UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Under Rule 14a-12
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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):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of
its filing:
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Amount previously paid:
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Form, Schedule or Registration Statement No:
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XPRESSPA
GROUP, INC.
780 Third Avenue, 12
th
Floor
New York, New York 10017
August 27, 2018
To Our Stockholders:
You are cordially invited
to attend the 2018 annual meeting of stockholders of XpresSpa Group, Inc. to be held at 11:00 A.M. EST on Tuesday, September 18,
2018 at the offices of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., located at 666 Third Avenue, New York, New York,
10017.
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 this proxy statement.
At the annual meeting,
we will ask stockholders to consider the following proposals:
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1.
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To elect Edward Jankowski, Bruce T. Bernstein, Donald E. Stout, Salvatore Giardina and Richard
K. Abbe to our Board of Directors;
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2.
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To ratify the selection of CohnReznick LLP as our independent registered public accounting firm
for the fiscal year ending December 31, 2018;
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3.
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To authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares
of our common stock underlying convertible notes and warrants issued by us pursuant to the terms of that certain Securities Purchase
Agreement, dated May 15, 2018, by and among XpresSpa Group, Inc. and the investors named therein, in an amount equal to or in excess
of 20% of our common stock outstanding before the issuance of such convertible notes and warrants (including upon the operation
of “full-ratchet” anti-dilution provisions contained in such convertible notes and warrants);
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4.
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To approve an 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 5-for-1 and 25-for-1;
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5.
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To approve, by an advisory vote, the compensation of our named executive officers, as disclosed
in this proxy statement, and
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6.
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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 the proposals referred to in clauses (2) through (5).
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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.
Also at the annual meeting,
the holders of our Series D Preferred Stock may re-elect Andrew R. Heyer to the Board of Directors. The Board of Directors makes
no recommendation with respect to this proposal.
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 mail. When you have finished reading the proxy statement, you
are urged to vote in accordance with the instructions set forth in this 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. We look forward to seeing you at the annual meeting.
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Sincerely,
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Edward Jankowski
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Chief Executive Officer
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XPRESSPA
GROUP, INC.
780 Third Avenue, 12
th
Floor
New York, New York 10017
August 27, 2018
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
TIME: 11:00 a.m., local time
DATE: September 18, 2018
PLACE: Mintz, Levin, Cohn, Ferris, Glovsky
& Popeo, P.C., located at 666 Third Avenue, New York, New York, 10017
PURPOSES:
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1.
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To elect Edward Jankowski, Bruce T. Bernstein, Donald E. Stout, Salvatore Giardina and Richard
K. Abbe to our Board of Directors;
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2.
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To ratify the selection of CohnReznick LLP as our independent registered public accounting firm
for the fiscal year ending December 31, 2018;
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3.
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To authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares
of our common stock underlying convertible notes and warrants issued by us pursuant to the terms of that certain Securities Purchase
Agreement, dated May 15, 2018, by and among XpresSpa Group, Inc. and the investors named therein, in an amount equal to or in excess
of 20% of our common stock outstanding before the issuance of such convertible notes and warrants (including upon the operation
of “full-ratchet” anti-dilution provisions contained in such convertible notes and warrants);
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4.
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To approve an 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 5-for-1 and 25-for-1;
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5.
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To approve, by an advisory vote, the compensation of our named executive officers, as disclosed
in this proxy statement, and
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6.
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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 the proposals referred to in clauses (2) through (5).
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WHO MAY VOTE:
You may vote if you were
the record owner of XpresSpa Group, Inc. common stock or Series D Preferred Stock at the close of business on July 23, 2018. A
list of stockholders of record will be available at the annual meeting and, during the 10 days prior to the annual meeting, at
our principal executive offices located at 780 Third Avenue, 12
th
Floor, New York, New York 10017.
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 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.
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BY ORDER OF THE BOARD OF DIRECTORS
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Sincerely,
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Edward Jankowski
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Chief Executive Officer
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TABLE OF CONTENTS
PRELIMINARY COPIES FILED PURSUANT TO RULE
14a-6(a)
XPRESSPA
GROUP, INC.
780 Third Avenue, 12
th
Floor
New York, New York 10017
PROXY STATEMENT FOR THE XPRESSPA GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON SEPTEMBER 18, 2018
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. local time, on Tuesday, September 18, 2018, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., 666 Third
Avenue, New York, NY 10017.
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.
On or about August 9, 2018,
we began sending this proxy statement, the attached Notice of Annual Meeting of Stockholders and the enclosed proxy card to all
stockholders entitled to vote at the annual meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON SEPTEMBER 18, 2018
This proxy statement
and our 2017 annual report to stockholders are available for viewing, printing and downloading at
www.proxyvote.com.
To
view these materials please have your 16-digit control number(s) available that appears on your Notice or proxy card. On this website,
you can also elect to receive future distributions of our proxy statements and annual reports to stockholders by electronic delivery.
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, 2017, 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.xpresspa.com.
You may also obtain a printed copy of
our Annual Report on Form 10-K, including our financial statements, free of charge, from us by sending a written request to: XpresSpa
Group, Inc., 780 Third Avenue, 12
th
Floor, New York, New York 10017, Attention: Corporate Secretary. Exhibits will be
provided upon written request and payment of an appropriate processing fee.
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 at the offices of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., on September 18, 2018, at 11:00 a.m. local 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, the proxy card and
a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 because you owned shares of our common stock
on the record date. We intend to commence distribution of the Important Notice Regarding the Availability of Proxy Materials, which
we refer to throughout this proxy statement as the Notice, and, if applicable, the proxy materials to stockholders on or about
August 9, 2018.
Why Did I Receive a Notice in the Mail
Regarding the Internet Availability of Proxy Materials Instead of a Full Set of Proxy Materials?
As permitted by the rules
of the U.S. Securities and Exchange Commission, or the SEC, we may furnish our proxy materials to our stockholders by providing
access to such documents on the Internet, rather than mailing printed copies of these materials to each stockholder. Most stockholders
will not receive printed copies of the proxy materials unless they request them. We believe that this process should expedite stockholders’
receipt of proxy materials, lower the costs of the annual meeting and help to conserve natural resources. If you received a Notice
by mail or electronically, you will not receive a printed or email copy of the proxy materials, unless you request one by following
the instructions included in the Notice. Instead, the Notice instructs you as to how you may access and review all of the proxy
materials and submit your proxy on the Internet. If you requested a paper copy of the proxy materials, you may authorize the voting
of your shares by following the instructions on the proxy card, in addition to the other methods of voting described in this proxy
statement.
Why is the Company seeking approval for
the issuance of shares of common stock in connection with the financing transaction?
On May 15, 2018, we entered
into a securities purchase agreement pursuant to which we agreed to sell up to (i) an aggregate principal amount of $4,438,000
in 5% Secured Convertible Notes due 2019, which includes $88,000 to be issued to Palladium Capital Advisors as Placement Agent
(the “Notes”), convertible into shares of our common stock, par value $0.01 per share, at a conversion price of $0.62
per share, (ii) Class A Warrants to purchase 7,157,259 shares of common stock at an exercise price of $0.62 per share and (iii)
Class B Warrants to purchase 3,578,630 shares of common stock at an exercise price of $0.62 per share (the “Financing Transaction”).
The Notes bear interest at a rate of 5% per annum. The Notes are senior secured obligations of ours and are secured by certain
of our personal property. Unless earlier converted or redeemed, the Notes will mature in November 2019.
Nasdaq Listing Rule 5635(d)
generally requires us to obtain stockholder approval prior to issuing more than 20% of our outstanding shares of common stock under
the Financing Transaction. For more information, see “Proposal 3: Issuance of Shares of Common Stock in Financing Transaction”
contained elsewhere in this proxy statement.
Why is the Company seeking approval for
the reverse stock split?
On March 16, 2018, we
received a notification letter from Nasdaq informing us that for the last 30 consecutive business days, the bid price of our securities
had closed below $1.00 per share as required by Nasdaq Listing Rule 5550(a)(2). This notice has no immediate effect on our Nasdaq
listing and we had 180 calendar days, or until September 12, 2018, to regain compliance. As of August 27, 2018, we had not regained
compliance since the closing bid price of our securities was not at least $1.00 per share for a minimum of ten consecutive business
days. To cure the deficiency, we propose to conduct the reverse stock split of our common stock for which we are seeking stockholder
approval in Proposal 4 of this proxy statement. On July 25, 2018, the closing price of our common stock as reported on Nasdaq
was $0.27 per share.
The 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 4: Reverse Stock Split” contained elsewhere in this proxy statement.
Who Can Vote?
Only stockholders who owned
our common stock or Series D Preferred Stock at the close of business on July 23, 2018 are entitled to vote at the annual meeting.
On this record date, there were 27,114,662 shares of our common stock outstanding and entitled to vote and 420,541 shares of our
Series D Preferred Stock outstanding and entitled to vote, on an as-converted basis, such that holders of our Series D Preferred
Stock are entitled to an aggregate of 3,364,328 votes. Our common stock and our Series D Preferred Stock are our only classes 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.
How Many Votes Do I Have?
Each share of our common
stock that you own entitles you to one vote. Each share of our Series D Preferred Stock that you own entitles you to the number
of votes equal to the number of shares of common stock into which your shares of Series D Preferred Stock could have been converted
on the record date. This number is obtained by dividing the stated value of your Series D Preferred Stock ($48.00) by the conversion
price in effect on the record date ($6.00).
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 on the proxy card or as instructed
via the Internet. You may specify whether your shares should be voted for, against or abstain with respect to each of the 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 may vote:
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By the Internet or
by telephone.
Follow the instructions included in the Notice or, if you received printed materials, in the proxy card to vote
by Internet or telephone.
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By mail
. If you
received a proxy card by mail, you can vote by mail by completing, signing, dating and returning the proxy card as instructed
on the card. 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.
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In person at the meeting.
If you attend the meeting, you may deliver a completed proxy card
in person or you may vote by completing a ballot, which will be available at the meeting.
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Internet voting facilities for stockholders
of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Time on September 17, 2018.
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 voting
also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your
own name and you plan to vote your shares in person at the annual meeting, you should contact your broker or agent to obtain a
legal proxy or broker’s proxy card and bring it to the annual meeting in order to vote.
How Does the Board of Directors Recommend
That I Vote on the Proposals?
The Board of Directors recommends
that you vote as follows:
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“
FOR
” the election of the nominees for director;
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“
FOR
” the ratification of the selection of CohnReznick LLP as our independent
registered public accounting firm for our fiscal year ending December 31, 2018;
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“
FOR
” the approval, for purposes of complying with Nasdaq Listing Rule 5635(d), of the issuance of shares of our common stock underlying convertible notes and warrants issued by us pursuant to the terms of that certain Securities Purchase Agreement, dated May 15, 2018, by and among XpresSpa Group, Inc. and the investors named therein, in an amount equal to or in excess of 20% of our common stock outstanding before the issuance of such convertible notes and warrants (including upon the operation of “full-ratchet” anti-dilution provisions contained in such convertible notes and warrants);
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“
FOR
” the amendment to our Amended and Restated Certificate of Incorporation
to effect a reverse stock split of our common stock, par value $0.01 per share, at a ratio of between 5-for-1 and 25-for-1;
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“FOR
” the compensation of our named executive officers, as disclosed in this
proxy statement; and
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“FOR
” adjournment of our annual meeting of stockholders, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposals referred to above.
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For holders of Series D Preferred Stock,
“NO RECOMMENDATION”
on whether
to vote in favor of or withhold your vote on the re-election of Andrew R. Heyer.
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If any other matter is
presented at the annual meeting, your proxy provides that your shares will be voted by the 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:
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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;
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by re-voting by the Internet or telephone as instructed above;
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by notifying the Corporate Secretary of XpresSpa Group, Inc. in writing before the annual meeting that you have revoked your proxy; or
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by attending the annual meeting in person and voting in person. Attending the annual meeting in person will not in and of itself revoke a previously submitted proxy. You must specifically request at the annual meeting that it be revoked.
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Your most current vote, whether by
the Internet 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, 3 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
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The 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 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.
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Proposal 2: Ratify Selection of Independent Registered Public Accounting Firm
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The affirmative vote of the holders of a majority of the shares of common stock and Series D Preferred Stock voting on an as-converted basis 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 CohnReznick LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. 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 CohnReznick LLP as our independent registered public accounting firm for 2018, our Audit Committee of our Board of Directors will reconsider its selection.
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Proposal 3: Issuance of Shares of Common Stock in Financing Transaction
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The affirmative vote of the holders of a majority of the total votes
cast in person or by proxy at the annual meeting is required to approve, in accordance with Nasdaq Listing Rule 5635(d), the issuance,
under the terms of that certain Securities Purchase Agreement dated May 15, 2018, by and among XpresSpa Group, Inc. and the investors
thereto, and related documents, of shares of our common stock underlying convertible notes and warrants issued by us (including
upon the operation of “full-ratchet” anti-dilution provisions contained in such convertible notes and warrants). 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.
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Proposal 4: Reverse Stock Split
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The affirmative vote of the holders of a majority
of the outstanding shares of our common stock and Series D Preferred Stock voting on an as-converted basis entitled to vote on
the matter either in person or by proxy at the annual meeting 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.
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Proposal 5: Approve an Advisory Vote on the Compensation of our Named Executive Officers
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The affirmative vote of the holders of a majority
of the shares of common stock and Series D Preferred Stock voting on an as-converted basis 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 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.
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Proposal 6: Approve an Adjournment of the Annual Meeting, if Necessary, to Solicit Additional Proxies if there are not Sufficient Votes in Favor of Proposals 2 through 5.
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Approval of the adjournment of the annual meeting,
if necessary, 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 and Series D Preferred Stock present and entitled to vote 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.
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Preferred Stockholder Proposal: Election of Director by Series D Preferred Stockholders
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The nominee for director who receives the most votes (also known as a “plurality” of the votes cast) will be elected. You may vote either FOR the nominee or WITHHOLD your vote from the nominee. 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.
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Is Voting Confidential?
We will keep all the proxies, ballots and voting
tabulations private. We only let our Inspectors of Election, American Stock Transfer & Trust Company, LLC, 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 provide.
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 The Proxy Advisory Group, 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 $15,000 in the aggregate.
What Constitutes a Quorum for the Annual
Meeting?
The presence, in person
or by proxy, of the holders of a majority of the voting power of all outstanding shares of our common stock and Series D Preferred
Stock entitled to vote at the annual meeting is necessary to constitute a quorum at the annual 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.
Attending the Annual Meeting
The annual meeting will
be held at 11:00 a.m. on Tuesday, September 18, 2018, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. When
you arrive at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., signs will direct you to the appropriate meeting rooms. 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., 780 Third Avenue, 12
th
Floor, New York,
New York, 10017.
If you do not wish to participate
in “householding” and would like to receive your own Notice or, if applicable, set of our proxy materials in future
years, follow the instructions described below. Conversely, if you share an address with another of our stockholder and together
both of you would like to receive only a single Notice or, if applicable, set of proxy materials, follow these instructions:
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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.
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•
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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, the name of your brokerage firm and your account number.
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Electronic Delivery of Company Stockholder
Communications
Most stockholders can elect
to view or receive copies of future proxy materials over the Internet instead of receiving paper copies in the mail.
You can choose this option
and save the Company the cost of producing and mailing these documents by:
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following the instructions provided on your proxy card;
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·
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following the instructions provided when you vote over the Internet; or
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·
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going to
www.proxyvote.com
and following the instructions provided.
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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, Series D Preferred Stock and common stock
underlying our convertible notes as of July 10, 2018 for (a) each stockholder known by us to own beneficially more than 5% of our
common stock, Series D Preferred Stock or common stock underlying our convertible notes (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, Series D Preferred Stock and common stock underlying our convertible notes that may be acquired
by an individual or group within 60 days of July 10, 2018 pursuant to the exercise of options or warrants, the vesting of restricted
stock units, or the conversion of notes into shares of common stock to be outstanding for the purpose of computing the percentage
ownership of such individual or group, but are not deemed 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, Series D Preferred Stock, and/or
common stock underlying our convertible notes shown to be beneficially owned by them based on information provided to us by these
stockholders. Percentage of ownership is based on (i) 27,114,662 shares of common stock, (ii) 420,541 shares of Series D Preferred
Stock convertible into 3,364,328 shares of common stock, and (iii) 7,157,259 shares of common stock underlying our convertible
notes outstanding on July 10, 2018.
Name and Address of Beneficial
Owner
(1)
|
|
Number of
Shares of
Common Stock
Beneficially
Owned
|
|
|
Percent of
Shares of
Common
Stock
Beneficially
Owned
|
|
|
Number of
Shares of
Common Stock
Underlying Series D
Preferred
Beneficially Owned
|
|
|
Percent of Shares
of Common Stock
Underlying Series
D Preferred
Beneficially Owned
|
|
Five percent or more beneficial owners:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mistral Spa Holdings, LLC
(2)
650 Fifth Avenue, Floor 31
New York, NY 10019
|
|
|
3,926,806
|
|
|
|
13.7
|
%
|
|
|
2,414,992
|
|
|
|
8.2
|
%
|
Alpha Capital Anstalt
(3)
|
|
|
3,629,032
|
|
|
|
11.8
|
%
|
|
|
—
|
|
|
|
—
|
|
AWM Investment Company, Inc.
(4)
527 Madison Avenue, Suite 2600
New York, NY 10022
|
|
|
2,643,745
|
|
|
|
9.8
|
%
|
|
|
—
|
|
|
|
—
|
|
Directors and named executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Jankowski
(5)
|
|
|
283,962
|
|
|
|
1.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Andrew Perlman
(6)
|
|
|
1,426,912
|
|
|
|
5.1
|
%
|
|
|
—
|
|
|
|
—
|
|
Anastasia Nyrkovskaya
(7)
|
|
|
508,062
|
|
|
|
1.8
|
%
|
|
|
—
|
|
|
|
—
|
|
Janine Canale
(8)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Bruce T. Bernstein
(9)
|
|
|
834,058
|
|
|
|
3.0
|
%
|
|
|
393,416
|
|
|
|
1.4
|
%
|
John Engelman
(10)
|
|
|
189,908
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
Donald E. Stout
(11)
|
|
|
264,632
|
|
|
|
1.0
|
%
|
|
|
—
|
|
|
|
—
|
|
Salvatore Giardina
(12)
|
|
|
145,000
|
|
|
|
*
|
|
|
|
—
|
|
|
|
—
|
|
Richard K. Abbe
(13)
|
|
|
723,292
|
|
|
|
2.6
|
%
|
|
|
—
|
|
|
|
—
|
|
Andrew R. Heyer
(2)(14)
|
|
|
4,116,806
|
|
|
|
14.3
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%
|
|
|
2,414,992
|
|
|
|
8.2
|
%
|
All current directors and officers as a group (11 individuals)
(16)
:
|
|
|
8,492,632
|
|
|
|
26.9
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%
|
|
|
2,808,408
|
|
|
|
9.4
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%
|
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(1)
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Unless otherwise indicated, the business address of the individuals is c/o XpresSpa Group, Inc.,
780 Third Avenue, 12
th
Floor, New York, NY 10017.
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(2)
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The number of shares of common stock beneficially owned includes 2,338,690 shares of common stock
and warrants to purchase 1,588,116 shares of common stock at the exercise price of $3.00 per share.
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The number of shares of common stock
underlying Series D Preferred beneficially includes 301,874 shares of Series D Preferred stock convertible into 2,414,992 shares
of common stock.
Mistral Spa Holdings, LLC (“MSH”),
a Delaware limited liability company, is an investment entity indirectly controlled by Mr. Heyer through Mistral Equity Partners,
LP (“MEP”), Mistral Equity Partners QP, LP (“MEP QP”) and MEP Co-Invest, LLC (“MEP Co-Invest”).
Mistral Equity GP, LLC (“MEP GP” and, together with MEP, MEP QP, and MEP Co-Invest, the “Mistral Fund Entities”)
is the general partner of MEP and MEP QP. By reason of the provisions of Rule 16a-1 of the Exchange Act, the Mistral Fund Entities
may be deemed to be beneficial owners of certain of the securities that are deemed to be beneficially owned by MSH, and Mr. Heyer
may be deemed to be the beneficial owner of any securities that may be deemed to be beneficially owned by MSH and/or the Mistral
Fund Entities. Mr. Heyer may be deemed to have an indirect pecuniary interest (within the meaning of Rule 16a-1 of the Exchange
Act) in an indeterminate portion of the securities reported as beneficially owned by MSH, and MEP GP may be deemed to have an indirect
pecuniary interest in an indeterminate portion of the securities reported as beneficially owned by MEP and MEP QP. Mr. Heyer’s
business address is c/o Mistral Capital Management, LLC, 650 Fifth Avenue, 31st Floor, New York, NY 10019.
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(3)
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Based solely upon the securities purchase agreement we entered into on May 15, 2018, Alpha Capital
Anstalt has been deemed to have beneficial ownership of 3,629,032 shares of our common stock issuable upon conversion of our convertible
notes. Not included are warrants to purchase 5,443,548 shares of our common stock, as the warrants are not exercisable until November
17, 2018. The address of Alpha Capital Anstalt is Lettstrasse 32, P.O. Box 1212, 9490 Vaduz, Liechtenstein.
|
|
(4)
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AWM Investment Company, Inc., a Delaware corporation (“AWM”), is the investment adviser
to Special Situations Cayman Fund, L.P. (“CAYMAN”), Special Situations Fund III QP, L.P. (“SSFQP”) and
Special Situations Private Equity Fund, L.P. (“SSPE” and together with CAYMAN and SSFQP, the “Funds”).
As the investment adviser to the Funds, AWM holds sole voting and investment power over 462,561 shares of common stock held by
CAYMAN, 1,387,683 shares of common stock held by SSFQP and 793,501 shares of common stock held by SSPE.
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Austin W. Marxe, David M. Greenhouse
and Adam C. Stettner are the controlling principals of AWM. The reporting person disclaims beneficial ownership of the shares,
except to the extent of its pecuniary interest therein.
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(5)
|
The number of shares of common stock beneficially owned includes options to purchase 125,000 shares
of our common stock exercisable within 60 days of July 10, 2018. Not included are options to purchase 125,000 shares of our common
stock that are not exercisable within 60 days of July 10, 2018.
|
|
(6)
|
The number of shares of common stock beneficially owned includes options to purchase 848,333 shares
of our common stock exercisable within 60 days of July 10, 2018.
|
|
(7)
|
The number of shares of common stock beneficially owned includes options to purchase 447,500 shares
of our common stock exercisable within 60 days of July 10, 2018. Not included are options to purchase 212,500 shares of our common
stock that are not exercisable within 60 days of July 10, 2018.
|
|
(8)
|
Not included are 50,000 restricted stock units that vest on May 15, 2019.
|
|
(9)
|
The number of shares of common stock beneficially owned includes options to purchase 145,000 shares
of our common stock exercisable within 60 days of July 10, 2018 and warrants to purchase 258,712 shares of common stock at the
exercise price of $3.00 per share. Not included are warrants to purchase 250,000 shares of our common stock, as the warrants are
not exercisable until November 17, 2018.
|
The number of shares of common stock
underlying Series D Preferred beneficially includes 49,177 shares of Series D Preferred stock convertible into 393,416 shares of
common stock.
|
(10)
|
The number of shares of common stock beneficially owned includes options to purchase 167,500 shares
of our common stock exercisable within 60 days of July 10, 2018.
|
|
(11)
|
The number of shares of common stock beneficially owned includes options to purchase 172,500 shares
of our common stock exercisable within 60 days of July 10, 2018.
|
|
(12)
|
The number of shares of common stock beneficially owned includes options to purchase 145,000 shares
of our common stock exercisable within 60 days of July 10, 2018.
|
|
(13)
|
The number of shares of common stock beneficially owned includes options to purchase 125,000 shares
of our common stock exercisable within 60 days of July 10, 2018 and warrants to purchase 311,750 shares of common stock at the
exercise price of $3.00 per share.
|
Warrants to purchase 225,750 shares
of common stock are held by Iroquois Master Fund Ltd. (the "Fund") and warrants to purchase 86,000 shares are held by
Iroquois Capital Investment Group (“ICIG”). Mr. Abbe is president of Iroquois Capital Management L.L.C, and managing
member of ICIG, who has the authority and responsibility for the investments made on behalf of the Fund and ICIG, and, as such,
may be deemed to be the beneficial owner of all shares of common stock held by the Fund and ICIG. Mr. Abbe disclaims beneficial
ownership of these securities except to the extent of his pecuniary interest therein, and the inclusion of these shares in this
report shall not be deemed an admission of beneficial ownership of all of the reported shares for purposes of Section 16 or for
any other purpose.
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(14)
|
The number of shares of common stock beneficially owned includes options to purchase 75,000 shares
of our common stock exercisable within 60 days of July 10, 2018 and warrants to purchase 1,588,116 shares of common stock at the
exercise price of $3.00 per share.
|
The number of shares of common stock
underlying Series D Preferred beneficially includes 301,874 shares of Series D Preferred stock convertible into 2,414,992 shares
of common stock.
|
(15)
|
See footnotes (5) through (14).
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MANAGEMENT AND
CORPORATE GOVERNANCE
Our Board of Directors
currently consists of seven (7) 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 director nominees and executive
officers, their ages (as of the filing date of this proxy statement), their position(s) with us, 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
|
Edward Jankowski
|
|
64
|
|
Chief Executive Officer and Director
|
Janine Canale
|
|
33
|
|
Principal Financial and Accounting Officer
|
Bruce T. Bernstein*
(1)(2)(3)
|
|
54
|
|
Chairman of the Board of Directors
|
John Engelman*
(4)
|
|
62
|
|
Director
|
Donald E. Stout*
(1)(2)(3)
|
|
71
|
|
Director
|
Salvatore Giardina*
(2)
|
|
56
|
|
Director
|
Richard K. Abbe*
|
|
47
|
|
Director
|
Andrew R. Heyer*
|
|
60
|
|
Director
|
|
*
|
Independent director under the rules of The Nasdaq Stock
Market
|
|
(1)
|
Current member of Compensation Committee
|
|
(2)
|
Current member of Audit Committee
|
|
(3)
|
Current member of Nominating and Corporate Governance Committee
|
|
(4)
|
Current member of the Board of Directors who is not a candidate
for re-election at the 2018 annual meeting.
|
Our Board of Directors
has reviewed the materiality of any relationship that each of our directors has with the Company, 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, Salvatore Giardina, Richard
K. Abbe and Andrew R. Heyer.
Edward Jankowski
has served as our Chief Executive Officer and as a member of our Board of Directors since April 19, 2018. From December
2016 to April 2018, Mr. Jankowski served as our Senior Vice President and from June 2016 to April 2018, Mr. Jankowski served as
the Chief Executive Officer of our XpresSpa Holdings, LLC (“XpresSpa”) subsidiary. From 2012 to 2016, Mr. Jankowski
was the Vice President and General Manager of Luxury Retail at Luxottica, where he oversaw the Ilori and Optical Shop of Aspen
and Persol retail stores. From 2007 to 2012, Mr. Jankowski was Senior Vice President and General Manager for Godiva Chocolatier,
responsible for the $400 million North America multi-channel business, consisting of 240 retail stores, plus wholesale, direct,
and interactive business. From 2001 to 2007, Mr. Jankowski was the Chief Operating Officer of Safilo Group’s Solstice sunglasses
stores, where he opened 120 stores, oversaw store operations, merchandising, finance, planning/distribution, marketing and communications,
loss prevention, real estate, visual and store design/development/construction. From 1999 to 2001, Mr. Jankowski was the President
of Airport Shops Division of World Duty Free Americas, a division of B.A.A., where he was a member of the Senior Executive Committee,
with responsibility for the $120 million Airport Division. From 1993 to 1999, Mr. Jankowski served as the Vice President/Director
of Stores for Liz Claiborne, where he was a member of the Retail Executive Committee and led execution of business strategies,
sales results and store profit. Prior to his position at Liz Claiborne, Mr. Jankowski held leadership positions at Casual Corner,
Atherton Industries, Woman’s World, and Ganto’s. Mr. Jankowski began his career in 1975 as an Executive Trainee for
R.H. Macy’s. Mr. Jankowski currently serves on the Board of Directors of the Accessories Council, FIT Accessories Advisory
and the Elizabeth Carter Beach Association. Mr. Jankowski received his B.Sc. in management and commerce marketing from Rider University.
We believe Mr. Jankowski’s
prior experience in the retail industry and with the XpresSpa business qualifies him to serve on our Board of Directors.
Janine Canale
joined us in March 2017 as the Controller of XpresSpa and has served as our Principal Accounting Officer since June 19, 2018 and
our Principal Financial Officer since July10, 2018. Prior to joining the Company, Ms. Canale most recently was an auditor at BDO
USA, LLP from 2011 to 2017 and began her career at CohnReznick LLP from 2006 to 2011. Ms. Canale holds a B.B.A. in Accounting
from Adelphi University and an M.B.A. with a concentration in Finance from Hofstra University. Ms. Canale is a Certified Public
Accountant and is a member of the American Institute of Certified Public Accountants.
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 has served as President of Rockmore Capital,
LLC since 2006, 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 Neurotrope, 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.
John Engelman
has been our director since December 2010. Mr. Engelman also serves as an independent director of Hemisphere Media Group, Inc.,
a publicly traded Hispanic media company that owns and operates television stations and cable networks in the United States, Puerto
Rico and Latin America. Mr. Engelman is a co-founder of Classic Media, Inc. (“Classic Media”), a global family and
children’s entertainment company where he served as co-president from 2001 to 2006 and 2008 to present. Classic Media
currently is a wholly owned subsidiary of NBCUniversal, a Comcast Company. From 1997 to 2001, Mr. Engelman was an operating
partner with Pegasus Capital Advisors and a managing director of Brener International Group, LLC. From 1991 to 1996, Mr. Engelman
was President of Broadway Video, Inc., a producer of live television and motion pictures. He began his career as a partner at the
Los Angeles law firm of Irell & Manella. Mr. Engelman has a J.D. from Harvard Law School and a B.A. from Harvard College.
Mr. Engelman will not be
a candidate for reelection at the 2018 annual meeting.
Donald E. Stout
has been our director since July 2012, and was a director of Innovate/Protect 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 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
experience in intellectual property law qualifies him to serve on our Board of Directors.
Salvatore Giardina
joined our Board of Directors in May 2016. Mr. Giardina has served as Chief Financial Officer of Pragma Securities LLC and its
holding company, Pragma Weeden Holdings LLC, since 2009. From 2006 through 2008, Mr. Giardina served as S.V.P. and Chief Financial
Officer of G-Trade Services LLC and ConvergEx Global Markets LLC. From 2002 through 2006, Mr. Giardina served as Vice President
and Chief Financial Officer of Ladenburg Thalmann Financial Services Inc., the publicly-traded holding company of Ladenburg Thalmann
& Co., Inc., where Mr. Giardina served as its Executive Vice President and Chief Financial Officer from 1998 through 2006 and
as its Controller from 1990 through 1998. From 1983 through 1990, Mr. Giardina was an auditor with the national public accounting
firm of Laventhol & Horwath. Mr. Giardina served as a director of National Holdings Corporation from 2012 through 2016 and
as Chairman of its Audit Committee from 2013 through 2016. Mr. Giardina is a certified public accountant and is Series 24 and Series
27 registered.
We believe Mr. Giardina’s
extensive financial expertise and his practical and management experience qualifies him to serve on our Board of Directors and
as a member and the chairperson of the audit committee of our Board of Directors.
Richard K. Abbe
joined our Board of Directors in March 2016. Mr. Abbe is the Co-founder and is a Principal and Managing Partner of Iroquois Capital
Management, LLC, the Investment Advisor to Iroquois Capital LP and Iroquois Capital (offshore) Ltd. Mr. Abbe has served as Co-Chief
Investment Officer of Iroquois Capital since its inception in 2003. Previously, Mr. Abbe co-founded and served as Co-Chief Investment
Officer of Vertical Ventures, LLC, a merchant bank. Prior to that, he was employed by Lehman Brothers and served as Senior Managing
Director at Gruntal & Company, LLC, where he also served on the firm’s Board of Directors. Mr. Abbe also previously served
as Founding Partner at Hampshire Securities. He currently serves on the investment committee of Hobart and William Smith Colleges
Endowment Fund.
We believe Mr. Abbe’s
extensive experience in the securities industry qualifies him to serve on our Board of Directors.
Andrew R. Heyer
joined our Board of Directors in December 2016. Mr. Heyer is the Chief Executive Officer and founder of Mistral Capital Management,
LLC, a private equity fund manager. Prior to founding Mistral, he served as a Founding Managing Partner of Trimaran Capital Partners,
L.L.C. Mr. Heyer was formerly a Vice Chairman of CIBC World Markets Corp. and co-head of CIBC Argosy Merchant Banking Funds. Prior
to joining CIBC World Markets Corp. in 1995, Mr. Heyer was a founder and Managing Director of The Argosy Group L.P. Before Argosy,
Mr. Heyer was a Managing Director at Drexel Burnham Lambert Incorporated and previous to that, he worked at Shearman/American Express.
Mr. Heyer serves as a director of Jamba, Inc. and The Hain Celestial Group, both of which are publicly traded companies. He also
serves on the boards of Mistral’s portfolio companies. Mr. Heyer also serves as a member of the Executive Committee and Board
of Trustees of the University of Pennsylvania and the University of Pennsylvania Health System.
We believe Mr. Heyer’s
extensive experience in the securities industry qualifies him to serve on our Board of Directors.
Committees of the Board of Directors and Meetings
Meeting Attendance
. During
the fiscal year ended December 31, 2017 there were 13 meetings of our Board of Directors. The various committees of the Board of
Directors met a total of 8 times. No director attended fewer than 75% of the total number of meetings of the Board of Directors
and of committees of the Board of Directors on which he served during fiscal 2017. 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.
Audit Committee
. Our
Audit Committee met 5 times during fiscal 2017. This committee currently has three (3) members, Salvatore Giardina (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. All members of the Audit Committee satisfy the current independence
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. Giardina 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 met 2 times during fiscal 2017. This committee currently has two (2) members, Bruce T. Bernstein (Chairman)
and Donald E. Stout.
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 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 2006 Stock Option Plan (the “2006 Plan”). The Compensation Committee is responsible for the determination of the
compensation of our Chief Executive Officer, and conducts its decision-making process with respect to that action without the
Chief Executive Officer present, and establishment and reviewing 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 2017, based on the recommendation of management, the Compensation Committee did not engage third party compensation
consultants.
Both members of the Compensation Committee
qualify as independent under the definition promulgated by Nasdaq. 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 met 1 time during fiscal year 2017 and currently has two (2) members, Bruce T. Bernstein
and Donald E. Stout. The Nominating and Corporate Governance Committee’s role and responsibilities are set forth in the
Nominating and Corporate Governance Committee’s written charter and include 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.
|
We have no formal policy
regarding board diversity. 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.
Both members of the Nominating
and Corporate Governance Committee qualify as independent under the definition promulgated by Nasdaq. 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.
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
.
Board Leadership Structure and Role in Risk Oversight
Through all of 2017, Andrew
Perlman served as our Chief Executive Officer and led all meetings of the Board of Directors. On February 5, 2018, the Board of
Directors appointed Bruce T. Bernstein as the non-executive Chairman of the Board of Directors. On April 19, 2018, Mr. Perlman
resigned as Chief Executive Officer and as a Director of the Company.
The leadership structure
of the Board of Directors 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 of Directors
believes this division of responsibility is an effective approach for addressing the risks we face. All of our committees of the
Board of Directors are comprised of only independent directors. All Board committees are chaired by independent directors who report
to the full Board of Directors 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 of Directors 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 of Directors 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 of Directors 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 of Directors in its risk oversight function by overseeing strategies
with respect to our incentive compensation programs and key employee retention issues. We believe our Board of Directors leadership
structure facilitates the division of risk management oversight responsibilities among the Board of Directors committees and enhances
the Board of Directors’ efficiency in fulfilling its oversight function with respect to difference areas of our business
risks and our risk mitigation practices.
Summary Compensation
Table
The following table summarizes the total compensation
awarded to, earned or paid by the Company during the fiscal years ended December 31, 2017 and 2016 to (1) Andrew Perlman, our former
Chief Executive Officer, (2) Edward Jankowski, who has served as our Chief Executive Officer since April 19, 2018 and previously
served as our Senior Vice President and Chief Executive Officer of XpresSpa, and (3) Anastasia Nyrkovskaya, our Chief Financial
Officer and Treasurer, who are all of our named executive officers as of December 31, 2017.
Name and principal position
|
|
Year
|
|
|
Salary
($)
|
|
|
Incentive Pay
($)
(1)
|
|
|
Equity Awards
($)
(2)
|
|
|
Total
($)
|
|
Edward Jankowski
(3)
|
|
|
2017
|
|
|
|
375,000
|
|
|
|
125,000
|
|
|
|
361,301
|
|
|
|
861,301
|
|
|
|
|
2016
|
|
|
|
8,219
|
|
|
|
8,219
|
|
|
|
—
|
|
|
|
16,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew D. Perlman
(4)
|
|
|
2017
|
|
|
|
450,000
|
|
|
|
125,000
|
|
|
|
608,562
|
|
|
|
1,183,562
|
|
|
|
|
2016
|
|
|
|
431,667
|
|
|
|
431,667
|
|
|
|
1,235,440
|
|
|
|
2,098,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anastasia Nyrkovskaya
(5)
|
|
|
2017
|
|
|
|
375,000
|
|
|
|
225,000
|
|
|
|
361,301
|
|
|
|
961,301
|
|
|
|
|
2016
|
|
|
|
333,333
|
|
|
|
333,333
|
|
|
|
540,505
|
|
|
|
1,207,171
|
|
|
(1)
|
Amounts represent a one-time discretionary cash bonus.
|
|
(2)
|
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 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017
|
|
(3)
|
Mr. Jankowski became the Chief Executive Officer of
XpresSpa in June 2016 and our Senior Vice President in December 2016. He currently serves as our Chief Executive Officer.
|
|
(4)
|
On April 19, 2018, Mr. Perlman resigned from his position
as Chief Executive Officer and as a Director of the Company.
|
|
(5)
|
On June 19, 2018, Ms. Nyrkovskaya resigned from her position as Chief Financial Officer and agreed to remain with the Company in a reduced capacity through October 15, 2018, during which time she is expected to transition certain projects while the Company completes an ongoing search for a new Chief Financial Officer.
|
Narrative Disclosure to Summary Compensation
Table
Edward Jankowski
On January 20, 2017, we
entered into an employment agreement with Mr. Jankowski, which has a term of three years. Under the terms of the employment agreement,
Mr. Jankowski receives an annual base salary of $375,000 and is eligible to participate in any annual bonus or other incentive
compensation program that we may have adopted from time to time for our executive officers. If Mr. Jankowski has earned any bonus
or non-equity based incentive compensation which remains unpaid upon termination of employment for any reason, whether by Mr. Jankowski
or us other than for cause, then Mr. Jankowski shall be entitled to receive a pro- rata portion of such incentive compensation
at the time it is paid.
In the event the employment
agreement is terminated for (i) Good Reason by Mr. Jankowski, or (ii) by us without Cause, Mr. Jankowski shall be entitled to receive
an amount of base salary (at the rate of base salary in effect immediately prior to such termination) equal to one times the base
salary, and COBRA continuation coverage paid in full by us for up to a maximum of twelve months following the date of termination.
“Cause” as used in Mr. Jankowski’s employment agreement means: (a) the willful and continued failure of Mr. Jankowski
to perform substantially his duties and responsibilities for us (other than any such failure resulting from his death or disability)
after a written demand by the Board of Directors for substantial performance is delivered to Mr. Jankowski by us, which specifically
identifies the manner in which the Board of Directors believes that Mr. Jankowski has not substantially performed his duties and
responsibilities, which willful and continued failure is not cured by Mr. Jankowski within thirty days of his receipt of such written
demand; (b) the conviction of, or plea of guilty or nolo contendere to a felony, (c) an intentional breach of his non-compete obligations,
(d) an intentional breach of the non-disclosure and non-solicitation agreement; or (e) a unanimous good faith finding by the Board
of Directors that Mr. Jankowski has engaged in fraud, dishonesty, gross negligence or misconduct which, if curable, has not been
cured within thirty days after his receipt of a written notice from the Board of Directors stating with reasonable specificity
the basis of such finding. “Good Reason” as used Mr. Jankowski’s employment agreement means (a) the assignment,
without Mr. Jankowski’s consent, to Mr. Jankowski of duties that result in a substantial diminution of the duties that he
assumed; (b) the assignment, without Mr. Jankowski’s consent, of a title that is subordinate to the title Senior Vice President;
(c) a reduction in Mr. Jankowski’s base salary; (d) our requirement that Mr. Jankowski regularly report to work in a location
that is more than fifty miles from our current New York office, without Mr. Jankowski’s consent; (e) a change in Mr. Jankowski’s
reporting relationship other than to our Chief Executive Officer; or (f) a material breach by us of Mr. Perlman’s employment
agreement, or (g) our failure to provide compensation and benefits to Mr. Jankowski as required by the employment agreement when
due.
In addition, unless Mr.
Jankowski is terminated for cause, all applicable equity awards held by him as of the date of termination of employment that would
have vested in the one-year period immediately following such termination will vest during the following year, provided that Mr.
Jankowski makes himself reasonably available and cooperates with reasonable requests from us involving facts or events relating
to us that Mr. Jankowski may have knowledge of.
Andrew D. Perlman
On February 13, 2013, we
entered into an employment agreement with Mr. Perlman, which had a term of three (3) years. Under the terms of that employment
agreement, from January 1, 2015, Mr. Perlman received a base salary of $415,000 and was eligible to participate in any annual bonus
or other incentive compensation program that we may have adopted from time to time for our executive officers.
On October 13, 2015, we
entered into an amendment to the existing employment agreement with Mr. Perlman, pursuant to which the employment period under
the employment agreement was extended to December 31, 2017, and Mr. Perlman remained eligible to receive an annual performance
bonus according to corporate and personal goals as established by the Compensation Committee in its sole discretion.
On January 20, 2017, we
entered into a new employment agreement with Mr. Perlman that superseded his prior employment agreement. Under the terms of this
new employment agreement, Mr. Perlman’s annual base salary was increased to $450,000, retroactive to January 1, 2017. The
employment agreement was for a term of three (3) years, provided that the employment agreement would extend in two (2) month increments
for up to one (1) year thereafter for each month that the negotiations were not concluded prior to sixth months before the end
of the term. The employment agreement provided that Mr. Perlman would be eligible to participate in any annual bonus and other
incentive compensation program that we may adopt from time to time for our executive officers and if Mr. Perlman had earned any
bonus or non-equity based incentive compensation which remained unpaid upon termination of employment for any reason, whether by
Mr. Perlman or us other than for cause, then Mr. Perlman would be entitled to receive a pro- rata portion of such incentive compensation
at the time it is paid.
In the event the employment
agreement was terminated for (i) Good Reason by Mr. Perlman, or (ii) by us without Cause, Mr. Perlman was entitled to receive an
amount of base salary (at the rate of base salary in effect immediately prior to such termination) equal to the lesser of (x) one
times the base salary and (y) two times the base salary payable for the number of full months remaining in the employment period,
and COBRA continuation coverage paid in full by us for up to a maximum of twelve months following the date of termination. “Cause”
as used in Mr. Perlman’s employment agreement means: (a) the willful and continued failure of Mr. Perlman to perform substantially
his duties and responsibilities for us (other than any such failure resulting from his death or disability) after a written demand
by the Board of Directors for substantial performance is delivered to Mr. Perlman by us, which specifically identifies the manner
in which the Board of Directors believes that Mr. Perlman has not substantially performed his duties and responsibilities, which
willful and continued failure is not cured by Mr. Perlman within thirty days of his receipt of such written demand; (b) the conviction
of, or plea of guilty or nolo contendere to a felony, (c) an intentional breach of his non-compete obligations, (d) an intentional
breach of the non-disclosure and non-solicitation agreement; or (e) a unanimous good faith finding by the Board of Directors that
Mr. Perlman has engaged in fraud, dishonesty, gross negligence or misconduct which, if curable, has not been cured within thirty
days after his receipt of a written notice from the Board of Directors stating with reasonable specificity the basis of such finding.
“Good Reason” as used in Mr. Perlman’s employment agreement means (a) the assignment, without Mr. Perlman’s
consent, to Mr. Perlman of duties that result in a substantial diminution of the duties that he assumed; provided, however, the
failure of Mr. Perlman to be reelected to the Board of Directors shall not be deemed to be a diminution of duties; (b) the assignment,
without Mr. Perlman’s consent, of a title that is subordinate to the title Chief Executive Officer; (c) a reduction in Mr.
Perlman’s base salary; (d) our requirement that Mr. Perlman regularly report to work in a location that is more than fifty
miles from our current New York office, without Mr. Perlman’s consent; (e) a change in reporting relationship, provided however,
that Good Reason does not include a change in the reporting relationship whereby Mr. Perlman will report to the Board of Directors
of an acquiring company after a change of control (as that term is defined in our 2012 Employee, Director and Consultant Equity
Incentive Plan); or (f) a material breach by us of Mr. Perlman’s employment agreement.
In addition, unless Mr.
Perlman were terminated for cause, all applicable equity awards held by him as of the date of termination of employment that would
have vested in the one-year period immediately following such termination will vest during the following year, provided that Mr.
Perlman made himself reasonably available and cooperated with reasonable requests from us involving facts or events relating to
us that Mr. Perlman may have knowledge of. In the event the employment agreement was terminated for good reason by Mr. Perlman,
or by us without cause, and Mr. Perlman provided us with a release of claims, he would have been entitled to receive a cash severance
payment in the amount of one times his then current base salary and one year of COBRA continuation coverage.
On April 19, 2018, Andrew resigned from his
position as Chief Executive Officer and as a Director of the Company.
Anastasia Nyrkovskaya
On December 19, 2014, we
entered into an employment agreement with Ms. Nyrkovskaya. Under the terms of her employment agreement, Ms. Nyrkovskaya’s
annual base salary was $315,000.
On October 13, 2015, we
entered into an amendment to the existing employment agreement with Ms. Nyrkovskaya, pursuant to which, the employment period under
the employment agreement was extended to December 31, 2017. In addition, the annual base salary of Ms. Nyrkovskaya was increased
from $315,000 to $325,000 and Ms. Nyrkovskaya remained eligible to receive an annual performance bonus according to corporate and
personal goals, as established by the Compensation Committee in its sole discretion.
On January 20, 2017, we
entered into an employment agreement with Ms. Nyrkovskaya that superseded her prior employment agreement. Under the terms
of this new employment agreement, Ms. Nyrkovskaya was entitled to receive a base salary of $375,000 from January 1, 2017. The employment
agreement was for a term of three (3) years, provided that the employment agreement would extend in two (2) month increments for
up to one (1) year thereafter for each month that the negotiations were not concluded prior to sixth months before the end of the
term. The employment agreement provided that Ms. Nyrkovskaya would be eligible to participate in any annual bonus and other incentive
compensation program that we may adopt from time to time for our executive officers and if Ms. Nyrkovskaya had earned any bonus
or non-equity based incentive compensation which remained unpaid upon termination of employment for any reason, whether by Ms.
Nyrkovskaya or us other than for cause, then Ms. Nyrkovskaya would be entitled to receive a pro- rata portion of such incentive
compensation at the time it is paid.
In the event the employment
agreement was terminated for (i) Good Reason by Ms. Nyrkovskaya, or (ii) by us without Cause, Ms. Nyrkovskaya was entitled to receive
an amount of base salary at the rate of base salary in effect immediately prior to such termination equal to twelve months of base
salary, and COBRA continuation coverage paid in full by us for up to a maximum of twelve months following the date of termination.
In case the agreement was terminated by Ms. Nyrkovskaya without Good Reason, she would provide us with a written notice, at least
ninety calendar days prior to such termination. "Cause" as used in Ms. Nyrkovskaya’s employment agreement means:
(a) the willful and continued failure of Ms. Nyrkovskaya to perform substantially her duties and responsibilities for us (other
than any such failure resulting from her death or disability) after a written demand by the chief executive officer for substantial
performance is delivered to Ms. Nyrkovskaya by us, which specifically identifies the manner in which the chief executive officer
believes that Ms. Nyrkovskaya has not substantially performed her duties and responsibilities, which willful and continued failure
is not cured by Ms. Nyrkovskaya within thirty days of her receipt of such written demand; (b) the conviction of, or plea of guilty
or nolo contendere to a felony, (c) breach of her non-compete obligations, (d) breach of the non-disclosure and non-solicitation
agreement; or (e) a good faith finding by the chief executive officer that Ms. Nyrkovskaya has engaged in fraud, intentional dishonesty,
or gross negligence. "Good Reason" as used in Ms. Nyrkovskaya’s employment agreement means (a) the assignment,
without Ms. Nyrkovskaya’s consent, to Ms. Nyrkovskaya of duties that result in a substantial diminution of the duties that
she assumed; (b) the assignment, without Ms. Nyrkovskaya’s consent, of a title that is subordinate to the title Chief Financial
Officer; (c) a reduction in Ms. Nyrkovskaya’s base salary; (d) our requirement that Ms. Nyrkovskaya regularly report to work
in a location that is more than fifty miles from our current New York office, without Ms. Nyrkovskaya’s consent; (e) a material
breach by us of the agreement during its term. Ms. Nyrkovskaya’s employment agreement also includes a covenant not to compete
with us or solicit any material commercial relationships of ours for a period of one year after Ms. Nyrkovskaya is actually no
longer employed by us
.
In addition, unless Ms.
Nyrkovskaya were terminated for cause, all applicable equity awards held by her as of the date of termination of employment that
would have vested in the one-year period immediately following such termination will vest during the following year, provided that
Ms. Nyrkovskaya made herself reasonably available and cooperated with reasonable requests from us involving facts or events relating
to us that Ms. Nyrkovskaya may have knowledge of. In the event the employment agreement was terminated for good reason by Ms. Nyrkovskaya,
or by us without cause, and Ms. Nyrkovskaya provided us with a release of claims, she would have been entitled to receive a cash
severance payment in the amount of one times her then current base salary and one year of COBRA continuation coverage.
On June 19, 2018,
Ms. Nyrkovskaya resigned from her position as Chief Financial Officer and agreed to remain with the Company in a reduced capacity
through October 15, 2018, during which time she is expected to transition certain projects while the Company completes an ongoing
search for a new Chief Financial Officer.
Outstanding Equity Awards at 2017 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, 2017, to each of our named executive officers.
|
|
Options Awards
|
Name
|
|
Number of securities
underlying
unexercised options
(#) exercisable
|
|
|
Number of securities
underlying
unexercised options
(#) un-exercisable
|
|
|
Option
exercise
price ($)
|
|
|
Option expiration date
|
Edward Jankowski
|
|
|
83,333
|
|
|
|
166,667
|
|
|
|
2.12
|
|
|
January 17, 2027
|
Andrew D. Perlman
|
|
|
32,816
|
|
|
|
—
|
|
|
|
16.50
|
|
|
March 13, 2018
|
Andrew D. Perlman
|
|
|
127,500
|
|
|
|
—
|
|
|
|
37.20
|
|
|
July 26, 2022
|
Andrew D. Perlman
|
|
|
62,500
|
|
|
|
—
|
|
|
|
31.80
|
|
|
February 11, 2023
|
Andrew D. Perlman
|
|
|
466,667
|
|
|
|
333,333
|
|
|
|
1.55
|
|
|
April 4, 2026
|
Andrew D. Perlman
|
|
|
100,000
|
|
|
|
200,000
|
|
|
|
2.12
|
|
|
January 17, 2027
|
Anastasia Nyrkovskaya
|
|
|
30,000
|
|
|
|
—
|
|
|
|
28.50
|
|
|
May 6, 2023
|
Anastasia Nyrkovskaya
|
|
|
30,000
|
|
|
|
—
|
|
|
|
41.00
|
|
|
February 20, 2024
|
Anastasia Nyrkovskaya
|
|
|
204,167
|
|
|
|
145,833
|
|
|
|
1.55
|
|
|
April 4, 2026
|
Anastasia Nyrkovskaya
|
|
|
83,333
|
|
|
|
166,667
|
|
|
|
2.12
|
|
|
January 17, 2027
|
|
*
|
The market value is determined by multiplying the number of shares by $1.37, the closing price of our common stock on Nasdaq on December 29, 2017, the last day of our fiscal year.
|
|
**
|
Options vest in twelve equal quarterly increments (8.33% per quarter) over three years, subject to the participant's continuous service on the relevant vesting date.
|
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 potential payments to each of our named executive officers as of December 31, 2017 upon termination or change-in-control. The
discussion assumes that such event occurred on December 29, 2017, the last business day of our fiscal year, at which time the closing
price of our common stock as listed on Nasdaq was $1.37 per share. For a further discussion of these provisions see the “Narrative
Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” above.
Edward Jankowski
In the event Mr. Jankowski’s
employment was terminated for (i) Good Reason by Mr. Jankowski, or (ii) by us without Cause on December 29, 2017, Mr. Jankowski
would have received severance in the amount of one year of base salary, and COBRA payments totaling approximately $39,600.
In addition, in the event
a change-in-control of our wholly-owned subsidiary XpresSpa had occurred on December 29, 2017, Mr. Jankowski would have been entitled
to receive 2% of the amount equal to the total amount of cash and the fair market value of all non-cash consideration paid or payable
to us or our stockholders in connection with the change of control, net of transaction expenses payable to third parties and less
the original acquisition price of wholly-owned subsidiary XpresSpa of $45,000,000 and less any past or future capital contributions
made or to be made by us or our stockholders. A change of control of our wholly-owned subsidiary XpresSpa means (A) an acquisition
or series of acquisitions by a person or entity unrelated to the Company of more than fifty percent (50%) of the outstanding shares
or securities entitled to vote for the election of directors or similar managing authority of wholly-owned subsidiary XpresSpa
or (B) a sale or disposition of all or substantially all of wholly-owned subsidiary XpresSpa’s assets to an unrelated third
party. In the event that a closing of a public spin-off or initial public offering of our wholly-owned subsidiary XpresSpa had
occurred on December 29, 2017, Mr. Jankowski would have been entitled to receive deferred stock units ("DSUs"), pursuant
to wholly-owned subsidiary XpresSpa’s equity incentive plan then in effect, equal to 2% of wholly-owned subsidiary XpresSpa’s
outstanding shares of common stock immediately after the such public offering; which DSUs would have been settled in common stock
of XpresSpa twelve (12) months after the date of such public offering, which had no intrinsic value as of December 29, 2017.
Andrew D. Perlman
In the event Mr. Perlman’s
employment was terminated for (i) Good Reason by Mr. Perlman, or (ii) by us without Cause on December 29, 2017, Mr. Perlman would
have received severance in the amount of one year of base salary, and COBRA payments totaling approximately $57,000. In addition,
in the event a change-in-control had occurred on December 29, 2017, Mr. Perlman would have received severance in the amount of
one year of base salary, or $450,000, and Mr. Perlman would have been entitled to receive 75% acceleration of certain unvested
options, which had no intrinsic value as of December 29, 2017.
On April 19, 2018 (the
“Separation Date”), we entered into a separation agreement (the “Separation Agreement”) with Mr. Perlman
related to his resignation as Chief Executive Officer and as our Director. The Separation Agreement includes a release by Mr. Perlman
of claims against us and certain related parties. In connection with the entry into the Settlement Agreement, Mr. Perlman agreed
that he would continue to be subject to the Non-Disclosure Agreement between Mr. Perlman and us that contains a covenant protecting
our confidential information. In addition, Mr. Perlman agreed to be subject to a covenant not to compete with us for a two-year
period following the Separation Date, a covenant prohibiting Mr. Perlman from soliciting or hiring our employees for a two-year
period following the Separation Date, and a covenant not to disparage us or any of our businesses, services, products, affiliates
or current, former or future directors and named executive officers (in their capacity as such). The Separation Agreement also
includes certain affirmative covenants binding on Mr. Perlman, including, without limitation, a covenant to reasonably cooperate
with us in connection with any action, suit, or proceeding, whether or not by or in the right of us and whether civil, criminal,
administrative, investigative or otherwise.
In consideration of the
foregoing release and covenants, we will pay Mr. Perlman, severance in an amount equal to $125,000 (the “Deferred Cash”),
payable in monthly installments of $20,833.34 over the six (6) month period following the date that we achieve both of the following
objectives at the end of an applicable calendar quarter as shown in the Form 10-Q or Form 10-K reporting such quarter (the “Cash
Objectives”): (i) our Working Capital exceeds $6,368,000, and (ii) Free Cash exceeds $6,368,000; provided that if we do
not achieve the Cash Objectives prior to the second (2
nd
) anniversary of the Separation Date, the Deferred Cash shall
be forfeited and no amounts shall be payable under the Separation Agreement. For purposes of the Separation Agreement, “Free
Cash” means cash and cash equivalents as defined in our Form 10-K and calculated consistently, less (i) any cash or cash
equivalents that are restricted in any way, and (ii) any cash received by us from a debt, equity or other capital raise subsequent
to the Separation Date. For purposes of the Separation Agreement, “Working Capital” shall mean (i) current assets
less current liabilities, prepared in accordance with GAAP and consistent with our prior filings of Form 10-K, less (ii) any cash
received by us from a debt, equity or other capital raise subsequent to the Separation Date.
Further, in consideration of the foregoing
release and covenants, an aggregate of 153,302 of Mr. Perlman’s restricted stock units that vested on May 17, 2018 (the
“Current RSUs”) will be subject to a restriction on sale until the earlier of: (i) the one (1) year anniversary of
the Separation Date; and (ii) the date upon which the volume weighted average price (“VWAP”) for our common stock
for thirty (30) consecutive trading days exceeds $1.50 (as adjusted by us in our discretion for any stock split, subdivision,
dividend or distribution).
In addition, we have granted to Mr. Perlman an additional 150,000 restricted stock units,
which shall be fully vested as of the date of grant (the “Granted RSUs”); provided, however, that such Granted RSUs
will be subject to a restriction on sale until the earlier of: (i) the one (1) year anniversary of the Separation Date; and (ii)
the date upon which the VWAP for our common stock for thirty (30) consecutive trading days exceeds $1.50 (as adjusted by us in
our discretion for any stock split, subdivision, dividend or distribution).
Anastasia Nyrkovskaya
In the event Ms. Nyrkovskaya’s
employment was terminated for (i) Good Reason by Ms. Nyrkovskaya, or (ii) by us without Cause on December 29, 2017, Ms. Nyrkovskaya
would have received severance in the amount of one year of base salary, or $375,000, and COBRA payments totaling approximately
$57,000. In addition, upon a change-in-control, Ms. Nyrkovskaya would have been entitled to receive 75% acceleration of certain
unvested options, which had no intrinsic value as of December 29, 2017.
On June 19, 2018,
Ms. Nyrkovskaya resigned from her position as Chief Financial Officer and agreed to remain with the Company in a reduced capacity
through October 15, 2018, during which time she is expected to transition certain projects while the Company completes an ongoing
search for a new Chief Financial Officer.
Director Compensation
The following table sets
forth the compensation of persons who served as non-employee members of our Board of Directors during the fiscal year ended December
31, 2017. Directors who are employed by us are not compensated for their service on our Board of Directors.
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Option Awards
($)
(1)
|
|
|
Total
($)
|
|
Bruce T. Bernstein
(2)
|
|
|
50,000
|
|
|
|
75,862
|
|
|
|
125,862
|
|
John Engelman
(3)
|
|
|
50,000
|
|
|
|
66,937
|
|
|
|
116,937
|
|
Donald E. Stout
(4)
|
|
|
50,000
|
|
|
|
71,399
|
|
|
|
121,399
|
|
Salvatore Giardina
(5)
|
|
|
50,000
|
|
|
|
75,862
|
|
|
|
125,862
|
|
Richard K. Abbe
(6)
|
|
|
50,000
|
|
|
|
66,937
|
|
|
|
116,937
|
|
Andrew R. Heyer
(7)
|
|
|
50,000
|
|
|
|
66,937
|
|
|
|
116,937
|
|
|
(1)
|
Amounts represent the aggregate
grant date fair value in accordance with FASB ASC
Topic 718
. See Notes 2 and 12 of the consolidated financial statements
disclosed in the Form 10-K for the year ended December 31, 2017, for the assumptions made in the valuation of the equity awards.
|
|
(2)
|
As of December 31, 2017,
Mr. Bernstein held 145,000 fully vested options.
|
|
(3)
|
As of December 31, 2017,
Mr. Engelman held 187,000 fully vested options.
|
|
(4)
|
As of December 31, 2017,
Mr. Stout held 172,500 fully vested options.
|
|
(5)
|
As of December 31, 2016,
Mr. Giardina held 145,000 fully vested options.
|
|
(6)
|
As of December 31, 2017,
Mr. Abbe held 125,000 fully vested options.
|
|
(7)
|
As of December 31, 2017,
Mr. Heyer held 75,000 fully vested options.
|
We reimburse each member
of our Board of Directors for reasonable travel and other out-of-pocket expenses in connection with attending meetings of the Board
of Directors.
We compensate each of our
non-employee directors an annual cash retainer of $50,000. On January 17, 2017, we granted options to purchase shares of our common
stock to each of our non-employee directors. Mr. Bernstein and Mr. Giardina each received options to purchase 85,000 shares of
our common stock, Mr. Stout received options to purchase 80,000 shares of our common stock, and Mr. Engelman, Mr. Abbe and Mr.
Heyer each received options to purchase 75,000 shares of our common stock. The options feature an exercise price of $2.12 per share
and vest in equal quarterly installments over a one-year period, with one-fourth vesting on the date of grant and one-fourth vesting
at the end of each fiscal quarter thereafter.
Equity Compensation Plan Information
The following table provides
certain aggregate information, as of December 31, 2017, with respect to all of our equity compensation plans then in effect:
Plan Category
|
|
No. of securities to be
issued upon exercise of
outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights ($)
|
|
|
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)(2)
|
|
|
4,683,508
|
|
|
$
|
5.39
|
|
|
|
2,111,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These plans consist of the 2012 Plan, as amended on November 23, 2016, and the 2006 Plan. Under the amended 2012 Plan, a maximum of 7,100,000 shares of common stock may be awarded. The 2012 Plan was originally approved by our stockholders on July 19, 2012, following the merger with Innovate/Protect, replacing our then existing 2006 Plan.
|
|
(2)
|
The numbers of securities
to be issued upon exercise of outstanding equity awards are 4,615,942 and 67,566 for the 2012 Plan and the 2006 Plan, respectively.
The weighted-average exercise prices of outstanding options are $5.23 and $16.30 for the 2012 Plan and the 2006 Plan, respectively.
|
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 CohnReznick LLP. In fulfilling its responsibilities for the financial statements for fiscal
year ended December 31, 2017, the Audit Committee took the following actions:
|
•
|
Reviewed and discussed the audited financial statements
for the fiscal year ended December 31, 2017 with management and CohnReznick LLP, our independent registered public accounting
firm;
|
|
•
|
Discussed with CohnReznick LLP the matters required to
be discussed in accordance with Auditing Standard No. 16 —
Communications with Audit Committees
; and
|
|
•
|
Received written disclosures and the letter from CohnReznick
LLP regarding its independence as required by applicable requirements of the Public Company Accounting Oversight Board regarding
CohnReznick LLP communications with the Audit Committee and the Audit Committee further discussed with CohnReznick 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 CohnReznick 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, 2017 for filing with the SEC.
Members of the XpresSpa Group, Inc. Audit Committee
Bruce T. Bernstein
Salvatore Giardina
Donald E. Stout
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers and beneficial owners
of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in the ownership
of our common stock and other equity securities. Such persons are required to furnish us copies of all Section 16(a) filings.
Based solely upon a review
of the copies of the forms furnished to us, we believe that our officers, directors and beneficial owners of more than 10% of our
common stock complied with all applicable filing requirements during the fiscal year ended December 31, 2017, with the exception
of a Form 4 which was not filed on a timely basis on behalf of each of Andrew Perlman (two transactions), Anastasia Nyrkovskaya
(two transactions), Jason Charkow, our Senior Vice President, Legal and Business Affairs (two transactions), Edward Jankowski (two
transactions), John Engelman (one transaction), Donald E. Stout (one transaction), Salvatore Giardina (one transaction), Richard
K. Abbe (one transaction) and Andrew R. Heyer (one transaction), and two Forms 4 which were not filed on a timely basis on behalf
of Bruce T. Bernstein (three transactions).
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
During the year ended
December 31, 2017, we entered into the following related party transactions:
XpresSpa entered in a
credit agreement and secured promissory note (“Debt”) with Rockmore Investment Master Fund Ltd. (“Rockmore”)
on April 22, 2015 that was amended on August 8, 2016. The principal amount of the debt is $6,500,000. Rockmore is an investment
entity controlled by our board member, Bruce T. Bernstein. We believe the terms of the Debt were reflective of market rates as
of the time of issuance. In addition, we paid $212,000 to Bruce T. Bernstein in March 2017 for legal costs incurred in conjunction
with the acquisition of XpresSpa and Amiral
Holdings SAS
legal proceedings prior
to the completion of the acquisition, as he was indemnified by XpresSpa. These costs are included in the accounts payable, accrued
expenses and other current liabilities in the consolidated balance sheet as of December 31, 2017.
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. Stout, Giardina, Bernstein, Heyer and Abbe qualify as independent directors in accordance
with the standards set by Nasdaq, as well as Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Accordingly, our Board of Directors is comprised of a majority of independent directors as required
by Nasdaq rules. The 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. The Board of Directors has further determined that Messrs. Giardina and Bernstein are “audit
committee financial experts” as defined in the rules of the SEC.
PROPOSAL 1: ELECTION OF DIRECTORS
(Notice Item 1)
On July 26, 2018 the Board
of Directors nominated Edward Jankowski, Donald E. Stout, Salvatore Giardina, Bruce T. Bernstein and Richard K. Abbe for election
by the holders of common stock at the annual meeting. If they are elected, they will serve on our Board of Directors until the
2018 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 the enclosed proxy will be voted
FOR
the election as directors
of Edward Jankowski, Donald E. Stout, Salvatore Giardina, Bruce T. Bernstein and Richard K. Abbe. In the event that either nominee
becomes unable or unwilling to serve, the shares represented by the enclosed proxy 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
A plurality of the shares
voted for each nominee at the annual meeting is required to elect each nominee as a director. 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 THE ELECTION OF EDWARD JANKOWSKI, DONALD E. STOUT, SALVATORE GIARDINA, BRUCE T. BERNSTEIN AND RICHARD K. ABBE AS DIRECTORS,
AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
PROPOSAL
2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Notice Item 2)
The Audit Committee has
appointed CohnReznick LLP as our independent registered public accounting firm, to audit our financial statements for the fiscal
year ending December 31, 2018. The Board of Directors proposes that the stockholders ratify this appointment. CohnReznick LLP audited
our financial statements for the fiscal year ended December 31, 2017. We expect that representatives of CohnReznick LLP will be
present at the annual meeting, will be able to make a statement if they so desire, and will be available to respond to appropriate
questions.
In deciding to appoint
CohnReznick LLP, the Audit Committee reviewed auditor independence issues and existing commercial relationships with CohnReznick
LLP and concluded that CohnReznick LLP has no commercial relationship with the Company that would impair its independence for the
fiscal year ending December 31, 2018.
The following table presents
fees for professional audit services rendered by CohnReznick LLP for the audit of the Company’s annual financial statements
for the years ended December 31, 2017 and 2016, and fees billed for other services rendered by CohnReznick LLP during those periods.
|
|
2017
|
|
|
2016
|
|
Audit fees
(1)
|
|
$
|
431,325
|
|
|
$
|
383,250
|
|
Audit-related fees
(2)
|
|
|
25,450
|
|
|
|
—
|
|
Total
|
|
$
|
456,775
|
|
|
$
|
383,250
|
|
|
(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 includes fees for benefit plan audits and lease compliance audits.
|
Audit Committee Pre-Approval Policies
and Procedures
Consistent with SEC policies
and guidelines regarding auditor independence, the 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 has pre-approved
all of the services provided by our independent registered public accounting firms in 2017 and 2016.
Vote Required and Board of Directors’
Recommendation
The affirmative vote
of the holders of a majority of the shares of common stock and Series D Preferred Stock voting on an as-converted basis 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
CohnReznick LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. 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 CohnReznick LLP as our independent registered
public accounting firm for 2018, our Audit Committee of our Board of Directors will reconsider its selection.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE TO RATIFY THE APPOINTMENT OF COHNREZNICK 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.
PROPOSAL 3: TO
AUTHORIZE, FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(d), THE ISSUANCE OF SHARES OF OUR COMMON STOCK UNDERLYING CONVERTIBLE
NOTES AND WARRANTS ISSUED BY US PURSUANT TO THE TERMS OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED MAY 15, 2018, BY AND
AMONG XPRESSPA GROUP, INC. AND THE INVESTORS NAMED THEREIN, IN AN AMOUNT EQUAL TO OR IN EXCESS OF 20% OF OUR COMMON STOCK OUTSTANDING
BEFORE THE ISSUANCE OF SUCH CONVERTIBLE NOTES AND WARRANTS (INCLUDING UPON THE OPERATION OF “FULL-RATCHET” ANTI-DILUTION
PROVISIONS CONTAINED IN SUCH CONVERTIBLE NOTES AND WARRANTS).
(Notice Item 3)
Background and Description of Proposal
Financing Transaction
On May 15, 2018, we entered
into a securities purchase agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”),
pursuant to which we agreed to sell (the “Offering”) up to (i) an aggregate principal amount of $4,438,000 in 5% Secured
Convertible Notes due 2019 (the “Notes”), which includes $88,000 of Notes issued to Palladium Capital Advisors as
Placement Agent, convertible into shares of our common stock at a conversion price of $0.62 per share, (ii) Class A Warrants to
purchase 7,157,259 shares of our common stock at an exercise price of $0.62 per share (the “Class A Warrants”) and
(iii) Class B Warrants to purchase 3,578,630 shares of our common stock at an exercise price of $0.62 per share (the “Class
B Warrants,” and together with the Class A Warrants, the “Warrants”).
In connection with the
Offering, we agreed to seek approval of our stockholders of an adjustment to the conversion price of the Notes and the exercise
price of the Warrants, as the case may be, below the then applicable conversion price or exercise price, as the case may be, with
the recommendation of our Board of Directors that such proposal be approved. In addition, we agreed to seek approval of our stockholders
to issue shares of our common stock at a price below the then applicable price floor with respect to the Notes or Warrants, as
the case may be (as further discussed below).
Reasons for the Common Stock Financing
As of March 31, 2018, our
cash balance was approximately $3.8 million. In May 2018, our Board of Directors determined that it was necessary to raise additional
funds to support our continuing operations and to provide working capital for general corporate purposes.
We believe that the Offering,
which yielded gross proceeds of approximately $4.4 million, was necessary in light of the Company’s cash balance and funding
requirements at the time. We also believe that the anti-dilution protections contained in the Notes and Warrants were reasonable
in light of market conditions and the size and type of the Offering, and that we would not have been able to complete the sale
of the Notes and Warrants unless such anti-dilution provisions were offered. In addition, at the time of the Offering, our Board
of Directors considered numerous other alternatives to the transaction, none of which proved to be feasible or, in the opinion
of our Board of Directors, would have resulted in aggregate terms equivalent to, or more favorable than, the terms obtained in
the Offering.
Securities Purchase Agreement
The Notes and Warrants
were issued on May 17, 2018 (the “Closing”) pursuant to the terms of the Purchase Agreement. The Purchase Agreement
provides for the sale of the Notes and the Warrants at the Closing for gross proceeds of $4,350,000.
The Purchase Agreement
obligates us to indemnify the Investors and various related parties for certain losses including those resulting from (i) any misrepresentation
or breach of any representation or warranty made by us, (ii) any breach of any obligation of ours, and (iii) certain claims by
third parties.
The Purchase Agreement
contains representations and warranties of us and the Investors which are typical for transactions of this type. In addition, the
Purchase Agreement contains customary covenants on our part that are typical for transactions of this type, as well as the following
additional covenants: (i) until an Investor holds less than 10% of the Notes originally issued to such Investor, we agreed not
to enter into any variable rate transactions; (ii) we agreed to offer to the Investors, until one year after the Closing, the opportunity
to participate in any subsequent securities offerings by us; (iii) we agreed to use our commercially reasonable efforts to hold
a stockholder meeting within 120 days of the Closing at which we will solicit the stockholders’ affirmative vote for approval
of our issuance of certain shares issuable upon conversion of the Notes and the exercise of the Warrants described in the transaction
documents in accordance with the applicable law and rules and regulations of Nasdaq, to which this Proposal 3 relates.
Notes
The Notes were not issued
with an original issue discount and are not subject to defeasance. The Notes were issued in certificated form and not as global
securities.
Ranking
The Notes are our senior
secured obligations and are secured by certain of our personal property, pursuant to a security agreement.
Maturity Date
The Notes will mature
on November 17, 2019, the date that is eighteen months following their issuance date (the “Maturity Date”), unless
earlier converted or redeemed.
Interest
Interest on the Notes will
accrue at 5% per annum on the principal amount of the Notes. Interest on the Notes is payable in arrears beginning September 17,
2018 and is payable on each monthly anniversary thereafter, including at maturity when all amounts outstanding under the Notes
become due and payable (each a “Payment Date”). We may elect to pay interest in cash, shares of our common stock or
a combination thereof (the amount to be paid in shares of Common Stock, the “Interest Share Amount”). The Interest
Share Amount will be determined by dividing the amount of interest on the subject Payment Date by the then applicable conversion
price.
If a holder elects to convert
or redeem all or any portion of a Note prior to the Maturity Date, all accrued and unpaid interest on the amount being converted
or redeemed will also be payable. If we elect to redeem all or any portion of a Note prior to the Maturity Date, all accrued and
unpaid interest on the amount being redeemed will also be payable.
Conversion
All amounts due under the
Notes are convertible at any time, in whole or in part, at the option of the holders into shares of our common stock at a conversion
price which is subject to adjustment as described below. If a holder elects to convert all or any portion of a Note prior to the
Maturity Date, all accrued and unpaid interest on the principal amount being converted will also be converted at the conversion
price.
The Notes are initially
convertible into shares of our common stock at the conversion price at $0.62 per share of common stock. The conversion price is
subject to adjustment for stock splits, combinations or similar events. If we fail to timely deliver common stock upon conversion
of the Notes, we have agreed to pay certain liquidated damages to the converting holder.
In addition, except
in the case of issuances of certain excluded securities, the Notes are subject to “full- ratchet” anti-dilution protection
in the event we issue additional common stock, options or common stock equivalents at a price per share less than the conversion
price in effect. If we issue common stock, options or common stock equivalents at a price less than the conversion price of the
Notes, subject to certain customary exceptions, the conversion price of the Notes will be reduced to that lower price; provided,
however, that the conversion price of the Notes shall not be adjusted to be less than
twenty
percent (20%) of the conversion price on the original issuance date (subject to appropriate adjustments for stock splits, stock
dividends, recapitalizations, reclassifications, combinations or other similar transactions) (the “Conversion Price Floor”);
provided, further, however, that the conversion price can be reduced below the Conversion Price Floor if we are not then subject
to Nasdaq Listing Rule 5635(d) or if approved by Nasdaq.
Therefore, the “full-ratchet” anti-dilution provision
in the Notes may result in the downward adjustment of the conversion price of the Notes. This anti-dilution provision of the Notes
will not be effective until stockholder approval is obtained. If we obtain stockholder approval of this Proposal 3, the conversion
price of the Notes may be adjusted upon a dilutive issuance.
Payment
of Principal and Interest
We have agreed to
make amortization payments with respect to the principal amount of each Note commencing on
the
fourth monthly anniversary of the original issuance date and on the same day of each month thereafter until the principal amount
has been repaid in full, whether by the payment of cash or by the conversion of such principal amount into common stock pursuant
to the terms thereof. On each such repayment date, we agreed to make payments to the Note holder in an amount equal to 6.67%
of the initial principal amount (the “Monthly Principal Amount”)
.
Amounts
of conversions of principal amount and amounts paid pursuant to the prepayment and redemption provisions of the Note shall be
applied first against outstanding fees and damages, then against outstanding already payable accrued interest and then to principal
amounts of not yet due
Monthly Principal Amounts
commencing
with the last
Monthly Principal Amount
next payable and thereafter to
Monthly Principal
Amounts
in reverse chronological order. Any principal amount, interest and any other sum arising
under the Note and the related transaction documents that remains outstanding on the Maturity Date shall be due and payable on
the Maturity Date.
We
may elect to pay the Monthly Principal Amount with shares of common stock or a combination of cash and shares of common stock (the
amount to be paid in shares of common stock, the “Principal Share Amount”) subject to the following conditions. The
Principal Share Amount will be determined by dividing (i) the monthly principal amount by (ii) ninety percent (90%) of the VWAP
of the common stock for the five (5) trading days commencing eight (8) days prior to the relevant repayment date and ending on
the fourth (4
th
) trading day preceding such
repayment date;
provided
,
however
, that notwithstanding the foregoing, the result of such calculation shall
not be less than the Conversion Price Floor; provided, further, however, that the result of such calculation can be reduced below
the Conversion Price Floor if we are not then subject to Nasdaq Listing Rule 5635(d) or if approved by Nasdaq.
Prepayment
In
connection with closing of an offering of our common stock, preferred stock, other equity or debt, in one or more tranches upon
which we receive gross cash proceeds of $10 million or more (a “Subsequent Financing”), we must offer to the holders
of the Notes t
he right to receive such holder’s pro rata portion of the net proceeds of such Subsequent Financing
to be applied in satisfaction of up to 100% of such holder’s principal amount and accrued but unpaid interest designated
by such holder. Commencing on September 17, 2018, we will have the option of prepaying the outstanding principal amount of the
Notes, in whole or in part, by paying to each holder a sum of money in cash equal to 115% of the principal amount to be redeemed,
together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable.
Event
of Default
If any event of default
or a fundamental transaction or a change of control transaction occurs, the outstanding principal amount of the Notes, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Note holder’s election,
immediately due and payable in cash at the sum of (a) the greater of (i) the outstanding principal amount of the Note divided by
the conversion price on the date the Mandatory Default Amount (as defined below) is either (A) demanded (if demand or notice is
required to create an event of default) or otherwise due or (B) paid in full, whichever has a lower conversion price, multiplied
by the VWAP on the date the Mandatory Default Amount is either (x) demanded (if demand or notice is required to create an event
of default) or otherwise due or (y) paid in full, whichever has a higher VWAP, or (ii) 120% of the outstanding principal amount
of the Note and (b) all other amounts, costs, expenses and liquidated damages due in respect of the Note (the “Mandatory
Default Amount”). Commencing on the Maturity Date and also five (5) days after the occurrence of any event of default interest
on the Note shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable
law.
Fundamental
Transactions
The Notes prohibit
us from entering into specified transactions involving a change of control, unless the successor entity assumes in writing all
of our obligations under the Notes under a written agreement.
In the event of transactions
involving a change of control, the holder of a Note will have the right to receive, for each conversion share that would have been
issuable upon such conversion immediately prior to the occurrence of such fundamental transaction, the number of shares of common
stock of the successor or acquiring corporation or of us, if we are the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable as a result of such fundamental transaction by a holder of the number of
shares of common stock for which the Note is convertible immediately prior to such fundamental transaction.
Limitations
on Conversion and Issuance
A Note may not be converted
and shares of common stock may not be issued under the Notes if, after giving effect to the conversion or issuance, the holder
together with its affiliates would beneficially own in excess of 9.99% of our outstanding shares of common stock (the “Note
Blocker”). The Note Blocker may be raised or lowered to any other percentage not in excess of 9.99% at the option of the
selling security holder, except that any raise will only be effective upon 61-days’ prior notice to us.
In
addition, prior to obtaining stockholder approval, we may not issue, upon conversion of the Notes, a number of shares of common
stock which, when aggregated with any shares of common stock issued in connection with any conversion of Notes, would exceed 5,300,260
shares of common stock (the “Conversion Cap”). The Notes sold in the Offering, including shares of common stock that
have previously been converted into common stock, are currently convertible into an aggregate of approximately 7,157,259 shares
of common stock. The Conversion Cap shall be allocated among the holders of the Notes pro rata.
Warrants
On the Closing Date,
we issued (i) Class A Warrants to purchase 7,157,259 shares of our common stock at an exercise price of $0.62 per share and (ii)
Class B Warrants to purchase 3,578,630 shares of our common Stock at an exercise price of $0.62 per share. The Class A Warrants
are exercisable beginning six months from the date of issuance and have a term of five years. The Class B Warrants are exercisable
beginning six months from the date of issuance and have a term of six months. We can require that the holders of the Class B Warrants
exercise their Warrants if at any time after the issuance date the volume weighted average price of our common stock equals or
exceeds $1.24 (subject to appropriate adjustments for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications,
combinations, reverse stock splits or other similar transactions after the issuance date) for not less than ten consecutive trading
days (the “Mandatory Exercise Measuring Period”); (ii) the daily average dollar value of our common stock traded during
the Mandatory Exercise Measuring Period equals or exceeds $100,000 (subject to appropriate adjustments for stock splits, stock
dividends, recapitalizations, reorganizations, reclassifications, combinations, reverse stock splits or other similar transactions
after the issuance date); and (iii) no Equity Conditions Failure (as defined in the Class B Warrant) has occurred (unless the holder
has waived such Equity Conditions Failure) as of such date. The Class A Warrants and Class B Warrants each have an exercise price
of $0.62 per share.
The Warrants may be
exercised for cash, provided that, if there is no effective registration statement available registering the exercise of the Warrants,
the Warrants may be exercised on a cashless basis. The exercise price of the Warrants is subject to adjustment for stock splits,
combinations or similar events. Similar to the Notes, the Warrants require “buy-in” payments to be made by us for failure
to deliver the shares of common stock issuable upon exercise.
In addition, except
in the case of issuances of certain excluded securities, the Warrants are subject to “full- ratchet” anti-dilution
protection in the event we issue additional common stock, options or common stock equivalents at a price per share less than the
exercise price in effect. If we issue common stock, options or common stock equivalents at a price less than the exercise price
of the Warrants, subject to certain customary exceptions, the exercise price of the Warrants will be reduced to that lower price
and the number of shares issuable pursuant to the Warrants will be increased such that the exercise price payable pursuant to the
Warrants, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to
such adjustment; provided, however, that the exercise price of the Warrants shall not be adjusted to be less than
twenty
percent (20%) of the exercise price on the original issuance date (subject to appropriate adjustments for stock splits, stock dividends,
recapitalizations, reclassifications, combinations or other similar transactions) (the “Exercise Price Floor”); provided,
further, however, that the exercise price can be reduced below the Exercise Price Floor if we are not then subject to Nasdaq Listing
Rule 5635(d) or if approved by Nasdaq.
Therefore, the “full-ratchet” anti-dilution provision in the Warrants
may result in the downward adjustment of the exercise price of the Warrants and result in a greater number of shares being issued
pursuant to the Warrants. This anti-dilution provision of the Warrants will not be effective until stockholder approval is obtained.
If we obtain stockholder approval of this Proposal 3, the exercise price of the Warrants and the number of shares to be issued
upon exercise of the Warrants may be adjusted upon a dilutive issuance.
Effect of Issuance of Securities
The potential issuance
of (x) the aggregate of 17,893,148 shares of our common stock underlying (i) the Notes (an aggregate of 7,157,259 shares of common
stock), and (ii) the Warrants (10,735,889 shares of common stock) and (y) the potential additional shares of common stock issuable
as (i) payment of principal or interest on the Notes, (ii) pursuant to the anti-dilution terms of the Notes and the Warrants or
(iii) at a price below the applicable price floor, in each case, that are the subject of this Proposal 3, would result in an increase
in the number of shares of common stock outstanding, and our stockholders will incur dilution of their percentage ownership to
the extent that the investors convert their Notes or exercise their Warrants, or additional shares of common stock are issued as
payment of principal or interest on the Notes, pursuant to the anti-dilution terms of the Notes or the Warrants, or at a price
below the applicable price floor. Because of potential adjustments to the number of shares of common stock issuable upon conversion
of the Notes and exercise of the Warrants to be issued in connection with the Offering, the exact magnitude of the dilutive effect
of the Notes and Warrants cannot be conclusively determined. However, the dilutive effect may be material to our current stockholders.
Proposal to Approve Financing Transaction
Nasdaq Listing Rule
5635(d) requires us to obtain stockholder approval prior to the issuance of securities in connection with a transaction other than
a public offering involving (i) the sale, issuance or potential issuance by us of our common stock (or securities convertible into
or exercisable for our common stock) at a price less than the greater of book or market value which equals 20% or more of common
stock or 20% or more of the voting power outstanding before the issuance; or (ii) the sale, issuance or potential issuance by us
of our common stock (or securities convertible into or exercisable for our common stock) equal to 20% or more of the common stock
or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.
In the case of the Offering, the 20% threshold is determined based on the shares of our common stock outstanding immediately preceding
the Offering, which we signed on May 15, 2018. Warrants to purchase common stock may be excluded from the calculation if they have
a per share exercise price equal to or greater than the consolidated closing bid price immediately preceding execution of the binding
agreements, and if they are not exercisable for at least six months. In the Offering, the initial exercise price of the Warrants
(in this case, $0.62) was equal to or greater than the book or market value of our common stock on the relevant date, and the warrants
are not exercisable for at least six months after issuance. Consequently, the Warrants are excluded from the 20% calculation under
Nasdaq Listing Rule 5635(d). However, we are seeking stockholder approval under Nasdaq Rule 5635(d) of the “full-ratchet”
anti-dilution feature of the Warrants since such provision may reduce the $0.62 per share exercise price of the Warrants and result
in the issuance of shares at less than the greater of market price or book value per share. Without the “full-ratchet”
anti-dilution feature, the Warrants meet the criteria of Nasdaq Listing Rule 5635(d) such that the terms of the Warrants did not
require stockholder approval.
Because the issuance
of shares of our common stock underlying the Notes may trigger our obligation to obtain stockholder approval under Nasdaq Listing
Rule 5635(d), the Note holders agreed that the total shares of our common stock that may be issued under the Notes is limited to
19.99% of the total number of shares of our common stock outstanding immediately preceding the Offering, until we obtain stockholder
approval of the Offering or a waiver of Nasdaq Listing Rule 5635(d). We are permitted to issue up to 5,300,260 shares of our common
stock to the Note holders without obtaining stockholder approval under Nasdaq Listing Rule 5635(d).
We generally have no
control over whether the Note holders convert their Notes or whether the Warrant holders exercise their Warrants (other than pursuant
to the mandatory exercise feature of the Class B Warrants). Further, we cannot predict the market price of our common stock at
any future date, and therefore cannot predict the applicable prices at which the Notes may be converted. For these reasons, we
are unable to accurately forecast or predict with any certainty the total amount of shares that may be issued under the Notes or
Warrants. Under certain circumstances, however, it is possible, that we may have to issue more than 20% of our outstanding shares
of common stock to the Note and Warrant holders under the terms of the Offering. Therefore, we are seeking stockholder approval
under this proposal to issue more than 20% of our outstanding shares of common stock, if necessary, to the Note and Warrant holders
under the terms of the Offering.
Any transaction requiring
approval by our stockholders under Nasdaq Listing Rule 5635(d) would likely result in a significant increase in the number of shares
of our common stock outstanding, and, as a result, our current stockholders will own a smaller percentage of our outstanding shares
of common stock.
Future issuances of
securities in connection with the Offering, if any, may cause a significant reduction in the percentage interests of our current
stockholders in the voting power, any liquidation value, our book and market value, and in any future earnings. Further, the issuance
or resale of common stock issued to the Note and Warrant holders could cause the market price of our common stock to decline. In
addition to the foregoing, the increase in the number of issued shares of common stock in connection with the Offering may have
an incidental anti-takeover effect in that additional shares could be used to dilute the stock ownership of parties seeking to
obtain control of us. The increased number of issued shares could discourage the possibility of, or render more difficult, certain
mergers, tender offers, proxy contests or other change of control or ownership transactions.
Under the Nasdaq Listing
Rules, we are not permitted (without risk of delisting) to undertake a transaction that could result in a change in control of
us, as defined by Nasdaq Listing Rule 5635(b), without seeking and obtaining separate stockholder approval. We are not required
to obtain stockholder approval for the Financing Transaction under Nasdaq Listing Rule 5635(b) because the Note and Warrant holders
have agreed that, for so long as they hold any shares of our common stock, neither they nor any of their affiliates will acquire
shares of our common stock which result in them and their affiliates, collectively, beneficially owning or controlling more than
9.99% of the total outstanding shares of our common stock.
Consequences of Not Approving this
Proposal
After extensive efforts
to raise capital on more favorable terms, we believed that the Offering was the only viable financing alternative available to
us at the time. If our stockholders do not approve this proposal, we will not be able to issue more than 20% of our outstanding
shares of common stock to the Note and Warrant holders in connection with the Offering. As a result, we may be unable to make
some of the amortization payments due under the Notes in shares of our common stock or issue sufficient shares upon exercise of
the Warrants which will, in lieu of those shares, require that we pay substantial cash amounts to the Note and Warrant holders.
We do not anticipate having sufficient funds to make any substantial cash payments to the Note holders.
The Purchase Agreement,
the form of Note and the forms of Warrants were filed with the Securities and Exchange Commission in connection with our Quarterly
Report on Form 10-Q filed on May 15, 2018.
Vote Required and Board of Directors’
Recommendation
Nasdaq Listing Rule
5635(d) generally requires us to obtain stockholder approval prior to issuing more than 20% of our outstanding shares of common
stock under the Offering. The approval of Proposal 3 requires the affirmative vote of the holders of a majority of the total votes
cast in person or by proxy at the annual meeting. 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.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE TO APPROVE THE ISSUANCE OF SHARES OF OUR COMMON STOCK UNDERLYING THE CONVERTIBLE NOTES AND WARRANTS, IN AN AMOUNT
EQUAL TO OR IN EXCESS OF 20% OF OUR COMMON STOCK OUTSTANDING BEFORE THE ISSUANCE OF SUCH CONVERTIBLE NOTES AND WARRANTS, IN SATISFACTION
OF THE NASDAQ LISTING RULE 5635(d), INCLUDING THE APPROVAL OF THE ANTI-DILUTION PROTECTIONS CONTAINED IN SUCH CONVERTIBLE NOTES
AND WARRANTS, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE PROPOSAL UNLESS A STOCKHOLDER INDICATES
OTHERWISE ON THE PROXY.
PROPOSAL 4: REVERSE STOCK
SPLIT
(Notice Item 4)
General
At our 2018 annual
meeting of stockholders, holders of our common stock are being asked to approve the proposal that our Amended and Restated Certificate
of Incorporation be amended to effect a reverse stock split of the issued and outstanding shares of common stock (such split to
combine a number of outstanding shares of our common stock between 5-for-1 and 25-for-1, such number consisting of only whole shares,
into one (1) share of common stock). The full text of the proposed amendment to our Amended and Restated Certificate of Incorporation
is attached to this proxy statement as
Appendix A
. If approved by the stockholders, the reverse stock split would become
effective at a time, and at a ratio, to be designated by the Board of Directors. The Board of Directors may effect only one reverse
stock split as a result of this authorization. The Board of Directors’ decision as to whether and when to effect the reverse
stock split will be based on a number of factors, including market conditions, existing and expected trading prices for our common
stock and the continued listing requirements of The Nasdaq Capital Market. Even if the stockholders approve the reverse stock split,
we reserve the right not to effect the reverse stock split if the Board of Directors does not deem it to be in the best interests
of us and our stockholders to effect the reverse stock split. The reverse stock split, if authorized pursuant to this resolution
and if deemed by the Board of Directors to be in the best interests of us and our stockholders, will be effected, if at all, at
a time that is not later than March 11, 2019.
The proposed amendment
to our Amended and Restated Certificate of Incorporation to effect the reverse stock split, as more fully described below, will
effect the reverse stock split but will not change the number of authorized shares of common stock or preferred stock, or the par
value of common stock or preferred stock. As of the date of this proxy statement, we do not have any current arrangements or understandings
relating to the issuance of any additional shares of common stock following the reverse stock split.
Purpose
On July 26, 2018, the
Board of Directors approved the proposal authorizing the reverse stock split for the following reasons:
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the Board of Directors believes that effecting the reverse stock split may be an effective means
of regaining compliance with the bid price requirement for continued listing of our common stock on The Nasdaq Capital Market;
and
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the Board of Directors believes that a higher stock price may help generate investor interest in
us, including interest among institutional investors.
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If the reverse stock
split successfully increases the per share price of our common stock and facilitates the continued listing of our common stock
on The Nasdaq Capital Market, as to which no assurance can be given, the Board of Directors believes this increase may facilitate
future financings, enhance our ability to transact with our securities and increase the appetite of third parties with whom we
may be negotiating for purposes of evaluating potential strategic alternatives.
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 July 25, 2018, the closing market price per share
of our common stock was $0.27, as reported by the Nasdaq Capital Market, and the price has been below $1.00 for more than 30 consecutive
trading days.
On March 16, 2018,
we received a letter from Nasdaq indicating that for the last 30 consecutive business days, the bid price of our common shares
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 September
12, 2018, to regain compliance with the minimum bid price requirement. In accordance with NASDAQ Listing Rule 5810(c)(3)(A)(ii),
we expect to be granted an additional 180 day period, or until March 11, 2019, to regain compliance with the minimum $1.00 bid
price per share requirement for continued listing on The NASDAQ Capital Market.
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 4. We cannot assure you that our share price 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 shares lose their status on the Nasdaq Capital Market, our common shares would likely trade in the over-the-counter market.
If our shares were
to trade on the over-the-counter market, selling our common shares 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.
Potential Increased Investor Interest
In approving the proposal
authorizing the reverse stock split, the Board of Directors considered that our common stock may not appeal to brokerage firms
that are reluctant to recommend lower priced securities to their clients. Investors may also be dissuaded from purchasing lower
priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover,
the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower priced stocks.
There are risks associated
with the reverse stock split, including that the reverse stock split may not result in a sustained increase in the per share price
of our common stock.
We cannot predict whether
the reverse stock split will increase the market price for our common stock on a sustained basis. The history of similar stock
split combinations for companies in like circumstances is varied. There is no assurance that:
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the market price per share of our common stock after the reverse stock split will rise in proportion
to the reduction in the number of shares of our common stock outstanding before the reverse stock split;
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the reverse stock split will result in a per share price that will attract brokers and investors
who do not trade in lower priced stocks;
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our ability to conduct future financings will be enhanced; and
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the market price per share will either exceed or remain in excess of the $1.00 minimum bid price
as required by Nasdaq, or that we will otherwise meet the requirements of Nasdaq for continued inclusion for trading on the Nasdaq
Capital Market.
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The market price of
our common stock will also be based on our performance and other factors, some of which are unrelated to the number of shares outstanding.
If the reverse stock split is effected and the market price of our common stock declines, the percentage decline as an absolute
number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock
split. Furthermore, the liquidity of our common stock could be adversely affected by the reduced number of shares that would be
outstanding after the reverse stock split.
Principal Effects of the Reverse Stock
Split
If the stockholders
approve the proposal to authorize the Board of Directors to implement the reverse stock split and the Board of Directors implements
the reverse stock split, we will amend the existing provision of Article Fourth of our Amended and Restated Certificate of Incorporation
by adding the following paragraphs:
“(3) Reverse
Stock Split. Effective at 5:00 p.m. (Eastern time), on the date of filing of this Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware (the “Effective Time”),
the shares of the Corporation’s Common Stock issued and outstanding prior to the Effective Time and the shares of Common
Stock issued and held in treasury of the Corporation immediately prior to the Effective Time shall automatically be reclassified
into a smaller number of shares such that each ( ) shares of the Corporation’s issued and outstanding
Common Stock immediately prior to the Effective Time are reclassified into one validly issued, fully paid and nonassessable share
of Common Stock, without any further action by the Corporation or the holder thereof. No fractional shares of Corporation common
stock will be issued as a result of the reverse stock split. Instead, stockholders of record who otherwise would be entitled to
receive fractional shares, will be entitled to rounding up of their fractional share to the nearest whole share.
(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 whole share
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 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 whole share in lieu of a fractional share of Common Stock).”
The reverse stock split
will be effected simultaneously for all issued and outstanding shares of common stock and the exchange ratio will be the same for
all issued and outstanding shares of common stock. The reverse stock split will affect all of our stockholders uniformly and will
not affect any stockholder’s percentage ownership interests in the Company, except to the extent that the reverse stock split
results in any of our stockholders owning a fractional share that would be rounded up to the next highest whole share. Common stock
issued pursuant to the reverse stock split will remain fully paid and nonassessable. The reverse stock split will not affect the
Company continuing to be subject to the periodic reporting requirements of the Exchange Act. Following the reverse stock split,
our common stock will continue to be listed on the Nasdaq Capital Market, under the symbol “XSPA,” although it would
receive a new CUSIP number.
By approving this
amendment, stockholders will approve the combination of any whole number of shares of common stock between and including 5 and
25 into one (1) share. The certificate of amendment to be filed with the Secretary of State of the State of Delaware will include
only that number determined by the Board of Directors to be in the best interests of the Company and its stockholders. The Board
of Directors will not implement any amendment providing for a different split ratio.
Procedure for Effecting Reverse Stock
Split and Exchange of Stock Certificates
If the certificate
of amendment is approved by our stockholders, and if at such time the Board of Directors Still believes that a reverse stock split
is in the best interests of the Company and its stockholders, the Board of Directors will determine the ratio of the reverse stock
split to be implemented. We will file the certificate of amendment with the Secretary of State of the State of Delaware at such
time as the Board of Directors has determined the appropriate effective time for the reverse stock split. The Board of Directors
may delay effecting the reverse stock split, if at all, until a time that is not later than March 11, 2019, without re-soliciting
stockholder approval. The reverse stock split will become effective on the date of filing of the certificate of amendment with
the Secretary of State of the State of Delaware. Beginning on the effective date of the split, each certificate representing pre-split
shares will be deemed for all corporate purposes to evidence ownership of post-split shares.
Book-Entry Shares
If the reverse stock
split is effected, stockholders who hold uncertificated shares (i.e., shares held in book-entry form and not represented by a physical
stock certificate), either as direct or beneficial owners, will have their holdings electronically adjusted automatically by our
transfer agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit,
as the case may be) to give effect to the reverse stock split. Stockholders who hold uncertificated shares as direct owners will
be sent a statement of holding from our transfer agent that indicates the number of post-reverse stock split shares of our common
stock owned in book-entry form.
Certificated Shares
As soon as practicable
after the effective date of the split, stockholders will be notified that the reverse stock split has been effected. We expect
that our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of
pre-split shares will be asked to surrender to the exchange agent certificates representing pre-split shares in exchange for certificates
representing post-split shares in accordance with the procedures to be set forth in a letter of transmittal to be sent by us or
our exchange agent. No new certificates will be issued to a stockholder until such stockholder has surrendered such stockholder’s
outstanding certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent. Any pre-split
shares submitted for transfer, whether pursuant to a sale or other disposition, or otherwise, will automatically be exchanged for
post-split shares. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED
TO DO SO.
Fractional Shares
No fractional shares
will be issued in connection with the reverse stock split. Stockholders of record on the effective date of the split who otherwise
would be entitled to receive fractional shares because they hold a number of pre-split shares not evenly divisible by the number
of pre-split shares for which each post-split share is to be exchanged, will in lieu of a fractional share, be entitled upon surrender
to the exchange agent of certificates representing such pre-split shares, to receive one whole share of common stock by virtue
of rounding up such fractional share to the next highest whole share. The ownership of such a whole share will give the holder
thereof the same voting, dividend, and other rights as are held by other holders of common stock.
Stockholders should
be aware that receipt of a whole share of common stock resulting from the rounding up of a fractional share interest to the next
highest whole share may have tax consequences. Each holder should seek advice based on the holder’s particular circumstances
from an independent tax advisor.
Accounting Matters
The reverse stock split
will not affect the common stock capital account on our balance sheet. However, because the par value of our common stock will
remain unchanged on the effective date of the split, the components that make up the common stock capital account will change by
offsetting amounts. Depending on the size of the reverse stock split the Board of Directors decides to implement, the stated capital
component will be reduced to an amount between $10,654 and $53,269 of its present amount, and the additional paid-in capital component
will be increased with the amount by which the stated capital is reduced. The per share net income or loss and net book value of
our common stock will be increased because there will be fewer shares of common stock outstanding. Prior periods’ per share
amounts will be restated to reflect the reverse stock split.
Effect on Par Value
The proposed amendment
to our Amended and Restated Certificate of Incorporation will not affect the par value of our common stock, which will remain at
$0.01 per share.
No Going Private Transaction
Notwithstanding the
decrease in the number of outstanding shares following the proposed reverse stock split, our Board of Directors does not intend
for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the
Exchange Act.
Potential Anti-Takeover Effect
Although the increased
proportion of unissued authorized shares to issued shares could, under certain circumstances, have an anti-takeover effect (for
example, by permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition
of the Board of Directors or contemplating a tender offer or other transaction for the combination of the Company with another
company), the reverse stock split proposal is not being proposed in response to any effort of which we are aware to accumulate
shares of our common stock or obtain control of the Company, nor is it part of a plan by management to recommend a series of similar
amendments to the Board of Directors and stockholders. Other than the reverse stock split proposal, the Board of Directors does
not currently contemplate recommending the adoption of any other actions that could be construed to affect the ability of third
parties to take over or change control of the Company.
No Dissenters’ Rights
Under the Delaware
General Corporation Law, our stockholders are not entitled to dissenters’ rights with respect to the reverse stock split,
and we will not independently provide stockholders with any such right.
Material United States Federal Income
Tax Consequences of the Reverse Stock Split
The following is not
intended as tax or legal advice. Each holder should seek advice based on his, her or its particular circumstances from an independent
tax advisor.
The following discussion
describes the anticipated material United States federal income tax consequences to “U.S. holders” (as defined below)
of our capital stock relating to the reverse stock split. This discussion is based upon the Internal Revenue Code of 1986, as amended
(the “Code”), Treasury Regulations promulgated thereunder, judicial authorities, published positions of the Internal
Revenue Service (“IRS”), and other applicable authorities, all as currently in effect and all of which are subject
to change or differing interpretations (possibly with retroactive effect). We have not obtained a ruling from the IRS or an opinion
of legal or tax counsel with respect to the 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. The following discussion is
for information purposes only and is not intended as tax or legal advice.
For purposes of this
discussion, the term “U.S. holder” means a beneficial owner of our capital stock that is for United States federal
income tax purposes:
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(i)
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an individual citizen or resident of the United States;
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(ii)
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state or the District of Columbia;
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(iii)
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an estate with income subject to United States federal income tax regardless of its source; or
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(iv)
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a trust that (a) is subject to primary supervision by a United States court and for which United States persons control all substantial decisions or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person.
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This discussion assumes
that a U.S. holder holds our capital stock as a capital asset within the meaning of Code Section 1221. This discussion does not
address all of the tax consequences that may be relevant to a particular stockholder or to stockholders that are subject to special
treatment under United States federal income tax laws including, but not limited to, financial institutions, tax-exempt organizations,
insurance companies, regulated investment companies, persons that are broker-dealers, traders in securities who elect the mark-to-market
method of accounting for their securities, or stockholders holding their shares of our capital stock as part of a “straddle,”
“hedge,” “conversion transaction” or other integrated transaction. In addition, this discussion does not
address other United States federal taxes (such as gift or estate taxes or alternative minimum taxes), the tax consequences of
the reverse stock split under state, local or foreign tax laws or certain tax reporting requirements that may be applicable with
respect to the reverse stock split.
If a partnership (or
other entity treated as a partnership for United States federal income tax purposes) is a stockholder, the tax treatment of a partner
in the partnership or any equity owner of such other entity will generally depend upon the status of the person and the activities
of the partnership or other entity treated as a partnership for United States federal income tax purposes.
Tax Consequences of the Reverse Stock
Split Generally
We believe that the
reverse stock split should qualify as a “recapitalization” under Section 368(a)(1)(E) of the Code. Accordingly:
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A U.S. holder will not recognize any gain or loss as a result of the reverse stock split.
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A U.S. holder’s aggregate tax basis in his, her or its post-reverse stock split shares will be equal to the aggregate tax basis in the pre-reverse stock split shares exchanged therefor.
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A U.S. holder’s holding period for the post-reverse stock split shares will include the period during which such stockholder held the pre-reverse stock split shares surrendered in the reverse stock split.
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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. Holders of shares of our common stock
who acquired their shares 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 among their post-reverse stock split shares.
Interests of Directors and Executive
Officers
Our directors and executive
officers have no substantial interests, directly or indirectly, in the matters set forth in this proposal except to the extent
of their ownership of shares of our common stock.
Reservation of Right to Abandon Reverse
Stock Split
We reserve the right
to not file the Certificate of Amendment and to abandon any reverse stock split without further action by our stockholders at any
time before the effectiveness of the filing with the Secretary of the State of Delaware of the Certificate of Amendment, even if
the authority to effect these amendments is approved by our stockholders at the annual meeting. By voting in favor of a reverse
stock split, you are expressly also authorizing the Board of Directors to delay, not proceed with, and abandon, these proposed
amendments if it should so decide, in its sole discretion, that such action is in the best interests of our stockholders.
Vote Required and Board of Directors’
Recommendation
The affirmative vote
of the holders of a majority of the outstanding shares of our common stock and Series D Preferred Stock voting on an as-converted
basis entitled to vote on the matter either in person or by proxy at the annual meeting 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.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE TO AUTHORIZE THE BOARD OF DIRECTORS IN ITS DISCRETION TO AMEND THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF THE ISSUED AND OUTSTANDING SHARES OF OUR COMMON STOCK (SUCH SPLIT TO COMBINE A NUMBER OF OUTSTANDING
SHARES OF OUR COMMON STOCK BETWEEN 5 AND 25, SUCH NUMBER CONSISTING OF ONLY WHOLE SHARES, INTO ONE (1) SHARE OF OUR COMMON STOCK),
AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE AMENDMENT UNLESS A STOCKHOLDER INDICATES OTHERWISE
ON THE PROXY.
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 described in the Compensation Discussion and Analysis, the compensation tables and related material
contained 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 2019 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:
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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
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a long-term performance element in the form of equity, to incentivize our named executive officers to achieve superior corporate performance.
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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:
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our competitive position;
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our financial performance and the contribution of each individual to our financial performance;
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individual performance, including past and expected contribution to our corporate goals and execution of our business plan and strategy; and
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our long-term needs and operational goals, including attracting and retaining key management personnel.
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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 2018 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, the compensation tables and the related material disclosed in the proxy statement,
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 and Series D Preferred Stock voting on an as-converted basis 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 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 TO APPROVE 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 ON THE PROXY.
PROPOSAL 6: APPROVAL OF THE ADJOURNMENT
OF THE ANNUAL MEETING,
IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES
IN FAVOR OF 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, if necessary, 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, if necessary, 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 and Series D Preferred Stock
present and entitled to vote 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, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE
ARE NOT SUFFICIENT VOTES IN FAVOR OF PROPOSALS 2 THROUGH 5.
PREFERRED STOCKHOLDER PROPOSAL: ELECTION
OF DIRECTORS
On July 26, 2018 the
Board of Directors nominated Andrew R. Heyer for election by the holders of Series D Preferred Stock at the annual meeting. If
he is elected, Mr. Heyer will serve on our Board of Directors until the 2019 annual meeting of stockholders and until his successor
has been elected and qualified.
Unless authority to
vote for Mr. Heyer is withheld, the shares represented by the enclosed proxy will be voted
FOR
the election as directors
of Andrew R. Heyer. In the event that Mr. Heyer becomes unable or unwilling to serve, the shares represented by the enclosed proxy
will be voted for the election of such other person as the Board of Directors may recommend in Mr. Heyer’s place. We have
no reason to believe that Mr. Heyer will be unable or unwilling to serve as a director.
Vote Required and Board of Directors’
Recommendation
A plurality of the
shares voted for each nominee at the annual meeting is required to elect each nominee as a director.
THE BOARD OF DIRECTORS
DOES NOT MAKE A RECOMMENDATION IN FAVOR OF OR AGAINST THE ELECTION OF ANDREW R. HEYER AS DIRECTOR.
CODE OF CONDUCT AND ETHICS
We have adopted a code
of conduct and ethics that applies to all of our employees, including our CEO and chief financial and accounting officers. The
text of the code of conduct and ethics is posted on the “Investors — Corporate Governance” section
of our website at
www.xpresspagroup.com
, and will be made available to stockholders without charge, upon request, in writing
to the Corporate Secretary at 780 Third Avenue, 12
th
Floor, New York, New York 10017. 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 the rules of Nasdaq
Stock Market.
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 named therein.
STOCKHOLDER
PROPOSALS AND NOMINATIONS FOR DIRECTOR
To
be considered for inclusion in the proxy statement relating to our 2019 annual meeting of stockholders, we must receive stockholder
proposals (other than for director nominations) no later than April 11, 2019, which is 120 days prior to the date that is one year
from this year’s mailing date. To be considered for presentation at the 2019 annual meeting, although not included in the
proxy statement, proposals (including director nominations that are not requested to be included in our proxy statement) must be
received no earlier than May 26, 2018, which is 75 days prior to the date that is one year from this year’s mailing date
and no later than June 25, 2018, which is 45 days prior to the date that is one year from this year’s mailing date. Proposals
that are not received in a timely manner will not be voted on at the 2018 annual meeting. If a proposal is received on time, the
proxies that management solicits for the meeting may still exercise discretionary voting authority on the proposal under circumstances
consistent with the proxy rules of the SEC. All stockholder proposals should be marked for the attention of Tracy Oats at Broadridge
Financial Solutions, Inc., 51 Mercedes Way, Edgewood, New Jersey 11717.
New York, New York
July 27, 2018
APPENDIX A – PROXY BALLOTS
APPENDIX B – TEXT OF CERTIFICATE OF AMENDMENT FOR REVERSE
STOCK SPLIT
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