XWELL, INC.
10-Ks and 10-Qs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
the Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐
Preliminary Proxy Statement
☐
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material Under Rule 14a-12
XpresSpa Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒
No fee required.
☐
Fee paid previously with preliminary materials.
☐
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14A-6(i)(1) and
-11
![[MISSING IMAGE: lg_xpresspa-bw.jpg]](lg_xpresspa-bw.jpg){kind=small}
XPRESSPA GROUP, INC.
254 West 31st Street, 11th Floor
New York, New York 10001
254 West 31st Street, 11th Floor
New York, New York 10001
August 29, 2022
To Our Stockholders:
You are cordially invited to attend the 2022 annual meeting of stockholders of XpresSpa Group, Inc. to be held at 11:00 a.m. Eastern time on Tuesday, October 4, 2022.
As a result of the continuing public health and travel risks and concerns due to COVID-19, the 2022 annual meeting will be a virtual meeting via live webcast on the internet. You will be able to attend the Stockholder Meeting by first registering at
www.viewproxy.com/XpresSpa/2022
. You will receive a meeting invitation by e-mail with your unique join link along with a password prior to the meeting date. Stockholders will be able to listen, vote and submit questions during the virtual meeting. You will not be able to attend the annual meeting in person.
Details regarding the meeting, the business to be conducted at the meeting, and information about XpresSpa Group, Inc. that you should consider when you vote your shares are described in the accompanying proxy statement.
At the annual meeting, we will ask stockholders to consider the following proposals:
1.
To elect Scott R. Milford, Bruce T. Bernstein, Robert Weinstein, Donald E. Stout and Michael Lebowitz to our Board of Directors;
2.
To ratify the selection of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022;
3.
To approve a proposed amendment to the XpresSpa Group, Inc. Amended and Restated Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock, at a ratio of between 1-for-2 and 1-for-6;
4.
To approve a proposed amendment to our 2020 Equity Incentive Plan (the “Plan”) to increase the number of shares authorized for issuance under the Plan by 7,500,000 shares;
5.
To approve, by an advisory vote, the compensation of our named executive officers, as disclosed in the accompanying proxy statement; and
6.
To approve an adjournment of our annual meeting of stockholders to solicit additional proxies if there are not sufficient votes in favor of proposals 2 through 5.
The Board of Directors recommends the approval of each of these proposals.
Such other business will be transacted as may properly come before the annual meeting.
We hope you will be able to attend the annual meeting. Whether you plan to attend the annual meeting or not, it is important that you cast your vote either in person or by proxy. You may vote over the Internet as well as by telephone or by mail. When you have finished reading the proxy statement, you are urged to vote in accordance with the instructions set forth in the proxy statement. We encourage you to vote by proxy so that your shares will be represented and voted at the meeting, whether or not you can attend.
Thank you for your continued support of XpresSpa Group, Inc.
Sincerely,
Scott R. Milford
Chief Executive Officer
Chief Executive Officer
2
XPRESSPA GROUP, INC.
254 West 31st Street, 11th Floor
New York, New York 10001
254 West 31st Street, 11th Floor
New York, New York 10001
August 29, 2022
NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS
TIME:
11:00 a.m., Eastern time
DATE:
October 4, 2022
ACCESS:
The 2022 annual meeting will be a virtual meeting via live webcast on the Internet. You will be able to attend the Stockholder Meeting by first registering at
www.viewproxy.com/XpresSpa/2022
. You will receive a meeting invitation by e-mail with your unique join link along with a password prior to the meeting date. Stockholders will be able to listen, vote and submit questions during the virtual meeting.
PURPOSES:
1.
To elect Scott R. Milford, Bruce T. Bernstein, Robert Weinstein, Donald E. Stout and Michael Lebowitz to our Board of Directors;
2.
To ratify the selection of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022;
3.
To approve a proposed amendment to the XpresSpa Group, Inc. Amended and Restated Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock, at a ratio of between 1-for-2 and 1-for-6;
4.
To approve a proposed amendment to our 2020 Equity Incentive Plan (the “Plan”) to increase the number of shares authorized for issuance under the Plan by 7,500,000 shares;
5.
To approve, by an advisory vote, the compensation of our named executive officers, as disclosed in the proxy statement; and
6.
To approve an adjournment of our annual meeting of stockholders to solicit additional proxies if there are not sufficient votes in favor of proposals 2 through 5.
We are electronically disseminating annual meeting materials to our stockholders, as permitted under the “Notice and Access” rules approved by the Securities and Exchange Commission. Stockholders who have not opted out of Notice and Access will receive a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access annual meeting materials via the Internet. The Notice also provides instructions on how to obtain paper copies if preferred.
You may vote if you were the record owner of XpresSpa Group, Inc. common stock at the close of business on August 15, 2022. A list of stockholders of record will be available for 10 days prior to the annual meeting at our headquarters, 254 West 31st Street, New York, New York 10001. If you would like to view the stockholder list, please contact Omar Haynes, our Interim Chief Financial Officer, at (917) 261-3836 to schedule an appointment or for alternative arrangements to the extent office access is impracticable due to the COVID-19 pandemic. In addition, a list of stockholders of record will be available during the annual meeting for inspection by stockholders of record for any legally valid purpose related to the meeting.
3
All stockholders are cordially invited to attend the annual meeting.
Whether you plan to attend the annual meeting or not, we urge you to vote and submit your proxy by the Internet, telephone or mail in order to ensure the presence of a quorum.
You may change or revoke your proxy at any time before it is voted at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Sincerely,
Scott R. Milford
Chief Executive Officer
Chief Executive Officer
4
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON OCTOBER 4, 2022
SHAREHOLDER MEETING TO BE HELD ON OCTOBER 4, 2022
This proxy statement, the Notice of Annual Meeting of Stockholders, and our 2021 Annual Report to stockholders are available for viewing, printing and downloading at
www.viewproxy.com/XpresSpa/2022
.
Additionally, you can find a copy of our Annual Report on Form 10-K, as amended, which includes our financial statements for the fiscal year ended December 31, 2021, on the website of the Securities and Exchange Commission, or the SEC, at
www.sec.gov
, or in the “SEC Filings” section of the “Investors” section of our website at
www.xpresspagroup.com
. You may also obtain a printed copy of our Annual Report on Form 10-K, as amended, including our financial statements, free of charge, from us by sending a written request to: XpresSpa Group, Inc., 254 West 31st Street, 11th Floor, New York, New York 10001, Attention: Corporate Secretary. Exhibits will be provided upon written request and payment of an appropriate processing fee.
5
TABLE OF CONTENTS
| | | |
PAGE
|
| |||
| | | | | 7 | | | |
| | | | | 14 | | | |
| | | | | 16 | | | |
| | | | | 28 | | | |
| | | | | 29 | | | |
| | | | | 29 | | | |
| | | | | 30 | | | |
| | | | | 31 | | | |
| | | | | 33 | | | |
| | | | | 40 | | | |
| | | | | 45 | | | |
| | | | | 47 | | | |
| | | | | 48 | | | |
| | | | | 48 | | | |
| | | | | 48 | | | |
| APPENDIX | | | | | | | |
| | | | | A-1 | | | |
| | | | | B-1 | | | |
6
XPRESSPA GROUP, INC.
254 West 31st Street, 11th Floor
New York, New York 10001
254 West 31st Street, 11th Floor
New York, New York 10001
PROXY STATEMENT FOR THE XPRESSPA GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 4, 2022
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 4, 2022
This proxy statement, along with the accompanying notice of annual meeting of stockholders, contains information about the annual meeting of stockholders of XpresSpa Group, Inc. including any adjournments or postponements of the annual meeting. We are holding the annual meeting at 11:00 a.m. Eastern time, on Tuesday, October 4, 2022. As a result of the continuing public health and travel risks and concerns due to COVID-19, the 2022 annual meeting will be a virtual meeting via live webcast on the internet. You will be able to attend the Stockholder Meeting by first registering at
www.viewproxy.com/XpresSpa/2022
. You will receive a meeting invitation by e-mail with your unique join link along with a password prior to the meeting date. Stockholders will be able to listen, vote and submit questions during the virtual meeting. You will not be able to attend the 2022 annual meeting in person.
In this proxy statement, we refer to XpresSpa Group, Inc. as “
XpresSpa
,” “
the Company
,” “
we
” and “
us
.”
This proxy statement relates to the solicitation of proxies by our Board of Directors for use at the annual meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON OCTOBER 4, 2022
SHAREHOLDER MEETING TO BE HELD ON OCTOBER 4, 2022
This proxy statement is available for viewing, printing and downloading at
www.viewproxy.com/XpresSpa/2022
.
IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why is the Company Soliciting My Proxy?
The Board of Directors of XpresSpa Group, Inc. is soliciting your proxy to vote at the annual meeting of stockholders to be held virtually on October 4, 2022, at 11:00 a.m. Eastern time and any adjournments of the meeting, which we refer to as the annual meeting. The proxy statement, along with the accompanying Notice of Annual Meeting of Stockholders, summarizes the purposes of the meeting and the information you need to know to vote at the annual meeting.
We have made available to you on the Internet or have sent you this proxy statement, the Notice of Annual Meeting of Stockholders and a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as amended, because you owned shares of our common stock, par value $0.01 per share, on the record date. On or about August 29, 2022, we made these materials available to all stockholders entitled to vote at the annual meeting.
Why Are You Holding a Virtual Annual Meeting?
Due to the continuing public health impact of COVID-19 and to support the health and well-being of our stockholders, this annual meeting will be held in a virtual meeting format only. We have designed our virtual format to enhance, rather than constrain, stockholder access, participation and communication. For example, the virtual format allows stockholders to communicate with us throughout the annual meeting so they can ask questions of our Board of Directors or management, as time permits.
Why is the Company seeking approval for the reverse stock split?
The continued listing standards of The Nasdaq Stock Market (“Nasdaq”) provide, among other things, that a company may be delisted if the bid price of its stock drops below $1.00 for a period of 30 consecutive business days.
7
On June 8, 2022, we received a written notification (the “Notice”) from the Listing Qualifications Department of Nasdaq notifying us that the closing bid price for our common stock had been below $1.00 for 30 consecutive business days and that we therefore were not in compliance with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”). Under the Nasdaq Listing Rules, we have a period of 180 calendar days from the date of the Notice to regain compliance with the Bid Price Requirement, and accordingly, we have until December 5, 2022 (the “Compliance Date”), to regain compliance with the Bid Price Requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 for a minimum of ten consecutive business days prior to the Compliance Date.
Our Board of Directors has approved the reverse stock split as a means of increasing the share price of our common stock. Our Board of Directors believes that maintaining our listing on The Nasdaq Capital Market may provide a broader market for our common stock and facilitate the use of our common stock in financing and other transactions. We expect the reverse stock split to facilitate the continuation of such listing. We cannot assure you, however, that the reverse stock split will result in an increase in the per share price of our common stock, or if it does, how long the increase would be sustained, if at all. Although the reverse stock split is designed to raise the stock price, there is no guarantee that the share price will rise proportionately to the reverse stock split, so the end result could be a loss of value.
For more information, see
“Proposal 3: Reverse Stock Split”
contained elsewhere in this proxy statement.
Why is the Company seeking approval for an increase in the shares available under our 2020 Equity Incentive Plan?
Our Board of Directors, the Compensation Committee and management believe that the effective use of stock-based long-term incentive compensation is vital to our ability to achieve strong performance in the future. Our 2020 Equity Incentive Plan (the “2020 Plan” or the “Plan”) will maintain and enhance the key policies and practices adopted by our management and Board of Directors to align employee and stockholder interests and to link compensation to Company performance. In addition, our future success depends, in large part, upon our ability to maintain a competitive position in attracting, retaining and motivating key personnel. We believe that the increase in the number of shares available for issuance under our Plan is essential to permit our management to continue to provide long-term, equity-based incentives to present and future key employees, consultants and directors. Our Board of Directors believes that the number of shares currently remaining available for issuance pursuant to future awards under the 2020 Plan (as of June 30, 2022) is not sufficient for future granting needs.
For more information, see “
Proposal 4: Approval of an Amendment to Our 2020 Equity Incentive Plan to Increase the Number of Shares Available Thereunder by 7,500,000 Shares
” contained elsewhere in this proxy statement.
What Happens if There Are Technical Difficulties during the Annual Meeting?
There will be technicians ready to assist you with any technical difficulties you may have accessing the annual meeting live audio webcast. Please be sure to check in 15 minutes prior to the start of the meeting, so that any technical difficulties may be addressed before the annual meeting live audio webcast begins. If you encounter any difficulties accessing the webcast during the check-in or meeting time, please email VirtualMeeting@viewproxy.com or call 866-612-8937.
Who Can Vote?
Only stockholders who owned our common stock at the close of business on August 15, 2022 are entitled to vote at the annual meeting. On this record date, there were 94,278,118 shares of our common stock outstanding and entitled to vote. Our common stock is our only class of voting stock.
You do not need to attend the annual meeting to vote your shares. Shares represented by valid proxies, received in time for the annual meeting and not revoked prior to the annual meeting, will be voted at the annual meeting. For instructions on how to change or revoke your proxy, see “
May I Change or Revoke My Proxy?
” below.
8
How Many Votes Do I Have?
Each share of our common stock that you own entitles you to one vote. There is no cumulative voting in the election of directors.
How Do I Vote?
Whether you plan to attend the annual meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions. You may specify whether your shares should be voted FOR or WITHHELD for each nominee for director, and whether your shares should be voted FOR, AGAINST or ABSTAIN with respect to each of the other proposals. If you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board of Directors’ recommendations as noted below. Voting by proxy will not affect your right to attend the annual meeting. If your shares are registered directly in your name through our stock transfer agent, American Stock Transfer & Trust Company, LLC, or you have stock certificates registered in your name, you are a “registered stockholder”, and you may vote:
•
Over the Internet.
Go to
www.FCRvote.com/XSPA
and have your Notice or proxy card available.
•
By telephone:
Call 1-(866) 402-3906 and follow the instructions. Have your Notice or proxy card available.
•
By mail.
If you received a proxy card by mail, you can vote by mail by completing, signing, dating and returning the proxy card in the envelope provided. If you sign the proxy card but do not specify how you want your shares voted, they will be voted in accordance with the Board of Directors’ recommendations as noted below.
•
During the meeting.
If you attend the virtual annual meeting, you may vote during the annual meeting by first registering at
www.viewproxy.com/XpresSpa/2022
,
and entering the control number included on the Notice or proxy card you receive.
If you are a registered holder, your virtual control number will be on your Notice of Internet Availability of Proxy Materials or proxy card.
Internet and telephone voting facilities for registered stockholders will be available 24 hours a day and will close at 11:59 p.m. Eastern Time on October 3, 2022.
If you hold your shares beneficially through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the annual meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the 2022 annual meeting (but will not be able to vote your shares) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at
www.viewproxy.com/XpresSpa/2022
. On the day of the annual meeting, you may only vote during the meeting by e-mailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the meeting.
If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Internet and telephone voting also will be offered to stockholders owning shares through certain banks and brokers.
How Does the Board of Directors Recommend That I Vote on the Proposals?
The Board of Directors recommends that you vote as follows:
•
“
FOR
” the election of each of the nominees for director;
•
“
FOR
” the ratification of the selection of Friedman LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2022;
•
“
FOR
” the approval of the amendment to the XpresSpa Group, Inc. Amended and Restated Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock, at a ratio of between 1-for-2 and 1-for-6;
9
•
“
FOR
” the approval of the amendment to our 2020 Equity Incentive Plan (the “Plan”), to increase the number of shares authorized for issuance under the Plan by 7,500,000 shares;
•
“
FOR
” the compensation of our named executive officers, as disclosed in this proxy statement; and
•
“
FOR
” adjournment of our annual meeting of stockholders to solicit additional proxies if there are not sufficient votes in favor of proposals 2 through 5.
If any other matter is presented at the annual meeting, your proxy provides that your shares will be voted by a proxy holder listed in the proxy in accordance with his or her best judgment. At the time this proxy statement was first made available, we knew of no matters that needed to be acted on at the annual meeting, other than those discussed in this proxy statement.
May I Change or Revoke My Proxy?
If you give us your proxy, you may change or revoke it at any time before the annual meeting. You may change or revoke your proxy in any one of the following ways:
•
if you received a proxy card, by signing a new proxy card with a date later than your previously delivered proxy and submitting it as instructed above;
•
by re-voting by the Internet or telephone as instructed above;
•
by notifying the Corporate Secretary of XpresSpa Group, Inc. in writing before the annual meeting that you have revoked your proxy; or
•
by attending the annual meeting virtually and voting at the meeting. Attending the annual meeting virtually will not in and of itself revoke a previously submitted proxy.
Your most current vote, whether by the Internet, telephone or proxy card is the one that will be counted.
What if I Receive More Than One Notice or Proxy Card?
You may receive more than one Notice or proxy card if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described above under “
How Do I Vote?
” for each account to ensure that all of your shares are voted.
Will My Shares be Voted if I Do Not Vote?
If your shares are registered in your name or if you have stock certificates, they will not be counted if you do not vote. If your shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares as described above, the bank, broker or other nominee that holds your shares does not have the authority to vote your unvoted shares on Proposals 1, 4 and 5. Therefore, we encourage you to provide voting instructions to your bank, broker or other nominee. This ensures your shares will be voted at the annual meeting and in the manner you desire. A “broker non-vote” will occur if your broker cannot vote your shares on a particular matter because it has not received instructions from you and does not have discretionary voting authority on that matter or because your broker chooses not to vote on a matter for which it does have discretionary voting authority.
What Vote is Required to Approve Each Proposal and How are Votes Counted?
| |
Proposal 1: Election of Directors
|
| | The five nominees for director who receive the most votes (also known as a “plurality” of the votes cast) will be elected. You may vote either FOR all of the nominees, WITHHOLD your vote from all of the nominees or WITHHOLD your vote from any one or more of the nominees. Votes that are withheld will not be included in the vote tally for the election of the directors. Brokerage firms do not have | |
10
| | | | | authority to vote customers’ unvoted shares held by the firms in street name for the election of the directors. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote. | |
| |
Proposal 2: Ratify Selection of Independent Registered Public Accounting Firm
|
| | The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote on the matter either virtually or by proxy at the annual meeting is required to ratify the appointment of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. Abstentions will be treated as votes AGAINST this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. We are not required to obtain the approval of our stockholders to select our independent registered public accounting firm. However, if our stockholders do not ratify the selection of Friedman LLP as our independent registered public accounting firm for 2022, the Audit Committee of our Board of Directors will reconsider its selection. | |
| |
Proposal 3: Reverse Stock Split
|
| | The affirmative vote of the holders of a majority of the shares of our common stock having voting power outstanding on the Record Date is required to approve the amendment to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of our common stock. Abstentions will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have the same effect as a vote against such proposal. | |
| |
Proposal 4: Approval of an Amendment to our 2020 Equity Incentive Plan to increase the number of shares available thereunder by 7,500,000 shares
|
| | The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote on the matter either in person or by proxy at the annual meeting is required to approve the amendment to our 2020 Equity Incentive Plan to increase the number of shares available thereunder by 7,500,000 shares. Abstentions will be treated as votes against this proposal. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote. | |
11
| |
Proposal 5: Advisory Vote on the Compensation of our Named Executive Officers
|
| | The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote on the matter either in person or by proxy at the annual meeting is required to approve, on an advisory basis, the compensation of our named executive officers, as described this proxy statement. Abstentions will be treated as votes AGAINST this proposal. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote. Although the advisory vote is non-binding, the Compensation Committee and the Board of Directors will review the voting results and take them into consideration when making future decisions regarding executive compensation. | |
| |
Proposal 6: Approve an Adjournment of the Annual Meeting to Solicit Additional Proxies if there are not Sufficient Votes in Favor of Proposals 2 through 5
|
| | Approval of the adjournment of the annual meeting to solicit additional proxies if there are not sufficient votes in favor of Proposals 2 through 5 requires the affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote on the matter either virtually or by proxy at the annual meeting. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. | |
Is Voting Confidential?
We will keep all the proxies, ballots and voting tabulations private. We only let our Inspectors of Election, Alliance Advisors, examine these documents. Management will not know how you voted on a specific proposal unless it is necessary to meet legal requirements. We will, however, forward to management any written comments you make, on the proxy card or otherwise.
Where Can I Find the Voting Results of the Annual Meeting?
The preliminary voting results will be announced at the annual meeting, and we will publish preliminary, or final results, if available, in a Current Report on Form 8-K within four business days of the annual meeting. If final results are unavailable at the time we file the Form 8-K, then we will file an amended report on Form 8-K to disclose the final voting results within four business days after the final voting results are known.
What Are the Costs of Soliciting these Proxies?
We will pay all of the costs of soliciting these proxies. Our directors and employees may solicit proxies in person or by telephone, fax or email. We will pay these employees and directors no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses.
We have engaged Alliance Advisors, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements that are not expected to exceed $160,000 in the aggregate.
12
What Constitutes a Quorum for the Annual Meeting?
The presence, virtually or by proxy, of the holders of one-third (33.33%) of the shares of our common stock issued and outstanding and entitled to vote on the matters at the annual meeting is necessary to constitute a quorum at the meeting. Votes of stockholders of record who are present at the annual meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.
Why did I receive a Notice of Internet Availability of Proxy Materials rather than a full set of proxy materials?
In accordance with SEC rules, we have elected to furnish our proxy materials, including this proxy statement and the Annual Report, primarily via the Internet rather than by mailing the materials to stockholders. The Notice of Internet Availability of Proxy Materials provides instructions on how to access our proxy materials on the Internet, how to vote and how to request printed copies of the proxy materials. Stockholders may request to receive the proxy materials in printed form by following the instructions contained in the Notice of Internet Availability of Proxy Materials. We encourage stockholders to take advantage of the proxy materials on the Internet to reduce the costs and environmental impact of our Annual Meeting.
If you are a registered stockholder and wish to receive paper copies of future proxy materials, please visit
www.viewproxy.com/XpresSpa/2022
.
Attending the Annual Meeting
The annual meeting will be held at 11:00 a.m. Eastern time on Tuesday, October 4, 2022. The annual meeting will be held in a virtual meeting format only. You will be able to attend the Stockholder Meeting by first registering at www.viewproxy.com/XpresSpa/2022. You will receive a meeting invitation by e-mail with your unique join link along with a password prior to the meeting date. Stockholders will be able to listen, vote and submit questions during the virtual meeting. You need not attend the annual meeting in order to vote.
Householding of Annual Disclosure Documents
SEC rules concerning the delivery of annual disclosure documents allow us or your broker to send a single Notice or, if applicable, a single set of our proxy materials to any household at which two or more of our stockholders reside, if we or your broker believe that the stockholders are members of the same family.
This practice, referred to as “householding,” benefits both you and us. It reduces the volume of duplicate information received at your household and helps to reduce our expenses. The rule applies to our Notices, annual reports, proxy statements and information statements. Once you receive notice from your broker or from us that communications to your address will be “householded,” the practice will continue until you are otherwise notified or until you revoke your consent to the practice. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.
If your household received a single Notice or, if applicable, a single set of proxy materials this year, but you would prefer to receive your own copy, please contact XpresSpa Group’s Corporate Secretary at XpresSpa Group, Inc., 254 West 31st Street, 11th Floor, New York, New York 10001.
If you do not wish to participate in “householding” and would like to receive your own Notice or, if applicable, your own set of our proxy materials in future years, follow the instructions described below. Conversely, if you share an address with another of our stockholders and together both of you would like to receive only a single Notice or, if applicable, set of proxy materials, follow these instructions:
•
If your shares are registered in your own name, please contact American Stock Transfer & Trust Company, LLC and inform them of your request by calling them at 718-921-8200.
•
If a broker or other nominee holds your shares, please contact the broker or other nominee directly and inform them of your request. Be sure to include your name and your account number.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of August 15, 2022 for (a) each stockholder known by us to own beneficially more than 5% of our common stock, (b) each of our named executive officers, (c) each of our directors and director nominees, and (d) all of our current directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. We deem shares of common stock that may be acquired by an individual or group within 60 days of August 15, 2022, pursuant to the exercise of options or warrants or the vesting of restricted stock units to be outstanding for the purpose of computing the percentage ownership of such individual or group, but do not deem those shares to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 94,278,118 shares of common stock outstanding as of August 15, 2022.
|
Name and Address of Beneficial Owner
(1)
|
| |
Number of
Shares of Common Stock Beneficially Owned |
| |
Percent of
Shares of Common Stock Beneficially Owned |
| ||||||
| Five percent or more beneficial owners: | | | | | | | | | | | | | |
|
Sabby Volatility Warrant Master Fund, Ltd
(2)
|
| | | | 14,383,810 | | | | | | 13.8 % | | |
| Directors and named executive officers: | | | | | | | | | | | | | |
|
Scott Milford
(3)
|
| | | | 230,059 | | | | | | * | | |
|
James A. Berry
(4)
|
| | | | 68,004 | | | | | | * | | |
|
Bruce T. Bernstein
(5)
|
| | | | 940,418 | | | | | | 1.0 % | | |
|
Donald E. Stout
(6)
|
| | | | 293,573 | | | | | | * | | |
|
Robert Weinstein
(7)
|
| | | | 238,573 | | | | | | * | | |
|
Michael Lebowitz
(8)
|
| | | | 379,906 | | | | | | * | | |
|
Douglas Satzman
(9)
|
| | | | 772,783 | | | | | | * | | |
|
All current directors and officers as a group (7 individuals)
(10)
:
|
| | | | 2,221,436 | | | | | | 2.3 % | | |
*
Less than 1%
(1)
Unless otherwise indicated, the business address of the individuals is c/o XpresSpa Group, Inc., 254 West 31st Street, 11th Floor, New York, NY 10001.
(2)
Based on (i) Form SC 13G/A filed by Sabby Volatility Warrant Master Fund, Ltd., Sabby Management, LLC and Hal Mintz with the SEC on January 7, 2021, which reported 4,691,933 shares of common stock ownership as of December 31, 2020, and (ii) 9,691,877 shares of common stock issuable upon exercise of warrant held by Sabby Volatility Warrant Master Fund, Ltd. The principal business address of Sabby Volatility Warrant Master Fund, Ltd. is 89 Nexus Way, Camara Bay, Grand Cayman KY1-9007, Cayman Islands. The principal business address of Sabby Management, LLC and Hal Mintz is 10 Mountainview Road, Suite 205, Upper Saddle River, New Jersey 07458.
(3)
The number of shares of common stock beneficially owned includes 12,405 shares of common stock and options to purchase 217,654 shares of common stock, which are exercisable within 60 days of August 15, 2022.
(4)
Mr. Berry ceased his service as our Chief Financial Officer effective June 13, 2022. The number of shares of common stock beneficially owned includes 24,602 shares of common stock and options to purchase 43,402 shares of common stock, which are exercisable within 60 days of August 15, 2022.
14
(5)
The number of shares of common stock beneficially owned includes 713,573 shares of common stock and options to purchase 226,845 shares of common stock, which are exercisable within 60 days of August 15, 2022.
(6)
The number of shares of common stock beneficially owned includes 151,673 shares of common stock and options to purchase 141,900 shares of common stock, which are exercisable within 60 days of August 15, 2022.
(7)
The number of shares of common stock beneficially owned includes 98,673 shares of common stock and options to purchase 139,900 shares of common stock, which are exercisable within 60 days of August 15, 2022.
(8)
The number of shares of common stock beneficially owned includes 251,673 vested shares of common stock and options to purchase 128,233 shares of common stock, which are exercisable within 60 days of August 15, 2022.
(9)
The number of shares of common stock beneficially owned includes 148,145 shares of common stock and options to purchase 624,638 shares of common stock, and which are exercisable within 60 days of August 15, 2022. All of Mr. Satzman’s equity awards immediately vested pursuant to his Separation Agreement, dated January 21, 2022.
(10)
See footnotes (3) and (5) through (8). In addition, includes 548 shares of common stock and options to purchase 60,508 shares of common stock, and which are exercisable within 60 days of August 15, 2022 for Mr. Haynes, who became our Interim Chief Financial Officer effective June 13, 2022 and 77,851 shares of common stock held by Ezra T. Ernst, who became our Executive Vice President and Chief Executive Officer of XpresTest, Inc. effective January 14, 2022.
15
MANAGEMENT AND CORPORATE GOVERNANCE
Our Board of Directors currently consists of five (5) members. Prior to each annual meeting of stockholders, the Board of Directors considers the recommendations of the Nominating and Corporate Governance Committee and votes to nominate individuals for election or re-election for a term of one year or until their successors are duly elected and qualify or until their earlier death, resignation, or removal. Election takes place at our annual meeting of stockholders.
Set forth below are the names of our directors and executive officers, their ages (as of the filing date of this proxy statement), their position(s) with the Company, if any, their principal occupations or employment for at least the past five years, the length of their tenure as directors and the names of other public companies in which such persons hold or have held directorships during the past five years. Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There are no family relationships among any of the directors or executive officers. Additionally, information about the specific experience, qualifications, attributes or skills that led to our Board of Directors’ conclusion that each person listed below should serve as a director is set forth below:
|
Name
|
| |
Age
|
| |
Position(s) with the Company
|
|
| Bruce T. Bernstein* (1) | | |
58
|
| | Chairman of the Board of Directors | |
| Robert Weinstein* (2) | | |
62
|
| | Director | |
| Donald E. Stout* (3) | | |
76
|
| | Director | |
| Michael Lebowitz* (4) | | |
49
|
| | Director | |
| Scott R. Milford | | |
57
|
| | Chief Executive Officer and Director | |
| Omar A. Haynes | | |
40
|
| | Interim Chief Financial Officer | |
*
Independent director under the rules of The Nasdaq Stock Market
(1)
Current Chairperson of the Compensation Committee, the Nominating and Corporate Governance Committee and the Strategic Affairs Committee, and member of the Audit Committee
(2)
Current Chairperson of the Audit Committee and member of the Strategic Affairs Committee
(3)
Current member of the Compensation Committee, the Audit Committee and the Nominating and Corporate Governance Committee
(4)
Current member of the Strategic Affairs Committee
Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based upon this review, our Board of Directors has determined that the following members of our Board of Directors are “independent directors” as defined by The Nasdaq Stock Market: Bruce T. Bernstein, Donald E. Stout, Robert Weinstein, and Michael Lebowitz.
Scott R. Milford
joined the Company in July 2019 and has served as our Chief Executive Officer and as a member of our Board of Directors since January 19, 2022. Prior to January 2022, Mr. Milford served as our Chief Operating Officer since December 2020. Prior to that, he served as our first Chief People Officer since July 2019. Mr. Milford has over 30 years of experience at high profile and diverse organizations. Prior to joining XpresSpa, he served as VP, People Operations at SoulCycle from January to July 2019, where he led the creation and deployment of that company’s talent acquisition strategy, the development of an annual performance cycle, and created and deployed the “people strategy” that supported the opening of the brand’s first European studio in London. This included the development of talent acquisition and talent management plans, compensation design and all policies and procedures governing studio operations. Prior to that, he served as Chief People Officer for Bayada, a $1 billion Home Health Care Company, during 2018, where he played a significant role in building the organizational infrastructure necessary to scale the business from 400 service offices to 1,000 offices. Previously, he was Senior Vice President — Human Resources for Le Pain Quotidien from 2016 to 2018, where he was responsible for driving operational excellence through strategic HR planning, building organizational and employee capabilities, facilitating change, and building effective working relationships with employees and guests on a global scale. His other relevant experiences include senior leadership positions at Town Sports International, Starbucks Coffee Company, Universal Music Group, Viacom, and Blockbuster Entertainment.
16
We believe Mr. Milford’s extensive experience in the retail industry and his knowledge of our business due to his status as an executive officer of the Company qualifies him to serve on our Board of Directors.
Bruce T. Bernstein
joined our Board of Directors in February 2016 and has served as the Chairman of our Board of Directors since February 2018. Mr. Bernstein has over thirty years of experience in the securities industry, primarily as senior portfolio manager for two alternative finance funds as well as in trading and structuring of arbitrage strategies. Mr. Bernstein served as President of Rockmore Capital, LLC from 2006 until February 2017, the manager of a direct investment and lending fund with peak assets under management of $140 million. Previously, he served as Co-President of Omicron Capital, LP, an investment firm based in New York, which he joined in 2001. Omicron Capital focused on direct investing and lending to public small cap companies and had peak assets under management of $260 million. Prior to joining Omicron Capital, Mr. Bernstein was with Fortis Investments Inc., where he was Senior Vice President in the bank’s Global Securities Arbitrage business unit, specializing in equity structured products and equity arbitrage and then President in charge of the bank’s proprietary investment business in the United States. Prior to Fortis, Mr. Bernstein was Director in the Equity Derivatives Group at Nomura Securities International specializing in cross-border tax arbitrage, domestic equity arbitrage and structured equity swaps. Mr. Bernstein started his career at Kidder Peabody, where he rose to the level of Assistant Treasurer. Mr. Bernstein also serves as a member of the Board of Directors of Synaptogenix, Inc. (formerly Neurotrope Bioscience, Inc.), Mr. Bernstein is also a member of the board of Summit Digital Health, a laser-based blood glucose monitor distributor, based in New Jersey. Mr. Bernstein holds a B.B.A. from City University of New York (Baruch).
We believe Mr. Bernstein’s extensive experience in the securities industry qualifies him to serve on our Board of Directors.
Robert Weinstein
joined our Board of Directors in February 2020. Mr. Weinstein has extensive accounting and finance experience, spanning more than thirty years, as a public accountant, investment banker, healthcare private equity fund principal and chief financial officer. Since October 2013, Mr. Weinstein has been the Chief Financial Officer of Synaptogenix, Inc. (formerly Neurotrope Bioscience, Inc.), a publicly-traded biotechnology company. From September 2011 to September 2013, Mr. Weinstein was an independent consultant for several healthcare companies in the pharmaceutical and biotechnology industries. From March 2010 to August 2011, Mr. Weinstein was the Chief Financial Officer of Green Energy Management Services Holdings, Inc., a publicly-traded energy consulting company. From August 2007 to February 2010, Mr. Weinstein served as Chief Financial Officer of Xcorporeal, Inc., a publicly-traded, development-stage medical device company which was sold in March 2010 to Fresenius Medical USA, the largest provider of dialysis equipment and services worldwide. Mr. Weinstein received his MBA degree in finance and international business from the University of Chicago Graduate School of Business, is a Certified Public Accountant (inactive), and received his B.S. in accounting from the State University of New York at Albany.
We believe Mr. Weinstein’s extensive financial expertise and healthcare experience qualify him to serve on our Board of Directors and as a member and the chairperson of the audit committee of our Board of Directors.
Donald E. Stout
has been our director since July 2012, and was a director of Innovate/Protect, Inc. from November 2011 through the consummation of the merger with us. In a career spanning over forty years, Mr. Stout has been involved in virtually all facets of intellectual property law. Mr. Stout has been a partner at a law firm Fitch, Even, Tabin & Flannery LLP since 2015 and he had been a senior partner at the law firm of Antonelli, Terry, Stout & Kraus, LLP from 1982 to 2015. As an attorney in private practice, Mr. Stout has focused on litigation, licensing and representation of clients before the United States Patent and Trademark Office (“USPTO”) in diverse technological areas. From 1971 to 1972, Mr. Stout worked as a law clerk for two members of the USPTO Board of Appeals and, from 1968 to 1972, Mr. Stout was an assistant examiner at the USPTO, where he focused on patent applications covering radio and television technologies. Mr. Stout has written and prosecuted hundreds of patent applications in diverse technologies, rendered opinions on patent infringement and validity, and has testified as an expert witness regarding obtaining and prosecuting patents. Mr. Stout is also the co-founder of NTP Inc., which licensed Research in Motion (RIM), the maker of the Blackberry handheld devices, for $612.5 million to settle a patent infringement action. Mr. Stout also previously served on the Board of Directors of Tessera Technologies, Inc. (TSRA). Mr. Stout is a member of the bars of the District of Columbia and Virginia, and is admitted to practice before
17
the Supreme Court of the United States, the Court of Appeals for the Federal Circuit and the USPTO. Mr. Stout holds a Bachelor’s degree in Electrical Engineering, with distinction, from Pennsylvania State University, and a J.D., with honors, from The George Washington University
.
We believe Mr. Stout’s historical knowledge of the Company and intellectual property experience qualifies him to serve on our Board of Directors
Michael Lebowitz
joined our Board of Directors in April 2020. An expert in customer experience strategy and innovation, Mr. Lebowitz has a twenty-five year track record in defining creative strategy and vision for some of the world’s most recognizable brands. Mr. Lebowitz founded Big Spaceship, a globally-recognized creative consultancy, in 2000 and has served as Chief Executive Officer of Big Spaceship since its founding. Mr. Lebowitz received his Bachelor’s degree in Film from Vassar College.
We believe Mr. Lebowitz’s extensive experience in the area of creative brand strategy qualifies him to serve on our Board of Directors.
Executive Officer
Omar A. Haynes
was appointed as Interim Chief Financial Officer of the Company effective on June 13, 2022. In such role, Mr. Haynes serves as our principal financial officer and principal accounting officer for SEC reporting purposes. Mr. Haynes has served as Vice President of Treasury & Finance of the Company since June 2021 and will continue to retain those titles while serving as our Interim Chief Financial Officer. He joined the Company as Associate Director of Finance in March 2017, then served as Director of Finance, Analytics & Treasury from January 2019 to June 2020 and Treasurer & Senior Director of Finance from June 2020 to May 2021. Before joining the Company, he worked in corporate structuring and interim management consulting, focusing on performance improvement and cash management.
Committees of the Board of Directors and Meetings
Meeting Attendance
. During the fiscal year ended December 31, 2021, there were 8 meetings of our Board of Directors as well as 4 unanimous written consents. The various committees of the Board of Directors met a total of 4 times. All directors attended more than 75 percent of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings held by all committees of the board on which he served. The Board of Directors has adopted a policy under which each member of the Board of Directors is strongly encouraged, but not required, to attend each annual meeting of our stockholders. All five of our directors attended our 2021 annual meeting of stockholders.
Audit Committee
. Our Audit Committee met 4 times during fiscal 2021. This committee currently has three (3) members, Robert Weinstein (Chairman), Bruce T. Bernstein and Donald E. Stout. Our Audit Committee’s role and responsibilities are set forth in the Audit Committee’s written charter and include the authority to retain and terminate the services of our independent registered public accounting firm. In addition, the Audit Committee reviews our annual and quarterly financial statements, considers matters relating to accounting policy and internal controls and reviews the scope of annual audits.
The Board determined that all members of the Audit Committee qualify as independent under the listing standards promulgated by the SEC and The Nasdaq Stock Market (“Nasdaq”), as such standards apply specifically to members of audit committees. The Board of Directors has determined that both Messrs. Weinstein and Bernstein are “audit committee financial experts,” as defined by the SEC in Item 407 of Regulation S-K. A copy of the Audit Committee’s written charter is publicly available through the “Investors Corporate Governance” section of our website at
www.xpresspagroup.com/corp_governance
.
Compensation Committee
Our Compensation Committee, has two (2) members, Bruce T. Bernstein (Chairman) and Donald E. Stout. Although the Compensation Committee did not formally meet during 2021, the members held numerous discussions informally by telephone and acted by unanimous written consent at various times during 2021.
Our Compensation Committee’s role and responsibilities are set forth in the Compensation Committee’s written charter and includes reviewing, approving and making recommendations regarding our compensation policies, practices and procedures to ensure that legal and fiduciary responsibilities of the Board of
18
Directors are carried out and that such policies, practices and procedures contribute to our success. Our Compensation Committee also administers our 2012 Employee, Director and Consultant Equity Incentive Plan (the “2012 Plan”) and our 2020 Equity Incentive Plan (the “2020 Plan”). The Compensation Committee is responsible for (1) the determination of the compensation of our Chief Executive Officer, and conducts its decision-making process with respect to that issue without the Chief Executive Officer present, (2) the determination of the compensation of the executive officers of the Company other than the Chief Executive Officer based upon the recommendation of the Chief Executive Officer and such other customary factors that the Committee deems necessary or appropriate, and (3) the establishment and review of general compensation policies with the objective of attracting and retaining superior talent, rewarding individual performance and achieving our financial goals. The Compensation Committee has the authority to directly retain the services of independent consultants and other experts to assist in fulfilling its responsibilities. During fiscal year 2021, the Compensation Committee did engage a third-party compensation consultant to review the Company’s compensation structure as well as benchmark it against the Company’s peer group.
The Board determined that both members of the Compensation Committee qualify as independent under the Nasdaq listing standards. A copy of the Compensation Committee’s written charter is publicly available through the “Investors — Corporate Governance” section of our website at
www.xpresspagroup.com/corp_governance
.
Nominating and Corporate Governance Committee
. Our Nominating and Corporate Governance Committee currently has two (2) members, Bruce T. Bernstein and Donald E. Stout. Although the Nominating and Corporate Governance Committee did not formally meet during 2021, the members held numerous discussions informally by telephone and acted by unanimous written consent at various times during 2021.
The Nominating and Corporate Governance Committee’s role and responsibilities are set forth in the Nominating and Corporate Governance Committee’s written charter and is authorized to:
•
identify and nominate members of the Board of Directors;
•
oversee the evaluation of the Board of Directors and management;
•
develop and recommend corporate governance guidelines to the Board of Directors;
•
evaluate the performance of the members of the Board of Directors; and
•
make recommendations to the Board of Directors as to the structure, composition and functioning of the Board of Directors and its committees.
Our Nominating and Corporate Governance Committee and Board of Directors may therefore consider a broad range of factors relating to the qualifications and background of nominees, which may include diversity, which is not only limited to race, gender or national origin. Our Nominating and Corporate Governance Committee’s and Board of Directors’ priority in selecting Board members is identification of persons who will further the interests of our stockholders through their established record of professional accomplishment, the ability to contribute positively to the collaborative culture among Board members and professional and personal experiences and expertise relevant to our growth strategy.
In addition, under our current corporate governance policies, the Nominating and Corporate Governance Committee may consider candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. For all potential candidates, the Nominating and Corporate Governance Committee may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the Board of Directors, and concern for the long-term interests of the stockholders. In general, persons recommended by stockholders will be considered on the same basis as candidates from other sources.
The Board determined that both members of the Nominating and Corporate Governance Committee qualify as independent under the Nasdaq listing standards. A copy of the Nominating and Governance Committee’s written charter is publicly available through the “Investors — Corporate Governance” section of our website at
www.xpresspagroup.com/corp_governance
.
19
Additional Committee — the Strategic Affairs Committee
. The Strategic Affairs Committee was formed in September of 2021 to assist the Board in in reviewing, analyzing, considering and assessing, potential acquisitions, joint ventures, strategic investments, divestitures and other strategic transactions. The committee’s current members are Bruce T. Bernstein (chairman), Robert Weinstein and Michael Lebowitz. The Strategic Affairs Committee’s responsibilities include, among others:
•
assisting management with the identification of potential acquisition, joint venture, strategic investment, divestiture and other strategic transaction opportunities and review transaction candidates with management, when and as appropriate;
•
evaluating strategic transactions received by the Company or proposed by management; and
•
overseeing and coordinating the process of reviewing, analyzing and responding to proposals received by the Company or proposed by management with respect to such potential acquisition, joint venture, strategic investment, divestiture and other strategic transaction opportunities.
Board Leadership Structure and Role in Risk Oversight
Effective February 5, 2018, the Board appointed Bruce T. Bernstein as the non-executive Chairman of the Board of Directors.
The leadership structure of the Board currently consists of a Chairman of the Board who oversees the Board meetings. We separate the roles of Chairman of the Board and Chief Executive Officer in recognition of the differences between the two roles. Our Board believes this division of responsibility is an effective approach for addressing the risks we face. All of our Board committees are comprised of only independent directors. All Board committees are chaired by independent directors who report to the full Board whenever necessary. We believe this leadership structure helps facilitate efficient decision-making and communication among our directors and fosters efficient Board functioning at meetings.
Our management is primarily responsible for managing the risks we face in the ordinary course of operating our business. The Board oversees potential risks and our risk management activities by receiving operational and strategic presentations from management which include discussions of key risks to our business. The Board also periodically discusses with management important compliance and quality issues. In addition, the Board has delegated risk oversight to each of its key committees within their areas of responsibility. For example, the Audit Committee assists the Board in fulfilling its oversight of the quality and integrity of our financial statements and our compliance with legal and regulatory requirements relating to our financial statements and related disclosures. The Compensation Committee assists the Board in its risk oversight function by overseeing strategies with respect to our incentive compensation programs and key employee retention issues. We believe our Board leadership structure facilitates the division of risk management oversight responsibilities among the Board committees and enhances the Board’s efficiency in fulfilling its oversight function with respect to difference areas of our business risks and our risk mitigation practices.
Board Diversity Matrix
The Nasdaq diversity matrix is set forth below as required under the listing requirements of Nasdaq.
20
|
Board Diversity Matrix (As of April 19, 2022)
|
| |||||||||||||||
|
Total Number of Directors – 5
|
| | | | | | | | | | | | | | | |
| | | |
Female
|
| |
Male
|
| |
Non-Binary
|
| |
Did Not
Disclose Gender |
| |||
| Part I: Gender Identity | | | | | | | | | | | | | | | | |
|
Directors
|
| | | | | | | 5 | | | | | | | | |
| Part II: Demographic Background | | | | | | | | | | | | | | | | |
|
African American or Black
|
| | | | | | | | | | | | | | | |
|
Alaskan Native or Native American
|
| | | | | | | | | | | | | | | |
|
Asian
|
| | | | | | | | | | | | | | | |
|
Hispanic or Latinx
|
| | | | | | | | | | | | | | | |
|
Native Hawaiian or Pacific Islander
|
| | | | | | | | | | | | | | | |
|
White
|
| | | | | | | 5 | | | | | | | | |
|
Two or More Races or Ethnicities
|
| | | | | | | | | | | | | | | |
|
LGBTQ+
|
| | | | | | | | | | | | | | | |
|
Did Not Disclose Demographic Background
|
| | | | | | | | | | | | | | | |
Summary Compensation Table
The following table summarizes the total compensation awarded or paid by us during the fiscal years ended December 31, 2021 and 2020 to (i) our principal executive officer; and (ii) the two most highly compensated executive officers other than the principal executive officer who were serving as executive officers at December 31, 2021 (collectively, the “named executive officers”).
|
Name and principal position
|
| |
Year
|
| |
Salary
($) |
| |
Non-Equity
Incentive Plan Compensation ($) |
| |
Option
Awards ($) (1) |
| |
Stock
Awards ($) (1) |
| |
Total
($) |
| ||||||||||||||||||
|
Douglas Satzman
(2)
Former Chief Executive Officer |
| | | | 2021 | | | | | | 472,115 | | | | | | 158,341 | | | | | | 1,042,934 | | | | | | 639,632 | | | | | | 2,313,022 | | |
| | | | 2020 | | | | | | 387,578 | | | | | | 135,000 | | | | | | 108,070 | | | | | | 38,625 | | | | | | 669,273 | | | ||
|
Scott Milford
(3)
Chief Executive Officer/Chief Operating Officer |
| | | | 2021 | | | | | | 350,000 | | | | | | — | | | | | | 768,479 | | | | | | — | | | | | | 1,118,479 | | |
| | | | 2020 | | | | | | 279,582 | | | | | | 90,000 | | | | | | 192,394 | | | | | | 67,552 | | | | | | 629,528 | | | ||
|
James A Berry
(4)
Former Chief Financial Officer |
| | | | 2021 | | | | | | 263,942 | | | | | | 47,203 | | | | | | — | | | | | | — | | | | | | 311,145 | | |
| | | | 2020 | | | | | | 9,615 | | | | | | — | | | | | | 211,940 | | | | | | — | | | | | | 221,555 | | | ||
(1)
Amounts represent the aggregate grant date fair value in accordance with FASB ASC
Topic 718
. For the assumptions made in the valuation of our equity awards see Notes 2 and 14 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The amount reported for Mr. Satzman in the “stock Awards” column represents the grant date fair value of (i) a restricted stock unit award for 200,000 shares of our common stock, which he received as compensation for his services as a Board member, and (ii) an award of 60 shares of immediately vested restricted stock of XpresTest under the Subsidiary in January 2021, in each case as described in the narrative description accompany the tabular disclosure under “— Director Compensation” below.
(2)
Mr. Satzman served as our Chief Executive Officer from February 11, 2019 until January 19, 2022. Compensation in 2021 and 2020 includes equity awards of stock options and restricted stock. As noted under “— Potential Payments upon Termination or Change-In-Control” below, Mr. Satzman received incentive compensation of $158,341 attributable to calendar year 2021, as provided in his employment agreement.
(3)
Mr. Milford is currently our Chief Executive Officer, effective January 19, 2022. Prior to that, he served as our Chief Operating Officer since December 14, 2020 and as our first Chief People Officer, a
21
non-executive role, from July 8, 2019 to December 14, 2020. Compensation in 2020 includes equity awards of stock options and restricted stock.
(4)
Mr. Berry served as our Chief Financial Officer and Principal Financial & Accounting Officer from December 14, 2020 through June 13, 2022. Compensation in 2020 includes an equity award of stock options.
Narrative Disclosure to Summary Compensation Table
Douglas Satzman
On February 11, 2019, we entered into an employment agreement with Mr. Satzman, which had a term of three years provided that the employment agreement would extend in two month increments for up to one (1) year thereafter for each month that the negotiations for an extension to the Employment Agreement were not concluded prior to sixth months before the end of the term. Prior to his resignation and under the terms of the employment agreement, Mr. Satzman received an initial annual base salary of $400,000 and was eligible to participate in any annual bonus or other incentive compensation program adopted from time to time for our executive officers. The employment agreement provided that if Mr. Satzman earned any bonus or non-equity based incentive compensation which remained unpaid upon termination of employment for any reason, whether by Mr. Satzman or us other than for cause, then the employment agreement provided that Mr. Satzman would be entitled to receive a pro- rata portion of such incentive compensation at the time it was paid. Mr. Satzman resigned from the Company on January 19, 2022 and received the amounts set forth below under “Potential Payments upon Termination or Change-In-Control.”
Scott R. Milford
On July 8, 2019, we entered into an employment agreement with Mr. Milford, pursuant to which he agreed to serve as our Chief People Officer for an annual base salary of $280,000 and $300,000, for the first year ended July 31, 2020 and the second year ending on July 31, 2021, respectively. After July 31, 2021, Mr. Milford continued to be employed by the Company as an ‘at will’ employee, subject to annual review by the Compensation Committee. Mr. Milford was also entitled to a one-time 10% minimum guaranteed bonus for 2019 to be calculated off his Base Salary as of his July 8, 2019 commencement date as well as to participate in any annual bonus or other incentive compensation program that the Company may adopt from time to time for its executive officers. Mr. Milford was promoted to Chief Operating Officer in December 2020; no changes to his compensation were made at that time in connection with the promotion.
On March 28, 2022, we entered into an Executive Employment Agreement with Mr. Milford (the “Employment Agreement”) in connection with his service to the Company as its CEO. The terms of the Employment Agreement were effective as of January 19, 2022, the date of Mr. Milford’s assumption of the role of CEO. The Employment agreement has a term of two years (the “Employment Period”) from the Effective Date. Following the Employment Period, Mr. Milford will continue to be employed by the Company as an “at will” employee. Pursuant to the terms of the Employment Agreement, Mr. Milford will be entitled to receive an annual base salary of $425,000. The Employment agreement also provides that Mr. Milford will be eligible to participate in any annual bonus and other incentive compensation program that the Company may adopt from time to time for its executive officers. Under the Employment Agreement, Mr. Milford will be eligible to earn an annual bonus, the target amount of which will be up to one hundred percent (100%) of Base Salary, based upon the achievement of performance goals and metrics established by the Board at its sole discretion. Any bonus will be determined as soon as reasonably practicable after our annual financial statements are finalized and will be split 50/50 between cash and a grant of restricted stock units with respect to our common stock.
In the event the Employment Agreement is terminated for good reason by Mr. Milford, or by the Company without cause and Mr. Milford provides the Company with a release of claims, Mr. Milford shall be entitled to receive a cash severance payment in the amount of one hundred percent (100%) of his then current base salary and one year of COBRA continuation coverage. In addition, the Employment Agreement contains non-solicitation and non-competition provisions that apply during the term of Mr. Milford’s employment and for six months thereafter.
22
James A. Berry
On November 27, 2020, we entered into an offer letter with Mr. Berry, pursuant to which he agreed to serve as our Chief Financial Officer for an annual base salary of $250,000, subject to annual review by the Compensation Committee. Mr. Berry separated service from the Company effective June 13, 2022. See further disclosure under “Potential Payments upon Termination or Change-In-Control” below.
Outstanding Equity Awards at 2021 Fiscal Year End
The following table sets forth information regarding grants of stock options and unvested stock awards outstanding on the last day of the fiscal year ended December 31, 2021, to each of our named executive officers.
| | | |
Options Awards
|
| |
Stock Awards
|
| |||||||||||||||||||||||||||
|
Name
|
| |
Number
of securities underlying unexercised options (#) exercisable |
| |
Number
of securities underlying unexercised options (#) un-exercisable |
| |
Option
exercise price ($) |
| |
Option expiration
date |
| |
Number
of shares of units of stock that have not vested (#) |
| |
Market
value of shares of units of stock that have not vested ($) |
| |||||||||||||||
| Doug Satzman (1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
2019 Non-Qualified Stock Option from the 2012 Plan
|
| | | | 12,500 | | | | | | 12,500 | | | | | | 12.60 | | | |
February 11, 2029
|
| | | | | | | | | | | | |
|
2020 Non-Qualified Stock Options from the 2012 Plan
|
| | | | 83,334 | | | | | | — | | | | | | 1.53 | | | |
April 20, 2030
|
| | | | | | | | | | | | |
|
2021 Non-Qualified Stock Options from the 2020 Plan
|
| | | | — | | | | | | 516,304 | | | | | | 1.61 | | | |
January 21, 2031
|
| | | | | | | | | | | | |
|
2021 Restricted Stock Units (RSUs)
from the 2020 Plan |
| | | | | | | | | | | | | | | | | | | | | | | | | 100,000 | | | | | | 202,000 | | |
|
Scott Milford
(2)
|
| | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | — | | |
|
2020 Non-Qualified Stock Options from the 2012 Plan
|
| | | | 58,334 | | | | | | — | | | | | | 1.53 | | | |
April 20, 2030
|
| | | | | | | | | | | | |
|
2020 Incentive Stock Options from the 2012 Plan
|
| | | | 32,106 | | | | | | — | | | | | | 5.01 | | | |
September 6, 2030
|
| | | | | | | | | | | | |
|
2020 Non-Qualified Stock Options from the 2020 Plan
|
| | | | — | | | | | | 96,319 | | | | | | 5.01 | | | |
October 28, 2030
|
| | | | | | | | | | | | |
|
2021 Non-Qualified Stock Options from the 2020 Plan
|
| | | | — | | | | | | 380,435 | | | | | | 1.61 | | | |
January 21, 2031
|
| | | | | | | | | | | | |
|
James A Berry
(3)
: 2020 Non-Qualified Stock Options from the 2020 Plan
|
| | | | 43,402 | | | | | | 130,209 | | | | | | 1.44 | | | |
December 14, 2030
|
| | | | — | | | | | | — | | |
(1)
In connection with his Separation Agreement, dated January 21, 2022 all of Mr. Satzman’s stock options and RSUs outstanding and held by Mr. Satzman vested immediately after the Effective Date of such agreement, notwithstanding any vesting provisions set forth such stock-based awards or the Employment Agreement.
(2)
Options vest in equal annual increments over one to four years following the date of grant.
(3)
Mr. Berry separated from service from the Company effective June 13, 2022. On that date, all of Mr. Berry’s options under this award were forfeited except for the 43,402 that were vested as of December 31, 2021.
23
Pension Benefits
We do not have any qualified or nonqualified defined benefit plans.
Nonqualified Deferred Compensation
We do not have any nonqualified defined contribution plans or other deferred compensation plans.
Potential Payments upon Termination or Change-In-Control
The following summarizes the payments and potential payments to each of our named executive officers as of December 31, 2021 upon termination or change-in-control. The discussion assumes that such event occurred on December 31, 2021, the last business day of our fiscal year, at which time the closing price of our common stock as listed on Nasdaq was $2.02 per share. For a further discussion of these provisions see the “Narrative Disclosure to Summary Compensation Table” above.
Douglas Satzman
Mr. Satzman resigned from the Company on January 19, 2022. Under the terms of the Separation Agreement and Release that he entered into with the Company, Mr. Satzman will receive (i) an amount equal to his current annual base salary ($475,000) as severance, payable over the 12-month period following January 21, 2022 in accordance with the Company’s regular payroll schedule and (ii) if elected by Mr. Satzman, subsidization of COBRA continuation payments under the Company’ group medical insurance plans until the earlier of January 31, 2023, the date he is eligible under another employer’s heath plan or Medicare, or the expiration of the maximum COBRA continuation coverage period for which he eligible under law. As disclosed above, Mr. Satzman’s employment provided that if he had earned any bonus or non-equity based incentive compensation which remained unpaid upon termination of employment for any reason, whether by Mr. Satzman or us other than for cause, then he became entitled to receive a pro- rata portion of such incentive compensation at the time it was paid. Mr. Satzman received incentive compensation of $158,341 attributable to calendar year 2021 as provided in his employment agreement, as well as $10,000 representing expense reimbursement. The Separation and Release Agreement also provided for the vesting of all stock options, RSUs and other stock-based awards outstanding held by Mr. Satzman immediately after the effective date of that agreement, in exchange for a general release in favor of the Company.
Scott R. Milford
In the event the Employment Agreement is terminated for good reason by Mr. Milford, or by the Company without cause and Mr. Milford provides the Company with a release of claims, Mr. Milford shall be entitled to receive a cash severance payment in the amount of one hundred percent (100%) of his then current base salary and one year of COBRA continuation coverage. In addition, the Employment Agreement contains non-solicitation and non-competition provisions that apply during the term of Mr. Milford’s employment and for six months thereafter.
James A. Berry
Mr. Berry separated from service on June 13, 2022. He did not receive any payments upon such event. All of Mr. Berry’s outstanding equity awards were forfeited except to the extent of 43,403 stock options, which were vested as of the date of his separation of service and which remain exercisable at an exercise price of $1.44 per share.
Director Compensation
The following table sets forth the compensation of persons who served as non-employee members of our Board of Directors during the fiscal year ended December 31, 2021. As described below, Mr. Satzman, our former CEO, received certain equity compensation for his service on our Board of Directors; such compensation is fully reflected in the Summary Compensation Table above and is not reflected below.
24
|
Name
|
| |
Fees
Earned or Paid in Cash ($) |
| |
Stock
Awards ($) (1) |
| |
Option
Awards ($) (1) |
| |
All Other
Compensation ($) (6) |
| |
Total
($) |
| |||||||||||||||
|
Bruce T. Bernstein
(2)(6)
|
| | | | 120,000 | | | | | | 881,000 | | | | | | 170,922 | | | | | | 433,632 | | | | | | 1,605,554 | | |
|
Donald E. Stout
(3)
|
| | | | 56,000 | | | | | | 196,600 | | | | | | 87,016 | | | |
—
|
| | | | 339,615 | | | |||
|
Robert Weinstein
(4)
|
| | | | 76,000 | | | | | | 359,600 | | | | | | 87,016 | | | |
—
|
| | | | 522,615 | | | |||
|
Michael Lebowitz
(5)
|
| | | | 56,000 | | | | | | 359,600 | | | | | | 87,016 | | | |
—
|
| | | | 502,615 | | | |||
(1)
Amounts represent the aggregate grant date fair value of the restricted stock units granted during the fiscal year computed in accordance with FASB ASC
Topic 718
. See Notes 2 and 14 to the consolidated financial statements disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for the assumptions made in the valuation of the equity awards.
(2)
As of December 31, 2021, Mr. Bernstein held 156,532 unexercised options and 250,000 unvested restricted stock units.
(3)
As of December 31, 2021, Mr. Stout held 106,952 unexercised options and 50,000 unvested restricted stock units.
(4)
As of December 31, 2021, Mr. Weinstein held 104,744 unexercised options and 100,000 unvested restricted stock units.
(5)
As of December 31, 2021, Mr. Lebowitz held 93,077 unexercised options and 100,000 unvested restricted stock units.
(6)
Consists of (i) $120,000 in cash paid in respect of XpresTest board services (as described below); and (ii) $313,632, which is the grant date fair value of 60 shares of restricted stock of our majority owned subsidiary, XpresTest, Inc., paid in respect of XpresTest board services, as computed in accordance with ASC 718.
In December 2020, the Board requested and received analysis and evaluation from StreeterWyatt Analytics, an independent third-party compensation analyst, regarding our compensation structure as well as to benchmark it against our peer group. Effective in January 2021, Board approved, upon recommendation of the Compensation Committee, the following compensation structure for its non-employee directors for fiscal year 2021:
•
For the Chairman of the Board, total compensation of $275,000, consisting of a 40/60 split of cash and equity:
•
$110,000 in cash; and
•
equity awards having a combined value of $165,000, weighted as 40% in RSUs and 60% in non-qualified stock options.
•
For all other Board members, total compensation of $140,000, consisting of a 40/60 split of cash and equity:
•
$56,000 in cash; and
•
equity awards having a combined value of $84,000, weighted 40% in RSUs and 60% in non-qualified stock options.
•
The following additional cash payments:
•
$20,000 in cash to the Chairman of the Audit Committee.
•
$10,000 in cash to the Chairman of the Compensation Committee.
In January 2021, the Company, its Board and the board of directors of XpresTest, Inc., a Delaware corporation and majority-owned subsidiary of the Company (“XpresTest”), approved the issuance of 60 shares of immediately vested restricted stock under the XpresTest, Inc. 2020 Equity Incentive Plan (the “Subsidiary Plan”) to each of Messrs. Bernstein and Satzman, pursuant to a restricted stock award agreement under the Subsidiary Plan. In addition, the restricted stock award agreements each contain an
25
antidilution provision pursuant to which XpresTest agreed to issue such additional shares of XpresTest common stock to each such individual (for no additional consideration) sufficient to maintain share ownership interest for each such individual at 6% of the total capital stock of XpresTest on a fully-diluted basis, including all options, warrants, convertible securities, and other rights to acquire capital stock, including shares reserved for equity plans not yet allocated, but in the case of convertible debt, only at the time that such convertible debt converts into capital stock, or at such time that a specific conversion ratio is established pursuant to the operation of such instrument) through and until immediately prior to the sale and issuance of XpresTest’s capital stock in a bona fide equity or convertible note financing which assumes that the enterprise value XpresTest is at or above $100 million.
In February and March 2021, following the conclusion of it previous review and approval of cash and equity compensation for its non-employee directors, the Board further requested and received analysis and evaluation from StreeterWyatt Analytics of appropriate director compensation specifically related to the duties, responsibilities and services of Mr. Bernstein beyond the scope of normal Board member services in connection with his role as a non-employee director of XpresTest, especially in light of the significance of the XpresTest business for the Company as a whole commencing in 2020 and going forward in to the future. In March 2021, following such review, the Board determined it was necessary, advisable and appropriate, and in the best interests of the Company and its stockholders, to provide for an appropriate amount of additional compensation to Mr. Bernstein for his XpresTest board services, in addition to the amounts previously approved for other services as director of our Board, and approved the payment to Mr. Bernstein of $120,000 per year in cash compensation for such XpresTest board services, retroactive to January 1, 2021. The Board concluded that, under the circumstances and in light of the services performed, such compensation represents “ordinary-course compensation” for Mr. Bernstein’s XpresTest board services as a member of the board of directors of XpresTest, and that such compensation therefore would not preclude a determination that Mr. Bernstein would be independent for, among other things, membership of the Audit Committee of the Company under Rule 10A-3 under the Securities Exchange Act of 1934, and Nasdaq listing rules, as such compensation represents fees for such XpresTest board services.
In July 2021, after reviewing the data provided by StreeterWyatt Analytics in analyzing the appropriateness of market grants to board members, the Committee deemed it to be in the best interest of the Company to recommend that the Board make restricted stock unit grants to each of the members of the Board. Based on the Committee’s recommendation, the Board approved the grants of restricted stock units, vesting in equal quarterly installments of 25% each on the last date of the first, second, third and fourth quarters after the grant date (commencing on September 30, 2021 and being fully vested on June 30, 2022), subject to the individuals continuous service with the Company through such dates, of 500,000 shares for Mr. Bernstein (as Chairman of the Board), 200,000 shares to each of Messrs. Satzman (as CEO of the Company and a Board member), Weinstein (as the Audit Committee Chairman) and Lebowitz, and 100,000 shares to Mr. Stout.
In January 2022, the Board requested and received analysis and evaluation from StreeterWyatt Analytics regarding our compensation structure. Based on its review, the Compensation Committee recommended, and the full Board approved, a new director compensation program effective for fiscal year 2022:
•
For the Chairman of the Board: $350,000 per year, consisting of:
•
$150,000 in cash; and
•
equity awards having a combined value of $200,000, consisting of (i) a grant of a Non-Qualified Stock Option to purchase such number of shares of common stock having a grant date fair value of $120,000 and (ii) a grant of RSUs of such number of shares having a grant date value of $80,000.
•
For the other non-employee Directors: $170,000 per year, consisting of:
•
$70,000 in cash; and
•
equity awards having a combined value of $100,000, consisting of (i) a grant of a Non-Qualified Stock Option to purchase such number of shares of common stock having a grant date fair value of $60,000 and (ii) a grant of RSUs of such number of shares having a grant date value of $40,000.
26
•
The following additional cash payments:
•
$30,000 in cash to the Chairman of the Audit Committee.
•
$20,000 in cash to the Chairman of the Compensation Committee.
•
$20,000 in cash to each member of the Investment Committee.
We reimburse our directors for reasonable out-of-pocket expenses incurred in connection with attendance and participation in Board and committee meetings (including costs of travel, food and lodging).
Equity Compensation Plan Information
The following table provides certain aggregate information, as of December 31, 2021 with respect to all of our equity compensation plans then in effect:
|
Plan Category
|
| |
No. of securities
to be issued upon exercise of outstanding options, warrants and rights |
| |
Weighted-
average exercise price of outstanding options, warrants and rights ($) |
| |
No. of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) |
| |||||||||
|
Total equity compensation plans approved by security holders
(1)
|
| | | | 3,426,871 | | | | | $ | 3.14 | | | | | | 815,628 | | |
(1)
These plans consist solely of the 2020 Plan, as approved by our Board of Directors in September 2020 and by our stockholders in October 2020.
27
REPORT OF AUDIT COMMITTEE
The Audit Committee of the Board of Directors, which consists entirely of directors who meet the independence and experience requirements of the Nasdaq Capital Market, has furnished the following report:
The Audit Committee assists the Board of Directors in overseeing and monitoring the integrity of our financial reporting process, compliance with legal and regulatory requirements and the quality of internal and external audit processes. This committee’s role and responsibilities are set forth in our charter adopted by the Board of Directors, which is available on our website at
www.xpresspagroup.com
. This committee reviews and reassesses our charter annually and recommends any changes to the Board of Directors for approval. The Audit Committee is responsible for overseeing our overall financial reporting process, and for the appointment, compensation, retention, and oversight of the work of our independent registered public accounting firm. In fulfilling its responsibilities for the financial statements for fiscal year ended December 31, 2021, the Audit Committee took the following actions:
•
Reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2021 with management and Friedman LLP, our independent registered public accounting firm;
•
Discussed with Friedman LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the Securities and Exchange Commission (the “SEC”); and
•
Received written disclosures and the letter from Friedman LLP regarding its independence as required by applicable requirements of the PCAOB regarding Friedman LLP communications with the Audit Committee and the Audit Committee further discussed with Friedman LLP their independence. The Audit Committee also considered the status of pending litigation, taxation matters and other areas of oversight relating to the financial reporting and audit process that the committee determined appropriate.
Based on the Audit Committee’s review of the audited financial statements and discussions with management and Friedman LLP, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for filing with the SEC.
Members of the XpresSpa Group, Inc. Audit Committee
Robert Weinstein (Chairman)
Bruce T. Bernstein
Donald E. Stout
Bruce T. Bernstein
Donald E. Stout
28
DELINQUENT SECTION 16(a) REPORTS
Our records reflect that all reports which were required to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, were filed on a timely basis, except that Donald E. Stout, a director, filed a Form 4 reporting receipt of an equity grant one day late.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Related Person Transactions Approval Policy
All related party transactions must be approved by our Audit Committee or a majority of our independent directors who do not have an interest in the transaction and who will have access, at our expense, to our independent legal counsel.
Transactions with Related Persons
None.
Director Independence and Committee Qualifications
Our Board of Directors has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly. Based upon this review, we believe that Messrs. Bernstein, Weinstein, Stout, and Lebowitz qualify as independent directors in accordance with the standards set by Nasdaq, as well as Rule 10A-3 promulgated under the Exchange Act. Accordingly, our Board of Directors is comprised of a majority of independent directors as required by Nasdaq rules. Our Board of Directors has also determined that each member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee meets the independence requirements applicable to each such committee member prescribed by Nasdaq and the SEC. Our Board of Directors has further determined that Messrs. Bernstein and Weinstein are “audit committee financial experts” as defined in the rules of the SEC.
29
PROPOSAL 1: ELECTION OF DIRECTORS
(Notice Item 1)
The Board of Directors nominated Scott R. Milford, Bruce T. Bernstein, Robert Weinstein, Donald E. Stout, and Michael Lebowitz for election as directors by the holders of common stock at the annual meeting. If they are elected, they will serve on our Board of Directors until the 2023 annual meeting of stockholders and until their respective successors have been elected and qualified.
Unless authority to vote for any of these nominees is withheld, the shares represented by proxies solicited by the Board will be voted FOR the election as directors of each of Scott R. Milford, Bruce T. Bernstein, Robert Weinstein, Donald E. Stout, and Michael Lebowitz. In the event that any nominee becomes unable or unwilling to serve, the shares represented by proxies solicited by the Board will be voted for the election of such other person as the Board of Directors may recommend in that nominee’s place. We have no reason to believe that any nominee will be unable or unwilling to serve as a director.
Vote Required and Board of Directors’ Recommendation
The five nominees for director who receive the most votes (also known as a “plurality” of the votes cast) will be elected. Votes that are withheld will not be included in the vote tally for the election of the directors. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name for the election of the directors. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF SCOTT R. MILFORD, BRUCE T. BERNSTEIN, ROBERT WEINSTEIN, DONALD E. STOUT AND MICHAEL LEBOWITZ AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE
30
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Notice Item 2)
CohnReznick LLP (“CohnReznick”) was selected by our Audit Committee as our independent registered public accounting firm for the fiscal year ended December 31, 2019. This selection was ratified by our stockholders at the 2019 annual meeting held on October 2, 2019. On May 4, 2020, we dismissed CohnReznick and approved the engagement of Friedman LLP (“Friedman”) as our independent registered public accounting firm for the fiscal year ended December 31, 2020. This selection was ratified by our stockholders at the 2020 annual meeting held on October 28, 2020. In deciding to select CohnReznick and Friedman, the Audit Committee carefully considered the qualifications of CohnReznick and Friedman, including their reputation for integrity, quality, and competence in the fields of accounting and auditing. Further, the Audit Committee reviewed auditor independence issues and existing commercial relationships with CohnReznick and Friedman. The Audit Committee concluded that independence of CohnReznick and Friedman was not impaired for the fiscal years ended December 31, 2021, and 2020. For the fiscal years ended December 31, 2021, and 2020, we incurred the following fees for the services of CohnReznick and Friedman:
| | | |
2021
|
| |
2020
|
| ||||||
| Friedman: | | | | | | | | | | | | | |
|
Audit fees
(1)
|
| | | $ | 268,957 | | | | | $ | 148,243 | | |
|
Audit-related fees
(2)
|
| | | | 107,492 | | | | | | 45,780 | | |
| CohnReznick: | | | | | | | | | | | | | |
|
Audit fees
(1)
|
| | | | — | | | | | $ | 170,000 | | |
|
Audit-related fees
(2)
|
| | | | — | | | | | | 14,500 | | |
|
Total
|
| | | $ | 376,449 | | | | | $ | 378,523 | | |
(1)
Audit fees includes fees associated with the annual audits of our financial statements, quarterly reviews of our financial statements, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
(2)
Audit-related fees for includes fees for benefit plan audits and lease compliance audits.
Dismissal of Previous Independent Registered Accounting Firm
On May 4, 2020, the Audit Committee informed CohnReznick of its decision to dismiss CohnReznick as the Company’s independent registered public accounting firm, effective as of that date.
CohnReznick’s report on the Company’s consolidated financial statements as of December 31, 2019 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, other than to include an explanatory paragraph regarding substantial doubt as to the Company’s ability to continue as a going concern.
During the year ended December 31, 2019 and the subsequent interim period through May 4, 2020, there were no “disagreements” (as such term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304) with CohnReznick on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of CohnReznick would have caused CohnReznick to make reference to the subject matter of the disagreements or reportable events in connection with its reports on the financial statements for such years. During the year ended December 31, 2019 and the subsequent interim period through May 4, 2020, there were no “reportable events” (as such term is defined in Item 304(a)(1)(v) of Regulation S-K), except for the material weakness identified in the Company’s internal control over its financial close and reporting process.
31
The Company provided CohnReznick with a copy of the disclosure it made in response to Item 304(a) of Regulation S-K and requested that CohnReznick furnish the Company with a copy of its letter addressed to the SEC, pursuant to Item 304(a)(3) of Regulation S-K, stating whether CohnReznick agrees with the statements made by the Company in response to Item 304(a) of Regulation S-K. A copy of CohnReznick’s letter to the SEC dated May 5, 2020 was filed as Exhibit 16.1 to the Company’s Current Report on Form 8-K, which was filed with the SEC on May 6, 2020.
Appointment of New Independent Registered Public Accounting Firm
On May 4, 2020, the Audit Committee approved the engagement of Friedman as the Company’s new independent registered public accounting firm for the fiscal year ending December 31, 2020, effective immediately. During the fiscal year ended December 31, 2019 and through the subsequent interim period as of May 4, 2020, neither the Company, nor any party on behalf of the Company, consulted with Friedman regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the audit opinion that might be rendered regarding the Company’s consolidated financial statements, and no written report or oral advice was provided to the Company that Friedman concluded was an important factor considered by the Company in deciding on any accounting, auditing or financial reporting issue, or (ii) any matter subject to any “disagreement” (as such term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as such term is defined in Item 304(a)(1)(v) of Regulation S-K).
Pre-Approval of Audit and Non-Audit Services
Consistent with SEC policies and guidelines regarding audit independence, our Audit Committee is responsible for the pre-approval of all audit and permissible non-audit services provided by our independent registered public accounting firm on a case-by-case basis. Our Audit Committee has established a policy regarding approval of all audit and permissible non-audit services provided by our independent registered public accounting firm. Our Audit Committee pre-approves these services by category and service. Our Audit Committee pre-approved all of the services provided by our independent registered public accounting firms in 2021 and 2020.
Vote Required and Board of Directors’ Recommendation
The Audit Committee has appointed Friedman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote on the matter either in person or by proxy at the annual meeting is required to ratify the appointment of Friedman as our independent registered public accounting firm for the fiscal year ending December 31, 2022. Abstentions will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. We are not required to obtain the approval of our stockholders to select our independent registered public accounting firm. However, if our stockholders do not ratify the selection of Friedman as our independent registered public accounting firm for 2022, our Audit Committee of our Board of Directors will reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF FRIEDMAN LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF SUCH RATIFICATION UNLESS A STOCKHOLDER INDICATES OTHERWISE ON THE PROXY.
32
PROPOSAL 3: REVERSE STOCK SPLIT
(Notice Item 3)
Introduction
The Board of Directors has approved and recommended that our stockholders approve an amendment to the Company’s Amended and Restated Certificate of Incorporation (in this section, the “Charter”) to effect a reverse stock split of the Company’s shares of Common Stock (the “Reverse Stock Split”) at a ratio within a range of 1:2 to 1:6 (the “Ratio Range”), with the exact reverse split ratio to be decided and publicly announced by the Board of Directors prior to the effective time of the Reverse Stock Split.
On August 9, 2021, the Board of Directors unanimously adopted a resolution approving the Reverse Stock Split and directing that it be submitted to our stockholders for approval. If this proposal is approved, the Board of Directors, or a committee of the Board of Directors, in its sole discretion, will have the authority to decide, within 12 months from the Annual Meeting, whether to implement the Reverse Stock Split and the exact ratio of the split within the Ratio Range, if it is to be implemented. If the Board of Directors or a committee of the Board of Directors decides to implement the Reverse Stock Split, then it will become effective at the time specified in the the amendment to our Charter filed with the Secretary of State of the State of Delaware (the “Effective Date”). If the Reverse Stock Split is implemented, then the number of issued and outstanding shares of Common Stock or shares of Common Stock held by the Company as treasury stock would be reduced in accordance with the exchange ratio selected by the Board of Directors, or a committee of the Board of Directors, within the Ratio Range. The total number of authorized shares of Common Stock, however, would remain unchanged following the Reverse Stock Split. The form of certificate of amendment to the Charter to effect the Reverse Stock Split is attached as
Appendix A
to this proxy statement.
The Board of Directors, in its sole discretion, may elect not to implement the Reverse Stock Split. However, the Board of Directors believes that having the time-limited authority to take such an action is an important proactive step to maintain and build stockholder value.
Purpose and Background of the Reverse Stock Split
The Board of Directors’ primary objectives in proposing the Reverse Stock Split are to raise the per share trading price of the Common Stock and to increase the number of shares of authorized but unissued Common Stock. The Board of Directors believes that the Reverse Stock Split would, among other things, (a) be an effective tool to enable the Company to maintain the listing of its Common Stock on the Nasdaq, (b) better enable the Company to raise funds to finance its planned operations, and (c) facilitate higher levels of institutional stock ownership, where investment policies generally prohibit investments in lower-priced securities.
Nasdaq Requirements for Continued Listing
Our Common Stock is listed on The Nasdaq Capital Market under the symbol “XSPA.” One of the requirements for continued listing on The Nasdaq Capital Market is maintenance of a minimum closing bid price of $1.00. On August 26, 2022, the closing market price per share of our Common Stock was $1.04, as reported by the Nasdaq Capital Market.
On June 8, 2022, we received a letter from Nasdaq indicating that for the last 30 consecutive business days, the bid price of our Common Stock closed below the minimum $1.00 per share requirement pursuant to Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until December 5, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our Common Stock must be at least $1.00 per share for a minimum of ten consecutive business days. If we do not regain compliance by December 5, 2022, we may be eligible for additional time to regain compliance or if we are otherwise not eligible, we may request a hearing before a Hearings Panel.
Our plan to regain compliance with the Nasdaq Listing Rules includes effecting the reverse stock split for which we are seeking stockholder approval in this Proposal 3. We cannot assure you that our share price
33
will comply with the requirements for continued listing of our common shares on the Nasdaq Capital Market in the future or that we will comply with the other continued listing requirements. If our Common Stock loses its listing on the Nasdaq Capital Market, our Common Stock would likely trade in the over-the-counter market.
If our shares were to trade on the over-the-counter market, selling our Common Stock could be more difficult because smaller quantities of shares would likely be bought and sold, and transactions could be delayed. In addition, in the event our Common Stock is delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our Common Stock, further limiting the liquidity of our Common Stock. These factors could result in lower prices and larger spreads in the bid and ask prices for our Common Stock.
Such delisting from The Nasdaq Capital Market and continued or further declines in our share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing, and could significantly increase the ownership dilution to stockholders caused by our issuing equity in financing or other transactions.
In light of the factors mentioned above, our Board of Directors approved the reverse stock split as a potential means of increasing the share price of our Common Stock to above $1.00 per share and of maintaining the share price of our common stock above $1.00 per share in compliance with Nasdaq requirements.
Facilitation of future capital raising
As of the date of this proxy statement, the Company has relatively few authorized shares of Common Stock that are not issued and outstanding or reserved for future issuance, and as a result its ability to raise additional equity capital is significantly constrained. The Board of Directors believes it is critically important for the Company to maintain its flexibility in accessing the equity capital markets.
The Reverse Stock Split would reduce the number of shares of Common Stock outstanding without reducing the total number of authorized shares of Common Stock. As a result, the Company would have a larger number of authorized but unissued shares from which to issue additional shares of Common Stock, or securities convertible into or exercisable for shares of Common Stock, in equity financing transactions.
As the Reverse Stock Split does not impact the number of shares of the Company’s Common Stock authorized for issuance, the Company will have additional authorized but unissued shares available for issuance if the Reverse Stock Split is implemented. The additional authorized shares of Common Stock would be available for issuance from time to time for corporate purposes, including raising additional capital through equity financing. The Company believes that the availability of these shares of Common Stock following the Reverse Stock Split will provide the Company with the flexibility to raise capital to execute its business plans, and to otherwise take advantage of favorable opportunities as they arise.
Institutional Investor Interest
Furthermore, the Board of Directors believes that an increased stock price may encourage investor interest and improve the marketability of the Common Stock to a broader range of investors, and thus potentially improve liquidity. Because of the trading volatility often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. The Board of Directors believes that the anticipated higher market price resulting from a reverse stock split would enable institutional investors and brokerage firms with policies and practices such as those described above to invest in the Common Stock.
The Board of Directors reserves its right to elect not to proceed with the Reverse Stock Split if it determines, in its sole discretion, that this proposal is no longer in the best interests of the Company.
34
Material Effects of Proposed Reverse Stock Split
Because the Company will not reduce the number of authorized shares of Common Stock, the overall effect of the Reverse Stock Split will be an increase in authorized but unissued shares of Common Stock as a result of the Reverse Stock Split. These authorized shares of Common Stock may be issued at the Board of Directors’ discretion, subject to applicable limitations. Any future issuances of shares of Common Stock will have the effect of diluting the percentage of stock ownership and voting rights of the present holders of Common Stock.
The Board of Directors believes that the Reverse Stock Split will increase the price level of the Common Stock in order to, among other things, generate interest in the Company among investors, and in particular institutional investors that have investment policies that prohibit investment in lower-priced securities and to ensure continued compliance with the Nasdaq’s minimum per share listing requirements. The Board of Directors cannot predict, however, the effect of the Reverse Stock Split upon the market price for the Common Stock, and the history of similar reverse stock splits for companies in like circumstances is varied. The market price per share of Common Stock after the Reverse Stock Split may not rise in proportion to the reduction in the number of shares of Common Stock outstanding resulting from the Reverse Stock Split, which would reduce the market capitalization of the Company. The market price per post-reverse split share may not remain in excess of the $1.00 minimum per share price as required by the Nasdaq, or the Company may not otherwise meet the additional requirements for continued listing on the Nasdaq. The market price of the Common Stock may also be based on our performance and other factors, the effect of which the Board of Directors cannot predict.
The Reverse Stock Split will affect all stockholders of the Company uniformly and will not affect any stockholder’s percentage ownership interests or proportionate voting power, except to the extent that the Reverse Stock Split results in any stockholder owning a fractional share. In lieu of issuing fractional shares, the Company will directly pay each stockholder who would otherwise have been entitled to a fraction of a share an amount in cash based on the closing sale price of the Common Stock, as quoted on the Nasdaq on the Effective Date, multiplied by the fractional share amount.
If the Reverse Stock Split had been effected on June 30, 2022, its principal effect would have been that the number of shares of Common Stock issued and outstanding would have been reduced from shares to a range of approximately 15,893,379 to 47,680,136 shares, depending on the exact split ratio chosen by the Board of Directors or a committee of the Board of Directors within the Ratio Range. In addition, all outstanding options, restricted stock and restricted stock units (collectively, the “Outstanding Equity Rights”) entitling the holders thereof to acquire, through purchase, exchange or otherwise, shares of Common Stock will enable such holders to acquire upon exercise of their respective Outstanding Equity Rights that the number of shares of Common Stock, as adjusted based on the final ratio selected by the Board, which such holders would have been able to purchase upon exercise or conversion, as and to the extent applicable, of their respective Outstanding Equity Rights immediately preceding the Reverse Stock Split, at an exercise price or conversion rate, as and to the extent applicable, equal to the exercise price or conversion rate, as applicable, specified before the reverse split, as adjusted by the Ratio Range, resulting in the same aggregate price being required to be paid upon exercise or conversion thereof immediately preceding the Reverse Stock Split. Furthermore, the number of shares reserved for issuance pursuant to the 2020 Equity Incentive Plan (including the increase in the shares in the 2020 Plan if Proposal 4 is adopted) will be reduced based on the final reverse stock split ratio selected by the Board.
The Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of Common Stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots may be higher than the costs of transactions in “round lots” of even multiples of 100 shares.
The Reverse Stock Split will not affect the par value of the Common Stock. As a result, on the Effective Date, the value of the stated capital on the Company’s balance sheet attributable to the Common Stock will be reduced based on the applicable ratio within the Ratio Range, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. The per share net income or loss and net book value of the Common Stock will be retroactively increased for each period because there will be fewer shares of Common Stock outstanding.
35
The Reverse Stock Split will not change the terms of the Common Stock. After the Reverse Stock Split, the shares of Common Stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the Common Stock now authorized. Each stockholder’s percentage ownership of the Company based on holdings of Common Stock will not be altered except for the effect of eliminating fractional shares. The Common Stock issued pursuant to the Reverse Stock Split will remain fully paid and non-assessable. The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 under the Exchange Act. Following the Reverse Stock Split, the Company will continue to be subject to the periodic reporting requirements of the Exchange Act.
Because the proposed Charter amendment provides that the number of authorized shares of Common Stock will be unaffected by the Reverse Stock Split, the amendment that is filed with the Secretary of State of the State of Delaware, if any such amendment is filed, will result in a relative increase in the number of authorized but unissued shares of our Common Stock in relation to the number of outstanding shares of our Common Stock after the Reverse Stock Split and, could, under certain circumstances, have an anti-takeover effect, although this is not the purpose or intent of the Board of Directors. The primary purposes of the proposed Reverse Stock Split are to increase the authorized but unissued shares to better enable the Company to raise funds to finance its planned operations, and to provide the Board of Directors with a mechanism to raise the per share trading price of our Common Stock in order to improve liquidity and help ensure that the price per share of our Common Stock remains above the minimum amount required to maintain our listing on the Nasdaq. However, a relative increase in the number of our authorized shares of Common Stock could enable the Board of Directors to render more difficult or discourage an attempt by a party attempting to obtain control of the Company by tender offer or other means. The issuance of Common Stock in a public or private sale, merger or similar transaction would increase the number of outstanding shares of Common Stock entitled to vote, increase the number of votes required to approve a change of control of the Company and dilute the interest of a party attempting to obtain control of the Company. Any such issuance could deprive stockholders of benefits that could result from an attempt to obtain control of the Company, such as the realization of a premium over market price that such an attempt could cause. Moreover, the issuance of Common Stock to persons friendly to the Board of Directors could make it more difficult to remove incumbent officers and directors from office even if such change were favorable to stockholders generally. The Company has no present intent to use the relative increase in the number of authorized shares of Common Stock for anti-takeover purposes, and the proposed amendment to the Charter is not part of a plan by the Board of Directors to adopt any anti-takeover provisions. However, if the proposed amendment is approved by the stockholders, then a greater number of shares of our Common Stock would be available for such purpose than currently is available. The Company is not aware of any pending or threatened efforts to obtain control of the Company, and the Board of Directors has no present intent to authorize the issuance of additional shares of Common Stock to discourage such efforts if they were to arise.
Procedure for Effecting Reverse Split and Exchange of Stock Certificates
If the Reverse Stock Split is approved by the Company’s stockholders, and the Board of Directors or a committee of the Board of Directors determines it is in the best interests of the Company to effect the split, then the Reverse Stock Split would become effective at such time as set forth in the certificate of amendment to the Charter, the form of which is attached as
Appendix A
to this proxy statement, filed with the Secretary of State of the State of Delaware.
As soon as practicable after the Effective Date, stockholders will be notified that the Reverse Stock Split has been effected. American Stock Transfer & Trust Company, LLC, the Company’s transfer agent, will act as exchange agent for purposes of implementing the exchange of stock certificates.
Certain registered holders of our Common Stock may hold some or all of their respective shares electronically in book-entry form with the transfer agent. These stockholders do not have stock certificates evidencing their ownership of the Common Stock. They are, however, provided with a periodic statement reflecting the number of shares of Common Stock registered in their accounts. Stockholders who hold shares electronically in book-entry form with the transfer agent will not need to take action to receive whole shares of post-Reverse Stock Split Common Stock, because the exchange will be automatic. The effect of the Reverse Stock Split on the number of shares of Common Stock held by stockholders electronically in book-entry form will be reflected in subsequent periodic statements.
36
Fractional Shares
The Company will not issue fractional certificates for post-Reverse Stock Split shares in connection with the Reverse Stock Split. Instead, any stockholder who would otherwise be entitled to a fractional share of common stock as a result of the Reverse Stock Split will be entitled to receive a cash payment equal to (1) the resulting fractional interest in one share of Common Stock multiplied by (2) an amount based on the closing trading price of our common stock on the Nasdaq Capital Market on the trading day immediately preceding the effective time of the amendment.
Criteria to be Used for Decision to Apply the Reverse Stock Split
If the stockholders approve the Reverse Stock Split, then the Board of Directors or a committee of the Board of Directors will be authorized to proceed with the Reverse Stock Split within the time period indicated. In determining whether to proceed with the Reverse Stock Split and setting the exact amount of split within the Ratio Range, if any, the Board of Directors or a committee of the Board of Directors will consider a number of factors, including the Company’s additional funding requirements and the amount of the Company’s authorized but unissued Common Stock, market conditions, existing and expected trading prices of the Company’s Common Stock and the Nasdaq listing requirements.
No Dissenter’s Rights
Under the DGCL, stockholders will not be entitled to dissenter’s rights with respect to the proposed amendment to the Charter to effect the Reverse Stock Split, and the Company does not intend to independently provide stockholders with any such right.
Certain Material U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of certain material U.S. federal income tax consequences of the Reverse Stock Split to U.S. Holders (as defined below). This discussion assumes that a U.S. Holder owns their shares of our Common Stock as “capital assets” within the meaning of section 1221 the Internal Revenue Code of 1986, as amended (the “Code”) (generally, assets held for investment).
This discussion is included for general information purposes only and does not address all aspects of U.S. federal income taxation that may be relevant to shareholders that may be subject to special tax rules, including, without limitation: (i) shareholders subject to the alternative minimum tax: (ii) banks, insurance companies, or other financial institutions; (iii) tax-exempt organizations; (iv) dealers in securities or commodities; (v) regulated investment companies or real estate investment trusts; (vi) partnerships (or other flow-through entities for US. federal income tax purposes and their partners or members); (vii) traders in securities that elect to use a mark-to-market method of accounting for their securities holding; (viii) U.S. Holders whose “functional currency” is not the U.S. dollar; (ix) persons holding our Common Stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction; (x) persons who acquire shares of our Common Stock in connection with employment on other performance services; (xi) U.S. expatriates; (xii) persons who are not U.S. Holders; (xiii) controlled foreign corporations or passive foreign investment companies; or (xix) persons who own or are deemed to own 10% or more of our Common Stock. In addition, this summary does not address other U.S. federal tax laws (such as gift or estate tax laws), or tax consequences arising under the laws of any foreign, state or local jurisdiction.
This summary is based upon the provisions of the Code, the Treasury regulations promulgated thereunder, administrative ruling and judicial decision as of the date hereof, all of which may change, possibly with retroactive effect, resulting in U.S. federal income tax consequences that may differ from those discussed below. We have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service (“IRS”) regarding the United States federal income tax consequences of the Reverse Stock Split and there can be no assurance the IRS will not challenge the statements set forth below or that a court would not sustain any such challenge.
37
The following discussion is for information purposes only and is not intended as tax or legal advice.
EACH SHAREHOLDER OF COMMON STOCK SHOULD CONSULT SUCH SHAREHOLDER’S TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO SUCH SHAREHOLDER.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of our Common Stock that for U.S. federal income tax purposes is: (1) an individual citizen or resident of the United States; (2) a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state or political subdivision thereof; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust, the administration of which is subject to the primary supervision of a U.S. court and as to which one or more U.S. persons have the authority to control all substantial decisions of the trust, or that has a valid election in effect to be treated as a U.S. person.
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of our Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our Common Stock, you should consult your own tax advisors as to the consequences to you of the Reverse Stock Split.
Tax Consequences of Reverse Stock Split Generally
The Reverse Stock Split is intended to constitute a reorganization within the meaning of Section 368(a) of the Code. Assuming the Reverse Stock Split qualifies as a reorganization, no gain or loss should be recognized by a U.S. Holder as a result of the Reverse Stock Split, other than as a result of cash payments for fractional shares, as discussed further below. In general, the aggregate tax basis in the shares of our Common Stock received pursuant to the Reverse Stock Split should equal the aggregate tax basis of the shares of our Common Stock surrendered therefor (excluding any portion of such basis that is allocated to any fractional share of our Common Stock for which cash is received). A U.S. Holder’s holding period in the shares of our Common Stock received should include the holding period in the shares of our Common Stock surrendered pursuant to the Reverse Stock Split.
Treasury regulations promulgated under the Code provide detailed rules for allocating the tax basis and holding period of the shares of our Common Stock surrendered to the shares of our Common Stock received pursuant to the Reverse Stock Split. U.S. Holders that acquired shares of our Common Stock on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares as a result of the Reverse Stock Split.
Tax Consequences of Cash Received in Lieu of Fractional Shares
U.S. Holders of our Common Stock that receive cash in lieu of fractional shares will recognize either dividend income, or capital gain or loss, depending on their particular facts and circumstances. To the extent the cash received in lieu of fractional shares is treated as giving rise to dividend income, U.S. Holders who are individuals may be taxed at a reduced rate. To the extent the cash received in lieu of fractional shares is treated as a payment in exchange for such fractional shares, a U.S. Holder will recognize capital gain or loss equal to the difference between the amount of cash received by such U.S. Holder and the adjusted tax basis deemed to be allocated to the fractional shares pursuant to the rules discussed above. Any capital gain or loss realized will be treated as long-term capital gain or loss if the U.S. Holder’s holding period for our Common Stock surrendered is greater than one year. Long-term capital gains of U.S. Holders who are individuals are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Shareholders of our Common Stock should consult their own advisors as to the proper treatment of any cash received in lieu of fractional shares.
U.S. Tax Information Reporting
U.S. Holders may be subject to information reporting with respect to the receipt of cash in lieu of fractional shares unless such shareholders can establish an exemption therefrom. In addition, U.S. Holders
38
may be subject to a backup withholding tax on the cash paid in lieu of fractional shares if they do not provide their taxpayer identification numbers in the manner required or otherwise fail to comply with applicable backup withholding tax rules. In general, backup withholding will not apply to cash paid in lieu of fractional shares to a U.S. Holder if the U.S. Holder provides a properly completed and duly executed IRS Form W-9.
Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a shareholder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.
TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT DEPEND UPON THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER. ACCORDINGLY, EACH SHAREHOLDER IS ADVISED TO CONSULT THE SHAREHOLDER’S TAX ADVISOR WITH RESPECT TO ALL OF THE POTENTIAL TAX CONSEQUENCES TO THE SHAREHOLDER OF A REVERSE STOCK SPLIT.
Recommendation and Vote Required
The Board of Directors recommends that stockholders vote “FOR” the approval of the amendment to the Company’s Charter to effect a reverse stock split of the Company’s Common Stock.
The proxy holders will vote all proxies received for approval of this proposal unless instructed otherwise. Approval of this proposal requires the affirmative vote of a majority of the outstanding shares of Common Stock. Abstentions will have the same effect as votes “AGAINST” this proposal. Because the proposal to amend our Charter to effect the Reverse Stock Split is considered a “routine” matter, there will be no broker non-votes with respect to this proposal.
39
PROPOSAL 4: APPROVAL OF AN AMENDMENT TO OUR 2020 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE THEREUNDER BY 7,500,000 SHARES
(Notice Item 4)
General
Our Board of Directors is requesting that our stockholders approve the adoption of an amendment to our 2020 Equity Incentive Plan (the “2020 Plan”), which amendment was approved by the Board of Directors and Compensation Committee on August 9, 2022 effective upon approval by our stockholders at the annual meeting. If this proposal is approved, the number of shares authorized for issuance of awards under the 2020 Plan will be increased by 7,500,000 shares of common stock.
The 2020 Plan was originally approved by our Board of Directors on September 17, 2020 (the “Effective Date”) and by stockholders on October 28, 2020. By its terms, the 2020 Plan may be amended by the Board at any time, provided that, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to, among other things, satisfy applicable law or stock exchange rules. Approval by our stockholders is required by the listing rules of The Nasdaq Stock Market. In addition, stockholder approval is required in order to ensure favorable federal income tax treatment for grants of incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
If stockholders approve the amendment to the 2020 Plan, the number of shares available for future awards under the 2020 Plan as of the date of the annual meeting would be the sum of (1) 7,500,000, (2) the number of shares available for future awards under the 2020 Plan immediately before such approval (as of August 15, 2022, 378,289 shares were available for future awards under the 2020 Plan) and (3) any shares subject to outstanding awards under the 2020 Plan or the 2012 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2012 Plan”), that are terminated, cancelled, surrendered or forfeited (as of August 15, 2022, 1,889,259 shares were subject to outstanding awards under the 2020 Plan and the 2012 Plan).
Reasons for Amendment of the 2020 Plan
Our Board of Directors, the Compensation Committee and management believe that the effective use of stock-based long-term incentive compensation is vital to our ability to achieve strong performance in the future. The 2020 Plan will maintain and enhance the key policies and practices adopted by our management and Board of Directors to align employee and stockholder interests and to link compensation to Company performance. In addition, our future success depends, in large part, upon our ability to maintain a competitive position in attracting, retaining and motivating key personnel. We believe that the increase in the number of shares available for issuance under our Plan is essential to permit our management to continue to provide long-term, equity-based incentives to present and future key employees, consultants and directors. Our Board of Directors believes that the number of shares currently remaining available for issuance pursuant to future awards under the 2020 Plan (as of June 30, 2022) is not sufficient for future granting needs. Our Board of Directors currently believes that if the amendment to the 2020 Plan is approved by stockholders, the shares available for issuance under the 2020 Plan will result in a more appropriate number of shares of common stock being available for future awards under the 2020 Plan.
Summary of Material Features of the 2020 Plan
The following is a brief summary of the 2020 Plan, as amended. This summary is qualified in its entirety by reference to the text of the 2020 Plan, a copy of which, as proposed to be amended, is attached as Appendix B to this Proxy Statement.
Shares Subject to the 2020 Plan
. The aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2020 Plan will not exceed 12,500,000 shares, plus the number shares of subject to outstanding awards under the 2012 Plan which are thereafter forfeited, settled in cash or cancelled or expire or are reacquired by the Company. The number of shares of common stock that may be issued pursuant to incentive stock options under the 2020 Plan is also limited to 12,500,000 shares. Shares
40
of common stock available for distribution under the 2020 Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
Any shares of common stock subject to an award that expires or is cancelled, forfeited, or terminated without issuance of the full number of shares of common stock to which the award related will again be added back. Shares of common stock subject to an award will not again be made available for issuance or delivery under the 2020 Plan if such shares are (a) shares that are tendered or withheld to satisfy tax withholding obligations with respect to an award or to pay the exercise price of an option or (b) shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on exercise thereof options.
Eligibility
. Participation in the 2020 Plan is limited to employees, directors and consultants of the Company and its affiliated entities. As of August 15, 2022, there were four non-employee directors, approximately 40 employees, and approximately four consultants of the Company that are eligible for grants under the 2020 Plan. The 2020 Plan provides that the maximum number of shares of common stock subject to awards to non-employee directors during any fiscal year must not exceed $400,000 (calculating the value of any awards based on the grant date fair value for financial reporting purposes).
Substitute Awards
. Awards may, in the sole discretion of the plan administrator, be granted under the 2020 Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“
Substitute Awards
”). Substitute Awards will not be counted against the share reserve, provided that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as incentive stock options will be counted against the ISO limit. Subject to applicable stock exchange requirements, available shares under a stockholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect such acquisition or transaction) may be used for awards under the 2020 Plan and will not count toward the total share reserve.
Administration
. The Board has delegated authority to administer the 2020 Plan to the Compensation Committee. Subject to the terms of the 2020 Plan, the Compensation Committee, as plan administrator, has full authority to determine participants and the type, terms and conditions and number of shares subject to awards and to construe and interpret the 2020 Plan and awards. The Compensation Committee may delegate administration of the 2020 Plan to a committee or committees of one or more members of the Board, and may delegate its authority to one or more officers of the Company with respect to awards that do not involve “insiders” within the meaning of Section 16 of the Exchange Act.
No Repricing without Stockholder Approval
. The 2020 Plan provides that stockholder approval is required before a repricing is effective.
Types of Awards Available for Grant under the 2020 Plan
. The plan administrator has the authority to grant the following types of awards under the 2020 Plan. All awards will be evidenced by an award agreement and will be subject to such conditions not inconsistent with the 2020 Plan as may be reflected in the award agreement.
•
Options
. The plan administrator may grant options to purchase shares of common stock that are exercisable at a price per share not less than the fair market value, determined in accordance with the 2020 Plan, per share of common stock on the date that the option is awarded. Such options may be either incentive stock options or non-qualified stock options. A 10% stockholder may not be granted an incentive stock option unless the exercise price is at least 110% of the fair market value of the common stock on the grant date and the option is not exercisable after the expiration of five years from the grant date. The plan administrator may permit an option exercise price to be paid in cash or any form of legal consideration specified by the plan administrator, including by the delivery of previously-owned shares of common stock, through a cashless exercise executed through a broker or by having a number of shares of common stock otherwise issuable at the time of exercise withheld. The maximum term of any option is ten years.
•
Stock Appreciation Rights
. The plan administrator may grant stock appreciation rights either separately or in connection with another award under the 2020 Plan. The maximum term of any stock appreciation right is ten years. The plan administrator may provide that stock appreciation rights
41
are exercisable at the discretion of the holder or that they will be paid at a time or times certain or upon the occurrence or non-occurrence of certain events.
•
Restricted Stock and Restricted Stock Units
. The plan administrator may grant shares of restricted common stock or RSUs representing the right to receive common stock in the future, subject to such restrictions and conditions, if any, as the plan administrator will determine. No shares of common stock will be issued at the time an RSU is granted, and the Company will not be required to set aside funds for the payment of any such award. The plan administrator may also grant RSUs with a deferral feature (“deferred stock units”), whereby settlement is deferred beyond the vesting date until the occurrence of a future payment date or event set forth in an award agreement. At the discretion of the plan administrator, each RSU or deferred stock unit (representing one share of common stock) may be credited with dividend equivalents in an amount equal to the cash and stock dividends paid by the Company in respect of one share of common stock. Dividend equivalents will be withheld by the Company and credited to the participant’s account, and interest may be credited on the amount of cash dividend equivalents credited to the participant’s account at a rate and subject to such terms as determined by the plan administrator. Dividend equivalents credited to a participant’s account and attributable to any particular RSU or deferred stock unit (and earnings thereon, if applicable) will be distributed in cash or, at the discretion of the plan administrator, in shares of common stock having a fair market value (as determined under the 2020 Plan) equal to the amount of such dividend equivalents and earnings, If applicable, to the participant upon settlement of such RSU or deferred stock unit and, if such RSU or deferred stock unit is forfeited, the participant will have no right to such dividend equivalents.
•
Performance Share Awards
. The plan administrator may grant performance share awards and determine: (i) the number of shares of common stock or stock-denominated units subject to a performance share award granted to any participant; (ii) the performance period applicable to any award; (iii) the conditions that must be satisfied for a participant to earn an award; and (iv) the other terms, conditions and restrictions of the award. The number of performance shares earned by a participant will depend on the extent to which the performance goals established by the plan administrator are attained within the applicable performance period, as determined by the plan administrator.
•
Other Equity-Based and Cash Awards
. Cash awards and other equity-based awards may be granted in such numbers and may be subject to such conditions or restrictions as the plan administrator will determine and will be payable in cash or shares of common stock, as the plan administrator may determine.
Deferrals
. The plan administrator may establish one or more programs under the 2020 Plan to permit selected participants the opportunity to elect to defer receipt of consideration upon exercise of an award, satisfaction of performance criteria, or other event that absent the election would entitle the participant to payment or receipt of shares of common stock or other consideration under an award. The plan administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the plan administrator deems advisable for the administration of any such deferral program.
Exercisability and Vesting upon Death or Disability
. The plan administrator has the power to accelerate the time at which an award may first be exercised or the time during which an award or any part thereof will vest on a participant’s termination of employment or service due to death or disability, notwithstanding the provisions in the award stating the time at which it may first be exercised or the time during which it will vest.
Recapitalizations and Reorganizations
.
The number of shares of common stock reserved for issuance in connection with the grant or settlement of awards or to which an award is subject, and the exercise price of each option and stock appreciation right are subject to, adjustment in the event of any recapitalization of the Company or similar event effected without receipt of consideration by the Company.
Change in Control
. The 2020 Plan provides that, except to the extent an award agreement provides for a different treatment (in which case the award agreement will govern), all then-outstanding awards held by a
42
participant and not previously vested will become fully vested, provided that if the achievement of any performance goals applicable to an award have not been measured, then such performance goals will be deemed satisfied as if target performance was achieved.
Transferability
. Awards are not generally transferable or assignable, unless the plan administrator provides otherwise.
Forfeiture and Clawbacks
. Awards will be subject to forfeiture, cancellation, reimbursement or recoupment to the extent provided in any applicable clawback policy adopted by the Company or otherwise required pursuant to applicable law.
Amendment or Termination
. The 2020 Plan may be amended by the Board of Directors, but stockholder approval will be required for any amendment (except as provided above regarding recapitalizations and reorganizations) to the extent stockholder approval is necessary to satisfy applicable law or stock exchange rules. The plan administrator may amend outstanding awards subject to the terms of the 2020 Plan but in general may not take away a participant’s rights without the participant’s consent. The 2020 Plan will terminate automatically on the tenth anniversary of the Effective Date.
Federal Income Tax Considerations
The following discussion outlines generally the federal income tax consequences of awards that may be granted under the 2020 Plan. Individual circumstances may vary and each participant should rely on his or her own tax counsel for advice regarding federal income tax treatment under the plan. To the extent that a participant recognizes ordinary income in the circumstances described below, the Company will generally be entitled to a corresponding tax deduction. If a participant is our employee or an employee of one of our affiliates, any ordinary income recognized will be subject to employment and withholding taxes.
Non-Qualified Options
. A participant will generally not recognize income upon the grant of an option or at any time prior to the exercise of the option or a portion thereof. At the time the participant exercises a non-qualified option or portion thereof, he or she will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of the common stock on the date the option is exercised over the price paid for the common stock. Depending upon the length of the period that the shares of common stock are held after exercise, the sale or other taxable disposition of shares acquired through the exercise of a non-qualified option generally will result in a short- or long- term capital gain or loss equal to the difference between the amount realized on such disposition and the fair market value of such shares when the non-qualified option was exercised.
Incentive Stock Options
. A participant who exercises an incentive stock option will generally not recognize compensation taxable as ordinary income at the time he or she exercises the option. Instead, he or she will be taxed at the time he or she sells the common stock purchased pursuant to the option. The participant will be taxed on the difference between the price he or she paid for the stock and the amount for which he or she sells the stock. If the participant does not sell the stock prior to two years from the date of grant of the option and one year from the date the stock is transferred to him or her, the participant will be entitled to capital gain or loss treatment based upon the difference between the amount realized on the disposition and the aggregate exercise price. If the participant sells the stock at a gain prior to that time, the difference between the amount the participant paid for the stock and the lesser of the fair market value on the date of exercise or the amount for which the stock is sold, will be taxed as ordinary income; if the stock is sold for an amount in excess of the fair market value on the date of exercise, the excess amount is taxed as capital gain. If the participant sells the stock for less than the amount he or she paid for the stock prior to the one or two year periods indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss. Exercise of an incentive stock option may subject a participant to, or increase a participant’s liability for, the alternative minimum tax.
Restricted Stock
. A participant will generally not be taxed upon the grant of a restricted stock award if such award is not transferable by the participant or is subject to a “substantial risk of forfeiture,” as defined in the Code. However, when the shares of common stock that are subject to the restricted stock award are transferable by the participant or are no longer subject to a substantial risk of forfeiture, the participant will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the
43
stock subject to the stock award, less any amount paid for such stock. However, if a participant so elects at the time of receipt of a restricted stock award in accordance with Section 83(b) of the Code, he or she may include the fair market value of the stock subject to the restricted stock award, less any amount paid for such stock, as compensation taxable as ordinary income at that time.
Restricted Stock Units (RSUs)
. A participant will generally not be taxed upon the grant of an award of RSUs. The participant generally will be subject to compensation taxable as ordinary income on the fair market value of unrestricted common shares on the date that such shares are transferred to the participant under the RSUs (reduced by any amount paid by the participant for such RSUs), and the capital gains/
loss holding period for such transferred shares will also commence on such date.
Other Stock-Based Awards
. A participant will generally not recognize income upon the grant of any other stock-based award. Generally, at the time a participant receives payment under any other stock-based award, he or she will recognize compensation taxable as ordinary income in an amount equal to the cash or the fair market value of the common stock received.
Section 280G
. Sections 280G and 4999 of the Code provide that executive officers and directors, stockholders who hold significant equity interests, and certain other service providers may be subject to significant additional taxes if they receive payments or benefits that exceed certain prescribed limits in connection with a change of control of a company, and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax.
Section 409A
. Section 409A of the Code imposes additional income taxes for certain types of deferred compensation that do not comply with Section 409A. The Company attempts in good faith to structure awards under the 2020 Plan so that such awards either comply with the requirements of, or qualify for an exemption under, Section 409A. However, neither the Company nor the plan administrator has any obligation to take any action to prevent the assessment of any additional tax or penalty on any participant under Section 409A of the Code and neither the Company nor the plan administrator will have any liability to any participant for such tax or penalty.
Section 162(m)
. Section 162(m) of the Code generally places a limit of $1 million per year on the amount of deductible compensation paid to certain “covered employees,” which includes, among other individuals, our named executive officers.
Plan Benefits
The amounts of future grants under the 2020 Plan are not determinable and will be granted at the sole discretion of the Compensation Committee or other delegated persons. We cannot determine at this time either the persons who will receive such awards under the 2020 Plan or the amount or types of any such awards.
On August 26, 2022, the closing market price per share of our common stock was $1.04, as reported by The Nasdaq Stock Market.
The affirmative vote of the holders of a majority of the shares of our common stock present and entitled to vote on the matter either in person or by proxy at the annual meeting is required for the adoption of our Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT TO THE 2020 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE THEREUNDER BY 7,500,000 SHARES.
44
PROPOSAL 5: ADVISORY VOTE ON APPROVAL OF EXECUTIVE COMPENSATION AS DISCLOSED IN THIS PROXY STATEMENT
(Notice Item 5)
We are seeking your advisory vote as required by Section 14A of the Securities Exchange Act of 1934, as amended, on the approval of the compensation of our named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission in the compensation tables and the related material disclosed in this proxy statement. Because your vote is advisory, it will not be binding on our Compensation Committee or our Board of Directors. However, the Compensation Committee and the Board of Directors will review the voting results and take them into consideration when making future decisions regarding executive compensation. We have determined to hold an advisory vote to approve the compensation of our named executive officers annually and the next such advisory vote will occur at the 2023 annual meeting of stockholders.
Our compensation philosophy is designed to provide the compensation and incentives needed to motivate and reward fairly those individuals who perform over time at or above the levels that we expect and to attract, as needed, and retain individuals with the skills necessary to achieve our objectives and who are crucial to our long-term success. Our compensation program is also designed to reinforce a sense of ownership and to link compensation to our performance as well as the performance of each of our named executive officers.
We rely on qualified, highly skilled and talented employees who have experience in the retail and health and wellness industries to execute our business plan and strategy. Thus, our compensation program is structured in a manner similar to companies in these industries in order to attract and retain talented employees who may have other opportunities in these industry areas.
Our compensation program consists of these general elements:
•
a fixed portion of compensation, in the form of a base salary, to retain and provide a base level of compensation to our named executive officers; and
•
a long-term performance element in the form of equity, to incentivize our named executive officers to achieve superior corporate performance.
In determining the total amount and mixture of the compensation for each of our named executive officers, the Compensation Committee subjectively considers the overall value to the Company of each named executive officer in light of numerous factors, including, but not limited to, the following:
•
our competitive position;
•
our financial performance and the contribution of each individual to our financial performance;
•
individual performance, including past and expected contribution to our corporate goals and execution of our business plan and strategy; and
•
our long-term needs and operational goals, including attracting and retaining key management personnel.
In accordance with the rules of the SEC, the following resolution, commonly known as a “say-on-pay” vote, is being submitted for a stockholder vote at the 2022 annual meeting:
“RESOLVED, that the compensation paid to the named executive officers of XpresSpa Group, Inc., as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission in the compensation tables and the related material disclosed in the proxy statement for the meeting, is hereby APPROVED.”
Vote Required and Board of Directors’ Recommendation
The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote on the matter either in person or by proxy at the annual meeting is required to approve, on an advisory basis, the compensation of our named executive officers, as described in this proxy statement. Abstentions
45
will be treated as votes against this proposal. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote. Although the advisory vote is non-binding, the Compensation Committee and the Board of Directors will review the voting results and take them into consideration when making future decisions regarding executive compensation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF SUCH APPROVAL UNLESS A STOCKHOLDER INDICATES OTHERWISE
46
PROPOSAL 6: APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF
PROPOSALS 2 THROUGH 5
PROPOSALS 2 THROUGH 5
(Notice Item 6)
We are asking our stockholders to vote on a proposal to approve the adjournment of the annual meeting to solicit additional proxies if there are not sufficient votes in favor of Proposals 2 through 5.
Vote Required and Board of Directors’ Recommendation
Approval of the adjournment of the annual meeting to solicit additional proxies if there are not sufficient votes in favor of the Proposals 2 through 5 requires the affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote on the matter either in person or by proxy at the annual meeting. A “broker non-vote” or a failure to submit a proxy or vote at the annual meeting will have no effect on the outcome of the vote for this Proposal 6. For purposes of the vote on this Proposal 6, an abstention will have the same effect as a vote “AGAINST” such proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADJOURNMENT OF THE ANNUAL MEETING TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF PROPOSALS 2 THROUGH 5, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF SUCH APPROVAL UNLESS A STOCKHOLDER INDICATES OTHERWISE.
47
CODE OF CONDUCT AND ETHICS
We have adopted a code of ethics that applies to all of our employees. The text of the code of conduct and ethics is posted on the “Investors — Corporate Governance” section of our website at
www.xpresspagroup.com/corp_governance
, and will be made available to stockholders without charge, upon request, in writing to the Corporate Secretary at 254 West 31 Street 11th Floor, New York, New York 10001. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting or the issuance of a press release of such amendments or waivers is then permitted by Nasdaq rules.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented to the annual meeting. If any other business is properly brought before the annual meeting, proxies will be voted in accordance with the judgment of the persons acting as proxies.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR
To be considered for inclusion in the proxy statement relating to our 2022 annual meeting of stockholders, we must receive stockholder proposals (other than for director nominations) no later than May 1, 2023, which is 120 days prior to the date that is one year from this year’s release date. All stockholder proposals should be sent to the attention of XpresSpa Group, Inc., 254 West 31st Street, 11th Floor, New York, New York 10001, attention Cara Soffer, General Counsel.
New York, New York
August 29, 2022
August 29, 2022
48
APPENDIX A
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
XPRESSPA GROUP, INC.
Pursuant to Section 242 of the General Corporation Law of the State of Delaware, XpresSpa Group, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:
1. The name of the Corporation is XpresSpa Group, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was January 9, 2006, under the name of Vringo, Inc. The name of the Corporation was changed to FORM Holdings Corp. by filing a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware on May 6, 2016. The name of the Corporation was changed to XpresSpa Group, Inc. by filing a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware on January 5, 2018.
2. The Board of Directors of the Corporation has duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware setting forth a proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The requisite stockholders of the Corporation have duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware. The amendment amends the Amended and Restated Certificate of Incorporation of the Corporation as follows:
Sections (3) and (4) of Article Fourth of the Corporation’s Amended and Restated Certificate of Incorporation are hereby amended and restated in their entirety to read as follows:
“(3) Upon effectiveness of this Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Corporation (the “Effective Time”), the shares of Common Stock issued and outstanding immediately prior to the Effective Time and the shares of Common Stock issued and held in the treasury of the Corporation immediately prior to the Effective Time shall be reclassified as, and shall be combined and changed into, a smaller number of shares such that each two (2) to six (6) shares of issued Common Stock immediately prior to the Effective Time shall be reclassified into and become one share of Common Stock, the exact reverse split ratio within such two-to-six range to be determined by the Board of Directors of the Corporation and publicly announced by the Corporation prior to the Effective Time.
Notwithstanding the immediately preceding sentence, no fractional shares shall be issued as a result of the reverse stock split. Instead, any stockholder who would otherwise be entitled to a fractional share of Common Stock as a result of the reclassification shall be entitled to receive a cash payment equal to the product of such resulting fractional interest in one share of Common Stock multiplied by the closing trading price of Common Stock on the Nasdaq Capital Market on the trading day immediately preceding the Effective Time. Notwithstanding the foregoing, the Corporation shall not be obliged to issue certificates evidencing the shares of Common Stock outstanding as a result of the reverse stock split or cash in lieu of fractional shares, if any, unless and until the certificates evidencing the shares held by a holder prior to the reverse stock split are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates.
(4) Each stock certificate that, immediately prior to the Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified (as well as the right to receive a cash payment in lieu of a fractional share of Common Stock), provided, however, that each person of record holding a certificate that represented shares of Common Stock that were
A-1
issued and outstanding immediately prior to the Effective Time shall receive, upon surrender of such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified (including the right to receive a cash payment in lieu of a fractional share of Common Stock).”
This Certificate of Amendment shall be effective on , 20 at Eastern Time.
IN WITNESS WHEREOF
, the Corporation has caused this Certificate of Amendment to be signed by its Chief Executive Officer on this day of , 20 .
XPRESSPA GROUP, INC.
By:
Name: Scott R. Milford
Title: Chief Executive Officer
A-2
APPENDIX B
XPRESSPA GROUP, INC.
2020 Equity Incentive Plan
(as amended October 4, 2022)
2020 Equity Incentive Plan
(as amended October 4, 2022)
1.
Purpose; Eligibility
.
1.1
General Purpose
. The name of this plan is the XpresSpa Group, Inc. 2020 Equity Incentive Plan. The purposes of the Plan are to (a) enable XpresSpa Group, Inc., a Delaware corporation, and any Affiliate to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the stockholders of the Company; and (c) promote the success of the Company’s business.
1.2
Eligible Award Recipients
. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.
1.3
Available Awards
. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-Qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Stock Awards, (f) Cash Awards, and (g) Other Equity-Based Awards.
2.
Definitions
.
“
Affiliate
” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company.
“
Applicable Laws
” means the requirements related to or implicated by the administration of the Plan under applicable state corporate law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.
“
Award
” means any right granted under the Plan, including an Incentive Stock Option, a Non-Qualified Stock Option, a Stock Appreciation Right, a Restricted Award, a Performance Stock Award, a Cash Award, or an Other Equity-Based Award.
“
Award Agreement
” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.
“
Beneficial Owner
” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular Person, such Person shall be deemed to have beneficial ownership of all securities that such Person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“
Board
” means the Board of Directors of the Company, as constituted at any time.
“Cash Award”
means an Award denominated in cash that is granted under
Section 7.4
of the Plan.
“
Cause
” means, with respect to any Participant, unless otherwise provided in the applicable Award Agreement, (a) dishonesty with respect to the Company or any Affiliate, (b) insubordination, substantial malfeasance or non-feasance of duty, (c) unauthorized disclosure of confidential information, (d) breach by a Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any Affiliate, and (e) conduct substantially prejudicial to the business of the Company or any Affiliate; provided, however, that any provision in an agreement between a Participant and the Company or an Affiliate, which contains a conflicting definition
B-1
of Cause for termination and which is in effect at the time of such termination, shall supersede this definition with respect to that Participant. The determination of the Committee as to the existence of Cause will be conclusive on the Participant and the Company.
“
Change in Control
” with respect to any Participant shall have the meaning specified in the Participant’s Award Agreement. In the absence of any such definition, a “Change in Control” shall mean the occurrence of any of the following:
(i)
Ownership
. Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities (excluding for this purpose any such voting securities held by the Company or its Affiliates or by any employee benefit plan of the Company) pursuant to a transaction or a series of related transactions which the Board of Directors does not approve; or
(ii)
Merger/Sale of Assets
. (A) A merger or consolidation of the Company whether or not approved by the Board of Directors, other than 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 entity or the parent of such corporation) more than 50% of the total voting power represented by the voting securities of the Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or consolidation; or (B) the sale or disposition by the Company of all or substantially all of the Company’s assets in a transaction requiring stockholder approval; or
(iii)
Change in Board Composition
. A change in the composition of the Board of Directors, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the effective date of the Plan, which for this purpose shall be the date of its approval by the stockholders of the Company, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).
If required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.
“
Code
” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.
“
Committee
” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with
Section 3.3
and
Section 3.4
, or any Officers of the Company to whom it has delegated authority as permitted under Section 3.3.
“
Common Stock
” means shares of the Company’s common stock, $0.01 par value per share, or such other securities of the Company as may be designated by the Committee from time to time in substitution thereof.
“
Company
” means XpresSpa Group, Inc., and any successor thereto.
“
Consultant
” means any individual or entity which performs bona fide services to the Company or an Affiliate, other than as an Employee or Director, and who may be offered securities registerable pursuant to a registration statement on Form S-8 under the Securities Act or any successor form thereto.
B-2
“
Continuous Service
” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service,
provided that
there is no interruption or termination of the Participant’s Continuous Service;
provided further that
if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service. The Committee or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence. The Committee or its delegate, in its sole discretion, may determine whether a Company transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a termination of Continuous Service for purposes of affected Awards, and such decision shall be final, conclusive and binding.
“
Deferred Stock Units
” has the meaning set forth in
Section 7.2
hereof.
“
Director
” means a member of the Board.
“
Disability
” means, unless the applicable Award Agreement says otherwise, permanent and total disability as defined in Section 22(e)(3) of the Code.
“
Disqualifying Disposition
” has the meaning set forth in
Section 14.12
.
“
Effective Date
” shall mean the date as of which this Plan is adopted by the Board.
“
Employee
” means any person, including an Officer or Director, employed as an employee by the Company or an Affiliate;
provided, that,
for purposes of determining eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation within the meaning of Section 424 of the Code. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
“
Fair Market Value
” means, as of any date, the value of the Common Stock as determined below. If the Common Stock is listed on any established stock exchange or a national market system, including without limitation, the New York Stock Exchange or the NASDAQ Stock Market, the Fair Market Value shall be the closing price of a Common Stock (or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in the
Wall Street Journal
. In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons. Notwithstanding the foregoing, the Committee may also determine the Fair Market Value upon the average selling price of the Common Stock during a specified period that is within thirty (30) days before or thirty (30) days after such date, provided that, with respect to the grant of an Option or Stock Appreciation Right, the commitment to grant such Award based on such valuation method must be irrevocable before the beginning of the specified period and otherwise compliant with Section 409A of the Code.
“Fiscal Year”
means the Company’s fiscal year.
“
Grant Date
” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.
“
Incentive Stock Option
” means an Option that is designated by the Committee as an incentive stock option within the meaning of Section 422 of the Code and that meets the requirements set out in the Plan.
“
Non-Employee Director
” means a Director who is a “non-employee director” within the meaning of Rule 16b-3 and an “independent director” as defined in the Marketplace Rules of The NASDAQ Stock Market LLC.
B-3
“
Non-Qualified Stock Option
” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
“
Officer
” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
“
Option
” means an Incentive Stock Option or a Non-Qualified Stock Option granted pursuant to the Plan.
“
Optionholder
” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
“
Option Exercise Price
” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.
“Other Equity-Based Award”
means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Performance Stock Award that is granted under
Section 7.4
and is payable by delivery of Common Stock and/or which is measured by reference to the value of Common Stock.
“
Participant
” means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
“
Performance Goals
” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon business criteria or other performance measures determined by the Committee in its discretion.
“
Performance Period
” means the one or more periods of time, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Stock Award or a Cash Award.
“
Performance Stock Award
” means any Award granted pursuant to
Section 7.3
hereof.
“
Performance Stock
” means the grant of a right to receive a number of actual shares of Common Stock or stock units based upon the performance of the Company during a Performance Period, as determined by the Committee.
“Person”
means a person as defined in Section 13(d)(3) of the Exchange Act.
“
Plan
” means this XpresSpa Group, Inc. 2020 Equity Incentive Plan, as amended and/or amended and restated from time to time.
“
Prior Plan
” means the Vringo, Inc. 2012 Employee, Director and Consultant Equity Incentive Plan, as amended.
“
Restricted Award
” means any Award granted pursuant to
Section 7.2(a)
.
“
Restricted Period
” has the meaning set forth in
Section 7.2(a)
.
“
Restricted Stock
” has the meaning set forth in
Section 7.2(a)
.
“
Restricted Stock Units
” has the meaning set forth in
Section 7.2(a)
.
“
Rule 16b-3
” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
“
Securities Act
” means the Securities Act of 1933, as amended.
“
Stock Appreciation Right
” means the right pursuant to an Award granted under
Section 7.1
to receive, upon exercise, an amount payable in cash or stock equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (a) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (b) the exercise price specified in the Stock Appreciation Right Award Agreement.
B-4
“
Stock for Stock Exchange
” has the meaning set forth in
Section 6.4
.
“Substitute Award”
has the meaning set forth in
Section 4.7
.
“
Ten Percent Stockholder
” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or of any of its Affiliates.
“Total Share Reserve
” has the meaning set forth in
Section 4.1
.
3.
Administration
.
3.1
Authority of Committee
. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the Board. Subject to the terms of the Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall have the authority:
(a)
to construe and interpret the Plan and apply its provisions;
(b)
to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
(c)
to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(d)
to delegate its authority to one or more Officers of the Company with respect to Awards that do not involve “insiders” within the meaning of Section 16 of the Exchange Act;
(e)
to determine when Awards are to be granted under the Plan and the applicable Grant Date;
(f)
from time to time to select, subject to the limitations set forth in this Plan, those eligible Award recipients to whom Awards shall be granted;
(g)
to determine the number of shares of Common Stock to be made subject to each Award;
(h)
to determine whether each Option is to be an Incentive Stock Option or a Non-Qualified Stock Option;
(i)
to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;
(j)
to determine the target number of Performance Stock to be granted pursuant to a Performance Stock Award, the performance measures that will be used to establish the Performance Goals, the Performance Period(s) and the number of Performance Stock earned by a Participant;
(k)
to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award;
provided, however
, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;
(l)
to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies;
(m)
to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
(n)
to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; and
B-5
(o)
to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan.
The Committee also may modify the purchase price or the exercise price of any outstanding Award,
provided that
if the modification effects a repricing, stockholder approval shall be required before the repricing is effective.
3.2
Committee Decisions Final
. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.
3.3
Delegation
. The Committee or, if no Committee has been appointed, the Board may delegate administration of the Plan to a committee or committees of one or more members of the Board, and the term “
Committee
” shall apply to any person or persons to whom such authority has been delegated. The Committee shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board or the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.
3.4
Committee Composition
. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors. The Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3. However, if the Board intends to satisfy such exemption requirements, with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors. Within the scope of such authority, the Board or the Committee may delegate to an Officer or Officers the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors.
3.5
Indemnification
. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee in settlement thereof (
provided, however
, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful;
provided, however
, that within 60 days after the institution of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
4.
Shares Subject to the Plan
.
4.1 Subject to adjustment in accordance with Section 11, the maximum aggregate number of shares of Common Stock available for issuance under the Plan is 12,500,000 shares plus the number of shares of
B-6
Common Stock subject to outstanding awards under the Prior Plan or any predecessor plans as of the Effective Date which thereafter are forfeited, settled in cash or cancelled or expire or are reacquired by the Company (the “
Total Share Reserve
”). During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards. Upon the approval of this Plan by Company stockholders, no additional awards will be granted under the Prior Plan or any predecessor plan; provided that all outstanding awards previously granted under the Prior Plan or predecessor plans as of such approval date shall remain outstanding and shall be administered and settled in accordance with the provisions of the Prior Plan and such other predecessor plans.
4.2 Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.
4.3 Subject to adjustment in accordance with Section 11, no more than 12,500,000 shares of Common Stock may be issued in the aggregate pursuant to the exercise of Incentive Stock Options (the
“ISO Limit”
).
4.4 The maximum number of shares of Common Stock subject to Awards granted during a single Fiscal Year to any Director who is not an Employee or Consultant during the Fiscal Year shall not exceed a total value of $400,000 (calculating the value of any Awards based on the grant date fair value for financial reporting purposes).
4.5 Any Common Stock subject to an Award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares of Common Stock to which the Award related will again be available for issuance under the Plan. Notwithstanding anything to the contrary contained herein: shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any tax withholding obligation, or (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon the settlement of the Award.
4.6 Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“
Substitute Awards
”). Substitute Awards shall not be counted against the Total Share Reserve; provided, that, Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as Incentive Stock Options shall be counted against the ISO limit. Subject to applicable stock exchange requirements, available shares under a stockholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect such acquisition or transaction) may be used for Awards under the Plan and shall not count toward the Total Share Limit.
5. No dividends will be paid to a Participant with respect to any shares subject to an Award prior to the vesting of such Award. For the avoidance of doubt, as described in Section 7.2(b), any dividends that may be attributable to any particular share of Restricted Stock or any particular Restricted Stock Unit or Deferred Stock Unit shall only be distributed to a Participant upon the release of restrictions on such share of Restricted Stock or the settlement of such Restricted Stock Unit or Deferred Stock Unit, as applicable, and a Participant shall have no right to such dividends if such Award is forfeited.
Eligibility
.
5.1
Eligibility for Specific Awards
. Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors and those individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors following the Grant Date.
5.2
Ten Percent Stockholders
. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.
6.
Option Provisions
. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-Qualified Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for Common
B-7
Stock purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
6.1
Term
. Subject to the provisions of
Section 5.2
regarding Ten Percent Stockholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from the Grant Date. The term of a Non-Qualified Stock Option granted under the Plan shall be determined by the Committee;
provided, however
, no Non-Qualified Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.
6.2
Exercise Price of an Incentive Stock Option
. Subject to the provisions of
Section 5.2
regarding Ten Percent Stockholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
6.3
Exercise Price of a Non-Qualified Stock Option
. The Option Exercise Price of each Non-Qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-Qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code.
6.4
Consideration
. The Option Exercise Price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) in the discretion of the Committee, upon such terms as the Committee shall approve, the Option Exercise Price may be paid: (i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares of Common Stock that have an aggregate Fair Market Value on the date of attestation equal to the Option Exercise Price (or portion thereof) and receives a number of shares of Common Stock equal to the difference between the number of shares thereby purchased and the number of identified attestation shares of Common Stock (a “
Stock for Stock Exchange
”); (ii) if the shares of Common Stock are listed on any established stock exchange or a national market system, through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the exercise price (i.e., by means of a “cashless” exercise procedure); (iii) by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise (i.e., by means of a “net exercise”); (iv) by any combination of the foregoing methods; or (v) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Option, the exercise price of Common Stock acquired pursuant to an Option that is paid by delivery (or attestation) to the Company of other shares of Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of Common Stock of the Company that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the foregoing, during any period for which the shares of Common Stock are publicly traded (i.e., the Common Stock is listed on any established stock exchange or a national market system) an exercise by a Director or Officer that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be
B-8
prohibited with respect to any Award under this Plan. Notwithstanding the foregoing, the Committee shall accept only such payment on exercise of an Incentive Stock Option as is permitted by Section 422 of the Code.
6.5
Transferability of an Incentive Stock Option
. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
6.6
Transferability of a Non-Qualified Stock Option
. A Non-Qualified Stock Option may, in the sole discretion of the Committee, be transferable, upon written approval by the Committee to the extent provided in the Award Agreement. If the Non-Qualified Stock Option does not provide for transferability, then the Non-Qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
6.7
Vesting of Options
. Each Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Committee may deem appropriate. The vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a share.
6.8
Termination of Continuous Service
. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder’s Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement;
provided that
, if the termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.
6.9
Extension of Termination Date
. An Optionholder’s Award Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service for any reason would be prohibited at any time because the issuance of Common Stock would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate on the earlier of (a) the expiration of the term of the Option in accordance with Section 6.1 or (b) the expiration of a period after termination of the Participant’s Continuous Service that is three months after the end of the period during which the exercise of the Option would be in violation of such registration or other securities law requirements.
6.10
Disability of Optionholder
. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date that is 12 months following such termination or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.
6.11
Death of Optionholder
. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then the
B-9
Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.
6.12
Incentive Stock Option $100,000 Limitation
. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-Qualified Stock Options.
6.13
Reload Options
. No Option may include provisions that “reload” the Option upon exercise.
7.
Provisions of Awards Other Than Options
.
7.1
Stock Appreciation Rights
.
(a)
General
. Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions set forth in this
Section
, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
(b)
Term of Stock Appreciation Rights
. The term of a Stock Appreciation Right granted under the Plan shall be determined by the Committee;
provided, however
, no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the Grant Date.
(c)
Vesting of Stock Appreciation Rights
. Each Stock Appreciation Right may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Stock Appreciation Right may be subject to such other terms and conditions on the time or times when it may be exercised as the Committee may deem appropriate. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a share.
(d)
Exercise and Payment
. Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to the number of shares of Common Stock subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the Committee.
(e)
Exercise Price
. The exercise price of a Stock Appreciation Right shall be determined by the Committee.
7.2
Restricted Awards
.
(a)
General
. A Restricted Award is an Award of actual Common Stock (“
Restricted Stock
”) or hypothetical Common Stock units (“
Restricted Stock Units
”) having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “
Restricted Period
”) as the Committee shall determine. Each Restricted Award granted under the Plan shall be evidenced by an Award Agreement. Each Restricted Award so granted shall be subject to the conditions set forth in this
Section
and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
B-10
(b)
Restricted Stock and Restricted Stock Units
.
(i) Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee. The cash dividends or stock dividends so withheld by the Committee and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee, in Common Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such stock and, if such stock is forfeited, the Participant shall have no right to such dividends.
(ii) The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No Common Stock shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside funds for the payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. The Committee may also grant Restricted Stock Units with a deferral feature, whereby settlement is deferred beyond the vesting date until the occurrence of a future payment date or event set forth in an Award Agreement (“
Deferred Stock Units
”). At the discretion of the Committee, each Restricted Stock Unit or Deferred Stock Unit (representing one share of Common Stock) may be credited with an amount equal to the cash and stock dividends paid by the Company in respect of one share of Common Stock (“
Dividend Equivalents
”). Dividend Equivalents shall be withheld by the Company and credited to the Participant’s account, and interest may be credited on the amount of cash Dividend Equivalents credited to the Participant’s account at a rate and subject to such terms as determined by the Committee. Dividend Equivalents credited to a Participant’s account and attributable to any particular Restricted Stock Unit or Deferred Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Committee, in Common Stock having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted Stock Unit or Deferred Stock Unit and, if such Restricted Stock Unit or Deferred Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.
(c)
Restrictions
.
(i) Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect to such shares shall terminate without further obligation on the part of the Company.
(ii) Restricted Stock Units and Deferred Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units or Deferred Stock Units are forfeited, all rights of the Participant to
B-11
such Restricted Stock Units or Deferred Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.
(d)
Restricted Period
. With respect to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule established by the Committee in the applicable Award Agreement. No Restricted Award may be granted or settled for a fraction of a share.
(e)
Delivery of Restricted Stock and Settlement of Restricted Stock Units
. Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in
Section 7.2(c)
and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited to the Participant’s account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, or at the expiration of the deferral period with respect to any outstanding Deferred Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock for each such outstanding vested Restricted Stock Unit or Deferred Stock Unit (“
Vested Unit
”) and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit in accordance with
Section 7.2(b)(ii)
hereof and the interest thereon or, at the discretion of the Committee, in Common Stock having a Fair Market Value equal to such Dividend Equivalents and the interest thereon, if any;
provided, however
, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Common Stock in lieu of delivering only Common Stock for Vested Units. If a cash payment is made in lieu of delivering Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed in the case of Restricted Stock Units, or the delivery date in the case of Deferred Stock Units, with respect to each Vested Unit.
(f)
Stock Restrictions
. Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.
7.3
Performance Stock Awards
.
(a)
Grant of Performance Stock Awards
. Each Performance Stock Award granted under the Plan shall be evidenced by an Award Agreement. Each Performance Stock Award so granted shall be subject to the conditions set forth in this
Section
, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. The Committee shall have the discretion to determine: (i) the number of shares of Common Stock or share-denominated units subject to a Performance Stock Award granted to any Participant; (ii) the Performance Period applicable to any Award; (iii) the conditions that must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and restrictions of the Award.
(b)
Earning Performance Stock Awards
. The number of shares of Performance Stock earned by a Participant will depend on the extent to which the performance goals established by the Committee are attained within the applicable Performance Period, as determined by the Committee.
7.4
Other Equity-Based Awards and Cash Awards
. The Committee may grant Other Equity-Based Awards, either alone or in tandem with other Awards, in such amounts and subject to such conditions as the Committee shall determine in its sole discretion. Each Equity-Based Award shall be evidenced by an Award Agreement and shall be subject to such conditions, not inconsistent with the Plan, as may be reflected in the applicable Award Agreement. The Committee may grant Cash Awards in such amounts and subject to such Performance Goals, other vesting conditions, and such other terms as the Committee determines in its discretion. Cash Awards shall be evidenced in such form as the Committee may determine.
B-12
8.
Securities Law Compliance
. Each Award Agreement shall provide that no Common Stock shall be purchased or sold thereunder unless and until (a) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require. The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell Common Stock upon exercise of the Awards;
provided, however
, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained.
9.
Use of Proceeds from Stock
. Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.
10.
Miscellaneous
.
10.1
Acceleration of Exercisability and Vesting
. Notwithstanding anything herein or in the Award to the contrary, the Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest.
10.2
Stockholder Rights
. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Common Stock subject to such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Common Stock certificate is issued, except as provided in
Section 11
hereof.
10.3
No Employment or Other Service Rights
. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without Cause or (b) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
10.4
Transfer; Approved Leave of Absence
. For purposes of the Plan, no termination of employment by an Employee shall be deemed to result from either (a) a transfer of employment to the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another, or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.
10.5
Withholding Obligations
. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold Common Stock from the Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award,
provided, however
, that no Common Stock is withheld for such purpose with a value exceeding the maximum amount of tax required to be withheld by law; (c) delivering to the Company previously owned and unencumbered Common Stock of the Company; or (d) if the Common Stock is listed on
B-13
any established stock exchange or a national market system, through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the tax required to be withheld by law (i.e., by means of a “cashless” exercise procedure).
11.
Adjustments Upon Changes in Stock
. In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options and Stock Appreciation Rights, the Performance Goals to which Performance Stock Awards and Cash Awards are subject, the maximum number of shares of Common Stock subject to all Awards stated in Section 4 will be equitably adjusted or substituted, as to the number, price or kind of Common Stock or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section, unless the Committee specifically determines that such adjustment is in the best interests of the Company or its Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section will not constitute modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-Qualified Stock Options, ensure that any adjustments under this Section will not constitute a modification of such Non-Qualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
12.
Effect of Change in Control
. Notwithstanding any other provision of the Plan to the contrary, immediately upon the occurrence of a Change in Control, the following provisions of this Section shall apply except to the extent an Award Agreement provides for a different treatment (in which case the Award Agreement shall govern): all then-outstanding Awards held by a Participant and not previously vested shall become 100% vested; provided that, if the achievement of the performance goals applicable to an Award have not been measured, then such performance goals shall be deemed satisfied as if target performance was achieved.
13.
Amendment of the Plan and Awards
.
13.1
Amendment of Plan
. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided in
Section 11
relating to adjustments upon changes in Common Stock and
Section 13.3
, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy any Applicable Laws. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on stockholder approval.
13.2
Stockholder Approval
. The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval.
13.3
Contemplated Amendments
. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance therewith.
13.4
No Impairment of Rights
. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
13.5
Amendment of Awards
. The Committee at any time, and from time to time, may amend the terms of any one or more Awards;
provided, however
, that the Committee may not make any amendment which would otherwise constitute an impairment of the rights of a Participant under any Award unless the Participant consents in writing.
B-14
14.
General Provisions
.
14.1
Forfeiture Events
. The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.
14.2
Clawback
. Notwithstanding any other provisions in this Plan, the Company may cancel any Award, require reimbursement of any Award by a Participant, and effect any other right of recoupment of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from time to time (
“Clawback Policy”
). In addition, a Participant may be required to repay to the Company previously paid compensation, whether provided pursuant to the Plan or an Award Agreement, in accordance with the Clawback Policy. By accepting an Award, the Participant is agreeing to be bound by the Clawback Policy, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion (including, without limitation, to comply with applicable law or stock exchange listing requirements).
14.3
Other Compensation Arrangements
. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
14.4
Sub-Plans
. The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be deemed a part of the Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was designed.
14.5
Deferral of Awards
. The Committee may establish one or more programs under the Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of Common Stock or other consideration under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.
14.6
Unfunded Plan
. The Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.
14.7
Recapitalizations
. Each Award Agreement may contain provisions to reflect the provisions of
Section 11
.
14.8
Delivery
. Upon exercise of a right granted under this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, 30 days shall be considered a reasonable period of time.
14.9
No Fractional Shares
. No fractional Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
B-15
14.10
Other Provisions
. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of Awards, as the Committee may deem advisable.
14.11
Section 409A
. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.
14.12
Disqualifying Dispositions
. Any Participant who shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the Common Stock acquired upon exercise of such Incentive Stock Option (a “
Disqualifying Disposition
”) shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such Common Stock.
14.13
Section 16
. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this
Section
, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
14.14
Beneficiary Designation
. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.
14.15
Expenses
. The costs of administering the Plan shall be paid by the Company.
14.16
Severability
. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.
14.17
Plan Headings
. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.
14.18
Non-Uniform Treatment
. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.
15.
Effective Date of Plan
. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of a stock Award, shall be granted) unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
B-16
16.
Termination or Suspension of the Plan
. The Plan shall terminate automatically on tenth anniversary of the Effective Date. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 13.1 hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
17.
18.
Choice of Law
. The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.
B-17
![[MISSING IMAGE: tm2223452d2-px_01pagebw.jpg]](tm2223452d2-px_01pagebw.jpg)
PROXY XPRESSPA GROUP, INC. Annual Meeting of Stockholders
October 4, 2022 at 11:00 AM Eastern time This Proxy is solicited on behalf of the
Board of Directors of XpresSpa Group, Inc. The undersigned hereby appoints Bruce T. Bernstein, Scott R. Milford and Cara Soffer (the “Named Proxies”), and each or any of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and hereby authorizes them, and each of them, to represent and to vote, as designated on the reverse side of this proxy, all of the shares of common stock of XpresSpa Group, Inc. that the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at 11:00 AM Eastern time on October 4, 2022 and any adjournment or postponement thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given. The Annual Meeting of Stockholders will be held virtually. In order to attend the Annual Meeting, you must register at https://viewproxy.com/XpresSpa/2022/ by 11:59 PM Eastern time on October 1, 2022. On the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by clicking on the link provided and entering the password you received via email in your registration confirmation. Further instructions on how to attend and vote during the Annual Meeting are contained in the Proxy Statement in the sections titled “Important Information About the Annual Meeting and Voting — Attending the Annual Meeting” and “Important Information About the Annual Meeting and Voting — How Do I Vote?” THE SHARES REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO SUCH DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS IN ITEM 1 AND FOR THE PROPOSALS IN ITEMS 2 THROUGH 6. THE PROXIES WILL VOTE IN THEIR DISCRETION ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT THEREOF. (Continued and to be marked, dated and signed on other side) Important Notice of Internet Availability of Proxy Materials for the Virtual Annual Meeting: The Notice of Meeting and Proxy Statement and Annual Report are available at: http://viewproxy.com/XpresSpa/2022
October 4, 2022 at 11:00 AM Eastern time This Proxy is solicited on behalf of the
Board of Directors of XpresSpa Group, Inc. The undersigned hereby appoints Bruce T. Bernstein, Scott R. Milford and Cara Soffer (the “Named Proxies”), and each or any of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and hereby authorizes them, and each of them, to represent and to vote, as designated on the reverse side of this proxy, all of the shares of common stock of XpresSpa Group, Inc. that the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at 11:00 AM Eastern time on October 4, 2022 and any adjournment or postponement thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given. The Annual Meeting of Stockholders will be held virtually. In order to attend the Annual Meeting, you must register at https://viewproxy.com/XpresSpa/2022/ by 11:59 PM Eastern time on October 1, 2022. On the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by clicking on the link provided and entering the password you received via email in your registration confirmation. Further instructions on how to attend and vote during the Annual Meeting are contained in the Proxy Statement in the sections titled “Important Information About the Annual Meeting and Voting — Attending the Annual Meeting” and “Important Information About the Annual Meeting and Voting — How Do I Vote?” THE SHARES REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO SUCH DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS IN ITEM 1 AND FOR THE PROPOSALS IN ITEMS 2 THROUGH 6. THE PROXIES WILL VOTE IN THEIR DISCRETION ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT THEREOF. (Continued and to be marked, dated and signed on other side) Important Notice of Internet Availability of Proxy Materials for the Virtual Annual Meeting: The Notice of Meeting and Proxy Statement and Annual Report are available at: http://viewproxy.com/XpresSpa/2022
![[MISSING IMAGE: tm2223452d1-px_02pagebw.jpg]](tm2223452d1-px_02pagebw.jpg)
The Board of Directors recommends a vote “FOR” each of the director nominees listed in Proposal 1 and “FOR” Proposals 2, 3, 4, 5 and 6.
Please mark your votes like this ☒
Proposal 1.
Election of Directors. NOMINEES: FOR WITHHOLD 01. Scott R. Milford ☐ ☐ 02. Bruce T. Bernstein ☐ ☐ 03. Robert Weinstein ☐ ☐ 04. Donald E. Stout ☐ ☐ 05. Michael Lebowitz ☐ ☐ Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) ☐
VIRTUAL CONTROL NUMBER
Proposal 2.
To ratify the selection of Friedman LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. FOR ☐ AGAINST ☐ ABSTAIN ☐
Proposal 3.
To approve a proposed amendment to the XpresSpa Group, Inc. Amended and Restated Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock, at a ratio of between 1-for-2 and 1-for-6. FOR ☐ AGAINST ☐ ABSTAIN ☐
Proposal 4.
To approve a proposed amendment to our 2020 Equity Incentive Plan, to increase the number of shares authorized for issuance under the Plan by 7,500,000 shares. FOR ☐ AGAINST ☐ ABSTAIN ☐
Proposal 5.
To approve, by an advisory vote, the compensation of our named executive officers, as disclosed in the accompanying proxy statement. FOR ☐ AGAINST ☐ ABSTAIN ☐
Proposal 6.
To approve an adjournment of our annual meeting of stockholders, if necessary, to solicit additional proxies if there are not sufficient votes in favor of proposals 2 through 5. FOR ☐ AGAINST ☐ ABSTAIN ☐ NOTE: To conduct any other business properly brought before the meeting or any adjournment thereof. Date Signature Signature (if held jointly) NOTE: This proxy should be marked, dated and signed by each stockholder exactly as such stockholder’s name appears hereon, and returned promptly in the enclosed envelope. When shares are held jointly, each holder should sign. When signing as an executor, administrator, attorney, trustee or guardian, please give full title as such. If the signatory is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If the signatory is a partnership, please sign in the partnership name by authorized person. As a stockholder of XpresSpa Group, Inc., you have the option of voting your shares electronically through the Internet or by telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the Named Proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. As a registered holder, you may vote your shares at the Annual Meeting by first registering at
http://viewproxy.com/
XpresSpa/2022/
using your Virtual Control Number below. Your registration must be received by 11:59 PM Eastern time on October 1, 2022. On the day of the Annual Meeting, if you have properly registered you may log in to the Annual Meeting by clicking on the link provided and the password you received via email in your registration confirmation and follow instructions to vote your shares. Please have your Virtual Control Number with you during the Annual Meeting in order to vote. Further instructions on how to attend and vote during the Annual Meeting are contained in the Proxy Statement in the sections titled “Important Information About the Annual Meeting and Voting — Attending the Annual Meeting” and “Important Information About the Annual Meeting and Voting —How Do I Vote?”
VIRTUAL CONTROL NUMBER
PROXY VOTING INSTRUCTIONS Please have your 11-digit Virtual Control Number ready when voting by Internet or Telephone, or when voting during the Virtual Annual Meeting.
INTERNET
TELEPHONE
MAIL
Vote Your Proxy on the Internet:
Go to www.FCRvote.com/XSPA Vote Your Proxy by Phone:
Call 1 (866) 402-3906 Vote Your Proxy by Mail: Have your proxy card available when you access the above website. Follow the prompts to vote your shares. Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
Go to www.FCRvote.com/XSPA Vote Your Proxy by Phone:
Call 1 (866) 402-3906 Vote Your Proxy by Mail: Have your proxy card available when you access the above website. Follow the prompts to vote your shares. Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
TABLE OF CONTENTS
IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . MANAGEMENT AND CORPORATE GOVERNANCE REPORT OF AUDIT COMMITTEE DELINQUENT SECTION 16(a) REPORTS CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS PROPOSAL 1: ELECTION OF DIRECTORS PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PROPOSAL 3: REVERSE STOCK SPLIT PROPOSAL 4: APPROVAL OF AN AMENDMENT TO OUR 2020 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE THEREUNDER BY 7,500,000 SHARES PROPOSAL 5: ADVISORY VOTE ON APPROVAL OF EXECUTIVE COMPENSATION AS DISCLOSED IN THIS PROXY STATEMENT. PROPOSAL 6: APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF PROPOSALS 2 THROUGH 5 CODE OF CONDUCT AND ETHICS OTHER MATTERS STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR APPENDIX A FORM OF CERTIFICATE OF AMENDMENT TO EFFECT REVERSE STOCK SPLIT A-1 APPENDIX B 2020 EQUITY INCNENTIVE PLAN, AS AMENDED B-1