VASCO DATA SECURITY INTERNATIONAL, INC.

COMPENSATION COMMITTEE

OF THE BOARD OF DIRECTORS

CHARTER

 

I.         Purpose of the Compensation Committee

The Board of Directors (the " Board") of VASCO Data Security International, Inc. (the "Company") has constituted and established a Compensation Committee (the "Committee") with authority, responsibility, and specific duties as described in this Compensation Committee Charter.  The primary purpose of the Committee is: (i) to assist the Board in discharging its responsibilities in respect of compensation of the Company's executive officers (the “Officers”), as defined in the Company’s By-Laws, and its directors; and (ii) to produce an annual report for inclusion in the Company's proxy statement on Officers’ compensation in accordance with the applicable rules and regulations.

II.        Composition of the Compensation Committee

The Committee shall consist of not less than three members. Each member of the Committee shall be appointed by the Board and shall be determined to be “independent”, as defined under rules of the Nasdaq Stock Market, Inc. The Committee's chairperson (the “Chair”) shall be designated by the full Board or, if it does not do so, the Committee members shall elect a chairperson by vote of a majority of the full Committee.

Members of the Committee shall also qualify as "non-employee directors" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and shall satisfy any other necessary standards of independence under the federal securities and tax laws.

Vacancies on the Committee shall be filled by majority vote of the Board at the next meeting of the Board following the occurrence of the vacancy. The members of the Committee serve at the pleasure of the Board and may be removed by a majority vote of the Board.

III.      Authority and Responsibilities of the Compensation Committee

The Committee's primary responsibility is to assure that the Company’s compensation plans for Officers are consistent with the Company’s objectives, internal equity considerations, competitive practice, and the requirements of the appropriate regulatory bodies.

The Committee shall also communicate to shareholders the Company's compensation policies and the reasoning behind such policies as required by the Securities and Exchange Commission.

More specifically, the Committee shall:

·         Review, from time to time, the Company's compensation strategy to ensure that the compensation plans allow the Committee to structure CEO and other Executive Officers compensation in a manner that is consistent with the organization’s objectives and shareholders’ interests.

·         Review and approve annually the corporate goals and objectives relevant to the compensation of the CEO and other Executive Officers, evaluate the CEO’s and other Executive Officers’ performance against those goals and objectives and set the CEO’s and other Executive Officers’ compensation levels based on this evaluation.

·         Prepare a report annually on compensation in accordance with applicable rules and regulations to be included in the Company’s proxy statement.

·         Review and periodically make recommendations, if needed, to the Board with respect to changes that should be considered in the Executive Incentive Compensation Plan and all equity-based plans.

·         Exercise all rights, authority and functions of the Board under the Company’s Executive Incentive Compensation Plan and all equity-based plans including, but not limited to the review and approval of all annual grants of stock options and/or other equity awards.  At the Committee’s option, it may also establish guidelines for the Officers’ use in granting equity awards to new employees of the Company.

·         Review and periodically make recommendations to the Board with respect to non-employee Director compensation (including compensation for members of committees of the Board).

·         Form and delegate authority to a subcommittee(s) when it deems appropriate.  The subcommittee may consist of either one or two of the Committee’s members.

·         Such other duties and responsibilities (i) as may be assigned to the Committee, from time to time, by the Board and/or the Chairman of the Board, (ii) as set forth in the By-Laws of the Company, or (iii) as designated in the plan documents of any Company plan.

IV.      Meetings of the Compensation Committee

The Committee will meet as often as necessary to carry out its responsibilities. Reports of meetings of the Committee shall be made to the Board at its next regularly scheduled meeting following the Committee meeting accompanied by any recommendations to the Board approved by the Committee.

The Chair will preside at each meeting of the Committee and, in consultation with the other members of the Committee, shall set the date, time, duration and the agenda of items to be addressed at each upcoming meeting. A majority of the members of the Committee present in person or by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other shall constitute a quorum.

V.        Evaluation of the Compensation Committee

The Committee shall, on an annual basis, consider ways to improve its performance under this Charter. In reviewing its performance, the Committee shall evaluate whether this Charter appropriately addresses the matters that are or should be within its scope and compare the performance of the Committee to the requirements of this Charter. The Committee shall also consider all matters that the Committee deems relevant to its performance, including, but not limited to, the adequacy, appropriateness and quality of the information and recommendations presented to the Committee by the management of the Company and other advisors, the manner in which issues were discussed or debated, and whether the number and length of meetings of the Committee were adequate for the Committee to complete its work in a thorough and thoughtful manner.

The Committee shall prepare and review with the Board the annual performance evaluation of the Committee, which report by the chairperson of the Committee may take the form of an oral report and present any recommended changes in its Charter to the Board for review and approval.

VI.      Investigations and Studies; Outside Advisers

The Committee may conduct or authorize investigations into or studies of matters within its scope of responsibilities, and may retain, at the Company's expense, such independent counsel or other advisers as it deems necessary or appropriate to discharge its duties and responsibilities. The Committee shall have the sole authority to retain or terminate a compensation consultant to assist it in carrying out its responsibilities, including sole authority to approve the consultant's fees and other retention terms, such fees to be borne by the Company.