Annual Report 2009 (1 MB, pdf) - Vasco

VASCO DATA SECURITY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(amounts in thousands, except per share data)
was 83 in 2009 and 29 in 2008, which represents the number of shares that will be received if the Company
achieves 100% of the performance goal. The shares received for performance at a level between stated
performance percentages will be interpolated. The performance targets are established by the Board of Directors.
Compensation expense equal to the market value of the stock on the grant date is recorded on a straight-line
basis over the vesting period if the performance condition is deemed to be probable, as required by ASC 718-10.
Compensation expense in 2009 includes a benefit of $650 for the reversal of 2007 and 2008 award accruals and
expense of $231 for the 2009 awards. The unamortized future compensation expense for the performance-based
restricted stock was $477 at December 31, 2009.
The following table summarizes the activity related to performance share units during 2009:
Shares
Weighted
average
remaining
term (years)
Aggregate
intrinsic
value
Outstanding at January 1, 2009 ..................... 74 1.42 $765
Shares lapsed, unearned .......................... (45) —
Shares awarded ................................. 83 686
Outstanding at December 31, 2009 .................. 112 1.76 703
Long-term Incentive Compensation
Under the 1997 Compensation Plan, we provided long-term incentive awards to key employees, other than
named executive officers, that can be earned if the company achieves certain cumulative earnings per share
targets over a three year period. The amount of payment will be determined as follows: no award will be paid if
the cumulative earnings per share is less than 90% of the target; if the cumulative earnings per share is greater
than 90% but less than 110% of the target, the award will be prorated on a basis consistent with actual
performance; and if the cumulative earnings per share is greater than 110% of the target, 120% of the award will
be paid.
The award amounts are designated as a specific dollar amount but, at the option of the company, can be paid
in either VASCO common stock or cash. If paid in stock, the company will issue the corresponding number of
freely tradable shares to the employees based on the stock price on the date the awards are earned. The company
granted awards totaling $1,968, $1,980, and $1,440 in 2009, 2008 and 2007, respectively. Compensation expense
for long-term incentive awards is recognized ratably over the period beginning with the effective date of the
grant and ending on December 31 of the targeted three-year period, if it is deemed probable that the target will be
met. Accruals for the 2007 and 2008 grants were reversed in the first quarter of 2009, when it became clear that
the performance targets were not likely to be met. Compensation expense in 2009 includes a benefit of $1,352 for
the 2007 and 2008 reversals and expense of $490 for the 2009 award. Employees forfeit their awards if they
terminate from the company prior to the end of the three-year target period. The amounts expensed are reported
as liabilities on the balance sheet. The unamortized future compensation expense for the long-term incentive
awards was $1,478 at December 31, 2009.
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