awards
to retain and attract qualified employees and to also encourage stock ownership
by Equity Incentive Plan participants, thereby aligning their interests with
those of VeriSign's stockholders.
The Board of Directors approved a further amendment to the Equity Incentive
Plan, which is also the subject of this Proposal, to eliminate the provision of
the plan that permits the compensation committee to reprice outstanding
options. Currently, the compensation committee may reduce the exercise price of
outstanding options to a price not less than the exercise price of any other
options that are then outstanding. If the Proposal is approved by stockholders,
any future reduction in the exercise price of outstanding options would require
the approval of the Board of Directors and the stockholders. The Board of
Directors believes that the repricing of outstanding options should be subject
to approval by stockholders, as well as the Board of Directors, and that the
Proposal is in the best interests of VeriSign's stockholders.
Shares Subject to the Equity Incentive Plan
An aggregate of 44,000,000 shares of VeriSign's common stock has been
reserved by the Board of Directors for issuance under the Equity Incentive
Plan, after approval of the amendment under this Proposal. If any option
granted pursuant to the Equity Incentive Plan, or the predecessor 1995 Stock
Option Plan or 1997 Stock Option Plan, expires or terminates for any reason
without being exercised in whole or in part, or any Award terminates without
being issued, or any Award is forfeited or repurchased by VeriSign at the
original purchase price, the shares released from such Award will again become
available for grant and purchase under the Equity Incentive Plan. This number
of shares is subject to proportional adjustment to reflect stock splits, stock
dividends and other similar events.
Administration
The compensation committee, the members of which are appointed by the Board
of Directors, administers the Equity Incentive Plan. The compensation committee
currently consists of Mr. Bidzos, Mr. Cowan and Mr. Reyes, all of whom are
"non-employee directors," as that term is defined in the Securities Exchange
Act of 1934, and "outside directors," as that term is defined pursuant to
Section 162(m) of the Internal Revenue Code.
Subject to the terms of the Equity Incentive Plan, the compensation
committee determines the persons who are to receive Awards, the number of
shares subject to each such Award and the terms and conditions of each such
Award. The compensation committee has the authority to construe and interpret
any of the provisions of the Equity Incentive Plan or any Awards granted
thereunder.
Eligibility
Employees, officers, directors and consultants of VeriSign, and of any
subsidiaries and affiliates, are eligible to receive awards under the Equity
Incentive Plan. Prior to amendment of the Equity Incentive Plan, no person is
eligible to receive more than 400,000 shares of common stock in any calendar
year under the plan, other than new employees of VeriSign, including directors
and officers who are also new employees, who are eligible to receive up to a
maximum of 1,000,000 shares of common stock in the calendar year in which they
commence their employment with VeriSign. If the Proposal is approved by
stockholders, the limit will be increased to 1,500,000 shares for all persons.
As of February 28, 2002, approximately 3,566 persons were eligible to
participate in the Equity Incentive Plan.
8
Stock Options
The Equity Incentive Plan provides for the grant of both incentive stock
options, or ISOs, that qualify under Section 422 of the Internal Revenue Code,
and nonqualified stock options, or NQSOs. ISOs may be granted only to employees
of VeriSign or of a parent or subsidiary of VeriSign. All awards other than
ISOs may be granted to employees, officers, directors and consultants. The
exercise price of ISOs must be at least equal to the fair market value of the
common stock on the date of grant. The exercise price of NQSOs must be at least
equal to 85% of the fair market value of the common stock on the date of grant.
The maximum term of options granted under the Equity Incentive Plan is ten
years, although options are generally granted with a term of seven to ten
years. Awards granted under the Equity Incentive Plan generally vest as to 25%
of the shares on the first anniversary of the date of grant and as to 6.25% of
the shares each of the next 12 quarters. Upon certain changes in control of
VeriSign, this vesting schedule accelerates as to 50% of any shares that are
then unvested for officers of VeriSign at the level of senior vice president
and above and as to 100% of any shares that are then unvested for the President
and Chief Executive Officer.
The exercise price of options granted under the Equity Incentive Plan may be
paid as approved by the compensation committee at the time of grant: (1) in
cash (by check); (2) by cancellation of indebtedness of VeriSign to the
participant; (3) by surrender of shares of VeriSign's common stock owned by the
participant for at least six months and having a fair market value on the date
of surrender equal to the aggregate exercise price of the option; (4) by tender
of a full recourse promissory note; (5) by waiver of compensation due to or
accrued by the participant for services rendered; (6) by a "same-day sale"
commitment from the participant and a National Association of Securities
Dealers, Inc., or NASD, broker; (7) by a "margin" commitment from the
participant and a NASD broker; or (8) by any combination of the foregoing.
Termination of Options
Options are generally exercisable for a period of seven to ten years.
Options granted under the Equity Incentive Plan generally expire three months
after the termination of the optionee's service, except in the case of death or
disability, in which case the options generally may be exercised for up to 12
months following the date of death or termination of service due to disability.
Options will generally terminate immediately upon termination for cause.
Restricted Stock Awards
The compensation committee may grant restricted stock awards to purchase
stock either in addition to, or in tandem with, other Awards under the Equity
Incentive Plan, under such terms, conditions and restrictions as the
compensation committee may determine. The purchase price for such Awards must
be no less than 85% of the fair market value of VeriSign's common stock on the
date of the Award. In the case of an Award granted to a 10% stockholder, the
purchase price must be 100% of fair market value. The purchase price can be
paid for in any of the forms of consideration listed in items (1) through (5)
in "Stock Options" above, as are approved by the compensation committee at the
time of grant. To date, VeriSign has not granted any restricted stock awards.
Stock Bonus Awards
The compensation committee may grant stock bonus awards either in addition
to or in tandem with, other Awards under the Equity Incentive Plan, under such
terms, conditions and restrictions as the compensation committee may determine.
To date, VeriSign has not granted any stock bonus awards.
9
Mergers, Consolidations and Change of Control
In the event of the dissolution or liquidation of VeriSign or a "change in
control" transaction, outstanding Awards may be assumed or substituted by the
successor corporation, if any. If a successor corporation does not assume or
substitute the Awards, they will expire upon the effectiveness of the
transaction. Upon certain changes in control of VeriSign, the vesting schedule
accelerates as to 50% of any shares that are then unvested for officers of
VeriSign at the level of senior vice president and above and as to 100% of any
shares that are then unvested for the President and Chief Executive Officer.
The compensation committee, in its discretion, may provide that the vesting of
any or all Awards will accelerate prior to the effectiveness of the transaction.
Amendment of the Plan
The Board of Directors may at any time amend or terminate the Equity
Incentive Plan, including amendment of any form of award agreement or
instrument to be executed pursuant to the Equity Incentive Plan. However, the
Board of Directors may not amend the Equity Incentive Plan in any manner that
requires stockholder approval pursuant to the Internal Revenue Code or the
regulations promulgated thereunder, or the Exchange Act or Rule 16b-3, or its
successor, promulgated thereunder.
Term of the Plan
The Equity Incentive Plan will terminate in October 2007, unless sooner
terminated in accordance with the terms of the Equity Incentive Plan.
Federal Income Tax Information
The following is a general summary as of the date of this proxy statement of
the federal income tax consequences to VeriSign and participants under the
Equity Incentive Plan. The federal tax laws may change and the federal, state
and local tax consequences for any participant will depend upon his or her
individual circumstances. Each participant has been, and is, encouraged to seek
the advice of a qualified tax advisor regarding the tax consequences of
participation in the Equity Incentive Plan.
Incentive Stock Options. A participant will not recognize income upon grant
of an ISO and will not incur tax on its exercise, unless the participant is
subject to the alternative minimum tax described below. If the participant
holds the stock acquired upon exercise of an ISO, or ISO shares, for one year
after the date the option was exercised and for two years after the date the
option was granted, the participant generally will realize capital gain or
loss, rather than ordinary income or loss, upon disposition of the ISO shares.
This gain or loss will be equal to the difference between the amount realized
upon such disposition and the amount paid for the ISO shares.
If the participant disposes of ISO shares prior to the expiration of either
required holding period, which is called a disqualifying disposition, then gain
realized upon the disposition, up to the difference between the fair market
value of the ISO shares on the date of exercise, or, if less, the amount
realized on a sale of the shares, and the option exercise price, generally will
be treated as ordinary income. Any additional gain will be capital gain; taxed
at a rate that depends upon the amount of time the ISO shares were held by the
participant.
Alternative Minimum Tax. The difference between the fair market value of
the ISO shares on the date of exercise and the exercise price is an adjustment
to income for purposes of the alternative minimum tax, or AMT. The AMT, which
is imposed to the extent it exceeds the taxpayer's regular tax, is 26% of an
individual taxpayer's alternative minimum taxable income. The AMT rate
increases to 28% in the case of alternative minimum taxable income in excess of
$175,000. A maximum 20% AMT rate applies to the portion of alternative minimum
taxable income that would otherwise be taxable as net capital gain. Alternative
minimum taxable income is determined by adjusting regular taxable income for
certain items, increasing that income by certain tax
10
preference items, including the difference between the fair market value of the
ISO shares on the date of exercise and the exercise price, and reducing this
amount by the applicable exemption amount. The exemption amount is $49,000 in
the case of a joint return, subject to reduction under certain circumstances.
If a disqualifying disposition of the ISO shares occurs in the same calendar
year as an exercise of the ISO, there is no AMT adjustment with respect to
those shares. Also upon a sale of ISO shares that is not a disqualifying
disposition, alternative minimum taxable income is reduced in the year of sale
by the excess of the tax basis for AMT purposes, over the tax basis for regular
tax purposes, of the ISO stock. Special rules apply where all or a portion of
the exercise price is paid by tendering shares of common stock.
Nonqualified Stock Options. A participant will not recognize any taxable
income at the time a NQSO is granted. However, upon exercise of a NQSO the
participant will include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the participant's exercise price. The included amount will be treated as
ordinary income by the participant and may be subject to income tax and FICA
withholding by VeriSign, either by payment in cash or withholding out of the
participant's salary. Upon resale of the shares by the participant, any
subsequent appreciation or depreciation in the value of the shares will be
treated as capital gain or loss. Special rules apply where all, or a portion,
of the exercise price is paid by tendering shares of common stock.
Tax Treatment of VeriSign. VeriSign will be entitled to a deduction in
connection with the exercise of a NQSO by a participant or the receipt of
restricted stock or stock bonuses by a participant to the extent that the
participant recognizes ordinary income. VeriSign will be entitled to a
deduction in connection with the disposition of ISO shares only to the extent
that the participant recognizes ordinary income on a disqualifying disposition
of the ISO shares.
ERISA
The Equity Incentive Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA) and is not qualified
under Section 401(a) of the Internal Revenue Code.
2001 Stock Incentive Plan
In January 2001, the Board of Directors adopted the 2001 Stock Incentive
Plan. The plan authorizes the award of options and restricted stock awards.
Each of these is referred to as an Award. An aggregate of 15,000,000 shares of
VeriSign's common stock has been reserved for issuance under the 2001 Stock
Incentive Plan. On each January 1, the aggregate number of shares reserved and
available for grant will be increased automatically by a number of shares equal
to two percent (2%) of the total outstanding shares of VeriSign as of the
immediately preceding December 31, provided that the Board of Directors may in
its sole discretion reduce the amount of the increase in any particular year.
If any option granted pursuant to the 2001 Stock Incentive Plan expires or
terminates for any reason without being exercised in whole or in part, or any
Award terminates without being issued, or any Award is forfeited or repurchased
by VeriSign at the original purchase price, the shares released from such Award
will again become available for grant and purchase under the 2001 Stock
Incentive Plan. This number of shares is subject to proportional adjustment to
reflect stock splits, stock dividends and other similar events.
Employees, consultants, independent contractors and advisors of VeriSign or
any parent or subsidiary of VeriSign are eligible to receive Awards under the
plan. Awards granted to officers may not exceed in the aggregate forty percent
(40%) of all shares that are reserved for grant under the plan. Awards granted
as restricted stock to officers may not exceed in the aggregate forty percent
(40%) of all shares that are granted as restricted stock.
11
New Plan Benefits
No option grants have been made through March 31, 2002 under the 1998 Equity
Incentive Plan out of the 10,000,000 additional shares reserved under the
Equity Incentive Plan that stockholders are being asked to approve. The numbers
of option grants to be made under the 1998 Equity Incentive Plan in 2002 to the
individuals or groups of individuals listed in the table below, and the prices
at which such grants will be made, are not determinable. The following table
sets forth the option grants that were made during the year ended December 31,
2001 under the 1998 Equity Incentive Plan to:
. the Named Executive Officers (see the "Summary Compensation Table" in this
proxy statement);
. all current executive officers, as a group;
. all current directors who are not executive officers, as a group; and
. all employees, including officers who are not executive officers, as a
group.
Weighted
Average
Exercise Number of
Name and Position Price(1) Shares(1)
----------------- -------- ---------
Stratton D. Sclavos......................................................... $56.81 400,000
President, Chief Executive Officer and Chairman of the Board
Dana L. Evan................................................................ 34.25 130,000
Executive Vice President of Finance and Administration and
Chief Financial Officer..................................................
Quentin P. Gallivan......................................................... 34.24 125,000
Executive Vice President of Worldwide Sales and Services
Robert J. Korzeniewski...................................................... 34.24 125,000
Executive Vice President, Corporate and Business Development
Anil H.P. Pereira........................................................... 34.28 85,000
Executive Vice President and General Manager, Enterprise and
Service Provider Division................................................
James P. Rutt(2)............................................................ -- --
All current executive officers as a group (10 persons)...................... 44.53 1,214,250
All current directors who are not executive officers as a group (7 persons). -- --
All employees, including officers who are not executive officers, as a group -- --
--------
(1) The exercise price and number of options to be granted in the future under
the 1998 Equity Incentive Plan is unknown, as the exercise price will be
equal to fair market value on the date of grant, and option grants are made
at the discretion of the compensation committee. An option granted in
August 2001 to Stratton D. Sclavos to purchase 300,000 shares of VeriSign
common stock will vest in sixteen equal quarterly installments starting on
November 1, 2001. An option granted in May 2001 to Mr. Sclavos to purchase
100,000 shares vested as to 25,000 shares on October 2, 2001 and as to
75,000 shares will vest ratably thereafter over the next twelve quarters.
(2) James P. Rutt was employed by VeriSign until April 1, 2001.
The Board of Directors Recommends a Vote "FOR" the Proposal to Amend the
1998 Equity Incentive Plan to (1) Increase the Number of Shares of Common Stock
Authorized for Issuance under the Plan, (2) Increase the Annual Grant Limit
Under the Plan and (3) Prohibit Repricings Under the Plan Without Stockholder
Approval.
12
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
VeriSign has selected KPMG LLP as its independent auditors to perform the
audit of its financial statements for the year ending December 31, 2002, and
the stockholders are being asked to ratify this selection. Representatives of
KPMG LLP are expected to be present at the Meeting, will have the opportunity
to make a statement at the Meeting if they desire to do so and are expected to
be available to respond to appropriate questions.
The Board of Directors Recommends a Vote "FOR" the Ratification of the
Selection of KPMG LLP.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of VeriSign's common stock as of February 28, 2002 by:
. each person who is known by VeriSign to own beneficially more than 5% of
VeriSign's common stock;
. each director of VeriSign;
. each of the Named Executive Officers (see the "Summary Compensation Table"
in this proxy statement); and
. all directors and executive officers of VeriSign as a group.
The percentage ownership is based on 236,009,529 shares of common stock
outstanding at February 28, 2002. Shares of common stock that are subject to
options currently exercisable or exercisable within 60 days of February 28,
2002 are deemed outstanding for the purpose of computing the percentage
ownership of the person holding such options but are not deemed outstanding for
computing the percentage ownership of any other person. Unless otherwise
indicated in the footnotes following the table, the persons and entities named
in the table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where applicable.
Shares
Beneficially Owned
-----------------
Name of Beneficial Owner Number Percent
------------------------ ---------- -------
Massachusetts Financial Services Company(1)...... 29,112,137 12.3%
T. Rowe Price Associates, Inc.(2)................ 14,849,377 6.3%
Putnam Investments, LLC(3)....................... 14,646,242 6.2%
SAIC Venture Capital Corporation(4).............. 12,277,500 5.2%
Stratton D. Sclavos(5)........................... 1,900,784 *
Dana L. Evan(6).................................. 319,981 *
Quentin P. Gallivan(7)........................... 285,197 *
Kevin R. Compton (8)............................. 216,464 *
Robert J. Korzeniewski(9)........................ 167,599 *
Anil H.P. Pereira(10)............................ 94,420 *
Scott G. Kriens(11).............................. 88,594 *
D. James Bidzos(12).............................. 70,938 *
William L. Chenevich(13)......................... 30,813 *
David J. Cowan(14)............................... 30,342 *
James P. Rutt(15)................................ 7,337 *
Gregory L. Reyes(16)............................. 6,250 *
Roger H. Moore................................... 983 *
All executive officers and directors as a group
(18 persons)(17)............................... 3,190,747 1.4%
--------
* Less than 1% of VeriSign's common stock.
(1) Based on a Schedule 13G filed by such person on February 14, 2002.
Includes the sole power to vote of 28,291,631 shares and the sole power to
direct the disposition of 29,112,137 shares. The address of Massachusetts
Financial Services Company is 500 Boylston Street, Boston, Massachusetts
02116.
(2) Based on a Schedule 13G filed by such person on February 13, 2002.
Includes the sole power to vote of 2,336,600 shares and the sole power to
direct the disposition of 14,849,377 shares. The address of T. Rowe Price
Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202.
(3) Based on a Schedule 13G filed by such person on February 15, 2002.
Includes the shared power to direct the voting of 1,327,860 shares, and
the shared power to direct the disposition of 14,646,242 shares by Putnam
Investments, LLC; the shared power to direct the disposition of 12,636,356
shares by Putnam
14
Investment Management, LLC; and the shared power to direct the voting of
1,327,860 shares, and the shared power to direct the disposition of
2,009,886 shares, by The Putnam Advisory Company, LLC. The address of
Putnam Investments, LLC is One Post Office Square, Boston, Massachusetts
02109.
(4) Based on a Schedule 13G filed by such person on February 12, 2002.
Represents the shared power to vote and direct the disposition of
12,277,500 shares by Science Applications International Corporation and
SAIC Venture Capital Corporation. The address of SAIC Venture Capital
Corporation is 3993 Howard Hughes Parkway, Suite 570, Las Vegas,
Nevada 89109.
(5) Includes 85,600 shares held by Eladha Partners, LP under which Stratton D.
Sclavos and his spouse, Jody Sclavos, are limited partners with an
ownership interest of 98%. Includes 18,333 shares held by Sclavos Family
Partners, LP under which Mr. Sclavos and Jody Sclavos are limited partners
with an ownership interest of 50% and Mr. Sclavos' children, Nicholas L.
Sclavos and Alexandra C. Sclavos, are limited partners with a 48%
ownership interest. Includes 130,718 shares held by the Sclavos 1990
Revocable Trust under which Mr. Sclavos and Jody Sclavos are co-trustees.
Includes 12,205 shares held by the Sclavos Family Foundation under which
Mr. Sclavos is the beneficial owner. Also includes 1,476,630 shares
subject to options held by Mr. Sclavos, and 153,125 shares subject to
options held by Boutari Ventures, LLC, that are exercisable within 60 days
of February 28, 2002. Mr. Sclavos and Jody Sclavos are co-managers of
Boutari Ventures, LLC. Mr. Sclavos is President, Chief Executive Officer
and Chairman of the Board of VeriSign.
(6) Includes 20,242 shares held by TDC&R Investments LP under which Dana L.
Evan and her spouse, Tom Evan, are 1% general partners and Ms. Evan's
children, Christopher and Ryan, are limited partners with an ownership
interest of 99%. Includes 62,302 shares held by the Evan 1991 Living Trust
under which Ms. Evan and Tom Evan are co-trustees. Includes 236,841 shares
subject to options held by Ms. Evan that are exercisable within 60 days of
February 28, 2002. Ms. Evan is the Executive Vice President for Finance
and Administration and Chief Financial Officer of VeriSign.
(7) Includes 176,415 shares subject to options held by Quentin P. Gallivan
that are exercisable within 60 days of February 28, 2002. Mr. Gallivan is
Executive Vice President of Worldwide Sales and Services of VeriSign.
(8) Includes 109,938 shares subject to options held by Kevin R. Compton that
are exercisable within 60 days of February 28, 2002.
(9) Includes 120,376 shares subject to options held by Robert J. Korzeniewski
that are exercisable within 60 days of February 28, 2002. Mr. Korzeniewski
is Executive Vice President, Corporate and Business Development of
VeriSign.
(10) Includes 93,336 shares subject to options held by Anil H.P. Pereira that
are exercisable within 60 days of February 28, 2002. Mr. Pereira is
Executive Vice President and General Manager, Enterprise and Service
Provider Division of VeriSign.
(11) Represents 80,000 shares held by the 1996 Kriens Trust under which Scott
G. Kriens is a trustee. Includes 8,594 shares subject to options held by
Mr. Kriens that are exercisable within 60 days of February 28, 2002.
(12) Includes 59,938 shares subject to options held by D. James Bidzos and
10,000 shares subject to options held by Kairdos, L.L.C. that are
exercisable within 60 days of February 28, 2002. Mr. Bidzos is the General
Manager of Kairdos, L.L.C. and disclaims beneficial ownership of holdings
of Kairdos, L.L.C. except to the extent of his proportional interest
therein.
(13) Includes 27,813 shares subject to options held by William L. Chenevich
that are exercisable within 60 days of February 28, 2002.
(14) Includes 20,813 shares subject to options held by David J. Cowan that are
exercisable within 60 days of February 28, 2002.
15
(15) James P. Rutt was employed by VeriSign until April 1, 2001. The beneficial
ownership information for Mr. Rutt is provided as of March 31, 2001, the
latest date for which VeriSign has information regarding Mr. Rutt's
beneficial ownership of its shares.
(16) Includes 6,250 shares subject to options held by Gregory L. Reyes that are
exercisable within 60 days of February 28, 2002.
(17) Includes the shares described in footnotes (5)-(16) and 423,105 shares
beneficially held by five additional executive officers.
16
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to, earned by, or paid for services rendered to VeriSign
in all capacities during 1999, 2000 and 2001 by VeriSign's Chief Executive
Officer, the four most highly compensated executive officers, other than the
Chief Executive Officer, who were serving as executive officers at the end of
2001, and one additional individual who would have been among the four most
highly compensated executive officers but for the fact that the individual was
not serving as an executive officer of VeriSign at the end of 2001. These
officers are referred to together as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
--------------------- ------------
Securities
Underlying
Name and Principal Position Year Salary(1)(2) Bonus Options(3)
--------------------------- ---- ------------ -------- ------------
Stratton D. Sclavos.............................. 2001 $329,712 $150,000 1,325,000
President, Chief Executive Officer and 2000 300,000 137,500 100,000
Chairman of the Board 1999 250,000 78,125 400,000
Quentin P. Gallivan.............................. 2001 294,797 61,776 125,000
Executive Vice President of Worldwide 2000 300,000 -- 175,000
Sales and Services 1999 150,000 150,000 300,000
Dana L. Evan..................................... 2001 260,951 86,179 130,000
Executive Vice President of Finance and 2000 189,999 54,236 150,000
Administration, Chief Financial Officer 1999 165,000 49,840 200,000
Robert J. Korzeniewski(4)........................ 2001 270,182 61,776 125,000
Executive Vice President, Corporate and 2000 118,562 105,600 153,750
Business Development
Anil H.P. Pereira................................ 2001 198,586 61,183 85,000
Executive Vice President and General Manager, 2000 170,308 31,112 100,000
Enterprise and Service Provider Division 1999 137,920 43,044 180,000
James P. Rutt(5)................................. 2001 96,154 350,000 --
Former Chief Executive Officer of Network 2000 196,875 -- --
Solutions, Inc.
--------
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation described in this table does not include medical, group life
insurance or other benefits received by the Named Executive Officers which
are available generally to all salaried employees of the Company, and
certain perquisites and other personal benefits received by the Named
Executive Officers which do not exceed the lesser of $50,000 or 10% of any
such officer's salary and bonus disclosed in this table.
(2) Includes, where applicable, amounts electively deferred by each Named
Executive Officer under VeriSign's 401K Plan and amounts contributed to the
VeriSign 1998 Employee Stock Purchase Plan.
(3) All options were granted under the 1998 Equity Incentive Plan, except with
respect to an option to purchase 925,000 shares of VeriSign common stock
that was granted to Stratton D. Sclavos under the 2001 Stock Incentive
Plan. Options have a maximum term of seven years measured from the date of
grant, subject to earlier termination in certain events related to
termination of employment. These options generally vest at the rate of 25%
of the shares subject to the option on the first anniversary of the date of
the grant and
17
thereafter with respect to 6.25% each quarter. Upon certain changes in
control of VeriSign, the vesting schedule accelerates as to 50% of any
shares that are then unvested for officers of VeriSign at the level of
senior vice president and above and as to 100% of any shares that are then
unvested for the President and Chief Executive Officer. An option granted in
August 2001 to Mr. Sclavos to purchase 1,225,000 shares will vest in sixteen
equal quarterly installments starting on November 1, 2001. An option granted
in May 2001 to Mr. Sclavos to purchase 100,000 shares vested as to 25,000
shares on October 2, 2001 and as to 75,000 shares will vest ratably
thereafter over the next twelve quarters.
(4) Robert J. Korzeniewski joined VeriSign on June 8, 2000 after the
acquisition of Network Solutions, Inc.
(5) James P. Rutt was employed by VeriSign until April 1, 2001.
18
OPTION GRANTS IN FISCAL YEAR 2001
The following table sets forth certain information regarding stock options
granted to each of the Named Executive Officers during the year ended December
31, 2001.
Individual Grants(1)
- ----------------------------------------------------
Potential Realizable Value at
Number of Assumed Annual Rates of
Securities Percent of Total Stock Price Appreciation for
Underlying Options Granted Exercise Option Terms(2)
Options to Employees in Price Expiration -----------------------------
Name Granted Fiscal Year(%)(3) Per Share(4) Date 5% 10%
---- ---------- ----------------- ------------ ---------- ----------- -----------
Stratton D. Sclavos.................... 100,000 0.639% $59.40 05/02/08 $ 2,418,177 $ 5,635,380
1,225,000 7.83% 55.94 08/01/08 27,897,167 65,012,262
Dana L. Evan........................... 40,000 0.256% 34.44 03/15/08 560,789 1,306,877
90,000 0.575% 34.16 09/06/08 1,251,590 2,916,736
Quentin P. Gallivan.................... 35,000 0.224% 34.44 03/15/08 490,690 1,143,517
90,000 0.575% 34.16 09/06/08 1,251,590 2,916,736
Robert J. Korzeniewski................. 35,000 0.224% 34.44 03/15/08 490,690 1,143,517
90,000 0.575% 34.16 09/06/08 1,251,590 2,916,736
Anil H.P. Pereira...................... 35,000 0.224% 34.44 03/15/08 490,690 1,143,517
50,000 0.320% 34.16 09/06/08 695,328 1,620,409
James P. Rutt.......................... -- -- -- -- -- --
--------
(1) All options granted in 2001 were granted under VeriSign's 1998 Equity
Incentive Plan, except with respect to an option to purchase 925,000 shares
of VeriSign common stock that was granted to Stratton D. Sclavos under the
2001 Stock Incentive Plan. Options generally become exercisable with
respect to 25% of the shares covered by the option on the first anniversary
of the date of grant and with respect to an additional 6.25% of these
shares each quarter thereafter. These options have a term of seven years.
Upon certain changes in control of VeriSign, the vesting schedule
accelerates as to 50% of any shares that are then unvested for officers of
VeriSign at the level of senior vice president and above and as to 100% of
any shares that are then unvested for the President and Chief Executive
Officer. An option granted in August 2001 to Mr. Sclavos to purchase
1,225,000 shares will vest in sixteen equal quarterly installments starting
on November 1, 2001. An option granted in May 2001 to Mr. Sclavos to
purchase 100,000 shares vested as to 25,000 shares on October 2, 2001 and
as to 75,000 shares will vest ratably thereafter over the next
twelve quarters.
(2) Potential realizable values are net of exercise price but before taxes, and
are based on the assumption that the common stock of VeriSign appreciates
at the annual rate shown, compounded annually, from the date of grant until
the expiration of the seven-year term. These numbers are calculated based
on Securities and Exchange Commission requirements and do not reflect
VeriSign's projection or estimate of future stock price growth.
(3) VeriSign granted options to purchase 15,651,542 shares of common stock to
employees during 2001.
(4) Options were granted at an exercise price equal to the fair market value
per share of VeriSign common stock, as quoted on the Nasdaq National Market.
19
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2001 AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the year ended December 31, 2001 and the year-end number and value of
exercisable and unexercisable options.
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at 12/31/01(1) at 12/31/01(2)
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ----------- ------------- ----------- -------------
Stratton D. Sclavos.................... 195,375 $10,458,350 1,428,453 1,807,397 $27,989,710 $8,826,853
Quentin P. Gallivan.................... 209,584 9,287,660 117,977 424,687 961,009 1,970,131
Robert J. Korzeniewski................. 128,326 6,347,051 69,750 262,105 -- 894,933
Dana L. Evan........................... 108,450 5,486,484 222,693 382,187 2,383,759 2,400,897
Anil H.P. Pereira...................... 62,800 2,393,598 57,085 216,250 325,508 1,044,367
James P. Rutt.......................... 716,687 18,607,144 -- -- -- --
--------
(1) Except for options shown for James P. Rutt and Robert J. Korzeniewski, all
options exercised and shown in this table were granted under VeriSign's
1995 Stock Option Plan, 1997 Stock Option Plan, 1998 Equity Incentive Plan
and 2001 Stock Incentive Plan, and are subject to vesting as described in
footnote (1) to the option grant table above. Mr. Rutt's options and
106,855 of Mr. Korzeniewski's outstanding options were granted under the
Network Solutions 1996 Stock Incentive Plan. Those options become
exercisable with respect to 30% of the shares covered by the option on the
first anniversary of the date of grant and with respect to an additional
30%, 20% and 20% of these shares on the second, third and fourth
anniversaries of the date of the grant thereafter. The options granted
under the Network Solutions 1996 Stock Incentive Plan have a term of five
years.
(2) Based on a value of $38.04, the closing price per share of VeriSign's
common stock on The Nasdaq National Market on December 31, 2001, net of the
option exercise price.
COMPENSATION ARRANGEMENTS WITH EXECUTIVE OFFICERS
Under the 1995 Stock Option Plan, Dana L. Evan was granted two options to
purchase an aggregate of 680,000 shares of common stock, at exercise prices of
$0.1875 and $1.50, respectively. Each of these options is subject to the
standard four-year vesting schedule under the 1995 Stock Option Plan or, in
certain circumstances, is immediately exercisable, subject to VeriSign's right
to repurchase shares subject to such options, which repurchase right lapses on
a schedule similar to the vesting schedule for options granted under the 1995
Stock Option Plan. As of December 31, 2001, all of these options had vested.
20
Under Item 402(a)(9) of Regulation S-K promulgated by the Securities and
Exchange Commission, or SEC, neither the "Report of the Compensation Committee"
nor the material under the caption "Stock Price Performance Graph" shall be
deemed to be filed with the SEC for purposes of the Securities Exchange Act of
1934, as amended, nor shall the report or the graph be deemed to be
incorporated by reference in any past or future filing by the Company under the
Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as
amended.
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of the Board of Directors administers VeriSign's
executive compensation program. The current members of the compensation
committee are D. James Bidzos, David J. Cowan and Gregory L. Reyes. Each of
these persons is a non-employee director within the meaning of Section 16 of
the Securities Exchange Act of 1934, as amended, and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code. None of Mr.
Bidzos, Mr. Cowan or Mr. Reyes has any interlocking relationships as defined by
the SEC.
General Compensation Philosophy
The role of the compensation committee is to set the salaries and other
compensation of the executive officers and certain other key employees of
VeriSign, and to make grants under, and to administer, the stock option and
other employee equity and bonus plans. VeriSign's compensation philosophy for
executive officers is to relate compensation to corporate performance and
increases in stockholder value, while providing a total compensation package
that is competitive and enables VeriSign to attract, motivate, reward and
retain key executives and employees. Accordingly, each executive officer's
compensation package may, in one or more years, be comprised of the following
three elements:
. base salary that is designed primarily to be competitive with base salary
levels in effect at high technology companies in the Silicon Valley that
are of comparable size to VeriSign and with which VeriSign competes for
executive personnel;
. annual variable performance awards, such as bonuses, payable in cash and
tied to the achievement of performance goals, financial or otherwise,
established by the compensation committee; and
. long-term stock-based incentive awards which strengthen the mutuality of
interests between the executive officers and VeriSign's stockholders.
Executive Compensation
Base Salary. Salaries for executive officers for 2001 were generally
determined on an individual basis by evaluating each executive's scope of
responsibility, performance, prior experience and salary history, as well as
the salaries for similar positions at comparable companies. In addition,
VeriSign's Human Resources Department provided information to the compensation
committee regarding salary range guidelines for specific positions.
Base salary is adjusted each year to take into account the executive
officer's performance and to maintain a competitive salary structure. The
compensation committee conducts reviews of executive compensation practices on
an annual basis and may change each executive officer's salary based on the
individual's contributions and responsibilities over the prior twelve months
and any change in median comparable company pay levels. The compensation
committee believes that, on the basis of its knowledge of executive
compensation in the industry, that VeriSign's salary levels for the executive
officers are reasonable and necessary given the competition for executive
talent in the industry and VeriSign's financial resources.
Bonus Plan. VeriSign has established a broad based bonus plan. Certain
employees, including executive officers, are eligible to participate in this
plan. Target bonuses are established based on a percentage of base
21
salary and become payable upon the achievement of specified total company
financial goals and personal and team objectives. The compensation committee
administers this plan with regard to Mr. Sclavos. The executive management team
administers the plan for all other employees.
Bonus payments are based on the company's actual performance in achieving
financial, product delivery and customer satisfaction targets as compared to
planned results for these criteria. The financial target is based on VeriSign's
earnings per share, revenue, and success in managing corporate expenses to
plan. The product delivery target is based on VeriSign's ability to meet
product deadlines, ensure product quality, and generally execute against its
overall product roadmap in a timely fashion. The customer satisfaction target
is measured by customer loyalty (i.e., the percentage of customers who respond
positively to the possibility that they will renew VeriSign services and/or
recommend our services to others) and customer satisfaction (i.e., the overall
rating of customer satisfaction for VeriSign products, services, and attention
to the customer). All targets and related objectives are defined and measured
on a quarterly basis, with a final annual measurement; all measurements are
made at the consolidated corporate level.
Long-Term Incentive Awards. The compensation committee believes that
equity-based compensation in the form of stock options links the interests of
executive officers with the long-term interests of VeriSign's stockholders and
encourages executive officers to remain in VeriSign's employ. Stock options
generally have value for executive officers only if the price of VeriSign's
stock increases above the fair market value on the grant date and the officer
remains in VeriSign's employ for the period required for the shares to vest.
VeriSign grants stock options in accordance with the Equity Incentive Plan
and 2001 Stock Incentive Plan. In 2001, stock options were granted to executive
officers to aid in the retention of executive officers and to align their
interests with those of the stockholders. Stock options typically have been
granted to executive officers when the executive first joins VeriSign, in
connection with a significant change in responsibilities and, occasionally, to
achieve equity within a peer group. The compensation committee may, however,
grant additional stock options to executive officers for other reasons. The
number of shares subject to each stock option granted is within the discretion
of the compensation committee and is based on anticipated future contribution
and ability to impact VeriSign's results, past performance or consistency
within the executive officer's peer group. In 2001, the compensation committee
considered these factors, as well as the number of unvested option shares held
by the executive officer as of the date of grant. At the discretion of the
compensation committee, executive officers may also be granted stock options to
provide greater incentives to continue their employment with VeriSign and to
strive to increase the value of VeriSign's common stock. The stock options
generally become exercisable over a four-year period and are granted at a price
that is equal to the fair market value of VeriSign's common stock on the date
of grant.
Chief Executive Officer Compensation
Mr. Sclavos' base salary, target bonus, bonus paid and long-term incentive
awards for 2001 were determined by the compensation committee in a manner
consistent with the factors described above for all executive officers. Mr.
Sclavos' base salary for 2001 was set at the annual rate of $375,000; he was
eligible for a bonus of up to $375,000. Mr. Sclavos' bonus was paid in
accordance with VeriSign's regular bonus plan and was based on VeriSign's
actual performance in 2001 in achieving financial, product delivery and
customer satisfaction targets as compared to planned results for these
criteria. The compensation committee also considered Mr. Sclavos' achievement
of his individual objectives. An important aspect of VeriSign's continued
success was, and will continue to be, Mr. Sclavos' leadership in developing and
articulating the long-term strategic direction of VeriSign, as well as his
continued attention to the development of the appropriate senior management
team to support and execute that strategy. Finally, in considering competitive
compensation practices with respect to Mr. Sclavos' total compensation, the
compensation committee paid particular attention to the compensation practices
of competitor companies and sought to assure that Mr. Sclavos' total
compensation was appropriate relative to the total compensation paid to the
chief executive officers at similarly situated companies.
22
Internal Revenue Code Section 162(m) Limitation
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1.0
million for compensation paid to certain executives of public companies. Having
considered the requirements of Section 162(m), the compensation committee
believes that grants made pursuant to the Equity Incentive Plan meet the
requirements that such grants be "performance based" and are, therefore, exempt
from the limitations on deductibility. Historically, the combined salary and
bonus of each executive officer has been below the $1.0 million limit. The
compensation committee's present intention is to comply with Section 162(m)
unless the compensation committee feels that required changes would not be in
the best interest of VeriSign or its stockholders.
This report is submitted by the
Compensation Committee.
D. James Bidzos
David J. Cowan
Gregory L. Reyes
23
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
VeriSign's common stock, the Nasdaq Composite Index, and the JPMorgan H&Q
Internet Index. The graph assumes that $100 was invested in VeriSign's common
stock, the Nasdaq Composite Index and the JPMorgan H&Q Internet Index on
January 30, 1998, the date of VeriSign's initial public offering, and
calculates the return quarterly through December 31, 2001. The stock price
performance on the following graph is not necessarily indicative of future
stock price performance.
[CHART]
DATES VeriSign, JPMorgan H&Q Nasdaq Stock Market - U.S.
Inc. Technology
Jan-98 100.00 100.00 100.00
Feb-98 204.47 111.89 109.40
Mar-98 314.29 113.79 113.44
Apr-98 274.11 118.21 115.36
May-98 228.13 109.59 108.95
Jun-98 266.97 116.49 116.56
Jul-98 221.43 115.02 115.19
Aug-98 202.68 90.46 92.35
Sep-98 194.64 103.55 105.17
Oct-98 219.20 112.28 109.79
Nov-98 286.61 125.63 120.95
Dec-98 422.32 146.17 136.66
Jan-99 680.36 166.17 156.49
Feb-99 700.00 147.75 142.48
Mar-99 1100.00 159.19 153.26
Apr-99 821.43 165.20 158.19
May-99 846.43 167.47 153.81
Jun-99 1232.14 188.54 167.64
Jul-99 1058.93 185.96 164.62
Aug-99 1547.32 195.01 171.58
Sep-99 1521.43 199.46 171.82
Oct-99 1764.29 220.39 185.59
Nov-99 2654.47 257.62 208.17
Dec-99 5446.43 326.45 253.96
Jan-00 4610.71 312.32 244.58
Feb-00 7228.57 399.20 291.11
Mar-00 4271.43 368.25 285.10
Apr-00 3982.14 328.50 239.80
May-00 3867.86 288.82 210.87
Jun-00 5042.86 330.77 247.90
Jul-00 4533.93 309.61 234.46
Aug-00 5682.14 364.18 262.18
Sep-00 5787.50 324.75 228.12
Oct-00 3771.43 295.19 209.38
Nov-00 2476.79 211.31 161.32
Dec-00 2119.64 211.04 152.75
Jan-01 2100.00 241.32 171.28
Feb-01 1362.50 172.36 132.60
Mar-01 1012.50 147.58 114.02
Apr-01 1465.14 175.85 131.03
May-01 1614.29 166.68 130.87
Jun-01 1714.57 164.51 134.39
Jul-01 1560.29 154.01 125.84
Aug-01 1172.86 137.01 112.13
Sep-01 1197.14 107.75 93.24
Oct-01 1106.00 123.49 105.20
Nov-01 1067.43 143.64 120.17
Dec-01 1086.86 145.87 121.21
REPORT OF THE AUDIT COMMITTEE
The following is the report of the audit committee with respect to
VeriSign's audited financial statements for the fiscal year end December 31,
2001. The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that VeriSign
specifically incorporates by reference in such filing.
The audit committee of the Board of Directors is composed of three
non-management directors who meet the independence and experience requirements
of Nasdaq. The audit committee operates under a written charter adopted by the
Board of Directors. The members of the audit committee are Mr. Compton
(Chairman), Mr. Chenevich and Mr. Kriens.
24
Management is responsible for the preparation, presentation and integrity of
VeriSign's financial statements, accounting and financial reporting principles
and internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. The independent
auditors, KPMG LLP, are responsible for performing an independent audit of
VeriSign'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 responsibilities include the monitoring
and oversight of these processes.
During 2001, at each of its meetings, the audit committee met with the
senior members of VeriSign's financial management team and our independent
auditors. The audit committee had private sessions at which candid discussions
of financial management, accounting and internal control issues took place.
The audit committee recommended to the Board of Directors that KPMG LLP be
engaged as VeriSign's independent auditors and reviewed with VeriSign's
financial managers and the independent auditors overall audit scopes and plans,
the results of the audit, evaluations by the auditors of VeriSign's internal
controls and quality of VeriSign's financial reporting.
Management has reviewed with the audit committee the audited financial
statements contained in VeriSign's Annual Report on Form 10-K for the year
ended December 31, 2001. This review included a discussion of the accounting
principals, reasonableness of significant judgments, and clarity of disclosures
in the financial statements. Management represented to the audit committee that
VeriSign's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America and
the audit committee has reviewed and discussed the consolidated financial
statements with management and the independent auditors.
The audit committee discussed with the independent auditors matters required
to be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees." The audit committee also discussed with the auditors their
annual written disclosures on their independence from VeriSign and its
management, as required by Independent Standards Board Standard No. 1,
"Independence Discussions with Audit Committees." The audit committee has also
considered whether the non-audit services provided by KPMG LLP to VeriSign
during 2001 is compatible with maintaining the auditors' independence.
Based upon the audit committee's discussions with management and the
independent auditors and the audit committee's review of the representations of
management, and the report of the independent auditors to the audit committee,
the audit committee recommended that the Board of Directors include the audited
consolidated financial statements in VeriSign's Annual Report on Form 10-K for
the year ended December 31, 2001, as filed with the Securities and Exchange
Commission.
This report is submitted by the Audit
Committee.
Kevin R. Compton (Chairman)
William L. Chenevich
Scott G. Kriens
25
AUDIT AND NON-AUDIT FEES
The following table presents fees for professional services rendered by KPMG
LLP for the audit of VeriSign's annual consolidated financial statements for
the year ended December 31, 2001, and fees billed for other services provided
by KPMG LLP.
Audit fees, excluding audit related........................ $ 650,000
Financial information systems design and implementation.... --
All other fees:
Audit related fees(1)................................... 590,000
Tax compliance services................................. 623,000
Other non-audit services(2)............................. 285,000
----------
Total all other fees................................ 1,498,000
----------
Total fees.......................................... $2,148,000
==========
--------
(1) Audit related fees consisted principally of service auditors' reports
($395,000), statutory audits of foreign subsidiaries ($110,000), and
accounting advice, issuance of letters to underwriters, review of
registration statements and issuances of consents ($85,000).
(2) Other non-audit services consisted of international tax structuring
services ($199,000) and acquisition due diligence services ($86,000).
26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 2001, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which VeriSign or any of
its subsidiaries was or is to be a party in which the amount involved exceeded
or will exceed $60,000 and in which any director, executive officer or holder
of more than 5% of the common stock of VeriSign or any member of the immediate
family of any of the foregoing persons had or will have a direct or indirect
material interest other than (1) the compensation agreements, which are
described where required in "Executive Compensation," and (2) the transactions
described below.
Executive Relocation Loans. In March 2001, VeriSign loaned $2,000,000 to
James M. Ulam, Senior Vice President and General Counsel of VeriSign, in
connection with his relocation from Virginia to California. This loan, which is
secured by Mr. Ulam's principal residence, accrues interest at a rate of 0% per
annum. The principal amount of the loan is forgivable in installments and will
be forgiven in full on October 1, 2004 as long as Mr. Ulam remains employed
with VeriSign. $250,000 of the principal amount of the loan was forgiven on
October 1, 2001.
In April 2001, VeriSign loaned $150,000 to William P. Fasig, Senior Vice
President Corporate Marketing Services of VeriSign, in connection with his
relocation from Texas to California. This loan, which is secured by Mr. Fasig's
principal residence, accrues interest at a rate of 0% per annum. The principal
amount of the loan is forgivable in installments and will be forgiven in full
on April 12, 2004 as long as Mr. Fasig remains employed with VeriSign.
Severance Payments Related to Illuminet Holdings, Inc. Acquisition. In
December 2001, VeriSign and Roger Moore, President and Chief Executive Officer
of Illuminet Holdings, Inc. entered into a severance agreement pursuant to
which VeriSign agreed to make certain payments to Mr. Moore in connection with
the termination of his employment with Illuminet. The total amount payable
under the severance agreement is approximately $900,000 in the aggregate. Mr.
Moore is a member of the Board of Directors of VeriSign.
All future transactions between VeriSign and its officers, directors and
principal shareholders and their affiliates will be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested directors of the Board of Directors, and will be on terms no less
favorable to VeriSign than could be obtained from unaffiliated third parties.
27
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING OF STOCKHOLDERS
VeriSign's bylaws establish an advance notice procedure for stockholder
proposals not included in VeriSign's proxy statement, to be brought before an
annual meeting of stockholders. In general, nominations for the election of
directors may be made by:
. VeriSign's Board of Directors;
. any nominating committee appointed by VeriSign's Board of Directors; or
. any stockholder entitled to vote who has delivered written notice to the
Secretary of VeriSign sixty (60) days or no more than ninety (90) days in
advance of May 21, 2003, which notice must contain specified information
concerning the nominees and concerning the stockholder proposing the
nominations.
The only business that will be conducted at an annual meeting of VeriSign
stockholders is business that is brought before the meeting by or at the
direction of the chairman of the meeting or by any stockholder entitled to vote
who has delivered timely written notice to the Secretary of VeriSign sixty (60)
days or no more than ninety (90) days prior to the first anniversary of this
year's annual meeting. In the event that the date of the annual meeting is more
than thirty (30) days before or more than sixty (60) days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the ninetieth (90th) day prior to the
annual meeting and not later than the close of business on the later of the
sixtieth (60th) day prior to the annual meeting or the close of business on the
tenth (10th) day following the day on which public announcement of the date of
such meeting is first made by VeriSign. The stockholder's notice must contain
specified information concerning the matters to be brought before the meeting
and concerning the stockholder proposing those matters. If a stockholder who
has notified VeriSign of his intention to present a proposal at an annual
meeting does not appear or send a qualified representative to present his
proposal at the meeting, VeriSign need not present the proposal for a vote at
the meeting. A copy of the full text of the bylaw provisions discussed above
may be obtained by writing to the Secretary of VeriSign. All notices of
proposals by stockholders, whether or not included in VeriSign's proxy
materials, should be sent to the Secretary of VeriSign at its principal
executive offices.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires
VeriSign's directors and officers, and persons who own more than 10% of
VeriSign's common stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission, or SEC, and
the Nasdaq Stock Market. These persons are required by SEC regulations to
furnish VeriSign with copies of all Section 16(a) forms that they file.
Based solely on its review of the copy of the forms furnished to VeriSign
and written representations from the executive officers and directors, VeriSign
believes that one delinquent filing was made by Quentin P. Gallivan. It appears
that Mr. Gallivan inadvertently did not report two open market sales of an
aggregate of 50,000 shares in November 2001 on a Form 4 for that month. The
sales were reported on a Form 5, filed on February 14, 2002. In addition, it
appears that David J. Cowan inadvertently did not report the acquisition of
465 shares of VeriSign common stock acquired in connection with VeriSign's
acquisition of all of the outstanding shares of Illuminet Holdings, Inc. in
December 2001 on a Form 4 for that month. The acquisition was reported on a
Form 4, filed in February 2002.
28
OTHER BUSINESS
The Board of Directors does not presently intend to bring any other business
before the Meeting, and, so far as is known to the Board of Directors, no
matters are to be brought before the Meeting except as specified in the Notice
of the Meeting. As to any business that may properly come before the Meeting,
however, it is intended that proxies, in the form enclosed, will be voted in
respect thereof in accordance with the judgment of the persons voting such
proxies.
Whether or not you expect to attend the meeting, please complete, date, sign
and promptly return the accompanying proxy in the enclosed postage paid
envelope so that your shares may be represented at the meeting.
29
COMMUNICATING WITH VERISIGN
We have from time-to-time received calls from stockholders inquiring about
the available means of communication with VeriSign. We thought that it would be
helpful to describe these arrangements which are available for your use.
. If you would like to receive information about VeriSign, you may use one
of these convenient methods:
1. To have information such as our latest Quarterly Earnings Release,
Annual Report on Form 10-K or Form 10-Q mailed to you, please call our
Investor Relations Department at (866) 447-8776 (4IR-VRSN).
2. To view VeriSign's home page on the Internet, use VeriSign's Internet
address: www.verisign.com. VeriSign's home page gives you access to
product, marketing and financial data, and an on-line version of this
proxy statement, VeriSign's Annual Report on Form 10-K and other
filings with the Securities and Exchange Commission and job listings.
Internet access to this information has the advantage of providing you
with up-to-date information about us throughout the year.
. If you would like to write to us, please send your correspondence to the
following address:
VeriSign, Inc.
Attention: Investor Relations
487 East Middlefield Road
Mountain View, CA 94043-4047
. If you would like to inquire about stock transfer requirements, lost
certificates and change of stockholder address, please call our transfer
agent, Mellon Investor Services LLC at (800) 356-2017. Foreign
stockholders please call (201) 329-8660. You may also visit their web site
at www.melloninvestor.com for step-by-step transfer instructions.
Of course, as a stockholder, you will continue to receive the Annual Report
on Form 10-K and proxy statement by mail.
30
VeriSign, Inc.
487 East Middlefield Road
Mountain View, California 94043-4047
----------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stratton D. Sclavos and Dana L. Evan, as
proxies, each with full powers of substitution, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all shares of Common
Stock, $0.001 par value, of VeriSign, Inc. (the "Company") held of record by the
undersigned on March 22, 2002, at the 2002 Annual Meeting of Stockholders of the
Company (the "Meeting") to be held on May 21, 2002, and at any continuations or
adjournments thereof.
This Proxy, when properly executed and returned in a timely manner, will be
voted at the Meeting and any continuations or adjournments thereof in the manner
described herein. If no contrary indication is made, the proxy will be voted FOR
the Board of Director nominees, FOR Proposal 2 and FOR Proposal 3 and in
accordance with the judgment of the persons named as proxies herein on any other
matters that may properly come before the Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE.
SEE REVERSE SIDE
--------------------------------------------------------------------------------
[X] Please mark
your votes as indicated
in this example
The Board of Directors unanimously recommends that you vote FOR the Board of
Director nominees and FOR Proposals 2 and 3.
1. Election of Directors
[ ] FOR all nominees listed below (except as marked to the contrary).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Nominees: Scott G. Kriens and Stratton D. Sclavos
To withhold authority to vote for any individual nominee, strike a line through
that nominee's name.
2. Proposal to approve Amendments to the 1998 Equity Incentive Plan to FOR AGAINST ABSTAIN
increase the number of shares issuable thereunder by an aggregate of
10,000,000, increase the annual grant limit thereunder, and prohibit [ ] [ ] [ ]
repricing of options without stockholder approval.
3. Proposal to ratify the appointment of KPMG LLP as independent auditors FOR AGAINST ABSTAIN
for the year ending December 31, 2002 [ ] [ ] [ ]
In accordance with their judgment, the proxies are authorized to vote upon such
other matters as may properly come before the Annual Meeting or any
continuations on adjournments thereof.
This Proxy must be signed exactly as your name appears hereon. If more than one
name appears, all persons so designated should sign. Attorneys, executors,
administrators, trustees and guardians should indicate their capacities. If the
signer is a corporation, please print full corporate name and indicate capacity
of duly authorized officer executing on behalf of the corporation. If the signer
is a partnership, please print full partnership name and indicate capacity of
duly authorized person executing on behalf of the partnership.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE ENCLOSED ENVELOPE.
Signature: Date: ,2002
--------------------------------------- --------------------
Signature: Date: ,2002
--------------------------------------- --------------------
(Reverse Side)