UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
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SCHEDULE 14A
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Proxy Statement Pursuant
to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of
the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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Straight Path Communications
Inc.
(Name of Registrant as
Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rule 14a-6(i)(1), and 0-11.
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Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and state how it
was determined):
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Fee paid previously with preliminary
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1)
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Form, Schedule or Registration Statement
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Date Filed:
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STRAIGHT PATH
COMMUNICATIONS INC.
5300 Hickory Park Drive, Suite
218
Glen Allen, Virginia 23059
(804) 433-1522
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
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TIME
AND DATE:
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11:00 a.m., local time, on Tuesday, February 6,
2018.
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PLACE:
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Kellogg, Hansen, Todd, Figel & Frederick,
P.L.L.C.,
1615 M Street N.W., Suite 400, Washington DC 20036.
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ITEMS
OF BUSINESS:
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1. To elect four directors, each for a term of one year.
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2. To transact other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
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RECORD DATE:
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You can vote if you were a stockholder of record
at close of business on December 8, 2017.
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PROXY
VOTING:
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You can vote either in person at the Annual
Meeting or by proxy without attending the meeting. See details
under the heading “How do I Vote?”
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ANNUAL MEETING ADMISSION:
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If you are a stockholder of record, a form of
personal photo identification must be presented in order to be
admitted to the Annual Meeting. If your shares are held in the name
of a bank, broker or other holder of record, you must bring a
brokerage statement or other written proof of ownership as of
December 8, 2017 with you to the Annual Meeting, as well as a form
of personal photo identification.
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ANNUAL MEETING DIRECTIONS:
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You may request directions to the annual meeting
via email at info@spathinc.com or by calling SPCI Investor
Relations at (804) 433-1522.
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Important Notice Regarding the Availability of Proxy Materials for
the straight path communications inc. Stockholders Meeting to be
Held on FEBRUARY 6, 2018
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The Notice of Annual Meeting and Proxy Statement and the 2017
Annual Report are available at:
www.spathinc.com/investors
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BY ORDER OF THE BOARD OF DIRECTORS
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Yonatan Cantor
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Corporate Secretary
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Glen Allen, Virginia
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November 27, 2017
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STRAIGHT PATH
COMMUNICATIONS INC.
5300 Hickory Park Drive, Suite
218
Glen Allen, Virginia 23059
(804) 433-1522
_____________________
PROXY
STATEMENT
_____________________
GENERAL
INFORMATION
Introduction
This Proxy Statement is being furnished to the stockholders of
record of Straight Path Communications Inc., a Delaware corporation
(the “Company” or “SPCI”), as of the close
of business on December 8, 2017, in connection with the
solicitation by the Company’s Board of Directors (the
“Board of Directors”) of proxies for use in voting at
the Company’s 2018 Annual Meeting of Stockholders (the
“Annual Meeting”). The Annual Meeting will be held on
Tuesday, February 6, 2018 at 11:00 a.m., local time, at the offices
of Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., 1615 M
Street N.W., Suite 400, Washington DC 20036. The shares of the
Company’s Class A common stock, par value $0.01 per share
(“Class A Common Stock”), and Class B common stock, par
value $0.01 per share (“Class B Common Stock”), present
at the Annual Meeting or represented by the proxies received by
Internet or mail (properly marked, dated and executed) and not
revoked, will be voted at the Annual Meeting. This Proxy Statement
is being mailed to the Company’s stockholders starting on or
about December 18, 2017.
Solicitation and Voting
Procedures
This solicitation of proxies is being made by the Company. The
solicitation is being conducted by mail and by e-mail, and the
Company will bear all attendant costs. These costs will include the
expense of preparing and mailing proxy materials for the Annual
Meeting and any reimbursements paid to brokerage firms and others
for their expenses incurred in forwarding the solicitation
materials regarding the Annual Meeting to the beneficial owners of
the Company’s Class A Common Stock and Class B Common Stock.
The Company may conduct further solicitations personally, by
telephone or by facsimile through its officers, directors and
employees, none of whom will receive additional compensation for
assisting with the solicitation.
The close of business on Friday, December 8, 2017, has been fixed
as the record date (the “Record Date”) for determining
the holders of shares of Class A Common Stock and Class B Common
Stock entitled to notice of, and to vote at, the Annual Meeting. As
of the date of this proxy statement, the Company had 12,767,810,
shares issued and outstanding and entitled to vote at the Annual
Meeting, consisting of 787,163 shares of Class A Common Stock and
11,980,664 shares of Class B Common Stock. The remaining shares,
issued, consisting of 39,693 of shares of Class B Common Stock, are
held in the treasury of the Company, and are not entitled to vote
or to be counted as present at the Annual Meeting for purposes of
determining whether a quorum is present. The shares of stock owned
by the Company will not be deemed to be outstanding for determining
whether a majority of the votes cast have voted in favor of any
proposal.
Stockholders are entitled to three votes for each share of Class A
Common Stock held by them and one-tenth of one vote for each share
of Class B Common Stock held by them. The holders of Class A Common
Stock and Class B Common Stock will vote as a single body on all
matters presented to the stockholders. There are no
dissenters’ rights of appraisal in connection with any
proposal.
How do I
Vote?
You can vote either in person at the Annual Meeting or by proxy
with or without attending the meeting.
Beneficial holders of the Company’s Class A Common Stock and
Class B Common Stock as of the close of business on the Record Date
whose stock is held of record by another party should receive
voting instructions from their bank, broker or other holder of
record. If a stockholder’s shares are held through a nominee
and the stockholder
1
wants to vote at the meeting, such stockholder must obtain a proxy
from the nominee record holder authorizing such stockholder to vote
at the Annual Meeting.
Stockholders of record should receive a paper copy of our proxy
materials and may vote by following the instructions on the proxy
card that is included with the proxy materials. As set forth on the
proxy card, there are two convenient methods for holders of record
to direct their vote by proxy without attending the Annual Meeting:
on the Internet or by mail. To vote by Internet, visit
www.voteproxy.com
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To vote by mail, mark, date and sign the enclosed proxy card and
return it in the postage-paid envelope provided. Holders of record
may also vote by attending the Annual Meeting and voting by
ballot.
All shares for which a proxy has been duly executed and delivered
(by Internet or mail) and not revoked will be voted at the Annual
Meeting. If a stockholder of record signs and returns a proxy card
but does not give voting instructions, the shares represented by
that proxy will be voted as recommended by the Board of Directors.
If any other matters are properly presented at the Annual Meeting
for consideration and if you have voted your shares by Internet or
mail, the persons named as proxies will have the discretion to vote
on those matters for you. On the date of filing this Proxy
Statement with the SEC, the Board of Directors did not know of any
other matter to be raised at the Annual Meeting.
How Can I Change My
Vote?
A stockholder of record can revoke his, her or its proxy at any
time before it is voted at the Annual Meeting by delivering to the
Company (to the attention of Yonatan Cantor, Corporate Secretary) a
written notice of revocation or by executing a later-dated proxy by
Internet or mail, or by attending the Annual Meeting and voting in
person.
If your shares are held in the name of a bank, broker, or other
nominee, you must obtain a proxy executed in your favor from the
holder of record (that is, your bank, broker, or nominee) to be
able to vote at the Annual Meeting.
Quorum and Vote
Required
The presence at the Annual Meeting of a majority of the voting
power of the Company’s outstanding Class A Common Stock and
Class B Common Stock voting together as a single class, either in
person or by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. Abstention votes and any broker
non-votes (i.e., votes withheld by brokers on non-routine proposals
in the absence of instructions from beneficial owners) will be
counted as present or represented at the Annual Meeting for
purposes of determining whether a quorum exists.
The affirmative vote of a majority of the voting power present (in
person or by proxy) at the Annual Meeting and casting a vote on a
Proposal will be required for the approval of the election of any
director (Proposal No. 1). This means that the number of votes cast
“for” a director nominee must exceed the number of
votes cast “against” that nominee. Abstentions are not
counted as votes “for” or “against” a
nominee or any of these proposals.
Under NYSE American rules, without voting instructions from the
beneficial owner, brokers may not vote shares on non-routine
matters. The election of directors (Proposal No. 1) is a
non-routine matter. In the absence of voting instructions from the
beneficial owner, a broker non-vote will occur. In the event of a
broker non-vote or an abstention with respect to any proposal
coming before the Annual Meeting, the shares represented by the
relevant proxy will not be deemed to be present and entitled to
vote on those proposals for the purpose of determining the total
number of shares of which a majority is required for adoption,
having the practical effect of reducing the number of affirmative
votes required to achieve a majority vote for such matters by
reducing the total number of shares from which a majority is
calculated.
How Many Votes Are
Required to Approve Other Matters?
Unless otherwise required by law or the Company’s Bylaws, the
affirmative vote of a majority of the voting power represented at
the Annual Meeting and entitled to vote will be required for other
matters that may properly come before the meeting.
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Stockholders Sharing the
Same Address
We are sending only one copy of the Annual Report and Proxy
Statement to stockholders of record who share the same last name
and address, unless they have notified the Company that they want
to continue to receive multiple copies. This practice, known as
“householding,” is designed to reduce duplicate
mailings and printings and postage costs. However, if any
stockholder residing at such address wishes to receive a separate
Annual Report or Proxy Statement in the future, he or she may
contact Yonatan Cantor, Corporate Secretary, Straight Path
Communications Inc., 5300 Hickory Park Drive, Suite 218, Glen
Allen, Virginia 23059, or by phone at (804) 433-1522, and we will
promptly forward to such stockholder a separate Annual Report or
Proxy Statement. The contact information above may also be used by
members of the same household currently receiving multiple copies
of the Annual Report and Proxy Statement in order to request that
only one set of materials be sent in the future.
References to Fiscal
Years
The Company’s fiscal year ends on July 31 of each calendar
year. Each reference to a Fiscal Year refers to the Fiscal Year
ending in the calendar year indicated (e.g., Fiscal 2017 refers to
the Fiscal Year ended July 31, 2017).
3
CORPORATE
GOVERNANCE
Introduction
The Company has in place a comprehensive corporate governance
framework that reflects the corporate governance requirements of
the Sarbanes-Oxley Act of 2002, the rules and regulations
promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and the corporate
governance-related listing requirements of the NYSE American.
Consistent with the Company’s commitment to strong corporate
governance, the Company does not rely on the exceptions from the
NYSE American corporate governance listing requirements available
to it because it is a “controlled company,” except as
described below with regard to the composition of the Nominating
Committee.
In accordance with Section 807 of the NYSE American Company Guide,
the Company has adopted a Code of Business Conduct and Ethics, the
full text of which is available for your review in the Governance
section of our website at http://spathinc.com/investors and which
also is available in print to any stockholder upon written request
to the Corporate Secretary.
The Company qualifies as a “controlled company” as
defined in Section 801(a) of the NYSE American Company Guide,
because more than 50% of the voting power of the Company is
controlled by The Patrick Henry Trust TR DTD July 31 2013 (the
“Trust”). Upon our spin-off (the
“Spin-Off”) from IDT Corporation (“IDT”),
Howard Jonas transferred the shares of our common stock that he was
entitled to receive to the Trust, and he is the beneficiary of the
economic interest of the shares held by the Trust, but, subject to
the below consent requirements, does not have voting power or
control with respect to such shares. Mr. Jonas’ consent is
needed with respect to certain significant corporate matters
requiring approval by our stockholders, including the approval of
any merger, consolidation or sale of all or substantially all of
our assets. The Trust and Howard Jonas entered into a voting
agreement (“Voting Agreement”) with Verizon
Communications Inc. (“Verizon”) concurrently with the
Company’s entry into an Agreement and Plan of Merger
(“the Verizon Merger Agreement”) with Verizon. The
Voting Agreement provides that Mr. Jonas (holding his Class A
shares through the Trust) will vote his Class A shares in the
Company in favor of the merger with Verizon and the other
transactions contemplated in the Verizon Merger Agreement, on the
terms and subject to the conditions set forth in the Voting
Agreement. At the special meeting of stockholders held on August 2,
2017, Mr. Jonas voted his shares in the Company in favor of the
merger with Verizon.
Notwithstanding that being a “controlled company”
entitles the Company to exempt itself from the requirement that a
majority of its directors be independent directors and that the
Compensation Committee and Nomination Committee be comprised
entirely of independent directors, the Board of Directors has
determined affirmatively that a majority of the members of the
Board of Directors and the director nominees are independent in
accordance with Section 803 of the NYSE American Company Guide and
that the Compensation Committee is in fact comprised entirely of
independent directors. As a “controlled company,” the
Company may, and has chosen to, exempt itself from the NYSE
American requirement that it have a Nominating Committee composed
entirely of independent directors. As noted above, and discussed in
greater detail below, the Board of Directors maintains a Corporate
Governance Committee comprised entirely of independent directors,
and a Nominating Committee comprised of the Chairman of the Board
of Directors, who is not an independent, and one independent
director.
Director
Independence
The Corporate Governance Guidelines adopted by the Board of
Directors provide that a majority of the members of the Board of
Directors, and each member of the Audit, Compensation and Corporate
Governance Committees, must meet the independence requirements set
forth therein. The full text of the Corporate Governance
Guidelines, including the independence requirements, is available
for your review in the Governance section of our website at
http://spathinc.com/investors. For a director to be considered
independent, the Board of Directors must determine that a director
meets the Independent Director Qualification Standards set forth in
the Corporate Governance Guidelines, which comply with the NYSE
American definitions of independent, and is free from any material
relationship with the Company and its executive officers. The Board
of Directors considers all relevant facts and circumstances known
to it in making an independence determination, and not merely from
the standpoint of the director, but also from that of persons or
organizations with which the director has an affiliation or
significant financial interest. In addition to considering all
relevant information available to it, the Board of Directors
uses
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the following categorical Independent Director Qualification
Standards in determining the “independence” of its
directors:
1.
During the past three years, the Company shall not have employed
the director, or, except in a non-officer capacity, any of the
director’s immediate family members;
2.
During the past three years, the director shall not have received,
and shall not have an immediate family member who has received,
during any twelve-month period within the last three years, more
than $120,000 in direct compensation from the Company, other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service);
3.
(a)
The director shall not be a current partner or employee of a firm
that is the Company’s internal or external auditor, (b) the
director shall not have an immediate family member who is a current
partner of such firm, (c) the director shall not have an immediate
family member who is a current employee of such firm and personally
works on the Company’s audit, and (d) neither the director
nor any of his or her immediate family members shall have been,
within the last three years, a partner or employee of such firm and
personally worked on the Company’s audit within that
time;
4.
Neither the director, nor any of his or her immediate family
members, shall be, or shall have been within the last three years,
employed as an executive officer of another company where any of
the Company’s present executive officers at the same time
serves or served on that company’s compensation (or
equivalent) committee; and
5.
The
director shall not be a current employee and shall not have an
immediate family member who is a current executive officer of a
company (excluding tax exempt organizations) that has made payments
to, or received payments from, the Company for property or services
in an amount which, in any of the last three Fiscal Years, exceeds
the greater of (a) $1 million or (b) two percent (2%) of the
consolidated gross revenues of such other company. The Corporate
Governance Committee will review the materiality of such
relationship to tax exempt organizations to determine if such
director qualifies as independent.
Based on the review and recommendation of the Corporate Governance
Committee, the Board of Directors has determined that each of K.
Chris Todd, William F. Weld and Fred S. Zeidman is independent in
accordance with the Corporate Governance Guidelines and, thus, that
a majority of the current Board of Directors, a majority of the
director nominees, and each member or nominee intended to become a
member of the Audit, Compensation and Corporate Governance
Committees is independent.
The Corporate Governance Committee considered the following
relationship between the Company and William F. Weld in determining
Mr. Weld’s independence: Mr. Weld is a contract partner (who
was on leave through November 8, 2016) at the law firm of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz
Levin”). During Fiscal 2017, Mintz Levin represented the
Company as litigation counsel in certain legal proceedings related
to the Company’s enforcement of its intellectual property
rights, and also represents the Company on certain matters related
to the Federal Communications Commission (“FCC”). As a
contract partner, Mr. Weld does not receive any direct or indirect
interest in the fees paid by the Company to Mintz Levin nor does he
have any involvement in Mintz Levin’s representation of the
Company. Legal fees incurred amounted to approximately $1,406,000
in Fiscal 2017. The Corporate Governance Committee determined,
after considering Mr. Weld’s position at Mintz Levin, that
the foregoing relationship would not impact Mr. Weld’s
independence. The Corporate Governance Committee (with Mr. Weld
abstaining), therefore, recommended that the Board of Directors
determine that Mr. Weld be deemed independent in accordance with
the Corporate Governance Guidelines. The Board of Directors (with
Mr. Weld abstaining) accepted the Corporate Governance
Committee’s recommendation.
The Corporate Governance Committee considered the following
relationship between the Company and K. Chris Todd in determining
Mr. Todd’s independence: Mr. Todd is a partner at the law
firm of Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C. The
Company retained Kellogg to advise the Company on certain matters
related to the Federal Communications Commission. $207,000 were
paid to Kellogg in Fiscal 2017, however, Mr. Todd did not receive
any direct or indirect interest in such fees. The Corporate
Governance Committee determined that the foregoing relationship
would not impact Mr. Todd’s independence. The Corporate
Governance Committee (with Mr. Todd abstaining), therefore,
recommended that the Board of Directors determine that Mr. Todd
be
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deemed independent in accordance with the Corporate Governance
Guidelines. The Board of Directors (with Mr. Todd abstaining)
accepted the Corporate Governance Committee’s recommendation.
When we use the term “non-employee director” in this
Proxy Statement we are referring to any director who is not an
employee of, or consultant to, the Company, and who is deemed to be
independent by the Board of Directors. Therefore, Davidi Jonas is
not a non-employee director. None of the other non-employee
directors or director nominees had any relationships with the
Company that the Corporate Governance Committee was required to
consider when reviewing independence.
Director Selection
Process
The Nominating Committee will consider director candidates
recommended by the Company’s stockholders. Stockholders may
recommend director candidates by contacting the Chairman of the
Board as provided under the heading “Director
Communications.” The Nominating Committee considers
candidates suggested by its members, other directors, senior
management and stockholders in anticipation of upcoming elections
and actual or expected board vacancies. All candidates, including
those recommended by stockholders, are evaluated on the same basis
in light of the entirety of their credentials and the needs of the
Board of Directors and the Company. Of particular importance is the
candidate’s wisdom, integrity, ability to make independent
analytical inquiries, understanding of the business environment in
which the Company operates, as well as his or her potential
contribution to the diversity of the Board of Directors and his or
her willingness to devote adequate time to fulfill duties as a
director. Under “Proposal No. 1 — Election of
Directors” below, we provide an overview of each
nominee’s experience, qualifications, attributes and skills
that led the Nominating Committee and the Board of Directors to
determine that each nominee should serve as a Director.
Director
Communications
Stockholders and other interested persons seeking to communicate
directly with the lead independent director or the independent
directors as a group, should submit their written comments c/o Lead
Independent Director (currently Fred S. Zeidman) at our corporate
headquarters, Straight Path Communications Inc., 5300 Hickory Park
Drive, Suite 218, Glen Allen, Virginia 23059. The lead independent
director will review any such communication at the next regularly
scheduled Board meeting unless, in his or her judgment, earlier
communication to the Board is warranted.
Stockholders and other interested persons seeking to communicate
directly with the Board of Directors, or to send any communication
that raises concerns about the ethical conduct of us or our
management, should submit their written communication directly to
our Corporate Secretary, Yonatan Cantor, at our principal executive
offices, Straight Path Communications Inc., 5300 Hickory Park
Drive, Suite 218, Glen Allen, Virginia 23059. The Corporate
Secretary will promptly forward a copy of any communication that
raises concerns about the ethical conduct of us or our management
to the Chairman of the Audit Committee and, if appropriate our
Chairman, and take such actions as they authorize to ensure that
the subject matter is addressed by the appropriate committee of the
Board of Directors, by management and/or by the full Board of
Directors.
The Corporate Secretary may filter out and disregard or re-direct
(without providing a copy to the directors or advising them of the
communication), or may otherwise handle at his or her discretion,
any director communication that falls into any of the following
categories:
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Obscene materials;
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Unsolicited marketing or advertising material or mass mailings;
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Unsolicited newsletters, newspapers, magazines, books and
publications;
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Surveys and questionnaires;
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Resumes and other forms of job inquiries;
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Requests for business contacts or referrals;
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Material that is threatening or illegal; or
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Any communications or materials that are not in writing.
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In addition, the Corporate Secretary may handle in his or her
discretion any director communication that can be described as an
“ordinary business matter.” Such matters include the
following:
•
Routine questions, service and product complaints and comments that
can be appropriately addressed by management; and
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Routine invoices, bills, account statements and related
communications that can be appropriately addressed by
management.
7
BOARD OF DIRECTORS AND
COMMITTEES
Board of
Directors
The Board of Directors held forty-nine (49) meetings in Fiscal
2017.
Directors are encouraged to attend the Company’s annual
meetings of stockholders, and the Company generally schedules a
meeting of the Board of Directors on the same date and at the same
place as the annual meeting of stockholders to encourage director
attendance. All of the members constituting the current Board of
Directors attended the 2017 annual meeting of stockholders.
Board of Directors
Leadership Structure and Risk Oversight Role
Our Chairman of the Board, Mr. Jonas, provides overall leadership
to the Board of Directors. The Board recognizes that one of its key
responsibilities is to evaluate and determine its optimal
leadership structure so as to provide independent oversight of
management. The Board understands that there is no single,
generally accepted approach to providing Board leadership, and that
given the dynamic and competitive environment in which we operate,
the right Board leadership structure may vary as circumstances
warrant. The Board has determined that, given Mr. Jonas’
leadership skills, relationships with the other members of
management and the members of the Board, and his prior positions
where he acted as leader of groups and provided oversight over
different bodies is optimal for the Company at the present
time.
The Board of Directors as a whole, and through its committees, has
responsibility for the oversight of risk management, including the
review of the policies with respect to risk management and risk
assessment. The risk management oversight roles of the
Compensation, Audit and Corporate Governance Committees discussed
below, which are comprised solely of independent directors, provide
an appropriate and effective balance to the Chairman of the
Board’s role. With the oversight of the full Board of
Directors, the Company’s senior management is responsible for
the day-to-day management of the material risks the Company faces.
The Board of Directors is required to satisfy itself that the risk
management process implemented by management is adequate and
functioning as designed.
Section 802 of the NYSE American Company Guide requires that the
non-employee directors of the Company meet at least annually in
executive session without the presence of non-independent directors
and management. These executive sessions are held at every
regularly scheduled meeting of the Board of Directors. The Lead
Independent Director, currently Fred S. Zeidman, serves as the
presiding director of these executive sessions. He has served as
Lead Independent Director since August 2, 2013. The Board of
Directors determined that the role of Lead Independent Director was
important to maintain a well-functioning Board of Directors that
objectively assesses management’s proposals.
The Board of Directors and each of its committees conduct annual
self-assessments in executive sessions to review and monitor their
respective continued effectiveness.
As stated above, each of the Audit, Compensation and Corporate
Governance Committees oversees certain aspects of risk management
and reports its respective findings to the full Board of Directors
on a quarterly basis, and as is otherwise needed. The Audit
Committee is responsible for overseeing risk management of
financial matters, financial reporting, the adequacy of the
risk-related internal controls, internal investigations, and
security risks, generally. The Corporate Governance Committee
oversees our Corporate Governance Guidelines and governance-related
risks, such as board independence, as well as senior management
succession planning. The Compensation Committee oversees risks
related to compensation policies and practices.
Board
Committees
The Board of Directors has established an Audit Committee, a
Compensation Committee, a Corporate Governance Committee and a
Nominating Committee.
Audit Committee
The Audit Committee is responsible for, among other things, the
appointment, compensation, removal and oversight of the work of the
Company’s independent registered public accounting firm. The
Audit Committee also oversees management’s performance of its
responsibility for the integrity of the Company’s accounting
and financial
8
reporting and its systems of internal controls, the performance of
the Company’s internal audit function and the Company’s
compliance with legal and regulatory requirements. The Audit
Committee operates under a written Audit Committee charter adopted
by the Board of Directors, which can be found in the Governance
section of our website, http://spathinc.com/investors, and is also
available in print to any stockholder upon request to the Corporate
Secretary. The Audit Committee consists of Fred S. Zeidman
(Chairman), K. Chris Todd and William F. Weld. The Audit Committee
held four (4) meetings during Fiscal 2017. The Board of Directors
has determined that (i) all of the members of the Audit Committee
are independent within the meaning of the Section 803 of the NYSE
American Company Guide and Rule 10A-3(b) under the Exchange Act,
and (ii) that Mr. Zeidman qualifies as an “audit committee
financial expert” within the meaning of Item 407(d)(5) of
Regulation S-K.
Compensation
Committee
The Compensation Committee is responsible for, among other things,
reviewing, evaluating and approving all compensation arrangements
for the executive officers of the Company, evaluating the
performance of executive officers, administering the
Company’s 2013 Stock Option and Incentive Plan, as amended
and restated as of October 8, 2015 (the “Incentive
Plan”), and recommending to the Board of Directors the
compensation for Board members, such as retainers, committee and
other fees, stock option, restricted stock and other stock awards,
and other similar compensation as deemed appropriate. The
Compensation Committee confers with the Company’s executive
officers when making the above determinations. The Compensation
Committee currently consists of Messrs. Todd (Chairman), Weld and
Zeidman. The Compensation Committee held eight (8) meetings during
Fiscal 2017. The Compensation Committee operates under a written
charter adopted by the Board of Directors, which can be found in
the Governance section of our website,
http://spathinc.com/investors, and which is also available in print
to any stockholder upon request to the Corporate Secretary. The
Board of Directors has determined that all of the members of the
Compensation Committee are independent within the meaning of
Section 803 of the NYSE American Company Guide and the categorical
standards set forth above.
The Compensation Committee adopts Company-wide goals and objectives
for the fiscal year to be used as a guide when determining annual
bonus payments to executive officers after the end of the fiscal
year. The Compensation Committee reviews the performance of the
Company relative to those goals and objectives, and the
contribution of each executive officer to such performance at the
end of the fiscal year and considers them as some of the factors
when determining the amounts of annual bonuses to be awarded to
executive officers.
In Fiscal 2017, the Compensation Committee retained Pearl Meyer
& Partners, LLC as compensation consultants to advise the
Committee on change-in-control and retention bonus programs
(details of which are discussed below under the heading
“Potential Payments Upon Termination or
Change-In-Control”) for the Company’s Named Executive
Officers. The material elements of the retention program included
the following: (i) identifying public companies that have been
acquired over the past five years that are within the
Company’s industry and companies that represent the general
industry, and grouped these companies into two peer groups; (ii)
calculating the aggregate payments made to the named executive
officers of the acquired companies and understanding the aggregate
value of these payments from a dollar, market cap and enterprise
value perspective, and where available, reviewed the aggregate
termination payments made beyond the named executive officers;
(iii) analyzing estimated severance payments that are expected to
be paid to bonus eligible named executive officers under existing
agreements or policies; (iv) developing a range of potential
aggregate payments that could be made to named executive officers
and developing a view of what aggregate payments Pearl Meyer
believes would be reasonable based on the Compensation Committee
objectives and market practices; and (v) developing a detailed
report of findings for the Compensation Committee’s
review.
Corporate Governance
Committee
The Corporate Governance Committee is responsible for, among other
things, reviewing and reporting to the Board of Directors on
matters involving relationships among the Board of Directors, the
stockholders and senior management. The Corporate Governance
Committee (i) reviews the Corporate Governance Guidelines and other
policies and governing documents of the Company and recommends
revisions as appropriate, (ii) reviews any potential conflicts of
interests of independent directors, (iii) reviews and monitors
related-person transactions, (iv) oversees the self-evaluations of
the Board of Directors, the Audit Committee and the Compensation
Committee and (v) reviews and determines director independence, and
makes recommendations to the Board of Directors regarding director
independence. The Corporate Governance Committee currently consists
of
9
Messrs. Weld (Chairman), Todd and Zeidman. The Corporate Governance
Committee held four (4) meetings during Fiscal 2017. The Corporate
Governance Committee operates under a written charter adopted by
the Board of Directors, which can be found in the Governance
section of our website http://spathinc.com/investors, and which is
also available in print to any stockholder upon request to the
Corporate Secretary. The Board of Directors has determined that all
of the members of the Corporate Governance Committee are
independent within the meaning of Section 803 of the NYSE American
Company Guide and the categorical standards set forth above.
Nominating Committee
The Nominating Committee is
responsible for overseeing nominations to the Board of Directors,
including: (i) developing the criteria and qualifications for
membership on the Board of Directors, (ii) recommending candidates
to fill new or vacant positions on the Board of Directors, and
(iii) conducting appropriate inquiries into the backgrounds of
potential candidates. A summary of new director qualifications can
be found under the heading “Director Selection
Process.” The Nominating Committee currently consists of
Davidi Jonas (Chairman) and Fred S. Zeidman, who is independent in
accordance with Section 803 of the NYSE American Company Guide. Mr.
Jonas is not independent. The Company, as a “controlled
company,” is exempt from the requirement to maintain an
independent nominating committee pursuant to Section 801(a) of the
NYSE American Company Guide. The Nominating Committee operates
under a written charter adopted by the Board of Directors, which
can be found in the Governance section of our website,
http://spathinc.com/investors, and which is also available in print
to any stockholder upon request to the Corporate Secretary. The
Nominating Committee held one (1) meeting during Fiscal
2017.
10
2017 COMPENSATION FOR
NON-EMPLOYEE DIRECTORS
Annual
compensation for non-employee directors is comprised of equity compensation, consisting of awards of restricted shares of the
Company’s Class B Common Stock that are subject to forfeiture (“Restricted Stock”), and cash compensation. Each
of these components is described in more detail below. Each non-employee director received 8,000 shares of Restricted Stock and
a cash retainer of $35,000 for Fiscal 2017.
Director Equity
Grants
Pursuant to the Company’s Incentive Plan, each non-employee
director of the Company was entitled to receive, on each January
5
th
(or the next business day thereafter), an annual grant of 8,000
restricted shares of our Class B common stock (pro-rated based on
the calendar quarter in which he or she joined the Board), which
vested immediately upon grant. A new director who becomes a member
of the Board of Directors during the course of a calendar year
receives an automatic grant on the date that he or she becomes a
director for an amount of shares that is 8,000 pro rated based on
the calendar quarter of the year in which he or she becomes a
director. The stock is granted on a going forward basis, before the
director completes his or her service for the calendar year. All
such grants of stock to directors are subject to certain terms and
conditions described in the Company’s Incentive Plan.
Director Board
Retainers
Each non-employee director of the Company who attends at least 75%
of the regularly scheduled meetings of the Board of Directors and
Board committees of which they are members during a calendar year
will receive an annual cash retainer of $35,000. Such payment will
be made quarterly following attendance of at least 75% of the Board
of Directors and committee meetings during the preceding quarter,
and is pro-rated, based on the quarter in which they join, for
non-employee directors who join the Board of Directors or depart
from the Board of Directors during the prior year, if such director
attended 75% of the regularly scheduled Board of Directors meetings
for such partial year. The Chairman of the Board may, in his
discretion, waive the requirement of 75% attendance by a director
to receive the annual retainer in the case of mitigating
circumstances. There is no additional compensation for serving on a
committee, as a committee chair, for the Lead Independent Director
or for the Audit Committee Financial Expert. The Compensation
Committee periodically reviews our director compensation
practices.
Fiscal 2017 Director
Compensation Table
The following table lists the Fiscal 2017 compensation for each
person who served as a non-employee director during Fiscal 2016.
This table does not include compensation to Davidi Jonas, who
serves as a director and is a Named Executive Officer (which is
explained below), as he did not receive compensation for his
service as a director during Fiscal 2017. Mr. Jonas’
compensation is set forth in the Executive Compensation section of
this Proxy Statement.
|
|
|
Dates
of Board
Service During
Fiscal 2016
|
|
Fees
Earned or
Paid in Cash
($)
(1)
|
|
|
|
All
Other
Compensation
($)
|
|
|
|
K. Chris Todd
|
|
08/01/2016 – 07/31/2017
|
|
$
|
35,000
|
|
$
|
295,440
|
|
$
|
—
|
|
$
|
330,440
|
|
William F. Weld
|
|
08/01/2016 – 07/31/2017
|
|
$
|
35,000
|
|
$
|
295,440
|
|
$
|
—
|
|
$
|
330,440
|
|
Fred S. Zeidman
|
|
08/01/2016 – 07/31/2017
|
|
$
|
35,000
|
|
$
|
295,440
|
|
$
|
—
|
|
$
|
330,440
|
11
As of July 31, 2017, non-employee directors held the following
shares of the Company’s Class B Common Stock granted for
their service as directors. Non-employee directors did not hold any
options to purchase shares of the Company’s capital stock as
of July 31, 2017.
|
|
|
|
|
K. Chris Todd
|
|
9,250
|
|
William F. Weld
|
|
8,000
|
|
Fred S. Zeidman
|
|
27,250
|
12
RELATED PERSON
TRANSACTIONS
Review of Related Person
Transactions
On July 22, 2013, the Board of Directors adopted a Statement of
Policy with respect to Related Person Transactions. This policy
covers any transaction or series of transactions in which the
Company or a subsidiary is a participant, the amount involved
exceeds $120,000 and a Related Person has a direct or indirect
material interest. Related Persons include directors, director
nominees, executive officers, any beneficial holder of more than 5%
of any class of the Company’s voting securities, and any
immediate family member of any of the foregoing persons. The policy
also includes transactions which, despite not meeting the criteria
set forth above, are otherwise material to investors based on
qualitative factors, as determined by the Corporate Governance
Committee with input from the Company’s management and
advisors. Transactions that fall within this definition are
considered by the Corporate Governance Committee for approval,
ratification or other action. Based on its consideration of all of
the relevant facts and circumstances, the Corporate Governance
Committee will decide whether or not to approve such transaction
and will approve only those transactions that are in the best
interests of the Company and its stockholders. If the Company
becomes aware of an existing Related Person Transaction that has
not been approved under this Policy, the matter will be referred to
the Corporate Governance Committee. The Corporate Governance
Committee will evaluate all options available, including
ratification, revision or termination of such transaction.
Transactions with
Related Persons, Promoters and Certain Control Persons
The Company retained the legal services of the law firm of Kellogg,
Hansen, Todd, Figel & Frederick, P.L.L.C. to advise the Company
on certain matters related to the Federal Communications
Commission. K. Chris Todd is a partner of the firm. Legal fees
incurred amounted to approximately $207,000 in Fiscal 2017,
however, Mr. Todd did not receive any direct or indirect interest
in such fees. There were no fees incurred in Fiscal 2016 and Fiscal
2015.
During Fiscal 2017, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (“Mintz Levin”) represented the Company as
litigation counsel in certain legal proceedings related to the
Company’s enforcement of its intellectual property rights,
and also represents the Company on certain matters related to the
Federal Communications Commission. Mr. Weld is a contract partner
(who was on leave through November 8, 2016) at Mintz Levin and has
no direct or indirect interest in the legal fees paid by the
Company to Mintz Levin. Legal fees incurred amounted to
approximately $1,406,000 in Fiscal 2017, $596,000 in Fiscal 2016
and $420,000 in Fiscal 2015.
On October 24, 2017, the Company entered into a Settlement
Agreement and Release (the “Settlement Agreement”) with
IDT, which is controlled by Howard S. Jonas, the trustor of our
controlling shareholder, The Patrick Henry TR DTD July 31 2013, and
father of our Chief Executive Officer and Chairman of the Board,
Davidi Jonas, PR-SP IP Holdings LLC, a Delaware limited liability
company controlled by Howard Jonas, and Company subsidiary,
Straight Path IP Group, Inc., a Delaware corporation (which was
subsequently converted into a Delaware limited liability company,
“SPIP”), reflecting the terms of the binding term sheet
entered into between the Company and IDT on April 9, 2017, and
pursuant to which the Company and IDT each granted a complete and
final mutual release of potential indemnification claims asserted
by each of the Company and IDT in connection with liabilities that
may exist or arise relating to the subject matter of the
investigation by (including but not limited to fines, fees or
penalties imposed by) the Federal Communications Commission (the
“Mutual Release”). IDT paid the Company an aggregate
amount of $16 million in cash, of which $10 million is being
allocated toward the settlement of claims and in consideration of
the Mutual Release and $6 million is being allocated to the
transfer of shares of Straight Path IP Group Holding, Inc.
(“New SPIP”), which holds the majority of the equity of
SPIP, held by the Company to IDT. The Settlement Agreement was
negotiated and approved by a special committee of the independent
directors of the Company.
13
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company’s Class A Common Stock
and Class B Common Stock by (i) each person known by the Company to
be the beneficial owner of more than 5% of the outstanding shares
of the Class A Common Stock or the Class B Common Stock of the
Company, (ii) each of the Company’s directors, director
nominees, and the Named Executive Officers, and (iii) all
directors, Named Executive Officers and executive officers of the
Company as a group. Unless otherwise noted in the footnotes to the
table, to the best of the Company’s knowledge, the persons
named in the table have sole voting and investing power with
respect to all shares indicated as being beneficially owned by
them.
Unless otherwise noted, the security ownership information provided
below is given as of November 24, 2017 and all shares are owned
directly. Percentage ownership information is based on the
following amount of outstanding shares: 787,163 shares of Class A
Common Stock and 11,980,664 shares of Class B Common Stock. The
numbers reported for The Patrick Henry TR DTD July 31 2013 assume
the conversion of all 787,163 currently outstanding shares of Class
A Common Stock into shares of Class B Common Stock on a one-for-one
basis.
|
|
|
Number of
Shares of
Class B Common Stock
|
|
Percentage of
Ownership of
Class B
Common Stock
|
|
Percentage
of
Aggregate
Voting Power
(
δ
)
|
|
The Patrick Henry TR DTD July 31
2013
(1)
c/o Alliance Trust Company, LLC
5375 Kietzke Lane, 2
nd
Floor Reno,
Nevada 89511
|
|
787,163
|
(2)
|
|
6.2
|
%
|
|
66.3
|
%
|
|
Howard S. Jonas
520 Broad Street Newark,
New Jersey 07102
|
|
1,196,813
|
(3)
|
|
12.6
|
%
|
|
3.4
|
%
|
|
Solus Alternative Asset Management LP
410 Park Avenue
11
th
Floor New York,
NY 10022
|
|
1,103984
|
(4)
|
|
9.27
|
%
|
|
3.1
|
%
|
|
Nikos Hecht
516 E. Hyman Avenue
Aspen, Colorado 81611
|
|
877,000
|
(5)
|
|
7.4
|
%
|
|
2.5
|
%
|
|
Arthur J. Samberg
77 Bedford Road
Katonah, NY 10536
|
|
691,100
|
(6)
|
|
5.8
|
%
|
|
1.9
|
%
|
|
Joseph D. Samberg
1091 Boston Post Rd.
Rye, NY 10580
|
|
670,000
|
(7)
|
|
5.6
|
%
|
|
1.9
|
%
|
|
Archer Capital Management, L.P.
570 Lexington Avenue, 40
th
Floor
New York, NY 10022
|
|
616,044
|
(8)
|
|
5.2
|
%
|
|
1.7
|
%
|
|
Gilder, Gagnon, Howe & Co. LLC
475 10
th
Avenue
New York, NY 10018
|
|
614,662
|
(9)
|
|
5.2
|
%
|
|
1.7
|
%
|
|
David Breau
|
|
17,500
|
(10)
|
|
*
|
|
|
*
|
|
|
Davidi Jonas
|
|
413,495
|
(11)
|
|
3.4
|
%
|
|
1.0
|
%
|
|
Zhouyue Pi
|
|
81,190
|
(12)
|
|
*
|
|
|
*
|
|
|
Jonathan Rand
|
|
80,322
|
(13)
|
|
*
|
|
|
*
|
|
|
K. Chris Todd
|
|
9,250
|
|
|
*
|
|
|
*
|
|
|
William F. Weld
|
|
8,000
|
(14)
|
|
*
|
|
|
*
|
|
|
Fred S. Zeidman
|
|
9,250
|
|
|
*
|
|
|
*
|
|
|
All directors, Named Executive Officers and
executive
officers as a group (7 persons)
|
|
619,007
|
(15)
|
|
5.1
|
%
|
|
1.6
|
%
|
14
15
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company’s
directors, executive officers, and any persons holding more than
ten percent or more of a registered class of the Company’s
equity securities are required to file reports of ownership and
changes in ownership, on a timely basis, with the SEC and the NYSE
American. Based on material provided to the Company, the Company
believes that all such required reports were filed on a timely
basis in Fiscal 2017.
16
EXECUTIVE
COMPENSATION
COMPENSATION COMMITTEE
REPORT
The Compensation Committee has reviewed and discussed with
management the following Compensation Discussion and Analysis
section of the Company’s Proxy Statement for the 2017 Annual
Meeting. Based on our review and discussions, we have recommended
to the Board of Directors that the Compensation Discussion and
Analysis be included in SPCI’s Proxy Statement for the 2018
Annual Meeting.
K. Chris Todd, Chairman
William F. Weld
Fred S. Zeidman
Notwithstanding
anything to the contrary set forth in any of the Company’s
previous filings under the Securities Act of 1933, as amended (the
“Act”), or the Exchange Act, that might incorporate
future filings, including this Proxy Statement, in whole or in
part, the foregoing report shall not be incorporated by reference
into any such filings, nor shall it be deemed to be soliciting
material or deemed filed with the Securities and Exchange
Commission (the “SEC”) under the Act or under the
Exchange Act.
COMPENSATION DISCUSSION
AND ANALYSIS
The following discussion and analysis of our compensation practices
and related compensation information should be read in conjunction
with the Summary Compensation table and other tables included in
this proxy statement, as well as our financial statements and
management’s discussion and analysis of our financial
condition and results of operations included in our Annual Report
on Form 10-K for Fiscal 2017 (the “Form 10-K”). The
following discussion includes statements of judgment and
forward-looking statements that involve risks and uncertainties.
These forward-looking statements are based on our current
expectations, estimates and projections about our industry, our
business, compensation, management’s beliefs, and certain
assumptions made by us, all of which are subject to change.
Forward-looking statements can often be identified by words such as
“anticipates,” “expects,”
“intends,” “plans,” “predicts,”
“believes,” “seeks,”
“estimates,” “may,” “will,”
“should,” “would,” “could,”
“potential,” “continue,”
“ongoing,” similar expressions, and variations or
negatives of these words and include, but are not limited to,
statements regarding projected performance and compensation. Actual
results could differ significantly from those projected in the
forward-looking statements as a result of certain factors,
including, but not limited to, the risk factors discussed in the
Form 10-K. We assume no obligation to update the forward-looking
statements or such risk factors.
Introduction
It is the responsibility of the Compensation Committee of our Board
of Directors to: (i) oversee our general compensation policies;
(ii) determine the base salary and bonus to be paid each year to
each of our executive officers; (iii) oversee our compensation
policies and practices as they relate to our risk management; and
(iv) determine the compensation to be paid each year to our
non-employee directors for service on our Board of Directors and
the various committees of our Board of Directors. In addition, the
Compensation Committee administers our Incentive Plan with respect
to Restricted Stock and stock option grants or other equity-based
awards made to our executive officers. Shares of Restricted Stock
are granted to our non-employee directors automatically under our
Incentive Plan on an annual basis.
The nature of our operations historically is such that long-term
goals were more significant than current operations. While Straight
Path Spectrum generated revenues from its spectrum leasing
operations, and in prior periods, Straight Path IP Group generated
revenues from its intellectual property enforcement efforts, the
core value of the Company’s assets was based on (i)
developing and implementing new strategies to deploy our spectrum
assets in new applications, and (ii) enforcement efforts at
Straight Path IP Group that were expected to only show results
after a long period. Straight Path Ventures is developing next
generation wireless technology, and its efforts are exploratory in
nature and may be unsuccessful or may not produce results until
after a long period.
In Fiscal 2017, the Company’s efforts were focused on
resolving issues raised by the challenges instituted by short
sellers, the investigation commenced by the Federal Communications
Commission and then the process of putting the Company up for
sale.
17
Elements of
Compensation
The three broad components of our executive officer compensation
are base salary, annual cash incentive bonus awards, and long-term
equity-based incentive awards. The Compensation Committee
periodically reviews total compensation levels and the allocation
of compensation among these three components for each of the
executive officers, as well as the Company as a whole, in the
context of our overall compensation policy. Additionally, the
Compensation Committee, in conjunction with our board, reviews the
relationship of executive compensation to corporate performance
generally and with respect to specific enumerated goals that are
established by the Compensation Committee early in each fiscal
year. The Compensation Committee believes that our current
compensation plans are serving their intended purposes and are
functioning reasonably.
Compensation Structure,
Philosophy and Process
Our executive compensation structure is designed to attract and
retain qualified and motivated personnel and align their interests
with the goals of the Company and with the best interests of our
stockholders. Our compensation philosophy is to provide
compensation to attract the individuals necessary for our current
needs and planned operations, and provide them with the proper
incentives to motivate those individuals to achieve our long-term
plans.
The base salary levels we pay to each of our Named Executive
Officers are based on the responsibilities undertaken by the
respective individuals, and the marketplace for employment of
people of similar skills and backgrounds. We note that, during
Fiscal 2017, our executive team consisted of only four individuals
and thus the breadth of responsibility of those individuals is
significant compared to companies with larger teams. Our use of
outside resources and efficient operations allow us to operate with
a small staff. This reduces our overall compensation costs, but
substantially adds to the workload and responsibilities of our
executives.
The base salaries paid to executive officers are determined by
discussions with the covered individuals and budgetary
considerations and approved by our Compensation Committee.
Incentive compensation is designed to reward contributions to
achieving the Company’s goals for the current period, as well
as for the longer term. Cash bonuses are awarded based upon goals
that are set early in each fiscal year. The goals are designed to
set forth achievable goals for the current performance of the
Company and its business units and for current contributions to
long-term initiatives.
In prior years, Mr. Jonas was entitled to a cash bonus equal to
2.5% of the Company’s net income (as determined in accordance
with GAAP) in a calendar year, as well as discretionary bonuses as
determined by our Compensation Committee. In Fiscal years 2016 and
2017, in light of changes to the Company’s strategic goals
and operations, the Compensation Committee awarded Mr. Jonas shares
of Restricted Stock in lieu of the cash bonus based on net income.
Messrs. Rand’s, Pi’s and Breau’s bonuses are
discretionary and are to be determined by our Compensation
Committee, with input from Mr. Jonas, with reference to the
achievement of the goals and such individuals’ contributions
to such efforts, as well as other accomplishments during the year
that were deemed relevant in specific instances. Each of our
executive officers is eligible to receive a cash bonus of up to
100% of his base salary (or up to 120% or higher upon extraordinary
performance).
Following the end of a fiscal year, management sets Company-wide
bonus levels for the fiscal year then ended, based on Company
performance and available resources. The proposed bonuses are then
presented to the Compensation Committee. Management reports to the
Compensation Committee on the achievement of the goals set for the
fiscal year then ended, the contributions of specific individuals
to the achievement of those goals, as well as other accomplishments
or other factors that impact performance or compensation.
Equity grants are made in order to provide longer term incentive
compensation and to better align the interests of our executives
with our stockholders.
Fiscal 2017
Base Salaries
In Fiscal 2017, the annual base salaries for our Named Executive
Officers were set at of $325,000 for Mr. Jonas, $250,000 for Mr.
Rand, $225,000 for Mr. Pi and $215,000 for Mr. Breau.
18
Pursuant to elections and agreements entered into in Fiscal 2016,
each of Messrs. Jonas, Rand and Pi received a portion of their base
salaries for the 12-month period commencing August 1, 2016 in the
form of options to purchase Class B common stock. Mr. Jonas agreed
to accept options to purchase 42,325 shares of Class B common stock
in lieu of $162,500 of his annual $325,000 base salary, Mr. Rand,
agreed to accept options to purchase 23,626 shares of Class B
common stock in lieu of $50,000 of his annual $250,000 base salary
and Mr. Pi, agreed to accept options to purchase 21,756 shares of
Class B common stock in lieu of $50,000 of his annual $225,000 base
salary. Each of the options, which were issued under our Incentive
Plan, have an exercise price of $50.00 per share (which represents
more than an 84% premium over the average of the closing prices of
the Class B common stock on the NYSE MKT for the week ended June
17, 2016), vest and become exercisable ratably over the 12-month
period commencing July 1, 2016, and have a term of three years. The
number of shares underlying each of the options was determined by
an independent analytic consultant based on a Black-Scholes
valuation model for such instruments, and applying a Real Options
Model for the value of the employment services, taking into account
various factors including the terms of the options, the volatility
of the price of our Class B common stock and relevant risk factors
related to the arrangement.
Goals for Fiscal 2017
At a meeting held on October 6, 2016, our Compensation Committee
approved the following goals for Fiscal 2017: (i) be prepared to
address a resolution of the pending FCC investigation, or to
challenge action taken by the FCC over the Company’s
objections; (ii) absent any FCC action that prevents growth of
spectrum leasing operations, increase revenue by $1 million in
calendar 2017; (iii) continue progress at the Company’s
Gigabit Mobility Lab, including conducting an outdoor demonstration
of hardware; (iv) continue regulatory advocacy in the FCC’s
rulemaking proceedings; (v) restart intellectual property
enforcement efforts; (vi) raise working capital; and (vii) operate
in accordance with budget.
Bonus
On August 7, 2017, our Compensation Committee met and approved cash
bonuses to our executive officers and other key employees, and set
base salaries for Fiscal 2017. Management had prepared recommended
amounts, and the Committee considered those recommendations in
determining the amount approved.
In making its determination, the Compensation Committee noted the
performance relative to the approved Fiscal 2017 goals as well as
other significant developments in executing on the Company’s
short, medium and long-term plans. The Compensation Committee took
note of the challenges faced by the Company and its management, and
the changed circumstances of the Company due to the FCC
investigation and the change in strategic focus for the Company
during the course of Fiscal 2017, noting specifically the
restrictions on growth of the spectrum leasing business imposed by
the consent decree entered into with the FCC and the Merger
Agreement with Verizon Communications.
With regard to the specific goal enumerated above, management
reported and the Compensation Committee noted: (i) the Company had
a plan developed to address the FCC investigation, including a
buildout of equipment covering over 90% of the Company’s
spectrum licenses, and that the FCC investigation was resolved by
entering into the consent decree; (ii) the Company has entered into
a four-year arrangement with Windstream that would likely have
generated over $1 million in revenue during Fiscal 2017, and $7
million over the term of the agreement and had made progress with
other Ties 2 carriers before all spectrum leasing efforts were
suspended due to the restrictions in the consent decree; (iii) the
Company’s Gigabit Mobility Lab completed several development
milestones and installed a test system on leased rooftops with a
schedule demonstration planned for early Fiscal 2018 (that took
place on August 31, 2017); (iv) the Company continued is advocacy
in the FCC’s further rulemaking proceedings, including
working with Verizon with respect to specific comments raised by
other participants; (v) the Company advanced all pending litigation
commenced by Straight Path IP Group, including successfully
defending challenges to the patentability of key claims in its
patents; (vi) the Company consummated an internal restructuring;
(vii) the Company raised $17 million in financing for payments to
the FCC and working capital; and viii) operated in accordance with
budget.
Following the above noted considerations, citing the extraordinary
performance of the management team under difficult circumstances,
and the integral participation of each individual to such
performance, the Compensation Committee determined to award each of
our Named Executive Officer a performance bonus equal to 120% of
his base compensation.
19
Equity Incentive Awards
On October 6, 2016, our Compensation Committee awarded 120,000
shares of Restricted Stock to Mr. Jonas, 39,000 shares of
Restricted Stock to Mr. Rand, 45,000 shares of Restricted Stock to
Mr. Pi and 24,000 shares of Restricted Stock to Mr. Breau. All of
the grants were made pursuant to our Incentive Plan. The grant to
Mr. Jonas vested as to 60,000 shares upon grant. The remainder of
the grant to Mr. Jonas and the entire grants to Messrs. Rand and
Breau vest in equal installments in October 2017, 2018 and 2019,
subject to accelerated vesting as provided in the Incentive Plan,
including upon a change of control of the Company. The grant to Mr.
Pi vests in equal installments in October 2018, 2019 and 2020.
On April 5, 2017, our Compensation Committee awarded 60,000 shares
of Restricted Stock to Mr. Jonas. The grant was made pursuant to
our Incentive Plan and was in lieu of the net income-based bonus
that was established for Mr. Jonas shortly after the
Company’s spin-off from IDT Corporation. The grant is to vest
as to 20,000 shares in each of April 2018, 2019 and 2020, subject
to accelerated vesting as provided in the Incentive Plan, including
upon a change of control of the Company.
Severance and Retention
Arrangements
As more fully described under the heading “Potential Payments
Upon Termination or change In Control” below, in Fiscal 2017,
our Compensation Committee, approved, subject to approval by the
Company’s stockholders (which approval was granted at a
special meeting held on August 2, 2017), arrangements (which were
subsequently formalized in written agreements entered into on
September 27, 2017) with each of the Named Executive Officers
providing for payments to each individual upon certain events. With
respect to Messrs. Jonas, Rand and Breau, the arrangements provide
for payments of $1.8 million, $1 million and $1 million,
respectively, if they remain employed by the Company through the
closing of a “corporate transaction” (as defined in the
agreements) and are not subsequently terminated for cause. The
proposed merger with Verizon Communications would qualify as a
“corporate transaction.”
The arrangements further provide that if the Named Executive
Officer is terminated by the Company without “cause” or
resigns from the Company with “good reason” (as such
terms are defined in the relevant agreements) within two years
following closing of a “corporate transaction,” he will
be entitled to a payment equal to 150% (or 250% with respect to Mr.
Jonas) of his base salary plus target annual bonus.
Fiscal 2016
Base Salaries
In Fiscal 2016, the annual base salaries for our Named Executive
Officers were set at of $325,000 for Mr. Jonas, $250,000 for Mr.
Rand and $225,000 for Mr. Pi.
On June 17, 2016, each of Messrs. Jonas, Rand and Pi agreed to
receive a portion of their base salaries for the 12-month period
commencing August 1, 2016 in the form of options to purchase Class
B common stock. Mr. Jonas agreed to accept options to purchase
42,325 shares of Class B common stock in lieu of $162,500 of his
annual $325,000 base salary, Mr. Rand, agreed to accept options to
purchase 23,626 shares of Class B common stock in lieu of $50,000
of his annual $250,000 base salary and Mr. Pi, agreed to accept
options to purchase 21,756 shares of Class B common stock in lieu
of $50,000 of his annual $225,000 base salary. Each of the options,
which were issued under our Incentive Plan, have an exercise price
of $50.00 per share (which represents more than an 84% premium over
the average of the closing prices of the Class B common stock on
the NYSE MKT for the week ended June 17, 2016), vest and become
exercisable ratably over the 12-month period commencing July 1,
2016, and have a term of three years. The number of shares
underlying each of the options was determined by an independent
analytic consultant based on a Black-Scholes valuation model for
such instruments, and applying a Real Options Model for the value
of the employment services, taking into account various factors
including the terms of the options, the volatility of the price of
our Class B common stock and relevant risk factors related to the
arrangement.
Goals
At a meeting held on October 8, 2015, our Compensation Committee
approved the following goals for Fiscal 2016: (i) advance effort
toward recognition of millimeter wave for 5G mobility applications,
including
20
recognition in the anticipated FCC Notice of Propose Rulemaking,
progress toward adoption of rules by the FCC, and adoption of
industry standards; (ii) progress toward development of prototype
equipment and systems for 5G utilization of millimeter wave; (iii)
formally establish Strategic Technical Advisory Board and secure
leading figures to serve; (iv) continue dialogue with equipment
manufacturers toward partnerships on joint solutions; (v) advance
product development of point-to-multipoint hardware for 39 GHz
applications; (vi) plan deployments of developed equipment; (vii)
increase revenue from spectrum leasing, including via point to
multi-point applications; (viii) advance development of a solution
utilizing our 39 GHz spectrum assets for small cell backhaul and
move toward establishment of a test bed for that solution; (ix)
continue to contend
inter partes
Review challenges to patents; (x) obtain opinion on appeal to
Federal Circuit and re-commence enforcement if possible; (xi)
explore settlements with infringers and industry groups; (xii)
operate efficiently and within budget including significant
investments in technology development; (xiii) consider financing if
terms are attractive; (xiv) increase research coverage and investor
relations efforts; and (xv) maintain full compliance and best
practices with respect to public disclosure and SEC filings.
Bonus and Incentive Equity
Awards
Following the end of Fiscal 2016, Mr. Jonas corresponded, and held
discussions, with the members of our Compensation Committee
regarding proposed bonuses and equity awards to executive officers
and other key personnel, including presenting them with a report on
performance of the Company relative to the goals for Fiscal 2016
previously set by the Compensation Committee. On September 23,
2016, our Compensation Committee, acting via written consent in
lieu of a meeting, approved cash bonuses to our executive officers
and other key personnel. Subsequently, at a meeting held on October
6, 2016, our Compensation Committee approved equity grants to our
executive officers and other key personnel, and set base salaries
for Fiscal 2017. Management had prepared recommended amounts, and
the Committee considered those recommendations in determining the
amount approved.
In making its determination, the Compensation Committee noted the
performance relative to the approved Fiscal 2016 goals (described
below) as well as other significant developments in executing on
the Company’s short, medium and long-term plans. The
Compensation Committee took note of the challenges faced by the
Company and its management commencing in fall 2015 stemming from a
negative report issued by Kerrisdale Capital, allegations made in
an anonymous report regarding the circumstances under which certain
of our spectrum licenses were renewed by the FCC in 2011 and 2012
and certain developments stemming from such reports. The Committee
also noted the pronouncements from the FCC regarding its rulemaking
related to use of millimeter wave spectrum for 5G mobile
applications, particularly with the release of the Notice of
Proposed Rulemaking (“NPRM”) in October 2015, and the
adoption of the Upper Microwave Flexible Use (“UMFU”)
Report and Order in July 2016, which reflect many of the proposals
that the Company made for the 39 GHz band, and exceeded the
Company’s goals for that matter. The Committee also
considered (i), the significant activity at industry and scientific
bodies regarding setting standards for mmWave mobility; (ii) the
progress made at the Company’s Gigabit Mobility Lab on
developing equipment and systems for 39 GHz deployments; (iii) the
creation of the Strategic Technical Advisory Board and the addition
of Ted Rappaport and Gabriel Rebeiz to that board; (iv) the entry
into an agreement with Cambridge Broadband Networks Ltd. to
accelerate development of point-to-multipoint (“PMP”)
radios for 39 GHz; (v) the deployment of point-to-point
(“PTP”) equipment across much of the area covered by
the Company’s spectrum licenses and discussions on deployment
of PMP equipment when it becomes available; (vi) entry into new
spectrum leases later in Fiscal 2016; (vii) success in the appeal
of the adverse
inter partes
review decisions at the Patent Trial and Appeal Board
(“PTAB”) and success on the remanded proceedings at the
PTAB; (viii) success in operating within revised budgets that took
into account the negative reports described above and the
consequences from those reports, and investment in hardware
development; and (ix) the Company maintained compliance and best
practices with respect to public disclosure and SEC filings.
In addition, management reported and the Compensation Committee
took into account that the Company did not achieve its goals
relative to a small cell backhaul solution, as the market
opportunity did not develop sufficiently and, due to the pendency
of the appeal of the PTAB ruling, did not enter into additional
settlements with infringers.
In recognition of the accomplishments, the efforts toward
addressing the challenges faced by the Company and the changed
circumstances, the Compensation Committee awarded cash bonuses and
equity grants to executive officers and other personnel.
21
Mr. Jonas was awarded a cash bonus in the amount of $100,000 and a
grant of 120,000 shares of Restricted Stock. This compares to a
cash bonus of $90,000 and a grant of 60,000 shares of Restricted
Stock for Fiscal 2015. In making the determination, the Committee
noted Mr. Jonas’ contribution to all of the Company’s
operations, in particular his lead role in advocacy efforts at the
FCC and in industry forums, his role in working with outside
counsel on the appeal of the PTAB decision and in discussions with
CBNL, and his continued engagement with NYU Wireless and the
members of the Company’s Strategic Technical Advisory Board.
The grant of Restricted Stock was in lieu of the net income-based
bonus that was established for Mr. Jonas shortly after the
Company’s spin-off from IDT Corporation.
Mr. Rand was awarded a cash bonus in the amount of $75,000 and a
grant of 39,000 shares of Restricted Stock. This compares to a cash
bonus of $50,000 and no equity grant for Fiscal 2015. In making the
determination, the Committee noted Mr. Rand’s lead role in
arranging for deployment of PTP equipment across a significant
segment of the Company’s spectrum license area and in
developing relationships for additional leasing activity for the
Company’s 39 GHz licenses when PMP equipment becomes
available. He was the executive primarily responsible for
completing the agreement with CBNL. As CFO, he is the lead person
on reporting, internal controls and investor relations, and is
instrumental in the Company’s expense control efforts that
enable efficient operations.
Mr. Pi was awarded a cash bonus in the amount of $65,000 and a
grant of 45,000 shares of Restricted Stock. In making the
determination, the Committee noted Mr. Pi’s essential role in
the successful advocacy with the FCC and engagement with academia
and the wireless industry. He is primarily responsible for
establishment of, and the progress made at, the Company’s
Gigabit Mobility Lab. Mr. Pi’s recognition in the industry
was a key factor in the success of the Company’s advocacy
efforts with the FCC and industry standard-making groups.
In addition to the equity grants described above, Messrs. Jonas,
Rand and Pi received the options as payment of a portion of their
base salaries for Fiscal 2016 as described above.
2017 base salaries
There were no changes to the Fiscal 2016 base salaries the Named
Executive Officers are to receive in Fiscal 2017.
Fiscal 2015
Base Salaries
During Fiscal 2015, base salaries paid to Mr. Jonas, Mr. Rand and
Mr. Pi were $325,000, $250,000 and $185,000, respectively.
Goals
At a meeting held on October 23, 2014, our Compensation Committee
approved the following goals for Fiscal 2015: (i) file and pursue
the appeal of the adverse PTAB decision regarding certain claims in
our patents; (ii) further the licensing portion of our intellectual
property enforcement program; (iii) advance the development,
testing and deployment of hardware utilizing our 39 GHz spectrum
licenses for point-to-multipoint applications; (iv) advance
development of a solution utilizing our 39 GHz spectrum assets for
small cell backhaul and move toward establishment of a test bed for
that solution; (v) further the long-term efforts to have our
millimeter wave spectrum be eligible for mobility for 5G networks,
specifically, assist in FCC rulemaking to permit that usage,
engaging with partners in the telecommunications operator and
hardware manufacturing industries, and with potential users of our
spectrum in that manner; (vi) operate efficiently and within
budget; (vii) upgrade marketing and on-line presence of the Company
and the Spectrum division; and (viii) maintain full compliance and
best practices with respect to public disclosure, SEC filings and
relations with investors and the media.
Performance and Bonus and Incentive Equity
Awards
At a meeting held on July 23, 2015, our Compensation Committee met
and approved cash bonuses and equity grants to our executive
officers and other key employees, and set base salaries for Fiscal
2016. Management had prepared recommended amounts, and the
Committee considered those recommendations in determining the
amount approved.
22
Upon presentation by management, the Compensation Committee noted
the following performance relative to the approved Fiscal 2015
goals as well as other significant developments in executing on the
Company’s short, medium and long-term plans. Specifically:
(i) the Company filed and was pursuing the appeal of the adverse
PTAB decision regarding certain claims in its patents, and that the
matter was proceeding expeditiously before the U.S. Court of
Appeals for the Federal Circuit; (ii) the Company was in advanced
discussions with external vendors with firm dates for the delivery
of hardware utilizing its 39 GHz spectrum licenses for PMP
applications, which would greatly expand the solutions to be
marketed for that spectrum; (iii) the Company had made tremendous
strides with the FCC, industry and academic groups and industry
participants in having millimeter wave spectrum be eligible for
mobility for 5G networks, as more fully described in the
Company’s periodic reports; (iv) during Fiscal 2015, the
Company operated efficiently and within budget, spending less than
budgeted while meeting or exceeding key goals and making progress
on all fronts; and (v) the Company continued extensive marketing
presence for current applications of its spectrum assets, signing
up new lessees to replace expiring transactions. Due to the
continuing pendency of the appeal of the PTAB’s decision, the
Company was not able to make any progress on its intellectual
property enforcement program.
Mr. Jonas was awarded a cash bonus in the amount of $90,000 and a
grant of 60,000 shares of Restricted Stock. In making the
determination, the Committee noted Mr. Jonas’ contribution to
all of the Company’s operations, in particular his leading
the efforts with outside counsel on the appeal of the PTAB
decision, his role in discussions with hardware developers for 39
GHz equipment, his engagement with NYU Wireless and establishment
of the Company’s Strategic Technical Advisory Board, as well
as his lead role in advocacy for the inclusion of millimeter wave
spectrum for mobility applications with the FCC and the wireless
communications industry.
Mr. Rand was awarded a cash bonus in the amount of $50,000. In
making the determination, the Committee noted Mr. Rand’s lead
role in marketing the Company’s spectrum assets for current
applications and in securing a leading equipment manufacturer to
develop PMP hardware using 39 GHz spectrum. He was also the lead
person on reporting, internal controls and investor relations, and
was instrumental in the Company’s expense control efforts
that enabled it to operate within budget on the expense side.
Mr. Pi was awarded a cash bonus in the amount of $50,000 and a
grant of 30,000 shares of Restricted Stock. In making the
determination, the Committee noted Mr. Pi’s essential role in
advocacy with the FCC, academia and the wireless industry, as well
as his development of the technology that may allow for utilization
of millimeter wave spectrum for mobility applications. Mr.
Pi’s recognition in the industry was a key factor in the
success of the Company’s advocacy efforts.
Fiscal 2015 Base Salaries
Our Compensation Committee approved base salaries for Fiscal 2015
of $325,000 for Mr. Jonas, $250,000 for Mr. Rand and $225,000 for
Mr. Pi. Mr. Pi’s increase was due to his increased role in
the Company and the greater effort required as the Company’s
efforts in his area were coming to fruition. Base salaries for
other executive officers remained unchanged.
Employment
Agreements
Except
for the Severance and Retention Agreements and the Severance Agreement, none of our executive officers are party to employment
agreements. The Company believes that the substantial portion of the compensation paid to executives that is in the form of long
term equity grants, creates sufficient incentive for retention of executives.
23
EXECUTIVE COMPENSATION
TABLES
Summary Compensation
Table
The table below summarizes the total compensation paid or awarded
to our Named Executive Officers by the Company during Fiscal 2017,
Fiscal 2016 and Fiscal 2015.
Name
and
Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
All
other
Compensation
($)
|
|
|
|
Davidi
Jonas
Chairman of the Board and Chief Executive Officer
|
|
Fiscal
2017
|
|
$
|
162,500
|
|
$
|
390,000
|
|
$
|
5,876,400
|
(4)
|
|
$
|
—
|
|
|
$
|
8,100
|
(6)
|
|
$
|
6,437,000
|
|
|
|
Fiscal
2016
|
|
$
|
325,000
|
|
$
|
100,000
|
|
$
|
—
|
|
|
$
|
186,757
|
(5)
|
|
$
|
10,600
|
(7)
|
|
$
|
622,357
|
|
|
|
Fiscal
2015
|
|
$
|
325,000
|
|
$
|
90,000
|
|
$
|
1,494,900
|
(8)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,909,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan
Rand
Chief Financial Officer
|
|
Fiscal
2017
|
|
$
|
200,000
|
|
$
|
300,000
|
|
$
|
1,044,420
|
(9)
|
|
$
|
—
|
|
|
$
|
10,600
|
(10)
|
|
$
|
1,555,020
|
|
|
|
Fiscal
2016
|
|
$
|
250,000
|
|
$
|
75,000
|
|
$
|
—
|
|
|
$
|
104,246
|
(11)
|
|
$
|
10,600
|
(12)
|
|
$
|
439,846
|
|
|
|
Fiscal
2015
|
|
$
|
250,000
|
|
$
|
50,000
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhouyue
(Jerry) Pi
Chief Technology Officer
|
|
Fiscal
2017
|
|
$
|
175,000
|
|
$
|
270,000
|
|
$
|
1,205,100
|
(13)
|
|
$
|
—
|
|
|
$
|
10,600
|
(14)
|
|
$
|
1,660,700
|
|
|
|
Fiscal
2016
|
|
$
|
225,000
|
|
$
|
65,000
|
|
$
|
—
|
|
|
$
|
95,995
|
(15)
|
|
$
|
10,600
|
(16)
|
|
$
|
396,595
|
|
|
|
Fiscal
2015
|
|
$
|
185,000
|
|
$
|
50,000
|
|
$
|
1,487,400
|
(17)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,722,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Breau
General Counsel
|
|
Fiscal
2017
|
|
$
|
215,000
|
|
$
|
258,000
|
|
$
|
642,720
|
(18)
|
|
$
|
—
|
|
|
$
|
10,600
|
(19)
|
|
$
|
1,126,320
|
24
Except as provided for in agreements that the Company may enter
into with its executive officers, any bonus compensation to
executive officers will be determined by our Compensation Committee
based on factors it deems appropriate, including the achievement of
specific performance targets and our financial and business
performance.
We adopted our Incentive Plan to provide equity compensation to our
Board of Directors, our management and our employees and
consultants.
Grants of Plan-Based
Awards
The following table sets forth information concerning the number of
shares of Class B Common Stock underlying restricted stock awards
under the Company’s Incentive Plan granted
to the Named Executive Officers in Fiscal 2017. There are no
estimated future payouts in connection with such awards. There were no stock option awards to Named Executive Officers in Fiscal 2017.
|
|
|
|
|
|
|
All
Other
Stock
Awards:
Number of
Shares of
Stock
or Units
(#)
|
|
All
Other
Option
Awards:
Number of
securities
underlying options
(#)
|
|
Exercise
or
Base Price of
Option
Awards
($/Sh)
|
|
Grant
Date
Fair Value of
Stock and
Option
Awards
(1)
|
|
Davidi
Jonas
|
|
10/17/2016
|
|
10/06/2016
|
|
120,000
|
|
—
|
|
—
|
|
$
|
3,732,000
|
|
|
|
04/09/2017
|
|
4/05/2017
|
|
60,000
|
|
—
|
|
—
|
|
$
|
2,144,400
|
|
Zhouyue
(Jerry) Pi
|
|
10/06/2016
|
|
10/06/2016
|
|
45,000
|
|
—
|
|
—
|
|
$
|
1,205,100
|
|
Jonathan
Rand
|
|
10/06/2016
|
|
10/06/2016
|
|
39,000
|
|
—
|
|
—
|
|
$
|
1,044,420
|
|
David
Breau
|
|
10/06/2016
|
|
10/06/2016
|
|
24,000
|
|
—
|
|
—
|
|
$
|
642,720
|
Outstanding Equity
Awards at 2017 Fiscal Year-End
The following table provides information on the current holdings of
restricted stock and options by our Named Executive Officers at
July 31, 2017.
|
|
|
|
|
|
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
|
|
Number
of
Shares or
Units of Stock
That Have Not Vested
(#)
|
|
Market
Value of
Shares or Units of
Stock That
Have Not
Vested
(1)
($)
|
|
Davidi
Jonas
|
|
6/21/2016
|
|
42,325
|
|
—
|
|
$
|
50.00
|
|
06/16/2019
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
120,000
|
(2)
|
|
$
|
21,528,000
|
|
Zhouyue
(Jerry) Pi
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
85,000
|
(3)
|
|
$
|
15,249,000
|
|
Jonathan
Rand
|
|
6/21/2016
|
|
10,000
|
|
—
|
|
$
|
50.00
|
|
06/16/2019
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
39,000
|
(4)
|
|
$
|
6,996,600
|
|
David
Breau
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
24,000
|
(5)
|
|
$
|
4,305,600
|
25
Option Exercises and
Stock Vested
The following table sets forth information regarding the stock
options exercised and restricted shares of Class B Common Stock
that vested for each of the Named Executive Officers in Fiscal
2017.
|
|
|
|
|
|
|
|
|
Number of
Shares Acquired
Upon Exercise
(#)
|
|
Value
Realized
On Exercise
($)
|
|
Number of
Shares Acquired Upon Vesting
(#)
|
|
Number of
Shares Withheld
to Cover Taxes
(#)
|
|
Value
Realized
on Vesting
($)
(1)
|
|
Davidi Jonas
|
|
—
|
|
$
|
—
|
|
159,536
|
|
0
|
|
$
|
3,878,770
|
|
Zhouye (Jerry) Pi
|
|
21,756
|
|
$
|
2,821,953
|
|
30,000
|
|
0
|
|
$
|
924,000
|
|
Jonathan Rand
|
|
13,626
|
|
$
|
1,768,902
|
|
29,756
|
|
0
|
|
$
|
3,427,890
|
|
David Breau
|
|
—
|
|
$
|
—
|
|
8,000
|
|
0
|
|
$
|
836,600
|
26
EQUITY COMPENSATION PLAN
INFORMATION
Employee Stock Incentive
Program
The Company maintains its Incentive Plan, pursuant to which shares
of Restricted Stock and options to purchase Class B Common Stock
have been awarded.
Equity Compensation
Plans and Individual Compensation Arrangements
The following chart provides aggregate information regarding grants
under all equity compensation plans of the Company through July 31,
2017.
|
|
|
Number
of
Securities to be
Issued upon
Exercise of
Outstanding
Options
(1)
|
|
Weighted-
Average
Exercise Price
of Outstanding
Options
|
|
Number
of
Securities
Remaining
Available for
Future Issuance
under Equity
Compensation
Plans
(1)
|
|
Equity
compensation plans approved by security holders
|
|
58,508
|
|
$
|
45.32
|
|
64,033
|
|
Total
|
|
58,508
|
|
$
|
45.32
|
|
64,033
|
POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE-IN-CONTROL
On September 27, 2017, each Named Executive Officer Davidi Jonas,
Jonathan Rand and David Breau entered into Severance and Retention
Agreements with the Company (the “Severance and Retention
Agreements”) and Zhouyue Pi entered into a Severance
Agreement (the “Severance Agreement”) with the Company.
These arrangements were approved by the Company’s
stockholders at a special meeting held on August 2, 2017.
The Severance and Retention Agreements provide that if such Named
Executive Officer remains employed by the Company through the
closing date of a Corporate Transaction, the Named Executive
Officer will be eligible to receive, upon or within 30 days
following such date, a retention bonus in a lump-sum amount equal
to $1.8 million for Davidi Jonas and $1.0 million for each of
Jonathan Rand and David Breau (the “Retention Bonus”).
However, Retention Bonus will not be payable to the such Named
Executive Officer hereunder in the event that, upon or following
the closing date but prior to the date such Retention Bonus is
actually paid, such Named Executive Officer’s employment with
the Company is terminated for Cause.
The term “Corporate Transaction” means (i) a merger or
consolidation of the Company with any other corporation or other
entity, other than (A) a merger or consolidation which would result
in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving or parent entity) 80% or more of the combined voting
power of the voting securities of the Company or such surviving or
parent entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no “person” (as defined in the
Securities Exchange Act of 1934, as amended from time to time)
acquired 25% or more of the combined voting power of the
Company’s then outstanding securities; or (ii) a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of its
assets (or any transaction having a similar effect).
Both the Severance and Retention Agreements and the Severance
Agreement provide that, in the event that the Named Executive
Officer’s employment is terminated without cause or the Named
Executive Officer resigns from the Company with Good Reason between
the closing date of the Corporate Transaction and the second
anniversary thereof, then such Named Executive Officer shall
receive a (i) Severance Payment in an amount equal to 1.5 times
(for Davidi Jonas it is 2.5 times) the sum of (A) the Named
Executive’s Base Salary and (B) Executive’s annual
bonus in the amount of a 100% of the Executive’s Base Salary
(or up to 120% or higher upon extraordinary
27
performance), paid in a lump sum in cash within 60 days following
the Termination Date; provided, that if such 60-day period spans
two calendar years, payment shall be made solely in the second
calendar year; and (ii) all accrued but unpaid salary, expenses and
benefits.
The term “Cause” as used in the Severance and Retention
Agreements and Severance Agreement shall mean the Named Executive
Officer’s repeated failure to perform any material duty to
the Company that is not corrected after 10 days’ written
notice thereof; misconduct, malfeasance, fraud or dishonesty that
materially and adversely affects the Company or its reputation in
the industry; or the commission of a felony or a crime involving
moral turpitude. All determinations as to Cause shall be made in
good faith by the Board of Directors of the Company, or a committee
thereof, in its sole discretion.
The term “Good Reason” as used in the Severance and
Retention Agreements and Severance Agreement means, without the
consent of the Named Executive Officer: (i) a reduction in the
Named Executive Officer’s then-current annual base salary or
target annual bonus, (ii) the notification of the Named Executive
Officer by the Company that the Company shall require the Named
Executive Officer to relocate Named Executive Officer’s
primary place of service with the Company to a site that is more
than 50 miles from both the Named Executive Officer’s current
primary place of service and the Named Executive Officer’s
primary residence, or (iii) a material reduction in the scope of
responsibility or authority of the Named Executive Officer;
provided, however, that no act or omission described above shall be
treated as “Good Reason” under this Agreement unless
(A) the Executive delivers to the Company a written statement of
the basis for Named Executive Officer’s belief that Good
Reason exists within 90 days following the date such basis first
arises, (B) the Company fails to cure the grounds constituting Good
Reason within 30 days following Executive’s delivery of such
written statement, and (C) Named Executive Officer actually resigns
within 30 days of such failure to cure.
The proposed merger with Verizon will constitute a Corporate
Transaction.
Each Severance and Retention Agreement and the Severance Agreement
will continue in effect for three years and will be automatically
extended for one-year terms thereafter unless notice is given by
the Company to the Named Executive Officer, provided, however, if
the agreements is in effect at the time of a Corporate Transaction
then it shall not terminate prior to the second anniversary of such
Corporate Transaction, provided, that if the Named Executive
Officer is terminated without cause or the Named Executive Officer
resigns for good reason, then the agreement will terminate when the
Company’s payment obligations are satisfied under the
agreement.
The Named Executive Officers have all been granted restricted stock
and stock options pursuant to the Company’s Incentive Plan.
Under the Incentive Plan, in the event of a “change in
control” (other than a “change in control” which
is also a “corporate transaction”), each as defined in
the Company’s Incentive Plan, (i) each option award which is
outstanding at the time of the change in control automatically
becomes fully vested and exercisable, and (ii) each share of
restricted stock is released from any restrictions on transfer and
repurchase or forfeiture rights.
The potential payments in the table below are based on the
agreements described above and the provisions of the Incentive Plan
and assumes the event of “change in control” took place
on July 31, 2017 and immediately following the closing of a change
of control, each Named Executive Officer experienced a covered
termination (i.e., the employment of each Named Executive Officer
of the Company was terminated without cause or due to resignation
with good reason). The value of each restricted share is computed
by multiplying the closing market price per share of the
Company’s Class B Common Stock on July 31, 2017 (the last
trading day of Fiscal 2017) ($179.40) by the number of unvested
shares of restricted Class B Common Stock held by the Named
Executive Officer on that date.
28
|
|
|
Change In
Control:
Qualifying
Termination
($)
|
|
David
Breau
|
|
|
|
|
|
Restricted Shares
|
|
$
|
4,305,600
|
(1)
|
|
Severance
|
|
$
|
1,645,000
|
|
|
Davidi Jonas
|
|
|
|
|
|
Restricted Shares
|
|
$
|
21,528,000
|
(2)
|
|
Severance
|
|
$
|
3,425,000
|
|
|
Zhouyue Pi
|
|
|
|
|
|
Restricted Shares
|
|
$
|
15,249,000
|
(3)
|
|
Severance
|
|
$
|
675,000
|
|
|
Jonathan Rand
|
|
|
|
|
|
Restricted Shares
|
|
$
|
6,996,600
|
(4)
|
|
Severance
|
|
$
|
1,750,000
|
|
29
PROPOSALS REQUIRING YOUR
VOTE
PROPOSAL NO.
1
ELECTION OF
DIRECTORS
Pursuant to the Company’s By-Laws, the authorized number of
directors on the Board of Directors is between three and seventeen,
with the actual number to be set, within that range, by the Board
of Directors from time to time. The Board of Directors has set the
number of directors on the Board of Directors at four. There are
currently four directors on the Board of Directors. The current
terms of all of the directors expire at the Annual Meeting. All
four directors are standing for re-election at the Annual
Meeting.
The nominees to the Board of Directors are Davidi Jonas, K. Chris
Todd, William F. Weld and Fred S. Zeidman, each of whom has
consented to be named in this proxy statement and to serve if
elected. Each of the nominees is currently serving as a director of
the Company. Brief biographical information about the nominees for
directors is furnished below.
Each of these director nominees is standing for election for a term
of one year until the 2019 Annual Meeting, or until his successor
is duly elected and qualified or until his earlier resignation or
removal. A majority of the votes cast at the Annual Meeting shall
elect each director. Stockholders may not vote for more than four
persons, which is the number of nominees identified herein. The
following pages contain biographical information and other
information about the nominees. Following each nominee’s
biographical information, we have provided information concerning
particular experience, qualifications, attributes and/or skills
that the Nominating Committee and the Board of Directors considered
when determining that each nominee should serve as a director.
Davidi
Jonas
has served as Chief Executive Officer, President and Director of SPCI since April 2013, and has served as Chairman
of the Board of SPCI since August 1, 2013. He previously served as Vice President, Business Development of IDT Corporation. He
has served as manager of Straight Path Spectrum since August 2012 and served as Executive Vice President and director of Straight
Path IP Group since November 2012. Mr. Jonas has also served as the Rabbi of Kingsbridge Center of Israel in the Bronx, New York
from 2010-2015. Mr. Jonas taught Judaic Studies in SAR High School in Riverdale, New York from 2010 to 2012. Mr. Jonas received
rabbinic ordination from Yeshivat Chovevei Torah Rabbinical School.
Key Attributes, Experience and
Skills:
Mr. Jonas is very familiar with the operations included within SPCI
and its subsidiaries, as well as IDT’s previous efforts to
generate value from the related assets. He has exceptional
inter-personal and leadership skills, and is creative in developing
new applications for assets and in crafting solutions to
challenges.
K. Chris Todd
has served as Director of SPCI since July
2013. Mr. Todd has been a partner at the law firm of Kellogg,
Hansen, Todd, Figel & Frederick, P.L.L.C. since 1994. Prior to
that, Mr. Todd was head of the Litigation Group at the law firm of
Johnson & Gibbs. Mr. Todd’s extensive career in
government service includes service as a Law Clerk to a federal
judge, as Associate Counsel in the Office of Independent Counsel
under Lawrence Walsh during the Iran/Contra Matter, and as
Assistant U.S. Attorney for the Criminal Division in the United
States Attorney’s Office, Southern District of New York where
Mr. Todd conducted the prosecution of numerous violations of
federal law, including multi-defendant business fraud and tax
evasion cases. Prior to serving in the Southern District, Mr. Todd
also served as a Trial Attorney for the Department of
Justice’s Tax Division, Criminal Section, where Mr. Todd
conducted numerous jury trials and grand jury investigations
involving tax evasion. He has a Bachelor of Arts from Texas Tech
University and a J.D. from the University of Texas School of Law
and completed graduate studies in law at Cambridge University in
England in 1974. For over 25 years Mr. Todd has served on the Board
of Trustees of College Year in Athens, a 501(c)(3) Delaware
corporation which provides a study abroad program on things
Greek.
Key Attributes, Experience and
Skills:
Mr. Todd’s private law practice focused on trial work,
including patent infringement cases, and he provides invaluable
expertise to the Board with respect to our Straight Path IP Group
business.
30
William F. Weld
has served as Director of SPCI since July
2013. Mr. Weld has been a member of the law firm of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. and a principal of ML
Strategies, LLC, a consulting affiliate of Mintz Levin, since 2012.
Mr. Weld has served as a director of Just Energy (TSX and NYSE: JE)
since 2012. Mr. Weld was a partner at McDermott Will & Emery
LLP from 2006 to 2012. In addition, Mr. Weld served two terms as
Governor of Massachusetts, being elected in 1990 and re-elected in
1994 and had previously served as Assistant U.S. Attorney General
in charge of the Criminal Division of the Justice Department in
Washington D.C. Mr. Weld received a Bachelor of Arts from Harvard
College and a JD from Harvard Law School.
Key Attributes, Experience and
Skills:
Mr. Weld’s extensive legal and other professional experience
will serve as valuable asset to the Company. He has extensive
contacts in commercial, legal and governmental arenas, and his
managerial experience in public service and the private sector
brings important skills to the functioning of the Board of
Directors.
Fred S. Zeidman
has served as Director of SPCI since July
2013. Mr. Zeidman has also served as a director of Prosperity
Bancshares, Inc. since 1986. He formerly served on the Board of
Hyperdynamics, Inc and as trustee for the AmeriSoft Liquidating
Trust. Mr. Zeidman has served as CEO, Interim CEO and Chairman of
the Board of a variety of companies, including several in the oil
and gas sector. Mr. Zeidman is the Chairman Emeritus of the United
States Holocaust Memorial Council. He was appointed to that
position by President George W. Bush in March 2002 and served from
2002-2010. He is also Chairman Emeritus of the University of Texas
Health Science System Houston and is on the Board of Trustees of
the Texas Heart Institute (where he currently serves as Interim
Chief Financial Officer). He formerly served on the Board of
Directors and Executive Committee of the University of Saint Thomas
and chaired its Development Committee. Mr. Zeidman received his
Bachelor of Science and Bachelor of Arts from Washington University
and a Masters of Business Administration from New York
University.
Key Attributes, Experience and
Skills:
Mr. Zeidman has served in board and other leadership positions in
many entities of varying size and in different industries. His
experience and familiarity with the role of a director will round
out the Board of Directors and provide a source of input for
management to draw on.
The Board of Directors has no reason to believe that any of the
persons named above will be unable or unwilling to serve as a
director, if elected.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
FOR
THE ELECTION OF THE NOMINEES NAMED ABOVE.
31
Directors, Director
Nominees, Executive Officers
The executive officers, directors, director nominees and certain
key personnel of the Company are as follows:
|
|
|
|
|
|
|
Davidi Jonas
|
|
31
|
|
Chairman of the Board of Directors, Director,
Director Nominee, Chief Executive Officer and Named Executive
Officer
|
|
Jonathan Rand
|
|
55
|
|
Chief Financial Officer and Named Executive
Officer
|
|
Zhouyue (Jerry) Pi
|
|
40
|
|
Chief Technology Officer and Named Executive
Officer
|
|
David L. Breau
|
|
42
|
|
General Counsel and Named Executive
Officer
|
|
K. Chris Todd
|
|
71
|
|
Director and Director Nominee
|
|
William F. Weld
|
|
72
|
|
Director and Director Nominee
|
|
Fred S. Zeidman
|
|
71
|
|
Director and Director Nominee
|
Set forth below is biographical information with respect to the
Company’s current executive officers except Davidi Jonas,
whose information is set forth above under Proposal No. 1:
Jonathan Rand
has served as Chief Financial Officer of SPCI
since June 2013, and has served as Chief Operating Officer of
SPCI’s subsidiary Straight Path Spectrum, Inc. since January
2014. Mr. Rand served as President and Chief Operating Officer of
Organic Motion, an innovative computer vision company, from 2006 to
2012. Mr. Rand co-founded and served as President of Indigo Capital
Advisers, providing consulting services to early stage technology
companies since 2002. Mr. Rand served as Executive Vice President
of Sales, Treasurer and Chief Executive Officer of the Y@P Division
of Net2Phone, Inc. from 1998 to 2001 and Executive Vice President
of Sales & Finance and Treasurer of IDT Corporation from 1992
to 1998. Prior to joining IDT, Mr. Rand founded and subsequently
sold a national magazine, Campus Connection. Mr. Rand worked in
Procter & Gamble’s brand management program, after
receiving a Bachelor of Science in Economics from the Wharton
School, University of Pennsylvania in 1984.
Zhouyue (Jerry) Pi
has served as Chief Technology Officer of
SPCI since September 2014. Prior to joining SPCI, Mr. Pi was a
Senior Director at Samsung Research America in Dallas, Texas, where
he led system research, standardization, and prototyping activities
in 4G and 5G wireless communications networks. Before joining
Samsung in 2006, Mr. Pi was with the Nokia Research Center in
Dallas and San Diego, where he was a leading contributor to
Nokia’s 3G wireless standardization and modern development
efforts for 3GPP2 1XEV-DV, 1xEV-DO, and Ultra Mobile Broadband
systems. Mr. Pi has co-authored more than 30 technical journal and
conference papers and is the co-inventor of more than 150 patents
and applications. Mr. Pi received a Bachelor of Engineering from
Tsinghua University (with honor), a Master of Science from Ohio
State University and a Masters of Business Administration from
Cornell University (with distinction). He is a Fellow of the
Institute of Electrical and Electronics Engineers.
David L. Breau
has served as General Counsel of SPCI since
February 2016. Before joining SPCI, Mr. Breau practiced law for
more than eight years at two highly regarded law firms in New York
City, Sullivan & Cromwell LLP and Sidley Austin LLP. Mr.
Breau’s legal practice at both firms included the defense of
securities class action litigations as well as internal and
regulatory investigations involving various federal and state
agencies. From 2006 to 2007, Mr. Breau was a law clerk to Judge
Stanley Marcus on the U.S. Court of Appeals for the Eleventh
Circuit. Mr. Breau earned his J.D.
cum laude
from
Duke University School of Law, and has a B.S. in Mechanical
Engineering from Johns Hopkins University. Before attending law
school, Mr. Breau served in the infantry of the Israel Defense
Forces.
32
Independent Public
Accountants
Zwick & Banyai, PLLC (“Zwick”) was the
Company’s independent registered public accounting firm for
Fiscal 2017 and has served the Company as its independent
registered public accounting firm since the Company’s
formation in April 2013. The Audit Committee of the Board of
Directors has not yet appointed the Company’s independent
registered public accounting firm for 2018 in light of the
potential merger with Verizon, which is expected to close during
the second/third quarter of Fiscal 2018. Zwick was retained to
review the Company’s financial statement for the first and
second quarter of 2018.
We expect that representatives for Zwick will be present
telephonically at the Annual Meeting, will be available to respond
to appropriate questions via telephone and will have the
opportunity to make such statements as they may desire.
During the Company’s two most recent fiscal years, the
Company did not consult with Zwick with respect to any of the
matters or events listed in Regulation S-K Item 304(a)(2).
Zwick’s report on the Company’s consolidated financial
statements for the past two fiscal years did not contain an adverse
opinion or a disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting
principles.
During the two most recent fiscal years there were no disagreements
between the Company and Zwick on any matter of accounting
principles or practices, consolidated financial statement
disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Zwick, would have caused Zwick
to make reference to the subject matter of the disagreements in
connection with its report on the Company’s consolidated
financial statements for such years.
During the two most recent fiscal years there were no
“reportable events”, as defined in Regulation S-K Item
304(a)(1)(v). Audit and Non-Audit Fees
The following table presents fees billed for professional services
rendered by Zwick & Banyai, PLLC for the fiscal years ended
July 31, 2017 and July 31, 2016.
Fiscal Year Ended July 31
|
|
|
|
|
|
Audit Fees
|
|
$
|
114,353
|
(1)
|
|
$
|
71,090
|
(2)
|
|
Audit Related Fees
|
|
|
—
|
|
|
|
—
|
|
|
Tax Fees
|
|
$
|
—
|
|
|
|
—
|
|
|
All Other Fees
|
|
$
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
114,353
|
|
|
$
|
71,090
|
|
The Audit Committee concluded that the provision of the non-audit
services listed above is compatible with maintaining the
independence of Zwick & Banyai, PLLC.
Policy on Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services
of the Independent Registered Public Accounting Firm
The Audit Committee is responsible for appointing, setting
compensation for, and overseeing the work of the Company’s
independent registered public accounting firm. The Audit Committee
has established a policy regarding pre-approval of all audit and
permissible non-audit services provided by the independent
registered public accounting firm, and all such services were
approved by the Audit Committee for the Interim Period following
the Spin-Off.
33
The Audit Committee assesses requests for services by the
independent registered public accounting firm using several
factors. The Audit Committee will consider whether such services
are consistent with the Public Company Accounting Oversight
Board’s and SEC’s rules on auditor independence. In
addition, the Audit Committee will determine whether the
independent registered public accounting firm is best positioned to
provide the most effective and efficient service based upon the
members’ familiarity with the Company’s business,
people, culture, accounting systems, risk profile and whether the
service might enhance the Company’s ability to manage or
control risk or improve audit quality.
Report of the Audit
Committee
The primary purpose of the Audit Committee is to assist the Board
of Directors in its general oversight of the Company’s
financial reporting process, internal controls, and audit
functions. The Audit Committee’s purpose is more fully
described in its charter, which can be found in the Governance
section of our website, h
ttp://spathinc.com/in
vestors. The
Audit Committee reviews its charter on an annual basis. The Board
of Directors annually reviews the NYSE American listing
standards’ definition of independence for Audit Committee
members and has determined that each member of the Committee meets
that standard and that each of the members is “financially
literate” as defined by Securities Exchange and Commission
and NYSE American rules. The Board of Directors has also determined
that Fred S. Zeidman, Chairman of the Audit Committee, qualifies as
an “audit committee financial expert” within the
meaning of Item 407(d)(5) of Regulation S-K.
The Company’s management is responsible for the preparation,
presentation, and integrity of the Company’s financial
statements, in accordance with U.S. generally accepted accounting
principles, and financial reporting requirements, internal
controls, and procedures designed to ensure compliance with
accounting standards, applicable laws, and regulations. The Company
has retained Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
(“Rotenberg”) to perform internal audit functions and
reports to the Audit Committee and to the Company’s
management. Rotenberg is responsible for objectively reviewing and
evaluating the adequacy, effectiveness, and quality of the
Company’s system of internal controls related to, for
example, the reliability and integrity of the Company’s
financial information and the safeguarding of the Company’s
assets. With regard to the internal audit functions, the Audit
Committee reviewed the audit plan, audit scope and its coverage in
relation to the scope of the external audit, and approved Rotenberg
to perform the internal audit function. The Company’s
independent registered public accounting firm for Fiscal 2017,
Zwick & Banyai, PLLC, is responsible for performing an
independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards and
expressing an opinion on the conformity of those financial
statements with U.S. generally accepted accounting principles. In
accordance with law, the Audit Committee has ultimate authority and
responsibility for selecting, compensating, evaluating, and, when
appropriate, replacing the Company’s independent audit firm,
and evaluates its independence. The Audit Committee has the
authority to engage its own outside advisors, including experts in
particular areas of accounting, as it determines appropriate, apart
from counsel or advisors hired by the Company’s
management.
Audit Committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or to
certify the activities of the Company’s management and the
independent audit firm; nor can the Audit Committee certify that
the independent audit firm is “independent” under
applicable rules. The Audit Committee serves a Board-level
oversight role in which it provides advice, counsel, and direction
to the Company’s management and to the auditors on the basis
of the information it receives, discussions with the
Company’s management and the auditors, and the experience of
the Audit Committee’s members in business, financial, and
accounting matters.
The Audit Committee’s annual agenda includes reviewing the
Company’s financial statements, internal control over
financial reporting, and audit and other matters. The Audit
Committee meets each quarter with Zwick & Banyai, PLLC and the
Company’s management to review the Company’s interim
financial results before the publication of the Company’s
quarterly earnings news releases. The Company’s
management’s and the independent audit firm’s
presentations to, and discussions with, the Audit Committee cover
various topics and events that may have significant financial
impact or are the subject of discussions between the
Company’s management and the independent audit firm. The
Audit Committee reviews and discusses with the Company’s
management the Company’s major financial risk exposures and
the steps that the Company’s management has taken to monitor
and control such exposures. In accordance with law, the Audit
Committee is responsible for establishing procedures for the
receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or
auditing matters, including confidential, anonymous submission by
the Company’s employees, received through established
procedures, of any concerns regarding questionable accounting or
auditing matters.
34
Among other matters, the Audit Committee monitors the activities
and performance of the Company’s vendor performing internal
audit function and independent registered public accounting firm,
including the audit scope, external audit fees, auditor
independence matters, and the extent to which the independent audit
firm can be retained to perform non-audit services. The
Company’s independent audit firm has provided the Audit
Committee with the written disclosures and the letter required by
the PCAOB regarding the independent accountant’s
communications with the Audit Committee concerning independence,
and the Audit Committee has discussed with the independent audit
firm and the Company’s management that firm’s
independence. In accordance with Audit Committee policy and the
requirements of law, the Audit Committee pre-approves all services
to be provided by Zwick & Banyai, PLLC. Pre-approval includes
audit services, audit-related services, tax services, and other
services.
The Committee has reviewed and discussed with the Company’s
management the audited financial statements of the Company for the
Fiscal Year ended July 31, 2017, as well as the effectiveness of
the Company’s internal controls over financial reporting as
of July 31, 2017. The Committee has also reviewed and discussed
with Z
wick
& Ba
nyai, PLLC the matters required to be discussed with
the independent registered public accounting firm by applicable
PCAOB rules regarding “Communication with Audit
Committees.”
In reliance on these reviews and discussions, the Audit Committee
recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the
Company’s Annual Report on Form 10-K for the fiscal year
ended July 31, 2017, for filing with the SEC.
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THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
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Fred S. Zeidman — Chairman and Audit
Committee Financial Expert
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K. Chris Todd
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William F. Weld
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Notwithstanding anything to the contrary set forth in any of the
Company’s previous filings under the Act or the Exchange Act
that might incorporate future filings, including this Proxy
Statement, in whole or in part, the foregoing report, as well as
any charters or policies referenced within this Proxy Statement,
shall not be incorporated by reference into any such filings, nor
shall they be deemed to be soliciting material or deemed filed with
the SEC under the Act or under the Exchange Act.
35
OTHER
INFORMATION
Submission of Proposals
for the 2019 Meeting of Stockholders
Stockholders who wish to present proposals for inclusion in the
Company’s proxy materials in connection with the 2019 annual
meeting of stockholders must submit such proposals in writing to
the Corporate Secretary of the Company at 5300 Hickory Park Drive,
Suite 218, Glen Allen, Virginia 23059, which proposals must be
received at such address no later than August 2, 2018. In addition,
any stockholder proposal submitted with respect to the
Company’s 2019 annual meeting of stockholders, which proposal
is submitted outside the requirements of Rule 14a-8 under the
Exchange Act and, therefore, will not be included in the relevant
proxy materials, will be considered untimely for purposes of Rule
14a-4 and 14a-5 if written notice thereof is received by the
Company’s Corporate Secretary after October 17, 2018.
Availability of Annual
Report on Form 10-K
Additional
copies of the Company’s 2017 Annual Report on Form 10-K obtained by contacting Yonatan Cantor, Corporate Secretary and VP
Business Affairs, by phone at (804) 433-1523, or by mail addressed to Yonatan Cantor, Corporate Secretary and VP Business Affairs,
at 5300 Hickory Park Drive, Suite 218, Glen Allen, Virginia 23059.
Other Matters
The Board of Directors knows of no other business that will be
presented at the Annual Meeting. If any other business is properly
brought before the Annual Meeting, it is intended that proxies
granted will be voted in respect thereof in accordance with the
judgments of the persons voting the proxies.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to fill in, sign and
promptly return the accompanying form in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
November 27, 2017
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Yonatan Cantor
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Corporate Secretary
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36
