DEF 14A 1 nc10023009x1_def14a.htm DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐			Preliminary Proxy Statement
☐			Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒			Definitive Proxy Statement
☐			Definitive Additional Materials
☐			Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-2

VirnetX Holding Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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VirnetX Holding Corporation

308 Dorla Ct.

Zephyr Cove, NV 89448

www.virnetx.com

April 13, 2021

To the Stockholders of VirnetX Holding Corporation:

You are cordially invited to attend the 2021 Annual Meeting of Stockholders and any adjournment or postponement thereof (the “Annual Meeting”) of VirnetX Holding Corporation to be held on Thursday, June 3, 2021, at 10:00 a.m. Pacific Time. Due to the continued public health impact of the COVID-19 pandemic, the Annual Meeting will be held in virtual format this year to support the health and well-being of our stockholders, and to afford the same rights and opportunities to participate as would be available at an in-person meeting. You may attend the Annual Meeting by visiting https://agm.issuerdirect.com/vhc, where you will be able to listen to the meeting live, submit questions limited to the proposals described in the proxy statement accompanying this letter (the “Proxy Statement”), and vote online by entering the control and request identification numbers located on your proxy card. Prior to the Annual Meeting, you may also submit questions relating to the proposals and VirnetX's business generally by emailing ir@virnetx.com by June 1, 2021. We will review these questions and answer as many as possible in the time allotted for the meeting.

At the Annual Meeting, we will ask you to consider the following proposals:

1.	To elect Thomas M. O’Brien and Robert D. Short III, Ph.D. as our Class II directors;

2.	To ratify the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021;

3.	To approve an amendment and restatement to our 2013 Equity Incentive Plan to increase the share reserve by 2,500,000 shares of common stock; and

4.	To transact such other business that may properly come before the Annual Meeting.

Our board of directors has fixed the close of business on April 9, 2021 as the record date for the Annual Meeting (the “Record Date”). Only stockholders of record as of the Record Date may vote at the Annual Meeting. Further information regarding voting rights and matters to be voted upon is presented in the accompanying proxy statement.

On or about April 13, 2021, we expect to mail to our stockholders of record as of the Record Date a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”) online. The Notice provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail. The Proxy Statement and the Annual Report can be accessed directly at www.iproxydirect.com/VHC. All you have to do is enter the control and request identification numbers located on your proxy card.

Your vote is important to us. Whether or not you plan to attend the Annual Meeting, we urge you to submit your vote online, by telephone or by mail.

Sincerely,

Kendall Larsen

Chairman of the Board of Directors

Zephyr Cove, Nevada

April 13, 2021

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 3, 2021

On Thursday, June 3, 2021, VirnetX Holding Corporation will hold its 2021 Annual Meeting of Stockholders at 10:00 a.m. Pacific Time. We refer to the 2021 Annual Meeting of Stockholders, together with any postponements, adjournments or other delays thereof, as the Annual Meeting. You may attend the Annual Meeting by visiting https://agm.issuerdirect.com/vhc, where you will be able to listen to the meeting live, submit questions limited to the proposals described in the Proxy Statement, and vote online by entering the control and request identification numbers located on your proxy card. Prior to the Annual Meeting, you may also submit questions relating to the proposals and VirnetX's business generally by emailing ir@virnetx.com by June 1, 2021. We will review these questions and answer as many as possible in the time allotted for the meeting.

The Annual Meeting will be held for the following purposes:

1.	To elect Thomas M. O’Brien and Robert D. Short III, Ph.D. as our Class II directors;

2.	To ratify the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021;

3.	To approve an amendment and restatement to our 2013 Equity Incentive Plan to increase the share reserve by 2,500,000 shares of common stock; and

4.	To transact such other business that may properly come before the Annual Meeting.

The foregoing items of business are further described in the proxy statement accompanying this notice (the “Proxy Statement”). Included with the Proxy Statement is a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2021 (the “Annual Report”). We encourage you to read the Annual Report. It includes our audited financial statements and information about our operations, markets and products. The close of business on April 9, 2021 has been fixed by our board of directors as the record date for the determination of stockholders entitled to notice of, and to vote at, our Annual Meeting (the “Record Date”). As of the Record Date, there were 71,058,570 shares of common stock issued and outstanding. Stockholders of record as of April 9, 2021 may vote at the Annual Meeting.

Your vote is important to us. Whether or not you plan to attend the 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. Returning the proxy card, voting online or voting by telephone will ensure your representation at the meeting, but does not deprive you of your right to attend the meeting and vote your shares. The Proxy Statement explains more about the proxy voting process. Please read it carefully. We look forward to your attendance at the Annual Meeting.

Kathleen Larsen

Corporate Secretary

Zephyr Cove, Nevada

April 13, 2021

Our Proxy Statement, Proxy Card and Annual Report for the year ended December 31, 2020 are available at www.iproxydirect.com/VHC.

	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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			Page
PROXY STATEMENT			1
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING			1
IMPORTANT ADDITIONAL VOTING INFORMATION FOR THE ANNUAL MEETING			7
Broker Voting			7
Your Participation in Voting the Shares You Own Is Important			7
BOARD OF DIRECTORS			8
Director Nominees and Continuing Directors			8
Director Nominees			8
Continuing Directors			9
Corporate Governance			10
Composition of the Board			11
Board and Committee Meetings and Annual Meeting Attendance			11
Committees of the Board			12
Nominating and Corporate Governance Committee Matters			12
Audit Committee Matters			14
Compensation Committee Matters			15
Communications with the Board			16
Director Compensation			16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			19
PROPOSAL I: ELECTION OF CLASS II DIRECTORS			20
Nominees			20
Vote Required			20
PROPOSAL II: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			21
Vote Required			21
PROPOSAL III: APPROVAL OF THE AMENDED 2013 PLAN			22
Amended 2013 Plan			22
Why We Are Seeking Approval of the Amended 2013 Plan			22
Description of the Amended 2013 Plan			23
Summary of U.S. Federal Income Tax Consequences			29
Number of Awards Granted to Employees, Consultants, and Directors			31
Vote Required			31
EXECUTIVE OFFICERS			32
EXECUTIVE COMPENSATION AND OTHER MATTERS			33
Compensation Program Objectives			33
Executive Compensation Process			33
Elements of Executive Compensation			34
Named Executive Officers’ Compensation Decisions for Fiscal 2020			35
Base Salary			36
Bonuses			36
Equity Incentive Compensation			37
Perquisites			37
Severance and Change in Control Arrangements			37
SUMMARY COMPENSATION TABLE			38
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR END			39
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL			40
DELINQUENT SECTION 16(a) REPORTS			40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			40
AUDIT COMMITTEE REPORT			42
OTHER BUSINESS			43
AVAILABILITY OF FORM 10-K			43
ANNUAL MEETING INSTRUCTIONS			44
APPENDIX A — VIRNETX HOLDING CORPORATION 2013 EQUITY INCENTIVE PLAN			A-1

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ANNUAL MEETING OF STOCKHOLDERS

VIRNETX HOLDING CORPORATION

PROXY STATEMENT

The Board of Directors (the “Board”) of VirnetX Holding Corporation (“we,” “us,” the “Company” or “VirnetX”) is providing these proxy materials to you for use in connection with the 2021 Annual Meeting of Stockholders to be held on Thursday, June 3, 2021 at 10:00 a.m. Pacific Time, and at any postponement or adjournment thereof (the “Annual Meeting”). The Annual Meeting will be held virtually and you may attend by visiting https://agm.issuerdirect.com/vhc.

Stockholders of record as of April 9, 2021 (the “Record Date”) are invited to attend the Annual Meeting and are asked to vote on the proposals described in this proxy statement (the “Proxy Statement”).

The Notice of Internet Availability (the “Notice”) will be first mailed to stockholders of record as of the Record Date on or about April 13, 2021. These proxy solicitation materials combined with the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”), including financial statements, were first made available online, on or about April 13, 2021. Our principal executive offices are located at 308 Dorla Ct., Zephyr Cove, Nevada 89448, and our telephone number is (775) 548-1785. We maintain a website at www.virnetx.com. The information on our website is not incorporated by reference in the Proxy Statement.

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS

AND THE ANNUAL MEETING

Q:	Why am I receiving these materials?

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 3, 2021. As a VirnetX stockholder as of the Record Date, you are invited to attend the Annual Meeting and are entitled to and requested to vote on the items of business described in the Proxy Statement.

Q:	Why did I receive a one-page notice in the mail regarding the internet availability of proxy materials this year instead of a full set of proxy materials?

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 how to access our proxy materials is first being mailed on or around April 13, 2021. Instructions on how to access the proxy materials over the internet 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:	What is included in the proxy materials?

A:	The proxy materials include:

•	the Proxy Statement; and

•	the Annual Report, which includes our audited consolidated financial statements.

If you requested printed versions of these materials by mail, these materials also include the proxy card or voting instruction card for the Annual Meeting.

Q:	How can I get electronic access to the proxy materials?

A:	The Notice will provide you with instructions regarding how to:

•	view our proxy materials for the Annual Meeting online; and

•	instruct us to send future proxy materials to you electronically by email.

Choosing to access the proxy materials on the internet or receive future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the

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environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it.

Q:	How may I obtain the Annual Report?

Stockholders may request a free copy of the Annual Report by writing to us at P.O. Box 439, Zephyr Cove, NV 89448 (Attention: Investor Relations). You may also obtain a copy free of charge from our website at www.virnetx.com. You may also obtain a copy of the Annual Report filed with the SEC on March 16, 2021 online at www.sec.gov.

Q:	Who pays for the expenses of soliciting proxies and what are the means of solicitation?

The expenses associated with the Company’s solicitation of proxies for the Annual Meeting are to be paid by the Company. Such solicitation of proxies may be made by means of personal calls to, or telephonic, facsimile or electronic communications with, stockholders or their representatives by our directors, officers and employees, who will not be specially compensated for such services. We may, on request, reimburse brokerage firms and other nominees for their expenses in forwarding proxy materials to beneficial owners.

Q:	How can I attend the Annual Meeting?

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. Stockholders of record and street name stockholders with a legal proxy from their broker, bank or other nominee will be able to attend the Annual Meeting by visiting https://agm.issuerdirect.com/vhc, which will allow such stockholders to submit questions during the meeting and vote shares electronically at the meeting.

We designed the format of the virtual Annual Meeting to ensure that our stockholders are afforded the same rights and opportunities to participate as they would at an in-person meeting and to enhance stockholder access, participation and communication through online tools. The virtual format facilitates stockholder attendance and participation by enabling stockholders to participate fully and equally from any location around the world. During the meeting, you will have the ability to submit questions real-time via the virtual meeting website. Prior to the meeting, you may also submit questions relating to the proposals and VirnetX's business generally by emailing ir@virnetx.com by June 1, 2021. We will review these questions and answer as many as possible in the time allotted for the meeting.

To participate in the Annual Meeting, you will need the control and request identification numbers included on your Notice, proxy card or the instructions that accompanied your proxy materials to attend the Annual Meeting. The Annual Meeting webcast will begin promptly at 10:00 a.m. Pacific Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 9:45 a.m. Pacific Time, and you should allow ample time for the check-in procedures.

Q:	Who is entitled to vote at the Annual Meeting?

Stockholders who our records show owned shares of VirnetX as of the close of business on the Record Date may vote at the Annual Meeting. On the Record Date, we had a total of 71,058,570 shares of common stock outstanding. The stock transfer books will not be closed between the Record Date and the date of the Annual Meeting.

Q:	What is the difference between holding shares as a registered stockholder and as a street name stockholder?

Registered Stockholders. If your shares are registered directly in your name with VirnetX’s transfer agent, you are considered the stockholder of record with respect to those shares, and the Proxy Statement was provided to you directly. As a stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or to vote at the Annual Meeting.

Street Name Stockholders. If your shares are held by a broker, 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

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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 at the Annual Meeting unless you obtain a legal 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.

Q:	What am I voting on?

A:	Our stockholders will vote on the following matters at the Annual Meeting:

1.	Election of Thomas M. O’Brien and Robert D. Short III, Ph.D. as our Class II directors;

2.	Ratification of the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; and

3.	Approval of an amendment and restatement to our 2013 Equity Incentive Plan to increase the share reserve by 2,500,000 shares of common stock.

Q:	How does the Board recommend I vote on these proposals?

A:	The Board recommends a vote:

1.	FOR the election of Thomas M. O’Brien and Robert D. Short III, Ph.D. as our Class II directors;

2.	FOR the ratification of the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; and

3.	FOR the amendment and restatement of the 2013 Equity Incentive Plan.

Q:	How do I vote?

A:	You may either vote “FOR” the nominees to the Board or you may “WITHHOLD” your vote for the nominees to the Board. For each of the other matters to be voted on, you may vote “FOR” or “AGAINST,” or “ABSTAIN” from voting.

Registered Stockholders: Registered stockholders may vote by one of the following methods:

•	At the Annual Meeting. Stockholders who attend the Annual Meeting may vote at the Meeting. Please see “How can I attend the Annual Meeting?” above for further information;

•	By Mail. If printed copies of the proxy materials were mailed to you, you can complete, sign and date the proxy card and return it in the prepaid envelope provided;

•	By Telephone. Stockholders of record as of the Record Date who live in the United States or Canada may submit proxies by following the “Vote by Phone” instructions on their proxy cards or the Notice or by following the voting instructions provided by email or over the internet; or

•	Online. Stockholders of record with internet access may submit proxies via the internet by following the “Vote by Internet” instructions described in the Notice.

Please note that online and telephone voting facilities for registered stockholders will close at 11:59 p.m. Eastern Time on June 2, 2021.

Street Name Stockholders: If your shares are held by a broker, bank or other nominee, you should have received instructions from your broker, bank or other nominee on how to vote or instruct your broker, bank or other nominee to vote your shares. Please follow their instructions carefully. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must request and obtain a legal proxy from your broker, bank or other nominee.

Street name stockholders may generally vote by one of the following methods:

•	By Mail. If printed copies of the proxy materials were mailed to you, you may vote by signing, dating and returning your voting instruction card in the enclosed pre-addressed envelope provided to you;

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•

By Methods Listed on Voting Instruction Card. Please refer to your voting instruction card or other information provided by your bank, broker or other nominee to determine whether you may vote by telephone or electronically on the internet, and follow the instructions on the voting instruction card or other information provided by the record holder; or

•

At the Annual Meeting with a Proxy from the Record Holder. A street name stockholder who wishes to vote at the Annual Meeting will need to obtain a legal proxy from his or her broker, bank or other nominee. Please consult the voting instruction card provided to you by your broker, bank or other nominee to determine how to obtain a legal proxy in order to vote at the Annual Meeting.

Q:	How many votes do I have?

A:	On each matter to be voted upon, you have one vote for each share of common stock you own as of the Record Date. Stockholders may not cumulate votes.

Q:	Will there be any other items of business on the agenda?

We do not know of any business to be considered at the Annual Meeting other than the proposals described in the Proxy Statement. However, if any other business is properly presented at the Annual Meeting pursuant to guidelines described in our bylaws, the accompanying proxy gives discretionary authority to the persons named on the proxy with respect to any other matters that might be brought before the Annual Meeting. Such matters include, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place, including without limitation, for the purpose of soliciting additional proxies.

Q:	If I submit a proxy, how will it be voted?

When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of the Board, as follows:

1.	FOR the election of Thomas M. O’Brien and Robert D. Short III, Ph.D. as our Class II directors;

2.	FOR the ratification of the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; and

3.	FOR the amendment and restatement of the 2013 Equity Incentive Plan.

Q:	Can I change my vote after submitting my proxy?

A:	Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any of the following ways:

•	you may submit another properly completed proxy card with a later date;

•	you may send a written notice that you are revoking your proxy to VirnetX Holding Corporation, P.O. Box 439, Zephyr Cove, Nevada 89448;

•	you may vote again on a later date online or by telephone (only your latest online or telephone proxy submitted prior to the Annual Meeting will be counted); or

•	you may attend the Annual Meeting and vote (attendance at the Annual Meeting will not by itself revoke a previously granted proxy).

If you are a beneficial owner of shares held in street name, you may change your vote:

•	by submitting new voting instructions to your broker, bank or nominee; or

•	if you have obtained a legal proxy from the broker, bank or other nominee that holds your shares giving you the right to vote the shares, by attending the Annual Meeting and voting (attendance at the Annual Meeting will not by itself revoke a previously granted proxy).

Q:	How are votes counted?

A:	For Proposal I - Election of Two Class II Directors, you may vote “FOR” the nominees or your vote may be “WITHHELD” with respect to the nominees. Votes that are withheld will be excluded entirely and will have

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no effect in the election of the director. If you hold your shares in street name, please note that your broker, bank or other nominee may not vote your shares in the election of the director without instructions from you. Thus, if you hold your shares in street name and you do not instruct your broker, bank or other nominee how to vote in the election of the director, no votes will be cast on your behalf, but your proxy will be counted for the purpose of establishing a quorum.

The director nominees receiving the highest number of votes cast 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.

For Proposal II - Ratification of Farber Hass Hurley LLP as our Independent Registered Public Accounting Firm, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain from voting on Proposal II, your shares will be counted as present and entitled to vote for the purpose of establishing a quorum and your abstention will have the same effect as a vote against the proposal. If you hold your shares in street name, your broker, bank or nominee will have discretionary authority to vote on Proposal II if they do not receive instructions from you.

For Proposal III – Approval of the Amended 2013 Plan, you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain from voting on Proposal III, your shares will be counted as present and entitled to vote for the purpose of establishing a quorum, but your abstention will have the same effect as a vote against the proposal. If you hold your shares in street name, your broker, bank or other nominee may not vote your shares on Proposal III without instructions from you. Thus, if you hold your shares in street name and you do not instruct your broker how to vote with regard to Proposal III, no votes will be cast on your behalf, but your proxy will be counted for the purpose of establishing a quorum.

The approval of the amendment and restatement of the 2013 Equity Incentive Plan will require the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting on this matter.

Finally, if you sign and return your proxy card with no further instructions, your shares will be counted as a vote “FOR” both Class II director nominees; “FOR” the ratification of the appointment of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; and “FOR” the amendment and restatement of the 2013 Equity Incentive Plan. In addition, the proxy also delegates discretionary authority to vote with respect to any other business which may properly come before the Annual Meeting or any adjournment or postponement thereof.

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 common stock are represented by stockholders as of the Record Date present at the meeting (including virtually) or by proxy.

Your shares will be counted towards the quorum only if you submit a valid proxy or if you vote at the Annual Meeting. Abstentions will be counted towards the quorum requirement. If there is no quorum, a majority of the votes present at the meeting may adjourn the meeting to another date.

Q:	What effect do abstentions and broker non-votes have on quorum requirements?

A:	Abstentions and broker non-votes are counted as present for establishing a quorum for the transaction of business at the Annual Meeting. A “broker non-vote” occurs when a broker votes on a matter it does not have authority to vote on.

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

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matters. Ratification of our independent registered public accounting firm (Proposal II) contained in this Proxy Statement is considered a routine matter. However, Proposal I and Proposal III are considered non-routine matters.

Brokers do not have discretionary authority to vote on the election of directors (Proposal I) or the approval of the amendment and restatement of the 2013 Plan (Proposal III), so it is very important that you instruct your broker how to vote with respect to these proposals.

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?

In an effort to reduce printing costs and postage fees, we have adopted a practice approved by the SEC called “householding.” Under this practice, stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of the Notice or our proxy materials if a full set is requested, unless one or more of these stockholders notifies us that he or she wishes to continue receiving individual copies. Stockholders who participate in householding will continue to receive separate proxy cards.

If you share an address with another stockholder and received only one Notice or set of proxy materials and would like to request a separate copy of these materials, please: (1) mail your written request to VirnetX Holding Corporation, P.O. Box 439, Zephyr Cove, Nevada 89448 (Attention: Investor Relations), or (2) call our Investor Relations department at (775) 548-1785. Additional copies of the proxy materials will be sent promptly after receipt of your request. Similarly, you may also contact us if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future.

Q:	What does it mean if I receive more than one Notice?

A:	It means that you hold shares in more than one account. To ensure that all your shares are voted, sign, date and return each proxy card.

Q:	Who tabulates the votes and how will I know the results of the voting at the Annual Meeting?

A:	The votes will be tabulated by an independent inspector of election, who will be a representative of Issuer Direct Corporation.

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 an amendment to the Current Report on Form 8-K reporting the preliminary voting results within four business days after the final voting results are available. You may obtain a copy free of charge on our website at 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,

or name of individual director

c/o Corporate Secretary

VirnetX Holding Corporation

P.O. Box 439

Zephyr Cove, Nevada 89448

Our Corporate Secretary will then direct such communications (except for solicitations or other matters unrelated to us) to the relevant director(s).

Q:	Where are your principal executive offices?

A:	Our principal executive offices are located at 308 Dorla Ct., Zephyr Cove, Nevada 89448. Our telephone number is (775) 548-1785.

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Q:	How do I submit a stockholder proposal for the 2022 Annual Meeting of Stockholders?

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 2022 annual meeting of stockholders, stockholder proposals must be received by the Company no later than December 13, 2021 and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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 no earlier than February 3, 2022 and no later than March 5, 2022.

If the date of the stockholder meeting is moved more than 30 days before or 60 days after the anniversary of the 2021 annual meeting and less than 60 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, the Company’s advance notice procedure requires that such proposal including certain information, as described in the Company’s bylaws, must be received by the Company not later than the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Our Bylaws have been publicly filed with the SEC and can be obtained online at www.sec.gov.

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 2022 Annual Meeting of Stockholders and the stockholder will not be permitted to present the proposal to the stockholders for a vote at our 2022 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, Equiniti Trust Company, by telephone at 1-866-877-6270, or by facsimile at 1-866-729-7680, if you have lost your stock certificate or need to change your mailing address.

IMPORTANT ADDITIONAL VOTING INFORMATION FOR THE ANNUAL MEETING

Broker Voting

Stockholders who hold shares of the Company through a broker, bank or other nominee receive proxy materials before each stockholder meeting. Your broker is not permitted to vote on your behalf on Proposal I or Proposal III, unless you follow the instructions provided by your broker. For your vote to be counted, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the Annual Meeting.

Your Participation in Voting the Shares You Own Is Important

Voting your shares is important to ensure that you have a say in the governance of the Company and to fulfill the objectives of the plurality voting standard that we apply in the election of directors. Please review the proxy materials and follow the instructions on the proxy card to vote your shares. We hope you will exercise your rights and fully participate as a stockholder in the Company’s future.

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BOARD OF DIRECTORS

The Board is presently composed of five members: Michael F. Angelo, Gary W. Feiner, Kendall Larsen, Thomas M. O’Brien and Robert D. Short III, Ph.D. Mr. Larsen serves as Chairman of the Board of Directors.

Our Amended and Restated Certificate of Incorporation provides that the directors on our Board shall be divided into three classes, with the classes serving for staggered, three-year terms. Currently, we have two Class I directors, two Class II directors and one Class III director. One class is elected each year at the annual meeting of stockholders. The term of each class of directors expires as follows: Class I at the 2023 annual meeting of stockholders, Class II at the Annual Meeting, and Class III at the 2022 annual meeting of stockholders. Each director shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal.

Director Nominees and Continuing Directors

Set forth below are the names and certain information about the nominees for Class II directors. The names of, and certain information about, the current Class I and Class III directors with unexpired terms are also set forth below. All information is as of March 1, 2021.

Director Nominees

Thomas M. O’Brien

2021

Director

2007

Robert D. Short III, Ph.D.

2021

Chief Technology Officer, Chief Scientist and Director

2010

Continuing Directors

Kendall Larsen

2023

President, Chief Executive Officer and

Chairman of the Board of Directors

2007

Gary W. Feiner

2023

Director

2014

Michael F. Angelo

III

2022

Director

2007

Director Nominees

Class II Directors

Thomas M. O’Brien has been a director since July 5, 2007. He is currently a private investor and founder of private companies engaged in areas such as real estate, youth sports, fitness, and travel. Mr. O’Brien also serves as a director for two nonprofit entities. Until December 31, 2017, he was Chief Executive Officer and President of TravelCenters of America LLC (NASDAQ: TA) since February 2007 and a Managing Director of TA since October 2006. Until December 31, 2017, he was an employee of The RMR Group, Inc. (NASDAQ: RMR) (“RMR”) since May 1996 and served as an Executive Vice President of that company since September 2008, prior to which he served in various roles since May 1996, including holding various positions with public entities related to RMR. From 1988 to 1996, Mr. O’Brien was a senior manager with Arthur Andersen LLP where he served a number of public company clients. Mr. O’Brien graduated cum laude from the University of Pennsylvania, Wharton School of Business, with a B.S. in Economics.

As a former certified public accountant, chief financial officer, chief executive officer, and director of public companies listed on the New York Stock Exchange (“NYSE”) and NASDAQ, Mr. O’Brien brings to the audit committee, of which he is Chairman, and the Board, a deep understanding of complex accounting and finance issues faced by the Company and can provide critical insight into the financial and other reporting requirements of a U.S. public company. In addition, his extensive capital markets experience is an invaluable resource as the Company regularly assesses its capital and liquidity needs.

Robert D. Short III, Ph.D. has been a director since July 9, 2010. He has been the Chief Scientist for the Company since May 2006 and in June 2010, became the Company’s Chief Technical Officer as well. From February 2000 to April 2007, Dr. Short was Assistant Vice President and Division Manager at Science Applications International Corporation, or SAIC, from which we acquired certain patents in 2006. From 1994 to February 2000, he also held various other positions at SAIC. Prior to SAIC, he worked at ARCO Power Technologies, Inc. (Atlantic Richfield Petroleum), Sperry Corporate Technology Center and Sperry Research Center. He has a Ph.D. in Electrical Engineering from Purdue University along with a M.S. in Mathematics and a B.S. in Electrical Engineering from Virginia Tech.

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As co-inventor on the majority of the patents in the Company’s patent portfolio, Dr. Short brings to the Board extraordinary technical knowledge and a deep understanding of the Company’s business, history and organization and the field of information security.

Continuing Directors

Class I Directors

Kendall Larsen has been Chairman of the Board, President and Chief Executive Officer since July 5, 2007 and held the same positions with VirnetX Inc. since its inception in August 2005. Mr. Larsen does not hold director positions with any other reporting or registered investment companies. From April 2003 to July 2005, Mr. Larsen focused on pre-incorporation activities related to VirnetX Inc. From April 2002 to April 2003, Mr. Larsen was a Limited Partner at Osprey Ventures, L.P., a venture fund that makes investments primarily in business and consumer technology companies. From October 2000 to April 2002, he was Senior Vice President and General Manager of the Security Products Division of Phoenix Technologies Ltd., a software and firmware developer, and he has also held senior executive positions over a period of over twenty years at various leading technology companies, including RSA Security, Inc., Xerox Corporation, Rolm/International Business Machines Corporation, Novell, Inc., General Magic, Inc., and Ramp Networks. Mr. Larsen holds a B.S. in Economics from the University of Utah.

With his years of managerial experience, Mr. Larsen brings to the Board demonstrated management ability at senior levels. Mr. Larsen’s day-to-day leadership and intimate knowledge of our business and operations provide the Board with Company-specific experience and expertise. Mr. Larsen’s drive for innovation and excellence position him well to serve as our Chairman, President and Chief Executive Officer.

Gary W. Feiner has been a director since 2014. Mr. Feiner has served as President at Feiner Financial Inc since 1993, an accounting and financial planning services company founded in 1977. Mr. Feiner has a wide breadth of business leadership knowledge covering tax law, audit, corporate planning, securities regulation, and finance. He advises on structuring comprehensive and creative strategies for achieving profitable growth and establishing effective relationships between companies and investment bankers. He is a recognized industry expert with a reputation for a “hands on” client-focused approach. He has provided personalized services in the fields of finance, medicine, law, real estate, education and technology. Mr. Feiner was selected to serve on the Board for his unique qualifications.

Class III Director

Michael F. Angelo, CRISC CISSP CDPSE, has been a director since July 5, 2007. He has been the Chief Security Architect at NetIQ Corporation/Micro Focus Security Products Division, 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 66 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. Mr. Angelo is also an Information Systems Security Association (“ISSA”) Fellow and ISSA Hall of Fame recipient.

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 corporate governance committee.

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Corporate Governance

Role of the Board

Our directors are appointed to oversee the actions and results of our management. They were selected for their educational background, professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom and ability to represent the best interests of our stockholders. Their responsibilities include but are not limited to:

•	providing general oversight of the business;

•	approving corporate strategy;

•	approving major management initiatives;

•	providing oversight of legal and ethical conduct;

•	overseeing our management of significant business risks;

•	selecting, compensating, and evaluating director nominees;

•	evaluating Board processes and performance; and

•	reviewing and implementing recommendations and reports of the committees of the Board.

Board Leadership Structure

The Board believes that the Company’s Chief Executive Officer is best situated to serve as Chairman of the Board because he is the director most familiar with the Company’s business and industry, and most capable of effectively identifying strategic priorities and leading the 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 Chairman of the Board and Chief Executive Officer promotes strategy development and execution, and facilitates information flow between management and the Board, which is essential 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. 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.

Risk Oversight

Management is responsible for the day-to-day management of risks that the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning, as designed. The Board believes that establishing the right “tone at the top” and full and open communication between management and the Board are essential for effective risk management and oversight. Senior management attends 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 and opportunities for the Company.

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 assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. Our compensation committee assists the

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Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The nominating and corporate governance committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.

Risk Assessment of Compensation Policies

The Company notes that:

•	the Company’s annual incentive compensation is based on performance that promotes disciplined progress towards longer-term Company goals;

•	the Company does not offer significant short-term incentives that might drive high-risk investments at the expense of long-term Company value;

•	the Company’s compensation programs are weighted toward offering long-term incentives that reward sustainable performance; and

•	the Company’s compensation awards are established at reasonable and sustainable levels, as determined by a review of the Company’s economic position and prospects, as well as the compensation offered by comparable companies.

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.

Code of Ethics

We have adopted a Code of Ethics for all employees and directors in accordance with the requirements of Item 406 of Regulation S-K and the NYSE Listed Company Manual. A copy of our Code of Ethics is available on our website at 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).

We intend to post on our website any amendment to, or waiver from, a provision of our Code of Ethics within four business days of such amendment or waiver.

Composition of the Board

Mix of Independent Directors and Officer-Directors

The Board has a majority of independent directors and has determined that it is beneficial for us and our stockholders for our Chief Executive Officer and Chief Scientist to also be Board members. Other officers may, from time to time, serve as Board members, but no officer other than the Chief Executive Officer should be expected to be elected to the Board by virtue of his or her office.

Independence Determinations

The Board annually determines the independence of directors based on a review by the directors and the nominating and corporate governance committee. No director is considered independent unless the Board has determined that he or she has no material relationship with the Company, either directly or as a partner, stockholder, or officer of an organization that has a material relationship with the Company.

Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act, and the listing standards of NYSE. Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and the listing standards of NYSE.

We have adopted rules for director independence standards of NYSE corporate governance listing standards and the rules and regulations of the SEC. The Board has determined that Michael F. Angelo, Gary W. Feiner and Thomas M. O’Brien meet the aforementioned independence standards.

Board and Committee Meetings and Annual Meeting Attendance

The Board held a total of nine meetings during the fiscal year ended December 31, 2020, and no director attended fewer than 75% of the total number of meetings of the Board and the committees of which he was a member.

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Since November 6, 2007, the Board has had a standing audit committee, compensation committee and nominating and corporate governance committee. Our audit committee charter, compensation committee charter, and nominating and corporate governance committee charter, each as adopted by the Board, and as may be amended from time to time, are posted on our website at www.virnetx.com in the “Highlights” link in the “Corporate Governance” subcategory under the “Investors” tab.

We encourage, but do not require, the Board members to attend our annual meetings of stockholders. All of our current Board members were in attendance for our 2020 Annual Meeting of Stockholders.

Committees of the Board

The Board has the following standing committees: audit committee, compensation committee and nominating and corporate governance committee. The following table details the membership of each standing committee and the number of meetings of each standing committee conducted during fiscal 2020:

Name of Director	Audit	Compensation	Nominating & Corporate Governance
Michael F. Angelo	M	M	C
Kendall Larsen	—	—	—
Thomas M. O’Brien	C	M	M
Robert D. Short III, Ph.D.	—	—	—
Gary W. Feiner	M	C	M
Number of Meetings in Fiscal 2020	7	8	7

M = Member

C = Chair

Nominating and Corporate Governance Committee Matters

Membership and Independence

Messrs. Angelo, Feiner and O’Brien comprise our nominating and corporate governance committee, or nominating and governance committee, with Mr. Angelo serving as the chairman. The Board has determined that each of Messrs. Angelo, Feiner and O’Brien meets NYSE requirements for independence. Our nominating and corporate governance committee met seven times during fiscal 2020.

Responsibilities

Our nominating and corporate governance committee is responsible for, among other things:

•	assisting the Board in identifying prospective director nominees and recommending to the Board director nominees for each annual meeting of stockholders, vacancy, or newly created director position;

•	providing oversight with respect to corporate governance and ethical conduct;

•	developing and recommending to the Board the Code of Ethics and assessing such Code of Ethics and recommending changes; and

•	delegating such of its authority and responsibilities as it deems proper to members of the nominating and corporate governance committee or a subcommittee thereof.

A more detailed description of our nominating and corporate governance committee’s functions can be found in our nominating and corporate governance committee charter at www.virnetx.com in the “Highlights” link in the “Corporate Governance” subcategory under the “Investors” tab, or by writing to us at VirnetX Holding Corporation, P.O. Box 439, Zephyr Cove, NV 89448 (Attention: Investor Relations).

Stockholder Recommendations and Nominees

The policy of our nominating and corporate governance committee is to consider properly submitted recommendations for candidates to the Board from stockholders. In evaluating such recommendations, our nominating and corporate governance committee seeks to achieve a balance of experience, knowledge, integrity, and

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capability on the Board and to address the membership criteria set forth under “Director Qualifications” below. Any stockholder recommendations for consideration by our nominating and corporate governance committee should include (1) the name, age, business address and residence address of such person, (2) the principal occupation or employment of such person, (3) the class and number of shares of the Company that are beneficially owned by such person, and (4) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including, without limitation, such person’s written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected).

Stockholder recommendations to the Board should be sent to our Corporate Secretary at VirnetX Holding Corporation, P.O. Box 439, Zephyr Cove, Nevada 89448.

In addition, our Bylaws permit stockholders to nominate directors for consideration at an annual meeting of stockholders. For a description of the process for nominating directors in accordance with our Bylaws, see “How do I submit a stockholder proposal for the 2022 Annual Meeting of Stockholders?” of this Proxy Statement and our Bylaws which have been filed with the SEC.

Director Qualifications

Our nominating and corporate governance committee evaluates and recommends candidates for membership on the Board consistent with criteria established by the Board. The Board has not formally established any specific, minimum qualifications that must be met by each candidate for the Board or specific qualities or skills that are necessary for one or more of the members of the Board. However, our nominating and corporate governance committee, when considering a potential candidate, will factor into its determination the following qualities of a candidate, among others: educational background, professional experience, including whether the person is a current or former chief executive officer or chief financial officer of a public company or the head of a division of a large international organization, knowledge of our business, integrity, professional reputation, independence, wisdom, and ability to represent the best interests of our 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.

Identification and Evaluation of Nominees for Directors

Our nominating and corporate governance committee uses a variety of methods for identifying and evaluating nominees for any position on the Board. Our nominating and corporate governance committee regularly assesses the appropriate size and composition of the Board, the needs of the Board, the respective committees of the Board, and the qualifications of candidates in light of these needs. Candidates may come to the attention of the nominating and corporate governance committee through stockholders, management, current members of the Board, or third-party search firms engaged by the nominating and corporate governance committee.

Once the nominating and corporate governance committee has identified a prospective nominee, the nominating and corporate governance committee makes an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on the information provided to the nominating and corporate governance committee concerning the prospective candidate, as well as the nominating and corporate governance committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. If the nominating and corporate governance committee determines, in consultation with other Board members as appropriate, that additional consideration is warranted, it may gather or request the third-party search firm to gather additional information about the prospective nominee’s background and experience. The nominating and corporate governance committee then evaluates the prospective nominee, taking into account whether the prospective nominee is independent within the meaning of the listing standards of NYSE and such other factors as it deems relevant, including the current composition of the Board, the balance of management and independent directors, the need for audit committee or compensation committee expertise, the prospective nominee’s qualifications as discussed above, the diversity of the member’s skills and experience in areas that are relevant to the Company’s businesses and activities, and its evaluations of other prospective nominees. In connection with this evaluation, the nominating and corporate governance committee determines whether to interview the prospective nominee and, if warranted, one or more members of the nominating and corporate governance committee and others, as appropriate, conduct interviews in person or by telephone. After completing this process, the

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nominating and corporate governance committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the nominating and corporate governance committee. The nominating and corporate governance committee follows the same process and uses the same criteria for evaluating candidates proposed by stockholders, members of the Board, and members of management.

The nominating and corporate governance committee considers diversity as one of a number of factors in identifying nominees for director. It does not, however, have a formal policy in this regard. The nominating and corporate governance committee views diversity broadly to include diversity of experience, skills, and viewpoint as well as traditional diversity concepts such as race or gender.

Audit Committee Matters

Membership and Independence

Messrs. Angelo, Feiner and O’Brien comprise our audit committee, with Mr. O’Brien serving as the chairman. The Board has determined that each of Messrs. Angelo, Feiner and O’Brien satisfies the requirements for independence under the rules and regulations of NYSE and the SEC, including the enhanced standards for audit committee members. The Board has also determined that Mr. O’Brien qualifies as an “audit committee financial expert” as defined in the SEC rules and satisfies the financial sophistication requirements of NYSE. Our audit committee met seven times during fiscal 2020.

Responsibilities

Our audit committee is responsible for, among other things:

•	appointment of and approval of compensation for our independent public accounting firm and overseeing its performance and independence;

•	overseeing our accounting and financial reporting processes;

•	overseeing the audits of our financial statements;

•	overseeing the effectiveness of our internal controls over financial reporting; and

•	preparing the audit committee report that the SEC requires in our annual proxy statement.

A more detailed description of our audit committee’s functions can be found in our audit committee charter at 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).

Principal Accountant Fees & Services

The following table sets forth the costs we incurred for services provided by Farber Hass Hurley LLP, our independent registered public accounting firm, which audited our financials for the years ended December 31, 2020 and December 31, 2019.

	Year Ended December 31⁽¹⁾
	2020	2019
Audit Fees	$209,000	$177,785
Audit-Related Fees	$59,530	$35,807
Tax Fees	$—	$—
All Other Fees	$—	$—
Total Fees	$268,530	$213,592

(1)	Reflects the fees approved by the Company and billed or to be billed by Farber Hass Hurley LLP with respect to services performed for the audit and other services for the applicable fiscal year.

Audit Fees. Consists of fees billed for professional services rendered in connection with the audit of our consolidated financial statements, including the audit of internal control over financial reporting, review of the interim consolidated financial statements included in our quarterly reports, and accounting services in connection with securities offerings.

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Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include consultations in connection with financial accounting and reporting standards.

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. We have nothing to report in this line item as we did not engage Farber Hass Hurley LLP to perform tax-related services for the Company.

All Other Fees. We have nothing to report in this line item as we did not engage Farber Hass Hurley LLP to perform services not covered by the preceding three categories.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Our audit committee’s policy is to pre-approve all services provided by our independent registered public accounting firm. For fiscal 2020, our audit committee pre-approved 100% of all services provided by our independent registered public accounting firm. These services include audit services and audit-related services. Our independent registered public accounting firm is required to periodically report to our audit committee regarding the extent of services provided by our independent registered public accounting firm in accordance with this pre-approval policy. Our audit committee may also delegate pre-approval authority to one or more of its members. Such member(s) must report any such pre-approval to our audit committee at the next scheduled meeting.

Compensation Committee Matters

Membership and Independence

Messrs. Angelo, Feiner and O’Brien comprise our compensation committee, with Mr. Feiner serving as the chairman. The Board has determined that each of Messrs. Angelo, Feiner and O’Brien satisfies the requirements for independence under the rules of NYSE including the enhanced standards for compensation committee members, and is a “non-employee director” within the meaning of Section 16 of the Exchange Act. Our compensation committee met eight times during fiscal 2020.

Responsibilities, Processes and Procedures

Our compensation committee’s responsibilities and primary processes for establishing and overseeing executive compensation include, among other things:

•	exclusive authority to determine the amount and form of compensation paid to the Company’s Chief Executive Officer;

•	determining the amount and form of compensation paid to the Company’s executive officers, officers, employees, consultants and advisors;

•	administering our equity incentive plans;

•	engaging, compensating and terminating compensation consultants, legal counsel and such other advisors to assist the compensation committee;

•	reviewing and discussing with management to Company’s proposed disclosure under “Compensation Discussion and Analysis” as set forth in Regulation S-K and recommending to the Board whether such disclosure should be included in the Company’s public filings, as applicable;

•	preparing the compensation committee report that the SEC requires in our annual proxy statement, as applicable;

•	recommending the compensation of non-employee directors to the Board; and

•	making regular reports to the Board with respect to significant actions and determinations made by the compensation committee.

Our Chief Executive Officer generally attends compensation committee meetings and makes recommendations to our compensation committee regarding the amount and form of the compensation of the other executive officers and key employees. He is not present for any of the executive sessions or for any decisions regarding his own compensation.

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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 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).

Compensation Committee Interlocks and Insider Participation

During fiscal 2020, Messrs. Angelo, Feiner and O’Brien served as members of our compensation committee. No member of our compensation committee was an officer or employee of VirnetX during fiscal 2020. 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.

Communications with the Board

Any of our stockholders who wish to communicate with the Board, a committee of the Board, the non-management directors as a group, or any individual member of the Board, may send correspondence to our Corporate Secretary at VirnetX Holding Corporation, P.O. Box 439, Zephyr Cove, Nevada 89448.

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, or an individual Board member. The independent directors of the Board review and approve the stockholders’ communications process periodically to ensure effective communication with stockholders.

Director Compensation

Directors who are also our employees are not compensated for serving on the Board. Information regarding compensation otherwise received by our directors, who are also named executive officers, is provided under the heading “Executive Compensation.”

Our compensation committee periodically reviews director compensation in consultation with its independent compensation consultant, Compensia, Inc., or Compensia. Any recommendations for changes are made to our full Board by our compensation committee. Our compensation committee last reviewed our director compensation program with Compensia in April 2018 and determined that the program remains competitive and did not recommend any changes to the full Board in 2018, 2019, or 2020.

Our amended and restated 2013 Equity Incentive Plan, or the 2013 Plan, which was last approved by our stockholders in 2017, contains maximum limits on the size of the equity awards that can be granted to each of our non-employee directors in any fiscal year. Those maximum limits do not reflect the intended size of any potential grants or a commitment to make any equity award grants to our non-employee directors in the future. These maximum limits provide that no non-employee director may be granted, in any fiscal year, equity awards covering more than 100,000 shares, in the aggregate. Equity awards granted to an individual while he or she was an employee or a consultant, but not a non-employee director, do not count for purposes of these limits.

Cash Compensation of Non-employee Directors

Consistent with our compensation policy, we provide the following cash compensation for non-employee directors:

•	each non-employee director receives an annual cash retainer of $44,000;

•

each non-employee director who serves as a member of our audit committee receives an annual cash retainer of $6,600; each non-employee director who serves as a member of our compensation committee receives an annual cash retainer of $5,500; and each non-employee director who serves as a member of our nominating and corporate governance committee receives an annual cash retainer of $2,200; and

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each non-employee director who serves as a chair of our audit committee receives an annual cash retainer of $18,150; each non-employee director who serves as a chair of our compensation committee receives an annual cash retainer of $9,900; and each non-employee director who serves as a chair of our nominating and corporate governance committees receives an annual cash retainer of $5,500.

We do not pay cash-based meeting fees for Board or committee meetings.

Stock Compensation of Non-Employee Directors

Consistent with our compensation policy, we provide the following stock compensation for non-employee directors:

•

Upon the initial election or appointment to the Board of a new non-employee director, such individual will be granted, under our 2013 Plan, an option to purchase 30,000 shares of our Common Stock with a per-share exercise price equal to the fair market value of that stock on the date of grant and which will vest monthly with respect to 1/36th of the total number of shares subject to the option, conditioned upon continued service as a director; provided that all vesting shall be accelerated such that the shares underlying such option shall be vested and become exercisable in full on the close of business on the day prior to the Company’s third annual meeting of stockholders to take place after the director’s initial election or appointment to the Board; and provided further that these options automatically become fully vested immediately prior to a “change in control” of the Company.

•

each existing non-employee director will be automatically granted, under the 2013 Plan, an option to purchase 12,500 shares of our Common Stock at each year’s annual meeting of stockholders with a per-share exercise price equal to the fair market value of that stock on the date of grant and which will fully vest upon the earlier of (a) the one-year anniversary of such a grant or (b) the close of business on the day prior to the following year’s annual meeting of stockholders, conditioned upon continued service as a director; provided that these options automatically become fully vested immediately prior to a “change in control” of the Company.

•

each existing non-employee director will be automatically granted, under the 2013 Plan, an award for 8,333 restricted stock units (“RSUs”) at each year’s annual meeting of stockholders, which will fully vest upon the earlier of (a) the one-year 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 RSUs 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 non-employee directors for fiscal 2020:

Name⁽¹⁾	Fees Earned or Paid in Cash	Stock Awards⁽²⁾	Option Awards⁽²⁾	All Other Compensation⁽³⁾	Total
Michael F. Angelo	$61,600	$55,414	$61,388	$133,333	$311,735
Gary W. Feiner	$62,700	$55,414	$61,388	$100,833	$280,335
Thomas M. O’Brien	$69,850	$55,414	$61,388	$123,333	$309,985

(1)	This table includes the compensation of only non-employee directors. For compensation of Mr. Larsen and Dr. Short, please see “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. 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 fiscal 2020.

(3)	The amounts in this column reflect the Adjustment Payments paid to our non-employee directors related to the 2020 Dividend. For additional information relating to such payments, please see “Fiscal 2020 Dividend” below.

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The following table lists all outstanding equity awards held by our non-employee directors as of December 31, 2020:

Name	Aggregate Number of Shares Underlying Outstanding Options	Number of Securities Underlying Unvested Stock Awards
Michael F. Angelo	127,500	8,333
Gary W. Feiner	105,000	8,333
Thomas M. O’Brien	127,500	8,333

Fiscal 2020 Dividend

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”).

In connection with the 2020 Dividend, the Board further approved equitable adjustments to all outstanding stock options and RSUs (the “Awards”) granted under the 2007 Plan and the 2013 Plan (together, the “Plans”) in its capacity as plan administrator under each Plan. Such adjustments resulted in a cash payment of $1.00 per share to each holder of outstanding Awards as of May 18, 2020 (the “Adjustment Payments”). Such Adjustment Payments resulted in payments to (1) each of Mr. Angelo, Mr. Feiner, and Mr. O’Brien of approximately $133,333, $100,833, and $123,333 respectively, and (2) each of Mr. Larsen, Dr. Short, and Mr. Nance of approximately $691,666, $1,368,334, and $107,996, respectively.

The timing and amounts of future dividends, if any, will depend on market conditions, corporate business and financial considerations and regulatory requirements.

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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 March 1, 2021 by:

•	all persons known to us, based on statements filed by such persons pursuant to Section 13(d) or 13(g) of the Exchange Act or in statements made to us, to be the beneficial owners of more than 5% of our Common Stock;

•	each director and nominee for director;

•	each of our named executive officers as listed in the “Summary Compensation Table” of this Proxy Statement; and

•	all current directors and executive officers as a group.

This table lists applicable percentage ownership based on 71,058,570 shares of Common Stock outstanding as of March 1, 2021. Securities that a person has a right to acquire pursuant to SEC rules within 60 days of March 1, 2021 are deemed to be beneficially owned by the persons holding these securities for the purpose of computing the number of shares owned by, and percentage ownership of, that person, but are not treated as outstanding for the purpose of computing any other person’s number of shares owned or ownership percentage.

Except as indicated by footnote, and subject to applicable community property laws, each person identified in the table possesses, to the best of our knowledge, sole voting and investment power with respect to all capital stock shown to be held by that person. The address of each executive officer and director, unless indicated otherwise, is c/o VirnetX Holding Corporation, P.O. Box 439, Zephyr Cove, NV, 89448.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership⁽¹⁾	Percent of Class
5% or Greater Stockholders:
Kendall Larsen	8,066,362⁽²⁾	11.20%
BlackRock, Inc.	4,698,827⁽³⁾	6.61%
The Vanguard Group	3,677,296⁽⁴⁾	5.18%
Directors and Named Executive Officers:
Kendall Larsen	8,066,362⁽²⁾	11.20%
Robert D. Short III, Ph.D.	1,361,476⁽⁵⁾	1.88%
Thomas M. O’Brien	278,328⁽⁶⁾	*
Michael F. Angelo	205,393⁽⁷⁾	*
Gary W. Feiner	134,165⁽⁸⁾	*
Richard H. Nance	101,831⁽⁹⁾	*
All directors and current executive officers as a group (6 persons):	10,147,555⁽¹⁰⁾	13.79%

(*)	Less than 1%.

(1)

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Securities which are exercisable, convertible or to which a holder has a right to acquire within 60 days of March 1, 2021 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) 963,123 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 1, 2021, of which, 434,480 are held by Mrs. 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) 486,861 shares of common stock held by Mrs. Larsen. Excludes 613,530 shares obtained prior to fiscal 2020 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)	The information is based solely on a Schedule 13G filed by this stockholder on February 1, 2021. The stockholder’s business address is 55 East 52nd Street, New York, NY 10055. This stockholder has sole dispositive power over all such shares.

(4)

The information is based solely on a Schedule 13G filed by this stockholder on February 10, 2021. The stockholder’s business address is 100 Vanguard Blvd., Malvern, PA 19355. This stockholder has sole dispositive power with respect to 3,497,266 of such shares and shared dispositive power over 180,030 of such shares.

(5)	Includes (i) 1,182,393 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 1, 2021 and (ii) 179,083 shares of common stock owned by the Short Revocable Living Trust.

(6)	Includes 115,000 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 1, 2021.

(7)	Includes 115,000 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 1, 2021.

(8)	Includes 92,500 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 1, 2021.

(9)	Includes 85,915 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 1, 2021.

(10)	Includes the following securities beneficially held by our current directors and executive officers as a group: 2,553,931 shares of common stock issuable upon exercise of options presently exercisable or exercisable within 60 days of March 1, 2021.

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PROPOSAL I:

ELECTION OF CLASS II DIRECTORS

The Board consists of five members. In accordance with our Amended and Restated Certificate of Incorporation, the Board is divided into three classes with staggered three-year terms. At the Annual Meeting, two Class II directors will be elected for three-year terms to serve until the 2024 annual meeting and until their respective successor is qualified and elected, or until their earlier death, resignation or removal.

Nominees

The nominating and corporate governance committee of the Board recommended, and the Board approved, Thomas M. O’Brien and Robert D. Short III, Ph.D. as the Class II director nominees for election to the Board at the Annual Meeting. If elected, Messrs. O’Brien and Short will serve as directors until our annual meeting in 2024, and until their respective successors are qualified and elected or until their earlier death, resignation or removal. Messrs. O’Brien and Short are both current directors of the Company. Please see “Director Nominees” of this Proxy Statement for information concerning Messrs. O’Brien and Short.

Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR Messrs. O’Brien and Short as Class II directors. If the nominees are unable or decline to serve as a director at the time of the Annual Meeting, the proxies will be voted for another nominee(s) designated by the Board. We are not aware of any reason that the nominees would be unable or unwilling to serve as a director.

Vote Required

The two director nominees receiving the highest number of votes cast 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. Votes that are withheld will be excluded entirely and will have no effect in the election of directors.

The Board of Directors unanimously recommends that stockholders vote “FOR” the election of Thomas M. O’Brien and Robert D. Short III, Ph.D. as Class II Directors.

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PROPOSAL II:

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, 2021 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 a 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 appropriate questions from stockholders.

Vote Required

Ratification of Farber Hass Hurley LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021 will require the affirmative vote of a majority of the shares present (including virtually) or by proxy and entitled 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 independent registered public accounting firm.

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, 2021.

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PROPOSAL III:

APPROVAL OF THE AMENDED 2013 PLAN

Our stockholders are being asked to approve an amendment and restatement of the 2013 Plan. In particular, we are seeking stockholder to approve an increase in the shares reserved under the 2013 Plan by 2,500,000 shares (the “Additional Shares”) from 5,000,000 shares to 7,500,000 shares (as amended, the “Amended 2013 Plan”).

If our stockholders approve this proposal, the addition of the Additional Shares to the Amended 2013 Plan will not result in the immediate grant of those Additional Shares to employees and other service providers. Instead, approval of this proposal will allow us the flexibility to issue competitive equity awards over approximately the next three years so that we can continue to incentivize and retain the key contributors to our business, as described in greater detail in this proposal.

Amended 2013 Plan

Our Board has approved the Amended 2013 Plan, subject to the approval of our stockholders at the 2021 Annual Meeting of Stockholders and recommends that our stockholders to approve the Amended 2013 Plan.

If our stockholders approve the Amended 2013 Plan, it will replace the 2013 Plan and it will become effective as of the date of stockholder approval.

If our stockholders do not approve this proposal, the 2013 Plan will not be replaced with the Amended 2013 Plan. In that case, the existing shares reserved for issuance under the 2013 Plan may be insufficient to achieve our personnel incentive, recruiting and retention objectives following this year, making it more difficult to meet these objectives. This ultimately may undermine our success as a company.

Our executive officers and directors have an interest in the approval of the Amended 2013 Plan because they are eligible for awards under the 2013 Plan, as proposed to be amended by the Amended 2013 Plan.

A copy of the Amended 2013 Plan is included as Appendix A to this Proxy Statement. No amendments other than the proposed Authorized Shares amendment have been made to the 2013 Plan.

Why We Are Seeking Approval of the Amended 2013 Plan

The 2013 Plan Will No Longer Have Enough Shares Available for Grant

As of March 1, 2021, a total of 545,210 shares were available for issuance under the 2013 Plan. Under our current forecasts and taking into account our historical forfeiture rates, we expect that the number of shares still available for grant under the 2013 Plan will not provide a sufficient number of shares to meet the needs of our equity compensation program this year. As a result, we may not be able to issue equity to our employees, directors and consultants in amounts that we believe are necessary to attract, retain and motivate them unless our stockholders approve the Amended 2013 Plan.

This proposal seeks an authorization of an increase of 2,500,000 shares. The number of shares under the Amended 2013 Plan for which we are seeking authorization represents approximately 3.5% of our outstanding shares as of March 1, 2021. The proposed increase of 2,500,000 shares is to the number of shares available for issuance and such shares may be subject to awards as the Board or our compensation committee determines over the next several years. If our stockholders approve this proposal, the addition of these shares to the Amended 2013 Plan will not result in the immediate grant of these shares to employees and other service providers.

In setting the Additional Shares, our compensation committee and our Board considered the following:

•

Historical Grant Practices. The historical amounts of equity awards the Company has granted in the past three years. In fiscal years 2018 through 2020, the Company granted equity awards representing a total of 2,907,488 shares. Our three-year gross average annual “burn rate” is 28%, which is significantly below industry guidelines published by Institutional Shareholder Services. The actual number of shares the Company routinely grants to its employees each fiscal year varies based upon factors such as our headcount, the ratio between full value awards (which generally involve less shares) and options, the number of employees hired each year, our stock price performance and benchmarking against market data (which includes the Company’s peer group for executive compensation) to assist in determining individual grant values and our aggregate equity budget. These factors make exact forecasting of share usage speculative, and thus our Board relied primarily upon the Company’s historical share usage as a reasonable predictor of future needs.

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Forecasted Grant Practices. The Additional Shares, if approved, are projected to provide enough shares for future equity award grants for the next three years. However, future circumstances and business needs may dictate a different result and our proposed increase in the share reserve under the Amended 2013 Plan is designed to give the Company flexibility to address those circumstances or needs as they arise. We have not provided an estimate for forfeitures because we have had nominal forfeited options and RSUs and believe that all outstanding options and RSUs at December 31, 2020, will vest. In the future, we may change this estimate based on actual and expected future forfeiture rates.

•

Awards Outstanding Under Existing Grants. The Company has outstanding, as of March 1, 2021, grants of 5,812,521 stock options, of which 1,266,958 are unvested, and 504,323 unvested restricted stock units. Accordingly, our approximately 6,316,844 outstanding awards (commonly referred to as the “overhang”) represent approximately 9% of our outstanding shares.

Long-Term Equity is a Key Component of our Compensation Philosophy

As described in “Executive Compensation and Other Matters,” we implement and maintain compensation plans that tie a substantial portion of each employee’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. Long-term equity awards are critical vehicle for helping us achieve this objective.

Our Board believes that the Company must offer a competitive equity incentive program if it is to continue to successfully attract and retain the best possible candidates for positions within the Company. Our Board expects that the Additional Shares under our Amended 2013 Plan will be vital in continuing to attract, retain and reward high caliber employees who are essential to our success and to provide incentives to these individuals to promote the success of the Company thereby aligning their interests with the interests of the Company’s stockholders.

The alternative to using equity for retention and incentive purposes would be to significantly increase cash compensation. We do not believe increasing cash compensation to make up for any shortfall in equity awards would be practical or advisable because, as a high-technology company, we believe that equity awards provide a more effective compensation vehicle than cash for attracting, retaining and motivating our employees and that equity awards align employees and stockholder long-term interests with a reduced impact on cash flow.

Description of the Amended 2013 Plan

A description of the 2013 Plan, as amended by the Amended 2013 Plan, is included below. The 2013 Plan as proposed to be amended by this Proposal is otherwise unchanged from the 2013 Plan as previously approved by our Board and stockholders, except for the increase in the total authorized shares thereunder.

The full text of the 2013 Plan was annexed as Appendix A to our 2017 Proxy Statement, filed on April 14, 2017 with the SEC, which is available at the SEC’s website located at www.sec.gov. The Amended 2013 Plan is annexed as Appendix A to this Proxy Statement, a copy of which is also available at the SEC’s website. If approved by our stockholders, the Amended 2013 Plan will be effective on the date of the Annual Meeting, June 3, 2021.

General

The purposes of the Amended 2013 Plan are to attract and retain the best available personnel, to provide incentives to individuals who perform services to the Company, to align the interests of such individuals with the interests of the Company’s stockholders and to promote the success of the Company’s business. These incentives are provided through the grant of an option to purchase common stock of the Company, or stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares, as the Administrator (as defined in the Amended 2013 Plan) may determine.

Authorized Shares

Subject to the adjustment provisions contained in the Amended 2013 Plan, stockholders are being asked to approve 2,500,000 shares of Company Common Stock for issuance under the Amended 2013 Plan so that the maximum shares of Company Common Stock reserved for issuance is 7,500,000, plus any shares subject to awards granted under the 2007 Stock Plan (the “2007 Plan”) that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 2007 Plan that are forfeited to or repurchased

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by the Company, with the shares subject to such awards credited to the share reserve as one share for every one share subject to such award and with the maximum number of shares to be added from the 2007 Plan equal to 3,736,946 shares. The shares may be authorized, but unissued, or reacquired Common Stock.

If any award granted under the Amended 2013 Plan expires or becomes unexercisable without having been exercised in full, or is forfeited to or repurchased by the Company, the expired, unexercised, forfeited or repurchased shares subject to such award will become available for future grant or sale under the Amended 2013 Plan. With respect to the exercise of stock appreciation rights, the net number of shares covered by the portion of the exercised award will cease to be available under the Amended 2013 Plan. If unvested shares of restricted stock, restricted stock units, performance shares or performance units are repurchased by or forfeited to the Company, such shares will become available for future grant under the Amended 2013 Plan. Shares used to pay the tax and/or exercise price of an award will become available for future grant or sale under the Amended 2013 Plan. Payment of cash rather than shares pursuant to an award will not result in reducing the number of shares available for issuance under the Amended 2013 Plan.

Adjustments to Shares Subject to the Amended 2013 Plan

In the event of any dividend or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or other securities of the Company, or other change in the corporate structure affecting the Company’s common stock occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Amended 2013 Plan, will adjust the number and class of shares that may be delivered under the Amended 2013 Plan, and/or the number, class and price of shares of stock subject to outstanding awards, and the award grant limitations discussed below.

Limitations (including Non-Employee Directors Award Limitations)

The Amended 2013 Plan contains annual grant limits intended to satisfy Section 162(m). Specifically, the maximum number of shares and/or dollars which could be issued to any one individual in any fiscal year of the Company pursuant to the Amended 2013 Plan is set forth below:

Award Type			Annual Number of Shares or Dollar Value
Stock Option			1,000,000
Stock Appreciation Right			1,000,000
Restricted Stock			1,000,000
Restricted Stock Units			1,000,000
Performance Shares			1,000,000
Performance Units			Initial Value of $5,000,000

Separately, apart from Section 162(m), the Amended 2013 Plan provides that a non-employee Board member may not receive awards under the Plan covering more than 100,000 number of shares in any calendar year.

The Administrator will adjust the share limitations in this section in the event of any adjustment to the Company’s shares discussed above in the “Adjustment to Shares Subject to the Amended 2013 Plan” section.

Additionally, subject to the terms of the Amended 2013 Plan, the terms of outstanding awards may not be amended to reduce the exercise price of outstanding stock options or stock appreciation rights or cancel outstanding stock options or stock appreciation rights in exchange for cash, other awards or stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original options or stock appreciation rights without stockholder approval.

Administration

The Board has delegated administration of the Amended 2013 Plan to the Board’s compensation committee. The Board and the compensation committee may further delegate administration of the Amended 2013 Plan to any committee of the Board, or a committee of individuals satisfying applicable laws appointed by the Board in accordance with the terms of the Amended 2013 Plan. For purposes of this description of the Amended 2013 Plan, the term “Administrator” will refer to the Board or any committee designated by the Board to administer the

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Amended 2013 Plan. To make grants to certain officers and key employees of the Company, the members of the committee must qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934. In the case of awards intended to qualify for the performance-based compensation exemption under Section 162(m), administration must be by a committee comprised solely of two or more “outside directors” within the meaning of Section 162(m).

Subject to the terms of the Amended 2013 Plan, the Administrator has the sole discretion to select the service providers who will receive awards, to determine the terms and conditions of awards, to modify or amend each award (subject to the repricing restrictions of the Amended 2013 Plan), including to accelerate vesting or waive forfeiture restrictions, and to interpret the provisions of the Amended 2013 Plan and outstanding awards. The Administrator may allow a participant to defer the receipt of payment of cash or delivery of shares that otherwise would be due to such participant. The Administrator may make rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws and may make all other determinations deemed necessary or advisable for administering the Amended 2013 Plan.

Notwithstanding the foregoing, the Administrator cannot institute, without prior stockholder approval, an exchange program whereby the exercise prices of outstanding awards may be reduced, outstanding awards may be surrendered or cancelled in exchange for awards with a higher or lower exercise price, or outstanding awards may be transferred to a third party.

Eligibility

Awards may be granted to service providers of the Company and employees and consultants of any parent or subsidiary corporation of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of March 1, 2021, we had approximately 25 service providers (including 22 employees who are not directors, 2 employee directors, 3 non-employee directors and 1 consultant. While consultants are eligible to participate pursuant to the terms of the Amended 2013 Plan, the Company has not generally made equity grants to its consultants.

Stock Options

Each option granted under the Amended 2013 Plan will be evidenced by a written or electronic agreement between the Company and a participant specifying the number of shares subject to the option and the other terms and conditions of the option, consistent with the requirements of the Amended 2013 Plan.

The exercise price per share of each option may not be less than the fair market value of a share of the Company’s Common Stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a “Ten Percent Stockholder”) must have an exercise price per share equal to at least 110% of the fair market value of a share on the date of grant. The aggregate fair market value of the shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year also may not exceed $100,000. Generally, the fair market value of the Common Stock is the closing sales price of our stock as reported on the NYSE or such other national securities exchange or automated inter-dealer quotation system on which the shares are listed.

The Amended 2013 Plan provides that the Administrator will determine the acceptable form(s) of consideration for exercising an option. An option will be deemed exercised when the Company receives the notice of exercise and full payment for the shares to be exercised, together with applicable tax withholdings.

Options will be exercisable at such times or under such conditions as determined by the Administrator and set forth in the award agreement. The maximum term of an option will be specified in the award agreement, provided that options will have a maximum term of no more than ten (10) years, and provided further that an incentive stock option granted to a Ten Percent Stockholder must have a term not exceeding five (5) years.

The Administrator will determine and specify in each award agreement, and solely in its discretion, the period of post-termination exercise applicable to each option following the participant’s cessation of service with the Company. In the absence of such a determination by the Administrator, the participant generally will be able to exercise his or her option for (i) three (3) months following his or her cessation of service for reasons other than death or cause and (ii) three (3) years following his or her death (with all shares subject to the option becoming fully vested and exercisable); provided, however, that the option immediately will terminate upon a cessation of service for cause.

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In addition, if the participant is terminated for cause, the Company has the option to repurchase at cost any shares previously acquired through the exercise of an option under the Amended 2013 Plan.

Stock Appreciation Rights

A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of Company Common Stock between the date of grant of the award and the date of its exercise. Each stock appreciation right granted under the Amended 2013 Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying the exercise price and the other terms and conditions of the award, consistent with the requirements of the Amended 2013 Plan.

The exercise price per share of each stock appreciation right may not be less than the fair market value of a share on the date of grant. Upon exercise of a stock appreciation right, the holder of the award will be entitled to receive an amount determined by multiplying (i) the difference between the fair market value of a share on the date of exercise over the exercise price by (ii) the number of exercised shares. The Company may pay the appreciation in cash, in shares, or in some combination thereof. The term of a stock appreciation right will be no more than ten (10) years from the date of grant. The terms and conditions relating to the period of post-termination exercise and the Company repurchase rights with respect to options described above also apply to stock appreciation rights.

Restricted Stock Awards

Awards of restricted stock are rights to acquire or purchase shares, which vest in accordance with the terms and conditions established by the Administrator in its sole discretion. Each restricted stock award granted will be evidenced by a written or electronic agreement between the Company and the participant specifying the number of shares subject to the award and the other terms and conditions of the award, consistent with the requirements of the Amended 2013 Plan. Restricted stock awards may be subject to vesting conditions as the Administrator specified, and the shares acquired may not be transferred by the participant until vested. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

Unless otherwise provided by the Administrator, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed prior to the participant’s termination of service. In addition, if the participant is terminated for cause, the Company has the option to repurchase at cost any vested shares previously acquired through an award of restricted stock under the Amended 2013 Plan.

Unless the Administrator provides otherwise, participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions on transferability and forfeitability as the original award. The Administrator may, in its sole discretion, reduce or waive any restrictions and may accelerate the time at which any restrictions will lapse or be removed.

Restricted Stock Units

The Administrator may grant restricted stock units which represent a right to receive shares at a future date as set forth in the participant’s award agreement. Each restricted stock unit granted under the Amended 2013 Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying the number of shares subject to the award and other terms and conditions of the award, consistent with the requirements of the Amended 2013 Plan.

Restricted stock units will result in a payment to a participant only if the performance goals or other vesting criteria the Administrator may establish are achieved or the awards otherwise vest. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

After the grant of a restricted stock unit award, the Administrator, in its sole discretion, may reduce or waive any restrictions or vesting criteria that must be met to receive a payout and may accelerate the time at which any restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units as of the date set forth in the award agreement. The Administrator in its sole discretion may pay earned restricted stock units in cash, shares of the Company’s Common Stock, or a combination of cash and shares.

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Performance Units and Performance Shares

Performance units and performance shares may also be granted under the Amended 2013 Plan. Each award of performance units or shares granted under the Amended 2013 Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying the performance period and other terms and conditions of the award, consistent with the requirements of the Amended 2013 Plan. Performance units and performance shares will result in a payment to a participant only if the performance goals or other vesting criteria the Administrator may establish are achieved or the awards otherwise vest.

Earned performance units and performance shares will be paid, in the sole discretion of the Administrator, in the form of cash, shares (which will have an aggregate fair market value equal to the earned performance units or shares at the close of the applicable performance period), or in a combination thereof. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment or service), or any other basis determined by the Administrator, in its discretion. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

After the grant of a performance unit or performance share, the Administrator, in its sole discretion, may accelerate, reduce or waive any performance objectives or other vesting provisions for such performance units or shares. Performance units will have an initial value established by the Administrator on or before the date of grant. Each performance share will have an initial value equal to the fair market value of a share on the grant date. A participant will forfeit any performance shares or units that are unearned or unvested as of the date set forth in the award agreement.

Performance Goals

The granting and/or vesting of awards of Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units, and other incentives under the Amended 2013 Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) and may provide for a targeted level or levels of achievement (“performance goals”) including: earnings before interest, taxes, depreciation and amortization (EBITDA), earnings before taxes and net earnings, earnings per Share, gross margin, new product development or innovation, net income, operating income, quality, operating margin, return on capital, return on equity, revenue, revenue growth, and total stockholder return. The performance goals may differ from participant to participant and from award to award. Any criteria used may be measured (as applicable), in absolute terms, in combination with another performance goal or goals (for example, as a ratio or matrix), in relative terms (including, but not limited to, results for other periods, passage of time and/or against another company or companies or an index or indices), on a per-share or per-capita basis, against the performance of the Company as a whole or a segment of the Company (including, but not limited to, any combination of the Company and any subsidiary, division, joint venture, affiliate, and/or other segment), and/or on a pre-tax or after-tax basis. Prior to latest date by which would meet the requirements under Section 162(m), the Administrator will determine whether any significant element(s) or item(s) will be included or excluded from the calculation of performance goals with respect to any award recipient. As determined in the discretion of the Administrator latest date by which would meet the requirements under Section 162(m), achievement of performance goals for a particular award may be calculated in accordance with generally accepted accounting principles (“GAAP”), or on a basis other than GAAP.

To the extent necessary to comply with the performance-based compensation provisions of Section 162(m), with respect to any award granted subject to performance goals, and no later than the latest possible date that could be used and still comply with the performance-based compensation provisions of Section 162(m), the Administrator will, in writing: (i) designate one or more participants, who would be considered a “covered employee” within the meaning of Code Section 162(m), to whom an award will be made, (ii) select the performance goals applicable to the performance period, (iii) establish the performance goals, and amounts or methods of computation of the awards which may be earned for the performance period, and (iv) specify the relationship between performance goals and the amounts or methods of computation of such awards, as applicable, to be earned by each participant for such performance period. Following the completion of each performance period, the Administrator will certify in writing whether the applicable performance goals have been achieved for such performance period. In determining the amounts earned by a participant, the Administrator may reduce or eliminate (but not increase) the amount payable

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at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the performance period. A participant will be eligible to receive payment pursuant to an award for a performance period only if the performance goals for such period are achieved.

Transferability of Awards

Unless determined otherwise by the Administrator, awards granted under the Amended 2013 Plan generally are not transferable other than by will or by the laws of descent or distribution, and all rights with respect to an award granted to a participant generally will be available during a participant’s lifetime only to the participant.

Dissolution or Liquidation

In the event of the Company’s proposed dissolution or liquidation, the Administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. An award will terminate immediately prior to consummation of such proposed action to the extent the award has not been previously exercised.

Change in Control

The Amended 2013 Plan provides that, in the event of a merger or a “change in control” (as defined in the Amended 2013 Plan), each award will be treated as the Administrator determines, including that each award be assumed or substantially equivalent awards substituted by the acquiring or succeeding corporation or its affiliate. The Administrator will not be required to treat all outstanding awards the same in the transaction.

If the successor corporation does not assume or substitute for the award, the participant will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock will lapse, and, with respect to restricted stock units, performance shares, and performance units, all performance goals or other vesting criteria will be deemed achieved target levels and all other terms and conditions met. In addition, if an option or stock appreciation right is not assumed or substituted for, the Administrator will notify the participant in writing or electronically that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period.

If the successor corporation assumes or substitutes outstanding awards held by a non-employee director and the non-employee director ceases to be a director prior to or on the closing of the merger or change in control or within twelve months following the merger or change in control, then his or her options and stock appreciation rights will fully vest and become immediately exercisable. In addition, all restrictions on restricted stock, restricted stock units, performance shares, or performance units held by such non-employee director will lapse, and all performance goals or other vesting requirements will be deemed achieved at 100%, and all other terms and conditions met.

Forfeiture Events

The Administrator may specify in an award agreement under the Amended 2013 Plan that a participant’s rights, payments, and benefits with respect to an award will 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 are not 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 our material 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 our business or reputation.

Termination or Amendment

The Amended 2013 Plan will automatically terminate ten (10) years from the date of its original adoption by the Board in 2013, unless terminated at an earlier time by the Board. The Administrator may amend, alter, suspend or terminate the Amended 2013 Plan at any time, provided that no amendment may be made without stockholder approval to the extent approval is necessary or desirable to comply with any applicable laws. No amendment, alteration, suspension or termination may impair the rights of any participant unless mutually agreed otherwise between the participant and the Administrator.

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Summary of U.S. Federal Income Tax Consequences

The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the Amended 2013 Plan as of March 2021. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances.

Incentive Stock Options

An optionee recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. Optionees who neither dispose of their shares within two (2) years following the date the option was granted nor within one (1) year following the exercise of the option normally will recognize a capital gain or loss equal to the difference, if any, between the sale price and the purchase price of the shares. If an optionee satisfies such holding periods upon a sale of the shares, the Company will not be entitled to any deduction for federal income tax purposes. If an optionee disposes of shares within two (2) years after the date of grant or within one (1) year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the shares on the exercise date and the option exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the optionee upon the disqualifying disposition of the shares generally should be deductible by the Company for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

The difference between the option exercise price and the fair market value of the shares on the exercise date is treated as an adjustment in computing the optionee’s alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to optionees subject to the alternative minimum tax.

Nonstatutory Stock Options

Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special U.S. tax status. An optionee generally recognizes no taxable income as the result of the grant of such an option. Upon exercise of a nonstatutory stock option, the optionee normally recognizes ordinary income equal to the amount that the fair market value of the shares on such date exceeds the exercise price. If the optionee is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss. No tax deduction is available to the Company with respect to the grant of a nonstatutory stock option or the sale of the stock acquired pursuant to such grant.

Stock Appreciation Rights

In general, no taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant generally will recognize ordinary income in an amount equal to the fair market value of any shares of our Common Stock received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Restricted Stock Awards

A participant acquiring restricted stock generally will recognize ordinary income equal to the fair market value of the shares on the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The participant may elect, pursuant to Section 83(b) of the Code, to accelerate the ordinary income tax event to the date of acquisition by filing an election with the Internal Revenue

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Service no later than thirty (30) days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss.

Restricted Stock Unit Awards

There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is awarded restricted stock units generally will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected by the Administrator or a participant. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or loss.

Performance Shares and Performance Unit Awards

A participant generally will recognize no income upon the grant of a performance share or a performance unit award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the fair market value of any cash or nonrestricted shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss.

Section 409A

Section 409A of the Code provides certain new requirements for nonstatutory deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the Amended 2013 Plan with a deferral feature will be subject to the requirements of Section 409A of the Code. If an award is subject to and fails to satisfy the requirements of Section 409A of the Code, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. Certain states have enacted laws similar to Section 409A which impose additional taxes, interest and penalties on nonstatutory deferred compensation arrangements. The Company will also have withholding and reporting requirements with respect to such amounts.

Tax Effect for the Company

The Company generally will be entitled to a tax deduction in connection with an award under the Amended 2013 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of compensation paid to our Chief Executive Officer and other “covered employees” as determined under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include (among others) stockholder approval of the Amended 2013 Plan, setting limits on the number of awards that any individual may receive and for awards other than certain stock options, establishing performance criteria that must be met before the award actually will vest or be paid. The Amended 2013 Plan has been designed to permit (but not require) the Administrator to grant awards are intended to qualify as performance-based for purposes of satisfying the conditions of Section 162(m).

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECTS OF FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY WITH RESPECT TO AWARDS UNDER THE AMENDED 2013 PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.

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Number of Awards Granted to Employees, Consultants, and Directors

The number of Awards that an employee, director or consultant may receive under the Amended 2013 Plan is in the discretion of the Administrator and therefore cannot be determined in advance. The following table sets forth for each of our named executive officers, executive officers as a group, non-employee directors, as a group, all employees (other than executive officers, as a group) and all non-employee service providers, as a group (i) the aggregate number of shares of common stock subject to options granted under the 2013 Plan during the last fiscal year, (ii) the average per share exercise price of such options, (iii) the aggregate number of RSUs granted under the 2013 Plan and (iv) the grant date value of these RSUs.

Name of Individual or Group	Number of Options Granted	Per Share Exercise Price	Number of RSUs Granted	Grant Date Value of RSUs
Kendall Larsen	75,000	$6.28	26,667	$6.92
Robert D. Short III, Ph.D.	55,000	$6.28	13,333	$6.92
Richard H. Nance	10,000	$6.92	6,666	$6.92
All executive officers, as a group	140,000	$6.40	46,666	$6.92
All non-employee directors, as a group	37,500	$6.65	24,999	$6.65
All employees who are not executive officers, as a group	560,000	$6.44	146,664	$6.92
All non-employee service providers, as a group	10,000	$5.18	—	$—

Vote Required

The approval of the amendment and restatement of the 2013 Plan will require the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting on this matter. Abstentions will have the same effect of a vote “against” the amendment and restatement of the 2013 Plan.

We strongly believe that the approval of the amendment and restatement of the 2013 Plan is essential to our continued success. Our employees are one of our most valuable assets. Stock options and other awards such as those provided under the 2013 Plan are vital to our ability to attract and retain outstanding and highly skilled individuals. Such awards also are crucial to our ability to motivate employees to achieve the Company’s goals. For the reasons stated above, the stockholders are being asked to approve the amendment and restatement of the 2013 Plan.

The Board of Directors unanimously recommends that you vote “FOR” the amendment and restatement of the 2013 Plan.

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EXECUTIVE OFFICERS

The following table sets forth the respective names, ages and positions of our named executive officers as of March 1, 2021.

Name	Age	Position
Kendall Larsen	64	Chairman of the Board of Directors, President and Chief Executive Officer
Richard H. Nance	72	Chief Financial Officer
Robert D. Short III, Ph.D.	69	Chief Technology Officer, Chief Scientist and Director

The biographies of Mr. Larsen and Dr. Short 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 2012. Mr. Nance has served clients in his private practice, which is involved in raising capital for companies in various industries, since 2011. Mr. Nance has also worked as Chief Executive Officer and Chief Financial Officer for both public and private companies involved in software technology, manufacturing and international sales and distribution, and is a Licensed Certified Public Accountant (CPA, CGMA). His work experience includes working as a bank examiner with the U.S. Comptroller of the Currency, as senior lending officer in commercial banking, and he has decades of experience in business consulting, strategic planning, and advisory services. Mr. Nance earned his Bachelor of Business Administration in Banking & Finance from North Texas State University, and a Bachelor of Science in Accounting from Central State University of Oklahoma. He holds memberships in the American Institute of CPAs and California Society of CPAs.

Each officer serves at the discretion of the Board and holds office until his successor is duly elected and qualified or until his earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

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EXECUTIVE COMPENSATION AND OTHER MATTERS

Compensation Program Objectives

The primary objectives of our executive compensation program are:

•	attracting and retaining the most talented and dedicated executives possible;

•

SEC Form DEF 14A filed by VirnetX Holding Corp