SCHEDULE 14A
(RULE 14a-101)
(Rule 14a-101)
INFORMATION REQUIRED IN
Network-1 Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
☒ | No fee required. |
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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☐ | 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 |
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(3) | Filing Party: | |
(4) | Date Filed: | |
65 Locust Avenue, Suite 912
New York, New York 10022
You are cordially invited to attend the Annual Meeting of Stockholders of Network-1 Technologies, Inc. (the "Company"“Company”) which will be held on Tuesday, September 19, 2017,20, 2022, at 10:00 A.M. (local time)(Eastern Time), virtually, via a live audio webcast at https://web.lumiagm.com/201466103. The Annual Meeting will be a completely virtual meeting of stockholders which will be conducted exclusively by webcast on the officesInternet. The Annual Meeting is being held entirely online due to the ongoing public health impact 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 20172022 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 personvirtually 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.
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 |
65 Locust Avenue, Suite 912
New York, New York 10022
NOTICE IS HEREBY GIVEN that the 20172022 Annual Meeting of Stockholders (the “Annual Meeting”) of Network-1 Technologies, Inc. (the "Company"“Company”) will be held on Tuesday, September 19, 2017,20, 2022, at 10:00 A.M. (local time)(Eastern Time), virtually, via a live audio webcast on the Internet at https://web.lumiagm.com/201466103, for the offices of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., 10th Floor, 805 Third Avenue, New York, New York 10022.
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3. | To cast a non-binding, advisory vote to approve the |
4. | To ratify the appointment of Friedman LLP as |
To transact such other business as may properly come before the Annual Meeting (including any adjournments or |
The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively by webcast on the Internet. No physical meeting will be held. Only stockholders of record at the close of business on July 25, 201726, 2022 are entitled to receive the notice of and to vote at the Annual Meeting or any adjournmentspostponement or adjournment thereof.
If your shares are registered in your name with American Stock Transfer & Trust Company LLC (“AST”), the Company’s transfer agent, and you wish to attend the online-only virtual meeting, go to https://web.lumiagm.com/201466103, enter the 11 digit voter control number you received on your proxy card or proxy materials and the password for the Annual Meeting, which is network2022. We encourage you to use ample time for online check-in which will begin at 9:00 A.M. (Eastern Time) on the day of the Annual Meeting.
If your shares are registered in the name of your broker, bank or other nominee, you are a “beneficial owner” of the shares. Beneficial owners of shares who wish to attend the online-only virtual meeting must obtain a valid legal proxy by contacting your account representative at the bank, broker, or other nominee that holds your shares and then register in advance to virtually attend the Annual Meeting. After obtaining a valid legal proxy from your broker, bank or other nominee, to then register to virtually attend the Annual Meeting, you must submit a copy of your legal proxy reflecting the number of your shares along with your name and e-mail address to American Stock Transfer and Trust Company, LLC. Request for registration should be directed to proxy@astfinancial.com or to facsimile number 718-765-8730. Written requests can be mailed to: American stock Transfer & Trust LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, New York 11219. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00p.m. (Eastern Time) on September 13, 2022.
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 approval of the 2022 Stock Incentive Plan, “FOR” the Say on Pay Vote. Further, the Board of Directors recommends that you vote "Vote and “FOR"” ratifying the appointment of Friedman LLP as the Company'sCompany’s independent registered public accounting firm.
By Order of the Board of Directors, | |
August 5, 2022 | /s/ Corey M. Horowitz |
Corey M. Horowitz | |
Chairman, Chief Executive Officer and Chairman of the Board of Directors |
GENERAL INFORMATION | 1 |
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Voting | 2 |
Revoking Your Proxy | 3 |
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Voting Instructions | 6 |
Tabulating the Vote | 6 |
Voting Results | 6 |
Solicitation/Costs | 6 |
Virtual Annual Meeting | 7 |
Submitting a Question | 7 |
Technical Difficulties | 7 |
PROPOSAL 1 - ELECTION OF DIRECTORS | |
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Director Independence | 11 |
Board Leadership Structure | 11 |
Board Oversight of Risk | 11 |
Meetings of the Board of Directors and Board Committees | 11 |
Board Committees | 11 |
Anti-Hedging and Anti-Pledging Policies | 13 |
Code of Ethics | 13 |
Communications with the Board | 13 |
CONSIDERATION OF DIRECTOR NOMINEES | |
DEADLINE AND PROCEDURES FOR SUBMITTING BOARD NOMINATIONS | |
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COMPENSATION | 15 |
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Named Executive Officers | 16 |
Compensation Overview | 16 |
Summary Compensation Table | 17 |
Outstanding Equity Awards At Year-End | 20 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 21 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | |
AUDIT COMMITTEE REPORT | 23 |
PROPOSAL 2 - APPROVAL | 24 |
Proposal | 24 |
Summary of Material Features of the Plan | 25 |
Rationale for Adoption of the 2022 | 26 |
Summary of the Plan | 26 |
New Plan Benefits | 30 |
Tax Aspects Under the Code | 30 |
Equity Compensation Plan Information | 32 |
PROPOSAL 3 - NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF | |
PROPOSAL | |
STOCKHOLDER PROPOSALS FOR | |
OTHER INFORMATION |
NETWORK-1 TECHNOLOGIES, INC.
PROXY STATEMENT
FOR THE 20172022 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, SEPTEMBER 19, 2017
GENERAL INFORMATION
Our Board of Directors (the "Board"“Board”) solicits your proxy on our behalf for the 20172022 Annual Meeting of Stockholders (the "Annual Meeting"“Annual Meeting”) of Network-1 Technologies, Inc. and at any postponement or adjournment of the Annual Meeting for the purposes set forth in this Proxy Statement and the accompanying Notice of 20172022 Annual Meeting of Stockholders (the "Notice"“Notice”). The Annual Meeting will be held at 10:00 A.M. (Eastern Time) on Tuesday, September 19, 201720, 2022, virtually, via live audio webcast on the Internet at https://web.lumiagm.com/201466103. The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively by webcast on the officesInternet. The Annual Meeting is being held entirely online due to the ongoing public health impact of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., which are locatedthe coronavirus pandemic (COVID-19) and to support the health and well being of our directors and stockholders. No physical meeting will be held. You will be able to attend the Annual Meeting, vote and submit your questions at 805 Third Avenue, 10th Floor, New York, New York 10022.
In this Proxy Statement the terms "Network-1"“Network-1”, the "Company"“Company”, "we"“we”, "us"“us”, and "our"“our” refer to Network-1 Technologies, Inc. The address and telephone number of our principal executive offices is Network-1 Technologies, Inc., 445 Park65 Locust Avenue, Suite 912,Third Floor, New York, New York 10022,Canaan, Connecticut 06840, telephone: (212) 829-5770.(203) 920-1055. This Proxy Statement, the accompanying proxy card and our 20162022 Annual Report will be first sent on or about August 2, 20175, 2022 to all stockholders of record as of July 25, 2017.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON SEPTEMBER 19, 2017:20, 2022: This Proxy Statement and the Company's 2016Company’s 2021 Annual Report are available for review on the Internet at http://www.network-1.com/sec/proxy2017/proxy2022/.
Record Date | July |
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. Votes withheld from any nominee, abstentions and |
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Shares Outstanding | As of July 26, 2022 (Record Date) there were 23,791,194 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 |
Voting | Each share of Network-1 common stock has one vote on each matter. Only shareholders of record as of the close of business on the Record Date (July There are four ways a stockholder of record |
(1)By Internet: | |
(2)By Telephone: | |
(3)By Mail: | |
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If you hold your shares as a beneficial owner (in street name) through a American Stock Transfer & Trust Company, LLC Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 P.M. (Eastern Time), on Tuesday, September 13, 2022. Even if you plan | |
Revoking Your Proxy |
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Votes Required to Adopt Proposals and Abstentions and Broker Non-Votes | 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 or Withheld Votes (for Election of Directors) | 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) | 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 | No effect on this proposal |
(3) 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 3 is required to approve this proposal. | Counted as | No effect on this proposal |
(4) Ratification of 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 4 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), approval of the 2022 Stock Incentive Plan (Proposal 2) or the Say on Pay Vote (Proposal |
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. | |
Effect of Abstentions and Broker Non-Votes | Under the rules that govern brokers holding shares for their customers, brokers who do not receive voting instructions from their customers have the discretion to vote uninstructed shares on routine matters, but do not have discretion to vote such uninstructed shares on non-routine matters. Only Proposal 4, the ratification of the appointment of Friedman LLP, is considered a routine matter where brokers are permitted to vote shares held by them without instruction. If your shares are held through a broker, those shares will not be voted on the election of directors (Proposal 1), approval of the 2022 Stock Incentive Plan (Proposal 2) or the Say on Pay Vote (Proposal 3) unless you affirmatively provide the broker with instructions on how to vote. |
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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 |
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, and a representative of the legal counsel to the Company. |
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. |
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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Virtual Annual Meeting | The Annual Meeting is being held entirely online due to the ongoing public health impact of the coronavirus pandemic (COVID-19) and to support the health and well being of our directors and stockholders. Hosting a virtual annual meeting provides easy access for our stockholders and facilitates participation since stockholders can participate from any location. |
Submitting a | If you want to submit a question during the Annual Meeting, log into https://web.lumiagm.com/201466103 (password: network2022). We intend to answer properly submitted questions that are pertinent to the Company and the meeting matters, as time permits. However, we reserve the right to edit inappropriate language to exclude questions that are not pertinent to meeting matters or that are otherwise inappropriate. The questions and answers will be available as soon as practicable after the Annual |
Technical Difficulties | If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Annual Meeting login page. |
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The Company'sCompany’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'sdirector’s earlier resignation or removal. The Company'sCompany’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'sCompany’s Board of Directors and the one nominee (Jonathan Greene) who is not presently on the Board, has indicated to the Board of Directors of the Company that he or she will be available to serve.
All nominees have been recommended by the Company'sCompany’s Nominating and Corporate Governance Committee.
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 belowin the table below is information each director has given us about all positions he or she holds, the director'sdirector’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'sdirector’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 | DIRECTOR SINCE | |||||
Corey M. Horowitz | 67 | Chairman, Chief Executive Officer and Chairman of the Board of Directors | April 1994 | |||
60 | — | |||||
Emanuel R. Pearlman | 62 | Director | January 2012 | |||
Niv Harizman | 58 | Director | December 2012 | |||
Allison Hoffman | 51 | Director | December 2012 |
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Corey M. Horowitz becamehas been our Chairman and Chief Executive Officer insince 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. Mr. Horowitz is also a member of the Life Sciences Institute Leadership Council at the University of Michigan. We believe Mr. Horowitz'sHorowitz’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, became our Chief Financial Officer in January 2004 and our Secretary in August 2012. Mr. Kahn was elected toJonathan Greene is a nominee for our Board of Directors. Mr. Greene has served as our Executive Vice President 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. KahnOctober 2013. He served as a full-time faculty memberconsultant 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 Yeshiva UniversityNetwork-1 in New York.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. We believe Mr. Kahn'sGreene’s qualifications to serve on our Board include his backgroundtechnical expertise and expertise in accounting and tax matters.
Emanuel R. Pearlman has been a member of our Board of Directors since January 2012.2012, 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 Chairman and CEOChief Executive Officer of Liberation Investment Group, LLC, a New York based investment management and financial consulting firm, a positionwhich he has held sincefounded in January 2003. From March 2022 to April 2022, Mr. Pearlman served as a member of the Board of Directors and Chair of the Strategic Review Committee of Redbox Entertainment, Inc. (NASDAQ:RDBX), an entertainment company that provides consumers access to a large variety of content across digital and physical media. From October 2020 to September 2021, Mr. Pearlman served as a member of the Board of Directors of Atlas Crest Investment Corp. (NYSE:ACIC) and during the period February 2021 until June 2022, he served on the Board of Directors of Atlas Crest Investment Corp. II (NYSE: ACII), each entity is a special purpose acquisition company (SPAC). Mr. Pearlman also serves as Executive Chairman of the BoardAudit Committee and a member of the Compensation Committee and Nomination & Governance Committee of Atlas Crest Investment Corp. and held the same committee positions for Atlas Crest Investment Corp. II during the period February 2021 until June 2022. Mr. Pearlman served as Executive Chairman of Empire Resorts, Inc. (NASDAQ: NYNY), a position he has held since from June 2016. From September 2010 to May 2016 heuntil November 2019, served as Non-Executive Chairman of the Board of Empire Resorts, Inc.,from September 2010 through May 2016, and as a director since May 2010. Mr. Pearlman also currently serves as Chairman of the Strategic Development Committee of Empire Resorts, Inc. Mr. Pearlman previously served on the Audit, Compensation, Corporate Governance and Regulatory Compliance Committees of Empire Resorts, Inc. Since May 2017, Mr. Pearlman has served on the Board of Directors from May 2010 to November 2019. Mr. Pearlman was a member of the Board of Directors of CEVA Logistics, AG (SIX:CEVA) from May 2018 until October 2019 and served on its Audit Committee from May 2018 through October 2019 and its Nomination and Governance Committee from May 2018 through May 2019. From June 2013 through May 2018, he served on the Strategic Review CommitteeBoard of ClubCorp.Directors of CEVA Holdings, Inc. (NYSE: MYCC).LLC. From January 2012 to January 2013,May 2017 through September 2017, Mr. Pearlman served on the boardBoard of directorsDirectors of Dune Energy,ClubCorp Holdings, Inc. (OTCBB: DUNR.OB) and as Chairman of the Nominating and Governance Committee. From October 2006 to March 2010, Mr. Pearlman(NYSE:MYCC), where he served on the board of directors of Multimedia Games, Inc. (NASDAQ: MGAM). Mr. Pearlman was previously a director of Network-1 from December 1999 to December 2002.Strategic Review Committee. We believe Mr. Pearlman'sPearlman’s qualifications to serve on our Board include his significant investment and financial experience and expertise combined with his Board experience.
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Niv Harizman became has been a director of our company insince 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'sHarizman’s qualifications to serve on our Board include his significant investment and financial transactional experience and expertise.
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Our stock is listed on the NYSE MKT LLC.American LLC under the symbol “NTIP”. 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 MKTAmerican 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'sCompany’s risk, the Company'sCompany’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'sCompany’s overall strategy.
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During the year ended December 31, 2016, the2021, our Board held sevenfive meetings and acted by unanimous consent in lieu of a meeting on one occasion. Board committees held the following meetings and acted by unanimous consent during the year ended December 31, 2016:2021 as follows: Audit Committee – four meetings and three unanimous consents in lieu of meeting; Compensation Committee - three meetings and threeacted by unanimous consent in lieu of meeting on two occasions; Compensation Committee – acted by unanimous consent in lieu of meeting on two occasions; and Nominating and Corporate Governance Committee - two meetings and– one unanimous consent in lieu of meeting. During 2016,2021, each of the Company'sour directors attended at least seventy-five percent of the aggregate of: (1)(i) the total number of meetings of the Board of Directors; and (2)(ii) the total number of meetings of all Board committees on which they 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.
Our Board of Directors currently has four standing committees: an Audit Committee; a Compensation Committee; a Nominating and Corporate Governance Committee and a Strategic Development Committee. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee has a charter. These charters are available on the Company'sour website at: http://www.Network-1.com/sec/sec.htmir.Network-1.com/governance-docs. Each member of each committee is an "independent"“independent” director under the standards of the NYSE MKT LLC.American LLC Company Guide. 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 Section 803A(2) of the NYSE MKTAmerican LLC Company Guide.
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Audit Committee
Our Board of Directors has a separately designated standing audit committee in accordance with Section 10A-33(a)(58)(A) of the Securities Exchange Act of 1934, as amended, and Section 803B of the NYSE MKTAmerican LLC Company Guide, consisting of Emanuel Pearlman (Chairman) and Allison Hoffman. Emanuel Pearlman and Allison Hoffman each qualify as an audit committee financial expert under applicable SEC rules. Mr. Pearlman and Ms. Hoffman also qualify as "independent"“independent” as independence for audit committee members is defined under SectionRule 10A-3 underof the Securities Exchange Act of 1934, as amended, and Section 803B(2) of the NYSE MKTAmerican LLC Company Guide.
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'sour financial statements, (ii) the Company'sour compliance with legal and regulatory requirements, (iii) selecting and evaluating the qualifications and independence of the Company'sour independent registered public accounting firm, (iv) evaluating the performance of the Company'sour internal audit function and independent registered public accounting firm, and (v) the Company'sour internal controls and procedures.
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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'sBoard’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.
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'sour 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.
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Anti-Hedging and Anti-Pledging Policies
Certain transactions in our securities (such as short sales) create a heightened compliance risk or could create the appearance of misalignment between management and stockholders. In addition, securities held in a margin account or pledged as collateral may be sold without consent if the Securities Exchange Actowner fails to meet a margin call or defaults on the loan, thus creating the risk that a sale may occur at a time when an officer or director is aware of 1934, as amended, requires our officers andmaterial non-public information or otherwise is not permitted to trade in company securities. Our insider trading policies prohibit all directors and persons who own more than ten percent (10%) ofexecutive officers from hedging transactions, buying our securities on margin, or holding such securities in a registered class ofmargin account, buying or selling derivatives on our equity securities, to file reports of ownership and changesengaging in ownership with the SEC. Toshort sales involving such securities or pledging our knowledge, we believe that all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent (10%) stockholders were complied with during 2016 exceptsecurities as collateral for one Form 4 filed by Jonathan Greene, our Executive Vice President, one day after its due date.
We have adopted Codesa Code of Ethics that applies to cover itsour executive officers, directors and employees. Copies of the Codesour Code of Ethics can be obtained, without charge, upon written request addressed to:
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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 Park65 Locust Avenue, Suite 912,Third Floor, New York, NY 10022.Canaan, Connecticut 06840. 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.
Stockholders wishing to recommend director candidates to theour 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 Park65 Locust Avenue, Suite 912,Third Floor, 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'scandidate’s qualifications, and complies with the procedures set forth below under "Deadline“Deadline and Procedures for Submitting Board Nominations"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 MKTAmerican LLC Rules,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.
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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 considerconsiders the evolving needs of the Board and seekseeks 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,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'scandidate’s credentials in the context of the foregoing standards.
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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 Park65 Locust Avenue, Suite 912,Third Floor, New York, NY 10022)Canaan, Connecticut 06840), 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'syear’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'sstockholder’s notice as described above.
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In 2016,2021, we compensated each non-management director of our companyCompany by granting to each such outside director an award of 15,000 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: 7,500 units on the datein equal amounts of grant, and 3,750 units on each of March 15, 2021, June 15, 2021, September 9, 201615, 2021 and December 9, 2016.15, 2021. 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 receivereceives annual fees of $3,750 and $2,500, respectively.
The Board of Directors, based upon the recommendation of the Compensation Committee, may review and determine the form and amount of directors'directors’ compensation, including cash, equity basedequity-based awards and other director compensation to maintain a transparent and readily understandable director compensation which ensures that the directors continue to receive fair and appropriate compensation for the time commitment required to discharge their duties for a company of our size.
The following table sets forth the compensation awarded to, earned by or paid to all persons who served as members of our boardBoard of directors (otherDirectors other than our Named Executive Officers)Officers (as defined on page 17 hereof) during the year ended December 31, 2016.2021. No director who is also a Named Executive Officer received any compensation for services as a director in 2016.
Name | Fees earned or paid in cash ($)(1) | Stock Awards(2) (3) ($) | All other compensation ($) | Total ($) | ||||||||||||
Emanuel Pearlman | $ | 50,000 | $ | 37,000 | — | $ | 87,000 | |||||||||
Niv Harizman | $ | 46,250 | $ | 37,000 | — | $ | 83,250 | |||||||||
Allison Hoffman | $ | 48,875 | $ | 37,000 | — | $ | 85,875 |
Name | Fees earned or | Stock Awards | All other | Total |
Emanuel Pearlman | $50,000 | $46,988 | $1,125 | $98,113 |
Niv Harizman | $46,250 | $46,988 | $1,125 | $94,363 |
Allison Hoffman | $48,830 | $46,988 | $1,125 | $96,943 |
___________________________
(1) | Represents |
(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 |
(3) | As of December 31, |
(4) | Represents payment of |
15 |
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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. KahnGreene on page 79 of this Proxy Statement.
Jonathan GreeneDavid C. Kahn, CPA, age 55, became70, has been our Executive Vice PresidentChief Financial Officer since January 2004 and our Secretary since August 2012. Mr. Kahn was elected to our Board in October 2013. HeApril 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 consultant to the Company from December 2004 until March 2013, providing technical and marketing analysis for our intellectual property portfolio. Mr. Greene became an employeefull-time faculty member of Network-1Yeshiva University 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. (NASDAQ: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.
For the year ended December 31, 2016,2021, 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 20162021 and at the end of 20162021 whose total compensation exceeded $100,000, are our Named Executive Officers (as defined on page 17), as follows:
Jonathan Greene, Executive Vice President.
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Network-1 Technologies, Inc. is a "smaller“smaller reporting company"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“Compensation Disclosure and Analysis"Analysis” disclosure required of larger reporting companies.
Role ofRole of the Compensation Committee.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 hasExecutive Officers. The Compensation Committee has a formal written charter which is available on our website.formal written charter which is available on our website.
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Advisory Vote on Executive Compensation. At our September 20162021 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 20162021 annual meeting, with an overwhelminga 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 2016 reflects our favorable financial performance and2021 advances our retention goals and promotes both short-term and long-term performance of our executive officers.
The following table summarizes compensation for the years ended December 31, 20162021 and December 31, 2015,2020, awarded to, earned by or paid to our Chief Executive Officer ("CEO"(“CEO”) and to each of our executive officers who received total compensation in excess of $100,000 for the year ended December 31, 20162021 for services rendered in all capacities to us (collectively, the "Named“Named Executive Officers"Officers”).
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards($)(3) | Option Awards (4) | All Other Compensation($)(1) | Total($) |
Corey M. Horowitz | 2016 | $440,000 | $ 4,902,000(2) | $1,696,000 | $ — | $35,000(5) | $7,073,000 |
Chairman and Chief Executive Officer | 2015 | $415,000 | $ 1,086,000(2) | $ — | $108,000 | $35,000(5) | $1,644,000 |
David Kahn | 2016 | $166,000 | $ 75,000 | $ 124,000 | $ — | $33,375(6) | $ 398,375 |
Chief Financial Officer | 2015 | $157,500 | $ 30,000 | $ — | $ 13,000 | $22,890(6) | $ 223,390 |
Jonathan Greene | 2016 | $200,000 | $ 125,000 | $ 124,000 | $ — | $33,375(7) | $ 482,375 |
Executive Vice President | 2015 | $200,000 | $ 40,000 | $ — | $ 13,000 | $33,375(7) | $ 286,375 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards($)(3) | All Other Compensation($)(1) | Total($) | |||||||||||||||||
Corey M. Horowitz | 2021 | $ | 535,000 | $ | 1,976,000 | (2) | $ | — | $ | 38,500 | (4) | $ | 2,549,500 | ||||||||||
Chairman and Chief Executive Officer | 2020 | $ | 527,000 | $ | 345,000 | (2) | $ | — | $ | 81,250 | (4) | $ | 953,250 | ||||||||||
David C. Kahn | 2021 | $ | 175,000 | $ | 22,500 | $ | — | $ | 29,291 | (5) | $ | 226,791 | |||||||||||
Chief Financial Officer | 2020 | $ | 175,000 | $ | 15,000 | $ | 25,200 | (3) | $ | 34,828 | (5) | $ | 250,028 | ||||||||||
Jonathan Greene | 2021 | $ | 200,000 | $ | 40,000 | $ | — | $ | 36,120 | (6) | $ | 276,120 | |||||||||||
Executive Vice President | 2020 | $ | 200,000 | $ | 25,000 | $ | 33,600 | (3) | $ | 43,000 | (6) | $ | 301,600 | ||||||||||
______________________________________________ |
(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 |
(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. In accordance with SEC rules, the grant date fair value of an award that is subject to a performance condition is based on the probable outcome of the performance condition. See Note |
(4) |
Includes |
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(5) | Includes 401 (k) matching funds contributions by the Company and profit sharing under the Company's 401 (k) Plan for the benefit of Mr. |
(6) |
Narrative Disclosure to Summary Compensation Table
Employment Agreements, Termination of Employment and Change-In-Control Change-In-Control Arrangements
On July 14, 2016,March 22, 2022, we entered into a new employment agreement ("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 fivefour year term (“Term”), at an annual base salary of $475,000$535,000 which shall be increased by 3% per annum during the term of the Agreement.Term. The Agreement established an annual target bonus of $175,000 for theour Chairman and Chief Executive Officer based upon performance. During the year ended December 31, 2021 and December 31, 2020, our Chairman and Chief Executive Officer received an annual discretionary bonus of $175,000 and $125,000, respectively.
In addition, pursuant to the Agreement, we granted to theour Chairman and Chief Executive Officer, under our 2013 Stock Incentive Plan ("(“2013 Plan"Plan”), (750,000600,000 restricted stock units (the "RSUs"“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 vestterms provided for vesting in threefour tranches, as follows: (i) 250,000(1) 175,000 RSUs of which 100,000 RSUs shall vest on July 14, 2018,March 22, 2023 and 75,000 RSUs shall vest on March 22, 2024, subject to Mr. Horowitz'sHorowitz’s continued employment by us through theeach such vesting date (the "Employment Condition"“Employment Condition”) (“Tranche 1”); (ii) 250,000(2) 150,000 RSUs shall vest if at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments forduring the remaining term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2)Term our common stock achieving(the “Common Stock”) achieves a closing price (for 20for twenty (20) consecutive trading days)days (“Closing Price”) of a minimum of $3.25$3.50 per share (subject to adjustment for stock splits) and the Employment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 2”); (3) 150,000 RSUs shall vest if at any time during the termTerm 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)Agreement our common stock achievingCommon Stock achieves a closing price (for 20 consecutive trading days)Closing Price (as defined above) of a minimum of $4.25$4.00 per share (subject to adjustment for stock splits) and the Employment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 3”); and (4) 125,000 RSUs shall vest if at any time during the term of employment. The aforementionedthe Agreement, our Common Stock achieves a Closing Price of a minimum of $4.50 per share (subject to adjustment for stock price vesting conditions have been satisfied. Notwithstandingsplits) and the aforementioned, inEmployment Condition is satisfied through the date such minimum per share Closing Price is achieved (“Tranche 4”). In the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employmentby Mr. Horowitz for Good Reason (as defined), all in each case prior to the last day of the 750,000Term, the vesting of all RSUs (Tranches 1, 2, 3 and 4) shall accelerate (and not be subject to any conditions) and all RSUs shall become immediately fully vested. All RSUs granted by us to our officers, directors or consultants have dividend equivalent rights.
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 the Company'sour 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 theour Remote Power Patent (including all of our Mirror Worlds Patent Portfolioexisting patent portfolios and Cox Patent Portfolio)our investment in ILiAD Biotechnologies) (collectively, the "Incentive Compensation"“Incentive Compensation”). During the year ended December 31, 20162021 and December 31, 2015,2020, Mr. Horowitz earned Incentive
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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 employmentTerm 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"“For Cause” (as defined) or terminated by him without "Good Reason"“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'sHorowitz’s employment is terminated by us "Other“Other Than For Cause"Cause” (as defined) or by him for "Good Reason"“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 AgreementTerm and for a period of 12 months thereafter if his employment is terminated "Other“Other Than For Cause"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"“For Cause” by us or "Without“Without Good Reason"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 ana current annual base salary of $175,000 (increased in June 2016 from $157,000).$175,000. Mr. Kahn received ana discretionary annual bonus of $75,000$22,500 for the year ended2021 and $15,000 for 2020. On December 31, 2016 and $30,000 for December 31, 2015. 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, 2016,29, 2020, Mr. Kahn was granted 50,000 restricted stock units (RSUs)7,500 RSUs under ourthe 2013 Plan, (each RSU represents a contingent right to receive one share50% of our common stock). Each such RSURSUs vested 50% on the one year anniversary of the grant (June 9, 2017)(December 29, 2021) and 50% willof such RSUs vest on the two year anniversary of the grant (June 9, 2018),(December 29, 2022) subject to Mr. Kahn'shis continued employment by us.employment. In addition, in the event Mr. Kahn'sKahn’s employment is terminated without "Good Cause"“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"“Good Cause” within 6 months following a "Change“Change of Control"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.
Jonathan Greene serves as our Executive Vice President on an at-will basis at an annual base salary of $200,000. Mr. Greene received ana discretionary annual bonus of $125,000 for the year ended December 31, 2016 and $40,000 for the year ended2021 and $25,000 in 2020. On December 31, 2015. On June 9, 2016,29, 2020, Mr. Greene was granted 50,000 restricted stock units (RSUs)10,000 RSUs under ourthe 2013 Plan, (each RSU represents a contingent right to receive one share50% of our common stock). Thesuch RSUs vested 50% on the one year anniversary of the date of grant (June 9, 2017)(December 29, 2021) and 50% willof such RSUs vest on the two year anniversary of the grant (June 9, 2018),(December 29, 2022) subject to his continued employment. On January 18, 2022, Mr. Greene's continued employment by us.
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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 $101,750$102,500 and $91,261$105,500 under the 401(k) plan for the years ended December 31, 20162021 and December 31, 2015,2020, respectively.
Outstanding Equity Awards at December 31, 2021
The following table sets forth information relating to unexercised options and unvested restricted stock units for each Named Executive Officer as of December 31, 2016:
Option Awards | Stock Awards | |||||||||||
Name | Number of Securities Underlying Unexercised Options | Option Exercise Price ($) | 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) | $2,550,000 | ||||||
David Kahn Chief Financial Officer | 50,000 75,000 | — | $ 1.65 $ 1.40 | 6/08/19 4/12/17 | 50,000(3) | $ 170,000 | ||||||
Jonathan Greene Executive Vice President | 50,000 | — | $ 1.65 | 11/09/19 | 50,000(4) | $ 170,000 |
Option Awards | Stock Awards | |||||
Name | Number of Securities | 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 | —
| $1.19
| 11/01/22
| — | $ — |
David Kahn
| —
|
— | —
| — | 3,750(2) | $10,575 |
Jonathan Greene Executive Vice President | — | — | — | — | 5,000(3) | $14,100 |
_____________________________
(1) | In accordance with SEC rules, market value is based on |
(2) | Represents |
(3) | 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, 20172022 for (i) each of our directors, (ii) each of our executive officers, (iii) 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.
NAME OF BENEFICIAL OWNER | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1) | PERCENTAGE OF COMMON STOCK BENEFICIALLY OWNED(2) | ||
Corey M. Horowitz(3) | 7,118,769 | 28.0% | ||
CMH Capital Management Corp(4) | 2,291,372 | 9.5% | ||
Steven D. Heinemann (5) | 3,252,815 | 13.5% | ||
Goose Hill Capital LLC(6) | 2,667,582 | 11.0% | ||
John Herzog(7) | 1,200,130 | 5.0% | ||
Niv Harizman(8) | 478,793 | 1.8% | ||
Allison Hoffman(9) | 166,750 | * | ||
Emanuel Pearlman(10) | 139,533 | * | ||
David C. Kahn(11) | 101,204 | * | ||
Jonathan E. Greene(12) | 86,512 | * | ||
All officers and directors as a group (6 Persons) | 8,091,561 | 30.9% |
NAME AND ADDRESS OF BENEFICIAL OWNER | AMOUNT AND NATURE OF BENEFICIAL | PERCENTAGE | |
Executive Officers and Directors: Corey M. Horowitz(3) |
7,016,751 |
28.9% | |
CMH Capital Management Corp.(4) | 2,291,372 | 9.6% | |
Niv Harizman(5) | 279,735 | 1.2% | |
David C. Kahn(6) | 116,053 | * | |
Emanuel Pearlman(7) | 105,809 | * | |
Jonathan E. Greene(8) | 85,717 | * | |
Allison Hoffman(9) | 68,061 | * | |
All officers and directors as a group (6 Persons) | 7,672,126 | 31.6% | |
5% Stockholders: | |||
Steven D. Heinemann(10) | 1,961,201 | 8.2% | |
Goose Hill Capital LLC(11) | 1,376,068 | 5.8% |
__________________________
*
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 15, |
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(3) | Includes (i) |
(4) | Includes |
(5) | Includes |
(6) | Includes 116,053 shares of common stock. Does not include 3,750 shares of common stock subject to restricted stock units owned by Mr. Kahn that do not vest within 60 days from July 15, 2022. |
(7) | Includes 105,809 shares of common stock. Does not include 7,500 shares of common stock subject to restricted stock units owned by Mr. Pearlman that do not vest within 60 days from July 15, 2022. |
(8) | Includes 85,717 shares of common stock. Does not include 20,000 shares of common stock subjected to restricted stock units owned by Mr. Greene that do not vest within 60 days from July 15, 2022. |
(9) | Includes 68,061 shares of common stock. Does not include 7,500 shares of common stock subject to restricted stock units owned by Ms. Hoffman that do not vest within 60 days from July 15, 2022. |
(10) | Includes 585,133 shares of common stock owned by Mr. Heinemann and |
(11) | Includes |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 27, 2021, the last two fiscal years there were no transactions with related persons requiring disclosure under Item 404Company repurchased from Emanuel Pearlman, a director of Regulation S-K under the Securities Act.
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 CodesCode 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'sparty’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.
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The information contained in this Audit Committee report isshall not "soliciting material"be deemed to “soliciting material” and has not been "filed"“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'sCompany’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'sCompany’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'smanagement’s evaluations of the Company'sCompany’s system of internal controls over financial reporting contained in the 20162021 Annual Report on Form 10-K.
As required by the standards of the Public Company Accounting Oversight Board ("PCAOB"(“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'saccountant’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, 20162021 which was filed with the SEC on March 20, 2016.
The Audit Committee – Emanuel Pearlman (Chairman) and Allison Hoffman
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23
APPROVAL OF THE NETWORK-1 TECHNOLOGIES, INC.
2022 STOCK INCENTIVE PLAN
Proposal
The Board believes that stock-based incentive awards play an important role in our success by encouraging and enabling our officers, employees, non-employee directors and consultants upon whose judgment, initiative and efforts we largely depend for the successful conduct of our business to acquire an equity interest in our company. The Board believes that providing such persons with a direct stake in our company assures a closer identification of the interests of such individuals with those of our company and its stockholders, thereby stimulating their efforts on our behalf and strengthening their desire to remain with Network-1.
On July 25, 2022, the Board adopted, subject to stockholder approval, the Network-1 2022 Stock Incentive Plan (the “Plan”). The Plan is designed to enable the flexibility to grant equity awards to our officers, employees, non-employee directors and consultants and to ensure that we can continue to grant equity awards to eligible recipients at levels determined to be appropriate by the Board and/or the Compensation Committee. A copy of the Plan is attached as Exhibit A to this Proxy Statement and is incorporated herein by reference.
If the Plan is approved, we intend to discontinue granting awards under our 2013 Stock Incentive Plan (the “2013 Plan”).
As of June 30, 2022, there were outstanding:
· | a stock option to acquire 500,000 shares of common stock under our equity compensation plans, with an exercise price per share of $1.19 and an expiration date of November 1, 2022; |
· | 235,000 unvested restricted stock unit awards with time-based vesting outstanding under our equity compensation plans; and |
· | 425,000 unvested restricted stock unit awards with performance-based vesting outstanding under our equity compensation plans. |
Other than the foregoing, no awards were outstanding under our equity compensation plans as of June 30, 2022. As of June 30, 2022, there were 1,212,938 shares of common stock available for awards under our 2013 Plan.
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Summary of Material Features of the Plan
The material features of the Plan are:
· | The maximum number of shares of common stock to be issued under the Plan is 2,300,000, which represents 1,087,062 shares more than the number of shares remaining available for issuance under the 2013 Plan as of June 30, 2022; |
· | The award of stock options (both incentive and non-qualified options), restricted stock units, restricted stock, stock appreciation rights, unrestricted stock, cash-based awards, and dividend equivalent rights is permitted; |
· | Shares tendered or held back for taxes will not be added back to the reserved pool under the Plan. Upon the exercise of a stock appreciation right that is settled in shares of common stock, the full number of shares underlying the award will be charged to the reserved pool. Additionally, shares we reacquire on the open market will not be added to the reserved pool under the Plan; |
· | Stock options and stock appreciation rights will not be repriced in any manner without stockholder approval; |
· | No more than 1,000,000 shares subject to an award may be granted to any individual grantee in any calendar year period. |
· | Any dividends and dividend equivalent rights payable with respect to any equity award are subject to the same vesting provisions as the underlying award; |
· | Any material amendment to the Plan is subject to approval by our stockholders; and |
· | The term of the Plan will expire on September 20, 2032, ten years from the date of the Annual Meeting. |
Based solely on the closing price of our common stock or $2.40 as reported by NYSE American on June 30, 2022 and the maximum number of shares that would have been available for awards as of such date under the Plan, the maximum aggregate market value of the common stock that could potentially be issued under the Plan is $5,520,000. The shares of common stock underlying any awards that are forfeited, canceled or otherwise terminated, other than by exercise, under the Plan, will be added back to the shares of common stock available for issuance under the Plan. Shares tendered or held back upon exercise of a stock option or settlement of an award under the Plan to cover the exercise price or tax withholding and shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof, will not be added back to the shares of common stock available for issuance under the Plan. In addition, shares of common stock repurchased on the open market will not be added back to the shares of common stock available for issuance under the Plan.
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Rationale for Adoption of the 2022
We previously adopted the 2013 Plan. The 2013 Plan is scheduled to expire in October 2023. As of June 30, 2022, 1,212,938 shares were available for issuance under the 2013 Plan. Accordingly, the Plan is important to our ongoing effort to build stockholder value. Equity incentive awards are an important component of our executive and non-management director compensation. Our Compensation Committee and the Board believe that we must continue to offer a competitive equity compensation program in order to attract, retain and motivate the talented and qualified employees necessary for our growth and success.
We manage our long-term stockholder dilution by limiting the number of equity incentive awards granted annually. The Compensation Committee monitors our compensation plans in order to maximize stockholder value by granting only the number of equity incentive awards that it believes are necessary and appropriate to attract, reward and retain our employees. By doing so, we link the interests of our employees with those of our stockholders and motivate our employees to act as owners of the business.
If the Plan is approved by our stockholders, we will have approximately 2,300,000 shares available for grant after the Annual Meeting. Our Compensation Committee determined the size of reserved pool under the Plan based on an assessment of the magnitude of increase that our institutional investors and the firms that advise them would likely find acceptable. We anticipate that if our request to adopt the Plan is approved by our stockholders, it will be sufficient to provide equity incentives to attract, retain and motivate employees for at least five years.
Summary of the Plan
The following description of certain features of the Plan is intended to be a summary only. The summary is qualified in its entirety by the full text of the Plan, which is attached hereto as Exhibit A.
Administration. The Plan will be administered by the Compensation Committee. The Compensation Committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the Plan. The Compensation Committee may delegate to a committee consisting of one or more of our officers the authority to grant awards to employees who are not subject to the reporting and other provisions of Section 16 of the Exchange Act, subject to certain limitations and guidelines.
Eligibility; Plan Limits. All of our full or part-time employees, non-employee directors and consultants are eligible to participate in the Plan, subject to the discretion of the administrator. As of June 30, 2022, approximately seven individuals would have been eligible to participate in the Plan had it been effective on such date, which includes three executive officers, three non-employee directors and one consultant. There are certain limits on the number of awards that may be granted under the Plan. Awards of no more than 1,000,000 shares may be granted to any one individual during any one calendar year period. No more than 1,000,000 shares of common stock may be issued in the form of incentive stock options in any one calendar period.
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Stock Options. The Plan permits the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. Options granted under the Plan will be non-qualified options if they fail to qualify as incentive stock options or exceed the annual limit on incentive stock options. Incentive stock options may only be granted to employees of Network-1 and its subsidiaries. Non-qualified options may be granted to employees, non-employee directors and consultants. The option exercise price of each option will be determined by the Compensation Committee. The exercise price of an option may not be less than 100% of the fair market value of the common stock on the date of grant. Fair market value for this purpose will be determined by reference to the price of the shares of common stock on NYSE American. The exercise price of an option may not be reduced after the date of the option grant without stockholder approval, other than to appropriately reflect changes in our capital structure.
The term of each option will be fixed by the Compensation Committee and may not exceed ten years from the date of grant. The Compensation Committee will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Compensation Committee. In general, unless otherwise permitted by the Compensation Committee, no option granted under the Plan is transferable by the optionee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order, and options may be exercised during the optionee’s lifetime only by the optionee, or by the optionee’s legal representative or guardian in the case of the optionee’s incapacity.
Upon exercise of options, the option exercise price must be paid in full either in cash, by certified or bank check or other instrument acceptable to the Compensation Committee or by delivery (or attestation to the ownership) of shares of common stock that are beneficially owned by the optionee and that are not subject to risk of forfeiture. Subject to applicable law, the exercise price may also be delivered to us by a broker pursuant to irrevocable instructions to the broker from the optionee. In addition, non-qualified options may be exercised using a net exercise feature which reduces the number of shares issued to the optionee by the number of shares with a fair market value equal to the exercise price.
To qualify as incentive stock options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive stock options that first become exercisable by a participant in any one calendar year.
Restricted Stock Units. The Compensation Committee may award restricted stock units to participants. Restricted stock units are ultimately payable in the form of shares of common stock or cash subject to such conditions and restrictions as the Compensation Committee may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment (or other service relationship) with the company through a specified vesting period. In the Compensation Committee’s sole discretion, it may permit a participant to make an advance election to receive a portion of his or her future cash compensation otherwise due in the form of a restricted stock unit award, subject to the participant’s compliance with the procedures established by the Compensation Committee and requirements of Section 409A of the Code.
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Restricted Stock. The Compensation Committee may award shares of common stock to participants subject to such conditions and restrictions as the Compensation Committee may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment (or other service relationship) with us through a specified restricted period. During the vesting period, restricted stock awards may be credited with dividends but dividends payable with respect to restricted stock awards shall not be paid unless and until the award vests.
Stock Appreciation Rights. The Compensation Committee may award stock appreciation rights subject to such conditions and restrictions as the Compensation Committee may determine. Stock appreciation rights entitle the recipient to shares of common stock or cash equal to the value of the appreciation in the stock price over the exercise price. The exercise price may not be less than the fair market value of the common stock on the date of grant. The term of a stock appreciation right may not exceed ten years.
Unrestricted Stock Awards. The Compensation Committee may also grant (or sell at par value or such higher price determined by the Compensation Committee) shares of common stock that are free from any restrictions under the Plan. Unrestricted stock may be granted to any participant in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participant.
Dividend Equivalent Rights. The Compensation Committee may grant dividend equivalent rights to participants, which entitle the recipient to receive credits for dividends that would be paid if the recipient had held specified shares of common stock. Dividend equivalent rights may be granted as a component of an award of Restricted Stock Units or as a freestanding award and will be paid only if the related award becomes vested. Dividend equivalent rights may not be granted as a component of a stock option or stock appreciation right award. Dividend equivalent rights may be settled in cash, shares of common stock or a combination thereof, in a single installment or installments, as specified in the award.
Cash-Based Awards. The Compensation Committee may grant cash bonuses under the Plan to participants. The cash bonuses may be subject to the achievement of certain performance goals.
Change of Control Provisions. In the event of a “sale event,” as defined in the Plan, awards under the Plan may be assumed, continued or substituted. All awards will terminate in connection with a sale event unless they are assumed by the successor entity. To the extent the parties to such “sale event” do not provide for the assumption, continuation or substitution of Awards, upon the effective time of the “sale event”, the Plan and all outstanding Awards granted thereunder shall terminate. In the event of such termination, (i) we shall have the option (in our sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding awards, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the sale price multiplied by the number of shares of stock subject to such outstanding awards (to the extent then vested or, in the case of Options and Stock Appreciation Rights, exercisable at prices not in excess of the sale price) and (B) if applicable, the aggregate exercise price (if any) of such outstanding awards; or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the “sale event” as determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights (to the extent then exercisable) held by such grantee, but in such case the Board shall first accelerate the exercisability of such Options and Stock Appreciation Rights prior to termination.
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Adjustments for Stock Dividends, Stock Splits, Etc. The Plan requires the Compensation Committee to make appropriate adjustments to the number of shares of common stock that are subject to the Plan, to certain limits in the Plan, and to any outstanding awards to reflect stock dividends, stock splits, reorganization, recapitalization; reclassification and similar events.
Tax Withholding. Participants in the Plan are responsible for the payment of any federal, state or local taxes that we are required by law to withhold upon the exercise of options or stock appreciation rights or vesting of other awards. The Compensation Committee may require that tax withholding obligations be satisfied by withholding shares of common stock to be issued pursuant to exercise or vesting. The Compensation Committee may also require our tax withholding obligation to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares issued pursuant to any award are immediately sold and proceeds from such sale are remitted to us in an amount that would satisfy the withholding amount due.
Amendments and Termination. The Board may at any time amend or discontinue the Plan and the Compensation Committee may at any time amend or cancel any outstanding award for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action may adversely affect any rights under any outstanding award without the holder’s consent. To the extent required under the rules of NYSE American, any amendments that materially change the terms of the Plan will be subject to approval by our stockholders. Amendments shall also be subject to approval by our stockholders if and to the extent determined by the Compensation Committee to be required by the Code to preserve the qualified status of incentive stock options.
Effective Date of Plan. The Plan was approved by our Board on July 25, 2022. Awards of incentive stock options may be granted under the Plan until September 20, 2032. No other awards may be granted under the Plan after the date that is ten years from the date of stockholder approval.
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New Plan Benefits
Because the grant of awards under the Plan is within the discretion of the Compensation Committee, we cannot determine the dollar value or number of shares of common stock that will in the future be received by or allocated to any participant in the Plan. Accordingly, in lieu of providing information regarding benefits that will be received under the Plan, the following table provides information concerning the benefits that were received by the following persons and groups during 2021: each named executive officer; all current executive officers, as a group; and all current directors who are not executive officers, as a group; (there were no current employees who are not executive officers):
Time-Based | ||
Name and Position | Dollar | Number of |
Corey M. Horowitz, Chairman and Chief Executive Officer | — | — |
David Kahn, Chief Financial Officer | — | — |
Jonathan Greene, Executive Vice President | — | — |
All current executive officers, as a group | — | — |
All current directors who are not executive officers, as a group | 140,864(2) | 45,000 |
____________________
(1) | The amounts included in this column represent the grant date fair value of restricted stock unit awards granted to non-management directors computed in accordance with FASB ASC Topic 718. The assumptions used to calculate the value of restricted stock awards are described in Note B[10] to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. |
(2) | Represents the aggregate grant date fair value for the group. |
Tax Aspects Under the Code
The following is a summary of the principal federal income tax consequences of certain transactions under the Plan. It does not describe all federal tax consequences under the 2022 Plan, nor does it describe state or local tax consequences.
Incentive Stock Options. No taxable income is generally realized by the optionee upon the grant or exercise of an incentive stock option. If shares of common stock issued to an optionee pursuant to the exercise of an incentive stock option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the exercise price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (ii) we will not be entitled to any deduction for federal income tax purposes. The exercise of an incentive stock option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.
If shares of common stock acquired upon the exercise of an incentive stock option are disposed of prior to the expiration of the two-year and one-year holding periods described above (a “disqualifying disposition”), generally (i) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of common stock at exercise (or, if less, the amount realized on a sale of such shares of common stock) over the exercise price thereof, and (ii) we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive stock option is paid by tendering shares of common stock.
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If an incentive stock option is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a non-qualified option. Generally, an incentive stock option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply.
Non-Qualified Options. No income is realized by the optionee at the time a non-qualified option is granted. Generally (i) at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the exercise price and the fair market value of the shares of common stock on the date of exercise, and we receive a tax deduction for the same amount, and (ii) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares of common stock. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.
Other Awards. We generally will be entitled to a tax deduction in connection with other awards under the Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income. Participants typically are subject to income tax and recognize such tax at the time that an award is exercised, vests or becomes non-forfeitable, unless the award provides for a further deferral.
Parachute Payments. The vesting of any portion of an award that is accelerated due to the occurrence of a change in control (such as a sale event) may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).
Limitation on Deductions. Under Section 162(m) of the Code, our deduction for awards under the Plan may be limited to the extent that any “covered employee” (as defined in Section 162(m) of the Code) receives compensation in excess of $1 million a year.
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Equity Compensation Plan Information
The following table sets forth information as of December 31, 2021 regarding shares of common stock that may be issued under our equity compensation plans, consisting of our 2013 Plan. The 2013 Plan provides for the issuance of incentive and non-qualified stock options, restricted stock, and other equity awards to our employees, officers, directors, consultants and advisors. The 2013 Plan was approved by the Stockholders in October 2013.
The following table summarizes share and exercise price information for our equity compensation plans as of December 31, 2021.
Number of securities to be issued upon exercise of outstanding | Weighted-average exercise price of outstanding options and rights(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) | |||||||
(a) | (b) | (c) | |||||||
Equity compensation plans approved by security holders(2) | 12,500(3) | $ — | 1,837,500 | ||||||
Equity compensation plans not approved by security holders | 500,000(4) | $ 1.19 | — | ||||||
Total | 512,500 | $ 1.19 | 1,837,500 |
(1) | The weighted average exercise price is based solely on the exercise price of the outstanding options to purchase shares of our common stock. It does not reflect the shares of our common stock that will be issued upon the vesting of outstanding awards of restricted stock units which have no exercise price. |
(2) | Consists of awards under the 2013 Plan. |
(3) | Consists of shares issuable upon vesting of outstanding restricted stock units. |
(4) | Represents an individual option grant to our Chairman and Chief Executive Officer outside of, and prior to the establishment of, the 2013 Stock Incentive Plan in October 2013 referred to in the above table. The option agreement pertaining to such option grant contains customary anti-dilution provisions. |
APPROVAL BY REQUIRED AND RECOMMENDATION
The affirmative vote of the holders of record of a majority in voting interest of the shares of stock entitled to vote of this Proposal 2 at the Annual Meeting, present in person or by proxy is required for approval of this Proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE NETWORK-1 TECHNOLOGIES, INC. 2022 STOCK INCENTIVE PLAN.
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PROPOSAL 3
NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE RESOLUTION APPROVINGOUR NAMED EXECUTIVE OFFICER COMPENSATION
As a matter of corporate governance and as required by Section 14A(a)(1) of the Exchange Act, we are asking itsour stockholders to approve a non-binding advisory resolution on itsour named executive officer compensation as reported in this Proxy Statement.
The following proposal, commonly known as a matter“say on pay” proposal, gives our stockholders the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of good corporate governance,our named executive officers. This vote is not intended to address any specific item of compensation or the Company iscompensation of any particular officer, but rather the overall compensation of our named executive officers and our compensation philosophy, policies and practices, as discussed in this Proxy Statement. Accordingly, we are asking our stockholders to approvevote for the following advisory resolution at the Annual Meeting:
RESOLVED, that the stockholders of Network-1 Technologies, Inc. (the "Company"“Company”) hereby approve, on ana non-binding, advisory basis, the compensation paid to the Company'sCompany’s named executive officers, as disclosed in this proxy statement pursuant to the SEC's disclosure rules,Item 402 of Regulation S-K, including the narrative discussion in the section entitled "Executive Compensation"“Executive Compensation”, the Summary Compensation Tablesummary compensation table and the related compensation tables, notes and narrative in the Proxy Statement for the Company's 2017Company’s 2022 Annual Meeting of Stockholders.
Before you vote, we recommend that you read the Executive Compensation section of this Proxy Statement for additional details on our executive compensation.
This vote is advisory, resolution, commonly referred to as a "say-on-pay" resolution, is non-bindingand therefore not binding on us, the Board of Directors. Although non-binding, the Board of Directors andor the Compensation Committee. However, out Board and Compensation Committee will carefully reviewvalue the opinions of our stockholders and considerintend to take into account the voting resultsoutcome of the vote when evaluatingconsidering future compensation decisions for 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 23 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"“FOR” THE APPROVAL OF THE NON-BINDING ADVISORY RESOLUTION ON THE COMPANY'SCOMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION.
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REGISTERED PUBLIC ACCOUNTING FIRM
Friedman LLP ("Friedman"(“Friedman”) has audited and reported upon the financial statements of the Company for the fiscal year ended December 31, 2016.2021. The Audit Committee of the Board of Directors has re-appointed Friedman as the Company'sCompany’s independent registered public accounting firm for the Company'sCompany’s fiscal year ending December 31, 2017,2022, 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'sCompany’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 20172022 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'sCompany’s relationship with Friedman and take such action as it deems appropriate, which may include continuing to retain Friedman as the Company'sCompany’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 $100,000$135,535 and $95,000,$125,211 for the years ended December 31, 20162021 and December 31, 2015,2020, 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 $10,900 during$22,890 and $33,577, respectively, for the yearyears ended December 31, 2016.2021 and December 31, 2020. Friedman did not render any other professional services other than those discussed above for the yearyears ended December 31, 2016. For the year ended2021 and December 31, 2015, Friedman did not render any other professional services other than those discussed above under "Audit Fees".
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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.
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APPROVAL REQUIRED AND RECOMMENDATION
The affirmative vote of the holders of record of a majority in voting interest of the shares entitled to vote on this Proposal 4 at the Annual Meeting, present in person or by proxy is required for approval of this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR“FOR” RATIFICATION OF THE APPOINTMENT OF FRIEDMAN LLP AS THE COMPANY'SCOMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017.
STOCKHOLDER PROPOSALS FOR 20182023 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 20182023 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,Proxy Statement, not later than March 31, 2018.
If a stockholder submits a proposal after the March 31, 2018April 12, 2023 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, 20172022 to be held in 2018,2023, 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'syear’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'sstockholder’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 1214 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.
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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'SCOMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 20162021 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE OF BUSINESS ON JULY 25, 2017.26, 2022. 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.
By Order of the Board of Directors, | |||
/s/ Corey M. Horowitz | |||
Corey M. Horowitz | |||
Chairman and Chief Executive Officer | |||
Chairman of the Board of Directors |
36 EXHIBIT A NETWORK-1 TECHNOLOGIES, INC. SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS The name of the plan is the Network-1 Technologies, Inc. 2022 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Directors and Consultants of Network-I Technologies, Inc. (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire an equity interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company. The following terms shall be defined as set forth below: “Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder. “Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation committee and which is comprised of not less than two Non-Employee Directors who are independent. “Affiliate” means a corporation, partnership, trust or unincorporated enterprise which is a member of the Company’s controlled group, within the meaning of Code Section 414(b) and (c). “Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Restricted Stock Units, Stock Appreciation Rights, Unrestricted Stock Awards, Cash-Based Awards, and Dividend Equivalent Rights. “Award Certificate” means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Certificate is subject to the terms and conditions of the Plan. “Board” means the Board of Directors of the Company. “Cash-Based Award” means an Award entitling the recipient to receive a cash-denominated Award granted pursuant to Section 10. “Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
“Consultant” means a consultant or advisor who provides bona fide services to the Company or an Affiliate as an independent contractor and who qualifies as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Act. “Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends granted pursuant to Section 11. “Effective Date” means the date on which the Plan becomes effective as set forth in Section 19. “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. “Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided, however, that if the Stock is listed on the New York Stock Exchange (including NYSE American), National Association of Securities Dealers Automated Quotation System (“NASDAQ”), NASDAQ Global Market or another national securities exchange or traded on any established market, the determination shall be made by reference to market quotations as of the close of the market. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations. “Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code. “Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary. “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option. “Option” or “Stock Option” means an option to purchase shares of Stock granted pursuant to Section 5. “Restricted Shares” means the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right of repurchase. “Restricted Stock Award” means an Award of Restricted Shares granted pursuant to Section 7. “Restricted Stock Units” means an Award of stock units granted pursuant to Section 6. “Sale Event” means the consummation of (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding stock immediately prior to such transaction do not own a majority of the outstanding voting power and outstanding stock or other equity interests of the resulting or
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