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VirnetX Holding Corporation 308 Dorla Zephyr Cove, NV 89448 www.virnetx.com April 28, 2023 | | |
To the Stockholders of VirnetX Holding Corporation:
1. | To elect Kendall Larsen and Gary W. Feiner as our Class I 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, 2023; |
3. | To approve, on a non-binding advisory basis, the compensation paid to our named executive officers; |
4. | To hold an advisory vote on the frequency of holding future advisory votes on the compensation paid to our named executive officers; |
5. | To approve the Company’s Amended and Restated 2013 Equity Incentive Plan and the reservation of shares thereunder; and |
6. | 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, 201624, 2023 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.
Your vote is important. Whether or not you plan to attend
| YOUR VOTE IS IMPORTANT TO US. | |
| WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD OR VOTING INSTRUCTION CARD AS INSTRUCTED OR VOTE BY TELEPHONE OR USING THE INTERNET AS INSTRUCTED ON THE PROXY CARD OR VOTING INSTRUCTION CARD. | |
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15, 2023 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 2, 20162, 2016,15, 2023, VirnetX Holding Corporation will hold its 20162023 Annual Meeting of Stockholders (the “Annual Meeting”) at 9:10:00 a.m. Pacific Time. We refer to the 2023 Annual Meeting of Stockholders, together with any postponements, adjournments or other delays thereof, as the Annual Meeting. How you may attend the Annual Meeting and vote depends on whether you are an objecting or non-objecting beneficial owner or whether you are a registered stockholder; if your status is unclear, please email info@virnetx.com no later than Wednesday, June 14, 2023, at 11:59 p.m. Eastern Time to confirm.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 Kendall Larsen and Gary W. Feiner as our Class I 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, 2023; 3. To approve, on a non-binding advisory basis, the compensation paid to our named executive officers; 4. To hold an advisory vote on the frequency of holding future advisory votes on the compensation paid to our named executive officers; 5. To approve the Company’s Amended and Restated 2013 Equity Incentive Plan and the reservation of shares thereunder; and 6. 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, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 15, 201631, 2023 (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, 201624, 2023 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 55,147,30971,428,253 shares of common stock issued and outstanding. Stockholders of record as of April 14, 2016the Record Date may vote at the Annual Meeting.
Kathleen Larsen Corporate Secretary Zephyr Cove, Nevada | ||
Palo Alto, CaliforniaApril 19, 2016
28, 2023
| YOUR VOTE IS | |
| WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD OR VOTING INSTRUCTION CARD AS INSTRUCTED OR VOTE BY TELEPHONE OR USING THE INTERNET AS INSTRUCTED ON THE PROXY CARD OR VOTING INSTRUCTION CARD. | |
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section titled “Annual Meeting Instructions.” 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.20162023 Annual Meeting of Stockholders to be held on Thursday, June 2, 201615, 2023 at 9:10:00 a.m. Pacific Time, and at any postponement or adjournment thereof (the “Annual Meeting”). TheFor instructions on how to attend the Annual Meeting, will be held atplease see the Hard Rock Hotel & Casino – South Lake Tahoe, 50 Highway 50, Stateline, Nevada 89449.14, 201624, 2023 (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, 2016.28, 2023. These proxy solicitation materials combined with the Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2022 (the “Annual Report”), including financial statements, were first made available online, on or about April 19, 2016.28, 2023. Our principal executive offices are located at 308 Dorla Ct.,Court, Zephyr Cove, Nevada 89448, and our telephone number is (775) 548-1785. We maintain a website at 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, 2016.15, 2023. 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 28, 2023. 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: | The Annual Meeting will be a completely virtual meeting of stockholders, which we believe provides the opportunity for participation by a broader group of stockholders while reducing the environmental impact and the costs associated with in-person meetings. |
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 broker, bank or other nominee, who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you follow your broker’s procedures for obtainingobtain a legal proxy.proxy from your broker, bank or other nominee. If you request a printed copy of the proxy materials by mail, your broker, bank or other nominee will provide a voting instruction card for you to use.
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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, 2023; |
3. | An advisory vote on the compensation paid to our named executive officers; |
4. | An advisory vote on the frequency of future advisory votes on the compensation of our named executive officers; |
5. | Approval of the Company’s Amended and Restated 2013 Equity Incentive Plan and the reservation of shares thereunder; and |
6. | Any other business that may properly come before the Annual Meeting. |
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, 2023; |
3. | FOR the approval of the compensation of our named executive officers; |
4. | FOR a three-year frequency of advisory votes on the compensation of our named executive officers; and |
5. | FOR the approval of the Company’s Amended and Restated 2013 Equity Incentive Plan and the reservation of shares thereunder. |
Q: | How do I vote? |
A: | You may either vote |
14, 2023.
nominee.
Q: |
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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, and you sign and return your proxy card with no further instructions, 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, 2023; |
3. | FOR the approval of the compensation paid to our named executive officers; |
4. | FOR a three-year frequency of advisory votes on the compensation of our named executive officers; and |
5. | FOR the approval of the Company’s Amended and Restated 2013 Equity Incentive Plan and the reservation of shares thereunder. |
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: |
Q: | How are votes counted? |
A: | For Proposal I |
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If a quorum is present, theThe director nominee receiving the highest number of votes in personcast by the shares present (including virtually) or by proxy and entitled to vote at the Annual Meeting on this matter will be elected to the Board.
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 |
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. Proposal IIRatification of our independent registered public accounting firm (Proposal II) contained in this Proxy Statement is considered a routine matter. However, ProposalProposals I, isIII, IV and V are considered a non-routine matter.
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 from us 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
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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 theour 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 |
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 a Current Report on Form 8-K to be filed with the SEC within four business days after the final voting results are known. 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 |
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 16, 2024 and no later than March 4, 2017.
17, 2024.
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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 20172024 Annual Meeting of Stockholders and the stockholder will not be permitted to present the proposal to the stockholders for a vote at our 20172024 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, |
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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.
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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 | | | | | | | | | | | |||||
Kendall Larsen | | | 65 | | | I | | | 2023 | | | President, Chief Executive Officer and Chairman of the Board of Directors | | | 2007 |
Gary W. Feiner | | | 60 | | | I | | | 2023 | | | Director | | | 2014 |
Continuing Directors | | | | | | | | | | | |||||
Thomas M. O’Brien | | | 56 | | | II | | | 2024 | | | Director | | | 2007 |
Robert D. Short III, Ph.D. | | | 71 | | | II | | | 2024 | | | Chief Scientist and Director | | | 2010 |
Michael F. Angelo | | | 63 | | | III | | | 2025 | | | Director | | | 2007 |
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.
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 held9
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.
TABLE OF CONTENTSCorporate Governance
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. Throughout the year, our Board and each committee spend a portion of their time reviewing and discussing these specific risk topics.Directorsdirectors 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:include but are not limited to:10
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.
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Corporate Governance Guidelines and Code of Ethics
We have adopted rules for director
subcategory.
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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 2022 | | | 7 | | | 6 | | | 4 |
Our nominating and governance committee met four times during fiscal 2015.
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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.
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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 inwww.ir.virnetx.com under the “Highlights” link“Investors” tab 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).
Name(1) | | | Fees Earned or Paid in Cash | | | Stock Awards(2) | | | Option Awards(2) | | | Total |
Michael F. Angelo | | | $71,600 | | | $10,166 | | | $10,625 | | | $92,391 |
Gary W. Feiner | | | $62,700 | | | $10,166 | | | $10,625 | | | $83,491 |
Thomas M. O’Brien | | | $69,850 | | | $10,166 | | | $10,625 | | | $90,641 |
(1) | This table includes the compensation of only non-employee directors. For compensation of Mr. Larsen and Dr. Short, please see “Executive Compensation and Other Matters” of this Proxy Statement. |
(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. The Company calculates the fair value of RSUs based on the fair market value of the Company’s common stock on the grant date. 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 6 titled “Stock-Based Compensation” in the Notes to the Financial Statements contained in the Company’s Annual Report on Form 10-K for 2022. |
Name | | | Aggregate Number of Shares Underlying Outstanding Options | | | Number of Shares Underlying Unvested Stock Awards |
Michael F. Angelo | | | 125,000 | | | 8,333 |
Gary W. Feiner | | | 130,000 | | | 8,333 |
Thomas M. O’Brien | | | 125,000 | | | 8,333 |
Name and Address of Beneficial Owner | | | Amount and Nature of Beneficial Ownership(1) | | | Percent of Class |
5% or Greater Stockholders: | | | | | ||
Kendall Larsen | | | 8,450,636(2) | | | 11.83% |
Directors and Named Executive Officers: | | | | | ||
Kendall Larsen | | | 8,450,636(2) | | | 11.83% |
Robert D. Short III, Ph.D. | | | 1,525,471(3) | | | 2.14% |
Thomas M. O’Brien | | | 292,494(4) | | | * |
Michael F. Angelo | | | 219,559(5) | | | * |
Gary W. Feiner | | | 175,831(6) | | | * |
Katherine Allanson | | | 56,040(7) | | | * |
All directors and current executive officers as a group (6 persons): | | | 10,720,031(8) | | | 15.01% |
(*) | 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 that are exercisable, convertible or to which a holder has a right to acquire within 60 days of March 31, 2023 are deemed outstanding for purposes of computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. The indication herein that shares are beneficially owned is not an admission on the part of the listed stockholder that he, she or it is or will be a direct or indirect beneficial owner of those shares. |
(2) | Includes (i) 1,146,269 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 31, 2023, of which, 523,258 are held by Kathleen Larsen, (ii) 300,000 shares held of record by K2 Investment Fund, LLC, of which Mr. Larsen and Mrs. Larsen are the sole member-managers, and (iii) 634,655 shares of common stock held by Mrs. Larsen. Excludes 613,530 shares obtained prior to 2021 and held by the Kathleen Sheehan Revocable Trust dated 2/5/2009 and shares, stock options, and RSUs held by Mr. and Mrs. Larsen’s adult children. Mr. Larsen disclaims beneficial ownership of the excluded shares. |
(3) | Includes (i) 1,323,255 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 31, 2023 and (ii) 179,083 shares of common stock owned by the Short Revocable Living Trust. |
(4) | Includes 112,500 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 31, 2023. |
(5) | Includes 112,500 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 31, 2023. |
(6) | Includes 117,500 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 31, 2023. |
(7) | Includes 56,040 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 31, 2023. |
(8) | Includes the following securities beneficially held by our current directors and executive officers as a group: 2,868,064 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 31, 2023. |
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) | ||||
| | 2022 | | | 2021 | |
Audit Fees | | | $200,450 | | | $196,850 |
Audit-Related Fees | | | $17,200 | | | $34,230 |
Tax Fees | | | $— | | | $— |
All Other Fees | | | $— | | | $— |
Total Fees | | | $217,650 | | | $231,080 |
(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.
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Messrs. Angelo, O’Brien and Feiner compriseentitled to vote at the Annual Meeting on this matter. Abstentions will have the same effect as a vote “against” the ratification of Farber Hass Hurley LLP as our compensationindependent registered public accounting firm.
Scope of Authority
Our compensation committee’s responsibilities include the following:
Except with respect to determining the Chief Executive Officer’s compensation, the compensation committee may delegate its authority to a subcommittee thereof and, to the extent permitted by applicable law, the compensation committee may delegate to officers or appropriate supervisory personnel the authority to grant stock awards to non-executive, non-director employees.
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, P.O. Box 439, Zephyr Cove, Nevada 89448 (Attention: Investor 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 the Board upon the recommendation of our compensation committee.
Compensation Committee Interlocks and Insider Participation
During fiscal 2015, Messrs. Angelo, O’Brien and Feiner served as members of our compensation committee. No member of our compensation committee was an officer or employee of VirnetX during fiscal 2015. In addition, no member of our compensation committee or executive officer of the Company served as a member of the Board or compensation committee of any entity that has an executive officer serving as a member of the Board or compensation committee.
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Any and our compensation committee value the opinions of our stockholders who wish to communicate withand will consider the Board, a committeeoutcome of the vote when making future compensation decisions for our named executive officers.
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 the Board, our non-management directors as a group, orleast once every six years, how frequently we should seek an individual Board member. The independent directors of the Board review and approve the stockholders’ communications process periodically to ensure effective communication with stockholders.
Directors who are also our employees are not paid an annual retainer, nor are they compensated for servingadvisory vote on the Board. Information regarding compensation otherwise received byof our directors, who are also named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules, such as Proposal III beginning on page 23 of this Proxy Statement. By voting on this Proposal IV, stockholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years.
Ourmost appropriate alternative for the Company, and therefore the Board recommends that you vote for a three-year interval for an advisory vote on the executive 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:
Stock Compensation of Non-Employee Directors
Consistent with our compensation policy, we provide the following stock compensation for non-employee directors:
○ | the removal from the Prior Plan of certain provisions relating to performance-based compensation in light of amendments to Section 162(m) of the Code; |
○ | the Amended and Restated 2013 Plan explicitly includes the ability to impose restrictions as to the timing and manner of resales or transfers of shares of our common stock issued under the Amended and Restated 2013 Plan and to require that a participant’s rights with respect to an award will be subject to reduction or recoupment upon the occurrence of certain specified events; |
○ | upon exercise of a stock appreciation right settled in our common stock, the gross number of shares covered by the portion of the exercised award will cease to be available under the Amended and Restated 2013 Plan; |
○ | shares used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award and shares repurchased by the Company using option exercise proceeds will not become available for future grant or sale under the Amended and Restated 2013 Plan; |
○ | the Amended and Restated 2013 Plan provides that upon the occurrence of certain events, the Administrator (as defined below) may make other reasonable adjustments to the number and class of shares of stock that may be delivered under the Amended and Restated 2013 Plan, and the number, class and/or price of shares of stock covered by outstanding awards or other reasonable adjustments; and |
○ | the Amended and Restated 2013 Plan will continue in effect until it is terminated by the Administrator. |
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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 fiscal 2015:
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 |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our Common Stock as of April 1, 2016 by:
This table lists applicable percentage ownership based on 54,889,855 shares of Common Stock outstandinggroup, current directors who are not executive officers, as of April 1, 2016. Securities that a person hasgroup, and all employees, including all current officers who are not executive officers, as a right to acquire pursuant to SEC rules within 60 days of April 1, 2016 are deemed to be beneficially owned bygroup: (i) the persons holding these securities for the purpose of computing theaggregate number of shares owned by, and percentage ownership of that person, but are not treated as outstanding forour common stock subject to options granted under the purposePrior Plan during the last fiscal year, (ii) the weighted average per share exercise price of computing any other person’ssuch options, (iii) the aggregate number of shares owned or ownership percentage.
Except as indicated by footnote,restricted stock units granted under the Prior Plan and subject to applicable community property laws, each person identified in(iv) the table possesses, to the bestgrant date value of our knowledge, sole voting and investment power with respect to all capitalthese restricted 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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ELECTION OF CLASS III DIRECTOR
The Board consists of five members. In accordance with our certificate of incorporation, the Board is divided into three classes with staggered three-year terms. At the Annual Meeting, one Class III director will be elected for a three-year term to serve until the 2019 annual meeting and until his or her respective successor is qualified and elected, or until his or her earlier death, resignation or removal.
The nominating and governance committeeapproval of the Board recommended,Amended and Restated 2013 Plan will require the Board approved, Michael F. Angelo as the Class III director nominee for election to the Board at the Annual Meeting. If elected, Mr. Angelo will serve asaffirmative vote of a director until our annual meeting in 2019, and until his successor is qualified and elected or until his earlier death, resignation or removal. Mr. Angelo is a current director of the Company. Please see “Nominee for Class III Director” of this Proxy Statement for information concerning Mr. Angelo.
Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR Mr. Angelo as a Class III director. If the nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for another nominee designated by the Board. We are not aware of any reason that the nominee would be unable or unwilling to serve as a director.
A director is elected by a plurality of the voting powermajority 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.Meeting on this matter. Abstentions and broker non-votes will have nothe same effect onof a vote “against” the outcomeapproval of the vote.
Amended and Restated 2013 Plan.
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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee has selected Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016 and recommends that stockholders vote for ratification of such selection. Although ratification by stockholders is not required by law, the Company has determined that it is desirable to request ratification by the stockholders of this selection. If the stockholders do not ratify the selection of Farber Hass Hurley LLP, the audit committee may reconsider its selection. Notwithstanding its selection or voting results, the audit committee, in its discretion, may appoint new independent registered public accounting firm at any time during the year if the audit committee believes that such a change would be in the best interests of the Company and its stockholders.
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 Annual Meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to questions from stockholders.
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 accounting firm for the fiscal year ending December 31, 2016. Abstentions are treated as shares of Common Stock present in person or represented by proxy and entitled to vote and therefore, will have the effect of a vote “against” the ratification of Farber Hass Hurley LLP as our independent registered public accounting firm. Broker non-votes will have no effect on the outcome of the vote.
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 the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016.
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Name | | | Age | | | Position |
Kendall Larsen | | | | | Chairman of the Board of Directors, President and | |
Robert D. Short III, Ph.D. | | | | | ||
Katherine Allanson | | | 62 | | | Chief Financial Officer |
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.
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.
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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.
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Role of the Chief Executive Officer and Management in Compensation Decisions
Our President and Chief Executive Officer generally attends the compensation committee’s meetings and makes recommendations to the compensation committee regarding the amount and form of the compensation of the other named executive officer and key employees. He is not present for any of the executive sessions or for discussion related to his own compensation.
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 fiscal 2015, the compensation committee engaged Compensia, Inc. (“Compensia”), an independent third-party compensation consulting firm, to:
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 & Rosati, Professional Corporation (“WSGR”). The compensation committee has reviewed our relationship with WSGR pursuant to NYSE MKT and SEC rules and has found no conflict of interest in WSGR continuing to provide advice to the compensation committee.
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.
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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.Ms. Allanson. Generally, the compensation committee wantsseeks to ensure thatprovide compensation for itsour executive officers that is competitive in the market placecompetitive and provides incentives for our executive officers to remain with the Company and to work to movedrive development in the Company toCompany’s business. In setting executive compensation, 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,, current executive equity holdings and retention hold and competitive market data for executives in fiscal 2015,similar positions.
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 approveform of the compensation of the Company’sother 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%officers and employees. He is not present for any of the votes present and entitledexecutive sessions or for discussion related 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. his own compensation.
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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 to realign salaries with market levels after taking into account relevant market data, individual responsibilities, performance, and experience.a targetan annual incentive bonus amount for each named executive officer based on a percentage of the executive’s base salary. The targetincentive 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. 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,RSUs, stock appreciation rights, performance units, performance shares and performance bonus awards. In fiscal 2015,2022, we granted both stock options and restricted stock unitsRSUs under our 2013 Equity Incentive Plan to our named executive officers.stock options and RSUs to bestock-based awards 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 grantedstock-based awards in relation to other elements of the individual executive’s total compensation and relative to comparable companies. We expect to continue to use stock options and RSUsstock-based awards as a long-term incentive vehicle potentially in combination with equity award types, because we believe that stock options and RSUs:27anythe 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 RSUsawards is tied directly to our stock price performance over time and declines if our price declines;performance;
Named Executive Officers’ Compensation Decisions for Fiscal 2015
2022
2021.
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 2022 | | | Targeted Cash Incentive Opportunity for 2022(1) | | | Actual Cash Incentive Paid for 2022(2) | | | Annual Incentive Bonus 2022(3) | | | Number of Shares Underlying Stock Option Grants for 2022(4) | | | Number of Shares Underlying Stock Awards for 2022(4) | | | All Other Compensation |
Kendall Larsen President & Chairman, Chief Executive Officer | | | $759,487 | | | 75% | | | 75% | | | $569,615 | | | 90,000 | | | 26,668 | | | $58,422(5) |
Robert D. Short III, Ph.D. Chief Scientist and Director | | | $483,224 | | | 75% | | | 75% | | | $362,418 | | | 45,000 | | | 13,336 | | | — |
Katherine Allanson Chief Financial Officer | | | $300,900 | | | 75% | | | 75% | | | $225,675 | | | — | | | — | | | — |
(1) | The target bonus level for cash incentive opportunities |
(2) | The actual bonus level for cash incentive opportunities |
(3) |
(4) | Stock option grants and stock awards |
(5) | Reflects a payment of $58,422 for accrued, but unused vacation in 2022. |
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Mr. Nance has significant public company experience, and
In January 2016,November 2022, the compensation committee reviewed the Company’s performance in fiscal 20152022 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%Ms. Allanson 75% of their fiscal 2015respective 2022 base salary respectively, in light of the Company’s overall performance for 2022. 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 20152022 annual incentive bonus payments paid to Mr. Larsen, Dr. Short and Mr. NanceMs. Allanson were $206,342, $175,080$569,615, $362,418 and $26,545,$225,675, respectively.
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 the Company granted. Based on this review, the Company determined that the Company’s equity compensation grant date fair value in fiscal 2015 was at the 30th percentile of our Peer Group from the Compensation Assessment for Mr. Larsen, Dr. Short and Mr. Nance, but was below the 25th percentile on a percent of company granted basis.
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(4) | | | Number of Shares Underlying Stock Award(3) | | | Stock Award Grant Date Fair Value(4) |
Kendall Larsen | | | Chief Executive Officer, President and Chairman | | | 6/7/2022 | | | 90,000 | | | $99,000 | | | | | ||
| 6/7/2022 | | | | | | | 26,668 | | | $39,735 | |||||||
Robert D. Short III, Ph.D. | | | Chief Scientist | | | 6/7/2022 | | | 45,000 | | | $49,500 | | | | | ||
| | | | 6/7/2022 | | | | | | | 13,336 | | | $19,870 | ||||
Katherine Allanson | | | Chief Financial Officer | | | — | | | — | | | — | | | — | | | — |
(1) | Subject to the continued service of the named executive officer, |
(2) |
(3) | Subject to the continued service of the named executive officer, the |
(4) | The |
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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.
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Respectfully submitted by the members of the compensation committee of the Board of Directors:
Gary Feiner (Chair)
Michael F. Angelo
Thomas M. O’Brien
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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 | | | 2022 | | | $759,487 | | | $569,615 | | | $39,735 | | | $99,000 | | | $58,422(3) | | | $1,526,259 |
| 2021 | | | $730,276 | | | $365,138 | | | $122,402 | | | $327,275 | | | $56,175(4) | | | $1,601,266 | ||
| 2020 | | | $702,189 | | | $1,033,028(5) | | | $184,536 | | | $362,035 | | | $797,617(6) | | | $3,079,405 | ||
Robert D. Short III, Ph.D. Chief Scientist | | | 2022 | | | $483,224 | | | $362,418 | | | $19,870 | | | $49,500 | | | $— | | | $915,012 |
| 2021 | | | $464,639 | | | $232,319 | | | $61,198 | | | $220,480 | | | $— | | | $978,636 | ||
| 2020 | | | $446,768 | | | $657,265(7) | | | $92,264 | | | $256,215 | | | $1,368,334(8) | | | $2,820,846 | ||
Katherine Allanson Chief Financial Officer | | | 2022 | | | $300,900 | | | $225,675 | | | $— | | | $— | | | $— | | | $526,575 |
| 2021 | | | $98,333(9) | | | $44,250 | | | $— | | | $370,800 | | | $— | | | $513,383 |
(1) | Actual salary earned during |
(2) |
2015 Grants of Plan-Based Awards
The following table shows all plan-based awards granted to the named executive officers during fiscal 2015. The equity awards identified in the table below are also reported in the “Outstanding Equity Awards at 2015 Fiscal Year-End” table below.
Name | Grant Date | Name of Plan | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards ($/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 |
(3) | Includes payment of $58,422 for accrued, but unused vacation in 2022. |
(4) | Includes payment of $56,175 for accrued, but unused vacation in 2021. |
(5) | Reflects (i) a special bonus payment of $506,386, approved by the Board in March 2020 (the “March Special Bonus”), and (ii) an annual incentive bonus payment of $526,642 for 2020. |
(6) | Reflects (i) an adjustment payment of $691,666 related to the 2020 Dividend (defined below) and (ii) payment of $51,937 and $54,014 in 2020 for accrued, but unused vacation in 2019 and 2020, respectively. Mr. Larsen also 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. In May 2020, the Board declared a special cash dividend to shareholders of record as of the close of business on May 18, 2020 of $1.00 per share of common stock, payable on May 26, 2020 (the “2020 Dividend”). For additional information relating to the 2020 Dividend, please see “Fiscal 2020 Dividend” in the 2021 proxy statement. |
(7) | Reflects (i) a March Special Bonus payment of $322,189 and (ii) an annual incentive bonus payment of $335,076 for 2020. |
(8) | Reflects an adjustment payment of $1,368,334 related to the 2020 Dividend. Dr. Short also 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) | Ms. Allanson’s initial base salary was $295,000, but because she joined us in September 2021, her compensation for 2021 was pro-rated to $98,333. |
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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) | | | 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(2) | | | — | | | $4.74 | | | 5/23/2026 | | | — | | | $— | |
| | 40,000(2) | | | — | | | $3.85 | | | 6/2/2027 | | | — | | | $— | |
| | 220,000(2) | | | — | | | $3.55 | | | 2/16/2028 | | | — | | | $— | |
| | 40,000(2) | | | — | | | $3.20 | | | 5/31/2028 | | | — | | | $— | |
| | 35,833(3) | | | 4,167 | | | $6.11 | | | 5/30/2029 | | | — | | | $— | |
| | 24,063(3) | | | 10,937 | | | $5.63 | | | 3/18/2030 | | | — | | | $— | |
| | 25,000(3) | | | 15,000 | | | $6.92 | | | 6/2/2030 | | | — | | | $— | |
| | 15,000(3) | | | 25,000 | | | $4.59 | | | 6/14/2031 | | | — | | | $— | |
| | 20,625(3) | | | 34,375 | | | $4.59 | | | 6/14/2031 | | | — | | | $— | |
| | 11,250(3) | | | 78,750 | | | $1.49 | | | 6/7/2032 | | | — | | | $— | |
| | — | | | — | | | — | | | — | | | 6,666(4) | | | $8,665.80 | |
| | — | | | — | | | — | | | — | | | 13,333(4) | | | $17,332.90 | |
| | — | | | — | | | — | | | — | | | 20,000(4) | | | $26,000.00 | |
| | — | | | — | | | — | | | — | | | 26,668(4) | | | $34,668.40 | |
Robert D. Short III, Ph.D. | | | 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(2) | | | — | | | $4.74 | | | 5/23/2026 | | | — | | | $— | |
| | 20,000(2) | | | — | | | $3.85 | | | 6/2/2027 | | | — | | | $— | |
| | 980,000(2) | | | — | | | $4.15 | | | 9/14/2027 | | | — | | | $— | |
| | 120,000(2) | | | — | | | $3.55 | | | 2/16/2028 | | | — | | | $— | |
| | 20,000(2) | | | — | | | $3.20 | | | 5/31/2028 | | | — | | | $— | |
| | 17,917(3) | | | 2,083 | | | $6.11 | | | 5/30/2029 | | | — | | | $— | |
| | 24,063(3) | | | 10,937 | | | $5.63 | | | 3/18/2030 | | | — | | | $— | |
| | 12,500(3) | | | 7,500 | | | $6.92 | | | 6/2/2030 | | | — | | | $— | |
| | 7,500(3) | | | 12,500 | | | $4.59 | | | 6/14/2031 | | | — | | | $— | |
| | 16,500(3) | | | 27,500 | | | $4.59 | | | 6/14/2031 | | | — | | | $— | |
| | 5,625(3) | | | 39,375 | | | $1.49 | | | 6/7/2032 | | | — | | | $— | |
| | — | | | — | | | — | | | — | | | 3,334(4) | | | $4,334.20 | |
| | — | | | — | | | — | | | — | | | 6,667(4) | | | $8,667.10 | |
| | — | | | — | | | — | | | — | | | 10,000(4) | | | $13,000.00 | |
| | — | | | — | | | — | | | — | | | 13,336(4) | | | $17,336.80 | |
Katherine Allanson | | | 5,000(5) | | | 5,000 | | | $5.18 | | | 12/18/30 | | | — | | | $— |
| | 37,500(5) | | | 82,500(5) | | | $4.12 | | | 9/15/31 | | | — | | | $— |
(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) | 25% of the shares subject to this option vest and become exercisable on the one-year anniversary of the grant date, and the remaining vest in 36 equal installments on the one-month anniversary of the grant date, subject to the optionee’s continued status as a service provider of the Company on each date. |
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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 |
Name | | | Option Awards | | | Stock Awards | ||||||
| Number of Shares Acquired on Exercise | | | Value Realized on Exercise(1) | | | Number of Shares Acquired on Vesting | | | Value Realized on Vesting(2) | ||
Kendall Larsen | | | 168,229 | | | — | | | 66,667 | | | $86,667 |
Robert D. Short III, Ph.D. | | | 99,895 | | | — | | | 33,336 | | | $43,338 |
Katherine Allanson | | | 87,500 | | | — | | | — | | | — |
(1) |
(2) |
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Year | | | Summary Compensation Table Total for PEO(1) | | | Compensation Actually Paid to PEO(4) | | | Average Summary Compensation Table for Non- PEO NEOs(1) | | | Average Compensation Actually Paid to Non-PEO NEOs(4) | | | Total Shareholder Return of Fixed $100 Investment(2) | | | Net Income (Loss)(3) |
2022 | | | $1,526,260 | | | $1,269,156 | | | $720,794 | | | $580,325 | | | $25.70 | | | $(36,260,000) |
2021 | | | $1,601,266 | | | $1,171,563 | | | $834,374 | | | $440,926 | | | $51.59 | | | $(42,921,000) |
(1) | PEO for 2022 and 2021: Kendall Larsen. |
(2) | Total Shareholder Return (“TSR”) is cumulative for the measurement periods beginning on December 31, 2020 and ending on December 31, 2021 and 2022, calculated in accordance with Item 210(e) of Regulation S-K. |
(3) | Net Income (Loss) for each year as set forth in our Consolidated Statements of Operations in our Annual Report on Form 10-K for each applicable year. |
(4) | The following table sets forth a reconciliation of the total compensation reflected in the summary compensation table to the compensation actually paid to the PEO and non-PEO NEOs: |
| | 2022 | | | 2021 | |||||||
Adjustments | | | PEO | | | Average Non-PEO NEOs | | | PEO | | | Average Non-PEO NEOs |
Total Compensation from Summary Compensation Table | | | $1,526,260 | | | $720,794 | | | $1,601,266 | | | $834,375 |
Less: Current year stock and option award grants in Summary Compensation Table | | | $(138,735) | | | $(34,685) | | | $(449,677) | | | $(358,763) |
Add fair value of unvested awards granted in current year | | | $105,780 | | | $26,444 | | | $202,002 | | | $151,796 |
Change in fair value of unvested awards granted in prior years | | | $(147,751) | | | $(93,108) | | | $(260,746) | | | $(104,967) |
Change in fair value of awards vesting in current year, granted in prior years | | | $(86,557) | | | $(41,660) | | | $59,765 | | | $(93,884) |
Add: fair value of awards granted in and vested in current year | | | $10,159 | | | $2,540 | | | $18,953 | | | $12,369 |
| | $1,269,156 | | | $580,325 | | | $1,171,563 | | | $440,926 |
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.
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 2015, Dustan Sheehan received an aggregate of $81,864 in the form of salary and bonus, $20,000 in the form of option grants, and $18,032 in the form of stock awards. During fiscal year 2015, Joshua Sheehan received an aggregate of $76,558 in the form of salary and bonus, $20,000 in the form of option grants and $18,032 in the form of stock awards. The foregoing compensation amounts reflect the aggregate grant date fair value of the stock options computed in accordance with FASB ASC Topic 718.
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.
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.
2022.
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Sincerely, Kathleen Larsen Corporate Secretary |
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See below for driving directions.
DRIVING DIRECTIONS TO ANNUAL MEETING
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From Sacramento or San Francisco (Route #2 - I-80)
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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. | Limitations. |
7. | Stock Options. |
8. | Restricted Stock. |
9. | Restricted Stock Units. |
10. | Stock Appreciation Rights. |
11. | Performance Units and Performance Shares. |
12. | 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. |
13. | Transferability of Awards. Unless determined otherwise by the Administrator (and subject to the provisions of Section 6 that provides that the Administrator cannot institute an Exchange Program), 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. |
14. | Adjustments; Dissolution or Liquidation; Merger or Change in Control. |
15. | Tax. |
16. | 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. |
17. | 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. |
18. | Term of Plan. Subject to Section 19 of the Plan, the Plan will become effective upon its approval by the Company’s stockholders at the 2023 Annual Meeting of Stockholders. The Plan will continue in effect until terminated under Section 19 of the Plan, but no Options that qualify as Incentive Stock Options may be granted after ten (10) years from the Restatement Date. |
19. | Amendment and Termination of the Plan. |
20. | Conditions Upon Issuance of Shares. |
21. | 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. |
22. | Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the Restatement Date. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. |
23. | 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. |