UNITED STATES
SCHEDULE 14A
(Rule 14a-101)
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
Network-1 Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
| (3) |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid previously. Identity the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
Network-1 Technologies, Inc.
445 Park Avenue, Suite 912
New York, New York 10022
August 102, 20182019
You are cordially invited to attend the Annual Meeting of Stockholders of Network-1 Technologies, Inc. (the "Company") which will be held on Wednesday,Tuesday, September 26, 2018,17, 2019, at 10:00 A.M. (local time), at the offices of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., 805 Third Avenue, 10th Floor, New York, New York 10022.
Details regarding the Annual Meeting and the business to be conducted are more fully described in the accompanying Notice of 20182019 Annual Meeting of Stockholders and Proxy Statement.
Your vote is important. Whether or not you plan to attend the Annual Meeting, I hope you will vote as soon as possible. You may vote over the Internet or in person at the Annual Meeting, or you also may vote by mailing a proxy card or by telephone. Please review the instructions on the proxy card or broker vote instruction form regarding your voting options.
Cordially,
YOUR VOTE IS IMPORTANT In order to ensure your representation at the Annual Meeting, whether or not you plan to attend the meeting, please vote your shares as promptly as possible over the Internet or by telephone by following the instructions on your proxy |
NETWORK-1 TECHNOLOGIES, INC.
445 Park Avenue, Suite 912
New York, New York 10022
NOTICE OF 20182019 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Network-1 Technologies, Inc.:
NOTICE IS HEREBY GIVEN that the 20182019 Annual Meeting of Stockholders of Network-1 Technologies, Inc. (the "Company") will be held on Wednesday,Tuesday, September 26, 2018,17, 2019, at 10:00 A.M. (local time), at the offices of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., 10th Floor, 805 Third Avenue, New York, New York 10022.
| 1. |
| 2. |
| 3. |
| To ratify the appointment of Friedman LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, |
Only stockholders of record at the close of business on August 1, 2018July 22, 2019 are entitled to notice of and to vote at the Annual Meeting or any adjournments thereof.
Your Board of Directors believes that the election of the nominees specified in the accompanying Proxy Statement as directors at the Annual Meeting is in the best interest of the Company and its stockholders and, accordingly, unanimously recommends a vote "FOR" such nominees. The Board of Directors also recommends that you vote "FOR" the Say on Pay Vote and "FOR" every "one year" on the Frequency of Say on Pay Vote. Further, the Board of Directors recommends that you vote "FOR" ratifying the appointment of Friedman LLP as the Company's independent registered public accounting firm.
| /s/ David Kahn |
PLEASE NOTE THAT ATTENDANCE AT THE ANNUAL MEETING WILL BE LIMITED TO STOCKHOLDERS OF THE COMPANY AS OF THE RECORD DATE OF AUGUST 1, 2018JULY 22, 2019 (OR THEIR AUTHORIZED REPRESENTATIVES) HOLDING EVIDENCE OF OWNERSHIP. IF YOUR SHARES ARE HELD BY A BROKER OR BANK OR OTHER INTERMEDIARY, PLEASE BRING TO THE MEETING YOUR BROKER OR BANK STATEMENT EVIDENCING YOUR BENEFICIAL OWNERSHIP OF COMPANY STOCK TO GAIN ADMISSION TO THE MEETING.
| GENERAL INFORMATION | 1 |
| Record Date | 1 |
| Quorum | 1 |
| Shares Outstanding | 1 |
| Shareholders of Record/Beneficial Owners | |
| Voting | 2 |
| 3 | |
| Votes Required to Adopt Proposals | 3 |
| Effect of Not Casting Your Vote | 4 |
| Voting Instructions | 4 |
| Solicitation/Costs | 4 |
| Tabulating the Vote | 5 |
| Voting Results | 5 |
| PROPOSAL 1 - ELECTION OF DIRECTORS | 6 |
| CORPORATE GOVERNANCE | 8 |
| Director Independence | 8 |
| Leadership Structure | 8 |
| Board Oversight of Risk | 8 |
| Meetings of the Board of Directors and Board Committees | |
| Board Committees | 9 |
| Delinquent Section 16(a) | 10 |
| Code of Ethics | 10 |
| Communications with the Board | |
| CONSIDERATION OF DIRECTOR NOMINEES | 11 |
| DEADLINE AND PROCEDURES FOR SUBMITTING BOARD NOMINATIONS | 12 |
| COMPENSATION OF DIRECTORS | 12 |
| EXECUTIVE OFFICERS | 14 |
| EXECUTIVE COMPENSATION | 14 |
| Named Executive Officers | 14 |
| Compensation Overview | 15 |
| Summary Compensation Table | 16 |
| Narrative Disclosure to Summary Compensation Table | 17 |
| Outstanding Equity Awards At Year-End | 19 |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | |
| 20 | |
| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 22 |
| AUDIT COMMITTEE REPORT | 22 |
| PROPOSAL 2 - APPROVAL BY NON-BINDING ADVISORY VOTE OF THE RESOLUTION APPROVING NAMED EXECUTIVE OFFICER COMPENSATION | 23 |
| PROPOSAL 3 - | |
| Audit Fees | |
| Audit Related Fees, Tax Fees and All Other Fees | |
| Audit Committee Pre-Approval Policies and Procedures | |
| STOCKHOLDER PROPOSALS FOR | |
| OTHER INFORMATION |
NETWORK-1 TECHNOLOGIES, INC.
PROXY STATEMENT
FOR THE 20182019 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, SEPTEMBER 26, 2018TUESDAY, SEPTMEBER 17, 2019
GENERAL INFORMATION
Our Board of Directors (the "Board") solicits your proxy on our behalf for the 20182019 Annual Meeting of Stockholders (the "Annual Meeting") and at any postponement or adjournment of the Annual Meeting for the purposes set forth in this Proxy Statement and the accompanying Notice of 20182019 Annual Meeting of Stockholders (the "Notice"). The Annual Meeting will be held at 10:00 A.M. (Eastern Time) on Wednesday,Tuesday, September 26, 201817, 2019 at the offices of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., which are located at 805 Third Avenue, 10th Floor, New York, New York 10022.
In this Proxy Statement the terms "Network-1", the "Company", "we", "us", and "our" refer to Network-1 Technologies, Inc. The address and telephone number of our principal executive offices is Network-1 Technologies, Inc., 445 Park Avenue, Suite 912, New York, New York 10022, telephone: (212) 829-5770. This Proxy Statement, the accompanying proxy card and our 20172018 Annual Report will be first sent on or about August 10, 20182, 2019 to all stockholders of record as of August 1, 2018.
July 22, 2019.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON SEPTEMBER 26, 2018:17, 2019: This Proxy Statement and the Company's 20172018 Annual Report are available for review on the Internet at http://www.network-1.com/sec/proxy2018/proxy2019/.
| Record Date | |
| Quorum | A majority of the shares of all issued and outstanding stock entitled to vote on the Record Date must be present in person at the Annual Meeting or represented by proxy to constitute a quorum. Abstentions and "broker non-votes" (i.e., where a broker has not received voting instructions from the beneficial owner and for which the broker does not have discretionary power to vote on a particular matter) are counted as present for purposes of determining the presence of a quorum. |
| Shares Outstanding | As of July 22, 2019 (Record Date) there were 24,156,998 shares of Network-1's common stock issued and outstanding. |
| Shareholders of Record/ Beneficial Owners | If your shares are registered directly in your name with American Stock Transfer & Trust Company, LLC, the Company's transfer agent, you are a shareholder of record with respect to those shares. If your shares are held in an account at a brokerage firm, bank or other intermediary, then you are the beneficial owner of shares held in "street name". As a beneficial owner, you have the right to instruct your brokerage firm, bank or other intermediary how to vote your shares. Most individual shareholders are beneficial owners of shares held in "street name". |
| Voting | Each share of Network-1 common stock has one vote on each matter. Only shareholders of record of the close of business on the Record Date There are four ways a stockholder of record or beneficial owner of shares held in street name can vote: |
(1) By Internet: You may vote over the Internet by following the instructions provided on the proxy | |
(2) By Telephone: You may vote by telephone by following the instructions on the proxy | |
(3) By Mail: You may complete, sign and return the accompanying proxy card, | |
(4) In Person: If you are a stockholder of record as of the Record Date, you may vote in person at the Annual Meeting. Submitting a proxy will not prevent a stockholder from attending the Annual Meeting, revoking their earlier submitted proxy, and voting in person. If you hold your shares as a beneficial owner through a brokerage firm, bank or other intermediary, Even if you plan on attending the Annual Meeting in person, we encourage you to vote your shares in advance using one of the methods described above and in the proxy card | |
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| You may change your vote at any time before the voting is closed at the Annual Meeting. You may revoke your proxy by attending the Annual Meeting and voting in person, by filing an instrument in writing revoking your proxy or by filing another duly executed proxy bearing a later date with our Secretary before the vote is closed at the Annual Meeting, or by voting again using the telephone or Internet before the cutoff time (your latest telephone or Internet proxy is the one that will be counted). Attendance at the Annual Meeting will not have the effect of revoking a proxy unless you give proper written notice of revocation to our Secretary or Inspector of Election before the proxy is exercised or you vote by ballot at the Annual Meeting. | |
| Votes Required to Adopt Proposals | The table below summarizes the votes required for approval of each matter to be brought before the Annual Meeting, as well as the treatment of abstentions and broker non-votes. If you sign and return a proxy but do not specify how you want your shares voted, your shares will be voted FOR the director nominees and FOR the other proposals listed below: |
| Proposal | Vote Required for Approval of Each Item | Abstentions | Broker Non-Votes |
(1)Election of Directors | Each director shall be elected by a plurality of the votes (greatest number of votes for) of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors (Proposal 1). | No effect on this proposal | No effect on this proposal |
(2)Advisory Vote on Say on Pay Vote | The affirmative vote of a majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on Proposal 2 is required to approve this | Counted as "against" | No effect on this proposal |
(3) Appointment of Auditors | The affirmative vote of a majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on Proposal 3 is required to approve this proposal. | Counted as "against" | |
| Not applicable since brokerage firms or banks have discretionary authority to vote on this proposal |
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| Effect of Not Casting Your Vote | If you are a beneficial owner and hold your shares in street name and want your shares to count in the election of directors (Proposal 1) If you are a shareholder of record and do not return your proxy or attend the Annual Meeting, your shares will not be considered present at the Annual Meeting for voting purposes or determining whether we have a quorum and no vote will be cast for your shares at the Annual Meeting. |
| Voting Instructions | If you complete and submit your proxy voting instructions, the persons appointed by the Board as proxies (the persons named in the proxy |
| Solicitation/Costs | We are paying for the distribution of the proxy materials and solicitation of the proxies. As part of this process, we reimburse brokerage firms, banks and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to our stockholders. Proxy solicitation expenses that we will pay include those for preparation, mailing, returning and tabulating the proxies. Our directors, officers and employees may also solicit proxies on our behalf in person, by telephone, email or facsimile, but they do not receive additional compensation for providing those services. |
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| Tabulating the Vote | Votes will be counted and certified by one or more Inspectors of Election who are expected to be an employee of American Stock Transfer & Trust Company, LLC, the transfer agent for the Company's common stock |
| Voting Results | We will announce preliminary results at the Annual Meeting. We will report final results by filing a Form 8-K within four business days after the Annual Meeting. If final results are not available at that time, we will provide preliminary voting results in the Form 8-K and will provide the final results in an amendment to the Form 8-K as soon as they become available. |
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The Company's Bylaws provide that at each annual meeting of stockholders, directors shall be elected to hold office until the expiration of the term for which they are elected, and until their respective successors are duly elected and qualified or until the director's earlier resignation or removal. The Company's Board of Directors has fixed the number of members of the Board of Directors at five members.
At the Annual Meeting, proxies granted by stockholders will be voted individually for the election, as directors of the Company, of the five persons listed below, unless a proxy specifies that it is not to be voted in favor of a nominee for director. In the event any of the nominees listed below is unable to serve (or for whatever reason declines to serve) at the time of the Annual Meeting, it is intended that the proxy will be voted for such other nominees as are designated by the Board of Directors. Each of the persons named below, who are all presently members of the Company's Board of Directors, has indicated to the Board of Directors of the Company that he or she will be available to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES SPECIFIED BELOW.
The following table sets forth the name and age of the nominees for election at this Annual Meeting and the length of continuous service as a director of the Company. Also included below the table is information each director has given us about all positions he or she holds, the director's principal occupation and business experience for at least the past five years, and the names of other publicly-held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each director's specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to Network-1 and our Board.
| AGE | POSITION | DIRECTOR SINCE | ||||
| Corey M. Horowitz | Chairman, Chief Executive Officer and Chairman of the Board of Directors | April 1994 | ||||
| David C. Kahn | Chief Financial Officer, Secretary and a Director | April 2012 | ||||
| Emanuel Pearlman | Director | January 2012 | ||||
| Niv Harizman | Director | December 2012 | ||||
| Allison Hoffman | Director | December 2012 |
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Corey M. Horowitz has been our Chairman and Chief Executive Officer since December 2003. Mr. Horowitz has also served as Chairman of our Board of Directors since January 1996 and has been a member of our Board of Directors since April 1994. In December 2018, Mr. Horowitz became a member of the Board of Managers of ILiAD Biotechnologies, LLC, a privately held biotechnology company, in connection with our investment in the company. We believe Mr. Horowitz's qualifications to serve on our Board of Directors include his significant experience and expertise as an executive in the intellectual property field, his understanding of our intellectual property and the patent acquisition, licensing and enforcement business combined with his private equity and corporate transactional experience.
David C. Kahn, CPA, has been our Chief Financial Officer since January 2004 and our Secretary since August 2012. Mr. Kahn was elected to our Board in April 2012. Since December 1989, Mr. Kahn has provided accounting and tax services on a consulting basis to private and public companies. From August 2000 until August 2012, Mr. Kahn served as a full-time faculty member of Yeshiva University in New York. We believe Mr. Kahn's qualifications to serve on our Board include his background and expertise in accounting and tax matters.
Emanuel R. Pearlman has been a member of our board of directors since January 2012, where he serves as Chairman of our Audit Committee and a member of our Nominating and Corporate Governance Committee. Mr. Pearlman currently serves as the Executive Chairman of Empire Resorts, Inc. (NASDAQ: NYNY), where he has served as a director since May 2010 and previously served as Non-Executive Chairman of the Board from September 2010 through May 2016. He is also the Chairman and Chief Executive Officer of Liberation Investment Group, LLC, a New York based investment management and financial consulting firm, which he founded in January 2003. Mr. Pearlman has been a member of the Board of directors of CEVA Logistics, AG (SIX:CIVA) since May 2018 and serves on its Audit Committee and Nominationalso served on its Nominating and Governance Committees.Committee until April 2019. From June 2013 through May 2018, he served on the board of directors of CEVA Holdings, LLC. From November 2018 to February 2019, Mr. Pearlman served on the Board of Managers and as President of each of SRC O.P. LLC, SRC Facilities LLC and SRC Real Estate (TX) LLC, which are special purpose bankruptcy remote limited liability companies with ownership of approximately 100 real estate properties of Sears. From May 2017 through September 2017, Mr. Pearlman served on the board of directors of ClubCorp Holdings, Inc. (NYSE:MYCC), where he served on the Strategic Review Committee, and from 2009-2014 heCommittee. From 2009 to 2014, Mr. Pearlman served as the sole independent director of the Fontainebleau Miami JV LLC, which currently owns and operates the Fontainebleau Hotel in Miami Beach. Mr. Pearlman also served as a member of the board of directors of Dune Energy (OTCBB: DUNR.OB) from January 2012 to January 2013 and Jameson Inns, Inc. from January 2012 to December 2012. He alsoIn addition, he served as a director of Multimedia Games, Inc., (NASDAQ-GS:MGAM) from October 2006 to March 2010. We believe Mr. Pearlman's qualifications to serve on our Board include his significant investment and financial experience and expertise combined with his Board experience.
Niv Harizman has been a director of our company since December 2012. Mr. Harizman is a Managing Member of Tyto Capital Partners LLC, a private investment firm specializing in debt and equity investments in middle market companies and special situations, a position he has held since August 2010. Since March 2010, Mr. Harizman has also been the Managing Member of NHK Partners LLC, an entity that makes private investments and provides consulting services. Since November 2013, Mr. Harizman has been affiliated with Riverside Management Group, a merchant banking firm, and BCW Securities LLC, its affiliated broker-dealer. From May 2005 to March 2010, Mr. Harizman was a Founding Partner and Head of Corporate Finance at Plainfield Asset Management LLC, which was a privately held registered investment adviser focused on alternative investments. From May 2000 until May 2005, Mr. Harizman was a member of the Mergers & Acquisitions Group of Credit Suisse First Boston LLC, where he was a Managing Director from 2001-2005 and a Director from 2000 to 2001. From 1995 until 2000, Mr. Harizman was employed by Bankers Trust and its successors including BT Alex. Brown Incorporated and Deutsche Bank in various investment banking positions in the Mergers & Acquisitions Group and Leveraged Finance Group. We believe Mr. Harizman's qualifications to serve on our Board include his significant investment and financial transactional experience and expertise.
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Allison Hoffman has been a director of our company since December 2012. Since January 2016, Ms. Hoffman has served as Chief Legal Officer and Chief Administrative Officer at Intersection Parent, Inc., an urban experience company that utilizes technology to make cities better, including bringing free Wi-Fi throughout New York City. From September 2013 to December 2015, Ms. Hoffman served as Executive Vice President, General Counsel and Corporate Secretary of Martha Stewart Living Omnimedia, Inc. (NYSE:MSO), a media and merchandising company providing consumers with high quality life style content and products. From December 2012 until September 2013, she provided legal services to Martha Stewart Living Omnimedia, Inc. From January 2007 until September 2012, Ms. Hoffman served as Senior Vice President, Chief Legal Officer and Secretary of ALM Media, LLC, a leading provider of specialized news and information for the legal and commercial real estate sectors. We believe that Ms. Hoffman's qualifications to serve on our Board include her extensive legal background and transactional experience.
CORPORATE GOVERNANCE
Our stock is listed on the NYSE American LLC. Three of our current five directors, Emanuel Pearlman, Allison Hoffman and Niv Harizman, are considered independent directors in compliance with the standard of independence in Rule 803A(2) of the NYSE American LLC Company Guide.
Corey M. Horowitz, our Chairman and Chief Executive Officer, serves as Chairman of our Board of Directors. The Company does not have a lead independent director. The majority of the members of our Board of Directors are independent and all members of Board committees (including Chairpersons) are independent. The Company believes its leadership is appropriate given the size of the Company, the majority of independent directors and the independent leadership of the committees of the Board.
With respect to the oversight of the Company's risk, the Company's executive officers supervise the day-to-day risk management responsibilities and in turn report, when necessary, to the Audit Committee with respect to financial and operational risk and to the full Board with respect to risks associated with the Company's overall strategy.
During the year ended December 31, 2017, the2018, our Board held nine meetings.six meetings and acted by unanimous consent on two occasions. Board committees held the following meetings orand acted by unanimous consent during the year ended December 31, 2017:2018: Audit Committee – foursix meetings and twoseven unanimous consents in lieu of meeting; Compensation Committee – two meetingsone meeting and twothree unanimous consents in lieu of meetingmeeting; and Nominating and Corporate Governance Committee – one meeting and one unanimous consent in lieu of meeting. During 2017,2018, each of the Company'sour directors attended at least seventy-five percent of the aggregate of: (1) the total number of meetings of the Board of Directors; and (2) the total number of meetings of all Board committees on which they served, except for Niv Harizman who attended 67% of such meetings.served.
Our current policy strongly encourages that all of its Directorsour directors attend all Board and Committee meetings and the Company'sour Annual Meeting of Stockholders, absent extenuating circumstances that would prevent their attendance. All of theour directors attended the Annual Meeting of Stockholders last year.
Audit Committee
The Audit Committee is appointed by our Board of Directors to provide assistance to the Board in fulfilling its oversight responsibility with respect to, among other things, (i) the integrity of the Company's our financial statements, (ii) the Company's our compliance with legal and regulatory requirements, (iii) selecting and evaluating the qualifications and independence of the Company's our independent registered public accounting firm, (iv) evaluating the performance of the Company's our internal audit function and independent registered public accounting firm, and (v) the Company's our internal controls and procedures.
Compensation Committee
The Compensation Committee consists of Allison Hoffman (Chairperson) and Niv Harizman. The Compensation Committee is appointed by theour Board of Directors to assist the Board in carrying out the Board's responsibilities relating to compensation of the Company'sour executive officers and directors. The Compensation Committee has overall responsibility for evaluating and approving the officer and director compensation plans, policies and programs of the Company.
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Nominating and Corporate Governance Committee
Our Board has a Nominating and Corporate Governance Committee consisting of Niv Harizman (Chairman) and Emanuel Pearlman. The Nominating and Corporate Governance Committee is responsible for, among other things, developing and recommending to the Board a set of corporate governance policies for the Company, establishing criteria for selecting new directors, and identifying, screening and recruiting new directors. The Committee also recommends to the Board nominees for directors and recommends directors for committee membership to the Board.
Strategic Development Committee
We also have a Strategic Development Committee to assist our Chairman and Chief Executive Officer in strategic development and planning of the Company's our business relating to identifying potential strategic partners, the developmentacquisition of new IP and other acquisition opportunities and strategic alternatives.opportunities. The Committee also assists in capital markets related activities. Niv Harizman is the sole member of the Strategic Development Committee.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than ten percent (10%) of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. To our knowledge, we believe that all Section 16(a) filing requirements applicable to itsour officers, directors and greater than ten percent (10%) stockholders were complied with during 2017.2018 except that Corey Horowitz, our Chairman and Chief Executive Officer, did not reflect a charitable contribution of 20,000 shares of our common stock in December 2017 on Form 5 for 2017 and it was disclosed on his Form 5 for 2018.
The Board of Directors, through its Nominating and Corporate Governance Committee, has established a process for stockholders to send communications to the Board of Directors. Stockholders may communicate with the Board of Directors individually or as a group by writing to: The Board of Directors of Network-1 Technologies, Inc. c/o Corporate Secretary, 445 Park Avenue, Suite 912, New York, NY 10022. Stockholders should identify their communication as being from a Network-1 stockholder. Our Corporate Secretary may require reasonable evidence that the communication or other submission is made by a Network-1 stockholder before transmitting the communication to theour Board of Directors.
CONSIDERATION OF DIRECTOR NOMINEES
Stockholders wishing to recommend director candidates to the Nominating and Corporate Governance Committee must submit their recommendations in writing to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Network-1 Technologies, Inc., 445 Park Avenue, Suite 912, New York, NY 10022.
The Nominating and Corporate Governance Committee will consider nominees recommended by Network-1 stockholders provided that the recommendation contains sufficient information for the Nominating and Corporate Governance Committee to assess the suitability of the candidate, including the candidate's qualifications, and complies with the procedures set forth below under "Deadline and Procedures for Submitting Board Nominations". In addition, it must include information regarding the recommended candidate relevant to a determination of whether the recommended candidate would be barred from being considered independent under applicable NYSE American LLC rules, or, alternatively, a statement that the recommended candidate would not be so barred. Candidates recommended by stockholders that comply with these procedures will receive the same consideration that candidates recommended by the Nominating and Corporate Governance Committee receive. A nomination which does not comply with the above requirements will not be considered.
The qualities and skills sought in prospective members of the Board are determined by the Nominating and Corporate Governance Committee. When reviewing candidates to our Board, the Nominating and Corporate Governance Committee considers the evolving needs of the Board and seeks candidates that fill any current or anticipated future needs. The Nominating and Corporate Governance Committee generally requires that director candidates be qualified individuals who, if added to the Board, would provide the mix of director characteristics, experience, perspectives and skills appropriate for Network-1. Criteria for selection of candidates will include, but not be limited to: (i) business and financial acumen, as determined by the Nominating and Corporate Governance Committee in its discretion; (ii) qualities reflecting a proven record of accomplishment and ability to work with others; (iii) knowledge of our industry, (iv) relevant experience and knowledge of corporate governance practices; and (v) expertise in an area relevant to Network-1. Such persons should not have commitments that would conflict with the time commitments of a Director of Network-1. Such persons shall have other characteristics considered appropriate for membership on the Board of Directors, as determined by the Nominating and Corporate Governance Committee. While the Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity, the Board and the Nominating and Corporate Governance Committee believe that it is important that the Board members represent diverse viewpoints. In considering candidates for the Board, the Nominating and Corporate Governance Committee and the Board consider the entirety of each candidate's credentials in the context of the foregoing standards.
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DEADLINE AND PROCEDURES FOR SUBMITTING BOARD NOMINATIONS
A stockholder wishing to nominate a candidate for election to our Board of Directors at a meeting of our stockholders must (i) be a stockholder of record at the time of giving of notice provided for in our Bylaws; (ii) be entitled to vote at the meeting; and (iii) comply with the procedures set forth in Section 8 of our Bylaws and applicable law. The required notice must be delivered personally to or mailed to and received by our Corporate Secretary at our principal executive offices (currently located at 445 Park Avenue, Suite 912, New York, NY 10022), not earlier than the close of business on the 120th day and not later than the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that, in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th90th day prior to the date of such annual meetingmeeting; provided, further, in the event that less than 100 days notice of prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be received no later than the 10th day following the earlier of (i) the day on which notice of the annual meeting was mailed, or (ii) such public disclosure was first made of the annual meeting. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder's notice as described above.
COMPENSATION OF DIRECTORS
In 2017,2018, we compensated each non-management director of our companyCompany by granting to each such outside director 13,50015,000 restricted stock units (each restricted stock unit represents a contingent right to receive one share of our common stock). The restricted stock units vested as follows: 3,375in equal amounts of 3,750 units on each of March 15, 2017,2018, June 15, 2017,2018, September 15, 20172018 and December 15, 2017.2018. In addition, we pay our non-management directors cash director fees of $40,000 per annum ($10,000 per quarter). Non-management directors also receive additional cash compensation on an annual basis for serving on the following Board committees: Audit Committee – Chairperson –receives $7,500 and member –members receive $5,000 and the Chairperson and member of each of the Compensation Committee and Nominating and Corporate Governance Committee receive annual fees of $3,750 and $2,500, respectively.
In consideration for serving as the sole member of our Strategic Development Committee, in June 2013 we issued to Niv Harizman a 5-yearfive-year stock option to purchase 300,000 shares of our Common Stock,common stock, at an exercise price of $1.88 per share, which option vested 100,000 shares on the date of grant, 100,000 shares on the first anniversary of the date of grant and vested 100,000 shares on the second anniversary from the grant date.
The Board of Directors, based upon the recommendation of the Compensation Committee, may review and determine the form and amount of directors' compensation, including cash, equity based awards and other director compensation to maintain a transparent and readily understandable director compensation which ensures that the directors continue to receive fair and appropriate compensation for the time commitment required to discharge their duties for a company of our size.
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The following table sets forth the compensation awarded to, earned by or paid to all persons who served as members of our board of directors (otherother than our Named Executive Officers)Officers (as defined on page 16 hereof) during the year ended December 31, 2017.2018. No director who is also a Named Executive Officer received any compensation for services as a director in 2017.2018.
| Name | Fees earned or paid in cash ($)(1) | Stock Awards ($)(2) (3) | All other compensation ($)(4) | Total ($) | ||||||||
| Emanuel Pearlman | $ 50,000 | $ 39,638 | $ 625 | $ 90,263 | ||||||||
| Niv Harizman | $ 46,250 | $ 39,638 | $ 625 | $ 86,513 | ||||||||
| Allison Hoffman | $ 48,830 | $ 39,638 | $ 625 | $ 89,093 |
| Name | Fees earned or paid in cash ($)(1) | Stock Awards(2) (3) ($) | All other compensation ($) | Total ($) | ||||||||||||
| Emanuel Pearlman | $ | 50,000 | $ | 51,300 | — | $ | 101,300 | |||||||||
| Niv Harizman | $ | 46,250 | $ | 51,300 | — | $ | 97,550 | |||||||||
| Allison Hoffman | $ | 48,750 | $ | 51,300 | — | $ | 100,050 | |||||||||
___________________________
| (1) | Represents director's fees payable in cash to each non-management director of $10,000 per quarter (or $40,000 per annum) for |
| (2) | The amounts included in this column represent the grant date fair value of restricted stock unit awards (RSUs) granted to directors, computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions see Note F[1] to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, |
| (3) | As of December 31, |
| (4) | Represents payment of dividends (dividend equivalent rights) on RSUs for 2018. |
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Our executive officers are Corey M. Horowitz, our Chairman and Chief Executive Officer, David Kahn, our Chief Financial Officer and Secretary, and Jonathan Greene, our Executive Vice President. See backgrounds of Mr. Horowitz and Mr. Kahn on page 7 of this Proxy Statement. The background of JonJonathan Greene, our executive officer, who does not serve on our Board of Directors, is as follows:
Jonathan Greene, age 56,57, became our Executive Vice President in October 2013. He served as a consultant to the Company from December 2004 until March 2013, providing technical and marketing analysis for our intellectual property portfolio. Mr. Greene became an employee of Network-1 in March 2013. From April 2006 to February 2009, Mr. Greene served as a marketing consultant for Avatier Corporation, a developer of identity management software. From August 2003 until December 2004, he served as a consultant to Neartek, Inc., a storage management software company (August 2003 until October 2003) and Kavado Inc., a security software company (November 2003 until December 2004). From January 2003 until July 2003, Mr. Greene served as Director of Product Management for FalconStor Software, Inc. (OTC:FALC), a storage management software company. From December 2001 through December 2002, Mr. Greene served as Senior Vice President of Marketing and Business Development of Network-1, at a time when Network-1 was engaged in the development, marketing and licensing of security software. From December 1999 until September 2001, he served as Senior Vice President of Marketing for Panacya Inc., a vendor of service management software.
EXECUTIVE COMPENSATION
For the year ended December 31, 2017,2018, we have determined that (i) our Chief Executive Officer, and (ii) our most highly compensated executive officers other than our Chief Executive Officer who served in such capacity during 20172018 and at the end of 20172018 whose total compensation exceeded $100,000, are our Named Executive Officers, as follows:
Jonathan Greene, Executive Vice President.
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Network-1 Technologies, Inc. is a "smaller reporting company" under the rules promulgated by the Securities and Exchange Commission and the Company complies with the disclosure requirements applicable to smaller reporting companies. Accordingly, this executive compensation summary is not intended to meet the "Compensation Disclosure and Analysis" disclosure required of larger reporting companies.
Role of the Compensation Committee. All compensation for our Named Executive Officers is determined by the Compensation Committee of our Board of Directors which is composed only of independent directors. The Compensation Committee is responsible for reviewing the performance and establishing the total compensation of our Named Executive Officers on an annual basis. The Compensation Committee administers compensation plans for our Named Executive Officers and is responsible for recommending grants of equity awards under our stock incentive plan to the Board of Directors for approval. Our Chairman and Chief Executive Officer annually makes recommendations to the Compensation Committee regarding base salary, bonus compensation and equity awards for the other Named Executive Officers.Officers. Such recommendations are considered by the Compensation Committee; however, the Compensation Committee retains full discretion and authority over the final compensation decisions for our Named Executive Officers. The Compensation Committee has a formal written charter which is available on our website.
Advisory Vote on Executive Compensation. At our September 20172018 annual meeting of stockholders, we held a stockholder advisory vote on the compensation of our Named Executive Officers, commonly referred to as a say-on-pay vote. Our stockholders approved the compensation of our Named Executive Officers at the September 20172018 annual meeting, with a majority of stockholder votes cast in favor of our say-on-pay resolution. As we evaluated our compensation practices, we were mindful of the support our stockholders expressed for our compensation practices. As a result, following our annual review of our executive compensation, the Compensation Committee decided to retain our general approach to executive compensation. Our executive compensation for 20172018 reflects our favorable financial performance and advances our retention goals and promotes both short-term and long-term performance of our executive officers.
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The following table summarizes compensation for the years ended December 31, 20172018 and December 31, 2016,2017, awarded to, earned by or paid to our Chief Executive Officer ("CEO") and to each of our executive officers who received total compensation in excess of $100,000 for the year ended December 31, 20172018 for services rendered in all capacities to us (collectively, the "Named Executive Officers").
Summary Compensation Table
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)3 | All Other Compensation($)1 | Total($) | |||||||||||
| Corey M. Horowitz | 2018 | $ 497,000 | $ 1,281,000(2) | $ — | $ 92,750(4) | $ 1,870,750 | |||||||||||
| Chairman and Chief | 2017 | $ 482,000 | $ 998,000(2) | $ — | $ 36,000(4) | $ 1,516,000 | |||||||||||
| Executive Officer | |||||||||||||||||
| David C. Kahn | 2018 | $ 175,000 | $ 30,000 | $ 102,400 | $ 40,250(5) | $ 347,650 | |||||||||||
| Chief Financial | 2017 | $ 175,000 | $ 30,000 | $ — | $ 37,250(5) | $ 242,250 | |||||||||||
| Officer | |||||||||||||||||
| Jonathan Greene | 2018 | $ 200,000 | $ 40,000 | $ 128,000 | $ 40,250(6) | $ 408,250 | |||||||||||
Executive Vice President | 2017 | $ 200,000 | $ 40,000 | $ — | $ 37,250(6) | $ 277,250 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)3 | All Other Compensation($)1 | Total($) |
| Corey M. Horowitz | 2017 | $482,000 | $ 998,000 (2) | $ — | $36,000 (4) | $1,516,000 |
| 2016 | $440,000 | $ 4,902,000 (2) | $ 1,696,000 (3) | $35,000 (4) | $7,073,000 | |
| David C. Kahn | 2017 | $175,000 | $ 30,000 | $ — | $36,000 (5) | $ 241,000 |
| Chief Financial Officer | 2016 | $166,000 | $ 75,000 | $ 124,000 | $33,375 (5) | $ 398,375 |
| Jonathan Greene | 2017 | $200,000 | $ 40,000 | $ — | $36,000 (6) | $ 276,000 |
| Executive Vice President | 2016 | $200,000 | $ 125,000 | $ 124,000 | $33,375 (6) | $ 482,375 |
| (1) | We have concluded that the aggregate amount of perquisites and other personal benefits paid in |
| (2) | Mr. Horowitz received the following cash incentive bonus payments for 2018: (i) an annual discretionary bonus of $175,000, and (ii) incentive bonus compensation of $1,106,000 pursuant to his employment agreement (see "Narrative Disclosure to Summary Compensation Table" below). Mr. Horowitz received the following cash incentive bonus payments for 2017: (i) an annual discretionary bonus of $175,000, and (ii) incentive bonus compensation of $823,000 pursuant to his employment |
| (3) | The amounts in this column represent the aggregate grant date fair value of restricted stock units awards granted to the Named Executive Officers computed in accordance with FASB ASC Topic 718. |
| (4) | Includes |
| (5) | Includes |
| (6) | Represents |
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Narrative Disclosure to Summary Compensation Table
Employment Agreements, Termination of Employment and Change-In-Control Arrangements
On July 14, 2016, we entered into a new employment agreement ("Agreement") with Corey M. Horowitz, our Chairman and Chief Executive Officer, pursuant to which he continues to serve as our Chairman and Chief Executive Officer for a five year term, at an annual base salary of $475,000 which shall be increased bysubject to increases of 3% per annum during the term of the Agreement. The Agreement established an annual target bonus of $175,000 for our Chairman and Chief Executive Officer based upon performance. During the year ended December 31, 20172018 and December 31, 2016,2017, our Chairman and Chief Executive Officer received an annual discretionary cash bonusesbonus of $175,000 and $650,000 respectively.$175,000. In addition, pursuant to the Agreement, we granted to theour Chairman and Chief Executive Officer, under our 2013 Plan, 750,000 restricted stock units (the "RSUs", each RSU awarded by us to our officers, directors and consultants represents a contingent right to receive one share of our common stock) which. The Agreement provided for the 750,000 RSUs to vest in three tranches, as follows: (i) 250,000 RSUs shall vest on July 14, 2018, subject to Mr. Horowitz's continued employment by us through the vesting date (the "Employment Condition"); (ii) 250,000 RSUs shall vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) our common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $3.25 per share (subject to adjustment for stock splits) at any time during the term of employment; and (iii) 250,000 RSUs vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) our common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $4.25 per share (subject to adjustment for stock splits) at any time during the term of employment. The aforementioned stock price vesting conditions of $3.25 per share and $4.25 per share have been satisfied. Notwithstanding the aforementioned, in the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employment for Good Reason (as defined), all of the 750,000 RSUs shall accelerate and become immediately fully vested. All RSUs granted by us to our officers, directors or consultants have dividend equivalent rights.
On July 14, 2018, 375,000 RSUs owned by our Chairman and Chief Executive Officer vested in accordance with the above referenced terms of the Agreement. With respect to such vesting of RSUs, our Chairman and Chief Executive Officer delivered 172,313 shares of common stock to satisfy withholding taxes, and received 202,687 net shares of common stock. In addition, in accordance with the above referenced RSU vesting provisions, at December 31, 2018, Mr. Horowitz owned 375,000 unvested RSUs which vest in equal annual installments of 125,000 shares of our common stock on each of July 14, 2019, July 14, 2020 and July 14, 2021, subject to his continued employment by us.
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Under the terms of the Agreement, so long as Mr. Horowitz continues to serve as an executive officer of the Company, whether pursuant to the Agreement or otherwise, Mr. Horowitz shall also receive incentive compensation in an amount equal to 5% of our gross royalties or other payments from Licensing Activities (as defined) (without deduction of legal fees or any other expenses) with respect to our Remote Power Patent and a 10% net interest (gross royalties and other payments after deduction of all legal fees and litigation expenses related to licensing, enforcement and sale activities, but in no event shall he receive less than 6.25% of the gross recovery) of our royalties and other payments relating to Licensing Activities with respect to patents other than the Remote Power Patent (including our Mirror Worlds Patent Portfolio, Cox Patent Portfolio and M2M/IoT Patent Portfolio) (collectively, the "Incentive Compensation"). During the year ended December 31, 20172018 and December 31, 2016,2017, Mr. Horowitz earned Incentive Compensation of $823,000$1,106,000 and $4,252,000,$823,000, respectively. The Incentive Compensation shall continue to be paid to Mr. Horowitz for the life of each of our patents with respect to licenses entered into with third parties during the term of his employment or at anytimeany time thereafter, whether he is employed by us or not; provided, that, the employment of Mr. Horowitz has not been terminated by us "For Cause" (as defined) or terminated by him without "Good Reason" (as defined). In the event of a merger or sale of substantially all of our assets, we have the option to extinguish the right of Mr. Horowitz to receive future Incentive
Compensation by payment to him of a lump sum payment, in an amount equal to the fair market value of such future interest as determined by an independent third party expert if the parties do not reach agreement as to such value. In the event that Mr. Horowitz's employment is terminated by us "Other Than For Cause" (as defined) or by him for "Good Reason" (as defined), Mr. Horowitz shall also be entitled to (i) a lump sum severance payment of 12 months base salary, (ii) a pro-rated portion of the $175,000 target bonus provided bonus criteria have been satisfied on a pro-rated basis through the calendar quarter in which the termination occurs and (iii) accelerated vesting of all unvested options, RSUs or other awards.
In connection with the Agreement, Mr. Horowitz has also agreed not to compete with us as follows: (i) during the term of the Agreement and for a period of 12 months thereafter if his employment is terminated by us "Other Than For Cause" (as defined) provided he is paid his 12 month base salary severance amount and (ii) for a period of two years from the termination date, if terminated "For Cause" by us or "Without Good Reason" by Mr. Horowitz.
David Kahn serves as our Chief Financial Officer on an at-will basis pursuant to an offer letter, dated April 9, 2014, at an annual base salary of $175,000 (increased in June 2016 from $157,000). Mr. Kahn received an annual bonus of $30,000 for the year ended December 31, 20172018 and an annual bonus of $75,000 forthe year ended December 31, 2016.2017. In connection with the offer letter, Mr. Kahn was issued, under our 2013 Plan, a 5-year stock option to purchase 50,000 shares of our common stock, at an exercise price of $1.65 per share, which option vested in two equal amounts (25,000 shares each) on each of December 31, 2014 and December 31, 2015. On June 9, 2016, Mr. Kahn was granted 50,000 restricted stock units (RSUs)RSUs under our 2013 Plan, (each RSU represents a contingent right to receive one share of our common stock). 50% of such RSUs vested on the one year anniversary of the grant (June 9, 2017) and 50% vested on the two year anniversary of the grant (June 9, 2018). On November 27, 2018, Mr. Kahn received an additional grant of 40,000 RSUs under the 2013 Plan, 50% of such RSUs will vest on the one year anniversary of the grant (November 27, 2019) and 50% of such RSUs will vest on the two year anniversary of the grant (November 27, 2020), subject to Mr. Kahn's continued employment by us. In addition, in the event Mr. Kahn's employment is terminated without "Good Cause" (as defined), he shall receive (i) (a) 6 months base salary or (b) 12 months base salary in the event of a termination without "Good Cause" within 6 months following a "Change of Control" of the Company (as defined) and (ii) accelerated vesting of all remaining unvested shares underlying his options, RSUs or any other awards he may receive in the future.
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Jonathan Greene serves as our Executive Vice President on an at-will basis at an annual base salary of $200,000. Mr. Greene received an annual bonus of $40,000 for the year ended December 31, 20172018 and an annual bonus of $125,000 for the year ended December 31, 2016.2017. On June 9, 2016, Mr. Greene was granted 50,000 restricted stock units (RSUs)RSUs under our 2013 Plan (each RSU represents a contingent right to receive one share of our common stock).Plan. 50% of the RSUs vested on the one year anniversary of grant (June 9, 2017) and 50% vested on the two year anniversary of grant (June 9, 2018).
Profit Sharing 401(k) Plan
We offer all employees who have completed a year of service (as defined) participation in a 401(k) retirement savings plan. 401(k) plans provide a tax-advantaged method of saving for retirement. We expensed matching contributions and profit sharing of $108,000$109,500 and $101,750$108,000 under the 401(k) plan for the years ended December 31, 20172018 and December 31, 2016,2017, respectively.
OUTSTANDING EQUITY AWARDS AT YEAR-END
Outstanding Equity Awards at December 31, 2017
2018
The following table sets forth information relating to unexercised options and unvested restricted stock units for each Named Executive Officer as of December 31, 2017:2018:
| Option Awards | Stock Awards | |||||||||||
| Name | Number of Securities Underlying Unexercised Options | Option Exercise Price ($) | Option Expiration Date | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested ($) | Equity incentive plan awards: Market value of unearned shares, units or other rights that have not vested (1) ($) | |||||||
| Exercisable | Unexercisable | |||||||||||
Corey M. Horowitz Chairman and CEO | 500,000 750,000 | — — | $ 1.19 $ 0.83 | 11/01/22 6/08/19 | 750,000(2) | $1,800,000 | ||||||
David Kahn Chief Financial Officer | 50,000 | — | $ 1.65 | 4/09/19 | 25,000(3) | $ 60,000 | ||||||
Jonathan Greene Executive Vice President | 50,000 | — | $ 1.65 | 4/09/19 | 25,000(4) | $ 60,000 | ||||||
| Option Awards | Stock Awards | |||||||||||
| Name | Number of Securities Underlying Unexercised Options | Option Exercise Price ($) | Option Expiration Date | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested ($) | Equity incentive plan awards: Market value of unearned shares, units or other rights that have not vested (1) ($) | |||||||
| Exercisable | Unexercisable | |||||||||||
Corey M. Horowitz Chairman and CEO | 500,000 750,000 | — — | $ 1.19 $ 0.83 | 11/01/22 6/08/19 | 375,000(2) | $836,250 | ||||||
David Kahn Chief Financial Officer | 50,000 | — | $ 1.65 | 4/09/19 | 40,000(3) | $ 89,200 | ||||||
Jonathan Greene Executive Vice President | 50,000 | — | $ 1.65 | 4/09/19 | 50,000(4) | $ 111,500 | ||||||
| (1) | In accordance with SEC rules, market value is based on |
| (2) | Represents |
| (3) | Represents |
| (4) | Represents |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common stock as of July 15, 20181, 2019 for (i) each of our executive officers, (ii) each of our directors, (iii) all of our executive officers and directors as a group, and (iv) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our executive officers and directors as a group.stock.
| NAME OF BENEFICIAL OWNER | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1) | PERCENTAGE OF COMMON STOCK BENEFICIALLY OWNED(2) | ||
Corey M. Horowitz(3) | 7,321,456 | 29.2% | ||
CMH Capital Management Corp(4) | 2,291,372 | 9.6% | ||
Steven D. Heinemann (5) | 3,027,815 | 12.7% | ||
Goose Hill Capital LLC(6) | 2,442,582 | 10.2% | ||
John Herzog(7) | 1,200,130 | 5.0% | ||
Niv Harizman(8) | 276,174 | 1.2% | ||
Emanuel Pearlman(9) | 142,340 | * | ||
Allison Hoffman(10) | 106,000 | * | ||
David C. Kahn(11) | 98,250 | * | ||
Jonathan E. Greene(12) | 93,899 | * | ||
| All officers and directors as a group (6 Persons) | 8,038,119 | 31.7% |
NAME AND ADDRESS OF BENEFICIAL OWNER | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)(2) | PERCENTAGE OF COMMON STOCK BENEFICIALLY OWNED(2) | |||
Executive Officers and Directors: Corey M. Horowitz(3) | 6,944,565 | 28.1% | |||
CMH Capital Management Corp(4) | 2,291,372 | 9.5% | |||
Niv Harizman(5) | 268,166 | 1.1% | |||
Emanuel Pearlman (6) | 134,240 | * | |||
David C. Kahn(7) | 98,250 | * | |||
Allison Hoffman(8) | 97,992 | * | |||
Jonathan E. Greene(9) | 71,612 | * | |||
All officers and directors as a group (6 Persons) | 7,614,825 | 30.7% | |||
| 5% Stockholders: | |||||
Steven D. Heinemann(10) | 2,827,815 | 11.7% | |||
Goose Hill Capital LLC(11) | 2,242,582 | 9.3% | |||
John Herzog(12) | 1,200,130 | 5.0% | |||
*Less than 1%.
| (1) | Unless otherwise indicated, we believe that all persons |
| (2) | A person is deemed to be the beneficial owner of shares of common stock that can be acquired by such person within 60 days from July |
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| (3) | Includes (i) |
| (4) | Includes |
| (5) | Includes (i) 233,166 shares of common stock, and (ii) 35,000 shares of common stock subject to currently exercisable stock options owned by Mr. Harizman. Does not include 7,500 shares of common stock subject to restricted stock units that do not vest within 60 days from July 1, 2019. |
| Includes (i) 99,240 shares of common stock, and (ii) 35,000 shares of common stock subject to currently exercisable stock options owned by Mr. Pearlman. Does not include 7,500 shares of common stock subject to restricted stock units that do not vest within 60 days from July 1, 2019. |
| (7) | Includes 98,250 shares of common stock. Does not include 40,000 shares of common stock subject to restricted stock units that do not vest within 60 days from July 1, 2019. |
| (8) | Includes (i) 62,992 shares of common stock, and (ii) 35,000 shares of common stock subject to currently exercisable stock options owned by Ms. Hoffman. Does not include 7,500 shares of common stock subject to restricted stock units that do not vest within 60 days from July 1, 2019. |
| (9) | Includes 71,612 shares of common stock. Does not include 50,000 shares of common stock subject to restricted stock units that do not vest within 60 days from July 1, 2019. |
| (10) | Includes 585,233 shares of common stock owned by Mr. Heinemann and |
| Includes |
| Includes 1,200,130 shares of common stock. The aforementioned beneficial ownership is based upon a Schedule 13G filed by Mr. Herzog with the SEC on February 10, 2016. The address of Mr. Herzog is 824 Harbor Road, Southport, Connecticut 06890-1410. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 30, 2018,2019, the Company repurchased from Allison Hoffman, a director of the Company, 75,000 shares of its common stock at a purchase price of $2.77 per share orfor an aggregate purchase price of $207,750.
Review, Approval or Ratification of Transactions with Related Persons
The Audit Committee has responsibility for reviewing and approving related-persons transactions in accordance with its charter. A related person is any executive officer, director, nominee for director or more than 5% stockholder of the Company, including immediate family members, and any entity owned or controlled by such persons. In addition, pursuant to our Codes of Ethics, all of our officers, directors and employees are to avoid conflicts of interest and to refrain from taking part or exercising influence in any transaction in which such party's personal interest may conflict with the best interest of the Company. Except for provisions of the Audit Committee Charter, there are no written procedures governing review of related-persons transactions.
AUDIT COMMITTEE REPORT
The information contained in this Audit Committee report is not "soliciting material" and has not been "filed" with the SEC. This report will not be incorporated by reference into any of our future filings under the Securities Act of 1933 or the Exchange Act, except to the extent that we may specifically incorporate it by reference into a future filing.
The Audit Committee reviews the Company's financial reporting process on behalf of the Board. Management is responsible for the financial statements and the reporting process, including the internal control over financial reporting. The Company's independent registered public accounting firm, Friedman LLP, is responsible for expressing an opinion on the conformity of the audited financial statements with U.S. generally accepted accounting principles. The Audit Committee has reviewed and discussed the audited financial statements with management and management's evaluations of the Company's system of internal controls over financial reporting contained in the 20172018 Annual Report on Form 10-K.
As required by the standards of the Public Company Accounting Oversight Board ("PCAOB"), the Committee has discussed with Friedman LLP (i) the matters specified in Auditing Standard 61 – "Communications with Audit Committees"required to be discussed by the applicable requirements of the PCAOB and the SEC and (ii) the independence of Friedman LLP from the Company and management. The Audit Committee received the written disclosures and the confirming letter from Friedman LLP required by applicable requirements of the PCAOB regarding the independent accountant's communications with the Audit Committee concerning independence and discussed with Friedman LLP its independence from the Company.
Based upon the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 20172018 which was filed with the SEC on April 2, 2018.March 29, 2019.
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APPROVAL BY NON-BINDING ADVISORY VOTE OF THE RESOLUTION APPROVING NAMED EXECUTIVE OFFICER COMPENSATION
The Company is asking its stockholders to approve a non-binding advisory resolution on its named executive officer compensation as reported in this Proxy Statement.
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, the Company is asking stockholders to approve the following advisory resolution at the Annual Meeting:
RESOLVED, that the stockholders of Network-1 Technologies, Inc. (the "Company") hereby approve, on an advisory basis, the compensation paid to the Company's named executive officers as disclosed in this proxy statement pursuant to the SEC's disclosure rules, including the narrative discussion in the section entitled "Executive Compensation", the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company's 20182019 Annual Meeting of Stockholders.
This advisory resolution, commonly referred to as a "say-on-pay" resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee will carefully review and consider the voting results when evaluating our named executive officer compensation.
The affirmative vote of the holders of record of a majority in voting interest of the shares of stock entitled to be voted on this Proposal 2 at the Annual Meeting, present in person or by proxy is required for approval of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE NON-BINDING ADVISORY RESOLUTION ON THE COMPANY'S NAMED EXECUTIVE OFFICER COMPENSATION.
PROPOSAL 4
3
REGISTERED PUBLIC ACCOUNTING FIRM
Friedman LLP ("Friedman") has audited and reported upon the financial statements of the Company for the fiscal year ended December 31, 2017.2018. The Audit Committee of the Board of Directors has re-appointed Friedman as the Company's independent registered public accounting firm for the Company's fiscal year ending December 31, 2018,2019, and the Board is asking stockholders to ratify that selection. Although current law, rules, and regulations, as well as the charterCharter of the Audit Committee, require the Audit Committee to engage, retain, and supervise the Company's independent registered public accounting firm, the Board considers the selection of the independent registered public accounting firm to be an important matter of stockholder concern and is submitting the selection of Friedman for ratification by stockholders as a matter of good corporate practice. The Audit Committee reserves the right, even after ratification by stockholders, to change the appointment of Friedman as auditors, at any time during the 20182019 fiscal year, if it deems such change to be in the best interest of the Company. If the stockholders do not ratify the selection of Friedman, the Audit Committee will review the Company's relationship with Friedman and take such action as it deems appropriate, which may include continuing to retain Friedman as the Company's independent registered public accounting firm. A representative of Friedman is expected to be present at the Annual Meeting with the opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate questions.
Friedman, our independent registered public accounting firm, billed us aggregate fees of $105,000$122,400 and $100,000$105,000 for the years ended December 31, 20172018 and December 31, 2016,2017, respectively, for the audit of our annual financial statements, review of our financial statements included in our Form 10-Qs and for other services in connection with statutory or regulatory filings.
Friedman provided various tax compliance services for which it billed us $20,000$28,500 and $10,900,$20,000, respectively, for the years ended December 31, 20172018 and December 31, 2016.2017. Friedman did not render any other professional services other than those discussed above for the years ended December 3, 201731, 2018 and December 31, 2016.2017.
Audit Committee Pre-Approval Policies and Procedures
Our audit committee charterAudit Committee Charter provides that our audit committeeAudit Committee must comply with SEC rules to maintain auditor independence as set forth in Rule 2-01(c)(7)(i) of Regulation S-X. The Audit Committee has a policy to pre-approve all audit and permissible non-audit services to be provided by our independent registered public accounting firm. All the services above were approved in advance by our Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF FRIEDMAN LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018.
2019.
STOCKHOLDER PROPOSALS FOR 20192020 ANNUAL MEETING
Stockholders who wish to present proposals for inclusion in our proxy statement and form of proxy relating to our annual meeting of stockholders to be held in 20192020 must submit a notice containing the proposal in proper form consistent with Rule 14a-8 of the Exchange Act, addressed to the attention of our Corporate Secretary at our address set forth on the first page of this proxy statement, not later than April 4, 2019.5, 2020.
If a stockholder submits a proposal after the April 4, 20195, 2020 deadline required under Rule 14a-8 of the Exchange Act but still wishes to present the proposal at our annual meeting of stockholders (but not in our proxy statement) for the fiscal year ending December 31, 20182019 to be held in 2019,2020, the proposal, which must be presented in a manner consistent with procedures in our Bylaws and applicable law, must be submitted to our Corporate Secretary in proper form at the address set forth above so that it is received by our Corporate Secretary not earlier than the close of business on the 120th day and not later than the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that, in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120th120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th90th day prior to the date of such annual meetingmeeting; provided further, in the event that less than 100 days notice of prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be received no later than the 10th day following the earlier of (i) the day on which notice of the annual meeting was mailed, or (ii) such public disclosure was first made of the annual meeting. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder's notice as described above.
Under our Bylaws, to be in proper form, each such notice must set forth as to each matter the stockholder proposes to bring before the meeting (except for the submission of Board nominations – see page 12 of this Proxy Statement and our Bylaws for required procedures): (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial owner, if any, in such business; (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration); (iii) a complete and accurate description of all agreements, arrangements and understandings between or among such stockholder and such beneficial owner, if any, and any other person or persons (including their names and addresses) in connection with the proposal of such business by such stockholder; and (iv) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made such information as required in accordance of Section 8(b) and 8(c) of our Bylaws.
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through brokerage institutions and all expenses involved, including printing and postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 20172018 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE OF BUSINESS ON AUGUST 1, 2018.JULY 22, 2019. COPIES OF OUR ANNUAL REPORT ON FORM 10-K, AND ANY AMENDMENTS TO THE FORM 10-K, WITHOUT EXHIBITS, WILL BE PROVIDED UPON WRITTEN REQUEST. EXHIBITS TO THE FORM 10-K WILL BE PROVIDED FOR A NOMINAL CHARGE. A WRITTEN REQUEST FOR THE FORM 10-K SHOULD BE MADE TO:
The Board of Directors is aware of no other matters, except for those incident to the conduct of the Annual Meeting, that are to be presented to stockholders for formal action at the Annual Meeting. If, however, any other matters properly come before the Annual Meeting or any adjournments thereof, it is the intention of the persons named in the proxy to vote the proxy in accordance with their judgment.
ANNUAL MEETING Of STOCKHOLDERS Of
NETWORK-1 TECHNOLOGIES, INC.
September 26, 201817, 2019
| PROXY VOTING INSTRUCTIONS |
INTERNET - Access "www.voteproxy.com" and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. |  | |||
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. | ||||
| Vote online/phone until 11:59 PM EST the day before the meeting. | COMPANY NUMBER | |||
MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. | ACCOUNT NUMBER | |||
IN PERSON - You may vote your shares in person by attending the Annual Meeting. | ||||
GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. |
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at http://www.network-1.com/sec/ |
Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN BELOW.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒
1. Election of Directors: SEE INSTRUCTIONS BELOW TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S).
| NOMINEES: | |||||
| o | FOR ALL NOMINEES | m | Corey M. Horowitz | ||
| m | David C. Kahn | ||||
| o | WITHHOLD AUTHORITY FOR ALL NOMINEES | m m | Emanuel Pearlman Niv Harizman | ||
| m | Allison Hoffman | ||||
| o | FOR ALL EXCEPT (See instructions below) | ||||
INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:●
| FOR | AGAINST | ABSTAIN | ||||||||||||||||
| 2. | To approve, by non-binding advisory vote, the resolution | o | o | o | ||||||||||||||
| approving named executive officer compensation. | ||||||||||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||||||
| To ratify the appointment of Friedman LLP as the Company’s | o | o | o | |||||||||||||||
| independent registered public accounting firm for the fiscal year | ||||||||||||||||||
| ending December 31, | ||||||||||||||||||
| meeting or any adjournment(s) thereof. | ||||||||||||||||||
| The undersigned acknowledges receipt from the Company before the execution of this proxy of the Notice of Annual Meeting of Shareholders, a Proxy Statement for the Annual Meeting of Shareholders and the | ||||||||||||||||||
MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING. o
| To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | o |
| Signature of Stockholder | Date: | Signature of Stockholder | Date: |
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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o ■
NETWORK-1 TECHNOLOGIES, INC.
445 Park Avenue, Suite 912
New York, NY 10022
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Corey M. Horowitz and David C. Kahn, and each of them, with full power of substitution and power to act alone, as proxies to vote all the shares of Common Stock which the undersigned would be entitled to vote if personally present and acting at the Annual Meeting of Shareholders of Network-1 Technologies, Inc., to be held on Wednesday,Tuesday, September 26, 201817, 2019 at 10:00 a.m., and at any adjournments or postponements thereof, as follows:
(Continued and to be marked, dated and signed on the reverse side.)
| ■ 1.1 | 14475■ |