Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ | |||||||||||||||||||||
Check the appropriate box: |
| | Preliminary Proxy Statement | |
| | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☒ | | | Definitive Proxy Statement |
| | Definitive Additional Materials | |
| | 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) |
Payment of Filing Fee (Check the appropriate box):
☒ | | | No fee required. | |||
☐ | | |||||
Fee computed on table below per Exchange Act Rules 14a-6(i) | ||||||
| ||||||
| (1) | | | Title of each class of securities to which transaction applies: | ||
�� | | | | | ||
| | (2) | | | Aggregate number of securities to which transaction applies: | |
| | | | |||
| | (3) | | | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): | |
| | | | |||
| | (4) | | | Proposed maximum aggregate value of transaction: | |
| | | | |||
| | (5) | | | Total fee paid: | |
| | | | |||
☐ | ||||||
| Fee paid previously with preliminary materials. | |||||
☐ | | |||||
Check box if any part of the fee is offset as provided by Exchange Act Rule | ||||||
| | (1) | | | Amount Previously Paid: | |
| | | | |||
| (2) | | | Form, Schedule or Registration Statement No.: | ||
| | | | |||
| | (3) | | | Filing Party: | |
| | | | |||
| | (4) | | | Date Filed: | |
| | | |
VirnetX Holding Corporation 308 Dorla Ct. Zephyr Cove, NV 89448 www.virnetx.com April 13, 2021 | | |
To the Stockholders of VirnetX Holding Corporation:
1. | To elect Thomas M. O’Brien and Robert D. Short III, Ph.D. as our Class II directors; |
2. | To ratify the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; |
3. | To approve an amendment and restatement to our 2013 Equity Incentive Plan to increase the share reserve by 2,500,000 shares of common stock; and |
4. | To transact such other business that may properly come before the Annual Meeting. |
Our board of directors has fixed the close of business on April 14, 20169, 2021 as the record date for the Annual Meeting (the “Record Date”). Only stockholders of record as of the 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.
proxy statement.
Sincerely, Kendall Larsen Chairman of the Board of Directors Zephyr Cove, Nevada April 13, 2021 | |
3, 2021 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 13, 20212, 20162, 2016,3, 2021, VirnetX Holding Corporation will hold its 20162021 Annual Meeting of Stockholders (the “Annual Meeting”) at 9:10:00 a.m. Pacific Time. We refer to the 2021 Annual Meeting of Stockholders, together with any postponements, adjournments or other delays thereof, as the Annual Meeting. You may attend the Annual Meeting by visiting https://agm.issuerdirect.com/vhc, where you will be able to listen to the meeting live, submit questions limited to the proposals described in the Proxy Statement, and vote online by entering the control and request identification numbers located on your proxy card. Prior to the Annual Meeting, you may also submit questions relating to the proposals and VirnetX's business generally by emailing ir@virnetx.com by June 1, 2021. We will review these questions and answer as many as possible in the time allotted for the meeting.meetingAnnual Meeting will be held at the Hard Rock Hotel & Casino – South Lake Tahoe, 50 Highway 50, Stateline, Nevada 89449, for the following purposes:1. To elect Thomas M. O’Brien and Robert D. Short III, Ph.D. as our Class II directors; 2. To ratify the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; 3. To approve an amendment and restatement to our 2013 Equity Incentive Plan to increase the share reserve by 2,500,000 shares of common stock; and 4. To transact such other business that may properly come before the Annual Meeting. to elect Michael F. Angelo as a Class III director;to ratify the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016; andto transact such other business that may properly come before the Annual Meeting or at any adjournment or postponement thereof.2015,year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 15, 201616, 2021 (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 14, 20169, 2021 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 55,147,30971,058,570 shares of common stock issued and outstanding. Stockholders of record as of April 14, 20169, 2021 may vote at the Annual Meeting.important.important to us. 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 onlineor voting instruction card as instructed or vote by telephone.telephone or using the internet as instructed on the proxy card or voting instruction card. Returning the proxy card, voting online or voting by telephone will ensure your representation at the meeting, but does not deprive you of your right to attend the meeting and vote your shares in person.shares. The Proxy Statement explains more about the proxy voting process. Please read it carefully. We look forward to seeing youyour attendance at the Annual Meeting./s/ Katharine A. MartinKatharine A. MartinCorporate SecretaryPalo Alto, CaliforniaApril 19, 201620152020 are available at www.proxyvote.com.www.iproxydirect.com/VHC. IMPORTANT.IMPORTANT TO US.
| | Page | ||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
| | |||
i
ii
virtually and you may attend by visiting https://agm.issuerdirect.com/vhc. 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.20162021 Annual Meeting of Stockholders to be held on Thursday, June 2, 20163, 2021 at 9:10:00 a.m. Pacific Time, and at any postponement or adjournment thereof (the “Annual Meeting”). The Annual Meeting will be held at the Hard Rock Hotel & Casino – South Lake Tahoe, 50 Highway 50, Stateline, Nevada 89449.14, 20169, 2021 (the “Record Date”) are invited to attend the Annual Meeting and are asked to vote on the proposals described in this proxy statement (the “Proxy Statement”).22, 2016.13, 2021. These proxy solicitation materials combined with the Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2020 (the “Annual Report”), including financial statements, were first made available online, on or about April 19, 2016.13, 2021. Our principal executive offices are located at 308 Dorla Ct., Zephyr Cove, Nevada 89448, and our telephone number is (775) 548-1785. We maintain a website at www.virnetx.com.www.virnetx.com. The information on our website is not a part of thisincorporated by reference in the Proxy Statement.Q: Q:Why am I receiving these materials? A: We have made these materials available to you online or, upon your request, have delivered versions of these materials to you by mail or email, in connection with our solicitation of proxies for use at the Annual Meeting, which will take place on Thursday, June 2, 2016.3, 2021. As a VirnetX stockholder as of the Record Date, you are invited to attend the Annual Meeting and are entitled to and requested to vote on the items of business described in the Proxy Statement.Q: Q:Why did I receive a one-page notice in the mail regarding the Internetinternet availability of proxy materials this year instead of a full set of proxy materials?A: Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials online. Accordingly, the Notice containing instructions on April 22, 2016, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders of record and beneficial owners as of the Record Date. All stockholders will have the abilityhow to access theour proxy materials is first being mailed on the website referred to in the Notice (www.proxyvote.com) or request to receive a set of the proxy materials by mail or electronically by email.around April 13, 2021. Instructions on how to access the proxy materials over the Internetinternet or to request a printed copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.Q: Q:What is included in the proxy materials? A: The proxy materials include: Our proxy statement for the Annual Meeting; andOur 2015 Annual Report, on Form 10-K, which includes our audited consolidated financial statements.Q: Q:How can I get electronic access to the proxy materials? A: The Notice will provide you with instructions regarding how to: Viewview our proxy materials for the Annual Meeting online; andInstructinstruct 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
Q: | How may I obtain the |
A: | Stockholders may request a free copy of the |
Q: | Who pays for the expenses of soliciting proxies and what are the means of solicitation? |
A: | The expenses associated with the Company’s solicitation of |
Q: | How can I attend the Annual Meeting? |
A: |
Q: | Who is entitled to vote at the |
A: | Stockholders who our records show owned shares of VirnetX as of the close of business on the Record Date |
Q: | What is the difference between holding shares as a registered stockholder and as a street name stockholder? |
A: | Registered |
Street Name Stockholders. If your shares are held inby a stock brokerage account or by abroker, bank or other nominee, you are considered the beneficial owner of shares held in street name and the Proxy Statement should be forwarded to you by your
2
Q: | What am I voting on? |
A: | Our stockholders will vote on the following matters at the Annual Meeting: |
1. |
2. | Ratification of the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; and |
3. | Approval of an amendment and restatement to our 2013 Equity Incentive Plan to increase the share reserve by 2,500,000 shares of common stock. |
Q: | How does the Board recommend I vote on these proposals? |
A: | The Board recommends a vote: |
1. |
2. | 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, 2021; and |
3. | FOR the amendment and restatement of the 2013 Equity Incentive Plan. |
Q: | How do I vote? |
A: | You may either vote |
Registered Stockholders: Registered stockholders may vote by one of the following methods:
2, 2021.
nominee.
3
Q: | How many votes do I have? |
A: | On each matter to be voted upon, you have one vote for each share of common stock you own as of |
Q: | Will there be any other items of business on the agenda? |
A: | We do not know of any business to be considered at the Annual Meeting other than the proposals described in |
Q: | If I submit a proxy, how will it be voted? |
A: | When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of the Board, as follows: |
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?”
1. |
2. | 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, 2021; and |
3. | FOR the amendment and restatement of the 2013 Equity Incentive Plan. |
Q: | Can I change my vote after submitting my proxy? |
A: | Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any of the following ways: |
If you are a beneficial owner of shares held in street name, you may change your vote:
Q: | How are votes counted? |
A: | For Proposal I |
4
Ratification of Farber Hass Hurley LLP as our independent registered public accounting firmyour behalf, but your proxy will be counted for the fiscal year ending December 31, 2016purpose of establishing a quorum.
Meeting on this matter.
Q: | What is the quorum requirement? |
A: | A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of the outstanding shares of |
Your shares will be counted towards the quorum only if you submit a valid proxy or if you vote in person at the meeting.Annual 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.
Q: | What effect do abstentions and broker non-votes have on quorum requirements? |
A: | Abstentions and broker non-votes are counted as present for establishing a quorum for the transaction of business at the Annual Meeting. A “broker non-vote” occurs when a broker votes on a matter it does not have authority to |
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.
Q: | I share an address with another stockholder, and we received only one copy of the Notice. How may I obtain an additional copy of the Notice or proxy materials? |
A: | In an effort to reduce printing costs and postage fees, we have adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of the Notice or our proxy materials if a full set is requested, unless one or more of these stockholders notifies us that he or she wishes to continue receiving individual copies. Stockholders who participate in householding will continue to receive separate proxy cards. |
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, P.O. Box 439, Zephyr Cove, Nevada 89448 (Attn:(Attention: Investor Relations), or (2) call our Investor
5
Relations department at (775) 548-1785. Additional copies of the proxy materials will be sent promptly after receipt of your request. Similarly, you may also contact us if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future.
Q: | What does it mean if I receive more than one Notice? |
A: | It means that you hold shares in more than one account. To ensure that all your shares are voted, sign, date and return each proxy card. |
Q: | Who tabulates the votes and how will I know the results of the voting at the Annual Meeting? |
A: | The votes will be tabulated by an independent inspector of election, who will be a representative of |
We will announce preliminary voting results at the Annual Meeting. We will publish the preliminary, or if available, final, voting results in a Current Report on Form 8-K to be filed with the SEC on or before the fourth business day following the date of the Annual Meeting. If not published in an earlier Current Report on Form 8-K, we will publish the final voting results in aan amendment to the Current Report on Form 8-K to be filed withreporting the SECpreliminary voting results within four business days after the final voting results are known.available. You may obtain a copy free of charge on our website at http://www.virnetx.com, by contacting our Investor Relations Department at (775) 548-1785, or online at www.sec.gov.
Q: | How do I contact the Board? |
A: | You can send written communications to the Board or any individual director in accordance with our bylaws, addressed to: |
Board of Directors, Nominating and Corporate Governance Committee,
Q: | Where are your principal executive offices? |
A: | Our principal executive offices are located at 308 Dorla Ct., Zephyr Cove, Nevada 89448. Our telephone number is (775) 548-1785. |
Q: | How do I submit a stockholder proposal for the |
A: | Stockholders may present proper proposals for inclusion in the Company’s proxy statement and for consideration at the next annual meeting of its stockholders by submitting their proposals in writing to the Company in a timely manner. In order to be included in the proxy statement for the |
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 statement. In general, such proposals, including the information required by the Company’s bylaws, must be received by the Company not later than February 2, 2017 and no earlier than February 3, 2022 and no later than March 4, 2017.
5, 2022.
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 20172022 Annual Meeting of Stockholders and the stockholder will not be permitted to present the proposal to the stockholders for a vote at our 20172022 Annual Meeting of Stockholders.
Q: | What if I have questions about lost stock certificates or need to change my mailing address? |
A: | You may contact our transfer agent, |
7
Annual Meeting.
If you have any questions about the proxy voting process, please contact the broker, bank or other nominee where you hold your shares. The SEC also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. Additionally, you may call our Investor Relations department at (775) 548-1785.
8
Name | Age | Class | Current Term Expire | Position | Director Since |
Michael F. Angelo | 56 | III | 2016 | Director | 2007 |
Kendall Larsen | 59 | I | 2017 | President, Chief Executive Officer and Chairman of the Board of Directors | 2007 |
Gary Feiner | 53 | I | 2017 | Director | 2014 |
Thomas M. O’Brien | 49 | II | 2018 | Director | 2007 |
Robert D. Short III, Ph.D. | 64 | II | 2018 | Chief Technology Officer, Chief Scientist and Director | 2010 |
Name | | | Age | | | Class | | | Current Term Expires | | | Position | | | Director Since |
Director Nominees | | | | | | | | | | | |||||
Thomas M. O’Brien | | | 54 | | | II | | | 2021 | | | Director | | | 2007 |
Robert D. Short III, Ph.D. | | | 69 | | | II | | | 2021 | | | Chief Technology Officer, Chief Scientist and Director | | | 2010 |
Continuing Directors | | | | | | | | | | | |||||
Kendall Larsen | | | 64 | | | I | | | 2023 | | | President, Chief Executive Officer and Chairman of the Board of Directors | | | 2007 |
Gary W. Feiner | | | 58 | | | I | | | 2023 | | | Director | | | 2014 |
Michael F. Angelo | | | 61 | | | III | | | 2022 | | | Director | | | 2007 |
Director
Mr. Angelo is also an Information Systems Security Association (“ISSA”) Fellow and ISSA Hall of Fame recipient.
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 Security Products Division of Phoenix Technologies Ltd., a software and firmware developer, and he has also held
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. He is currently Chief Executive Officer and President of TravelCenters of America LLC (NYSE: TA), since February 2007 and a Managing Director of TA since October 2006. He has been an employee of The RMR Group LLC and its predecessors (“RMR”) since May 1996 and has served as an Executive Vice President of that company since September 2008, prior to which he served in various roles since May 1996, including holding various positions with public entities related to RMR. From 1988 to 1996, Mr. O’Brien was a senior manager with Arthur Andersen LLP where he served a number of public company clients. Mr. O’Brien graduated cum laude from the University of Pennsylvania, Wharton School of Business, with a B.S. in Economics.
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 a director since July 9, 2010. He has been the Chief Scientist for the Company since May 2006 and in June 2010, became the Company’s Chief Technical Officer as well. From February 2000 to April 2007, Dr. Short was Assistant Vice President and Division Manager at Science Applications International Corporation, or SAIC, from which we acquired certain patents in 2006. From 1994 to February 2000, he also held various other positions at SAIC. Prior to SAIC, he worked at ARCO Power Technologies, Inc. (Atlantic Richfield Petroleum), Sperry Corporate Technology Center and Sperry Research Center. He has a Ph.D. in Electrical Engineering from Purdue University along with a M.S. in Mathematics and a B.S. in Electrical Engineering from Virginia Tech.
As co-inventor on the majority of the patents in the Company’s patent portfolio, Dr. Short brings to the Board extraordinary technical knowledge and a deep understanding of the Company’s business, history and organization and the field of information security.
10
Board Leadership Structure
As a result of the Board’s committee system and majority of independent directors, the Board maintains effective oversight of our business operations, including independent oversight of our financial statements, executive compensation, selection of director candidates, and corporate governance programs. Accordingly, we believe that our current leadership structure is appropriate and enhances the Board’s ability to effectively carry out its roles and responsibilities on behalf of our stockholders.
The Company’s compensation policies and practices are intended not to foster risk taking above the level of risk associated with the Company’s business model. Accordingly, the Company believes it has a balanced pay and performance program that does not promote excessive risk taking.
11
Code of Ethics
12
The following table details the membership of each standing committee and the number of meetings of each standing committee conducted during fiscal 2015:
Name of Director | Audit | Compensation | Nominating & Governance |
Michael F. Angelo | M | M | C |
Kendall Larsen | — | — | — |
Thomas M. O’Brien | C | M | M |
Robert D. Short III, Ph.D. | — | — | — |
Gary Feiner | M | C | M |
Number of Meetings in Fiscal 2015 | 7 | 7 | 4 |
Name of Director | | | Audit | | | Compensation | | | Nominating & Corporate Governance |
Michael F. Angelo | | | M | | | M | | | C |
Kendall Larsen | | | — | | | — | | | — |
Thomas M. O’Brien | | | C | | | M | | | M |
Robert D. Short III, Ph.D. | | | — | | | — | | | — |
Gary W. Feiner | | | M | | | C | | | M |
Number of Meetings in Fiscal 2020 | | | 7 | | | 8 | | | 7 |
Our
Messrs. Angelo, O’Brien and Feiner comprise ouror nominating and governance committee, with Mr. Angelo serving as the chairman. The Board has determined that each of Messrs. Angelo, Feiner and O’Brien and Feiner meets the NYSE MKT requirements for independence. TheOur nominating and corporate governance committee met seven times during fiscal 2020.
A more detailed description of our nominating and corporate governance committee’s functions can be found in our nominating and corporate 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, P.O. Box 439, Zephyr Cove, NV 89448 (Attention: Investor Relations).
13
Director Qualifications
stockholders, diversity, and with respect to diversity, such factors as gender, race, ethnicity and experience, area of expertise, potential conflicts of interest and other commitments and other individual qualities and attributes that contribute to the total mix of viewpoints and experience represented on the Board.
NYSE. Our audit committee met seven times during fiscal 2015.
14
Responsibilities
Our audit committee’s responsibilities include the following:
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, POP.O. Box 439, Zephyr Cove, Nevada 89448 Attention:(Attention: Investor Relations.
Relations).
Year Ended December 31 (1) | ||||||
2015 | 2014 | |||||
Audit Fees | $ | 171,590 | $ | 143,180 | ||
Audit-Related Fees | $ | 14,771 | $ | 5,080 | ||
Tax Fees | $ | — | $ | — | ||
All Other Fees | $ | — | $ | — | ||
Total Fees | $ | 186,361 | $ | 148,260 |
| | Year Ended December 31(1) | ||||
| | 2020 | | | 2019 | |
Audit Fees | | | $209,000 | | | $177,785 |
Audit-Related Fees | | | $59,530 | | | $35,807 |
Tax Fees | | | $— | | | $— |
All Other Fees | | | $— | | | $— |
Total Fees | | | $268,530 | | | $213,592 |
(1) | Reflects the fees approved by the Company and billed or to be billed by Farber Hass Hurley LLP with respect to services performed for the audit and other services for the applicable fiscal year. |
Audit Fees. Consists of fees billed for professional services rendered in connection with the audit of our consolidated financial statements, including the audit of internal control over financial reporting, review of the interim consolidated financial statements included in our quarterly reports, and accounting services in connection with securities offerings.
Procedures2015,2020, our audit committee pre-approved 100% of all services provided by our independent registered public accounting firm. These services include audit services and audit-related services. Our independent registered public accounting firm is required to periodically report to our audit committee regarding the extent of services provided by our independent registered public accounting firm in accordance with this pre-approval policy. Our audit committee may also delegate pre-approval authority to one or more of its members. Such member(s) must report any such pre-approval to our audit committee at the next scheduled meeting.15O’BrienFeiner and FeinerO’Brien comprise our compensation committee, with Mr. Feiner serving as the chairman. The Board has determined that each member of our compensation committee meetsMessrs. Angelo, Feiner and O’Brien satisfies the requirements for independence under the rules of the NYSE MKT, including the enhanced standards for compensation committee members, and is a “non-employee director” within the meaning of Section 16 of the Exchange Act,Act. Our compensation committee met eight times during fiscal 2020.is an “outside director,” within the meaning of the Internal Revenue Code of 1986, as amended.Scope of Authoritythe following:among other things:filings;statement;statement, as applicable;
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 the Board upon the recommendation of our compensation committee.
Compensation Committee Interlocks and Insider Participation
16
these limits.
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.ourthe 2013 Equity Incentive Plan, an option to purchase 12,500 shares of our Common Stock at the Annual Meetingeach year’s annual meeting of stockholders with a per-share exercise price equal to the fair market value of that stock on the date of grant and which will fully vest upon the earlier of (a) the one-year anniversary of such a 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 options automatically become fully vested immediately prior to a “change in control” of the Company.ourthe 2013 Equity Incentive Plan, an award for 8,333 restricted stock units (“RSUs”) at the Annual Meeting,each year’s annual meeting of stockholders, which will fully vest upon the earlier of (a) the one-year
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 unitsRSUs automatically become fully vested immediately prior to a “change in control” of the Company.
Name (1) | Fees Earned or Paid in Cash | Stock Awards (2) | Option Awards (2) | Total | ||||||||
Michael F. Angelo | $ | 61,600 | $ | 53,998 | $ | 54,250 | $ | 169,848 | ||||
Thomas M. O’Brien | $ | 69,850 | $ | 53,998 | $ | 54,250 | $ | 178,098 | ||||
Gary Feiner | $ | 62,700 | $ | 53,998 | $ | 54,250 | $ | 170,948 |
Name(1) | | | Fees Earned or Paid in Cash | | | Stock Awards(2) | | | Option Awards(2) | | | All Other Compensation(3) | | | Total |
Michael F. Angelo | | | $61,600 | | | $55,414 | | | $61,388 | | | $133,333 | | | $311,735 |
Gary W. Feiner | | | $62,700 | | | $55,414 | | | $61,388 | | | $100,833 | | | $280,335 |
Thomas M. O’Brien | | | $69,850 | | | $55,414 | | | $61,388 | | | $123,333 | | | $309,985 |
(1) | This table includes the compensation of only non-employee directors. For compensation of Mr. Larsen and Dr. Short, please see |
(2) | The amounts in this column reflect the aggregate grant date fair value of the stock awards and option awards computed in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, or FASB ASC Topic 718. There can be no assurance that these amounts will ever be realized. For information on the valuation assumptions used in valuing these stock option awards, refer to Note |
(3) | The amounts in this column reflect the Adjustment Payments paid to our non-employee directors related to the 2020 Dividend. For additional information relating to such payments, please see “Fiscal 2020 Dividend” below. |
18
Name | | | Aggregate Number of Shares Underlying Outstanding Options | | | Number of Securities Underlying Unvested Stock Awards |
Michael F. Angelo | | | 127,500 | | | 8,333 |
Gary W. Feiner | | | 105,000 | | | 8,333 |
Thomas M. O’Brien | | | 127,500 | | | 8,333 |
This table lists applicable percentage ownership based on 54,889,85571,058,570 shares of Common Stock outstanding as of AprilMarch 1, 2016.2021. Securities that a person has a right to acquire pursuant to SEC rules within 60 days of AprilMarch 1, 20162021 are deemed to be beneficially owned by the persons holding these securities for the purpose of computing the number of shares owned by, and percentage ownership of, that person, but are not treated as outstanding for the purpose of computing any other person’s number of shares owned or ownership percentage.
Name and Address of Beneficial Owner | | | Amount and Beneficial | | | Percent Class | ||
5% or Greater | | | | | ||||
Kendall Larsen | | | | | ||||
BlackRock, Inc. | | | 4,698,827(3) | | | 6.61% | ||
The Vanguard Group | | | 3,677,296(4) | | | 5.18% | ||
Directors and Named Executive | | | | | ||||
Kendall Larsen | | | | | ||||
Robert D. Short III, Ph.D. | | | | | ||||
Thomas M. O’Brien | | | | | * | |||
Michael F. Angelo | | | | | * | |||
Gary W. Feiner | | | | | * | |||
Richard H. Nance | | | | | * | |||
All directors and current executive officers as a group (6 persons): | | | | |
(*) | Less than 1%. |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Securities which are exercisable, convertible or to which a holder has a right to acquire within 60 days of |
(2) | Includes (i) |
(3) |
(4) | The information is based solely on a Schedule 13G filed by this stockholder on February 10, 2021. The stockholder’s business address is 100 Vanguard Blvd., Malvern, PA 19355. This stockholder has sole dispositive power with respect to 3,497,266 of such shares and shared dispositive power over 180,030 of such shares. |
(5) | Includes (i) |
Includes |
Includes |
Includes |
19
Includes |
Includes the following securities beneficially held by our current directors and executive officers as a group: |
20
II DIRECTORS
Messrs. O’Brien and Short.
directors.
21
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
22
Award Type | | | Annual Number of Shares or Dollar Value |
Stock Option | | | 1,000,000 |
Stock Appreciation Right | | | 1,000,000 |
Restricted Stock | | | 1,000,000 |
Restricted Stock Units | | | 1,000,000 |
Performance Shares | | | 1,000,000 |
Performance Units | | | Initial Value of $5,000,000 |
Name of Individual or Group | | | Number of Options Granted | | | Per Share Exercise Price | | | Number of RSUs Granted | | | Grant Date Value of RSUs |
Kendall Larsen | | | 75,000 | | | $6.28 | | | 26,667 | | | $6.92 |
Robert D. Short III, Ph.D. | | | 55,000 | | | $6.28 | | | 13,333 | | | $6.92 |
Richard H. Nance | | | 10,000 | | | $6.92 | | | 6,666 | | | $6.92 |
All executive officers, as a group | | | 140,000 | | | $6.40 | | | 46,666 | | | $6.92 |
All non-employee directors, as a group | | | 37,500 | | | $6.65 | | | 24,999 | | | $6.65 |
All employees who are not executive officers, as a group | | | 560,000 | | | $6.44 | | | 146,664 | | | $6.92 |
All non-employee service providers, as a group | | | 10,000 | | | $5.18 | | | — | | | $— |
Name | | | Age | | | Position |
Kendall Larsen | | | | | Chairman of the Board of Directors, President and | |
Richard H. Nance | | | | | Chief Financial Officer | |
Robert D. Short III, Ph.D. | | | | | Chief Technology Officer, Chief Scientist and Director |
The biographies of KendallMr. Larsen and Robert D.Dr. Short III, Ph.D. are set forth under the heading “Board of Directors” in this Proxy Statement.
he has decades of experience in business consulting, strategic planning, and advisory services. Mr. Nance earned his Bachelor of Business Administration in Banking & Finance from North Texas State University, and a Bachelor of Science in Accounting from Central State University of Oklahoma. He holds memberships in the American Institute of CPAs and California Society of CPAs.
23
This Compensation Discussion and Analysis describes our compensation program as it relates to our Chief Executive Officer, our Chief Technology Officer and Chief Scientist, and our Chief Financial Officer, our three executive officers who we refer to as our named executive officers. This Compensation Discussion and Analysis should be read together with the compensation tables beginning on page 32 of this Proxy Statement. In this Compensation Discussion and Analysis, we first discuss certain of our business highlights that informed compensation decisions in fiscal 2015, and the objectives and philosophy of our executive compensation program. Next, we review the process our compensation committee follows in deciding how to compensate our named executive officers. We then provide a brief overview of the specific elements of our compensation program. Lastly, we present a detailed discussion and analysis of the compensation committee’s specific decisions about the compensation of our named executive officers for fiscal 2015.
In fiscal 2015, the Company achieved significant milestones in the development of its business. With only 20 employees, the Company depends heavily on its executive officers to drive achievement of its strategic, operational and financial goals. Some of the Company’s notable achievements in fiscal 2015 include:
The primary objectives of our executive compensation program are:
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 revenue-generating activities, product and technical development, corporate public relations and stockholder value creation. The compensation committee’s approach emphasizes the setting of compensation at levels it believes are competitive with executives at other companies of similar size and stage of development who are operating in the information technology industry while taking into account our relative performance, key qualitative factors such as executive performance, criticality and tenure and our own strategic goals.
24
statement, as applicable.
Compensation Consultant Independence
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 fiscal 2015, the compensation committee reviewed the Company’s compensation practices in comparison to the compensation practices of certain peer-group companies identified by Compensia in a report provided to the compensation committee in 2015 (the “Compensation Assessment”). As part of the Compensation Assessment, in 2015 the compensation committee and Compensia worked together to determine a group of 20 publicly-traded companies that generally had similar financial, operational and strategic characteristics as the Company. For the Compensation Assessment, our peer group (“Peer Group”) consisted of:
At the time of our Compensation Assessment, these peer companies were generally comparable to the Company with respect to annual revenue (all less than $416 million at such time), market capitalization (all between $60 million and $2.2 billion at such time) and industry (primarily IP-licensing and software and other high-technology industries) to the extent practical taking into consideration our unique business model and financial profile. To assess the competitiveness of our executive compensation program for fiscal 2015, the compensation committee reviewed the Compensation Assessment. As part of this process, Compensia analyzed base salaries, target bonuses and target total cash compensation, annual equity compensation and target total direct compensation for each of our named executive officers, as compared against the Compensation Assessment. Compensia then presented this information to the compensation committee for its review and use.
Our success largely depends on the skills, experience and efforts of our key personnel, including Mr. Larsen, Dr. Short and Mr. Nance. Generally, the compensation committee wants to ensure that compensation for its executive officers is competitive in the market place and provides incentives for our executive officers to remain with the Company and to work to move the Company to the next stage in its development. The compensation committee also considers various factors such as Company performance and individual performance, the importance of the officer’s role and the scope of the officer’s responsibilities (for example, job responsibilities that are broader than the specific position may suggest). Further, in fiscal 2015, the compensation committee compared the compensation of our Chief Executive Officer, Chief Technology Officer and Chief Scientist, and Chief Financial Officer to the Compensation Assessment for similar positions. For purposes of fiscal 2015, the compensation committee approved cash compensation levels (both base salary and target annual incentives) and equity compensation that resulted in total compensation for our Chief Executive Officer, Chief Technology Officer and Chief Scientist, and Chief Financial Officer that fell at the 40th, 50th and 55th percentile, respectively, of our Peer Group from the Compensation Assessment. The compensation committee believes these targets were appropriate for fiscal 2015 given the significant progress the Company made toward its financial and operational milestones in fiscal 2015 and the importance of Mr. Larsen, Dr. Short and Mr. Nance to the Company. When determining compensation for the named executive officers, the compensation committee took into account that Mr. Nance works on a part-time basis.
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 “For” an advisory vote to approve of the compensation of the Company’s named executive officers. In 2011, the Company’s shareholders voted to hold the Company’s say-on-pay vote every three years. In fiscal 2014, the Company held its second say-on-pay advisory vote. Over 93% of the votes present and entitled to vote on the proposal (votes “For” and “Against”, as well as abstentions) and 94% of the votes cast on the proposal (votes “For” and “Against”) voted “For” an advisory vote to approve of the compensation of the Company’s named executive officers. The compensation committee believes these results affirm stockholder support for our executive compensation decisions and policies, and as such, the compensation committee has not materially changed its approach to fiscal 2015 compensation. We will hold the next vote on the frequency of say-on-pay advisory votes at the 2017 Annual Meeting.
26
27
Named Executive Officers’ Compensation Decisions for Fiscal 2015
2020
2019.
Name | Base Salary Fiscal 2015 | Targeted Cash Incentive Opportunity for Fiscal 2015(1) | Actual Cash Incentive Paid for Fiscal 2015(2) | Annual Incentive Bonus Fiscal 2015 | Targeted Number of Shares Underlying Stock Option Grants for Fiscal 2015(3) | Targeted Number of Shares Underlying Stock Awards for Fiscal 2015(3) | ||||||||||||
Kendall Larsen | $ | 550,246 | 50 | % | 37.5 | % | $ | 206,342 | 40,000 | 26,667 | ||||||||
Chief Executive Officer, | ||||||||||||||||||
President & Chairman | ||||||||||||||||||
Robert D. Short III, Ph.D. | $ | 350,160 | 50 | % | 50 | % | $ | 175,080 | 20,000 | 13,333 | ||||||||
Chief Technology Officer, | ||||||||||||||||||
Chief Scientist and Director | ||||||||||||||||||
Richard Nance | $ | 70,787 | 50 | % | 37.5 | % | $ | 26,545 | 4,000 | 2,667 | ||||||||
Chief Financial Officer |
Name | | | Base Salary Fiscal 2020 | | | Targeted Cash Incentive Opportunity for Fiscal 2020(1) | | | Actual Cash Incentive Paid for Fiscal 2020(2) | | | Annual Incentive Bonus Fiscal 2020(3) | | | Number of Shares Underlying Stock Option Grants for Fiscal 2020(4) | | | Number of Shares Underlying Stock Awards for Fiscal 2020(4) | | | All Other Compensation |
Kendall Larsen President & Chairman, Chief Executive Officer | | | $702,189 | | | 75% | | | 75% | | | $526,642 | | | 75,000 | | | 26,667 | | | $797,617(5) |
Robert D. Short III, Ph.D. Chief Technology Officer, Chief Scientist and Director | | | $446,768 | | | 75% | | | 75% | | | $335,076 | | | 55,000 | | | 13,333 | | | $1,368,334(6) |
Richard Nance Chief Financial Officer | | | $180,709 | | | 75% | | | 75% | | | $135,532 | | | 10,000 | | | 6,666 | | | $121,897(7) |
(1) | The target bonus level for cash incentive opportunities is calculated as a percentage of base salary. |
(2) | The actual bonus level for cash incentive opportunities is calculated as a percentage of base salary. |
(3) |
(4) | Stock option grants and stock awards |
(5) | Reflects (i) an Adjustment Payment of $691,666 related to the 2020 Dividend (for additional information relating to such payment, please see “Fiscal 2020 Dividend” in this Proxy Statement) and (ii) payment of $51,937 and $54,014 in fiscal 2020 for accrued, but unused vacation in fiscal 2019 and 2020, respectively. |
(6) | Reflects an Adjustment Payment of $1,368,334 related to the 2020 Dividend. |
(7) | Reflects (i) an Adjustment Payment of $107,996 related to the 2020 Dividend and (ii) payment of $13,901 in fiscal 2020 for accrued, but unused vacation in fiscal 2020. |
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, inIn accordance with his appointmentcontinued role as CFO on a part-time basis, the compensation committee approved a base salary of $70,787$180,709 for Mr. Nance, based on an annual salary of $354,000 adjusted to reflect Mr. Nance’s actual part-time status, which approximates the 75th percentile of our Peer Group from the Compensation Assessment on an annualized basis.
In fiscal 2015, the compensation committee maintainedbelieved was appropriate given his long tenure with us and contributions to our business.
2019. In January 2016,December 2020, the compensation committee reviewed the Company’s performance in fiscal 20152020 and the contributions that Mr. Larsen, Dr. Short and Mr. Nanceour named executive officers made to such performance. The compensation committee determined to pay each of Mr. Larsen, Dr. Short and Mr. Nance 37.5%, 50%, and 37.5%75% of their respective fiscal 20152020 base salary respectively, in light of the Company’s overall performance for fiscal 2020. In making such payments, the yearcompensation committee considered various factors, including advances in product development and their contributions in achieving this performance. The compensation committee took into accountperformance, the achievement of certain licensing, technical, and litigation milestones, technical milestones, and the development of the Company’s patent portfolio, none of which were given any particular weight or assigned a dollar value. The resulting aggregate fiscal 20152020 annual incentive bonus payments paid to Mr. Larsen, Dr. Short and Mr. Nance were $206,342, $175,080$526,642, $335,076 and $26,545,$135,532, respectively.
As part of the compensation review, Compensia and
On May 20, 2015,
Name | Position | Number of Shares Underlying Option Grant(1) | Option Grant Date Fair Value(2) | Number of Shares Underlying Stock Award(3) | Stock Award Grant Date Fair Value(4) | ||||||||
Kendall Larsen | Chief Executive Officer, President and Chairman | 40,000 | $ | 160,000 | 26,667 | $ | 144,268 | ||||||
Robert D. Short III, Ph.D. | Chief Technology Officer and Chief Scientist | 20,000 | $ | 80,000 | 13,333 | $ | 72,132 | ||||||
Richard Nance | Chief Financial Officer | 4,000 | $ | 16,000 | 2,667 | $ | 14,428 |
Name | | | Position | | | Grant Date | | | Number of Shares Underlying Option Grant(1)(2) | | | Option Grant Date Fair Value | | | Number of Shares Underlying Stock Award(3) | | | Stock Award Grant Date Fair Value |
Kendall Larsen | | | Chief Executive Officer, President and Chairman | | | 3/19/2020 | | | 35,000 | | | $150,395 | | | | | ||
| 6/3/2020 | | | 40,000 | | | $211,640 | | | | | |||||||
| 6/3/2020 | | | | | | | 26,667 | | | $184,536 | |||||||
Robert D. Short III, Ph.D. | | | Chief Technology Officer and Chief Scientist | | | 3/19/2020 | | | 35,000 | | | $150,395 | | | | | ||
| 6/3/2020 | | | 20,000 | | | $105,820 | | | | | |||||||
| 6/3/2020 | | | | | | | 13,333 | | | $92,264 | |||||||
Richard Nance | | | Chief Financial Officer | | | 6/3/2020 | | | 10,000 | | | $52,910 | | | | | ||
| 6/3/2020 | | | | | | | 6,666 | | | $46,129 |
(1) | Subject to the continued service of the named executive officer, |
(2) |
(3) | Subject to the continued service of the named executive officer, the |
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 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.
Tax and Accounting Considerations
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 compensation committee has reviewed and discussed the Compensation Discussion and Analysis for fiscal 2015 required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the compensation committee has recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s annual report on Form 10-K and this Proxy Statement.
30
Respectfully submitted by the members of the compensation committee of the Board of Directors:
Gary Feiner (Chair)
Michael F. Angelo
Thomas M. O’Brien
31
The following table sets forth summary information concerning compensation earned by the Company’s Chief Executive Officer, Chief Technology Officer and the Company’s Chief Financial Officer.
Name and Principal Position | Year | Salary (1) | Bonus | Stock Awards (2) | Option Awards (2) | All Other Compensation | Total | ||||||||||||||
Kendall Larsen | 2015 | $ | 630,108 | (3) | $ | 206,342 | $ | 144,268 | $ | 160,000 | $ | — | $ | 1,140,718 | |||||||
Chief Executive Officer, | 2014 | $ | 556,789 | (4) | $ | 389,320 | $ | 410,672 | $ | 458,800 | $ | — | $ | 1,815,518 | |||||||
President and Chairman | 2013 | $ | 489,720 | $ | 244,860 | $ | 632,541 | $ | 721,200 | $ | — | $ | 2,088,321 | ||||||||
Robert D. Short III, Ph.D.(5) | 2015 | $ | 370,963 | (6) | $ | 175,080 | $ | 72,132 | $ | 80,000 | $ | — | $ | 698,175 | |||||||
Chief Technology Officer | 2014 | $ | 330,300 | $ | 247,760 | $ | 205,328 | $ | 229,400 | $ | — | $ | 1,012,788 | ||||||||
and Chief Scientist | 2013 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Richard H. Nance | 2015 | $ | 70,787 | $ | 26,545 | $ | 14,428 | $ | 16,000 | $ | — | $ | 127,760 | ||||||||
Chief Financial Officer | 2014 | $ | 66,800 | $ | 33,390 | $ | 41,072 | $ | 45,880 | $ | — | $ | 187,142 | ||||||||
2013 | $ | 63,000 | $ | 28,350 | $ | 63,261 | $ | 72,120 | $ | — | $ | 226,731 |
Name and Principal Position | | | Year | | | Salary(1) | | | Bonus | | | Stock Awards(2) | | | Option Awards(2) | | | All Other Compensation | | | Total |
Kendall Larsen Chief Executive Officer, President and Chairman | | | 2020 | | | $702,189 | | | $1,033,028(3) | | | $184,536 | | | $362,035 | | | $797,617(4) | | | $3,079,405 |
| 2019 | | | $725,121(5) | | | $— | | | $162,936 | | | $186,960 | | | $— | | | $1,075,019 | ||
| 2018 | | | $696,775(6) | | | $405,758 | | | $85,334 | | | $665,200 | | | $— | | | $1,853,068 | ||
Robert D. Short III, Ph.D. Chief Technology Officer and Chief Scientist | | | 2020 | | | $446,768 | | | $657,265(7) | | | $92,264 | | | $256,215 | | | $1,368,334(8) | | | $2,820,846 |
| 2019 | | | $429,585 | | | $— | | | $81,465 | | | $93,480 | | | $— | | | $604,529 | ||
| 2018 | | | $413,062 | | | $258,164 | | | $42,666 | | | $355,720 | | | $— | | | $1,069,612 | ||
Richard H. Nance Chief Financial Officer | | | 2020 | | | $180,709 | | | $265,851(9) | | | $46,129 | | | $52,910 | | | $121,897(10) | | | $667,496 |
| 2019 | | | $173,759 | | | $— | | | $40,729 | | | $46,740 | | | $— | | | $261,228 | ||
| 2018 | | | $167,076 | | | $104,422 | | | $21,331 | | | $23,300 | | | $— | | | $316,129 |
(1) | Actual salary earned during fiscal years |
(2) |
2015 Grants of Plan-Based Awards
The following table shows all plan-based awards granted to the named executive officers during fiscal 2015. The equity awards identified in the table below are also reported in the “Outstanding Equity Awards at 2015 Fiscal Year-End” table below.
Name | Grant Date | Name of Plan | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($/sh) | Grant Date Fair Value(1) | ||||||||
Kendall Larsen | 5/20/2015 | 2013 Equity Incentive Plan | 26,667 | $ | — | $ | 144,268 | |||||||
Kendall Larsen | 5/20/2015 | 2013 Equity Incentive Plan | 40,000 | $ | 5.41 | $ | 160,000 | |||||||
Robert D. Short III, Ph.D. | 5/20/2015 | 2013 Equity Incentive Plan | 13,333 | $ | — | $ | 72,132 | |||||||
Robert D. Short III, Ph.D. | 5/20/2015 | 2013 Equity Incentive Plan | 20,000 | $ | 5.41 | $ | 80,000 | |||||||
Richard H. Nance | 5/20/2015 | 2013 Equity Incentive Plan | 2,667 | $ | — | $ | 14,428 | |||||||
Richard H. Nance | 5/20/2015 | 2013 Equity Incentive Plan | 4,000 | $ | 5.41 | $ | 16,000 |
These amounts reflect the grant date fair value of such award computed in accordance with FASB ASC Topic 718 and do not reflect the actual amounts earned. For information on the valuation assumptions used in valuing these awards, refer to Note |
(3) | Reflects (i) a March Special Bonus payment of $506,386 and (ii) an annual incentive bonus payment of $526,642 for fiscal 2020. |
(4) | Reflects (i) an Adjustment Payment of $691,666 related to the 2020 Dividend and (ii) payment of $51,937 and $54,014 in fiscal 2020 for accrued, but unused vacation in fiscal 2019 and 2020, respectively. Mr. Larsen additionally received a dividend payment of $1.00 per share of common stock held by him in connection with the 2020 Dividend, which is not reflected in this amount. For additional information relating to the 2020 Dividend, please see “Fiscal 2020 Dividend” in this Proxy Statement. |
(5) | Includes payment of $49,940 for accrued, but unused vacation in fiscal 2018. |
(6) | Includes payment of $47,562 for accrued, but unused vacation in fiscal 2017. |
(7) | Reflects (i) a March Special Bonus payment of $322,189 and (ii) an annual incentive bonus payment of $335,076 for fiscal 2020. |
(8) | Reflects an Adjustment Payment of $1,368,334 related to the 2020 Dividend. Dr. Short additionally received a dividend payment of $1.00 per share of common stock held by him in connection with the 2020 Dividend, which is not reflected in this amount. |
(9) | Reflects (i) a March Special Bonus payment of $130,319 and (ii) an annual incentive bonus payment of $135,532 for fiscal 2020. |
(10) | Reflects (i) an Adjustment Payment of $107,996 related to the 2020 Dividend and (ii) payment of $13,901 in fiscal 2020 for accrued, but unused vacation in fiscal 2020. Mr. Nance additionally received a dividend payment of $1.00 per share of common stock held by him in connection with the 2020 Dividend, which is not reflected in this amount. |
32
Option Awards | Stock Awards | |||||||||||||||||
Name | # of Securities Underlying Unexercised Options Exercisable | # of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | # of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | ||||||||||||
Kendall Larsen(1) | 41,516 | (2) | — | $ | 0.2408712 | 3/22/2016 | — | $ | — | |||||||||
213,319 | (2) | — | $ | 5.88 | 12/30/2017 | — | $ | — | ||||||||||
585,425 | (2) | — | $ | 1.15 | 4/3/2019 | — | �� | $ | — | |||||||||
10,209 | (2) | — | $ | 6.028 | 2/23/2020 | — | $ | — | ||||||||||
24,791 | (2) | — | $ | 5.48 | 2/23/2020 | — | $ | — | ||||||||||
50,000 | (2) | — | $ | 23.62 | 5/12/2021 | — | $ | — | ||||||||||
36,667 | (3) | 3,333 | $ | 24.75 | 4/13/2022 | — | $ | — | ||||||||||
25,000 | (3) | 15,000 | $ | 23.72 | 6/5/2023 | — | $ | — | ||||||||||
14,167 | (3) | 25,833 | $ | 15.40 | 7/08/2024 | — | $ | — | ||||||||||
5,833 | (3) | 34,167 | $ | 5.41 | 5/20/2025 | — | $ | — | ||||||||||
— | — | $ | — | — | 6,666 | (4) | $ | 17,132 | ||||||||||
— | — | $ | — | — | 13,333 | (4) | $ | 34,266 | ||||||||||
— | — | $ | — | — | 20,000 | (4) | $ | 51,400 | ||||||||||
— | — | $ | — | — | 26,667 | (4) | $ | 68,543 | ||||||||||
Robert D. Short III, Ph.D. | 1,037,899 | (2) | — | $ | 4.20 | 7/24/2017 | — | $ | — | |||||||||
72,590 | (2) | — | $ | 1.15 | 4/2/2019 | — | $ | — | ||||||||||
35,000 | (2) | — | $ | 5.48 | 2/23/2020 | — | $ | — | ||||||||||
40,000 | (2) | — | $ | 23.62 | 05/12/2021 | — | $ | — | ||||||||||
18,333 | (3) | 1,667 | $ | 24.75 | 04/13/2022 | — | $ | — | ||||||||||
12,500 | (3) | 7,500 | $ | 23.72 | 6/06/2023 | — | $ | — | ||||||||||
7,083 | (3) | 12,917 | $ | 15.40 | 7/08/2024 | — | $ | — | ||||||||||
2,917 | (3) | 17,083 | $ | 5.41 | 5/20/2025 | — | $ | — | ||||||||||
— | — | $ | — | — | 3,334 | (4) | $ | 8,568 | ||||||||||
— | — | $ | — | — | 6,667 | (4) | $ | 17,134 | ||||||||||
— | — | $ | — | — | 10,000 | (4) | $ | 25,700 | ||||||||||
— | — | $ | — | — | 13,333 | (4) | $ | 34,266 | ||||||||||
Richard H. Nance | 45,833 | (3) | 4,167 | $ | 23.84 | 4/5/2022 | — | $ | — | |||||||||
2,500 | (3) | 1,500 | $ | 23.72 | 6/5/2023 | — | $ | — | ||||||||||
1,417 | (3) | 2,583 | $ | 15.40 | 7/08/2024 | — | $ | — | ||||||||||
583 | (3) | 3,417 | $ | 5.41 | 5/20/2025 | — | $ | — | ||||||||||
— | — | $ | — | — | 1,333 | (4) | $ | 3,426 | ||||||||||
— | — | $ | — | — | 2,000 | (4) | $ | 5,140 | ||||||||||
— | — | $ | — | — | 2,667 | (4) | $ | 6,854 |
| | Option Awards | | | Stock Awards | |||||||||||||
Name | | | # of Securities Underlying Unexercised Options Exercisable | | | # of Securities Underlying Unexercised Options Unexercisable | | | Option Exercise Price | | | Option Expiration Date | | | # of Shares or Units of Stock That Have Not Vested | | | Market Value of Shares or Units of Stock That Have Not Vested |
Kendall Larsen(1) | | | 50,000(2) | | | — | | | $23.62 | | | 5/13/2021 | | | — | | | $— |
| | 40,000(2) | | | — | | | $24.75 | | | 4/13/2022 | | | — | | | $— | |
| | 40,000(2) | | | — | | | $23.72 | | | 6/6/2023 | | | — | | | $— | |
| | 40,000(2) | | | — | | | $15.40 | | | 7/8/2024 | | | — | | | $— | |
| | 40,000(2) | | | — | | | $5.41 | | | 5/20/2025 | | | — | | | $— | |
| | 40,000(3) | | | — | | | $4.74 | | | 5/23/2026 | | | — | | | $— | |
| | 35,000(3) | | | 5,000 | | | $3.85 | | | 6/2/2027 | | | — | | | $— | |
| | 155,833(3) | | | 64,167 | | | $3.55 | | | 2/16/2028 | | | — | | | $— | |
| | 25,833(3) | | | 14,167 | | | $3.20 | | | 5/31/2028 | | | — | | | $— | |
| | 15,833(3) | | | 24,167 | | | $6.11 | | | 5/30/2029 | | | — | | | $— | |
| | 6,563(3) | | | 28,437 | | | $5.63 | | | 3/18/2030 | | | — | | | $— | |
| | 5,000(3) | | | 35,000 | | | $6.92 | | | 6/2/2030 | | | — | | | $— | |
| | — | | | — | | | $— | | | — | | | 6,666(4) | | | $33,597 | |
| | — | | | — | | | $— | | | — | | | 13,333(4) | | | $67,198 | |
| | — | | | — | | | $— | | | — | | | 20,000(4) | | | $100,800 | |
| | — | | | — | | | $— | | | — | | | 26,667(4) | | | $134,402 | |
Robert D. Short III, Ph.D. | | | 40,000(2) | | | — | | | $23.62 | | | 5/13/2021 | | | — | | | $— |
| | 20,000(2) | | | — | | | $24.75 | | | 4/13/2022 | | | — | | | $— | |
| | 20,000(2) | | | — | | | $23.72 | | | 6/6/2023 | | | — | | | $— | |
| | 20,000(2) | | | — | | | $15.40 | | | 7/8/2024 | | | — | | | $— | |
| | 20,000(2) | | | — | | | $5.41 | | | 5/20/2025 | | | — | | | $— | |
| | 20,000(3) | | | — | | | $4.74 | | | 5/23/2026 | | | — | | | $— | |
| | 17,500(3) | | | 2,500 | | | $3.85 | | | 6/2/2027 | | | — | | | $— | |
| | 796,250(3) | | | 183,750 | | | $4.15 | | | 9/14/2027 | | | — | | | $— | |
| | 97,500(5) | | | 22,500 | | | $3.55 | | | 2/16/2028 | | | — | | | $— | |
| | 12,917(3) | | | 7,083 | | | $3.20 | | | 5/31/2028 | | | — | | | $— | |
| | 7,917(3) | | | 12,083 | | | $6.11 | | | 5/30/2029 | | | — | | | $— | |
| | 6,562(2) | | | 28,437 | | | $5.63 | | | 3/18/2030 | | | — | | | $— | |
| | 2,500(2) | | | 17,500 | | | $6.92 | | | 6/2/2030 | | | — | | | $— | |
| | — | | | — | | | $— | | | — | | | 3,334(4) | | | $16,803 | |
| | — | | | — | | | $— | | | — | | | 6,667(4) | | | $33,602 | |
| | — | | | — | | | $— | | | — | | | 10,000(4) | | | $50,400 | |
| | — | | | — | | | $— | | | — | | | 13,333(4) | | | $67,198 | |
Richard H. Nance | | | 50,000(2) | | | — | | | $23.84 | | | 4/5/2022 | | | — | | | $— |
| | 4,000(2) | | | — | | | $23.72 | | | 6/6/2023 | | | — | | | $— | |
| | 4,000(2) | | | — | | | $15.40 | | | 7/8/2024 | | | — | | | $— | |
| | 4,000(2) | | | — | | | $5.41 | | | 5/20/2025 | | | — | | | $— | |
| | 4,000(3) | | | — | | | $4.74 | | | 5/23/2026 | | | — | | | $— | |
| | 5,250(3) | | | 750 | | | $3.85 | | | 6/2/2027 | | | — | | | $— | |
| | 6,458(3) | | | 3,542 | | | $3.20 | | | 5/31/2028 | | | — | | | $— | |
| | 3,958(3) | | | 6,042 | | | $6.11 | | | 5/30/2029 | | | — | | | $— | |
| | 1,250(3) | | | 8,750 | | | $6.92 | | | 6/2/2030 | | | — | | | $— | |
| | — | | | — | | | $— | | | — | | | 1,000(4) | | | $5,040 | |
| | — | | | — | | | $— | | | — | | | 3,332(4) | | | $16,793 | |
| | — | | | — | | | $— | | | — | | | 4,999(4) | | | $25,195 | |
| | — | | | — | | | $— | | | — | | | 6,666(4) | | | $33,597 |
(1) | This table does not include options or |
(2) | The shares subject to this option are fully vested and exercisable as of |
(3) | The shares subject to the option vest and become exercisable in 48 equal monthly installments beginning on the |
(4) | The |
(5) | The shares subject to this option vest and become exercisable as follows: 12,500 of the total number of shares subject to the option are vested and exercisable on the grant date. 1/43 of the remaining number of shares subject to the option shall vest and become exercisable on each monthly anniversary thereafter. |
(6) | The shares subject to this option were vested and exercisable as of December 31, 2020. |
33
The following table presents information regarding the vesting of stock awards during fiscal 2015. NoneControl
Stock Awards | ||||||
Name | Number of Shares Acquired on Vesting | Value Realized on Vesting (1) | ||||
Kendall Larsen(2) | 20,001 | $ | 106,005 | |||
Robert D. Short III, Ph.D. | 9,999 | $ | 52,995 | |||
Richard Nance | 1,334 | $ | 5,996 |
34
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that our executive officers and directors, and ten percent stockholders topersons who own more than 10% of our common stock, file reports of ownership and changes inof ownership with the SEC. The same personsSuch directors, executive officers and 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
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 Kathleen Larsen, Dustan Sheehan, Joshua Sheehan, and Corby Hoback were approved by the compensation committee. Compensation amounts above reflect the aggregate grant date fair value of the stock options computed in accordance with FASB ASC Topic 718. The values of the option grants and stock awards include the value of unvested shares. There can be no assurance that these amounts will ever be realized. For information on the valuation assumptions used in valuing these stock option awards, refer to Note 7 titled “Stock-Based Compensation” in the Note to the Financial Statements contained in the Company’s Annual Report on Form 10-K for fiscal 2015.
Company.
35
officer of the Company. Corby Hoback is currently
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 reportAnnual Report on Form 10-K for fiscal 2015.
2020.
36
Sincerely, Kathleen Larsen Corporate Secretary |
37
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.
DRIVING DIRECTIONS TO ANNUAL MEETING
Hard Rock Hotel & Casino – South Lake Tahoe
50 Highway 50
Stateline, Nevada 89449
(844) 588-7625
Driving Directions
From Sacramento (Route #1 Hwy-50):
From Sacramento or San Francisco (Route #2 - I-80)
From Reno
38
1. | Purposes of the Plan. The purposes of this Plan are: |
2. | Definitions. As used herein, the following definitions will apply: |
39
3. | Stock Subject to the Plan. |
4. | Administration of the Plan. |
5. | Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units may be granted to Service Providers. Incentive Stock Options may be granted only to Employees of the Company or any Parent or Subsidiary. |
6. | Stock Options. |
7. | Restricted Stock. |
8. | Restricted Stock Units. |
9. | Stock Appreciation Rights. |
10. | Performance Units and Performance Shares. |
11. | Performance-Based Compensation Under Code Section 162(m). |
12. | Limitations. |
13. | Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of (i) any military leave of absence, sick leave of absence, or other leave of absence approved by the Company, provided that such leave is not for a period of more than ninety (90) days unless reemployment upon expiration of such leave is guaranteed by contract, statute, or Company policy, or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary or other Affiliate. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option. |
14. | Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. |
15. | Adjustments; Dissolution or Liquidation; Merger or Change in Control. |
16. | Tax. |
17. | No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws. |
18. | Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant. |
19. | Term of Plan. Subject to Section 20 of the Plan, the Plan will become effective upon its approval by the Company’s stockholders. It will continue in effect for a term of ten (10) years from the date it was initially adopted by the Board, unless terminated earlier under Section 20 of the Plan. |
20. | Amendment and Termination of the Plan. |
21. | Conditions Upon Issuance of Shares. |
22. | Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares under any state, federal or foreign law or under the rules and regulations of the Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the Company’s counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority, registration, qualification or rule compliance will not have been obtained. |
23. | Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. |
24. | Forfeiture Events. The Administrator may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, fraud, breach of a fiduciary duty, restatement of financial statements as a result of fraud or willful errors or omissions, termination of employment for cause, violation of material Company and/or Subsidiary policies, breach of non-competition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Subsidiaries. The Administrator may also require the application of this Section with respect to any Award previously granted to a Participant even without any specified terms being included in any applicable Award Agreement to the extent required under Applicable Laws. |