OSPN OneSpan Inc

PROPOSAL 3—AUDITOR RATIFICATION

We are asking you to ratify, on an advisory (non-binding) basis, the appointment of KPMG as our independent registered public accounting firm for 2021. Although a stockholder vote for this appointment is not required by law and is not binding on us, our Audit Committee will take your vote on this proposal into consideration when appointing or making changes to our independent registered public accounting firm in the future.

For additional information concerning this proposal, see “Proposal 3—Advisory Vote on Ratification of Independent Registered Public Accounting Firm” on page 54, and for information concerning the fees we paid to KPMG during 2020 and 2019, see “Fees Paid to Independent Registered Public Accounting Firm for 2020 and 2019” on page 59.

Corporate Governance Highlights

We are committed to effective corporate governance and high ethical standards. We believe that strong corporate governance policies and practices strengthen the accountability of our Board and management, lead to better business performance and align the long-term interests of our management team with our stakeholders, including our stockholders, our customers and our employees. For additional information regarding our Board’s policies and practices and the composition of our Board, see “Information Regarding Our Board of Directors” on page 32 and “Director Compensation” on page 81. Highlights of our current corporate governance policies and practices and features of our Board include:

Director Skills, Qualifications and Characteristics

The Corporate Governance and Nominating Committee regularly evaluates the skills, qualifications and characteristics identified as important for directors to provide effective oversight to our Company. See “Information Regarding Our Board of Directors—Director Skills, Qualifications and Characteristics” on page 33 for additional information.

STOCKHOLDER ENGAGEMENT

The Company proactively and regularly engages with its stockholders. In 2020, the Company directly engaged with 18 of its top 20 stockholders (other than index funds, exchange traded funds and quantitative funds) through in-person meetings, virtual meetings or telephone calls.

The Company has taken the following specific actions in response to its stockholder engagement efforts:

2020 CORPORATE RESPONSIBILITY HIGHLIGHTS

OneSpan secures our customers’ digital journeys from first engagement through the transaction lifecycle with our suite of verified identity, intelligent fraud detection and secure account opening products and services. As a global corporate citizen with operations and suppliers in many countries, we are committed to sustainability, diversity, inclusion and good governance. We also believe that our commitment to corporate social responsibility is valued by our customers, our employees and our stockholders.

QUESTIONS AND ANSWERS REGARDING VOTING PROCEDURES
AND OTHER INFORMATION

Questions and Answers about the Proxy Materials

These proxy materials are being furnished to you in connection with the solicitation of proxies by our Board for the Annual Meeting to be held on [●], 2021 at [●] [a.m.][p.m.] Central Daylight Time. For more information on the participants in our Board’s solicitation, please see “Additional Information Regarding Participants in the Solicitation” beginning on page B-1 of this Proxy Statement.

Legion Partners Asset Management, LLC (“LPAM,” and together with its affiliates, “Legion”) has notified the Company that LPAM intends to nominate four director candidates for election at the Annual Meeting. You may receive proxy solicitation materials from Legion. The Company is not responsible for the accuracy of any information provided by or relating to Legion or LPAM’s nominees contained in proxy materials filed or disseminated by or on behalf of Legion or any other statements that Legion may make.

Our Board strongly urges you NOT to sign or return any white proxy card sent to you by Legion, even as a protest vote. Voting to “WITHHOLD” with respect to any of LPAM’s nominees on a white proxy card sent to you by Legion is not the same as voting “FOR” our Board’s nominees because a vote to “WITHHOLD” with respect to any of LPAM’s nominees on its white proxy card will revoke any BLUE proxy card you may have previously submitted, as only the nine nominees receiving the most votes “FOR” their election will be elected to our Board. To support our Board’s nominees, you should vote “FOR” our Board’s nominees on the enclosed BLUE proxy card and disregard, and not return, any white proxy card sent to you by Legion. If you have previously submitted a proxy card sent to you by Legion, you can revoke it and vote “FOR” our Board’s Nominees by signing, dating and returning the enclosed BLUE proxy card in the postage-paid envelope provided, or by following the instructions on the BLUE proxy card to vote via the Internet or by telephone. Only the latest validly executed proxy that you submit will be counted, and any proxy may be revoked at any time prior to its exercise at the Annual Meeting. If you instead attend and validly vote at the Annual Meeting, your proxy will not be used. However, you can attend the Annual Meeting to observe but vote via proxy prior to that time, if you so choose.

Our Board unanimously recommends using the enclosed BLUE proxy card to vote “FOR” each of our Board’s nominees. Our Board recommends that you DISREGARD any white proxy cards that you may receive.

QUESTIONS AND ANSWERS ABOUT VOTING 

All stockholders who owned shares of our Common Stock as of the close of business on [●], 2021 (the “Record Date”) are entitled to receive notice of the Annual Meeting and to vote the shares they owned as of the close of business on the Record Date.

As of the close of business on the Record Date, [●] shares of our Common Stock were outstanding and entitled to vote, and we had [●] stockholders of record. The number of stockholders of record does not include beneficial owners of our Common Stock who hold their shares in “street name.”

Each stockholder is entitled to one vote for each share of our Common Stock owned as of the close of business on the Record Date for each matter presented at the Annual Meeting (including one vote for each seat up for election at the Annual Meeting with respect to Proposal 1—Election of Directors). Cumulative voting is not permitted in the election of directors.

Stockholders of Record. Stockholders of record as of the Record Date may vote their shares or submit a proxy to have their shares voted by one of the following methods:

The Company is incorporated under Delaware law, which specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the independent inspector of election can determine that such proxy was authorized by the stockholder. The electronic voting procedures provided for the Annual Meeting are designed to authenticate each stockholder by the use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded.

If you have any questions or need assistance voting, please contact MacKenzie Partners, Inc. (“MacKenzie Partners”), our proxy solicitor assisting us in connection with the Annual Meeting. Stockholders may call toll free at (800) 322-2885 or email at OneSpan@mackenziepartners.com. You may also call collect at (212) 929-5550.

Beneficial Owners. If you were the beneficial owner of shares (that is, you held your shares in “street name” through an intermediary such as a broker, bank or other nominee) as of the Record Date, you will receive instructions from your broker, bank or other nominee as to how to vote your shares or submit a proxy to have your shares voted. In most cases, you will be able to do this by mail, via the Internet or by telephone. Alternatively, you may obtain a “legal proxy” from your broker, bank or other nominee and register in advance to attend the Annual Meeting at www.[●].com/OSPN prior to the deadline of [●], 2021 at [●] [a.m.][p.m.] [Eastern] Daylight Time by following the instructions described below.

As discussed below, your broker, bank or other nominee may not be able to vote your shares on any matters at the Annual Meeting unless you validly provide instructions on how to vote your shares. You should instruct your broker, bank or other nominee how to vote your shares by following the directions provided by your broker, bank or other nominee.

If your shares are registered directly in your name with our transfer agent, Broadridge Financial Solutions, Inc. (which may be referred to as “Broadridge” in the materials you receive), you are considered the “stockholder of record” with respect to those shares, and we have sent this Proxy Statement directly to you.

If you hold your shares in an account with a broker, bank or other nominee, rather than of record directly in your own name, then the broker, bank or other nominee is considered the record holder of that stock. You are considered the beneficial owner of that stock, and your stock is held in “street name.” This Proxy Statement has been forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote your shares, and you are also invited to attend the Annual Meeting.

Your broker, bank or other nominee has enclosed a voting instruction form for you to use in directing your broker, bank or other nominee as to how to vote your shares. You must follow these instructions in order for your shares to be voted. Your broker is required to vote those shares in accordance with your instructions. Because of the contested nature of the election, if you do not give instructions to your broker, your broker may not be able to vote your shares with respect to any of the proposals. We urge you to instruct your broker, bank or other nominee, by following the instructions on the enclosed BLUE voting instruction form, to vote your shares in line with our Board’s recommendations on the BLUE voting instruction form.

A proxy is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. Our Board has designated Mark S. Hoyt and Steven R. Worth as the Company’s proxies for the Annual Meeting. The proxies will vote your shares at the Annual Meeting in accordance with the instructions you have provided on the enclosed BLUE proxy card.

You can revoke your proxy or change your vote at any time prior to the Annual Meeting. Only your latest dated proxy will count.

If you are a stockholder of record who has properly executed and delivered a proxy, you may revoke your proxy at any time prior to the Annual Meeting by any of the following means:

Your attendance at the Annual Meeting will not revoke your proxy unless you specifically request it or you vote at the Annual Meeting. If your shares are held in “street name,” your broker, bank or other nominee should provide instructions explaining how you may change or revoke your voting instructions. In general, “street name” holders may change their vote at any time prior to 11:59 p.m. Eastern Daylight Time on the day before the Annual Meeting date. In the absence of a revocation, shares represented by proxies will be voted at the Annual Meeting.

If you have previously submitted a white proxy card sent to you by Legion, you may change your vote by completing and returning the enclosed BLUE proxy card in the postage-paid envelope provided, or by voting via the Internet or by telephone by following the instructions on the BLUE proxy card. Please note that submitting a white proxy card sent to you by Legion will revoke votes you have previously made via the Company’s BLUE proxy card. Voting to “WITHHOLD” with respect to any of LPAM’s nominees on a white proxy card sent to you by Legion is not the same as voting “FOR” our Board’s nominees because a vote to “WITHHOLD” with respect to any of LPAM’s nominees on its white proxy card will revoke any BLUE proxy you may have previously submitted.

Whether or not you plan to attend the Annual Meeting, we urge you to sign, date and return the enclosed BLUE proxy card in the postage-paid envelope provided, or vote via the Internet or by telephone as instructed on the BLUE proxy card.

The shares represented by any proxy card that is properly executed and received by the Company prior to or at the Annual Meeting will be voted in accordance with the specifications made on the card. Where a choice has been specified on the BLUE proxy card with respect to the proposals, the shares represented by the BLUE proxy card will be voted in accordance with the specifications.

If you return a validly executed and dated BLUE proxy card without indicating how your shares should be voted on a matter and you do not revoke your proxy, your proxy will be voted: “FOR” the election of all nine of our Board’s Nominees as set forth on the BLUE proxy card (Proposal 1); “FOR” the approval, on an advisory (non-binding) basis, of our NEO compensation (Proposal 2); and “FOR” the ratification, on an advisory (non-binding) basis, of the appointment of our independent registered public accounting firm (Proposal 3).

Our Board is not aware of any matters that are expected to come before the Annual Meeting other than those described in this Proxy Statement. If any other matter is presented at the Annual Meeting upon which a vote may be properly taken, shares represented by all BLUE proxy cards received by the Company will be voted with respect thereto at the discretion of the persons named as proxies on the enclosed BLUE proxy card.

If your shares are held in more than one account, you will receive more than one BLUE proxy card, and in that case, you can and are urged to vote all of your shares by signing, dating and returning all BLUE proxy cards you receive from the Company in the postage-paid envelope provided. If you choose to vote by phone or via the Internet, please vote using each BLUE proxy card you receive to ensure that all of your shares are voted. Each individual BLUE proxy card will have a unique control number that identifies the account. Only your latest dated proxy for each account will count. Please sign each proxy card exactly as your name or names appear on the proxy card. For joint accounts, each owner should sign the proxy card. When signing as an executor, administrator, attorney, trustee, guardian or other representative, please print your full name and title on the proxy card in the space provided.

If Legion proceeds with its previously announced nominations, the Company will likely conduct multiple mailings prior to the Annual Meeting to ensure stockholders have the Company’s latest proxy information and materials to vote. The Company will send you a new BLUE proxy card with each mailing, regardless of whether you have previously voted. We encourage you to vote every BLUE proxy card you receive. Only the latest dated proxy you submit will be counted, and, if you wish to vote as recommended by our Board, then you should only submit a BLUE proxy card.

If you have any questions or need assistance voting, please contact MacKenzie Partners. Stockholders may call toll free at (800) 322-2885, email at OneSpan@mackenziepartners.com or call collect at (212) 929-5550.

If your shares are registered in your name, you must sign and return a proxy card in order for your shares to be voted, unless you vote via the Internet or by telephone or attend and vote at the Annual Meeting. If you provide specific voting instructions, your shares will be voted as you have instructed. If you execute the BLUE proxy card and do not provide voting instructions on any matter, your shares will be voted in accordance with our Board’s recommendations on that matter. We urge you to sign, date and return the enclosed BLUE proxy card in the postage-paid envelope provided, or vote via the Internet or by telephone as instructed on the BLUE proxy card, whether or not you plan to attend the Annual Meeting.

If your shares are held in “street name” (that is, held for your account by a broker, bank or other nominee), you will receive voting instructions from your broker, bank or other nominee. You must follow these instructions in order for your shares to be voted. Your broker is required to vote those shares in accordance with your instructions. If you do not instruct your broker, bank or other nominee how to vote your shares, then your broker, bank or other nominee will not be able to vote your shares with respect to Proposal 1 or Proposal 2 or, to the extent that Legion provides you with a proxy card or voting instruction form, any of the other proposals. If Legion does not provide you with a proxy card or voting instruction form, your broker, bank or other nominee will be able to vote your shares with respect to Proposal 3, the ratification of the appointment of our registered public accounting firm. We urge you to instruct your broker, bank or other nominee, by following the instructions on the enclosed BLUE voting instruction form, to vote your shares in line with our Board’s recommendations on the BLUE voting instruction form, whether or not you plan to attend the Annual Meeting.

A quorum must be present in order for business to be conducted at the Annual Meeting. For purposes of the Annual Meeting, the presence by means of remote communication or by proxy of the holders of a majority in voting power of the outstanding shares of our Common Stock entitled to vote at the meeting shall constitute a quorum. In the absence of a quorum, the chair of the meeting or the stockholders so present (by a majority in voting power thereof) may adjourn the Annual Meeting without further notice. Abstentions, withhold votes and broker non-votes (if any) will be counted for purposes of determining whether a quorum is present at the Annual Meeting.

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed within the Company, to Legion or to other third parties, except: (i) as necessary to meet applicable legal requirements, (ii) to allow for the tabulation and certification of votes and (iii) to facilitate a proxy solicitation.

QUESTIONS AND ANSWERS ABOUT THE ITEMS TO BE VOTED ON AT THE ANNUAL MEETING

OUR BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF EACH OF OUR BOARD’S NOMINEES UNDER PROPOSAL 1 AND “FOR” PROPOSALS 2 AND 3 USING THE ENCLOSED BLUE PROXY CARD.

If you have previously submitted a white proxy card sent to you by Legion, you may change your vote by completing and returning the enclosed BLUE proxy card in the postage-paid envelope provided, or by voting via the Internet or by telephone by following the instructions on the BLUE proxy card. Please note that submitting a white proxy card sent to you by Legion will revoke votes you have previously made via the Company’s BLUE proxy card. Voting to “WITHHOLD” with respect to any of LPAM’s nominees on a white proxy card sent to you by Legion is not the same as voting “FOR” our Board’s nominees because a vote to “WITHHOLD” with respect to any of LPAM’s nominees on the white proxy card will revoke any BLUE proxy you may have previously submitted.

Broker non-votes occur when brokers do not have discretionary voting authority to vote certain shares held in “street name” on particular non-routine proposals and the beneficial owner of those shares has not instructed the broker to vote on those proposals. Typically, the ratification of the appointment of registered public accounting firm is considered a routine proposal, and brokers have discretion to vote on that matter even if no instructions are received from the “street name” holder. However, because Legion has initiated a proxy contest, to the extent that Legion provides a proxy card or voting instruction form to stockholders who hold their shares in “street name,” brokers will not have discretionary voting authority to vote on any of the proposals presented at the Annual Meeting. Broker non-votes are not counted in the tabulations of the votes cast or present at the Annual Meeting and entitled to vote on any of the proposals to be voted on at the Annual Meeting, and therefore will have no effect on the outcome of the proposals.

QUESTIONS AND ANSWERS ABOUT ATTENDING THE ANNUAL MEETING

Due to the continuing impact of the novel coronavirus (or COVID-19) pandemic and to support the health and well-being of our stockholders and employees, the Annual Meeting will be held in a virtual meeting format only. You will not be able to attend the Annual Meeting in person. As described above, you are entitled to participate in the Annual Meeting if you were a stockholder of record as of the close of business on the Record Date or hold a legal proxy for the meeting provided by your broker, bank or other nominee.

In order to attend, you must register in advance at www.[●].com/OSPN prior to the deadline of [●], 2021 at [●][a.m.][p.m.] [Eastern] Daylight Time.

Registering to Attend the Annual Meeting—Stockholders of Record. If you were a stockholder of record as of the close of business on the Record Date, you may register to attend the Annual Meeting by accessing www.[●].com/OSPN and entering the 11-digit control number provided on your BLUE proxy card. On the following screen, you should click on the link titled “Click here to pre-register for the online meeting” at the top of the page.

If you do not have your BLUE proxy card, you may register to attend the Annual Meeting by emailing proof of ownership of shares of our Common Stock as of the Record Date to [●]@[●].com. Such proof of ownership may include a copy of your proxy card received either from the Company or Legion or a statement showing your ownership as of the Record Date.

Registering to Attend the Annual Meeting—Beneficial Owners. If you were the beneficial owner of shares (that is, you held your shares in “street name” through an intermediary such as a broker, bank or other nominee) as of the Record Date, you may register to attend the Annual Meeting by emailing [●]@[●].com and attaching evidence that you beneficially owned shares of our Common Stock as of the Record Date, which may consist of a copy of the voting instruction form provided by your broker, bank or other nominee, an account statement or a letter or legal proxy from such broker, bank or other nominee.

After registering, our tabulator, Corporate Election Services (“CES”), will send you a confirmation email prior to the Annual Meeting with a link and instructions for entering the virtual Annual Meeting.

Although the meeting webcast will begin at [●][a.m.][p.m.] Central Daylight Time on [●], 2021, we encourage you to access the meeting site prior to the start time to allow ample time to log into the meeting webcast and test your computer system. Accordingly, the Annual Meeting site will first be accessible to registered stockholders beginning at [●][a.m.][p.m.] Central Daylight Time on the day of the meeting. If you encounter difficulties accessing the virtual meeting or during the meeting time, please contact: [●]. In the event of any technical disruptions that prevent the chair from hosting the Annual Meeting within [30] minutes of the date and time set forth above, the meeting may be adjourned or postponed.

Whether or not you plan to attend the Annual Meeting, we urge you to sign, date and return the enclosed BLUE proxy card in the postage-paid envelope provided, or vote via the Internet or by telephone as instructed on the BLUE proxy card. Additional information and our proxy materials can also be found at www.[●].com/OSPN. If you have any difficulty following the registration process, please email OneSpan@mackenizepartners.com.

Stockholders as of the close of business on the Record Date who register, attend and participate in the Annual Meeting will have an opportunity to submit questions live via the Internet during a designated portion of the meeting. These stockholders may also submit a question in advance of the Annual Meeting by registering at www.[●].com/OSPN and following the instructions provided via email upon completing their registration. In both cases, stockholders must have available their control number provided on their proxy card or voting authorization form.

Questions and Answers about Miscellaneous Matters

We have retained CES to assist as master tabulator and [●] (“[●]”) to serve as inspector of election. In such capacity, CES and [●] will count and certify votes at the Annual Meeting.

We expect to report preliminary results on a Form 8-K within four business days after the Annual Meeting. We will report final results as certified by the independent inspector of elections as soon as practicable on a Form 8-K. You can access both Form 8-Ks and our other reports we file with the Securities and Exchange Commission (the “SEC”) on our website at www.investors.onespan.com or on the SEC’s website at www.sec.gov. The information provided on these websites is for informational purposes only and is not incorporated by reference into this Proxy Statement.

The Company’s list of stockholders as of the close of business on the Record Date will be available for inspection by the Company’s stockholders for at least ten days prior to the Annual Meeting for any purpose germane to the Annual Meeting. If you want to inspect the stockholder list, please call the office of the Corporate Secretary at (312) 766-4001 to schedule an appointment during ordinary business hours. The stockholder list will also be open to the examination of any stockholder during the Annual Meeting at [www.cesonlineservices.com/[●]], accessible using the Stockholder List link located under the Meeting Links section of the virtual meeting website.

No. Delaware law does not provide stockholders any dissenters’ or appraisal rights with respect to the matters to be voted on at the Annual Meeting.

The Company has adopted a procedure approved by the SEC called “householding.” Under this procedure, stockholders of record who have the same address and last name, and who do not participate in electronic delivery of proxy materials, will receive only one set of the proxy materials, unless one or more of these stockholders notifies the Company that they wish to receive individual copies. We believe this will provide greater convenience for stockholders, as well as cost savings for the Company by reducing the number of duplicate documents that are mailed. We also believe householding reduces the environmental impact of the Annual Meeting by reducing the number of duplicate documents that are printed. Stockholders who participate in householding will continue to receive separate proxy cards. Householding will not in any way affect your rights as a stockholder.

You may revoke your consent to householding at any time by sending your name, the name of your brokerage firm and your account number to Householding Department, 51 Mercedes Way, Edgewood, New York 11717 (telephone number: 1-800-542-1061). The revocation of your consent to householding will be effective 30 days following its receipt. In any event, if you did not receive an individual copy of this Proxy Statement or our Annual Report, we will send a copy to you if you address your written request to or call OneSpan Inc., 121 West Wacker Drive, 20th Floor, Chicago, IL 60601, Attention: Corporate Secretary (telephone number: 312-766-4001).

If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of our proxy materials, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, please contact the Company if you hold your stock directly by mail at OneSpan Inc., 121 West Wacker Drive, 20th Floor, Chicago, IL 60601, Attention: Corporate Secretary, by phone at (312) 766-4001 or by email at legal@onespan.com. Alternatively, if you hold your stock in a brokerage account, please contact your broker. If you participate in householding and wish to receive a separate copy of our proxy materials, or if you do not wish to participate in householding and prefer to receive separate copies of these documents in the future, please contact the Company or your broker.

We hereby undertake to deliver promptly, upon written or oral request, a copy of the proxy materials to a stockholder at a shared address to which a single copy of the proxy materials was delivered. Street name holders can request information about householding from their brokers, banks or other stockholders of record.

If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Call Collect: (212) 929-5500

or

Call Toll-Free: (800) 322-2885

Email: OneSpan@mackenziepartners.com

BACKGROUND OF THE SOLICITATION

OVERVIEW

Based on information provided by Legion to the Company, Legion began purchasing shares of Company common stock in April 2018. From April 2018 through the date of this Proxy Statement, members of the Company’s management team have had over 40 calls and meetings with representatives of Legion, including as described below. During the same time period, the Company has been undergoing a transformation from a hardware to a software and services business model, including Software-as-a-Service (“SaaS”).

2018

On April 17, 2018, John Gunn, the Company’s Chief Marketing Officer, and Joe Maxa, the Company’s Vice President of Investor Relations, first met with Sagar Gupta, a Senior Analyst at Legion Partners Asset Management, LLC (“LPAM”), at a cybersecurity conference in San Francisco. During the meeting, Messrs. Gunn and Maxa provided an overview of the Company and responded to various questions from Mr. Gupta.

On May 10, 2018, Scott Clements, the Company’s Chief Executive Officer, first met with Christopher S. Kiper, Managing Director at LPAM, and Mr. Gupta at a conference in Los Angeles.

On May 30, 2018, the Company announced that it was changing its name from VASCO Data Security International, Inc. to OneSpan Inc. effective May 31, 2018 to reflect the shift in the Company’s strategy and solution offering towards providing customers with a new cloud platform and software solutions in the cybersecurity area in furtherance of the Company’s Trusted Identity strategy.

On June 13, 2018, the Board’s Corporate Governance and Nominating Committee (the “Nom/Gov Committee”) discussed the primary attributes that the Committee would seek in a Board candidate and the process to be followed in connection with a search for an additional Board candidate.

On June 14, 2018, Mr. Gupta met with Mark Hoyt, the Company’s Chief Financial Officer, at the Company’s headquarters in Chicago. During the meeting, Mr. Gupta presented an overview of Legion and its investment philosophy and advocated for various changes at the Company, including expanding analyst coverage, changing its financial disclosures to enable an easier “sum-of-the-parts” analysis, creating new investor materials, initiating a “major share repurchase plan,” hosting an Investor Day and considering adding new directors to the Board. The presentation indicated an implied price of Company common stock by the end of 2020 would be $32.24, after taking into account $20 million of “annual share repurchases.”

In August 2018, the Nom/Gov Committee and the Board identified desired areas of experience for a director candidate search, which areas of experience included corporate structure and financing; SaaS and mobile application security; software technology sector business development, marketing and sales; large enterprise security strategies and solutions; international business; mergers and acquisitions and leadership at a publicly-held consumer banking or financial services company.

On August 17, 2018, Messrs. Clements, Hoyt and Maxa had a telephone conversation with Messrs. Kiper and Gupta and Ted White, Managing Director at LPAM. During the call, the Legion representatives indicated that Legion held approximately 2% of the outstanding shares of Company common stock and options covering an additional ~2% of the outstanding shares of Company common stock. During the call, the Company representatives indicated that the Company intended to change its disclosures on a reasonable timeline (i.e., not immediately but as the business evolved and the data became available), and the Legion representatives indicated that the Company should disclose its total addressable market opportunities.

On September 6, 2018, Messrs. Clements and Maxa met with Mr. Gupta at a conference in Minneapolis. During the meeting, the parties discussed the Company’s revenue disclosure, the Company’s strategy, synergies from the Company’s acquisition of Dealflo and the Company’s eSignature product line’s transition to a SaaS model.

In the fall of 2018, members of the Nom/Gov Committee and the Board interviewed various candidates identified in connection with the ongoing director search.

On November 1, 2018, Legion filed a Schedule 13D, indicating that it believed the market price of shares of Company common stock did not reflect the intrinsic value of the Company at the time and that Legion was “highly focused on collaborating with the [Company’s] management and the [Board] to promote appropriate recognition of the [Company’s] intrinsic value and the continuation of effective capital allocation.” Legion also indicated that it “may seek to add industry and governance expertise to the [Board].” The Schedule 13D indicated that Legion estimated the potential enterprise value of the Company’s software business could be $1 billion (or $27 per share) by 2021 and that Legion estimated the value of the Company’s Hardware product line to be $100 million, such that, combined with the Company’s $92 million cash balance, the Company’s shares “could be worth approximately $33 per share by 2021.”

On November 13, 2018, Mr. Clements met with Messrs. Kiper and Gupta at an investor conference in New York City. During the meeting, the parties discussed Legion’s suggestion that the Company add three directors to the Board, including Mr. McConnell, a professional director with close ties to Legion. Mr. Clements indicated that he would respond after the December 2018 Board meeting.

On December 3, 2018, Mr. Clements sent an email to Messrs. Kiper and Gupta, stating that the Board had asked for a fuller understanding of what specific steps Legion is requesting that the Company take, given that the Company had already augmented its investor communications, was pursuing additional sell-side research coverage and was evaluating further enhancements to the Company’s disclosures for 2019. Mr. Clements welcomed additional specific thoughts from Legion on other steps. He also indicated that the Board had an ongoing process focused on ensuring that the Board has directors with the right skills and experience and that, to that end, Legion’s input with respect to the specific skills and experience the Legion representatives believe should be added, as well as suggestions for particular candidates, would be welcome.

On December 7, 2018, Mr. Clements and Mr. Hoyt had a follow-up telephone conversation with Mr. Kiper and Mr. Gupta. During the call, the Legion representatives proposed adding three or more new directors to the Board pursuant to a potential cooperation agreement.

On December 12, 2018, the Board interviewed Marc Zenner, former Managing Director and Global Co-Head of Corporate Finance Advisory at J.P. Morgan and former managing director and Global Head of the Financial Strategy Group at Citigroup, who had decades of experience as an investment banker and providing strategic advice to public and private companies.

On December 13, 2018, the Nom/Gov Committee discussed the ongoing work to identify additional Board candidates, including the process of identifying and vetting potential candidates, the individuals who had been identified as potential candidates and the skills and experience sought.

On December 21, 2018, Mr. Clements and Mr. Hoyt had another telephone conversation with Messrs. Kiper, White and Gupta, and Mr. Kiper sent an email to Mr. Clements, naming three director candidates: an individual serving as Senior Vice President of Business and Corporate Development at a global cybersecurity company (“Legion Candidate A”); an individual with less than one year of experience as Chief Financial Officer at a privately held venture capital-backed SaaS company with no public company executive officer or board experience (“Legion Candidate B”); and Mr. McConnell. Mr. Kiper stated that Legion believed that these candidates “could add tremendous value” to the Board and requested that Mr. Clements provide a time frame for completing interviews of the candidates and providing feedback to Legion.

2019

On January 1, 2019, pursuant to the Company’s Corporate Governance Guidelines, Arthur Gilliland tendered his resignation from the Board in light of his acceptance of a new executive position in the security software industry, and on January 3, 2019, the Board accepted Mr. Gilliland’s resignation.

Also on January 3, 2019, the Board adopted the Company’s Amended and Restated By-laws (the “By-laws”), including to adopt a majority voting standard for uncontested director elections and to provide for a non-executive Chairman of the Board.

On the same day, the Company’s founder and former Chief Executive Officer, T. Kendall Hunt, stepped down as Chairman of the Board, and the Board appointed the Lead Independent Director, John N. Fox, Jr., as non-executive Chairman of the Board.

On January 7, 2019, Mr. Clements had a telephone call with Mr. Kiper during which Mr. Clements indicated that an executive search firm engaged by the Company would be contacting each of the candidates recommended by Legion. The parties also discussed the amendments to the By-laws, Mr. Gilliland’s resignation and the transition of the Chairman of the Board from Mr. Hunt to Mr. Fox. Mr. Clements expressed hope that the parties could come to a mutually agreeable resolution in the coming weeks.

On January 8, 2019, Mr. Kiper thanked Mr. Clements for the January 7, 2019 call and sent Mr. Clements an example of a cooperation agreement that Legion had entered into in October 2018.

On January 16, 2019, Mr. Maxa met with Mr. Gupta at a conference in New York City, and Mr. Gupta inquired about the Company’s eSignature product line and the Company’s strategy.

On January 23, 2019, Mr. Clements had follow-up phone conversations with Mr. Gupta.

On February 5, 2019, Ancora Advisors (“Ancora”) issued a press release urging the Board to explore a sale of the Company.

In February 2019, the Legion candidates completed and returned director and officer questionnaires.

On February 12 and February 13, 2019, the Board interviewed five candidates, including all three candidates who had been recommended by Legion and two candidates who had been identified through the Board’s director search process.

On February 13, 2019, the Board discussed the candidates who had been interviewed prior to the Board meeting, including the three candidates suggested by Legion; Marc Boroditsky, the Senior Vice President of Sales at Twilio Inc., a cloud communications platform-as-a-service company, with more than 30 years of experience with technology companies, including founding and financing four software companies in electronic medical records, authentication and identity management; and Dr. Zenner. Taking into account the analysis performed by the executive search firm with respect to the strengths and weaknesses of each director candidate as well as the skills and experience of the candidates, their enthusiasm and apparent commitment to serve, their ability to complement and augment the skills and experience of the Board and other factors, the Board determined to continue discussions with Mr. Boroditsky, Dr. Zenner and Legion Candidate A.

On February 15, 2019, Messrs. Clements and Hoyt had a telephone call with Messrs. Kiper, White and Gupta. During the call, Mr. Clements explained that, although the Board candidate selection process had proceeded as planned and as had been previously communicated to Legion, as a result of Ancora’s public letter, the Board desired to understand Ancora’s perspectives on the Board and its composition before the Nom/Gov Committee and the Board made any decisions with respect to director candidates. Mr. Clements indicated that the full Board had participated in interviewing five of the seven candidates considered. During the call, the Legion representatives reiterated their willingness to wage a proxy contest and “would not hesitate to go public” if they did not believe that the Board was being responsive to their ideas.

On March 4, 2019, the Board held a special telephonic meeting, during which the consensus of the Board was that the top three candidates interviewed by the Board included one candidate who had been suggested by Legion (Legion Candidate A), and the Board requested that Mr. Clements and a representative of Sidley Austin LLP, counsel for the Company (“Sidley”), lead discussions with Legion and its counsel regarding a potential mutually agreeable resolution.

On March 5, 2019, Mr. Clements had a telephone call with Mr. Kiper. He indicated that the Board had carefully considered each of the director candidates recommended by Legion in addition to the candidates identified by the executive search firm engaged by the Company, directors and others, and was prepared to add one of the Legion candidates and one other candidate to the Board in exchange for a customary standstill agreement with Legion. Mr. Kiper indicated that this was not acceptable and requested that Mr. Clements return to the Board and ask the Board to consider adding three new directors—two of Legion’s recommended candidates (including Mr. McConnell) and one candidate identified by others.

On March 8, 2019, the Board held a special telephonic meeting, and after considering Mr. Kiper’s counterproposal, the Board requested that management present Legion with a non-binding term sheet reflecting the terms that the Board discussed.

On March 11, 2019, Mr. Clements sent an email to Messrs. Kiper, White and Gupta, attaching a term sheet, which set forth the terms on which the Board was willing to add Legion Candidate A and a director identified by the Board. The term sheet contemplated a standstill that terminated 10 days prior to the deadline for nominating candidates for election at any meeting for which the Board had not committed to renominate the Legion candidates (but in any event no earlier than the date of the Company’s 2021 annual meeting of stockholders).

Later that day, counsel to Legion sent Sidley a revised term sheet that contemplated, among other things, that the Board add Legion Candidate A and a director identified by the Board, entitling Legion to replace Legion Candidate A if he were unwilling or unable to serve on the Board for any reason, the formation of a strategic review committee of the Board, a standstill that expired prior to the deadline for notices of nominations of candidates for election to the Board at the Company’s 2020 annual meeting of stockholders (the “2020 Annual Meeting”)  and reimbursement of Legion’s expenses.

Over the course of the next several days, the parties negotiated the terms of a potential settlement agreement.

On March 12, 2019, Mr. Kiper left a voicemail for Mr. Clements, in which Mr. Kiper stated, “there is no way we are giving a two-year deal” (referring to the standstill detailed in the March 11, 2019 term sheet Mr. Clements had sent to the Legion representatives). Mr. Kiper then threatened to nominate candidates for election at the 2019 annual meeting, stating that nominating “is probably not very pretty on your end; since we are a 5% filer, we would have to file that publicly.”

On March 14, 2019, a Sidley representative communicated to Legion’s counsel the Board’s final offer, which contemplated the addition to the Board of Legion Candidate A and one candidate identified by the Board, no right for Legion to replace Legion Candidate A if he were unwilling or unable to serve on the Board, no formation of a strategic review committee of the Board, a standstill that expired 10 business days prior to the deadline for submission of notice of director nominations for the 2021 Annual Meeting and reimbursement of up to $25,000 of Legion’s expenses.

Later that day, Legion’s counsel responded by stating that Legion was not open to any resolution that prohibited Legion from nominating candidates for election to the Board at the 2020 Annual Meeting unless such resolution contemplated the addition of two of the Legion candidates to the Board.

On March 15, 2019, the window closed for timely notices of stockholder intent to nominate candidates for election to the Board at the Company’s 2019 annual meeting of stockholders (the “2019 Annual Meeting”). Legion did not nominate any director candidates for election at the 2019 Annual Meeting.

On April 11, 2019, Messrs. Clements and Fox again interviewed Legion Candidate A in Palo Alto.

On April 12, 2019, Legion sent a quarterly letter to its investors, noting that the Company “has a stellar customer base of over 10,000 clients, including the majority of the top 100 global banks. As a trusted partner to the world’s leading financial institutions, OneSpan is at the forefront of arguably the most important area of cybersecurity: identity.” The letter further noted, “While the Company’s transformation has been impressive to-date, the transition from a hardware to software business model is complex and entails execution challenges.”

On May 7, 2019, the Company announced that the Board had nominated Mr. Boroditsky and Dr. Zenner as two new independent directors for election to the Board at the 2019 Annual Meeting.

On May 9, 2019, Mr. Gupta met with Mr. Clements at a conference in Los Angeles. During this meeting, Mr. Gupta continued to press for Board change despite the announcement of the Board’s nominations of Mr. Boroditsky and Dr. Zenner for election to the Board.

On June 14, 2019, Messrs. Kiper and White, sent a private letter to the Board. In the letter, the Legion representatives expressed their belief that the Company was undervalued relative to its peers largely due to its “lack of meaningful financial disclosures, unclear investor communications, poor capital allocation, and insufficient industry and governance experience” on the Board. In the letter, the Legion representatives encouraged the Company to disclose gross margin by revenue type, host an Investor Day in 2019 (specifically to outline multi-year targets for revenue (by type), margins and free cash flow) and initiate a share repurchase program. The letter also criticized the Company’s then-largest stockholder, Mr. Hunt, for “routinely [selling] stock at indiscriminate prices.” Legion noted that it welcomed the addition of Mr. Boroditsky to the Board, but indicated Legion’s view that the Board lacked “certain critical skills/experience and a shareholder friendly perspective.”

On July 23, 2019, the Nom/Gov Committee discussed the ongoing search for director candidates, and in August 2019, the Nom/Gov Committee indicated that the ideal candidate would have leadership experience in the software business with a focus on one or more of cybersecurity, SaaS, cloud and mobile software; functional experience in general management, product development and go-to-market areas; senior leadership experience in consumer banking at a publicly listed financial services organization with direct experience in digital banking channels (on-line and mobile) and on related matters of security and user experience; and professional experience in large enterprise security strategies and solutions, international business, corporate finance, capital allocation and mergers and acquisitions.

On August 21, 2019, Messrs. Kiper and Gupta met with Messrs. Clements and Hoyt at the Company’s headquarters and presented the Legion representatives’ perspectives as set forth in the June 14, 2019 letter, noting, in particular, the desire for the Company to enhance its gross margin disclosure, host an Investor Day in 2019, produce a quarterly presentation with earnings, take a balanced approach to capital allocation and reconstitute the Board with operational or Board experience at a “modern public enterprise software/security company.” The Legion representatives pointed to Twilio Inc., where Mr. Boroditsky served as Chief Revenue Officer, as having exemplary disclosure regarding matters such as customer growth and revenue. The presentation indicated an implied price of Company common stock by the end of 2020 would be $28.16, after taking into account $20 million of share repurchases in 2020.

On October 24, 2019, Jean K. Holley provided an update to the Board regarding the Nom/Gov Committee’s efforts to identify additional potential director candidates, noting that over the previous months, approximately 20 candidates had been narrowed down to five.

On November 12, 2019, Mr. Maxa met with Messrs. Kiper and Gupta at a conference in New York City. During the meeting, the Legion representatives made suggestions regarding the Company’s upcoming Investor Day (e.g., to reaffirm or update guidance, provide multi-year financial targets, disclose gross margin by hardware, subscription and licenses even if only approximate ranges are provided), hiring plans and the Company’s recent registration statement filing.

On December 4, 2019, the Company held an Investor Day in New York City, during which members of the Company’s senior management provided updates on the Company’s strategic transformation, growth strategy and business outlook and presented the Company’s three-year financial targets. During the conference, the Company affirmed its 2019 guidance of $248 million to $250 million in revenue and $26 million to $28 million in Adjusted EBITDA.⁽¹⁾  At the Investor Day, Messrs. Kiper and Gupta met with Messrs. Fox, Hoyt and Clements, and Mr. Kiper indicated that Legion had identified several new candidates for the Board.

On December 13, 2019, Mr. Kiper and Mr. White sent a private letter to the Board, applauding management and the Board for hosting “a commendable” Investor Day. The letter called for “new skillsets and fresh perspectives” on the Board and specifically raised concerns regarding the Company’s recent $300 million universal shelf registration filing and the “lack of capital markets and capital allocation skills on the Board.” The letter included the resumes and contact information for three candidates: Sarika Garg; the former Chief Operating Officer of a customer success software company and a coach to “thousands of CEOs and executives at Fortune 500 companies” (“Legion Candidate C”); and an individual serving as Chief Security Officer at a merchant payments company (“Legion Candidate D”).

(1) For a reconciliation of Adjusted EBITDA to the most comparable U.S. Generally Accepted Accounting Principles (“GAAP”) financial measure, see Annex A to this Proxy Statement.

On December 19, 2019, Mr. Clements sent an email to Messrs. Kiper and Gupta indicating that Mr. Fox or Ms. Holley would be in touch with each of the candidates.

On December 20, 2019, Ms. Holley interviewed Ms. Garg by telephone.

On December 30, 2019, Ms. Holley interviewed Legion Candidate D by telephone.

2020

On January 2, 2020, Ms. Holley interviewed Legion Candidate C by telephone.

On January 6, 2020, Messrs. Fox and Clements interviewed Ms. Garg and Legion Candidate C in San Francisco, as the Board’s ongoing process to identify candidates was entering its final stages.

On January 8, 2020, Mr. Clements had a call with Messrs. Kiper, White and Gupta during which Mr. Clements provided an update regarding the interview process.

Also on January 8, 2020, Activist Insight released a podcast interview with Mr. Kiper in which he stated that Legion found director candidates “with security software expertise” by using LinkedIn and “went through a number of profiles . . . and made several trips to San Francisco.”

On January 14, 2020, Mr. Maxa met with Mr. Gupta at a conference in New York City. Mr. Gupta inquired about the Company’s long-term financial targets and had various modeling questions. Mr. Gupta also suggested that the Company consider providing metrics on software guidance, and consider providing quarterly guidance on bookings or annual recurring revenue (“ARR”) and begin disclosing gross margin for software and hardware.

On January 21, 2020, Mr. Clements interviewed Legion Candidate D by video conference.

On January 27, 2020, Mr. Clements sent an email to Messrs. Kiper, White and Gupta to arrange a call with Mr. Fox and Ms. Holley. The email indicated that the Company would like Legion to consider entering into a limited non-disclosure agreement with the Company in order to facilitate the discussion.

On January 28, 2020, a Sidley representative sent Legion’s counsel a draft non-disclosure agreement.

On January 29, 2020, the Company and Legion entered into a short-term non-disclosure agreement limited to discussions with respect to the composition of the Board and potential Board candidates in connection with the 2020 Annual Meeting.

On January 29, 2020, Mr. Fox and Ms. Holley had a telephone call with Mr. Gupta to provide an update on the director selection process. During the call, Mr. Fox discussed the Board’s ongoing process of refreshment, noting the Nom/Gov Committee’s focus on leaders with direct experience in digital banking and on technology leaders who understand the Company’s markets and commercializing cloud software. Ms. Holley noted that, as a result of the Nom/Gov Committee’s ongoing search process throughout 2019, the Nom/Gov Committee had narrowed its search to certain candidates and that the Board would like for Legion representatives to review the backgrounds of two candidates that had been identified through the Board’s search process and provide feedback on a confidential basis. Mr. Fox emphasized the Board’s openness to the input from Legion.

In February 2020, Legion representatives conducted telephonic interviews of two candidates who had been identified in connection with the Board’s director search:

On February 7, 2020, Mr. Gupta sent an email to Messrs. Clements and Fox and Ms. Holley, noting that Ms. Hassan’s “background in the financial services sector is arguably the best out of all the candidates. And she is very well versed on the technology front as it relates to OneSpan’s product portfolio and long-term strategy.” Mr. Sagar further noted that Legion was “pleased to see the Board take steps in the right direction to better align the experiences and skillsets of [the Board] with the challenges and opportunities the [Company] is facing today.” Mr. Gupta indicated that “a broader refreshment” than adding two directors would “truly enable [Mr. Clements] and his team to achieve the success they deserve while operating as a public company.”

On February 13, 2020, the Nom/Gov Committee met to discuss the Board’s refreshment activities. Following a discussion of the skills and experience, enthusiasm, commitment to serve, ability to complement and augment the skills and experience of the Board and other factors, the Committee determined to present Ms. Hassan and Ms. Johnson to the full Board for consideration.

On February 21, 2020, Messrs. Kiper, White and Gupta had a telephone call with Messrs. Clements and Fox, who indicated that, after careful consideration, the Nom/Gov Committee had determined not to recommend that the Board appoint Legion’s two candidates as directors but, rather, to proceed with recommending to the Board that Mses. Hassan and Johnson be added to the Board.

On March 3, 2020, the Company announced that the Board had increased the size of the Board from eight to ten directors and appointed Mses. Hassan and Johnson to the Board, effective March 15, 2020, noting their decades of banking, financial and cloud technology experience at leading companies.

On March 6, 2020, Messrs. Kiper, White and Gupta held a virtual meeting with Messrs. Clements and Hoyt to discuss the Company’s fourth quarter earnings results. During the meeting, the Legion representatives discussed the potential sale of the Hardware and eSignature product lines and opposed expanding the number of employees at the Company who would be eligible to receive equity-based compensation.

On May 8, 2020, Messrs. Kiper, White and Gupta held a virtual meeting with Messrs. Clements, Hoyt and Maxa to again discuss the Company’s financial performance, general strategy, operations and product offerings, as well as the potential sale of the Company’s Hardware and eSignature product lines.

On May 11, 2020, Mr. Hoyt solicited input from Mr. Gupta regarding multiples based on term license revenue as compared to perpetual licenses, and Mr. Gupta provided a response on May 12, 2020.

On May 18, 2020, Messrs. Kiper, White and Gupta held a virtual meeting with Messrs. Hoyt and Maxa to further discuss financial metrics and disclosures.

On May 20, 2020, Messrs. Kiper, White and Gupta met with Messrs. Clements and Maxa at a virtual conference. During the meeting, the Legion representatives indicated their view that the Company could “unlock $1 billion in value” by selling the Hardware product line. They also suggested the sale of the Company’s eSignature product line, indicating their view that it was worth $300 million. The Legion representatives also suggested that the Company implement a share repurchase program to offset the sale of stock by Mr. Hunt.

On May 21, 2020, Mr. Gupta sent an email to Messrs. Clements and Hoyt, providing examples of other companies’ investor presentations and suggesting that the Company disclose ARR, dollar-based net expansion (“DBNE”) rate, bookings data, operational efficiency data, customer/product/cohort metrics and total addressable market (“TAM”) data. Mr. Gupta noted that the Company already disclosed TAM data.

On June 9, 2020, Messrs. Kiper, White and Gupta held a virtual meeting with Mr. Hoyt to further discuss the information emailed to Messrs. Clements and Hoyt on May 21, 2020. Subsequent to the virtual meeting, Mr. Sagar emailed Mr. Hoyt additional examples of disclosure of various financial and operational metrics by other companies, suggesting that the Company provide long-term guidance with respect to ARR.

Also on June 10, 2020, the Board discussed various strategic alternatives, including the views of financial advisors with respect thereto.

On August 6, 2020, the Nom/Gov Committee engaged an executive search firm to assist with a director search to identify a director candidate with public company financial and accounting expertise at a software or technology company who could potentially succeed the Audit Committee Chair.

On August 11, 2020, the Company announced that the Board had authorized the repurchase of up to $50 million of the outstanding shares of Company common stock, effective until June 10, 2022.

On August 13, 2020, Messrs. Kiper and Gupta held a virtual meeting with Messrs. Clements, Hoyt and Maxa to discuss second quarter earnings. During the meeting, the Legion representatives called for Mr. Hunt’s resignation and the addition of new directors to the Board. In addition, the Legion representatives again suggested that the Company sell its Hardware product line or the economic rights to it. Mr. Kiper threatened to issue a public letter in the next week unless Mr. Hunt resigned by August 17, 2020 “and other issues are discussed.”

On August 15, 2020, a Sidley representative contacted Legion’s counsel to request a call on Monday, August 17, 2020 and in response, Legion’s counsel indicated that a discussion on Monday would be too late under Legion’s then-current timeline.

On August 16, 2020, a Sidley representative had a call with Legion’s counsel, during which the Sidley representative communicated the Company’s belief that a public letter from Legion would be counterproductive to the Board’s discussions with Mr. Hunt regarding his resignation. The Sidley representative also noted that the Company could not disclose to Legion any material non-public information such as the Company’s M&A strategy that the Company does not disclose to all other investors unless Legion enters into a confidentiality agreement. Legion’s counsel indicated that Legion was not interested in entering into a confidentiality agreement.

Later on August 16, 2020, Legion’s counsel contacted a Sidley representative to propose that in return for two Board seats—one for a Legion principal and one from among the independent candidates that Legion had already proposed—Legion would stand down from a public campaign and calling for an announcement regarding the exploration of strategic alternatives for the Hardware and eSignature product lines. Alternatively, Legion indicated that it would not insist on changes to the Board if the Company announced its strategy and the exploration of a sale of the Hardware and eSignature product lines.

On August 17, 2020, a Sidley representative provided an update to Legion’s counsel, requesting that, in light of ongoing discussions with Mr. Hunt, Legion hold off on issuing the public letter.

On August 18, 2020, Legion filed Amendment No. 1 to its Schedule 13D and issued a press release that contained a public letter to the Board. The letter included various suggestions to the Board, including an expansion of financial disclosures (including guidance in a format “in-line with software peers”), a publicly announced immediate strategic review and sale of the Company’s Hardware product line and “eSignature SaaS business,” the immediate resignation of the Company’s founder and former Chairman and Chief Executive Officer (as well as the Company’s then-largest stockholder) Mr. Hunt from the Board and the appointment of “one or more independent directors” with “pertinent capital markets and/or software industry experience.” Legion indicated that it was “more than willing to offer a representative from Legion to replace Mr. Hunt.”

On August 19, 2020, the Board adopted a supplement to the Company’s Corporate Compliance Stock Trading Policy, effective immediately and terminating on August 19, 2022. The supplement prohibits each director and his/her immediate family members and affiliates from selling, transferring or otherwise disposing of any securities issued by or related to the Company while such director is serving on the Board or within 10 days after such director ceases to serve on the Board (other than due to such director’s death, disability or failure to be re-elected by the Company’s stockholders). During the Board meeting, Ms. Holley also provided an update regarding the ongoing director search.

On August 21, 2020, Mr. Gupta sent an email to Messrs. Clements and Hoyt stating that “[i]n the spirit of our past and continued support and collaborative relationship,” he was providing a sample earnings presentation for the Company, which Mr. Gupta discussed with Mr. Hoyt on September 10, 2020 and September 11, 2020.

Also on September 10, 2020, Messrs. Hoyt and Maxa met with Messrs. Kiper, White and Gupta at a virtual investor conference. Again, Messrs. Kiper and Gupta advocated for a public sale process for the eSignature product line, and they indicated that some of the candidates that had been proposed by Legion were still interested in joining the Board.

On September 14, 2020, the Company announced that Mr. Hunt retired from the Board, effective September 12, 2020, and noted the four independent directors added to the Board since June 2019.

On September 15, 2020, Messrs. Clements and Maxa met with Messrs. Kiper, White and Gupta at a virtual investor conference. During this meeting, Mr. Clements responded to the Legion representatives’ questions, stating that no incumbent Board members had indicated any intention to retire from the Board (as any such indication would have triggered a Form 8-K filing requirement), and the parties discussed a potential strategic review of the Company’s Hardware and eSignature product lines.

On September 18, 2020, Messrs. Kiper and White sent a letter to the Board, noting the Company’s recently adopted supplement to its stock trading policy, the retirement of Mr. Hunt and the addition of four new directors to the Board. Nevertheless, the letter advocated for “further accelerated Board refreshment” and a strategic review of the Company’s Hardware and eSignature SaaS segments. Messrs. Kiper and White also recommended the appointment of Legion’s Senior Analyst Sagar Gupta to the Board.

Also on September 18, 2020, the Board formed a new Finance and Strategy Committee, comprised of Dr. Zenner (Chair), Mr. Boroditsky, Ms. Hassan, Ms. Johnson and Matthew Moog.

On September 22, 2020, the Company engaged an independent financial advisor to perform a sum of the parts (“SOTP”) evaluation of the Company’s hardware, eSignature, security software and Trusted Identity product lines.

On October 8, 2020, Legion representatives delivered a presentation regarding the Company at the 13D Monitor Active-Passive Investor Summit, which is a conference that is primarily attended by other activist investors and their advisors. The presentation appeared to be aimed at attracting like-minded investors to the Company. It was complimentary towards the Company’s Software product line and its potential for creating stockholder value, but emphasized the need for Board refreshment, specifically targeting Michael Cullinane, Mr. Fox and Ms. Holley.

On October 22, 2020, the independent financial advisor discussed the results of its SOTP evaluation with the Finance and Strategy Committee.

The same day, the Board received an update on the ongoing process for identifying an additional Board candidate. Following a discussion of the ongoing dialogue with Legion, the Board directed management to work on a potential resolution with Legion, and the Board provided direction with respect to the terms of any such resolution.

On October 27, 2020, a Sidley representative contacted Legion’s outside counsel to propose a potential resolution, which contemplated: (i) an increase in the size of the Board by two directors, the appointment of a mutually agreed independent director who was independent of Legion and had either executive or board experience at a SaaS company and the appointment of an independent director chosen by the Board; (ii) that one “longer-tenured incumbent director” would not stand for re-election at the Annual Meeting; and (iii) a standstill permitting Legion to nominate directors at the Company’s 2022 annual meeting of stockholders (the “2022 Annual Meeting”).

On October 30, 2020, Legion’s counsel indicated that Legion would respond to the Company’s proposal the following week.

During two third quarter earnings follow-up calls on November 3 and November 6, 2020 with Messrs. Clements, Hoyt and Maxa, Messrs. Kiper, White and Gupta expressed confusion regarding the Company’s GAAP recurring revenue reporting and asked about the strategic plan for the Hardware product line and indicated that the Company would receive “a lot of cash” for the sale of its Hardware product line. There was no discussion of any potential settlement terms.

On November 4, 2020, Legion’s counsel conveyed Legion’s counter-proposal, which contemplated: (i) the immediate replacement of Mr. Fox, Mr. Cullinane and Ms. Holley with three new directors, who would include Mr. Gupta, a second designee selected by Legion and a mutually agreeable candidate selected by the Board and Legion; (ii) fixing the Board size at nine directors through the term of the standstill; (iii) the immediate public announcement of a “strategic review of the entire company;” (iv) the creation of a special committee of the Board to oversee the strategic review process, which committee would include Mr. Gupta and Legion’s second designee; and (v) a “customary standstill.”

Beginning in early November 2020, Dr. Zenner, Chair of the Finance and Strategy Committee, oversaw a process to interview various investment banks.

On November 11, 2020, a Sidley representative communicated to Legion’s outside counsel that the Board had concluded that Legion’s proposed terms for a resolution were not in the best interests of the Company’s stockholders.

Also on November 11, 2020, the Company announced that the Board had appointed Alfred Nietzel as a new independent director, effective November 11, 2020, noting Mr. Nietzel’s public company Chief Financial Officer experience and his extensive financial experience in the software and SaaS sectors and that five new independent directors had been added to the Board since June 2019, with deep skills and experience in the areas of SaaS software, recurring revenue business models, capital allocation, innovation, product management, financial services and mergers and acquisitions.

Also on November 17, 2020, Messrs. Hoyt and Maxa met virtually with Messrs. Kiper, White and Gupta at a virtual conference, during which Mr. Clements also gave a presentation. Mr. Gupta again asked about the status of the strategic review of the Hardware product line but did not raise the settlement discussions.

On December 9, 2020, the Company engaged a leading investment bank to act as an independent financial advisor to the Company in connection with its review of strategy, business configuration, mergers and acquisitions, strategic alternatives and capital structure.

On December 14, 2020, the Board discussed various valuation analyses and various strategic alternatives with the Company’s independent financial advisor and directed the financial advisor to explore potential paths with respect to one of the Company’s product lines.

2021

On January 13, 2021, Messrs. Hoyt and Maxa met with Messrs. Kiper, White and Gupta at a virtual investor conference, during which the Company also gave a presentation. Mr. Gupta again asked about the status of the strategic review of the Hardware product line.

On January 26, 2021, Legion’s counsel sent a letter to Sidley on behalf of Legion, requesting copies of the form of written questionnaire (the “Questionnaire”) referenced in the By-laws.

On February 5, 2021, Sidley, on behalf of the Company, provided copies of the form of Questionnaire to Legion’s counsel.

On February 8, 2021, Legion’s counsel sent a letter requesting that the Company agree to exempt Legion from complying with the portion of the Questionnaire requiring each proposed director nominee to consent to being named in the Company’s Annual Report on Form 10-K and proxy statement.

On February 18, 2021, Mr. Cullinane informed the Board that he would not stand for re-election at the Annual Meeting.

On February 23, 2021, the Company issued its fourth quarter and full year 2020 results, reporting that full-year total revenue declined 15% (primarily driven by lower hardware sales) but full-year recurring revenue grew 26%. The Company also reported DBNE of 120% and recurring revenue growth of 24% for the fourth quarter of 2020 and provided full-year guidance with respect to ARR growth, recurring revenue and total revenue.

On February 24, 2021, Messrs. Clements, Hoyt and Maxa held a virtual meeting with Messrs. Kiper, Gupta and an unknown Legion representative who dialed into the meeting but remained silent. The purpose of the meeting was to review fourth quarter 2020 financial results and 2021 guidance. During the meeting, Mr. Gupta asked about the hardware operational review and 2021 operating expenses.

On February 24, 2021, Ms. Hassan informed the Board that she would resign from the Board, effective March 1, 2021, as she had accepted a position in the public sector that precluded her continued role as a Board member of a publicly traded company.

On February 25, 2021, Legion amended its Schedule 13D and submitted a notice (the “Nomination Notice”) to the Company of Legion’s intent to nominate Ms. Garg, Mr. Gupta, Mr. McConnell and Rinki Sethi (collectively, the “Legion Nominees”) for election to the Board at the Annual Meeting.

Also on February 25, 2021, Legion issued a public letter to the Company’s stockholders, encouraging them to support its campaign to add the four Legion Nominees to the Board.

On February 26, 2021, Legion’s counsel sent a letter on behalf of Legion to request a complete record or list of the stockholders of the Company, all policies and guidelines applicable to directors as described in the By-laws and a copy of the By-laws pursuant to Section 220 of the Delaware General Corporation Law (the “Books and Records Demand”).

In March 2021, the Board commenced a search for a director candidate to fill the vacancy created by Ms. Hassan’s departure. In a process led by the Nom/Gov Committee, members of the Board considered potential candidates who had been identified in connection with past director searches, potential candidates proposed by members of the Board and potential candidates who had been proposed by stockholders or other third parties.

On March 3, 2021, Ms. Garg supplemented her responses to her completed Questionnaire.

Also on March 3, 2021, Ms. Holley sent emails to each of the Legion Nominees, requesting their availability to meet with members of the Nom/Gov Committee and the Board by videoconference.

Within hours, Mr. Gupta sent an email to Ms. Holley claiming that the Board had a track record of “summarily rejecting Legion’s candidates” and stating that Legion “would be happy to have its nominees meet with members of the Committee, . . . subject to OneSpan and Legion coming to an understanding regarding Board refreshment and the formation of a strategic review committee. If the Board does not wish to engage in such discussions to avoid a contested election at the upcoming annual meeting, then we should just let OneSpan’s shareholders decide who will best represent them on the Board.”

On March 4, 2021, Ms. Holley responded to Mr. Gupta’s email, stating that the Board had never “summarily rejected” Legion’s candidates but rather, had interviewed and objectively considered each candidate Legion had suggested, including “by flying to the West Coast to meet with your candidates for in-person discussions.” Ms. Holley also noted that, excluding Mr. Cullinane, who was retiring at the Annual Meeting, only three independent directors who were on the Board when Legion first invested in the Company remained on the Board. Ms. Holley then asked what Mr. Gupta had in mind as an “understanding regarding Board refreshment” as a precondition to meeting with the Legion Nominees.

On March 5, 2021, Sidley, on behalf of the Company, responded to the Books and Records Demand, stating that the Company would make available to Legion the information referred to in the Books and Records Demand, subject to entry into an appropriate confidentiality agreement, as is customary for the distribution of such information in order to protect, among other things, the confidential personal information of the Company’s stockholders.

Between March 5, 2021 and March 12, 2021, Legion’s and the Company’s legal counsel negotiated a non-disclosure agreement (the “Books and Records NDA”) covering the information referred to in the Books and Records Demand.

On March 8, 2021, Mr. White responded to Ms. Holley’s March 4, 2021 email to Mr. Gupta. Mr. White proposed the following: (i) three of the Legion Nominees would be immediately added to the Board; (ii) Mr. Cullinane would step down from the Board immediately and an additional three unidentified incumbent directors would not stand for re-election at the Annual Meeting; (iii) the Board size would remain at eight directors through the term of the standstill; (iv) a five-member strategic review committee of the Board would be established, comprised of two incumbent directors and the three Legion Nominees to “explore and make recommendations to the Board with respect to a potential divestiture of the Company’s hardware business, eSignature business or the entire company;” (v) a charter of such committee to be agreed to by Legion and the Company but which charter would require the Board to publicly announce the Board’s conclusions of the strategic review by a certain date; and (vi) a standstill and voting obligations similar to Legion’s standstill agreement with Bed Bath & Beyond Inc. to terminate 30 days prior to the expiration of the nomination window for the 2022 Annual Meeting.

On March 11, 2021, Ms. Holley sent an email to Messrs. White and Gupta, stating that the Board’s unanimous view was that the framework proposed by Legion was not in the best interests of the Company’s stockholders. Ms. Holley stated that the Board continued to be interested in interviewing the Legion Nominees and encouraged Legion to make them available for discussions with the Board. Ms. Holley also indicated that the Board continued to welcome engagement with Legion and told Legion to contact the executive team or the Board at any time if Legion had any additional opinions about the Company’s business that Legion would like to share.

On March 11, 2021, Ms. Holley also contacted each of the other Legion Nominees to make sure that her prior invitation had reached them and that they remain interested in serving on the Board. Ms. Holley again requested that they provide times when they were available to have an initial discussion by videoconference.

Also on March 11, 2021, Mr. White sent an email to Mr. Clements stating that Ms. Holley had again requested an interview with the other Legion Nominees. Mr. White wrote, “If you wish to engage along the lines [proposed on March 8, 2021], contact us directly. Otherwise, we should just let shareholders decide at the annual meeting who should join the board going forward.”

Also on March 11, 2021, Ms. Garg further supplemented her responses to her completed Questionnaire.

On March 12, 2021, Legion and the Company executed the Books and Records NDA, and, on behalf of the Company, Sidley produced documents in response to the Books and Records Demand.

On March 22, 2021, Legion filed its preliminary proxy statement with the SEC, and on March 26, 2021, Legion filed a revised preliminary proxy statement with the SEC.

On April 6, 2021, the Board appointed Garry L. Capers to the Board, noting his highly relevant experience, given his P&L and operational responsibility for SaaS solutions primarily targeted at end markets in the financial services industry and his experience leading Equifax Inc.’s formation of a new business unit in the fraud and identity management space.

Also on April 6, 2021, the Board further amended and restated the By-laws to contemplate virtual stockholder meetings; provide for notice, waiver of notice and director consent by electronic transmission; add mechanics for the resignation of directors and officers; and contemplate gender neutrality.

On April 9, 2021, the Company filed its preliminary proxy statement with the SEC.

INFORMATION REGARDING OUR BOARD OF DIRECTORS

Director Information

Our Board is currently comprised of ten members, including nine independent directors and one executive director. Mr. Cullinane is currently a member of our Board but is not standing for re-election at the Annual Meeting. Our Board’s committee structure currently consists of four principal committees that are all comprised of independent directors: the Audit Committee, the Management Development and Compensation Committee, the Corporate Governance and Nominating Committee and the Finance and Strategy Committee. Our Board may also establish other ad hoc or sub-committees, the composition, number and membership of which our Board may revise from time to time, as appropriate.

The following table lists each of our current directors and sets forth the information about each of the committees of our Board:

Director Skills, Qualifications and Characteristics

We believe the following skills, qualifications and characteristics are essential in comprising a board equipped to serve the best interests of our stockholders. This table does not include Mr. Cullinane, who will not be standing for re-election at the Annual Meeting:

The following matrix illustrates the specific skills, qualifications and characteristics of our Board that the Corporate Governance and Nominating Committee consider important to our long-term strategy. Further information on the qualifications and relevant experience of each of our Board’s Nominees is provided in the individual biographies contained in “Proposal 1—Election of Directors.”

Boroditsky

Capers

Clements

Fox, Jr.

Holley

Johnson

Moog

Nietzel

Zenner

Technology/Software/SaaS Industry Experience

Financial Technology Platforms/R&D/ Innovation

Operational/Change Management Experience

Product Management/Strategy Experience

Audit Committee Financial Expert

Capital Allocation/M&A Experience

Financial Institutions/Target Market Executive Roles/Banking Industry Experience

International/Global Business Experience

Outside Public Company Board Service

Board Diversity and Inclusion

Our Board does not have a formal policy with respect to director diversity. However, our Board believes that it is essential that members of our Board represent diverse viewpoints, with a broad array of business experiences, professions, skills and backgrounds that, when considered as a group, provide a sufficient mix of perspectives to allow our Board to best fulfill its responsibilities to the long-term interests of our stockholders. One-third of our Board Nominees are female or racially or ethnically diverse.

Ongoing Board Refreshment

Our Board has an ongoing refreshment program, actively assessing itself against the Company’s current and expected future needs and seeking the advice of outside experts and large stockholders. This resulted in the addition of six new directors in the past two years. In 2019, our Board added two new directors, Marc D. Boroditsky and Marc Zenner, augmenting our Board’s skills and experience primarily in the areas of SaaS software, recurring revenue business models, capital allocation, mergers and acquisitions and financing.

The refreshment activities continued into 2020, and our Board appointed two additional directors in March 2020 (Naureen Hassan and Marianne Johnson) and one in November 2020 (Alfred Nietzel). The three directors appointed in 2020 added skills and experience in the financial services industry, financial technology platforms, innovation, R&D, recurring revenue business models, the software industry, capital allocation, executive oversight of operations and change management and financial expertise. They also increased our gender diversity, bringing the total number of women on our Board from one to three, although it then decreased to two upon Ms. Hassan’s departure from our Board on March 1, 2021, due to her appointment to a position in the public sector that precludes her continued role as a Board member of a publicly traded company.

On April 6, 2021, the Board appointed Garry L. Capers to fill the vacancy created by Ms. Hassan’s departure. Mr. Capers was identified by the Corporate Governance and Nominating Committee in connection with a thorough search that began with 15 candidates. Mr. Capers is racially and ethnically diverse and brings expertise, including leading cloud-based software businesses and developing strategies, managing go-to-market approaches and leading client delivery and services.

Our Board is committed to continuing this process as it balances the knowledge and experience of our longer-tenured directors, the benefits of the fresh perspectives of new directors, the evolving needs of the Company and the input of our stockholders.

Board Independence

Our Board conducts an annual review as to whether each of our directors meets the independence standards of the listing standards of Nasdaq. Our Board has determined that each of the current directors (other than Scott M. Clements, our current President and CEO) and Ms. Hassan (who served as a director until March 1, 2021) has no material relationship with OneSpan other than as a director and is independent within the listing standards of Nasdaq. Mr. Hunt, who served as a director in 2020 and is our former CEO and Executive Chairman, was not deemed to be independent. In making its independence determinations, our Board has broadly considered all relevant facts and circumstances and has concluded that there are no transactions or relationships that would impair the independence of any of the current directors, other than Mr. Clements. In conducting its evaluation of Ms. Johnson, our Board considered her affiliation with Cox Automotive, Inc., which purchases certain of our eSignature and secure agreement automation services, and in conducting its evaluations of Messrs. Boroditsky and Moog, our Board considered their respective affiliations with Twilio Inc., from which the Company purchases certain SMS services, and Built In Chicago, with which the Company partners to promote job openings. Our Board ultimately determined that the transactions considered were routine and normal and that no director derived a material benefit from the transactions. Accordingly, none of these transactions was considered a material relationship that impacted a director’s independence.

Board Leadership Structure

The current leadership structure of the Company provides for the separation of the roles of the CEO and the Chair of our Board. Mr. Fox serves as our independent Chair of the Board, and Mr. Clements, also a director, serves as our President and CEO. At this time, our Board believes that in light of the Company’s size and the nature of our business, the separation of these roles serves the best interests of OneSpan and our stockholders.

Lead Independent Director

In 2017, our Board adopted a lead independent director policy. In the absence of an independent director holding the position of Chair, our Board will appoint a Lead Independent Director. Given that the Chair of the Board, Mr. Fox, is independent, we do not currently have a Lead Independent Director.

Our independent directors regularly meet alone in executive session. In addition, each of our four standing Board committees is comprised solely of independent directors. Our Board regularly reviews the Company’s leadership structure and reserves the right to alter the structure as it deems appropriate.

Meetings of Our Board and Executive Sessions

Our Board met 11 times during 2020. Each director who served on our Board in 2020 attended more than 90% of the meetings of our Board and the meetings held by all committees on which he or she served, during his or her time of service, in 2020. As part of their duties, the directors are expected to attend the annual meetings of stockholders. Each of the then-serving directors attended last year’s annual meeting of stockholders.

The independent members of our Board met regularly in executive session with the Chair of the Board, or the applicable chair of a Board committee, presiding over these executive sessions. For additional information about the number of meetings held by each Board committee in 2020, see “Committees of Our Board.”

Committees of Our Board

Our Board’s committee structure currently consists of four principal committees: the Audit Committee, the Corporate Governance and Nominating Committee, the Management Development and Compensation Committee and the Finance and Strategy Committee. Our Board has adopted a written charter for each of its committees. A copy of each committee’s charter is available on our website, investors.onespan.com, in the governance section of our investor relations webpage. A brief description of the composition and the primary responsibilities of our committees is set forth in the following sections.

The Audit Committee of our Board must be composed of three or more independent directors, as required by the listing standards of Nasdaq, who also meet the additional independence standards required for audit committee members. The Audit Committee is responsible for overseeing the financial reporting process on behalf of our Board. Our Board has determined that Mr. Cullinane, who is not standing for re-election at the Annual Meeting, and Mr. Nietzel and Dr. Zenner qualify as audit committee financial experts and has designated them as such. Each year, the Audit Committee recommends the selection of the independent registered public accounting firm to our Board.

The Audit Committee has authority to delegate to subcommittees subject to applicable rules and regulations. In its sole discretion, the Audit Committee may retain, and will be directly responsible for the oversight of, such independent counsel, other advisors or consultants as it deems necessary or appropriate to discharge its duties and responsibilities.

The Corporate Governance and Nominating Committee of our Board must be composed of three or more independent directors, as required by the listing standards of Nasdaq. The Committee has authority to delegate to subcommittees subject to applicable rules and regulations. In its sole discretion, the Committee may retain, and will be directly responsible for the oversight of, such independent counsel, other advisors or consultants as it deems necessary or appropriate to discharge its duties and responsibilities.

The Management Development and Compensation Committee of our Board must be composed of three or more independent directors, as required by the listing standards of Nasdaq. The members of the Management Development and Compensation Committee must also qualify as “non-employee directors” within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), be “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986 (the “Code”) and satisfy any other necessary standards of independence under the federal securities and tax laws. The Management Development and Compensation Committee has authority to delegate to subcommittees subject to applicable rules and regulations. In its sole discretion, the Committee may retain, and will be directly responsible for the oversight of, such independent counsel, other advisors or consultants as it deems necessary or appropriate to discharge its duties and responsibilities.

In September 2020, our Board established the Finance and Strategy Committee, to be composed of three or more independent directors. The Committee has authority to delegate to subcommittees subject to applicable rules and regulations. In its sole discretion, the Committee may retain, and will be directly responsible for the oversight of, such independent counsel, other advisors or consultants as it deems necessary or appropriate to discharge its duties and responsibilities.

Director Selection Process

The Corporate Governance and Nominating Committee will consider director candidates who have relevant business experience, are accomplished in their respective fields and possess the skills and expertise to make a significant contribution to our Board, the Company and our stockholders. Director nominees should have executive-level leadership business experience, knowledge about issues affecting the Company and the ability and willingness to apply sound and independent business judgment. As part of our Board’s annual evaluation process, our Board discusses and compiles a matrix of key areas of experience, skills and other qualifications relating to Board composition. Each member of our Board evaluates himself or herself against the criteria, and the Board reviews and discusses the collective results to perform a gap analysis for purposes of succession planning and evaluating the overall skills and experience needed in future director candidates. All potential director candidates are evaluated in light of this gap analysis to identify the appropriate candidates to proceed to the interview phase. Then, as part of the Corporate Governance and Nominating Committee’s interview process, the Committee ranks a candidate’s relevant experience, on a scale from zero (no direct experience) to three (a qualified authority on the topic) across 30 core competencies in the areas of strategy; business operations; sales, marketing and customer success; technology and product; accounting and finance; investor relations and public relations; and board development/experience.

The Corporate Governance and Nominating Committee generally re-nominates incumbent directors who continue to satisfy the Corporate Governance and Nominating Committee criteria for membership on our Board, continue to make important contributions to our Board and consent to continue their service on our Board. However, the Corporate Governance and Nominating Committee regularly considers the needs of the Company and our Board with respect to directors and, if appropriate, the Committee will nominate new directors who best fit those needs. From time to time, the Corporate Governance and Nominating Committee engages a search firm to assist in identifying potential Board candidates. Search firms were engaged to identify and evaluate Mr. Nietzel and Ms. Hassan as director candidates in 2020.

The Corporate Governance and Nominating Committee will consider candidates for election to our Board who are recommended by stockholders, provided that a complete description of the nominees’ qualifications, experience and background, together with a statement signed by each candidate in which he or she consents to act as a director, if elected, accompany the recommendations. Such recommendations should be submitted in writing to the attention of the Corporate Governance and Nominating Committee, c/o OneSpan Inc., 121 W. Wacker Drive., 20^th Floor, Chicago, Illinois 60601 and should not include self-nominations. The Corporate Governance and Nominating Committee applies the same criteria described above to candidates recommended by stockholders. Except as discussed elsewhere in this Proxy Statement, the Corporate Governance and Nominating Committee did not receive any recommendations for director candidates for the Annual Meeting from any stockholder.

Any stockholder may nominate candidates for election as directors by following the procedures set forth in the OneSpan Inc. By-laws, as amended and restated on April 6, 2021 (our “By-laws”), including the applicable notice, information and consent provisions. For further information regarding these procedures, see “Other Matters—Director Nominations by Stockholders and Stockholder Proposals of Other Business.” A copy of our By-laws is available on our corporate website at investors.onespan.com in the governance section of our investor relations webpage. LPAM, an affiliate of Legion, has notified the Company that it intends to nominate four director candidates for election at the Annual Meeting.

OUR BOARD DOES NOT ENDORSE ANY OF LEGION’S NOMINEES AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” OUR BOARD’S NOMINEES BY USING THE ENCLOSED BLUE PROXY CARD AND DISREGARD ANY MATERIALS, AND DO NOT SIGN, RETURN OR VOTE ON ANY WHITE PROXY CARD, SENT TO YOU BY OR ON BEHALF OF LEGION.

Board Evaluation Process

Our Board recognizes that a rigorous evaluation process is an essential component of strong corporate governance practices and promoting ongoing Board effectiveness. Consistent with best practice, our Corporate Governance Guidelines and each of the committees’ charters, the Corporate Governance and Nominating Committee oversees the annual evaluation of the performance of our Board and the committees, with the independent Chair maintaining a substantial role in facilitating discussion among our Board and the committees.

As part of our Board evaluation process, our Board reviews the following:

Additionally, our Board reviews matters including its relationship with management, its meeting schedule and the structure, compensation, culture and roles and responsibilities of our Board. The committees are evaluated on matters including their meeting schedule, membership composition, culture, relationship with management and advisors and roles and responsibilities. Our Board and committee evaluation framework and process is conducted and reviewed annually and provides valuable insight as our Board and Corporate Governance and Nominating Committee evaluate the director selection process and succession planning, including the identification and optimization of current directors’ (or potential directors’) skills and experiences that would enable our Board to enhance its effectiveness.

In connection with its 2020 evaluation, our Board conducted an assessment of whether our Board had an appropriate committee composition and appropriate delegation to fulfill responsibilities efficiently, as well as an evaluation of our Board’s interactions with and succession plans for the CEO and senior executives across the organization. The 2020 evaluation process further informed our Board regarding succession planning and Board and committee composition, including enhancement of director skills, experience and qualifications through director education (including through our Board members’ participation in the National Association of Corporate Directors) and Board and committee appointments to meet the current and anticipated needs of the business.

Our Board’s Role in Risk Oversight

Our Board is primarily responsible for overseeing the assessment and management of the Company’s risk exposure, including the balance between risk and opportunity and the totality of risk exposure across the organization. Our Board does so directly and through each of its committees. Our Board and each of its committees regularly discuss with management the Company’s major risk exposures, their likelihood, the potential financial impact such risks may have on the Company and the steps the Company takes to manage any such risks. The Audit Committee oversees the Company’s risks and exposures regarding financial reporting and legal compliance. The Management Development and Compensation Committee oversees risks relating to our overall incentive compensation programs, including those for senior management. The Corporate Governance and Nominating Committee oversees risks related to succession planning and compliance with our Corporate Governance Guidelines and Code of Conduct and Ethics. The Finance and Strategy Committee oversees risks related to the Company’s capital allocation, product strategy and technology. As necessary or appropriate, our Board and its committees may also retain outside legal, financial or other advisors. Our Board reviews the Company’s overall risk management program at least annually, including the corporate insurance program. Throughout the year, management updates our Board and relevant committees about factors that affect areas of potential significant risk. In addition, our internal audit director is involved with our enterprise risk management process, and she communicates directly with our Audit Committee without other members of management present. We believe that this is an effective approach for addressing the risks faced by OneSpan and that our Board’s leadership structure, with an independent Chair of the Board, also supports this approach by providing additional independent risk oversight.

Further Information on Information Security at OneSpan

Optimizing security efforts and resources to properly protect OneSpan’s information systems and information assets requires a structured approach to identify the various assets needing to be protected, their relative importance to OneSpan and the risks faced by such assets. At least annually, we identify the security measures already in place, assess their effectiveness to help measure the residual risk and prioritize any changes that would be required to lower the risk to an acceptable level for OneSpan.

Governance. OneSpan’s Information Security Risk Management Policy formalizes everyone’s responsibility, from senior managers to individual users, in limiting information security risks. The policy is approved by the Information Security Steering Committee, is reviewed on a yearly basis to account for changes in OneSpan’s risk environment and describes a formal process to identify, assess, and track key information security risks. Whenever required, a risk treatment plan is implemented to bring risk levels below acceptable risk tolerance.

OneSpan’s Information Security Steering Committee is composed of key senior leaders who operate under a formal charter. Their role is to oversee the corporate information security program and OneSpan’s security posture. Their role also includes tracking progress over information security risks and approving and tracking risk-reduction initiatives. This committee conducts regular meetings, at least quarterly, with OneSpan’s Chief Information Security Officer (the “CISO”). The CISO reports to our Chief Compliance Officer (not to the Chief Information Officer) and is independent of our internal information technology group and our product groups.

Our Board also oversees the progress of the information security program and the variation of information security risks through quarterly information security briefings, at a minimum. The Audit Committee, comprised solely of independent directors, has the primary responsibility for this oversight. Our Board also includes many individuals with information security experience, such as a chief product officer at a software company, a former chief financial officer with information security oversight responsibilities, a former chief information officer who was responsible for this area and an individual with former senior responsibilities in authentication and fraud prevention solutions. In total, three of the five members of the current Audit Committee and six of our Board’s Nominees have information security experience.

Security Incidents. In the last three years, we have not experienced any material information security breaches.

Insurance. OneSpan maintains a cybersecurity risk insurance policy and utilizes the services of an independent insurance advisor.

Reviews and Certifications. For internal OneSpan information systems and information assets, we conduct regular internal reviews and employ continuous security monitoring. In order to provide additional assurance, OneSpan has conducted periodic independent reviews of the key components of its security program. These reviews are carried out by individuals independent of the area under review. Areas for review and the schedule for such reviews is determined based on their criticality.

For customer-facing products and services, in addition to internal reviews and testing, we undergo various external reviews and certifications. Some of our products are certified under specific technical standards or industry guidelines, such as European banking regulations referred to as PSD2. In addition, our cloud platforms for SaaS solutions are audited annually by external independent auditors. The auditors review our platforms against the Service Organization Controls (SOC) 2 and ISO 27001, 27017 and 27018 standards. We receive annual certifications under these audits.

In addition, we conduct self-certification activities for those standards or regulations that are not covered by the external auditors, such as the General Data Protection Regulation in Europe and Health Insurance Portability and Accountability Act regulations in the United States.

Training. In order to reduce the likelihood and impact of security incidents, OneSpan has implemented a global security awareness training program that includes mandatory security and privacy awareness training for all personnel at hire time and yearly thereafter. Additional training is made available to personnel as required based on their role. This includes secure development training for developers, in support of OneSpan’s secure development lifecycle, as well as incident response training.

In response to the various phishing attacks that often are at the root of many security breaches, and in addition to the various technical controls that are in place, OneSpan has implemented recurring phishing campaigns that target its employees at a minimum on a weekly basis to improve their ability to recognize and report phishing messages. Employees who respond inappropriately to internal phishing campaigns receive additional remedial training.

Communications with Directors

Stockholders may send communications to our Board at the Company’s address, 121 West Wacker Drive, 20^th Floor, Chicago, IL 60601. Any such communication addressed to a specific Board member and designated as “Confidential” will be delivered unopened to the specific Board member. If a communication is addressed to our Board as a whole and designated as “Confidential,” the communication will be delivered to the Chair of the Board. Any communication not designated as “Confidential” will be reviewed by management and brought to the attention of our Board at its next regularly scheduled meeting.

PROPOSAL 1

ELECTION OF DIRECTORS

Introduction

With the exception of Mr. Cullinane, who is not standing for re-election at the Annual Meeting, each member of our Board is up for election at each annual meeting of stockholders and, if elected, will hold office for a one-year term expiring at the next annual meeting. Each director holds office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. If a director retires, resigns or is otherwise unable to serve before the end of his or her one-year term, our Board may appoint a director to fill the remainder of such term, reduce the size of our Board or leave the position vacant.

Our By-laws provide that an election is considered “contested,” and will be held under a plurality vote standard, if as of the 10th day preceding the date the Company first mails its notice of meeting for such meeting to the stockholders of the corporation, a stockholder of the Company has provided to Company, and not withdrawn, a notice of an intention to nominate one or more candidates for election to our Board.

On February 25, 2021, LPAM provided notice to the Corporate Secretary of the Company that LPAM intends to nominate four director candidates for election at the Annual Meeting, and this notice was not withdrawn prior to the time mentioned in the immediately preceding paragraph. As a result, the election of directors at the Annual Meeting will be conducted under a plurality vote standard.

OUR BOARD DOES NOT ENDORSE ANY OF LEGION’S NOMINEES AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” OUR BOARD’S NOMINEES BY USING THE ENCLOSED BLUE PROXY CARD AND DISREGARD ANY MATERIALS, AND DO NOT SIGN, RETURN OR VOTE ON ANY WHITE PROXY CARD, SENT TO YOU BY OR ON BEHALF OF LEGION.

Our Board’s Nominees and Their Qualifications

All nine of our Board’s Nominees have been nominated by our Board, at the recommendation of the Corporate Governance and Nominating Committee, for election at the Annual Meeting to serve for a one-year term ending at our 2022 Annual Meeting, until their successors are duly elected and qualified, or until their earlier death, resignation or removal. All of the Board’s Nominees have consented to serving as a nominee, being named in the Proxy Statement and serving as a director if elected. The Corporate Governance and Nominating Committee and our Board believe that each of our Board’s Nominees brings a strong and distinct set of perspectives, experiences and skills to OneSpan. The Corporate Governance and Nominating Committee and our Board believe that if our Board is comprised of these nominees, our Board will be effective and well-functioning and have an optimal balance of experience, leadership, competencies, qualifications and skills in areas of importance to OneSpan and our stockholders.

Our Board has affirmatively determined that each of our Board’s Nominees, excluding Mr. Clements who also serves as our President and Chief Executive Officer, qualifies as an independent director under Nasdaq listing rules. None of our Board’s Nominees is being elected pursuant to any arrangement or understanding between any of the Board’s Nominees and any other person or persons. As described above, the Company engaged a third-party search firm to identify Mr. Nietzel as a potential director candidate, and Mr. Capers was recommended by another independent member of our Board. For further information on the process for director nominations and criteria for selection of Board nominees, see “Information Regarding Our Board of Directors—Director Selection Process” beginning on page 38.