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
Check
the appropriate box:
[X]
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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 Material
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Solicitation
Material under §240.14a-12
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GAUCHO
GROUP HOLDINGS, Inc.
(Name
of Registrant as Specified in Its Charter)
Payment
of filing fee (Check the appropriate box):
[X]
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) 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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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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Fee
paid 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, of the Form or Schedule and the date
of its filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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Filing
Party:
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4)
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Date
Filed:
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PRELIMINARY
PROXY STATEMENT — SUBJECT TO COMPLETION
GAUCHO
Group HOLDINGS, Inc.
135
Fifth Ave., 10
th
Floor
New
York, NY 10010
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS AND IMPORTANT NOTICE REGARDING THE AVAILABILITY OF THE COMPANY’S PROXY STATEMENT
On
July 8, 2019
To
our Stockholders:
You
are cordially invited to attend the Annual Meeting of Stockholders of Gaucho Group Holdings, Inc. (the “Company”,
or “GGH”) on July 8, 2019, at 2:00 p.m. Eastern Time, at 135 Fifth Ave., 10th Floor, New York, NY 10010 (the “Annual
Meeting”). At the Annual Meeting the Company will submit the following five (5) proposals to its stockholders for approval:
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1.
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To
elect the three (3) nominees to the board of directors named in this Proxy Statement to hold office for one-, two-, or three-year
terms, as described in Proposal No. 2 of the Proxy Statement, if Proposal No. 2 is approved, or until the next annual meeting,
if Proposal No. 2 is not approved, and in either case until their respective successors are elected and qualified.
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2.
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To
approve an amendment to the Company’s Amended and Restated Bylaws to implement a staggered Board structure (the “Classified
Board Provisions”) whereby the Board of Directors shall be divided into three classes, as nearly equal in number as
possible, designated: Class I, Class II and Class III, with each director serving for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided
,
that
each director
initially appointed to Class I shall serve for an initial term expiring at the Company’s 2020 annual meeting of stockholders;
each director initially appointed to Class II shall serve for an initial term expiring at the Company’s 2021 annual
meeting of stockholders; and each director initially appointed to Class III shall serve for an initial term expiring at the
Company’s 2022 annual meeting of stockholders.
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3.
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To
reauthorize granting the Board of Directors discretion (if necessary to effect a listing of the Company’s common stock
on a national exchange) on or before June 30, 2020, to implement a reverse stock split of the outstanding shares of common
stock in a range from one-for-two (1:2) up to one-for-twenty-five (1:25), or anywhere between, while maintaining the number
of authorized shares of Common Stock (the “Reverse Stock Split”) as a requirement of uplisting to Nasdaq.
This item was previously presented and approved at the 2018 Annual Meeting of the Stockholders but the Board of Directors’
discretionary power expired on June 30, 2019 before the Company has been able to uplist on a national exchange.
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4.
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Approval
of an amendment to the Company’s 2018 Equity Incentive Plan to allow for additional shares available for awards.
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5.
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To
ratify and approve the appointment of Marcum LLP, as the Company’s independent registered accounting firm for the year
ended December 31, 2019.
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Additionally,
any other business that may properly come before the Annual Meeting will be conducted.
The
discussion of the proposals set forth above is intended only as a summary and is qualified in its entirety by the information
contained in the accompanying Proxy Statement. Only holders of record of our common stock and holders of record of our Series
B preferred stock on an as converted basis to common stock on May 20, 2019 (the “Record Date”) will be entitled to
notice of and to vote at this Annual Meeting, and any postponements or adjournments thereof.
The
accompanying Proxy Statement is being furnished to our stockholders for informational purposes only, pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations prescribed
thereunder. The Board will be soliciting your proxy in connection with the matters discussed above. Stockholders who wish to vote
on the proposals accordingly must either attend the Annual Meeting and vote in person or otherwise designate a proxy to attend
the Annual Meeting and vote on their behalf.
We
are using the “Notice and Access” method of providing proxy materials to common stockholders of record via the internet.
We are mailing common stockholders of record a Notice of Internet Availability of Proxy Materials instead of a paper copy of the
proxy materials. Notice and Access provides a convenient way for stockholders to access the Company’s proxy materials and
vote shares on the internet, and also allows us to reduce costs and conserve resources. The Notice of Internet Availability includes
instructions on how to access our proxy materials and how to vote your shares. The Notice of Internet Availability also contains
instructions on how to receive a paper copy of the proxy materials if you prefer.
The
Company is using the “Full Set Delivery” method of providing proxy materials to all holders of record of Series B
preferred stock and beneficial owners of record of common stock (beneficial owners are those stockholders who hold the Company’s
common shares through a broker) and certain recent purchasers of common stock of the Company. These stockholders are unable to
vote by internet or by phone. Therefore, the Full Set Delivery option requires we mail our proxy materials to these stockholders
under the “traditional” method by providing paper copies as well as providing access to our proxy materials on a publicly
accessible website.
The
Company’s Proxy Statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and the other Annual Meeting materials
are available on the internet at:
https://www.cstproxy.com/gauchogroupholdings/2019
.
Whether
or not you expect to attend the Annual Meeting, please vote your shares in advance online or by mail to ensure that your vote
will be represented at the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the Annual Meeting, you must obtain a proxy issued in your name from that record holder.
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Sincerely,
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/s/
Scott L. Mathis
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Chairman
of the Board and
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Chief
Executive Officer
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GAUCHO
Group HOLDINGS, Inc.
135
Fifth Ave., 10
th
Floor
New
York, NY 10010
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on July 8, 2019 at 2:00 pm Eastern Time
May
14, 2019
We
are furnishing this Proxy Statement to stockholders of GAUCHO GROUP HOLDINGS, INC. (“we” or “GGH” or the
“Company”) in connection with the Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournments
or postponements thereof. We will hold the Annual Meeting on July 8, 2019, at 2:00 p.m. Eastern Time, at 135 Fifth Ave., 10th
Floor, New York, NY 10010.
The
Annual Meeting is being held for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. This Proxy
Statement (including the Notice of Annual Meeting of Stockholders) is first being made available to stockholders beginning on
or about May 29, 2019. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, including financial
statements (“Annual Report”), was filed with the Securities and Exchange Commission (the “SEC”) on April
1, 2019, and the Company’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2019 including financial
statements (“Quarterly Report”), will be filed with the SEC on May 15, 2019. Hard copies of this Proxy Statement and
the Annual Report will be provided to record holders of common stock (who are receiving proxy materials via the Notice and Access
Method) via U.S. mail only by request and the Quarterly Report is available on the internet at:
https://www.cstproxy.com/gauchogroupholdings/2019
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Voting
Securities and Quorum Required.
Holders
of record of our common stock and Series B preferred stock at the close of business on May 20, 2019 (the “Record Date”)
will be entitled to vote on all matters. On the Record Date, we had _____________ shares of common stock issued and _____________
outstanding. Each share of common stock is entitled to one vote per share. On the Record Date, we had _____________ shares of
Series B preferred stock issued and outstanding. Shares of Series B preferred stock are entitled to vote with common stock on
each proposal on as converted basis, for a total of _____________ votes. Common stock and Series B preferred stock represent our
only two classes of voting securities outstanding.
Cumulative
voting shall not be allowed in the election of directors or any of the proposals being submitted to the stockholders at the Annual
Meeting.
For
the transaction of business at the Annual Meeting a quorum must be present. A quorum consists of not less than one-third of the
shares entitled to vote at the Annual Meeting. In the event there are not sufficient votes for a quorum or to approve any proposals
at the time of the Annual Meeting, the Annual Meeting may be adjourned to a future time and date. Common stock and Series B preferred
stock (on an as-converted basis to common stock) will vote together as a class on each proposal.
Revocability
of Proxies
You
can revoke your proxy at any time before it is exercised by timely delivery of a properly executed, later-dated proxy, by delivering
a written revocation of your proxy to our Secretary, or by voting at the Annual Meeting. The method by which you vote by proxy
will in no way limit your right to vote at the Annual Meeting if you decide to attend in person. If your shares are held in the
name of a bank or brokerage firm, you must obtain a proxy, executed in your favor, from the bank or broker, to be able to vote
at the Annual Meeting.
No
Dissenters Rights
The
proposed corporate actions on which the stockholders are being asked to vote are not corporate actions for which stockholders
of a Delaware corporation have the right to dissent under the Delaware General Corporation Law (the “DGCL”).
Proposals
by Security Holders
No
stockholder has requested that we include any additional proposals in this Proxy Statement or otherwise requested that any proposals
be submitted to the stockholders at the Annual Meeting.
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Q.
Why am I receiving these materials?
A.
We have sent you these proxy materials because the Board of Directors (the “Board”) of Gaucho Group Holdings, Inc.
(sometimes referred to as the “Company” or “GGH”) is soliciting your proxy to vote at the 2019 Annual
Meeting of Stockholders (the “Annual Meeting”), including at any adjournments or postponements of the Annual Meeting.
You are invited to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However, you do not need
to attend the Annual Meeting to vote your shares. Instead, you may cast your vote by proxy over the internet by following the
instructions provided in the Notice of Internet Availability, or, if you have received, or requested to receive, printed proxy
materials, you can also vote by mail pursuant to the instructions provided on the proxy card.
In
accordance with SEC rules, we may furnish proxy materials, including this Proxy Statement and our Annual Report, to our stockholders
by providing access to such documents on the internet instead of mailing printed copies. Common stockholders of record will not
receive printed materials unless they request them. Instead, a Notice of Internet Availability is mailed that instructs stockholders
as to how they may access and review all of the proxy materials on the internet. We intend to commence the mailing of the Notice
of Internet Availability on or about May 29, 2019 to all common stockholders and Series B stockholders of record entitled to vote
at the Annual Meeting. The beneficial owners of record entitled to vote at the Annual Meeting will receive printed copies by mail.
We intend to commence mailing printed copies to these stockholders on or about May 29, 2019.
Q.
How do I attend the Annual Meeting?
A.
The Annual Meeting will be held on Monday, July 8, 2019 at 2:00 p.m. local time in the Company’s New York office at 135
Fifth Avenue, 10
th
Floor, New York, NY 10010. Directions to the Annual Meeting may be found at
https://www.gauchoholdings.com/contact/locations
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Information on how to vote in person at the Annual Meeting is discussed below.
Q.
Who can vote at the Annual Meeting?
A.
Only stockholders of record at the close of business on May 20, 2019 will be entitled to vote at the Annual Meeting. On this Record
Date, there were ___________ shares of common stock outstanding and entitled to vote and ___________ shares of Series B preferred
stock outstanding and entitled to vote on an as-converted basis to common shares.
Q.
What am I voting on?
A.
There are three matters scheduled for a vote:
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Election
of three (3) directors to the board of directors to hold office for one-, two-, or three-year terms, as described in Proposal
No. 2 of the Proxy Statement, if Proposal No. 2 is approved, or until the next annual meeting, if Proposal No. 2 is not approved,
and in either case until their respective successors are elected and qualified.
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To
approve an amendment to the Company’s Amended and Restated Bylaws to implement a staggered Board structure (the “Classified
Board Provisions”) whereby the Board of Directors shall be divided into three classes, as nearly equal in number as
possible, designated: Class I, Class II and Class III, with each director serving for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided
,
that
each director
initially appointed to Class I shall serve for an initial term expiring at the Company’s 2020 annual meeting of stockholders;
each director initially appointed to Class II shall serve for an initial term expiring at the Company’s 2021 annual
meeting of stockholders; and each director initially appointed to Class III shall serve for an initial term expiring at the
Company’s 2022 annual meeting of stockholders.
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Providing
the Board of Directors discretion (if necessary to effect a listing of the Company’s common stock on a national exchange)
on or before June 30, 2020, to implement a reverse stock split of the outstanding shares of common stock in a range from one-for-two
(1:2) up to one-for-twenty-five (1:25), or anywhere between, while maintaining the number of authorized shares of Common Stock
(the “Reverse Stock Split”). This item was previously presented and approved at the 2018 Annual Meeting of the
Stockholders but the Board of Directors’ discretionary power expires on June 30, 2019 before the Company will be able
to uplist on a national exchange.
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Approval
of an amendment to the Company’s 2018 Equity Incentive Plan to allow for additional shares available for awards.
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Ratification
and approval of the appointment of Marcum LLP, as the Company’s independent registered accounting firm for the year
ended December 31, 2019.
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Q.
What if another matter is properly brought before the Annual Meeting?
A.
The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly
brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters
in accordance with their best judgment.
Q.
How do I vote and what is the vote required for each proposal?
A.
As to the election of the three director nominees under Proposal No. 1, you may vote “For” the election of the nominee
proposed by the Board, or “Withhold” for the nominee being proposed. The directors will be elected by a plurality
of votes cast at the Annual Meeting.
With
respect to Proposal No. 2 (amendment to Bylaws), you may vote “For” or “Against” or “Abstain”
for such proposal. Proposal No. 2 will be approved if a majority of common stock outstanding on an as-converted basis are cast
at the Annual Meeting vote in favor of such proposal.
With
respect to Proposal No. 3 (Reverse Stock Split), you may vote “For” or “Against” or “Abstain”
for such proposal. Proposal No. 3 will be approved if a majority of common stock outstanding on an as-converted basis are cast
at the Annual Meeting vote in favor of such proposal.
With
respect to Proposal No. 4 (amendment to 2018 Plan), you may vote “For” or “Against” or “Abstain”
for each proposal. Proposal No. 4 will be approved if a majority of the votes present at the Annual Meeting vote in favor of such
proposal.
With
respect to Proposal No. 5 (ratification of the appointment of our independent registered accounting firm), you may vote “For”
or “Against” or “Abstain” for each proposal. Proposal No. 5 will be approved if a majority of the votes
present at the Annual Meeting vote in favor of such proposal.
Proposal
No. 5 is advisory in nature and non-binding on the Company. However, our Board of Directors values the opinions of all of our
stockholders and will consider the outcome of this vote when making future decisions.
The
procedures for voting are fairly simple:
Stockholder
of Record: Shares Registered in Your Name
If
on May 20, 2019 your shares were registered directly in your name with GGH’s transfer agent, Continental Stock Transfer
& Trust Company, Inc., then you are a stockholder of record. As a stockholder of record, you may vote in person at the Annual
Meeting or vote by proxy by visiting
https://www.cstproxy.com/gauchogroupholdings/2019
and following the instructions provided
on the Notice of Internet Availability. Whether or not you plan to attend the Annual Meeting, we urge you to fill out your proxy
via the internet to cast your votes or vote via telephone.
If
you have requested to receive printed copies of the proxy materials by mail, you may vote using the proxy card enclosed with the
proxy materials and returning it by mail. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to
ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have already voted by proxy.
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To
vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.
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To
vote online or via telephone, follow the instructions on the Notice of Internet Availability mailed to you.
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If
you have received or requested to receive your proxy materials by mail, you have the option to vote using the proxy card included
in the mailing. To do so, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided.
If we receive your signed proxy card before the Annual Meeting, we will vote your shares as you direct.
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Stockholders
Recently Purchasing Shares
If
you are an existing stockholder who recently purchased additional stock in the Company and/or you are a new stockholder who recently
purchased stock in the Company on or before May 20, 2019, you may vote in person at the Annual Meeting or vote by mail or fax
by following the instructions provided in your proxy materials. Whether or not you plan to attend the Annual Meeting, we urge
you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have
already voted by proxy.
Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If
on May 20, 2019 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar
organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being
forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for
purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding
how to vote the shares in your account. Simply complete the steps included in the voting instruction form to ensure that your
vote is counted.
You
are also invited to attend the Annual Meeting. To vote in person at the Annual Meeting, you must obtain a valid proxy from your
broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials or contact your
broker or bank to request a proxy form.
Series
B Preferred Shares: Series B Preferred Stock Holders
If
you are a holder of Series B preferred stock as of May 20, 2019, you may vote in person at the Annual Meeting or vote by mail
or fax by following the instructions provided in your proxy materials. Whether or not you plan to attend the Annual Meeting, we
urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you
have already voted by proxy.
Q.
How many votes do I have?
A.
On each matter to be voted upon, you have one vote for each share of common stock you own as of May 20, 2019 and for each share
of Series B preferred stock you own as of May 20, 2019, you are entitled to the number of votes per share based on the following
formula:
$10
÷ the fair market value of the Company’s common stock as of the date the shares of Series B preferred stock were
issued, subject to a maximum of ten votes per share of Series B preferred stock.
Q.
What happens if I do not vote?
Stockholders
of Record: Shares Registered in Your Name
A.
If you are a stockholder of record and do not vote by proxy by accessing
https://www.cstproxy.com/gauchogroupholdings/2019
,
by telephone, in person at the Annual Meeting, or, if you’ve received or requested to receive the proxy materials by mail,
and do not complete and return your proxy card by mail, your shares will not be voted.
Beneficial
Owners: Shares Registered in the Name of Broker or Bank
A.
If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether
your broker or nominee will still be able to vote your shares depends on whether the particular proposal is considered to be a
routine matter under applicable rules. Brokers and nominees can use their discretion to vote “uninstructed” shares
with respect to matters that are considered to be “routine” under applicable rules but not with respect to “non-routine”
matters. Under applicable rules and interpretations, “non-routine” matters are matters that may substantially affect
the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested),
executive compensation (including any advisory stockholder votes on executive compensation and on the frequency of stockholder
votes on executive compensation), and certain corporate governance proposals, even if management-supported. Accordingly, your
broker or nominee may not vote your shares on the election of directors (Proposal 1) or the Reverse Stock Split (Proposal 3) or
the Amendment to the Bylaws (Proposal 2) or the amendment to the 2018 Plan (Proposal 4) without your instructions but may vote
your shares on the ratification of Marcum LLP as our independent registered public accounting firm for fiscal year 2019 (Proposal
5) even in the absence of your instruction.
Q.
What if I return a proxy card or otherwise vote but do not make specific choices?
A.
If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as
applicable, “For” the election of the nominee for director named in this Proxy Statement, “For” the amendment
to the bylaws to establish the staggered board structure, “For” the reverse stock split to be implemented in the discretion
of the Board of Directors subject to the terms of the resolution, “For” the approval of the amendment to our 2018
Equity Incentive Plan, and “For” the approval of the appointment of Marcum LLP as our independent registered public
accounting firm for our fiscal year ending December 31, 2019. If any other matter is properly presented at the Annual Meeting,
your proxyholder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.
Q.
Who is paying for this proxy solicitation?
A.
The Company will pay for the entire cost of soliciting proxies. In addition to these proxy materials, the Company’s directors
and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will
not be paid any additional compensation for soliciting proxies. The Company may also reimburse brokerage firms, banks and other
agents for the cost of forwarding proxy materials to beneficial owners.
Q.
What does it mean if I receive more than one set of proxy materials?
A.
If you receive more than one set of proxy materials, your shares may be registered in more than one name or in different accounts.
Please follow the voting instructions on each Notice of Internet Availability (or each proxy card in the proxy materials if you’ve
requested printed proxy materials) to ensure that all of your shares are voted.
Q.
Can I change my vote after submitting my proxy?
All
Stockholders of Record: Shares Registered in Your Name
A.
Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares,
you may revoke your proxy in any one of the following ways:
1.
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If
you’ve requested your proxy materials be mailed to you, you may submit another properly completed proxy card with a
later date;
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2.
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You
may send a timely written notice that you are revoking your proxy to the Company’s Secretary at 135 Fifth Avenue, 10
th
Floor, New York, NY 10010;
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3.
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You
may change your vote using the online voting method, in which case your latest internet proxy submitted prior to the Annual
Meeting will be counted; or
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4.
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You
may attend the Annual Meeting and vote in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy.
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Your
most current proxy card is the one that is counted.
Beneficial
Owner: Shares Registered in the Name of Broker or Bank
A.
If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker
or bank.
Q.
When are stockholder proposals and director nominations due for next year’s Annual Meeting?
A.
We anticipate that our 2020 Annual Meeting will be held in July 2020. To be considered for inclusion in next year’s proxy
materials, your proposal must be submitted in writing to the attention of the Secretary of Gaucho Group Holdings, Inc. at 135
Fifth Avenue, 10
th
Floor, New York, NY 10010. If you wish to submit a proposal at the Annual Meeting that is to be
included in next year’s proxy materials, you must do so in accordance with the Company’s amended and restated bylaws
(the “Bylaws”), which contain additional requirements about advance notice of stockholder proposals and director nominations.
In addition, you must comply with all applicable requirements of Rule 14a-8 promulgated under the Securities Exchange Act of 1934.
Q.
What are “broker non-votes”?
A.
As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker
or nominee holding the shares as to how to vote on matters deemed by the Nasdaq Capital Market (“Nasdaq”) to be “non-routine,”
the broker or nominee cannot vote the shares. These unvoted shares are counted as “broker non-votes.”
Q.
What is the quorum requirement?
A.
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least one-third
of the outstanding common shares and Series B preferred shares (on an as converted basis with the common stock) entitled to vote
are present at the Annual Meeting in person or represented by proxy. On the Record Date, there were __________ common shares outstanding
and ________ shares of Series B preferred stock, convertible on a voting basis into __________ shares of common stock issued and
outstanding. Thus, the holders of __________ shares of common stock and Series B preferred stock (on an as converted basis) must
be present in person or represented by proxy at the Annual Meeting to have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker,
bank or other nominee) or if you vote in person at the Annual Meeting. Abstentions and broker non-votes will be counted towards
the quorum requirement. If there is no quorum, the chairman of the Annual Meeting or the holders of a majority of shares present
at the Annual Meeting in person or represented by proxy may adjourn the Annual Meeting to another date.
Q.
How can I find out the results of the voting at the Annual Meeting?
A.
Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current
report on Form 8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not
available to us in time to file a Form 8-K within four business days after the Annual Meeting, we intend to file a Form 8-K to
publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K
to publish the final results.
Q.
What proxy materials are available on the internet?
A.
The Proxy Statement and the annual report to stockholders are available at:
https://www.cstproxy.com/gauchogroupholdings/2019
.
Forward
Looking Statements
This
Proxy Statement may contain certain “forward-looking” statements, as defined in Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection
with the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions that, if
they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or
implied by such forward-looking statements.
Such
forward-looking statements include statements about our expectations, beliefs or intentions regarding actions contemplated by
this Proxy Statement, our potential business, financial condition, results of operations, strategies or prospects. You can identify
forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather,
forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made
and are often identified by the use of words such as “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intend,” “may,” or “will,”
and similar expressions or variations. Because forward-looking statements relate to matters that have not yet occurred, these
statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any
future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results
to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described
under the caption “Risk Factors” included in our other filings with the Securities and Exchange Commission (“SEC”),
including the disclosures set forth in Item 1A of our Form 10-K for the year ended December 31, 2018. Furthermore, such forward-looking
statements speak only as of the date of this Proxy Statement. We undertake no obligation to update any forward-looking statements
to reflect events or circumstances occurring after the date of such statements.
RECORD
DATE AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT
Security
Ownership of Management
As
of May 13, 2019, the Company had 52,400,252 shares of its common stock issued and 52,349,719 outstanding, and 902,670 shares of
its Series B preferred stock issued and outstanding. The following table sets forth the beneficial ownership of the Company’s
common stock and Series B preferred stock as of the Record Date by each person who serves as a director and/or an executive officer
of the Company on that date, and the number of shares beneficially owned by all of the Company’s directors and named executive
officers as a group:
Name
and Address
of
Beneficial Owner
|
|
Position
|
|
Amount
and
Nature
of
Beneficial
Ownership
of
Common
Stock
(1)
|
|
|
Percent
of
Common
Stock
|
|
|
Amount
and
Nature
of
Beneficial
Ownership
of
Series B
Stock
(1)
|
|
|
Percent
of
Series
B
Stock
|
|
|
Total
Voting
Power
(8)
|
|
Scott
L. Mathis
c/o
GGH, 135 Fifth Avenue, 10
th
Floor, New York, NY 10010
|
|
Chief
Executive Officer and Chairman of the Board of Directors
|
|
|
7,286,697
|
(2)
|
|
|
13.2
|
%
|
|
|
2,100
|
(3)
|
|
|
Less
than 1
|
%
|
|
|
11.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maria
Echevarria
c/o
GGH, 135 Fifth Avenue, 10
th
Floor, New York, NY 10010
|
|
Chief
Financial Officer
|
|
|
184,052
|
(4)
|
|
|
Less
than 1
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
Less
than 1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julian
Beale
|
|
Director
|
|
|
466,338
|
(5)
|
|
|
1.0
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
J.L. Lawrence
|
|
Director
|
|
|
564,450
|
(6)
|
|
|
1.1
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
A. Moel
|
|
Director
|
|
|
483,220
|
(7)
|
|
|
1.0
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
current directors, directors elect, director nominees, executive officers and named executive officers as a group (five persons)
|
|
|
|
|
8,984,757
|
|
|
|
17.3
|
%
|
|
|
2,100
|
|
|
|
Less
than 1
|
%
|
|
|
14.5
|
%
|
Notes
to
Security Ownership of Management
table shown above:
|
(1)
|
Calculated
in accordance with 1934 Act Rule 13d-3.
|
|
|
|
|
(2)
|
Consists
of (a) 538,362 shares of our common stock owned by Mr. Mathis directly; (b) 3,777,425 shares owned by The WOW Group, LLC,
of which Mr. Mathis is a controlling member; (c) 204,803 shares owned by Mr. Mathis’s 401(k) account; (d) warrants to
acquire 210,217 shares of common stock, and (e) the right to acquire 2,424,897 shares of common stock subject to the exercise
of options.
|
|
(3)
|
Consists
of 2,100 shares of Series B preferred stock owned by Mr. Mathis’ 401(k) and 19,800 shares of common stock on an as converted
basis to common stock for voting purposes.
|
|
|
|
|
(4)
|
Consists
of (a) 7,484 shares owned by Mrs. Echevarria’s 401(k) account and (b) 176,568 shares of our common stock issuable upon
the exercise of stock options.
|
|
|
|
|
(5)
|
Consists
of (a) 97,588 shares of our common stock owned by Mr. Beale directly; and (b) 466,338 shares of our common stock issuable
upon the exercise of stock options.
|
|
|
|
|
(6)
|
Consists
of (a) 184,971 shares of our common stock owned by Mr. Lawrence directly; (b) 10,729 shares owned by Mr. Lawrence and his
spouse as trustees for the Peter Lawrence 1992 Settlement Trust; and (c) 466,338 shares of our common stock issuable upon
the exercise of stock options.
|
|
|
|
|
(7)
|
Consists
of (a) 151,491 shares owned by Dr. Moel directly; (b) 176,546 shares held by Dr. Moel’s 401(k); (c) 26,693 shares held
by Andrew Moel, his son; (d) 28,490 shares held by Erin Moel, his daughter; and (e) 100,000 shares issuable upon the exercise
of stock options.
|
|
|
|
|
(8)
|
Calculated
based common stock being entitled to a total of 52,349,719 votes as of May 13, 2019 and Series B preferred stock being entitled
to a total of 8,456,072 votes as of May 13, 2019.
|
Security
Ownership of Certain Beneficial Owners
As
of May 13, 2019, the only persons or entities that beneficially own more than 5% of its outstanding common stock who do not serve
as an executive officer or director or who are a director nominee of the Company are presented in the table below.
Name
and Address of Beneficial Owner
|
|
Amount
and
Nature
of
Beneficial
Ownership
of
Common
Stock
(1)
|
|
|
Percent
of
Common
Stock
|
|
|
Amount
and
Nature
of
Beneficial
Ownership
of
Series
B
Stock
(1)
|
|
|
Percent
of
Series
B
Stock
|
|
|
Total
Voting
Power (4)
|
|
The
WOW Group, LLC
c/o Scott L. Mathis
135 Fifth Avenue
New York, New York 10010
|
|
|
3,777,425
|
|
|
|
7.2
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
6.2
|
%
|
Murdock
and Janie Richard (2)
|
|
|
2,789,913
|
|
|
|
5.3
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
4.6
|
%
|
Ralph
& Mary Rybacki (3)
|
|
|
2,782,348
|
|
|
|
5.3
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
4.6
|
%
|
|
(1)
|
Calculated
in accordance with 1934 Act Rule 13d-3.
|
|
|
|
|
(2)
|
Based
on information contained on Schedule 13G filed by Murdock Richard on February 6, 2015. The principal business address of Mr.
and Mrs. Richard is 5950 Sherry Lane, Suite 210, Dallas, TX 7522.
|
|
|
|
|
(3)
|
Based
on information contained on Schedule 13G filed by Ralph and Mary Rybacki on February 11, 2016. The principal business address
of Mr. and Mrs. Rybacki is 500 Capital Drive, Lake Zurich, IL 60047.
|
|
|
|
|
(4)
|
Calculated
based common stock being entitled to a total of 52,349,719 votes as of May 13, 2019 and Series B preferred stock being entitled
to a total of 8,456,072 votes as of May 13, 2019.
|
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
Board currently consists of four (4) directors who are not divided into classes. The Board authorized an increase in the number
of directors on the Board of Directors to four (4) on April 29, 2019. There are three (3) nominees for election to the Board this
year. Julian Beale has not been nominated as a director.
Delaware
law permits, but does not require, a classified or staggered board of directors, pursuant to which the directors can be divided
into as many as three classes with staggered terms of office, with one class of directors standing for election each year. As
a classified board, a certain number, but not all, of the directors of our Board of Directors will be elected each year.
On
May 13, 2019, the Board of Directors nominated Scott L. Mathis, Peter J.L. Lawrence, and Steven A. Moel for election at the 2019
Annual Meeting. If our stockholders vote to approve to amend the bylaws to establish a classified Board of Directors pursuant
to Proposal 2, our Board of Directors will be reestablished as a classified board of directors divided into three classes with
staggered terms (the “Classified Board Provision”). Under the Classified Board Provision, our Board of Directors will
be divided into three classes, designated Class I, and Class II and Class III. Our Board of Directors has determined that our
current directors who are nominated for re-election will be divided into classes as follows:
CLASS
|
|
DIRECTORS
|
I
|
|
Steven
A. Moel
(the
“Class I Directors”)
|
|
|
|
II
|
|
Peter
J.L. Lawrence
(the
“Class II Directors”)
|
|
|
|
III
|
|
Scott
L. Mathis
(the
“Class III Directors”)
|
Generally,
directors in a staggered board will be elected for three-year terms; however, in order to implement the staggered board at the
this Annual Meeting, the Class I Directors will be elected for a one-year term, to serve until the 2020 annual meeting of stockholders,
the Class II Directors will be elected for a two-year term, to serve until the 2021 annual meeting of stockholders, and the Class
III Directors will be elected for a three-year term, to serve until the 2022 annual meeting of stockholders, and in each case,
until their respective successor, if any, is duly elected and qualified.
In
the event our stockholders do not approve the establishment of a classified Board of Directors pursuant to Proposal 2, the directors
elected at this Annual Meeting will serve for one-year terms until the 2020 annual meeting of stockholders, and until their respective
successor, if any, is duly elected and qualified.
There
are no family relationships between or among any of our executive officers, directors or nominees for director. Mr. Julian Beale
is not standing for re-election as a director.
Information
Regarding the Board of Directors and Corporate Governance
As
of the Record Date, the names, titles, and ages of the members of the Company’s Board of Directors and its Director nominees
are as set forth in the below table.
Name
|
|
Age
as of
May
13,
2019
|
|
Position
|
Scott
L. Mathis
|
|
57
|
|
Chief
Executive Officer and Chairman of the Board of Directors; Director Nominee
|
Peter
J.L. Lawrence
|
|
85
|
|
Director;
Director Nominee
|
Steven
A. Moel
|
|
75
|
|
Director;
Director Nominee
|
Julian
Beale*
|
|
84
|
|
Director
|
*Mr.
Beale is currently a director of the Company but is not standing for re-election.
The
Company’s Board of Directors seeks to ensure that it is composed of members whose particular experience, qualifications,
attributes, and skills, when taken together, will allow the Board of Directors to satisfy its oversight obligations effectively.
The Company does not currently have a separate nominating (or similar) committee as given the Company’s small size the Company
does not yet believe such a committee is necessary. However, as the Company grows and considers trying to position itself for
a potential listing on a stock exchange, it will establish a separate nominating committee. Currently, the independent members
of the Board of Directors are responsible for identifying and nominating appropriate persons to add to the Board of Directors
when necessary. In identifying Board candidates, it is the goal of the independent members of the Board to identify persons whom
they believe have appropriate expertise and experience to contribute to the oversight of a company of GGH’s nature while
also reviewing other appropriate factors.
Messrs.
Mathis, Lawrence and Beale and Dr. Moel are current members of the Board of Directors. At the Company’s 2017 Annual Meeting,
Marc Dumont and Dr. Moel were elected to join the Board when the Company’s common stock is formally uplisted to Nasdaq,
which has not occurred to date. At the Company’s 2018 Annual Meeting, John I. Griffin was elected to join the Board when
the Company’s common stock is formally uplisted to Nasdaq, which has not occurred to date. Upon an uplisting to Nasdaq,
Messrs. Dumont and Griffin will join the Board.
Summaries
of the background and experience of the Company’s directors and officers are as follows:
|
●
|
Scott
Mathis
: Mr. Mathis has been actively involved with the Company’s business operations and strategy since it was founded
in 1999 and has significant knowledge regarding its current and contemplated business operations. The Board believes he is
valuable in forming the Company’s business strategy and identifying new business opportunities, a determination based
on his executive level experience working in the real estate development industry and in several consumer-focused businesses.
|
|
|
|
|
|
Mr.
Mathis is the founder of GGH and has served as Chief Executive Officer and Chairman of the Board of Directors since its inception
in April 1999. Mr. Mathis has over five years’ experience serving as Chief Executive Officer and Chairman of the Board
of Directors of Mercari Communications Group, Ltd., a public company. Mr. Mathis is also the founder, Chief Executive Officer,
and Chairman of InvestProperty Group, LLC and various other affiliated entities. Since July 2009, Mr. Mathis has served as
the Chief Executive Officer and Chairman of Hollywood Burger Holdings, Inc., a company he founded which is developing Hollywood-themed
American fast food restaurants. Since June 2011, Mr. Mathis has also served as the Chairman and Chief Executive Officer of
InvestBio, Inc., a former subsidiary of GGH that was spun off in 2010. Including his time with GGH and its subsidiaries, Mr.
Mathis worked for over 25 years in the securities brokerage field. From 1995-2000, he worked for National Securities Corporation
and The Boston Group, L.P. Before that, he was a partner at Oppenheimer and Company and a Senior Vice President and member
of the Directors Council at Lehman Brothers. Mr. Mathis also worked with Alex Brown & Sons, Gruntal and Company, Inc.
and Merrill Lynch. Mr. Mathis received a Bachelor of Science degree in Business Management from Mississippi State University.
|
|
●
|
Julian
H. Beale
. Mr. Beale has served as a director of GGH since its inception in April 1999. Since 1996, Mr. Beale has managed
his own investments, which include listed “blue chip” shares, numerous speculative stocks, and real estate. Mr.
Beale has over 10 years’ experience serving as a director of Adacel Technologies Ltd., an Australian Stock Exchange
listed company that provides air traffic simulations, training, and management activities. Mr. Beale is also a director of
Private Branded Beverage Ltd., a private company, and since July 2009 a director of InvestBio, Inc. After 14 years in engineering
and after forming a plastics processing company that he built to employ more than 200 people, Mr. Beale has since the early
1970’s been involved in consulting and investing. In 1977, he was part of a consortium that purchased what became the
Moonie Oil Company, a resources corporation that had interests in petroleum production. In 1984, he entered Federal Parliament
(Australia). During his 12 years in politics, he held many Shadow Minister portfolios (i.e., cabinet level position with minority
party). He has a Bachelor of Engineering degree from Sydney University, Australia and an MBA from Harvard University. The
determination was made that Mr. Beale should serve on GGH’s Board of Directors due to his experience as a director for
other public companies and as an investor in real estate. Mr. Beale is not standing for re-election as a director of GGH.
|
|
|
|
|
●
|
Peter
J.L. Lawrence:
Mr. Lawrence has served as a director of GGH since July 1999. The Board has determined that he is a valuable
member of the Board due to his experience as an investor in smaller public companies and service as a director for a number
of public companies.
|
|
|
|
|
|
Specifically,
Mr. Lawrence was from 2000 to 2014 a director of Sprue Aegis plc, a U.K. company traded on the London Stock
Exchange that designs and sells smoke and carbon monoxide detectors for fire protection of domestic and industrial premises
in the U.K.and Europe. In the same period he also served as Chairman of Infinity IP, a private company involved with intellectual
property and distribution in Australasia; and director of Hollywood Burger Holdings, Inc. From 1970 to 1996, Mr. Lawrence
served as Chairman of Associated British Industries plc, a holding company of a group of chemical manufacturers making
car engine and aviation jointings and sealants both for OEM and after markets, specialty waxes and anti-corrosion coatings
for the automotive, tire and plastics industries in U.K ,Europe and USA.
|
|
|
|
|
|
Mr.
Lawrence has additional experience as a director of a publicly-traded company by serving as a director of Beacon Investment
Trust PLC, a London Stock Exchange-listed company from 2003 to June 2010. Beacon invested in small and recently floated companies
on the Alternative Investment Market of the London Stock Exchange. Mr. Lawrence served on the investment committee of ABI
Pension fund for 20 years as well as the investment committee of Coram Foundation Children Charity founded in 1739
as the Foundling Hospital from 1977 to 2004. He received a Bachelor of Arts in Modern History from Oxford University where
he graduated with honors.
|
|
|
|
|
●
|
Steven
A. Moel:
Dr. Moel served as a Senior Business Advisor for the Company since 2008
and began serving as a director of its subsidiary, Gaucho Group, Inc. as of November
2018. Dr. Moel is a medical doctor and licensed attorney (currently inactive). Dr. Moel
had a private legal practice as a business and transactional attorney and is a member
of the California and American Bar Associations and has served as legal counsel to many
corporations. The Board has determined that he would be a valuable member of the Board
due to his extensive and broad experience and knowledge in business. In addition to serving
as a member of the Company’s Board of Advisors, Dr. Moel is presently a member
of the board of directors of Hollywood Burger Holdings, Inc., a related party to the
Company (International Fast Food Restaurants).
Previously,
Dr. Moel served in many roles, including most recently as a Senior Business Advisor for Global Job Hunt (International
Recruiting and Education). He was also founder of Akorn, Inc., NASDAQ: AKRX (Biotechnology/Pharmaceutical Mfg.), where
he served as a Director on the Executive Board and as Vice President of Mergers & Acquisitions. Dr. Moel previously
served as: the Vice President, Mergers & Acquisitions and Business Development of Virgilian, LLC (Nutraceuticals/Agricultural);
CEO of U.S. Highland, Inc. BB:UHLN (Mfg. of Motorcycles/Motorsports); CEO of Millennial Research Corp. (Mfg./Ultra-high
efficiency motors); Chairman and COO of WayBack Granola Co. (Granola Manufacturing); Executive VP, Mergers and Acquisitions
of Agaia Inc. (Green Cleaning Products). He has also served as: President, COO and Executive Director of American Wine
Group (Wine Production/Distribution); Senior Business and Advisor, of viaMarket Consumer Products, LLC (Manufacturer of
Consumer Products); as a member of the Board of Directors of Grudzen Development Corp. (Real Estate); COO and Chairman
of the Board of Directors of Paradigm Technologies (Electronics/Computer Developer); President and CEO of Sem-Redwood
Enterprises (Stock Pool), and as a member of the Advisory Board of Mahlia Collection (Jewelry Design/ Manufacturing).
Dr.
Moel is a board-certified ophthalmologist who was in private practice and academia. He is an Emeritus Fellow of the American
Academy of Ophthalmology and his academic history includes Washington University-St. Louis, University of Miami-Coral
Gables, Marshall University, West Virginia University, University of Colorado, Harvard University, Louisiana State University-New
Orleans, University of Illinois-Chicago, and the College of Law in Santa Barbara.
|
If
the stockholders vote to approve the establishment of a classified Board of Directors pursuant to Proposal 2, Steven A. Moel shall
serve as a Class I Director of the Company, Peter J.L. Lawrence shall serve as a Class II Director of the Company and Scott L.
Mathis shall serve as a Class III Director of the Company. If the stockholders do not vote to approve the establishment of a classified
Board of Directors pursuant to Proposal 2, all of our directors will serve for one-year terms until the 2020 annual meeting of
stockholders, and in either case, until a respective successor, if any, is duly elected and qualified.
Directors
are elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote for directors.
The three (3) nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies
will be voted, if authority to do so is not withheld, for the election of the three (3) nominees named below. Abstentions and
broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether any nominee is elected.
If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election
of a substitute nominee proposed by us. Each person nominated for election has agreed to serve if elected. Our management has
no reason to believe that any nominee will be unable to serve.
OUR
Board Of Directors Recommends A VOTE “
FOR
” EaCH
NAMED
NOMINEE.
Significant
Employees
There
are no significant employees of GGH other than its executive officers named above.
Transactions
with Related Persons
The
following is a description of transactions during the last fiscal year in which the transaction involved a material dollar amount
and in which any of the Company’s directors, executive officers or holders of more than 5% of GGH common stock and Series
B Preferred on an as- converted basis had or will have a direct or indirect material interest, other than compensation which is
described under “Executive Compensation.”
●
|
Accounts
receivable – related parties
, a net of $71,650 at December 31, 2018 represents the net realizable value of advances
made to related, but independent, entities under common management, which include Hollywood Burger Holdings, Inc. (“HBH”)
and The WOW Group, LLC “(WOW Group”), all of which represents amounts owed to the Company in connection with expense
sharing agreements as described elsewhere in the proxy materials and our Annual Report. Scott Mathis is Chairman and Chief
Executive Officer of Hollywood Burger Holdings, Inc. (“HBH”), a private company he founded which is developing
Hollywood-themed fast food restaurants in the United States. The Company has an expense sharing agreement with HBH to provide
office space and other clerical services. Mr. Mathis is also a managing member and holds a controlling interest in The WOW
Group. Non-managing members include certain former DPEC Capital employees and certain GGH stockholders. The WOW Group’s
only asset is its interest in GGH as of December 31, 2018.
|
Employment
Agreements
See
the Executive Compensation section of this Proxy Statement for a discussion of the employment agreement between the Company and
Mr. Mathis.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16 of the Exchange Act requires that reports of beneficial ownership of common stock and changes in such ownership be filed with
the Securities and Exchange Commission by Section 16 “reporting persons,” including directors, certain officers, holders
of more than 10% of the outstanding common stock and certain trusts of which reporting persons are trustees. We are required to
disclose in this Annual Report each reporting person whom we know to have failed to file any required reports under Section 16
on a timely basis during the fiscal year ended December 31, 2018. To our knowledge, based solely on a review of copies of Forms
3, 4 and 5 filed with the Securities and Exchange Commission and written representations that no other reports were required,
during the fiscal year ended December 31, 2018 our officers, directors and 10% stockholders complied with all Section 16(a) filing
requirements applicable to them, except that Mr. Beale has not yet filed a Form 4 related to stock options granted to him in November
2017 or in January 2019; Mr. Lawrence filed one Form 4 late; Mr. Mathis filed three Forms 4 late, Ms. Echevarria filed two Forms
4 late; and Dr. Moel filed a Form 3 late.
Director
Independence
After
the Annual Meeting, it is expected that Messrs. Dumont and Griffin will join the Board at such time that the Company’s common
stock is formally uplisted to Nasdaq. Assuming Proposal No. 1 is approved, the Company’s Board will continue to consist
of Messrs. Mathis and Lawrence and Dr. Moel, with Messrs. Dumont and Griffin joining the Board at such time that the Company’s
common stock is formally uplisted to Nasdaq.
The
Company utilizes the definition of “independent” as it is set forth in Section 5062(a)(2) of the Nasdaq Rules. Further,
the Board considers all relevant facts and circumstances in its determination of independence of all members of the board (including
any relationships). Based on the foregoing criteria, Messrs. Beale, Dumont, Lawrence, and Griffin and Dr. Moel would all be considered
independent directors and were confirmed as such by the Board of Directors.
Involvement
in Certain Legal Proceedings
During
the past ten years, except as provided below, none of the persons serving as executive officers and/or directors of the Company
has been the subject matter of any of the following legal proceedings that are required to be disclosed pursuant to Item 401(f)
of Regulation S-K including: (a) any bankruptcy petition filed by or against any business of which such person was a general partner
or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any criminal convictions;
(c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; (d) any finding by a court, the SEC or the CFTC to have violated a
federal or state securities or commodities law, any law or regulation respecting financial institutions or insurance companies,
or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory organization or registered
entity or equivalent exchange, association or entity. Further, no such legal proceedings are believed to be contemplated by governmental
authorities against any director or executive officer.
In
May 2007, InvestPrivate (now known as DPEC Capital), Scott Mathis and two other InvestPrivate officers entered into a settlement
of a disciplinary action filed in May 2004 by the NASD (now known as FINRA), the regulatory body that had primary jurisdiction
over InvestPrivate. As part of the settlement, the NASD expressly withdrew numerous allegations and charges, and also resolved
almost all of the remaining charges in the case. Mr. Mathis received a 30-day suspension from acting in a principal capacity for
InvestPrivate, and InvestPrivate was suspended for 60 days from accepting new engagements to offer private placements. The settling
parties paid fines totaling $215,000, and InvestPrivate was also required to engage an independent consultant to evaluate InvestPrivate’s
practices and procedures relating to private placement offerings, and to make necessary changes in response to the consultant’s
recommendations.
While
the settlement with the NASD resolved most of the issues in the case, a few remaining charges were not resolved, namely, whether
Mr. Mathis inadvertently or willfully failed to properly make certain disclosures on his personal NASD Form U-4, specifically,
the existence of certain federal tax liens on his Form U4 during the years 1996-2002.
In
December 2007, the FINRA Office of Hearing Officers (“OHO”) held that Mr. Mathis negligently failed to make certain
disclosures on his Form U4 concerning personal tax liens, and to have willfully failed to make other required U4 disclosures regarding
those tax liens. (All of the underlying tax liabilities were paid in 2003 so the liens were released in 2003.) Mr. Mathis received
a three-month suspension, and a $10,000 fine for the lien nondisclosures. With respect to other non-willful late U4 filings relating
to two customer complaints, he received an additional 10-day suspension (to run concurrently) plus an additional $2,500 fine.
The suspension was completed on September 4, 2012, and all fines have been paid.
Mr.
Mathis has never disputed that he failed to make or timely make these disclosures on his Form U4; he only disputed the willfulness
finding. He appealed the decision (principally with respect to the willfulness issue) to the FINRA National Adjudicatory Council
(“NAC”). In December 2008, NAC affirmed the OHO decision pertaining to the “willful” issue, and slightly
broadened the finding. Thereafter, Mr. Mathis appealed the NAC decision to the Securities and Exchange Commission and thereafter
to the U.S. Court of Appeals. In each instance, the decision of the NAC was affirmed.
While under FINRA’s rules the finding
that Mr. Mathis was found to have acted willfully subjects him to a “statutory disqualification,” in September 2012,
Mathis submitted to FINRA an application on Form MC-400 in which he sought permission to continue to work in the securities industry
notwithstanding the fact that he is subject to a statutory disqualification. That application was approved in Mr. Mathis’
favor in April 2015. Mr. Mathis was at all times able to remain as an associated person of a FINRA member in good standing.
Subsequently, the Company expanded into other business opportunities and the broker dealer subsidiary (DPEC Capital, Inc.)
was no longer necessary to the Company’s operations. Therefore, Mr. Mathis voluntarily ceased all activities
at the Company’s broker-dealer subsidiary (DPEC Capital, Inc.), and voluntarily terminated his registration with FINRA in
December 2016, when DPEC Capital, Inc. elected to discontinue its operations and filed a Notice of Withdrawal as a Broker or Dealer
on Form BDW.
Corporate
Governance
In
considering its corporate governance requirements and best practices, GGH looks to the Nasdaq Listed Company manual, which is
available through the internet at
http://nasdaq.cchwallstreet.com/
.
Board
Leadership Structure
The
Board does not have an express policy regarding the separation of the roles of Chief Executive Officer and Board Chairman as the
Board believes it is in the best interests of the Company to make that determination based on the position and direction of the
Company and the membership of the Board. The Board has not designated a lead independent director. Currently, Scott Mathis serves
as both the Company’s Chief Executive Officer and Chairman of the Board. As Chief Executive Officer, Mr. Mathis is involved
in the day-to-day operations of the Company and also provides strategic guidance on the Company’s operations. The Board
believes Mr. Mathis’s experience and knowledge are valuable in the oversight of both the Company’s operations as well
as with respect to the overall oversight of the Company at the Board level. The Board believes that this leadership structure
is appropriate as Mr. Mathis is intimately knowledgeable with the Company’s current and planned operations.
Role
of the Board and the Audit Committee in Risk Oversight
While
management is charged with the day-to-day management of risks that GGH faces, the Board of Directors, and the Audit Committee
of the Board, have been responsible for oversight of risk management. The full Board, and the Audit Committee since it was formed,
have responsibility for general oversight of risks facing the Company. Specifically, the Audit Committee will review and assess
the adequacy of GGH’s risk management policies and procedures with regard to identification of GGH’s principal risks,
both financial and non-financial, and review updates on these risks from the Chief Financial Officer and the Chief Executive Officer.
The Audit Committee will also review and assess the adequacy of the implementation of appropriate systems to mitigate and manage
the principal risks.
Review
and Approval of Transactions with Related Parties
On
April 15, 2015, the Board adopted a policy requiring that disinterested directors approve transactions with related parties which
are not market-based transactions. The Board of Directors had been following this policy on an informal basis before.
Generally,
the Board of Directors will approve transactions only to the extent the disinterested directors believe that they are in the best
interests of GGH and on terms that are fair and reasonable (in the judgment of the disinterested directors) to GGH.
Audit
Committee
The
Board of Directors established the Audit Committee on April 15, 2015 to comply with Section 3(a)(58)(A) of the Exchange Act and
NYSE American Rule 803(B) as modified for smaller reporting companies by NYSE American Rule 801(h). The Audit Committee was established
to oversee the Company’s corporate accounting and financial reporting processes and audits of its financial statements.
The members of our Audit Committee are Messrs. Beale and Lawrence and Dr. Moel. On May 14, 2015, Mr. Lawrence was appointed chairman
of the Audit Committee. On August 11, 2015, the Board of Directors determined that Messrs. Beale and Lawrence were independent
under SEC Rule 10A-3(b)(1). On April 29, 2019, the Board appointed Dr. Moel as a member of the Audit Committee and determined
that Dr. Moel was independent under SEC Rule 10A-3(b)(1). The Board has determined that all current members of the Audit Committee
are “financially literate” as interpreted by the Board in its business judgment. No members of the Audit Committee
have been qualified as an audit committee financial expert, as defined in the applicable rules of the SEC because the Board believes
that the Company’s status as a smaller reporting company does not require expertise beyond financial literacy. Because of
Mr. Beale’s health, the Audit Committee only met once during 2018. With Dr. Moel as a member of the Audit Committee, the
Audit Committee met and approved the Quarterly Report on Form 10-Q to be filed with the SEC on May 15, 2019, including unaudited
financials.
The
Audit Committee expects to meet periodically with our independent accountants and management to review the scope and results of
the annual audit and to review our financial statements and related reporting matters prior to the submission of the financial
statements to the Board. In addition, the Audit Committee expects to meet with the independent auditors at least on a quarterly
basis to review and discuss the annual audit or quarterly review of our financial statements. As permitted by the Company’s
Audit Committee Charter currently in effect, the Board consisting of Mr. Mathis and Mr. Lawrence met and approved the Annual Report
on Form 10-K as filed with the SEC on April 1, 2019.
We
have established an Audit Committee Charter that deals with the establishment of the Audit Committee and sets out its duties and
responsibilities. The Audit Committee is required to review and reassess the adequacy of the Audit Committee Charter on an annual
basis. The Audit Committee Charter is available on our Company website at
https://ir.gauchogroupholdings.com/governance-docs
.
No
Nominating Committee
GGH
has not established a nominating committee. However, on March 24, 2015 the Board adopted Nomination Guidelines effective April
15, 2015. The Nomination Guidelines were updated on December 6, 2017 to comply with the Nasdaq rules. Nominating decisions are
made by the independent directors. Eligible stockholders may nominate a person to the Board of Directors based on the procedure
set forth in the Nomination Guidelines. The Nomination Guidelines are available on our website at
https://ir.gauchogroupholdings.com/governance-docs
.
No
Compensation Committee or Compensation Consultant
GGH
has not established a compensation committee but adopted guidelines effective April 15, 2015 in accordance with NYSE American
rules. Under NYSE American Rule 805(a), if there is no compensation committee, compensation of the CEO (being Mr. Mathis) must
be determined, or recommended to the Board for determination, by a majority of independent directors on its Board of Directors.
The CEO may not be present during voting or deliberations for his compensation.
NYSE
American Rule 805(c)(1) enhances the independence requirements for directors in connection with compensation decisions by requiring
that the directors “consider all factors specifically relevant to determining whether a director has a relationship to the
listed company which is material to that director’s ability to be independent from management in connection with the duties
of a Compensation Committee member.” The Board of Directors has operated based on a belief that Messrs. Beale and Lawrence
and Dr. Moel are independent under this requirement.
Although
NYSE American Rule 805(c)(3)(i) provides that the Compensation Committee may (in its discretion, not Board discretion) retain
compensation consultants, independent legal counsel, and other advisors, the independent directors acting as the compensation
committee have not decided to do so. Our Compensation Guidelines are posted at our website:
https://ir.gauchogroupholdings.com/governance-docs
.
Code
of Business Conduct and Whistleblower Policy
On
March 24, 2015, our Board of Directors adopted a Code of Business Conduct and Whistleblower Policy effective April 15, 2015 (the
“Code of Conduct”). The Code of Conduct applies to all of our officers and employees, including our principal executive
officer, principal financial officer and principal accounting officer. Our Code of Conduct establishes standards and guidelines
to assist our directors, officers, and employees in complying with both the Company’s corporate policies and with the law
and is posted at our website:
https://ir.gauchogroupholdings.com/governance-docs
.
Insider
Trading Policy
On
March 24, 2015, our Board of Directors adopted an Insider Trading Policy effective April 15, 2015. The Insider Trading Policy
applies to all of our officers, directors, and employees. Our Insider Trading Policy is posted at our website:
https://ir.gauchogroupholdings.com/governance-docs
.
Stockholder
Communications to the Board
Stockholders
who are interested in communicating directly with members of the Board, or the Board as a group, may do so by writing directly
to the individual Board member c/o Secretary, Gaucho Group Holdings, Inc., 135 Fifth Ave., 10th Floor, New York, NY 10010. The
Company’s Secretary will forward communications directly to the appropriate Board member. If the correspondence is not addressed
to the particular member, the communication will be forwarded to a Board member to bring to the attention of the Board. The Company’s
Secretary will review all communications before forwarding them to the appropriate Board member.
Meetings
of the Board and Committees; Attendance at the Annual Meeting
The
Board of Directors held nine formal meetings either in person or via telephone during the fiscal year ended December 31, 2018
and acted by unanimous written consent one time during 2018. The Board has held seven meetings thereafter through the date of
this Proxy Statement and has not acted by unanimous written consent. Mr. Beale, currently a director but not standing for re-election,
attended fewer than 75% of the aggregate of the total number of Board meetings during fiscal 2018 due to health issues. Other
than Mr. Beale’s absence, regular communications were maintained throughout 2018 among all of the officers and directors
of the Company.
Board
members are not required to attend the Annual Meeting. This Annual Meeting is the Company’s third time hosting an annual
meeting.
Executive
Compensation
The
below table summarizes the compensation paid to our executive officers for the years ending December 31, 2017 and 2018.
Summary
Compensation Table for Executive Officers
|
Name
and Principal Position
|
|
Fiscal
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
(1)
($)
|
|
|
All
Other Compensation ($)
|
|
|
Total
($)
|
|
Scott
L. Mathis
(2)
|
|
|
2018
|
|
|
|
426,163
|
|
|
|
-
|
|
|
|
-
|
|
|
|
538,934
|
|
|
|
-
|
|
|
|
965,097
|
|
Chairman
of the Board and Chief Executive Officer
|
|
|
2017
|
|
|
|
426,164
|
|
|
|
-
|
|
|
|
-
|
|
|
|
97,243
|
|
|
|
-
|
|
|
|
523,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maria
I Echevarria
(3)
|
|
|
2018
|
|
|
|
150,000
|
|
|
|
35,000
|
|
|
|
-
|
|
|
|
14,628
|
|
|
|
-
|
|
|
|
199,628
|
|
Chief
Financial Officer and Chief Operating Officer
|
|
|
2017
|
|
|
|
150,000
|
|
|
|
35,000
|
|
|
|
-
|
|
|
|
16,407
|
|
|
|
-
|
|
|
|
201,407
|
|
(1)
|
Represents
the grant date full fair value of compensation costs of stock options granted during the respective year for financial statement
reporting purposes, using the Black-Scholes option pricing model. Assumptions used in the calculation of these amounts are
included in the Company’s consolidated financial statements. Refer to the Outstanding Equity Awards at Fiscal Year End
schedule regarding option details on an award-by-award basis. The above table does not include any options granted under our
subsidiary’s 2018 Equity Incentive Plan for Gaucho Group, Inc.
|
|
|
(2)
|
For
a description of Mr. Mathis’ employment agreement, please see “Employment Agreements” at page 23.
|
|
|
(3)
|
Maria
Echevarria was appointed Chief Financial Officer, Chief Operating Officer, Secretary and Compliance Officer effective April
13, 2015.
|
The
Board of Directors, acting in lieu of a compensation committee, is charged with reviewing and approving the terms and structure
of the compensation of the Company’s executive officers. Please see “
No Compensation Committee or Compensation
Consultant
” above at page 20 for details on the Company’s Compensation Guidelines.
The
Company considers various factors when evaluating and determining the compensation terms and structure of its executive officers,
including the following:
|
1.
|
The
executive’s leadership and operational performance and potential to enhance long-term value to the Company’s stockholders;
|
|
2.
|
The
Company’s financial resources, results of operations, and financial projections;
|
|
3.
|
Performance
compared to the financial, operational and strategic goals established for the Company;
|
|
4.
|
The
nature, scope and level of the executive’s responsibilities;
|
|
5.
|
Competitive
market compensation paid by other companies for similar positions, experience and performance levels; and
|
|
6.
|
The
executive’s current salary, the appropriate balance between incentives for long-term and short-term performance.
|
Company
management is responsible for reviewing the base salary, annual bonus and long-term compensation levels for other Company employees,
and the Company expects this practice to continue going forward. The entire Board of Directors remains responsible for significant
changes to, or adoption, of new employee benefit plans.
The
Company believes that the compensation environment for qualified professionals in the industry in which we operate is highly competitive.
In order to compete in this environment, the compensation of our executive officers is primarily comprised of the following four
components:
|
●
|
Base
salary;
|
|
●
|
Stock
option awards and/or equity based compensation;
|
|
●
|
Discretionary
cash bonuses; and
|
|
●
|
Other
employment benefits.
|
Base
Salary.
Base salary, paid in cash, is the first element of compensation to our officers. In determining base salaries for
our key executive officers, the Company aims to set base salaries at a level we believe enables us to hire and retain individuals
in a competitive environment and to reward individual performance and contribution to our overall business goals. The Board of
Directors believes that base salary should be relatively stable over time, providing the executive a dependable, minimum level
of compensation, which is approximately equivalent to compensation that may be paid by competitors for persons of similar abilities.
The Board of Directors believes that base salaries for our executive officers (not including our chief executive officer) are
appropriate for persons serving as executive officers of public companies similar in size and complexity similar to the Company.
On
September 28, 2015, we entered into an employment agreement with Scott Mathis, our CEO. For a description of the agreement terms,
please see “Employment Agreements” at page 23. The Company’s other executive officer, Ms. Echevarria, does not
have a written employment agreement but receives a base salary as noted above, believed to be in accordance with industry standards
and norms.
Stock
Option Plan Benefits –
Each of the Company’s executive officers is eligible to be granted awards under the Company’s
equity compensation plans. The Company believes that equity based compensation helps align management and executives’ interests
with the interests of our stockholders. Our equity incentives are also intended to reward the attainment of long-term corporate
objectives by our executives. We also believe that grants of equity-based compensation are necessary to enable us to be competitive
from a total remuneration standpoint. At the present time, we have three equity incentive plans for our management and employees.
The first is the 2008 Equity Incentive Plan, the second is the 2016 Equity Incentive Plan, and the third is the 2018 Equity Incentive
Plan. Almost all shares of common stock reserved for issuance in connection with awards under the 2008 Equity Incentive Plan have
been or were utilized in conjunction with existing, expired or cancelled awards of stock options. The Company will not issue any
additional options under the 2008 Equity Incentive Plan or the 2016 Equity Incentive Plan. As of May 13, 2019, there are
426,874 shares of common stock that remain reserved for issuance in connection with awards under the 2018 Equity Incentive
Plan.
We
have no set formula for granting awards to our executives or employees. In determining whether to grant awards and the amount
of any awards, we take into consideration discretionary factors such as the individual’s current and expected future performance,
level of responsibilities, retention considerations, and the total compensation package.
The
Company has granted each of its executive officers stock options, as outlined below.
Discretionary
Annual Bonus.
Discretionary cash bonuses are another prong of our compensation plan. The Board of Directors believes that
it is appropriate that executive officers and other employees have the potential to receive a portion of their annual cash compensation
as a cash bonus to encourage performance to achieve key corporate objectives and to be competitive from a total remuneration standpoint.
We
have no set formula for determining or awarding discretionary cash bonuses to our other executives or employees. In determining
whether to award bonuses and the amount of any bonuses, we have taken and expect to continue to take into consideration discretionary
factors such as the individual’s current and expected future performance, level of responsibilities, retention considerations,
and the total compensation package, as well as the Company’s overall performance including cash flow and other operational
factors.
The
employment agreement we have entered into with Mr. Mathis provides that he is eligible to receive a discretionary cash bonus,
to be determined by the Board of Directors. After the end of our 2018 fiscal year, the Board of Directors did not award any cash
bonuses to Mr. Mathis.
Other
Compensation/Benefits.
Another element of the overall compensation is through providing our executive officers various employment
benefits, such as the payment of health and life insurance premiums on behalf of the executive officers. Our executive officers
are also eligible to participate in our 401(k) plan on the same basis as other employees and the Company historically has made
matching contributions to the 401(k) plan, including for the benefit of our executive officers.
Employment
Agreements
We
have entered into an employment agreement with the Company’s Chief Executive Office, Scott L. Mathis.
Scott
Mathis -
On September 28, 2015, the Company entered into an employment agreement with its CEO (the “Employment Agreement”).
Among other things, the Employment Agreement provides for a three-year term of employment at an annual salary of $401,700 (subject
to a 3% cost-of-living adjustment per year), bonus eligibility, paid vacation and specified business expense reimbursements. The
Employment Agreement sets limits on the CEO’s annual sales of GGH common stock. The CEO is subject to a covenant not to
compete during the term of the Employment Agreement and following his termination for any reason, for a period of twelve months.
Upon a change of control (as defined by the Employment Agreement), all of the CEO’s outstanding equity-based awards will
vest in full and his employment term resets to two years from the date of the change of control. Following the CEO’s termination
for any reason, the CEO is prohibited from soliciting Company clients or employees for one year and disclosing any confidential
information of GGH for a period of two years.
The
Employment Agreement sets forth the terms whereby Mr. Mathis could be terminated by the Company for cause, in accordance with
the terms of the Employment Agreement. Should he be terminated without cause, he will be entitled to receive his then-current
base salary for a period of twelve months, plus all of the benefits or payments in respect of such benefits provided for under
the Employment Agreement.
On
September 20, 2018, the Board of Directors extended the Employment Agreement on the same terms for a period of 120 days. On January
31, 2019, the Board of Directors of the Company extended Scott Mathis’ Employment Agreement to expire on April 30, 2019
and on April 29, 2019, Mr. Lawrence, the sole independent director present at the meeting of the Board of Directors extended Mr.
Mathis’ Employment Agreement to expire on June 30, 2019. All other terms of the Employment Agreement remain the same.
Stock
Option, Stock Awards and Equity Incentive Plans
In
accordance with the Company’s 2016 and 2018 Equity Incentive Plans, the Company granted certain of its executive officers
stock options during the Company’s 2018 fiscal year; no other equity based awards were granted to executive officers during
the fiscal year.
The
following table provides information as to option awards granted by the Company and held by each of the named executive officers
of GGH as of December 31, 2018. There have been no stock awards made to Mr. Mathis or Ms. Echevarria as of December 31, 2018.
|
|
Option
Awards
|
Name
|
|
Number
of Securities Underlying Unexercised Options Exercisable
(#)
|
|
|
Number
of Securities Underlying Unexercised Options Unexercisable
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
Scott
L. Mathis
|
|
|
500,000
|
|
|
|
-
|
|
|
|
2.48
|
|
|
8/27/2019
|
|
|
|
150,000
|
|
|
|
-
|
|
|
|
2.48
|
|
|
8/27/2019
|
|
|
|
1,277,404
|
(1)
|
|
|
182,486
|
(1)
|
|
|
2.20
|
|
|
6/8/2020
|
|
|
|
75,000
|
(2)
|
|
|
225,000
|
(2)
|
|
|
1.10
|
|
|
11/17/2022
|
|
|
|
-
|
(3)
|
|
|
1,000,000
|
(3)
|
|
|
0.77
|
|
|
2/14/2023
|
|
|
|
-
|
(4)
|
|
|
725,000
|
(4)
|
|
|
0.54
|
|
|
9/20/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maria
I. Echevarria
|
|
|
131,250
|
(5)
|
|
|
18,750
|
(5)
|
|
|
2.20
|
|
|
6/8/2020
|
|
|
|
12,500
|
(6)
|
|
|
37,500
|
(6)
|
|
|
1.10
|
|
|
11/17/2022
|
|
|
|
-
|
(7)
|
|
|
25,000
|
(7)
|
|
|
0.77
|
|
|
2/14/2023
|
|
|
|
-
|
(8)
|
|
|
30,000
|
(8)
|
|
|
0.54
|
|
|
9/20/2023
|
The
above table does not include any options granted under our subsidiary’s 2018 Equity Incentive Plan for Gaucho Group, Inc.
(1)
|
On
June 8, 2015, Mr. Mathis was granted an option to acquire 1,459,890 shares of the Company’s common stock, of which 364,794
shares underlying the option vest on June 8, 2016, and 91,243 shares vest every three months thereafter.
|
|
|
(2)
|
On
November 17, 2017, Mr. Mathis was granted an option to acquire 300,000 shares of the Company’s common stock, of which
75,000 shares underlying the option vest on December 17, 2018, and 18,750 shares vest every three months thereafter.
|
|
|
(3)
|
On
February 14, 2018, Mr. Mathis was granted an option to acquire 1,000,000 shares of the Company’s common stock, of which
250,000 shares underlying the option vest on February 14, 2019, and 62,500 shares vest every three months thereafter.
|
|
|
(4)
|
On
September 20, 2018, Mr. Mathis was granted an option to acquire 725,000 shares of the Company’s common stock, of which
181,250 shares underlying the option vest on September 20, 2019, and 45,313 shares vest every three months thereafter.
|
|
|
(5)
|
On
June 8, 2015, Ms. Echevarria was granted an option to acquire 150,000 shares of the Company’s common stock, of which
37,500 shares underlying the option vest on June 8, 2016, and 9,375 shares vest every three months thereafter.
|
|
|
(6)
|
On
November 17, 2017, Ms. Echevarria was granted an option to acquire 50,000 shares of the Company’s common stock, of which
12,500 shares underlying the option vest on December 17, 2018, and 3,125 shares vest every three months thereafter.
|
|
|
(7)
|
On
February 14, 2018, Ms. Echevarria was granted an option to acquire 25,000 shares of the Company’s common stock, of which
6,256 shares underlying the option vest on February 14, 2019, and 1,562 shares vest every three months thereafter.
|
|
|
(8)
|
On
September 20, 2018, Ms. Echevarria was granted an option to acquire 30,000 shares of the Company’s common stock, of
which 7,500 shares underlying the option vest on September 20, 2019, and 1,875 shares vest every three months thereafter.
|
Compensation
of Directors
Since
its founding, the Company has compensated the non-employee members of its Board of Directors only with grants of stock options.
In 2018, the Company granted Mr. Lawrence an option to acquire 200,000 shares of the Company’s common stock at a price of
$0.539 per share, and in connection with Dr. Moel’s work on the Board of Advisors, to Dr. Moel, an option to acquire 40,000
shares at a price of $0.539 per share, neither of which were vested nor exercisable as of December 31, 2018.
The
following table sets forth compensation received by our non-employee directors:
|
|
|
|
|
Director
Compensation
|
|
|
|
Year
|
|
|
Fees
Earned or Paid in Cash
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
(1)
($)
|
|
|
Total
($)
|
|
Peter
Lawrence (2)
|
|
|
2018
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,450
|
|
|
|
19,450
|
|
|
|
|
2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,207
|
|
|
|
16,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julian
Beale (3)
|
|
|
2018
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,207
|
|
|
|
16,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
A. Moel (4)
|
|
|
2018
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,890
|
|
|
|
3,890
|
|
|
|
|
2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The
above table does not include any options granted under our subsidiary’s 2018 Equity Incentive Plan for Gaucho Group, Inc.
(1)
|
Represents
the grant date full fair value of compensation costs of stock options granted during the respective year for financial statement
reporting purposes, using the Black-Scholes option pricing model. Assumptions used in the calculation of these amounts are
included in the Company’s consolidated financial statements.
|
|
|
(2)
|
As
of December 31, 2018, Mr. Lawrence held options to acquire 600,000 shares of the Company’s common stock, of which 362,500
were vested and exercisable.
|
|
|
(3)
|
As
of December 31, 2018, Mr. Beale held options to acquire 400,000 shares of the Company’s common stock, of which 362,500
were vested and exercisable.
|
|
|
(4)
|
As
of December 31, 2018, Dr. Moel held options to acquire 40,000 shares of the Company’s common stock, of which none were
vested and exercisable. As compensation for his services on the Board of Advisors, Dr. Moel was granted options on August
27, 2014 at $2.48 per share to acquire 100,000 shares of common stock, all of which are vested and exercisable as of December
31, 2018.
|
Frequency
of the Advisory Vote on Executive Compensation
At
the 2017 Annual Meeting of Stockholders, the Board of Directors included an advisory stockholder vote regarding named executive
officer compensation. The next required advisory vote regarding the frequency of an advisory vote on named executive officer compensation
will be at the Annual Meeting of Stockholders to be held in 2020.
Risks
of Compensation Programs
The
Company’s equity-based compensation is performance based in that the issued stock options become valuable as the stockholders’
returns (measured by stock price) increase. Furthermore, in all cases, options granted to the Company’s employees are time-based
vesting. The Company believes that this vesting, coupled with the internal controls and oversight of the risk elements of its
business, have minimized the possibility that the compensation programs and practices will have a material adverse effect on the
Company and its financial, and operational, performance.
As
described above, the Board of Directors has general oversight responsibility with respect to risk management and exercises appropriate
oversight to ensure that risks are not viewed in isolation and are appropriately controlled. The Company’s compensation
programs are designed to work within this system of oversight and control, and the Board considers whether these compensation
programs reward reasonable risk-taking and achieve the proper balance between the desire to appropriately reward employees and
protecting the Company.
At
the Annual Meeting a vote will be taken on a proposal to approve the election of the three (3) director nominees.
Required
Vote
In
accordance with Delaware law, the directors will be elected by a plurality of votes cast at the Annual Meeting. As a result, abstentions
will have the same effect as votes for this proposal and broker non-votes will have no effect on this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE election of THE THREE (3) director nomineeS.
PROPOSAL
NO. 2
AMENDMENT
TO BYLAWS
We
believe that having a staggered Board of Directors divided by classes is in the best interest of both the Company and its stockholders
because it provides for greater stability and continuity on our Board of Directors.
Our
Board of Directors currently consists of four (4) members elected to one-year terms at each annual meeting of the stockholders.
We seek to establish a classified board of directors by dividing our Board of Directors into three classes with staggered terms.
A
classified board is one in which a certain number, but not all, of the directors are elected on a rotating basis each year. This
method of electing directors makes changes in the composition of the board of directors more difficult, and thus a potential change
in control of a corporation a lengthier and more difficult process. A classified board is designed to assure continuity and stability
in a board of directors’ leadership and policies by ensuring that at any given time a majority of the directors will have
prior experience with our Company and be familiar with our business and operations. Delaware law permits, but does not require,
a classified board of directors, pursuant to which the directors can be divided into as many as three classes with staggered terms
of office, with only one class of directors standing for election each year.
If
the stockholders approve this Proposal 2, the Amended and Restated Bylaws of the Company shall include the following new Sections
B and C of Article III, which set forth the terms of a classified Board of Directors with three classes of directors (the “Classified
Board Provisions”):
|
B.
|
Classes
of Directors
. The board of directors shall be and is divided into three classes, as nearly equal in number as possible,
designated: Class I, Class II and Class III. In case of any increase or decrease, from time to time, in the number of directors,
the number of directors in each class shall be apportioned as nearly equal as possible. No decrease in the number of directors
shall shorten the term of any incumbent director.
|
|
|
|
|
C.
|
Terms
of Office
. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting
at which such director was elected;
provided
,
that
each director initially appointed to Class I shall serve
for an initial term expiring at the corporation’s first annual meeting of stockholders following the effectiveness of
this provision; each director initially appointed to Class II shall serve for an initial term expiring at the corporation’s
second annual meeting of stockholders following the effectiveness of this provision; and each director initially appointed
to Class III shall serve for an initial term expiring at the corporation’s third annual meeting of stockholders following
the effectiveness of this provision;
provided further
, that the term of each director shall continue until the election
and qualification of a successor and be subject to such director’s earlier death or resignation.
|
Appendix
1
includes a copy of the Amendment to the Amended and Restated Bylaws showing the Classified Board Provisions.
If
our Company adopts the Classified Board Provisions, directors will be elected for three-year terms, with approximately one-third
of all directors elected each year; except that in order to implement the staggered board at the this annual meeting, the Class
I Directors will be elected for a one-year term, to serve until the 2020 annual meeting of stockholders, the Class II Directors
will be elected for a two-year term, to serve until the 2021 annual meeting of stockholders, and the Class III Directors will
be elected for a three-year term, to serve until the 2022 annual meeting of stockholders, and in each case, until their respective
successor, if any, is duly elected and qualified.
Effect
of Votes on Proposal 1 and Proposal 2
If
our stockholders approve Proposal 1, but do not approve Proposal 2, our directors will continue to be elected to one-year terms
at each annual meeting of stockholders and until their respective successor, if any, is duly elected and qualified.
Potential
Anti-Takeover Effects
The
Classified Board Provisions may increase the amount of time required for a takeover bidder to obtain control of the Company without
the cooperation of our Board of Directors, even if the takeover bidder were to acquire a majority of the voting power of our outstanding
common stock. Without the ability to obtain immediate control of our Board of Directors, a takeover bidder will not be able to
take action to remove other impediments to its acquisition of our Company. Thus, the Classified Board Provision could discourage
certain takeover attempts, perhaps including some takeovers that stockholders may feel would be in their best interests. Further,
the Classified Board Provision will make it more difficult for stockholders to change the majority composition of our Board of
Directors, even if our stockholders believe such a change would be beneficial. Because the Classified Board Provisions will make
the removal or replacement of directors more difficult, it will increase the directors’ security in their positions, and
could be viewed as tending to perpetuate incumbent management.
Since
the creation of a classified Board of Directors will increase the amount of time required for a hostile bidder to acquire control
of our Company, the existence of a classified board could tend to discourage certain tender offers which stockholders might feel
would be in their best interest. However, our Board of Directors believes that by forcing potential bidders to negotiate with
our Board of Directors for a change of control transaction will allow our Board of Director to better maximize stockholder value
in any change of control transaction.
We
are not aware of any present or threatened third-party plans to gain control of our Company, and the Classified Board Provisions
are not being recommended in response to any such plan or threat.
This
summary does not purport to be complete and is qualified in its entirety by reference to our Amended and Restated Bylaws attached
hereto as
Appendix 2
.
The
affirmative vote of a majority of the shares outstanding is required to approve this proposal. Brokerage firms do not have authority
to vote customers’ unvoted shares held by the firms in street name for this proposal. As a result, abstentions and any shares
not voted by a customer treated as broker non-votes will count towards a quorum but will have the effect of a vote “Against”
this proposal.
For
the reasons stated above, our Board of Directors believes that approval of this proposal is in the best interests of our Company
and our stockholders.
Required
Vote
In
accordance with Delaware law, approval of Proposal No. 2 requires the affirmative vote of a majority of the shares of common stock
outstanding on an as-converted basis and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will
have the same effect as votes for this proposal and broker non-votes will have no effect on this proposal.
OUR
Board Of Directors Recommends a vote “FOR” the ESTABLISHMENT OF A CLASSIFIED BOARD.
PROPOSAL
NO. 3
REVERSE
STOCK SPLIT
The
Company has applied to list the Company’s common stock ($0.01 par value, 80,000,000 shares authorized, referred to herein
as the “Common Stock”) on the Nasdaq Capital Market (“Nasdaq”). One of the requirements under the equity
standard for listing on the Nasdaq is that at the time the listing becomes effective, a company’s stock must initially trade
at or above $4.00 per share or alternatively, at or above $3.00 if the Company can meet certain requirements. The Board of Directors
believes that a reverse stock split will assist in satisfying the price per share requirements for an uplisting of GGH Common
Stock.
Therefore,
on May 13, 2019, the Board unanimously approved a reverse stock split of all the outstanding shares of GGH’s Common Stock
at an exchange ratio ranging from one post-split share for two pre-split shares (1:2) up to one post-split share for twenty-five
pre-split shares (1:25), or anywhere between those ratios, at the Board’s discretion (the “Reverse Stock Split”)
and approved an amendment to Article IV of GGH’s Amended and Restated Certificate of Incorporation to effect such Reverse
Stock Split. The Board noted that it will
only
effect the Reverse Stock Split as a condition of listing on a national exchange.
The Board based the wide stock split ratio on the current price of the Company’s shares as of May 13, 2019 and to give it
flexibility in determining the most conservative stock split ratio possible that will still meet the price per share requirements
necessary to uplist to a national exchange.
It
should be noted that a proposal for a reverse stock split with a range from one post-split share for two pre-split shares (1:2)
up to one post-split share for six pre-split shares (1:6) was presented and approved at the 2017 Annual Meeting of the Stockholders
and a proposal for a reverse stock split with a range from one post-split share for two pre-split shares (1:2) up to one post-split
share for twenty pre-split shares (1:20) was presented and approved at the 2018 Annual Meeting of Stockholders. This Reverse Stock
Split proposal is being presented this year in order to reauthorize the Board of Director’s discretion as the Company continues
to seek authorization to list on a national exchange.
Except
for adjustments that may result from the treatment of fractional shares, which will be rounded up to the nearest whole number,
each stockholder will beneficially hold the same percentage of Common Stock immediately following the Reverse Stock Split as such
stockholder held immediately prior to the Reverse Stock Split. Also, proportionate adjustments will be made to the per-share exercise
price and the number of shares covered by outstanding options and warrants to buy Common Stock, so that the total prices required
to be paid to fully exercise each option and warrant before and after the Reverse Stock Split will be approximately equal. Further,
with respect to the Company’s Series B preferred stock, proportionate adjustments will be made to the common stock conversion
and voting rights features of that stock to fairly reflect the effect of the Reverse Stock Split.
The
Board does not intend as part of the Reverse Stock Split to reduce the amount of the Company’s authorized shares of Common
Stock (or of its Series B preferred stock). As of May 13, 2019, the Company has a total of 80,000,000 shares of Common Stock authorized
and 52,400,252 shares issued, leaving 27,599,748 shares available for issuance, not including shares reserved for issuance upon
conversion of Series B preferred stock, or exercise of warrants or options, or any other convertible security. As a result, the
number of unissued, available authorized shares of Common Stock will increase, as reflected in the following table as if the Reverse
Stock Split were to occur on May 20, 2019:
Ratio
|
|
Authorized
|
|
|
Issued
pre-
Reverse
Stock
Split*
|
|
|
Issued
post-
Reverse
Stock
Split**
|
|
|
Increase
in
post-
Reverse
Stock
Split
Shares
Available
for
Issuance*
|
|
1:2
|
|
|
80,000,000
|
|
|
|
52,400,252
|
|
|
|
26,200,126
|
|
|
|
1,399,622
|
|
1:5
|
|
|
80,000,000
|
|
|
|
52,400,252
|
|
|
|
10,480,050
|
|
|
|
17,119,698
|
|
1:10
|
|
|
80,000,000
|
|
|
|
52,400,252
|
|
|
|
5,240,025
|
|
|
|
22,359,723
|
|
1:15
|
|
|
80,000,000
|
|
|
|
52,400,252
|
|
|
|
3,493,350
|
|
|
|
24,106,398
|
|
1:25
|
|
|
80,000,000
|
|
|
|
52,400,252
|
|
|
|
2,096,010
|
|
|
|
25,503,738
|
|
*Does
not reflect shares reserved for issuance upon conversion of Series B Preferred Stock, exercise of warrants or options, or any
other convertible security.
**For
purposes of this illustration, fractional shares are rounded.
The
increase in the number of shares of Common Stock available for issuance and any subsequent issuance of such shares could have
the effect of delaying or preventing a change in control of GGH without further action by the stockholders. The Board is not aware
of any attempt to take control of GGH and has not presented this proposal with the intention that the Reverse Stock Split be used
as a type of antitakeover device. Any additional common and preferred stock, when issued, would have the same rights and preferences
as the shares of common and preferred stock presently outstanding.
The
additional authorized common stock will be available for issuance by the Board for stock splits or stock dividends, acquisitions,
raising additional capital, conversion of GGH debt into equity, stock options or other corporate purposes. GGH does not anticipate
that it would seek authorization from the stockholders for issuance of such additional shares unless required by applicable law
or regulation.
Additional
Reasons for the Reverse Stock Split
In
addition to the achievement of a stock price required for listing on a national exchange, there are other reasons the Board believes
the Reverse Stock Split will be beneficial to GGH. One is that the Board believes that the increased market price of the Common
Stock expected as a result of implementing the Reverse Stock Split will improve the marketability of the Common Stock and will
encourage interest and trading in the Common Stock by brokerage houses and institutions that are not currently able or willing
to trade the Common Stock. Because of the trading volatility often associated with low-priced stocks, many potential investors
have internal policies and practices that either prohibit them from investing in low-priced stocks or that tend to discourage
individual brokers from recommending low-priced stocks to their customers. In addition, low-priced stocks not listed on an exchange
are subject to the additional broker-dealer disclosure requirements and restrictions found in SEC Rule 15g-6.
It
should be noted that the liquidity of the Common Stock may be adversely affected by the Reverse Stock Split given the reduced
number of shares that would be outstanding after the Reverse Stock Split. The Board anticipates, however, that the expected higher
market price and (if successful) exchange listing will mitigate, to some extent, the effects on the liquidity through the anticipated
increase in marketability discussed above.
The
Board understands that there is a risk that the market price for the Common Stock may not react proportionally to the Reverse
Stock Split. For example, if GGH accomplishes a 1:25 Reverse Stock Split at a time when the market price is $0.20 per share, there
can be no assurance that the resulting market price will thereafter remain at or above $5.00 per share (twenty-five times the
previous market price).
The
Board confirms that the contemplated reverse stock split is not and will not be the first step in a series of plans or proposals
of a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Based
upon the foregoing factors and understanding the risks, the Board has determined that the Reverse Stock Split is in the best interests
of the Company and its stockholders.
Required
Vote
In
accordance with Delaware law, approval of Proposal No. 3 requires the affirmative vote of a majority of the shares of common stock
outstanding on an as-converted basis and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will
have the same effect as votes for this proposal and broker non-votes will have no effect on this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE TO give THE Board of Directors discretion (if necessary to effect a listing of
GGH’s common stock on a national exchange) on or before JUNE 30, 2020, to implement a reverse stock split of the outstanding
shares of common stock in a range from one-for-two (1:2) up to one-for-TWENTY-FIVE (1:25), or anywhere between, while maintaining
the number of authorized shares of Common Stock.
PROPOSAL
NO. 4
AMENDMENT
TO 2018 EQUITY INCENTIVE PLAN
On
May 13, 2019, the Board of Directors approved an amendment to increase the number of shares available for awards made under the
Company’s 2018 Equity Incentive Plan (the “2018 Plan”) subject to approval by our stockholders. The amendment
to the 2018 Plan is attached hereto as
Appendix 3
and increases the number of shares of common stock authorized for issuance
under the 2018 Plan from 1,500,000 plus an automatic annual increase on January 1 of each year equal to 2.5% of the total number
of shares of common stock outstanding on such date, on a fully diluted basis to 4,139,800 plus an automatic annual increase on
January 1 of each year equal to 2.5% of the total number of shares of common stock outstanding on such date, on a fully diluted
basis.
Our
Board of Directors believes the 2018 Plan provides a means to attract and retain qualified individuals to perform services for
the Company, by providing incentive compensation for such individuals that is linked to the growth and profitability of the Company
and increases in stockholder value, and aligning the interests of such individuals with the interests of our stockholders through
opportunities for equity participation in the Company. We decided to amend the 2018 Plan as opposed to approve a new equity incentive
plan since the amendment is straightforward and amending the 2018 Plan is a more customary approach than adopting a new plan when
such an amendment is involved.
As
of January 1, 2018, there were a total of 1,500,000 shares of common stock of the Company authorized for issuance, all of which
were granted as options in September 2018. As of January 1, 2019, there were an additional 1,776,874 shares authorized for issuance,
accounting for the automatic annual increase on January 1 of each year equal to 2.5% of the total number of shares of common stock
outstanding on such date, on a fully diluted basis. On January 31, 2019, the Company granted options to purchase 1,350,000 shares.
As of May 13, 2019, there were 426,874 shares available for issuance under the 2018 Plan.
The
approval of the amendment to the 2018 Plan by our stockholders is important because the number of shares authorized for
issuance under the 2018 Plan is currently not expected to be sufficient to meet our needs over the next year. Certain of our
directors, executives and employees, most of whom have been with the Company since inception, hold options granted pursuant
to our 2008 Equity Incentive Plan (the “2008 Plan”) which are at an exercise price much higher than our current
stock price. We believe that cancelling these 3,139,800 options and reissuing them under the 2018 Plan with a price at
110% of fair market value pending stockholder approval will greatly assist us in retaining these employees and directors and
reward them for their years of service to the Company. The overall effect of the amendment is to increase the number of
options available under the 2018 Plan in order to replace the 2008 Plan options with no increase to the total amount of
options currently outstanding.
We will not cancel the 2008 options and reissue them under the 2018 Plan unless we
receive stockholder approval of the amendment to the 2018 Plan.
We
believe that the proposal to increase the number of shares of common stock available for issuance under the 2018 Plan by
4,139,800 additional shares is modest and consistent with our historical equity award granting practices. This allows us
to reissue the 2008 options and gives us a cushion of 1,000,000 available shares for awards under the 2018 Plan that will
help us attract new talent and two additional independent directors as required under Nasdaq listing rules. Although
future grants under the 2018 Plan will depend on a number of factors, including, among others, the number of participants in
the 2018 Plan, the price per share of our common stock, changes to our compensation strategy, changes in business practices
or industry standards, the compensation practices of our competitors, changes in compensation practices in the market
generally, and the methodology used to establish the equity award mix, we currently expect that the request for 4,139,800
additional shares of common stock reserved for issuance under the 2018 Plan will enable us to continue to utilize stock-based
awards as a significant component of our compensation program and help meet our objective to attract, retain and incentivize
talented personnel for the next three to five years.
In
view of the foregoing and for the reasons described below, on May 13, 2019, the Board approved the amendment to the 2018 Plan,
provided that the amendment is subject to approval by our stockholders and will be null and void if not approved by our stockholders.
Therefore, our Board and management, recommend that stockholders approve the amendment to the 2018 Plan. If our stockholders do
not approve the amendment, the 2018 Plan will remain in effect but without the changes provided in the amendment.
Summary
of the Plan
The
following is a summary of principal features of the 2018 Plan. The summary, however, does not purport to be a complete description
of all the provisions of the 2018 Plan. The 2018 Plan includes two types of options, stock appreciation rights, restricted stock
and restricted stock units, performance awards and other stock-based awards. Options intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended, are referred to as incentive options. Options which are not
intended to qualify as incentive options are referred to as non-qualified options.
The
2018 Plan is presently administered and interpreted by a committee of the Board of Directors which is comprised of at least two
independent members of the Board of Directors (the “Committee”). In the absence of this committee, the Board of Directors
shall administer the 2018 Plan. In addition to determining who will be granted options or other awards under the 2018 Plan and
what type of awards will be granted, the Committee has the authority and discretion to determine when awards will be granted and
the number of awards to be granted. The Committee also may determine the terms and conditions of the awards; amend the terms and
conditions of the awards; how the awards may be exercised whether in cash or securities or other property; establish, amend, suspend,
or waive applicable rules and regulations and appoint agents to administer the 2018 Plan; take any action for administration of
the 2018 Plan; and adopt modifications to comply with laws of non-U.S. jurisdictions.
Participants
in the 2018 Plan consist of Eligible Persons, who are employees, officers, consultants, advisors, independent contractors, or
directors providing services to the Company or any affiliate of the Company as determined by the Committee. The Committee may
take into account the duties of persons selected, their present and potential contributions to the success of Company and such
other considerations as the Committee deems relevant to the purposes of the 2018 Plan. There are approximately 50 Eligible Persons
who may participate in the 2018 Plan.
The
maximum number of shares subject to an award granted during a fiscal year to any member of the Board of Directors (exclusive of
shares subject to an award issued to any director in his or her capacity as an employee of the Company), together with any cash
fees paid to such director during the fiscal year shall not exceed a total value of $100,000 (calculating the value of any awards
based on the grant date fair value for financial reporting purposes).
The
exercise price of any option granted under the 2018 Plan must be no less than 100% of the “fair market value” of the
Company’s common stock on the date of grant. Any incentive stock option granted under the 2018 Plan to a person owning more
than 10% of the total combined voting power of the common stock must be at a price of no less than 110% of the fair market value
per share on the date of grant.
All
share amounts refer to pre-Reverse Stock Split shares, and those amounts will be adjusted to reflect the reverse stock split if
and when implemented.
Unless
otherwise determined by the Committee, awards remain exercisable for a period of six months (but no longer than the original term
of the award) after a participant ceases to be an employee or the consulting services are terminated due to death or disability.
All restricted stock held by the participant becomes free of all restrictions under the 2018 Plan, and any payment or benefit
under a performance award is forfeited and cancelled at time of termination unless the participant is irrevocably entitled to
such award at the time of termination, where termination results from death or disability. Termination of service as a result
of anything other than death or disability results in the award remaining exercisable for a period of one month (but no longer
than the original term of the award) after termination and any payment or benefit under a performance award is forfeited and cancelled
at time of termination unless the participant is irrevocably entitled to such award at the time of termination. All restricted
stock held by the participant becomes free of all restrictions unless the participant voluntarily resigns or is terminated for
cause, in which event the restricted stock is transferred back to the Company.
The
Committee may amend, alter, suspend, discontinue or terminate the 2018 Plan at any time; provided, however, that, without the
approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be
made that, absent such approval: (i) violates the rules or regulations of any securities exchange that are applicable to the Company;
(ii) causes the Company to be unable, under the Internal Revenue Code, to grant incentive stock options under the 2018 Plan; (iii)
increases the number of shares authorized under the 2018 Plan other than the 2.5% increase per year; or (iv) permits the award
of options or stock appreciation rights at a price less than 100% of the fair market value of a share on the date of grant of
such award, as prohibited by the 2018 Plan or the repricing of options or stock appreciation rights, as prohibited by the 2018
Plan.
U.S.
Federal Income Tax Consequences
The
information set forth below is a summary only and does not purport to be complete. The information is based upon current federal
income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any recipient may
depend on his or her particular situation, each recipient should consult the recipient’s tax adviser regarding the federal,
state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result
of an award. The 2018 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described
below depends on our generation of taxable income as well as the requirement of reasonableness and the satisfaction of our tax
reporting obligations.
Nonstatutory
Stock Options
Generally,
there is no taxation upon the grant of a nonstatutory stock option if the stock option is granted with an exercise price equal
to the fair market value of the underlying stock on the grant date. On exercise, an optionholder will recognize ordinary income
equal to the excess, if any, of the fair market value on the date of exercise of the stock over the exercise price. If the optionholder
is employed by us or one of our affiliates, that income will be subject to withholding taxes. The optionholder’s tax basis
in those shares will be equal to their fair market value on the date of exercise of the stock option, and the optionholder’s
capital gain holding period for those shares will begin on that date.
Subject
to the requirement of reasonableness and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax
deduction equal to the taxable ordinary income realized by the optionholder.
Amended
Plan Benefits
The
option grants to purchase 3,139,800 shares of our common stock described in the table below will be made pending stockholder approval.
If stockholder approval of the amendment does not occur, the proposed grants will not be made. The following table provides information
with respect to the number of shares underlying awards to be granted to our executive officers, directors who are not executive
officers, and employees following approval of the amendment to the 2018 Plan:
Name
and Position
|
|
Number
of
Shares under 2018 Plan
|
|
|
|
|
|
Scott
L. Mathis, Chief Executive Officer and Chairman of the Board
|
|
|
2,689,890
|
|
|
|
|
|
|
Maria
Echevarria, Chief Financial Officer
|
|
|
150,000
|
|
|
|
|
|
|
Executive
Officers as a Group
|
|
|
2,259,890
|
|
|
|
|
|
|
Non-employee
Directors as a Group
|
|
|
150,000
|
|
|
|
|
|
|
Employee
Group
|
|
|
730,000
|
|
|
|
|
|
|
Total
|
|
|
3,139,890
|
|
As
we plan to enter into a new employment agreement with Mr. Mathis, the availability of the options under the 2018 Plan will be
a crucial element of his new agreement.
Aside
from the grants described in the table above, the number of shares that may be granted to our executive officers, non-employee
directors, and employees under the amended 2018 Plan in the future is not determinable at this time, as such grants are subject
to the discretion of the Compensation Committee or the Board of Directors.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth securities authorized for issuance under equity compensation plans as of December 31, 2018.
Plan
category
|
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
|
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
|
|
Number
of securities
remaining
available
for
future issuance
under
equity
compensation
plans
(excluding
securities
reflected
in
column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity
compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
Plan
|
|
|
4,409,265
|
|
|
$
|
2.34
|
|
|
|
-
|
|
2016
Plan
|
|
|
3,564,328
|
|
|
|
1.26
|
|
|
|
-
|
|
2018
Plan
|
|
|
1,500,000
|
|
|
|
0.54
|
|
|
|
-
|
|
Equity
compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
9,473,593
|
|
|
$
|
1.65
|
|
|
|
-
|
|
On
July 27, 2018, the Board of Directors determined that no additional awards shall be granted under the Company’s 2008 Equity
Incentive Plan, as amended (the “2008 Plan”) or the 2016 Stock Option Plan (the “2016 Plan”), and that
no additional shares will be automatically reserved for issuance on each January 1 under the evergreen provision of the 2016 Plan.
Required
Vote
In
accordance with Delaware law, approval of Proposal No. 4 requires the affirmative vote of a majority of the shares of common stock
present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will have
the same effect as votes for this proposal and broker non-votes will have no effect on this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S 2018 EQUITY INCENTIVE
PLAN.
PROPOSAL
NO. 5:
RATIFICATION
OF THE APPOINTMENT OF MARCUM LLP
The
Board of Directors has selected the accounting firm of Marcum LLP (“Marcum”) to serve as our independent registered
public accounting firm for the 2019 fiscal year. We are asking our stockholders to ratify the selection of Marcum as our independent
registered public accounting firm. Although ratification is not required by our Bylaws or otherwise, the Board is submitting the
selection of Marcum to our stockholders for ratification because we value our stockholders’ views on the Company’s
independent registered public accounting firm and as a matter of good corporate practice.
If
our stockholders fail to ratify the selection, it will be considered as a direction to the Board to consider the selection of
a different firm. The Board considers Marcum to be well qualified to serve as the independent auditors for the Company and Marcum
has experience since 2010 in doing so. However, even if the selection is ratified, the Board of Directors in its discretion may
select a different independent registered public accounting firm at any time during the year if it determines that such a change
would be in the best interests of the Company and our stockholders. To the Company’s knowledge, a representative from Marcum
is not expected to be present at the Annual Meeting.
Fees
Billed By Independent Accounting Firm
The
following table sets forth the aggregate fees billed to us by Marcum, LLP, our independent registered public accounting firm,
for the years ended December 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Audit
fees
(1)
|
|
$
|
240,000
|
|
|
$
|
235,000
|
|
Audit-related
fees
(2)
|
|
|
15,000
|
|
|
|
13,000
|
|
Tax
fees
|
|
|
35,000
|
|
|
|
27,500
|
|
|
|
$
|
290,000
|
|
|
$
|
275,500
|
|
|
(1)
|
Represents
fees associated with the audit of the Company’s consolidated financial statements for the fiscal years ended December
31, 2018 and 2017, and the reviews of the consolidated financial statements included in the Company’s quarterly reports
on Form 10-Q during 2018 and 2017.
|
|
|
|
|
(2)
|
Represents
primarily travel costs associated with the audit of the Company’s consolidated financial statements for the fiscal years
ended December 31, 2018 and 2017.
|
Pre-Approval
Policies and Procedures
The
Audit Committee Charter provides that the Audit Committee is responsible for the appointment, compensation, retention and oversight
of the independent public accountants, and pre-approves all audit services and permissible non-audit services to be provided to
the Company by the independent public accountants. The Audit Committee may, in its discretion, delegate the authority to pre-approve
all audit services and permissible non-audit services to the Chairman of the Audit Committee provided the Chairman reports any
delegated pre-approvals to the Audit Committee at the next meeting thereof. The Audit Committee has not, however, adopted any
specific policies and procedures for the engagement of non-audit services.
The
Board of Directors approved Marcum performing our audit for the 2017 and 2018 fiscal years and approved Marcum performing our
audit for the 2019 fiscal year.
Required
Vote
In
accordance with Delaware law, approval of Proposal No. 5 requires the affirmative vote of a majority of the shares of common stock
present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will have
the same effect as votes for this proposal and broker non-votes will have no effect on this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF MARCUM LLP AS THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
OTHER
MATTERS
As
of the date of this Proxy Statement, management does not know of any other matters that will come before the Annual Meeting.
ANNUAL
REPORT ON FORM 10-K AND ADDITIONAL INFORMATION
Annual
Report
Available
with this Proxy Statement on the internet (and available by mail if a stockholder has made such a request) is the Company’s
2018 Annual Report to Stockholders on Form 10-K.
Information
Available
The
Company is subject to the information and reporting requirements of the Exchange Act and in accordance with the Exchange Act,
the Company files periodic reports, documents and other information with the SEC relating to its business, financial statements
and other matters, including the Company’s annual report on Form 10-K for the year ended December 31, 2018, the Company’s
quarterly report on Form 10-Q for the quarter ended March 31, 2019, and any reports prior to or subsequent to that date.
These
reports and other information filed with the SEC by the Company may be inspected and are available for copying at the public reference
facilities maintained at the Securities and Exchange Commission at 100 F Street NW, Washington, D.C. 20549.
The
Company’s filings with the Securities and Exchange Commission are also available to the public from the SEC’s website,
http://www.sec.gov
and at the Company’s website,
http://www.gauchoholdings.com
.
Our Annual Report on Form
10-K for the year ended December 31, 2018, and other reports filed under the Exchange Act, are also available in print to any
stockholder at no cost upon request to: Corporate Secretary, Gaucho Group Holdings, Inc., 135 Fifth Ave., 10th Floor, New York,
NY 10010; tel: (212) 735-7688.
Proxy
Materials Are Available on the Internet
The
Company is using the internet as the primary means of furnishing proxy materials to certain holders of common stock, however some
will receive their proxy materials by mail via the Full Set Delivery method described above. If you have received a Notice of
Internet Availability of Proxy Materials, you are receiving proxy materials by internet. We are sending a Notice of Internet Availability
of Proxy Materials to you which includes instructions on how to access the proxy materials online or how to request a printed
copy of the materials.
We
encourage stockholders to take advantage of the availability of the proxy materials online to help reduce the environmental impact
of our annual meetings and reduce the Company’s printing and mailing costs.
CERTIFICATE
OF AMENDMENT
OF
AMENDED
AND RESTATED bylaws
OF
Gaucho
GROUP Holdings, INC.
Gaucho
Group Holdings, Inc. (the “Corporation”), organized and existing under and by virtue of the General Corporation Law
of the State of Delaware, does hereby certify as follows:
By
vote of the Board of Directors of the Corporation on May 13, 2019, pursuant to Section 141 of the General Corporation Law of the
State of Delaware (the “DGCL”), and by a vote of the stockholders of the Corporation representing a majority of the
shares outstanding on ________, 2019, pursuant to Sections 141 and 211 of the DGCL, the following resolutions were adopted setting
forth amendments to the Amended and Restated Bylaws of the Corporation (the “Bylaws”). The resolutions setting forth
the amendment are as follows:
RESOLVED,
that Article III of the Amended and Restated Bylaws of the Corporation be and it hereby is deleted in its entirety and a new
Article III be inserted in lieu thereof to read as follows:
A.
Number
.
Subject to the provisions of the Certificate of Incorporation, the number of directors will be fixed from time to time
exclusively by resolutions adopted by the Board of Directors.
B.
Classes
of Directors
. The board of directors shall be and is divided into three classes, as nearly equal in number as possible,
designated: Class I, Class II and Class III. In case of any increase or decrease, from time to time, in the number of
directors, the number of directors in each class shall be apportioned as nearly equal as possible. No decrease in the number
of directors shall shorten the term of any incumbent director.
C.
Terms
of Office
. Each director shall serve for a term ending on the date of the third annual meeting following the annual
meeting at which such director was elected;
provided
,
that
each director initially appointed to Class I shall
serve for an initial term expiring at the corporation’s first annual meeting of stockholders following the
effectiveness of this provision; each director initially appointed to Class II shall serve for an initial term expiring at
the corporation’s second annual meeting of stockholders following the effectiveness of this provision; and each
director initially appointed to Class III shall serve for an initial term expiring at the corporation’s third annual
meeting of stockholders following the effectiveness of this provision;
provided further
, that the term of each
director shall continue until the election and qualification of a successor and be subject to such director’s earlier
death or resignation.
D.
Powers
.
The Board of Directors shall exercise all of the powers of the corporation except such as are, by applicable law, the
Certificate of Incorporation, or these Bylaws, conferred upon or reserved to the stockholders of any class or classes or
series thereof.
E.
Resignations
.
Any director may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or
the secretary; provided, however, that if such notice is given by electronic transmission, such electronic transmission must
either set forth or be submitted with information from which it can be determined that the electronic transmission was
authorized by the director. Such resignation shall take effect at the date of receipt of such notice or at any later time
specified therein. Acceptance of such resignation shall not be necessary to make it effective.
F.
Regular
Meetings
. The Board of Directors shall meet on the same days as the annual meeting of the stockholders, provided a
quorum is present, and no notice of such meeting will be necessary in order to legally constitute the meeting. Regular
meetings of the Board of Directors will be held at such times and places as the Board of Directors may from time to time
determine.
G.
Special
Meetings
. Special meetings of the Board of Directors may be called at any time, at any place and for any purpose by
the chairman of the board, the chief executive officer, or by a majority of the Board of Directors.
H.
Notice
of Meetings
. Notice of every meeting of the Board of Directors will be given to each director at his usual place of
business or at such other address as will have been furnished by him for such purpose. Such notice will be properly and
timely given if it is (1) deposited in the United States mail not later than the third calendar day preceding the date of the
meeting or (2) personally delivered, telegraphed, sent by facsimile or electronic transmission or communicated by telephone
at least twenty-four hours before the time of the meeting. Such notice need not include a statement of the business to be
transacted at, or the purpose of, any such meeting.
I.
Waiver
of Notice
. Attendance of a director at a meeting of the Board of Directors will constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice signed by
a director or directors entitled to such notice, whether before, at, or after the time for notice or the time of the meeting,
will be equivalent to the giving of such notice.
J.
Required
Vote; Adjournment
. Except as may be otherwise provided by law, the Certificate of Incorporation or these Bylaws, the act
of a majority of the directors present at a meeting at which a quorum is present will be deemed the act of the Board of
Directors. Less than a quorum may adjourn any meeting of the Board of Directors from time to time without notice.
K.
Procedure
.
The order of business and all other matters of procedure at every meeting of the Board of Directors may be determined by the
chairman of the Board of Directors or, in his or her absence, the most senior officer of the corporation present at the
meeting. The secretary of the corporation shall act as secretary of all meetings of the Board of Directors, but, in the
absence of the secretary, the presiding officer of the meeting may appoint any person to act as secretary of the
meeting.
L.
Participation
in Meetings by Telephone
. Members of the Board of Directors, or of any committee thereof, may participate in a meeting
of such board or committee by means of conference telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation will constitute presence in person at such
meeting.
M.
Action
Without a Meeting
. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required
or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if
written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the board or committee. Any such consent may be in counterparts
and will be effective on the date of the last signature thereon unless otherwise provided therein.
N.
Fees
and Compensation of Directors
. Unless otherwise provided by the Certificate of Incorporation, or these Bylaws, the Board
of Directors, by resolution or resolutions, may fix the compensation of directors. The directors may be reimbursed for their
expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as a director. Nothing contained in these Bylaws shall preclude any
director from serving the corporation in any other capacity and receiving compensation therefore. Members of special or
standing committees may be allowed like compensation for attending committee meetings.”
IN
WITNESS WHEREOF,
the Corporation has caused this Certificate of Amendment to the Amended and Restated Bylaws to be signed
by its Chief Executive Officer this _____ day of _______, 2019.
|
GAUCHO
GROUP HOLDINGS, INC.
|
|
|
|
|
By:
|
|
|
|
Scott
L. Mathis
|
|
|
Chief
Executive Officer
|
BYLAWS
OF
ALGODON
WINES & LUXURY DEVELOPMENT GROUP, INC.
AS
AMENDED
ARTICLE
I
OFFICES
The
registered office of Algodon Wines & Luxury Development Group, Inc., a Delaware corporation, in the State of Delaware will
be as provided for in the corporation’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”).
The corporation will have offices at such other places as the Board of Directors may from time to time determine.
ARTICLE
II
STOCKHOLDERS
A.
Annual Meetings
. The annual meeting of stockholders for the election of directors and for the transaction of such other
business as may properly come before the meeting will be held on the date and at the time and place, if any, fixed, from time
to time, by resolution of the Board of Directors.
B.
Special Meetings
. Special meetings of stockholders may be called by those persons authorized to do so in the Certificate
of Incorporation. In the case of a special meeting requested by stockholders, the Board of Directors shall, within 30 days of
the corporation’s receipt of a duly submitted request for such meeting, set a place, time and date for the meeting, which
date shall be not later than 90 days from the date such request is received.
C.
Notice of Meeting
. Written notice stating the place, if any, date and hour of the meeting, and, in case of a special meeting,
the purpose or purposes for which the meeting is called, will be given not less than ten nor more than 60 days before the date
of the meeting, except as otherwise required by law or the Certificate of Incorporation, either personally or by mail, facsimile
transmission, electronic mail, overnight courier, to each stockholder of record entitled to vote at such meeting. If mailed, such
notice will be deemed to be given when deposited in the United States mail, postage prepaid, addressed to the stockholder at the
stockholder’s address as it appears on the stock records of the corporation. Notice given by electronic transmission pursuant
to this Section shall be deemed given: (1) if by facsimile transmission, when directed to a facsimile telecommunication number
at which the stockholder has consented to receive notice; (2) if by electronic mail, when directed to the electronic mail address
at which the stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice
to the stockholder of such specific posting, upon the later of (a) such posting, and (b) the giving of such separate notice; and
(4) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the secretary or assistant
secretary or of the transfer agent or other agent of the corporation that the notice has been given by personal delivery, by mail,
or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
D.
Waiver
. Attendance of a stockholder of the corporation, either in person or by proxy, at any meeting, whether annual or
special, will constitute a waiver of notice of such meeting, except where a stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or
convened. A written or electronic transmission of waiver of notice of any such meeting signed by a stockholder or stockholders
entitled to such notice, whether before, at or after the time for notice or the time of the meeting, will be equivalent to notice.
If such waiver is given by electronic transmission, the electronic transmission must either set forth or be submitted with information
from which it can be determined that the electronic transmission was authorized by the stockholder. Neither the business to be
transacted at, nor the purposes of, any meeting need be specified in any written waiver of notice.
E.
Record Date for Meetings
. In order that the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date
shall not be more than 60 or fewer than ten days before the date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment
thereof shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived,
at the close of business on the day next preceding the day on which the meeting is held.
F.
Notice of Business to Be Transacted at Meetings of Stockholders
. No business may be transacted at any meeting of stockholders,
including the nomination or election of persons to the Board of Directors, other than business that is either (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized
committee thereof) with respect to an annual meeting or a special meeting, (b) otherwise properly brought before the meeting by
or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before
the meeting by any stockholder of the corporation (1) who is a stockholder of record on the date of the giving of the notice provided
for in this Section 2(F) and on the record date for the determination of stockholders entitled to vote at such meeting and (2)
who complies with the notice procedures set forth in this Section 2(F). In addition to any other applicable requirements, for
business to be properly brought before a meeting by a stockholder, such stockholder must have given timely notice thereof in proper
written form to the secretary of the corporation. The notice procedures set forth in this Section 2(F) shall not be deemed to
affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to, and
in compliance with the requirements of, Rule 14a-8 of the Securities Exchange Act of 1934 (the “Exchange Act”).
G.
Notices to the Company
.
(1)
To be timely, a stockholder’s notice to the secretary must be delivered to or mailed and received at the principal executive
offices of the corporation not less than ninety days nor more than one hundred twenty days prior to the date of the meeting; provided,
however, that in the event that public disclosure of the date of the meeting is first made less than 100 days prior to the date
of the meeting, notice by the stockholder in order to be timely must be so received not later than the close of business on the
tenth day following the day on which such public disclosure of the date of the meeting was made.
(2)
To be in proper written form, a stockholder’s notice to the secretary regarding any business other than nominations of persons
for election to the Board of Directors must set forth as to each matter such stockholder proposes to bring before the annual meeting;
(a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (b) the name and record address of such stockholder; (c) the class or series and number of shares of capital
stock of the corporation which are owned beneficially or of record by such stockholder; (d) all other ownership interests of such
stockholder, including derivatives, hedged positions, synthetic and temporary ownership techniques, swaps, securities, loans,
timed purchases and other economic and voting interests; (e) a description of all other arrangements or understandings between
such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in such business and (f) a representation that such stockholder intends
to appear in person or by proxy at the meeting to bring such business before the meeting.
(3)
To be in proper written form, a stockholder’s notice to the secretary regarding nominations of persons for election to the
Board of Directors must set forth (a) as to each proposed nominee; (i) the name, age, business address and residence address of
the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class or series and number of shares of capital
stock of the corporation which are owned beneficially or of record by the nominee and (iv) any other information relating to the
nominee that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder;
and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder, (ii) the class or series
and number of shares of capital stock of the corporation which are owned beneficially or of record by such stockholder, (iii)
all other ownership interests of such stockholder, including derivatives, hedged positions, synthetic and temporary ownership
techniques, swaps, securities, loans, timed purchases and other economic and voting interests, (iv) a description of all arrangements
or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant
to which the nomination(s) are to be made by such stockholder, (v) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice and (vi) any other information relating to such
stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve
as a director if elected. Each proposed nominee will be required to complete a questionnaire, in a form to be provided by the
corporation, to be submitted with the stockholder’s notice. The corporation may also require any proposed nominee to furnish
such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee
to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding
of the independence, or lack thereof, of such nominee.
(4)
No business shall be conducted at any meeting of stockholders, and no person nominated by a stockholder shall be eligible for
election as a director, unless proper notice was given with respect to the proposed action in compliance with the procedures set
forth in this Section 2(F). Determinations of the chairman of the meeting as to whether those procedures were complied with in
a particular case shall be final and binding.
H.
Quorum and Adjournment
. Except as otherwise required by law, the Certificate of Incorporation or these Bylaws,
the holders
of not less one-third of the shares entitled to vote at any meeting of the stockholders, present in person or by proxy, will constitute
a quorum.
If a quorum is not present at any meeting, the chairman of the meeting, or the stockholders, although less than
a quorum, may adjourn the meeting to another time and place. When a meeting is adjourned to another time and place, if any, unless
otherwise provided by these Bylaws, notice need not be given of the adjourned meeting if the date, time and place, if any, thereof
by which the stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced
at the meeting at which the adjournment is taken. At the adjourned meeting, the stockholders may transact any business that might
have been transacted at the original meeting. A determination of stockholders of record entitled to notice of or vote at a meeting
of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting. If the adjournment is for more than 30 days or, if after an adjournment, a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting. (
as amended on December 17, 2017
)
I.
Procedure
. The order of business and all other matters of procedure at every meeting of the stockholders may be determined
by the chairman of the meeting. The chairman of any meeting of the stockholders shall be the chairman of the Board of Directors
or, in his or her absence, the most senior officer of the corporation present at the meeting. The secretary of the corporation
shall act as secretary of all meetings of the stockholders, but, in the absence of the secretary, the presiding officer of the
meeting may appoint any person to act as secretary of the meeting.
J.
Vote Required
. Except as otherwise provided by law or by the Certificate of Incorporation:
(1)
Directors shall be elected by a plurality in voting power of the shares entitled to vote in the election of directors; and
(2)
Whenever any corporate action other than the election of directors is to be taken, it shall be authorized by a majority in voting
power of the shares entitled to vote on the subject matter
present at the meeting, whether in person or by proxy
. (
as
amended on December 17, 2017
)
K.
Manner of Voting; Proxies
.
(1)
At each meeting of stockholders, each stockholder having the right to vote shall be entitled to vote in person or by proxy. Each
stockholder shall be entitled to vote each share of stock having voting power and registered in such stockholder’s name
on the books of the corporation on the record date fixed for determination of stockholders entitled to vote at such meeting.
(2)
Each person entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder
by proxy, but no such proxy shall be voted or acted upon after one year from its date, unless the proxy provides for a longer
period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest
sufficient in law to support an irrevocable power. Proxies shall be filed with the secretary of the corporation prior to the meeting
being called to order. Without limiting the manner in which a stockholder may authorize another person or persons to act for such
stockholder as proxy, the following shall constitute valid means by which a stockholder may grant such authority:
a.
A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may
be accomplished by the stockholder or the stockholder’s authorized officer, director, employee, or agent signing such writing
or causing such person’s signature to be affixed to such writing by any reasonable means including, but not limited to,
by facsimile signature; and
b.
A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the
transmission of electronic mail, or other means of electronic transmission to the person or persons who will be the holder of
the proxy or to an agent of the proxyholder(s) duly authorized by such proxyholder(s) to receive such transmission; provided,
however, that any such electronic mail or other means of electronic transmission must either set forth or be submitted with information
from which it can be determined that the electronic mail or other electronic transmission was authorized by the stockholder. If
it is determined that any electronic mail or other electronic transmission is valid, the inspectors or, if there are no inspectors,
such other persons making that determination, shall specify the information upon which they relied.
Any
copy, facsimile telecommunication, or other reliable reproduction of a writing or electronic transmission authorizing a person
or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or electronic transmission
for any and all purposes for which the original writing or electronic transmission could be used; provided, however, that such
copy, facsimile telecommunication, or other reproduction shall be a complete reproduction of the entire original writing or electronic
transmission.
L.
Conduct of the Meeting
. At each meeting of stockholders, the presiding officer of the meeting shall fix and announce the
date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting
and shall determine the order of business and all other matters of procedure. The Board of Directors may adopt by resolution such
rules, regulations, and procedures for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with any such rules and regulations adopted by the Board of Directors, the presiding officer of the meeting
shall have the right and authority to convene and to adjourn the meeting and to establish rules, regulations, and procedures,
which need not be in writing, for the conduct of the meeting and to maintain order and safety. Without limiting the foregoing,
he or she may:
(1)
Restrict attendance at any time to bona fide stockholders of record and their proxies and other persons in attendance at the invitation
of the presiding officer or Board of Directors;
(2)
Place restrictions on entry to the meeting after the time fixed for the commencement thereof;
(3)
Restrict dissemination of solicitation materials and use of audio or visual recording devices at the meeting;
(4)
Adjourn the meeting without a vote of the stockholders, whether or not there is a quorum present;
(5)
Make rules governing speeches and debate, including time limits and access to microphones; and
(6)
The presiding officer of the meeting shall act in his or her absolute discretion and his or her rulings shall not be subject to
appeal.
M.
Inspectors of Election
. The corporation may, and shall if required by law, in advance of any meeting of stockholders, appoint
one or more inspectors of election, who may be employees of the corporation, to act at the meeting or any adjournment thereof
and to make a written report thereof. The corporation may designate one or more persons as alternate inspectors to replace any
inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders,
the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspector or inspectors so appointed or designated shall (1)
ascertain the number of shares of capital stock of the corporation outstanding and the voting power of each such share; (2) determine
the shares of capital stock of the corporation represented at the meeting and the validity of proxies and ballots; (3) count all
votes and ballots; (4) determine and retain for a reasonable period a record of the disposition of any challenges made to any
determination by the inspectors; and (5) certify their determination of the number of shares of capital stock of the corporation
represented at the meeting and such inspectors’ count of all votes and ballots. Such certification and report shall specify
such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any
meeting of stockholders of the corporation, the inspectors may consider such information as is permitted by applicable law. No
person who is a candidate for an office at an election may serve as an inspector at such election.
N.
Consent of Stockholders
. Any action required or permitted to be taken at any meeting of the stockholders of the Corporation
may be taken without a meeting without prior notice and without a vote if a consent in writing setting forth the action so taken
shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders
who have not consented in writing.
ARTICLE
III
DIRECTORS
A.
Number
. Subject to the provisions of the Certificate of Incorporation, the number of directors will be fixed from time
to time exclusively by resolutions adopted by the Board of Directors.
B.
Powers
. The Board of Directors shall exercise all of the powers of the corporation except such as are, by applicable law,
the Certificate of Incorporation, or these Bylaws, conferred upon or reserved to the stockholders of any class or classes or series
thereof.
C.
Resignations
. Any director may resign at any time by giving notice in writing or by electronic transmission to the Board
of Directors or the secretary; provided, however, that if such notice is given by electronic transmission, such electronic transmission
must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized
by the director. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein.
Acceptance of such resignation shall not be necessary to make it effective.
D.
Regular Meetings
. The Board of Directors shall meet on the same days as the annual meeting of the stockholders, provided
a quorum is present, and no notice of such meeting will be necessary in order to legally constitute the meeting. Regular meetings
of the Board of Directors will be held at such times and places as the Board of Directors may from time to time determine.
E.
Special Meetings
. Special meetings of the Board of Directors may be called at any time, at any place and for any purpose
by the chairman of the board, the chief executive officer, or by a majority of the Board of Directors.
F.
Notice of Meetings
. Notice of every meeting of the Board of Directors will be given to each director at his usual place
of business or at such other address as will have been furnished by him for such purpose. Such notice will be properly and timely
given if it is (1) deposited in the United States mail not later than the third calendar day preceding the date of the meeting
or (2) personally delivered, telegraphed, sent by facsimile or electronic transmission or communicated by telephone at least twenty-four
hours before the time of the meeting. Such notice need not include a statement of the business to be transacted at, or the purpose
of, any such meeting.
G.
Waiver of Notice
. Attendance of a director at a meeting of the Board of Directors will constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or convened. A written waiver of notice signed by
a director or directors entitled to such notice, whether before, at, or after the time for notice or the time of the meeting,
will be equivalent to the giving of such notice.
H.
Required Vote; Adjournment
. Except as may be otherwise provided by law, the Certificate of Incorporation or these Bylaws,
the act of a majority of the directors present at a meeting at which a quorum is present will be deemed the act of the Board of
Directors. Less than a quorum may adjourn any meeting of the Board of Directors from time to time without notice.
I.
Procedure
. The order of business and all other matters of procedure at every meeting of the Board of Directors may be determined
by the chairman of the Board of Directors or, in his or her absence, the most senior officer of the corporation present at the
meeting. The secretary of the corporation shall act as secretary of all meetings of the Board of Directors, but, in the absence
of the secretary, the presiding officer of the meeting may appoint any person to act as secretary of the meeting.
J.
Participation in Meetings by Telephone
. Members of the Board of Directors, or of any committee thereof, may participate
in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and such participation will constitute presence in person at such
meeting.
K.
Action Without a Meeting
. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required
or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if written
consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the board or committee. Any such consent may be in counterparts and will be
effective on the date of the last signature thereon unless otherwise provided therein.
L.
Fees and Compensation of Directors
. Unless otherwise provided by the Certificate of Incorporation, or these Bylaws, the
Board of Directors, by resolution or resolutions, may fix the compensation of directors. The directors may be reimbursed for their
expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as a director. Nothing contained in these Bylaws shall preclude any director
from serving the corporation in any other capacity and receiving compensation therefore. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
ARTICLE
IV
COMMITTEES
A.
Designation of Committees
. The Board of Directors may establish one or more committees for the performance of delegated
or designated functions to the extent permitted by law, each committee to consist of one or more directors of the corporation.
In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified
from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board of Directors
to act at the meeting in the place of such absent or disqualified member.
B.
Committee Powers and Authority
. Except to the extent otherwise required by law, the Board of Directors may provide, by
resolution or by amendment to these Bylaws, that a committee may exercise all the power and authority of the Board of Directors
in the management of the business and affairs of the corporation to the extent the Board of Directors deems it reasonable and
appropriate to do so.
ARTICLE
V
OFFICERS
A.
Number
. The officers of the corporation will be appointed or elected by the Board of Directors. The officers will be a
chairman, a chief executive officer, a president, such number, if any, of executive vice presidents as the Board of Directors
may from time to time determine, such number, if any, of vice presidents as the Board of Directors may from time to time determine,
a secretary, such number, if any, of assistant secretaries as the Board of Directors may from time to time determine, and a treasurer.
Any person may hold two or more offices at the same time.
B.
Additional Officers
. The Board of Directors may appoint such other officers as it may deem appropriate.
C.
Term of Office; Resignation
. All officers, agents and employees of the corporation will hold their respective offices or
positions at the pleasure of the Board of Directors and may be removed at any time by the Board of Directors with or without cause.
Any officer may resign at any time by giving written notice of his resignation to the chief executive officer, the president,
or to the secretary, and acceptance of such resignation will not be necessary to make it effective unless the notice so provides.
Any vacancy occurring in any office will be filled by the Board of Directors.
D.
Duties
. The officers of the corporation will perform the duties and exercise the powers as may be assigned to them from
time to time by the Board of Directors or the president and chief executive officer.
E.
Salaries
. Subject to any applicable law, regulation or stock exchange rule to which the corporation may be subject, the
salaries of all officers of the corporation shall be fixed by the Board of Directors from time to time, and no officer shall be
prevented from receiving such salary by reason of the fact that he or she is also a director of the corporation.
ARTICLE
VI
CAPITAL
STOCK
A.
Certificates
. The shares of capital stock of the corporation may be represented by certificates or may be uncertificated.
To the extent required by law, every holder of capital stock of the corporation represented by certificates, and upon request,
every holder of uncertificated shares, shall be entitled to a certificate representing such shares. Certificates for shares of
stock of the corporation shall be issued under the seal of the corporation, or a facsimile thereof, and shall be numbered and
shall be entered in the books of the corporation as they are issued. Each certificate shall bear a serial number, shall exhibit
the holder’s name and the number of shares evidenced thereby, and shall be signed by the chairman of the Board or a vice
chairman, if any, or the president, if any, or any vice president, and by the secretary. Any or all of the signatures on the certificate
may be a facsimile. If any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon
a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, the certificate
may be issued by the corporation with the same effect as if such person or entity were such officer, transfer agent, or registrar
at the date of issue.
B.
Registered Stockholders
. The corporation will be entitled to treat the holder of record of any share or shares of stock
of the corporation as the holder in fact thereof and, accordingly, will not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person, whether or not it has actual or other notice thereof,
except as provided by law.
C.
Transfer of Certificates
. Shares of stock shall be transferrable on the books of the corporation pursuant to applicable
law and such rules and regulations as the Board of Directors shall from time to time prescribe. Whenever any transfers of shares
shall be made for collateral security and not absolutely and written notice thereof shall be given to the secretary or to such
transfer agent or transfer clerk, such fact shall be stated in the entry of the transfer. Notwithstanding the foregoing, the transfer
of a share may only be registered in the corporation’s securities register upon:
(1)
Presentation and surrender of the certificate representing such share with an endorsement, which complies with the Act, made on
the certificate or delivered with the certificate, duly executed by an appropriate person as provided by the Act, together with
reasonable assurance that the endorsement is genuine and effective, upon payment of all applicable taxes and in any reasonable
fees prescribed by the Board; or
(2)
In the case of shares electronically issued without a certificate, upon receipt of proper transfer instructions from the registered
holder of the shares, a duly authorized attorney of the registered owner of the shares or an individual presenting proper evidence
of succession, assignment or authority to the transfer of the shares.
D.
Cancellation of Certificates
. All certificates surrendered to the corporation will be canceled and, except in the case
of lost, stolen or destroyed certificates, no new certificates will be issued until the former certificate or certificates for
the same number of shares of the same class of stock have been surrendered and canceled.
E.
Lost, Stolen, or Destroyed Certificates
. The Board of Directors or chief executive officer may direct a new certificate
or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have
been lost, stolen, or destroyed upon the making of an affidavit of that fact in a form acceptable to the Board of Directors or
the chief executive officer by the person claiming the certificate or certificates to be lost, stolen or destroyed. In its discretion,
and as a condition precedent to the issuance of any such new certificate or certificates, the Board of Directors or the chief
executive officer may require that the owner of such lost, stolen or destroyed certificate or certificates, or such person’s
legal representative, give the corporation and its transfer agent or agents, registrar or registrars a bond in such form and amount
as the Board of Directors or the chief executive officer may direct as indemnity against any claim that may be made against the
corporation and its transfer agent or agents, registrar or registrars on account of the alleged loss, theft, or destruction of
any such certificate or the issuance of such new certificate.
ARTICLE
VII
FISCAL
YEAR
The
corporation’s fiscal year will be as established by the Board of Directors.
ARTICLE
VIII
AMENDMENTS
Subject
to the laws of the State of Delaware, the Certificate of Incorporation and these Bylaws, the Board of Directors may amend these
Bylaws or enact such other Bylaws as in their judgment may be advisable relating to the business of the corporation, the conduct
of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers, or employees.
ARTICLE
IX
MISCELLANEOUS
A.
Books and Records
.
(1)
Any books or records maintained by the corporation in the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method; provided,
however, that the books and records so kept can be converted into clearly legible paper form within a reasonable time. The corporation
shall so convert any books or records so kept upon the request of any person entitled to inspect such records pursuant to the
Certificate of Incorporation, these Bylaws, or the provisions of Delaware law.
(2)
It shall be the duty of the secretary or other officer of the corporation who shall have charge of the stock ledger to prepare,
or have prepared, and make, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled
to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered
in the stockholder’s name. Nothing contained in this subsection (b) shall require the corporation to include electronic
mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, for a period of at least ten days prior to the meeting during ordinary business hours,
at the principal place of business of the corporation. At the meeting, the list shall be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence of the identity of the stockholders entitled to examine such list.
(3)
Except to the extent otherwise required by law, the Certificate of Incorporation, or these Bylaws, the Board of Directors shall
determine from time to time whether and, if allowed, when and under what conditions and regulations the stock ledger, books, records,
and accounts of the corporation, or any of them, shall be open to inspection by the stockholders and the stockholders’ rights,
if any, in respect thereof. Except as otherwise provided by law, the stock ledger shall be the only evidence of the identity of
the stockholders entitled to examine the stock ledger and the books, records, or accounts of the corporation.
B.
Voting Shares in Other Business Entities
. Any officer of the corporation designated by the Board of Directors may vote
any and all shares of stock or other equity interest held by the corporation in any other corporation or other business entity,
and may exercise on behalf of the corporation any and all rights and powers incident to the ownership of such stock or other equity
interest.
C.
Record Date for Distributions and Other Actions
. In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution, or allotment of any rights, or the stockholders entitled to exercise
any rights in respect of any change, conversion, or exchange of capital stock, or for the purpose of any other lawful action,
except as may otherwise be provided in these Bylaws, the Board of Directors may fix a record date. Such record date shall not
precede the date upon which the resolution fixing such record date is adopted, and shall not be more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be the close of business
on the day on which the Board of Directors adopts the resolution relating thereto.
D.
Electronic Transmission
. For purposes of these Bylaws, “electronic transmission” means any form of communication,
including but not limited to electronic mail, not directly involving the physical transmission of paper, that creates a record
that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such
a recipient through an automated process.
E.
Certificate of Incorporation
. Notwithstanding anything to the contrary contained herein, if any provision contained in
these Bylaws is inconsistent with or conflicts with a provision of the Certificate of Incorporation, such provision of these Bylaws
shall be superseded by the inconsistent provision in the Certificate of Incorporation to the extent necessary to give effect to
such provision in the Certificate of Incorporation.
F.
Delaware as Forum
. Unless the corporation consents in writing to the selection of an alternative forum, the sole and exclusive
forum for (1) any derivative action or proceeding brought on behalf of the corporation; (2) any action asserting a claim of breach
of a fiduciary duty owed by any director, officer or other employee of the corporation to the corporation or the corporation’s
stockholders; (3) any action asserting a claim arising pursuant to any provision of the Delaware General corporation Law; or (4)
any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the state
of Delaware, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed
to have notice of and consented to the provisions of this bylaw.
AMENDMENT
NO. 1 TO
2018
AWLD EQUITY INCENTIVE PLAN
Section
4(a) of the Plan is hereby amended as follows:
Section
4. Shares Available for Awards
(a)
Shares Available. Subject to adjustment
as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued under the Plan, excluding shares issued
under the Pre-Existing Plans, shall be 4,139,800 Shares, plus an automatic annual increase to be added on January 1 of each year
equal to 2.5% of the total number of Shares outstanding on such date (including for this purpose any Shares issuable upon conversion
of any outstanding capital stock of the Company).
(i)
Any Shares subject to an Award issued under this Plan or the Pre-Existing Plans that are canceled, forfeited or expire prior to
exercise or realization, either in full or in part, shall be added to the total number of Shares available for an Award to be
made under the Plan.
(ii)
Shares to be issued under the Plan must be authorized but unissued Shares.
(iii)
Notwithstanding the foregoing, (A) the number of Shares available for granting Incentive Stock Options under the Plan shall not
exceed the aggregate number of Shares that may be issued under the Plan not taking into account any automatic increase in the
share reserve, subject to adjustment as provided in Section 4(c) of the Plan and subject to the provisions of Section 422 or 424
of the Code or any successor provision and (B) the number of Shares available for granting Restricted Stock and Restricted Stock
Units shall not exceed 500,000, subject to adjustment as provided in Section 4(c) of the Plan. Shares tendered by Participants
as full or partial payment to the Company upon exercise of an Award, and Shares withheld by or otherwise remitted to the Company
to satisfy a Participant’s tax withholding obligations with respect to an Award, shall not then become available for issuance
under the Plan. Any Shares withheld or otherwise remitted to the Company to satisfy tax withholding obligations, to pay the exercise
price of an Award, or Shares of Common Stock subject to a broker-assisted cashless exercise of an Award shall reduce the number
of Shares available for issuance under the Plan.
(iv)
The maximum number of Shares subject to an Award granted during a Fiscal Year to any Director (exclusive of Shares subject to
an Award issued to any Director in his or her capacity as an Employee of the Company), together with any cash fees paid to such
Director during the Fiscal Year shall not exceed a total value of $100,000 (calculating the value of any Awards based on the grant
date fair value for financial reporting purposes).