UNITED STATES
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES
Filed by a Party other than the Registrant |
o | Confidential, for Use of the Commission Only (as permitted by Rule |
☒ | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to |
VirnetX Holding Corporation |
(Name of Registrant as Specified In Its Charter) |
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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(1) | Title of each class of securities to which transaction applies: |
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VirnetX Holding Corporation |
308 Dorla Ct. Zephyr Cove, NV 89448 www.virnetx.com |
To the Stockholders of VirnetX Holding Corporation:
You are cordially invited to attend the 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) of VirnetX Holding Corporation to be held on May 22, 2014,Thursday, June 2, 2016, at 9:3000 a.m. Pacific Time, at Harvey’s Resortthe Hard Rock Hotel & Casino – South Lake Tahoe, The Emerald Bay Room, 1850 Highway 50, Lake Tahoe, Nevada.Stateline, Nevada 89449. At the Annual Meeting, we will ask you to consider the following proposals:
Our board of directors has fixed the close of business on April 2, 201414, 2016 as the record date for the Annual Meeting.Meeting (the “Record Date”). Only stockholders of record as of April 2, 2014the Record Date may vote at the Annual Meeting. Further information regarding voting rights and matters to be voted upon is presented in the accompanying proxy.
On or about April 11, 2014,22, 2016, we expect to mail to our stockholders of record onas of the record dateRecord Date a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement and our annual report via the Internet.online. The Notice provides instructions on how to vote via the Internetonline or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail. The accompanying proxy statement and our annual report can be accessed directly at the following email address: www.proxyvote.com. All you have to do is enter the control number located on your proxy card.
Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to submit your vote via Internet,online, by telephone or by mail.
Sincerely, | |
/s/ Kendall Larsen | |
Kendall Larsen | |
Chairman of the Board of Directors |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
On May 22, 2014,Thursday, June 2, 2016, VirnetX Holding Corporation will hold its 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) at 9:3000 a.m. Pacific Time. The meeting will be held at Harvey’s Resortthe Hard Rock Hotel & Casino – South Lake Tahoe, The Emerald Bay Room, 1850 Highway 50, Lake Tahoe,Stateline, Nevada 89449, for the following purposes:
The foregoing items of business are further described in the proxy statement accompanying this notice (the “Proxy Statement”). Included with the Proxy Statement is a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013,2015, as filed with the Securities and Exchange Commission (the “SEC”) on March 3, 201415, 2016 (the “Annual Report”). We encourage you to read the Annual Report. It includes our audited financial statements and information about our operations, markets and products. The close of business on April 2, 201414, 2016 has been fixed by our board of directors as the record date for the determination of stockholders entitled to notice of, and to vote at, our Annual Meeting and any adjournments or postponements thereof (the “Record Date”). As of the Record Date, there were 51,492,23755,147,309 shares of common stock issued and outstanding. Stockholders of record as of April 2, 201414, 2016 may vote at the Annual Meeting.
Your vote is important. Whether or not you plan to attend the meeting, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid envelope, vote online or vote via the Internet or by telephone. Returning the proxy card, voting online or voting via the Internet or by telephone will ensure your representation at the meeting, but does not deprive you of your right to attend the meeting and to vote your shares in person. The Proxy Statement explains more about the proxy voting process. Please read it carefully. We look forward to seeing you at the Annual Meeting.
Palo Alto, California Our Proxy Statement, Proxy Card and Annual Report
TABLE OF CONTENTS
i ANNUAL MEETING OF STOCKHOLDERS OF VIRNETX HOLDING CORPORATION The Board of Directors (the “Board”) of VirnetX Holding Corporation (“we, Stockholders of record as of April The Notice of Internet Availability AND
Our proxy statement for the Annual Meeting; and Our 2015 Annual Report on Form 10-K, which includes our audited consolidated financial statements. If you requested printed versions of these materials by mail, these materials also include the proxy card or voting instruction card for the Annual Meeting.
View our proxy materials for the Annual Meeting online; and Instruct us to send future proxy materials to you electronically by email. Choosing to access the proxy materials on the internet or receive future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting
Street Name Stockholders . If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name and the Proxy Statement2
election of Michael F. Angelo as a Class III director; and ratification of the appointment of our independent registered public accounting firm for the fiscal year ending December 31, 2016.
FOR the election of Michael F. Angelo as a Class III director; and FOR the ratification of the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
Registered Stockholders : Registered stockholders may vote by one of the following methods:
Please note that June 1, 2016. Street Name Stockholders : If your shares are held by a broker, bank or other nominee, you should have received instructions on how to vote or instruct the broker to vote your shares from your broker, bank or other nominee. Please follow their instructions carefully. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must request a legal proxy from the bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the Annual Meeting to vote your shares.Street name stockholders may generally vote by one of the following methods:
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FOR the election Michael F. Angelo as a Class III director; and FOR the ratification of the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. If any matters not described in the Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned, the proxy holders can vote your shares on the new meeting date as well, unless you have revoked your proxy instructions, as described below under “Can I change my vote after submitting my proxy?”
you may submit another properly completed proxy card with a later date; you may send a written notice that you are revoking your proxy to VirnetX Holding Corporation, P.O. Box 439, Zephyr Cove, Nevada 89448; vote again on a later date online or by telephone (only your latest online or telephone proxy submitted prior to the Annual Meeting will be counted); or you may attend the Annual Meeting and vote in person (attendance at the meeting will not by itself revoke a previously granted proxy). If you are a beneficial owner of shares held in street name, you may change your vote: by submitting new voting instructions to your broker, bank or nominee; or if you have obtained a legal proxy from the broker, bank or nominee that holds your shares giving you the right to vote the shares, by attending the Annual Meeting and voting in person (attendance at the meeting will not by itself revoke a previously granted proxy).
4 If a quorum is present, the Board. For Proposal II – Ratification of Farber Hass Hurley LLP as our Independent Registered Public Accounting Firm , you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you vote to abstain on Proposal II, your shares will be counted as present and entitled to vote for the purpose of establishing a quorum but your abstention will have the same effect as a vote against the proposal. If you hold your shares in street name, your broker, bank or nominee will have discretionary authority to vote on Proposal II.Ratification of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, Finally, if you sign and return your proxy card with no further instructions, your shares will be counted as a vote “FOR” the director
Your shares will be counted towards the quorum only if you submit a valid proxy or if you vote in person at the meeting. Abstentions will be counted towards the quorum requirement. If there is no quorum, a majority of the votes present at the meeting may adjourn the meeting to another date.
Under the rules that govern brokers who have record ownership of shares that are held in “street name” for their clients, the beneficial owners of the shares, brokers have discretion to vote these shares on routine matters but not on non-routine matters. If you hold common stock through a broker and you have not given voting instructions to the broker, the broker will be prevented from voting shares on non-routine matters, resulting in a “broker non-vote.” Thus, if you do not otherwise instruct your broker, the broker may turn in a proxy card voting your shares on routine matters but expressly instructing that the broker is NOT voting on non-routine matters. Proposal II contained in this Proxy Statement is considered a routine matter. However, matter. Brokers do not have discretionary authority to vote on the election of directors (Proposal I) vote with respect to this proposal.
If you share an address with another stockholder and received only one Notice or set of proxy materials and would like to request a separate copy of these materials, please: (1) mail your written request to VirnetX Holding Corporation, 5 Relations department at (775)
We will announce preliminary voting results at the Annual
Board of Directors, or name of individual director c/o Corporate Secretary VirnetX Holding Corporation P.O. Box 439 Zephyr Cove, Our Secretary will then direct such communications us) to the relevant director(s).
In addition, the Company’s bylaws establish an advance notice procedure for stockholders who wish to present certain matters, including the nomination of directors, before an annual meeting of stockholders without including those matters in the Company’s proxy March 4, 2017. If the date of the stockholder meeting is moved more than 30 days before or 60 days after the anniversary of the 6 If a stockholder fails to give notice of a stockholder proposal as required by our bylaws or other applicable requirements, then the proposal will not be included in the proxy statement for our
7 Stockholders who hold shares of the Company through a broker, bank or other Voting your shares is important to ensure that you have a say in the governance of If you have any questions about the proxy voting process, please contact the broker, bank or other 8 The Board Our Amended and Restated Certificate of Incorporation provides that the directors of Set forth below are the names and certain information about the
1, 2016.
Class III Nominee Michael F. Angelo has been a director since July 5, 2007. He has been the Chief Security Architect at NetIQ Corporation, a global, enterprise software company since August 2005. From October 2003 to August 2005, Mr. Angelo was a Security Architect and Manager, Government Engagements SBU with Microsoft Corporation. From July 1989 to October 2003, Mr. Angelo was a Staff Fellow at both Hewlett Packard Company and Compaq Computer Corp. Mr. Angelo also served as Senior Systems Programmer at the John von Neumann National Supercomputer Center from September 1985 to July 1989. He was a Sub-Chairman of the National Institute of Standards and Technology Board of Assessment for Programs/National Research Council responsible for the CISD review for fiscal years 2001 and 2002, and he has been a technology contributor and participant on the U.S. Commerce Department’s Information Systems Technical Advisory Council (ISTAC) from 1999 to the present. Mr. Angelo was named a distinguished lecturer for 2004 and 2005 by Sigma XI, the Scientific Research Society. He currently holds 52 patents, most in the area of security and authentication, and was named the 2003 Inventor of the Year for the City of Houston by the Houston Intellectual Property Lawyers Association.As a holder of many patents in the fields of security and authentication, and as a result of his long and distinguished industry and scholarly background in the area of computer security and networking, Mr. Angelo brings to the Board critical technical and industry knowledge and expertise. With his extensive industry knowledge and having successfully served in multiple leadership capacities in various types of organizations, Mr. Angelo is uniquely qualified to serve as chair of the Company’s nominating and governance committee. Class I Kendall Larsen has been Chairman of the Board of Directors, President and Chief Executive Officer since July 5, 2007 and held the same positions with VirnetX Inc. since its inception in August 2005. Mr. Larsen does not hold director positions with any other reporting or registered investment companies. From April 2003 to July 2005, Mr. Larsen focused on pre-incorporation activities related to VirnetX Inc. From April 2002 to April 2003, Mr. Larsen was a Limited Partner at Osprey Ventures, L.P., a venture fund that makes investments primarily in business and consumer technology companies. From October 2000 to April 2002, he was Senior Vice President and General Manager of the 9 senior executive positions over a period of over twenty years at various leading technology companies, including RSA Security, Inc., Xerox Corporation, Rolm/International Business Machines Corporation, Novell, Inc., General Magic, Inc., and Ramp Networks. Mr. Larsen holds a B.S. in Economics from the University of Utah. With his years of managerial experience, Mr. Larsen brings to the Board demonstrated management ability at senior levels. Mr. Larsen’s day-to-day leadership and intimate knowledge of our business and operations provide the Board with Company-specific experience and expertise. Mr. Larsen’s drive for innovation and excellence position him well to serve as our Chairman, President and Chief Executive Officer. Gary Feiner has been a director since 2014. Mr. Feiner has served as President of Feiner Financial, a tax, accounting and planning services company, since 1993 and has been employed by Feiner Financial since 1986. Mr. Feiner was selected to serve on the Board because of his breadth of tax, accounting and financial knowledge. Thomas M. O’Brien has been a director since July 5, 2007. As a former certified public accountant and Chief Financial Officer of a public company listed on the NYSE and a current Chief Executive Officer and Director of a public company listed on the NYSE, Mr. O’Brien brings to the audit committee, of which he is Chairman, and the Board, a deep understanding of complex accounting and finance issues faced by the Company and can provide critical insight into the financial and other reporting requirements of a U.S. public company. In addition, his extensive capital markets experience is an invaluable resource as the Company regularly assesses its capital and liquidity needs. Robert D. Short III, Ph.D.has been As co-inventor on the Role of the Board Our Directors are appointed to oversee the actions and results of our management. They were selected for their educational background, professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom and ability to represent the best interests of our stockholders. Their responsibilities include: providing general oversight of the business; providing oversight of overseeing our management of significant business risks; selecting, compensating, and evaluating director nominees; 10 evaluating Board processes and performance; and reviewing and implementing recommendations and reports of the committees of the Board. Board Leadership Structure The Board believes that the Company’s Chief Executive Officer is best situated to serve as Chairman of the Board because he is the director most familiar with the Company’s business and industry, and most capable of effectively identifying strategic priorities and leading the The Company does not currently have a lead independent director. To ensure effective independent oversight, the Board has designed its leadership structure so that independent directors exercise oversight of the Company’s management and key issues related to strategy and risk. Only independent directors serve on and chair the audit committee, the compensation committee and the nominating and governance committee of the Board. Risk Oversight Management is responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning, as designed. The Board believes that establishing the right “tone at the top” and full and open communication between management and the Board are essential for effective risk management and oversight. Senior management attends While the Board is ultimately responsible for risk oversight for the Company, our three Board committees assist the Board in fulfilling its oversight responsibilities Risk Assessment of Compensation Policies The Company notes that: the Company’s annual incentive compensation is based on performance that promotes disciplined progress towards longer-term Company goals; The Company’s compensation policies and practices are intended not to 11 Code of Ethics We have adopted a Code of Ethics for all employees and directors in accordance with the requirements of Item 406 of Regulation S-K and the NYSE MKT Company Guide. A copy of our Code of Ethics is available on our website at http://www.virnetx.com in the “Highlights” link in the “Corporate Governance” subcategory under the “Investors” tab, or by writing to us at VirnetX Holding Corporation, Relations). We intend to post on our website any amendment to, or waiver from, a provision of our Code of Ethics within four business days following the date of such amendment or waiver. We do not anticipate any such amendments or waivers. Mix of Independent Directors and Officer-Directors The Board has a majority of independent directors and Independence Determinations The Board annually determines the independence of directors based on a review by the directors and the nominating and governance committee. No director is considered independent unless We have adopted rules for director independence standards of the NYSE MKT corporate governance listing standards and the rules and regulations of the SEC. The Board held a total of We encourage, but do not require, The Board 12 The following
M = Member C = Chair Membership and Independence Our nominating and governance committee met 2015. Messrs. Angelo, O’Brien and assisting the Board in identifying prospective director nominees and recommending to the Board director nominees for each annual meeting of stockholders, vacancy, or newly created director position; A more detailed description of our nominating and governance committee’s functions can be found in our nominating and governance committee charter at http://www.virnetx.com in the “Highlights” link in the “Corporate Governance” subcategory under the “Investors” tab, or by writing to us at VirnetX Holding Corporation, Relations). Stockholder Recommendations and Nominees The policy of our nominating and governance committee is to consider properly submitted recommendations for candidates to Stockholder recommendations to In addition, our Bylaws permit stockholders to nominate directors for consideration at an annual 13 Director Qualifications Our nominating and governance committee evaluates and recommends candidates for membership on Identification and Evaluation of Nominees for Directors Our nominating and governance committee uses a variety of methods for identifying and evaluating nominees for any position on Once the nominating and governance committee has identified a prospective nominee, the nominating and governance committee makes an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on the information provided to the nominating and governance committee concerning the prospective candidate, as well as the nominating and governance committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. If the nominating and governance committee determines, in consultation with other Board members as appropriate, that additional consideration is warranted, it may gather or request the third party search firm to gather additional information about the prospective nominee’s background and experience. The nominating and governance committee then evaluates the prospective nominee, taking into account whether the prospective nominee is independent within the meaning of the listing standards of the NYSE MKT and such other factors as it deems relevant, including the current composition of the Board, the balance of management and independent directors, the need for audit committee or compensation committee expertise, the prospective nominee’s qualifications as discussed above, the diversity of the member’s skills and experience in areas that are relevant to the Company’s businesses and activities, and its evaluations of other prospective nominees. In connection with this evaluation, the nominating and governance committee determines whether to interview the prospective nominee and, if warranted, one or more members of the nominating and governance committee and others, as appropriate, conduct interviews in person or by telephone. After completing this process, the nominating and governance committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the nominating and governance committee. The nominating and governance committee follows the same process and uses the same criteria for evaluating candidates proposed by stockholders, members of the Board, and members of management. The nominating and governance committee considers diversity as one of a number of factors in identifying nominees for director. It does not, however, have a formal policy in this regard. The nominating and governance committee views diversity broadly to include diversity of experience, skills, and viewpoint as well as traditional diversity concepts such as race or gender. Membership and Independence Messrs. Angelo, O’Brien and Our audit committee met 14 Responsibilities Our audit committee’s responsibilities include the following: appointment of and approval of compensation for our independent public accounting firm and overseeing its performance and independence; A more detailed description of our audit committee’s functions can be found in our audit committee charter at http://www.virnetx.com in the “Highlights” link in the “Corporate Governance” subcategory under the “Investors” tab, or by writing to us at VirnetX Holding Corporation, PO Box 439, Zephyr Cove, Principal Accountant Fees & Services The following table sets forth the costs we incurred for services provided by Farber Hass Hurley LLP, our independent registered public
Audit Fees . Consists of fees billed for professional services rendered in connection with the audit of our consolidated financial statements, review of the interim consolidated financial statements included in our quarterly reports, and accounting services in connection with securities offerings.Audit-Related Fees . Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include consultations in connection with financial accounting and reporting standards.Tax Fees . Consists of fees billed for professional services for tax compliance, tax advice and tax planning. We have nothing to report in this line item as we did not engage Farber Hass Hurley LLP to perform tax-related services for the Company.All Other Fees . We have nothing to report in this line item as we did not engage Farber Hass Hurley LLP to perform services not covered by the preceding three categories.Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm Our audit committee’s policy is to pre-approve all services provided by our independent registered public accounting firm. For 15 Membership and Independence Messrs. Angelo, O’Brien and Scope of Authority Our compensation committee’s responsibilities include the following: exclusive authority to determine the amount and form of compensation paid to the Company’s Chief Executive Officer; Except with respect to determining the A more detailed description of our compensation committee’s functions can be found in our compensation committee charter at http://www.virnetx.com in the “Highlights” link in the “Corporate Governance” subcategory under the “Investors” tab, or by writing to us at VirnetX Holding Corporation, Relations). Our Compensation Committee’s Processes and Procedures Our compensation committee’s primary processes for establishing and overseeing executive compensation include:
Non-employee directors’ compensation is established by Compensation Committee Interlocks and Insider Participation During fiscal 16 Any of our stockholders who wish to communicate with Our Corporate Secretary will compile and submit on a periodic basis all stockholder correspondence to our entire Board, or, if and as designated in the communication, to a committee of Directors who are also our employees are not paid an annual retainer, nor are they compensated for serving on the Board. Information regarding compensation otherwise received by our directors, who are also named executive officers, is provided under the heading “Executive Compensation.” Our compensation committee annually reviews director compensation. Any recommendations for changes are made to our full Board by our compensation committee. In order to align directors’ incentives with the creation of stockholder value, we believe that directors should hold meaningful equity ownership positions in the Company; accordingly, a significant portion of overall director compensation is in the form of equity in the Company. Cash Compensation of Non-employee Directors Consistent with our compensation policy, we provide the following cash compensation for non-employee directors: each non-employee director receives an annual cash retainer of $44,000; our audit committee receives an annual cash retainer of $6,600; each non-employee director who serves as a member of our compensation committee receives an annual cash retainer of $5,500; and each non-employee director who serves as a member of our nominating and governance committee receives an annual cash retainer of $2,200; and each non-employee director who serves as a chair of our audit committee receives an annual cash retainer of $18,150; each non-employee director who serves as a chair of our compensation committee receives an annual cash retainer of $9,900; and each non-employee director who serves as a chair of our nominating and governance committees receives an annual cash retainer of $5,500. Stock Compensation of Non-Employee Directors Consistent with our compensation policy, we provide the following stock compensation for non-employee directors: Upon the initial election or appointment to the Board of a new non-employee director, such individual will be granted, under our 2013 Equity Incentive Plan, an option to purchase 30,000 shares of our Common Stock with a per-share exercise price equal to the fair market value of that stock on the date of grant and which will vest monthly with respect to 1/36th of the total number of shares subject to the option, conditioned upon continued service as a director; provided that all vesting shall be accelerated such that the shares underlying such option shall be vested and become exercisable in full on the close of business on the day prior to the Company’s third annual meeting of stockholders to take place after the director’s initial election or appointment to the Board; and provided further that these options automatically become fully vested immediately prior to a “change in control” of the Company. 17 anniversary of such grant or (b) the close of business on the day prior to the following year’s annual meeting of stockholders, conditioned upon continued service as a director; provided that these restricted stock units automatically become fully vested immediately prior to a “change in control” of the Company. The following table shows the compensation earned by or paid to each of our independent directors for
18 The following table sets forth the beneficial ownership of our Common Stock as of all persons known to us, based on statements filed by such persons pursuant to Section 13(d) or 13(g) of the Exchange Act or in statements made to us, to be the beneficial owners of more than 5% of our Common Stock; This table lists applicable percentage ownership based on Except as indicated by footnote, and subject to applicable community property laws, each person identified in the table possesses, to the best of our knowledge, sole voting and investment power with respect to all capital stock shown to be held by that person. The address of each executive officer and director, unless indicated otherwise, is c/o VirnetX Holding Corporation, PO Box 439, Zephyr Cove, NV, 89448.
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20 ELECTION OF CLASS The Board The nominating and governance committee of the Board Mr. Angelo. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR A director is elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors at the Annual Meeting. Abstentions and broker non-votes will have no effect on the outcome of the vote. The Board of Directors unanimously recommends that stockholders vote “FOR” the election of 21 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The audit committee has selected Farber Hass Hurley LLP as our independent registered public Farber Hass Hurley LLP has audited our consolidated financial statements annually since it was first appointed in fiscal year 2007. We expect that representatives of Farber Hass Hurley LLP will be present at The affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote on the matter is necessary to ratify the selection of Farber Hass Hurley LLP as our independent registered public The Board of Directors, on behalf of the audit committee, recommends that stockholders vote “FOR” the ratification of the selection of Farber Hass Hurley LLP as 22 The following table sets forth the respective names, ages and positions of our executive officers as of March
The biographies of Kendall Richard H. Nance has been our Chief Financial Officer on a part-time basis since April 5, 2012. From 2002 to 2011, Mr. Nance worked for Strasbaugh Inc., a designer of precision surfacing systems and solutions for the global semiconductor and semiconductor equipment, silicon wafer and silicon wafer equipment, data storage, micro-electromechanical system (“MEMS”), light emitting diode (“LED”) and precision optics markets, serving most recently as its Executive Vice President and Chief Financial Officer. Mr. Nance has served clients in his private practice since 2011 and is a licensed CPA and CGMA.Each officer serves at the discretion of 23 This Compensation Discussion and Analysis describes our compensation program as it relates to our In Ongoing development of our licensing business, including engagement of IPVALUE Management Inc. in a multi-year agreement, to originate and assist the company with negotiating transactions related to patent licensing worldwide with respect to agreed third parties; The primary objectives attracting and retaining the most talented and dedicated executives possible; measurable performance objectives; and aligning executives’ incentives with stockholder value creation. To achieve these objectives, we implement and maintain compensation plans that tie a substantial portion of each executive officer’s overall compensation to key strategic financial and operational goals, such as 24 Role of the Compensation Committee We maintain an executive compensation program comprised of multiple elements. The compensation committee typically reviews the elements of compensation for our named executive officers annually. The compensation committee makes all compensation decisions with regard to our Role of the Chief Executive Officer and Management in Compensation Decisions Our Compensation Consultant The compensation committee retains sole authority to hire a compensation consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement. In review the Company’s current compensation practices; review and compare proposed cash and equity compensation adjustments for named executive officers in fiscal 2015 relative to competitive market data developed by Compensia for the compensation committee in 2015; and provide the compensation committee with input on the proposed cash and equity compensation adjustments for named executive officers in fiscal 2015 based, in part, on the market data provided by Compensia in 2015. Compensation Consultant Independence The compensation committee has reviewed our relationship with Compensia pursuant to NYSE MKT and SEC rules and has found no conflict of interest in Compensia continuing to provide advice to the compensation committee. The compensation committee is also regularly advised by our primary outside corporate and compensation and benefits legal counsel, Wilson Sonsini Goodrich & Competitive Data Our primary business is the development of software and technology solutions for securing real-time communications over the Internet. In addition, we hold a valuable intellectual property portfolio from which we have generated revenue, both from licenses and one time payments in settlement of infringement claims by us. 25 In
At the time of our Our success largely depends on the skills, experience and efforts of our key personnel, including Prior Say-on-Pay Advisory Approval Based on shareholder vote, the Company holds a say-on-pay vote every three years. In 2011, the Company held its initial say-on-pay advisory vote. Over 97% of the votes present and entitled to vote on the proposal (votes “For” and “Against”, as well as abstentions) and 99% of the votes cast on the proposal (votes “For” and “Against”) voted 26 Our executive compensation program consists of the following elements: Base Salary. Base salaries for our named executive officers are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies for similar positions. Generally, the program is designed to deliver executive base salaries within the range of salaries for executives with the requisite skills in similar positions with similar responsibilities at comparable companies, in line with our compensation philosophy. Executives with more experience, critical skills, and/or considered key performers may be compensated above the range as part of our strategy for attracting, motivating and retaining highly experienced and high performing employees. Base salaries are reviewed annually and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience. the executive’s base salary. The target bonus, combined with base salary, is intended to provide our executive officers with a competitive cash compensation package that will aid in the retention of the employee, as well as provide an incentive and a reward for strong Company and individual performance. The chief executive officer and the compensation committee agree on general performance objectives for our named executive officers for the year, but the compensation committee has the sole discretion to determine following the end of the fiscal year whether, and the extent to which, the performance objectives were met and the amount of the annual incentive bonuses to be paid. Given the Company’s rapidly evolving business and business model, this structure provides the compensation committee with flexibility to reward strategic and operational goals that may not be quantifiable and allows the compensation committee to take into account the Company’s overall performance based on a multitude of factors. The compensation committee generally utilizes the annual incentive bonuses to compensate officers for achieving financial and operational goals and for individual performance. Performance factors considered when determining bonuses typically include strategic factors such as establishment and maintenance of key strategic relationships, development and implementation of our licensing strategy, development of our product, identification and advancement of additional products, successful litigation strategies and financial factors such as improving our results of operations, and increasing the price per share of our Common Stock. Long-Term Incentive Program. We believe that long-term performance is achieved through an ownership culture that encourages high performance by our named executive officers through the use of stock-based awards. Our 2013 Equity Incentive Plan was established to provide our employees, including our named executive officers, with incentives to help align those employees’ interests with the interests of stockholders. Our compensation committee believes that the use of stock-based awards offers the best approach to achieving our compensation goals. Our 2013 Equity Incentive Plan allows for stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, performance shares and performance bonus awards. In fiscal 2015, we granted both stock options and restricted stock units under our 2013 Equity Incentive Plan to our executive officers. Stock-based awards are made at the commencement of employment, may be made annually based upon performance and, occasionally, following a significant change in job responsibilities or to meet other special retention objectives. The compensation committee reviews and approves stock-based awards to named executive officers based upon a review of competitive compensation data, its assessment of individual performance, a review of each executive’s existing long-term incentives, and retention considerations. In determining the number of stock options and RSUs to be granted to our named executive officers, we take into account the individual’s position, scope of responsibility, ability to affect profits and stockholder value, the individual’s historic and recent performance, the value of stock options and RSUs and percent of company granted in relation to other elements of the individual executive’s total compensation and align the interests of executives with those of the stockholders, support a pay-for-performance culture, foster employee stock ownership, and focus the management team on increasing value for the stockholders; 27 are performance-based in that any value received by the recipient from a stock option is based on the growth of the stock price from the grant date and value received from RSUs is tied directly to our stock price performance over time and declines if our price declines; help to provide a balance to the overall executive compensation program as base salary and our annual bonus program focus on short-term compensation, while the vesting of stock options and RSUs provide incentives to increase stockholder value over the longer term; and include vesting restrictions that encourage executive retention and the preservation of stockholder value. Named Executive Officers’ Compensation Decisions for Fiscal 2015 In The compensation for our named executive officers for fiscal
Mr. Larsen is our Dr. Short has significant scientific and technological expertise, and the compensation committee considered his technical, scientific and management skills, his level of responsibility and expected contributions to intellectual property and product development. Accordingly, in May, 2015, the compensation committee increased Dr. Short’s salary from $330,300 to $350,160 an increase of $19,900, or 6%, over fiscal 2014. With this increase, Dr. Short’s base salary also exceeded the 75th percentile of our Peer Group from the Compensation Assessment on an annualized basis. 28 Mr. Nance has significant public company experience, and the compensation committee considered his technical and strategic skills, his level of responsibility and expected contributions to our further success. Accordingly, in accordance with his appointment as CFO on a part-time basis, the compensation committee approved a salary of Annual Incentive Bonus In fiscal 2015, the compensation committee maintained the In As part of the compensation review, Compensia and the compensation committee also reviewed our executive officers’ equity incentive compensation in terms of both annual grant date fair value granted and percent of On
29 Our named executive officers participate in the same group insurance and employee benefit plans as our other salaried employees. At this time, we do not provide special benefits or other perquisites to our named executive officers. We do not provide change in control agreements or employment agreements providing formal cash or equity severance rights to any of our named executive officers. Our 2013 Equity Incentive Plan allows We have not adopted stock ownership guidelines, and we currently do not require our directors or executive officers to own a particular amount of our Common Stock. The compensation committee is satisfied that stock and option holdings among our directors and executive officers are sufficient at this time to provide motivation and to align this group’s interests with those of our stockholders. The Company has adopted policies that prohibits employee, officers, directors, and consultants from engaging in any short sale, “sale against the box” or any equivalent transaction involving the Company’s stock. Additionally, the Company’s directors and officers are prohibited from engaging in hedging or derivative transactions, such as “cashless” collars, forward contracts, equity swaps or other similar or related transactions, and all other Company employees and consultants may only engage in such transactions after obtaining approval from the Company’s compliance officer. The compensation committee considers the possible tax consequences to the Company and to its executives of our compensation programs, the accounting consequences to the Company of different compensation decisions and the impact of such decisions on stockholder dilution. With respect to the tax consequences to the Company, the compensation committee considers the potential future effects of Section 162(m) of the Internal Revenue Code of 1986, as amended, on the compensation paid to our named executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year for any of the named executive officers in the proxy statement, unless compensation is qualified performance based compensation within the meaning of Section 162(m). In approving the amount and form of compensation for our named executive officers, our compensation committee will continue to consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m). However, to maintain maximum flexibility in designing compensation programs, the compensation committee will not limit compensation to those levels or types of compensation that are intended to be deductible or that lead to a particular accounting result or level of stockholder dilution. The compensation committee structures our executive compensation program in a manner that it believes does not promote inappropriate risk taking by our executive officers, but rather encourages management to take a balanced approach, focused on achieving our corporate goals. The Company’s compensation program was reviewed by the compensation committee and determined not to create inappropriate or excessive risk that is likely to have a material adverse effect on the Company. The 30 Respectfully submitted by the members of the compensation committee of the Board of Gary Feiner (Chair) 31 The following table sets forth summary information concerning compensation earned by
The following table shows all plan-based awards granted to the named executive officers during fiscal
32 The following table shows all outstanding equity awards held by the named executive officers as of December 31,
33 2015 The following table presents information regarding the vesting of stock awards during fiscal
Section 16(a) of the Exchange Act requires our executive officers, directors and ten percent stockholders to file reports of ownership and changes in ownership with the SEC. The same persons are required to furnish us with copies of all Section 16(a) forms they file. a late Form 4 was filed by Mr. Nance on July 28, 2015 to report the acquisition of 2,667 restricted stock units and an option to purchase 4,000 shares of common stock granted on May 20, 2015; a late Form 4 was filed by Mr. Short on July 28, 2015 to report the acquisition of 13,333 restricted stock units and an option to purchase 20,000 shares of common stock granted on May 20, 2015; and a late Form 4 was filed by Mr. Larsen on Other than compensation arrangements of non-employee directors and named executive officers, we describe below transactions and series of similar transactions, during our last three fiscal years, to which we were a party or will be a party, in which: the amounts involved exceeded or will exceed $120,000; and The audit committee is responsible for reviewing and approving in advance any proposed related person transactions. The audit committee reviews any such proposed related person transactions on a quarterly basis, or more frequently as appropriate. In cases in which a transaction has been identified as a potential related person transaction, management must present information regarding the proposed transaction to the audit committee for consideration and approval or ratification. The audit committee is also responsible for reviewing the Company’s policies with respect to related person transactions and overseeing compliance with such practices. The compensation for Compensation amounts above reflect the aggregate grant date fair value of the stock options computed in accordance with Kendall Larsen, the Company’s Chairman of the Board of Directors, President and Chief Executive Officer, is married to the Company’s Chief Administrative Officer, Kathleen Larsen. Kathleen Larsen is not an executive officer of the Company. In addition, Kathleen Larsen’s sons, Dustan Sheehan and Joshua Sheehan, are employed by the Company as webmaster and operations manager, respectively. Neither Dustan Sheehan nor Joshua Sheehan are executive officers of the Company. Kathleen Larsen and each of Dustan and Joshua Sheehan are currently compensated at levels that the Company believes is comparable to other employees in similar positions of responsibility at comparable companies. During fiscal 2015, Kathleen Larsen received an aggregate of $481,471 in the form of salary and bonus, $80,000 in the form of option grants and $72,132 in the form of stock awards. During fiscal year Robert D. Short III, Ph.D., the Company’s Chief Technical Officer and Chief Scientist, is the father-in-law of Corby Hoback, who is employed by the Company as a Senior Software Engineer. Corby Hoback is not an executive 35 officer of the Company. Corby Hoback is currently compensated at a level that the Company believes is comparable to other employees in similar positions of responsibility at comparable companies. During fiscal 2015, Corby Hoback received an aggregate of $187,110 in the form of salary and bonus, $50,000 in the form of option grants and $45,082 in the form of stock awards. During fiscal 2015, the Company leased the use of an aircraft from K2 Investment Fund LLC (“LLC”) for business travel for employees of the Company. The Company incurred approximately $593,000 in rental fees (including fees and other reimbursements) to the LLC during fiscal 2014 for such use. Kendall Larsen and Kathleen Larsen are the sole member-managers of the LLC and control the equity interests of the LLC. On January 31, 2015 the Company entered into a 12-month non-exclusive lease with the LLC for use of the plane at a rate of $8,100 per flight hour, with no minimum usage requirement. The agreement contains other terms and conditions normal in such transactions and can be cancelled by either the Company or the LLC with 30-days notice. The audit committee has approved the rental fees and lease agreement. The following is the report of the audit committee of the Board of Directors. In connection with the financial statements for reviewed and discussed our audited financial statements for fiscal 2015 with our management and our independent registered public accounting firm; Based on the audit committee’s review of the matters noted above and its discussions with our independent accountants and our management, the audit committee recommended to the Board of Directors that the financial statements be included in our annual report on Form 10-K for 2015. Respectfully submitted by: Notwithstanding anything to the contrary set forth in any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate future filings, including this Proxy Statement, in whole or in part, the Audit Committee Report shall not be deemed to be incorporated by reference into any such filings, unless we specifically incorporate these reports by reference in some other filed document. 36 The Board is not aware of any other matters to be presented at the Annual Meeting. If, however, any other matter should properly come before the Annual Meeting, the enclosed proxy card confers discretionary authority with respect to such matter. We will provide upon request without charge to each person solicited by this Proxy Statement a copy of our Annual Report on Form 10-K for
37 Attendance at the Annual Meeting is limited to stockholders of record as of April 14, 2016. The use of cell phones, smartphones, pagers, recording and photographic equipment and/or computers is not permitted in the meeting room at the Annual Meeting. See below for driving directions. Hard Rock Hotel & Casino – South Lake Tahoe 50 Highway 50 Stateline, Nevada 89449 (844) 588-7625 Driving Directions From Sacramento (Route #1 Hwy-50): Take Highway 50 east through Placerville and over Echo Summit to South Lake Tahoe. From Sacramento or San Francisco (Route #2 - I-80) I-80 to Truckee
Continue around the lake through Crystal Bay and Incline Village, past Nevada‘s Lake Tahoe Turn right and continue past Glenbrook and Zephyr Cove to Hard Rock Hotel & Casino, located on your right From Reno Drive South on US-395, 33 miles to Carson City On the far South side of Carson City, take the US-50 turnoff West to Lake Tahoe Take US-50 another 22 miles to the California state line 38 |