APPROVAL OF A PROPOSED AMENDMENT TO
VIRNETX’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors has unanimously adopted resolutions approving and recommending to the stockholders for their approval a proposed Charter Amendment that would, at the discretion of the Board of Directors, effect a reverse stock split of all of the shares of common stock outstanding or held in treasury, whereby each twenty shares would be combined into one share of common stock. VirnetX’s authorized number of shares of common stock would remain at 100,000,000.
Our directors are appointedThe par value per share of common stock would remain unchanged at $0.0001 per share after the reverse stock split. Please see the table below under the heading “Principal Effects of the Reverse Stock Split” for an illustration of the effects of this proposed Charter Amendment (which is referred to overseein this proxy statement as the actions and results“reverse stock split”).
The text of our management. They were selectedthe proposed form of certificate of amendment to the Charter to effect the reverse stock split is attached to this proxy statement as Appendix A. The effectiveness or abandonment of such Charter Amendment will be determined by the Board of Directors.
The Board of Directors has recommended that the proposed Charter Amendment be presented to stockholders for their educational background, professional experience, knowledgeapproval. Upon receiving stockholder approval of our business, integrity, professional reputation, independence, wisdom and abilitythe proposed Charter Amendment, the Board of Directors will have the sole discretion to representelect, as it determines to be in the best interests of our stockholders. Their responsibilities include but are not limited to:
providing general oversightVirnetX and its stockholders, whether to effect the reverse stock split. As described in greater detail below, the reverse stock split is proposed to be effected to increase the price of the business;common stock to, among other things, meet the $1.00 minimum closing price requirement for continued listing on NYSE.
approving corporate strategy;
approving major management initiatives;
providing oversightIf the Board of legal and ethical conduct;
overseeing our managementDirectors determines to effect the reverse stock split by causing the certificate of cybersecurity and technology risks;
overseeing our managementamendment to the Charter to be filed with the Secretary of significant business risks;
selecting, compensating, and evaluating director nominees;
evaluating Board processes and performance; and
reviewing and implementing recommendations and reportsState of the committeesState of Delaware, the Charter would be amended accordingly. Approval of the Board.
reverse stock split will authorize the Board
Leadership Structure Theof Directors in its discretion to effectuate the reverse stock split. As noted, the Board of Directors will have the discretion to abandon the reverse stock split if it no longer believes it to be in the best interests of VirnetX and its stockholders, including if the Board of Directors determines that the Company’s Chief Executive Officerreverse stock split will not impact VirnetX’s ability to meet the continued listing requirements of NYSE, if such objective is best situated to serve as Chairmanno longer necessary or desirable, or for any other reason in the business judgment and discretion of the Board because he isof Directors. VirnetX currently expects that the director most familiarBoard of Directors will cause VirnetX to effect the reverse stock split as soon as practicable after the receipt of the requisite stockholder approval.
If the Board of Directors elects to effect the reverse stock split following stockholder approval, the number of issued and outstanding shares of common stock would be reduced in accordance with the Company’s business and industry, and most capablereverse stock split ratio. Except for adjustments that may result from the treatment of effectively identifying strategic priorities and leadingfractional shares, each stockholder will hold the execution of strategy. Independent directors and management have different perspectives and roles in strategy development. The Company’s independent directors bring experience, oversight and expertise from outside the Company and industry, while the Chief Executive Officer brings company-specific experience and expertise. The Board believes that the combined role of Chairmansame percentage of the Board and Chief Executive Officer promotes strategy development and execution, and facilitates information flow between management andoutstanding common stock immediately following the Board, which is essentialreverse stock split as such stockholder held immediately prior to effective governance.
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 corporate governance committee of the Board.reverse stock split. As described in greater detail below, as a result of the Board’s committee systemreverse stock split, stockholders who hold less than twenty shares of common stock will no longer be stockholders of VirnetX on a post-split basis.
The Board of Directors, with input from management, regularly reviews and majorityevaluates VirnetX’s business, strategic plans and prospects, including the performance of independent directors,the common stock, with the goal of maximizing stockholder value. The Board of Directors has reviewed various paths to maximizing stockholder value, including the review and evaluation of a reverse stock split. After review and discussion, 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 believeDirectors determined that our current leadership structurethe proposed reverse stock split is appropriate and enhances the Board’s ability to effectively carry out its roles and responsibilities on behalf of our stockholders.
Management is responsiblenecessary for the day-to-day managementcontinued listing of risks that the Company faces, whilecommon stock on NYSE. In addition, the Board asof Directors believes the reverse stock split will provide a wholenumber of other benefits to VirnetX and through its committees, has responsibility forstockholders, including enhancing the oversightdesirability and marketability of risk management. In its risk oversight role, the Board hascommon stock to the responsibility to satisfy itself thatfinancial community and the risk management processes designed and implemented by management are adequate and functioning, as designed. investing public.
The Board believes that establishingof Directors does not intend for this transaction to be the right “tone atfirst step in a series of plans or proposals of a “going private transaction” within the top” and full and open communication between management andmeaning of Rule 13e-3 of the Board are essential for effective risk management and oversight. Senior management attends Board meetings quarterly and is available to address any questions or concerns raised by the Board on risk management and any other matters. Each quarter, the Board receives presentations from senior management on strategic matters involving our operations. The Board holds strategic planning sessions with senior management to discuss strategies, key challenges, risks, including risks related to product, go-to-market and sales strategies, competitive risks, financial risks, brand and reputation risks, legal, compliance, governance and geo-political risks, operational risks and cybersecurity and technology risks, and opportunities for the Company. Throughout the year, our Board and each committee spend a portionSecurities Exchange Act of their time reviewing and discussing these specific risk topics.
While the Board is ultimately responsible for risk oversight for the Company, our three Board committees assist the Board in fulfilling its oversight responsibilities with respect to certain areas of risk. The audit committee assists1934, as amended (the “Exchange Act”).