UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Definitive
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Soliciting
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CINEDIGM
CORP.
(Name
of Registrant As Specified In Its Charter)
N/A
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(Name
of Person(s) Filing Proxy statement, if Other Than the Registrant)
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CINEDIGM
CORP.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held On September 21, 2021
Dear
Fellow Stockholders:
We
invite you to attend the 2021 Annual Meeting of Stockholders of Cinedigm Corp., a Delaware corporation (the “Company”), which
will be held virtually on September 21, 2021, at 2:00 p.m. Pacific time (the virtual “Annual Meeting”). At the Annual Meeting,
you will be asked to vote on the following proposals (as more fully described in the Proxy Statement accompanying this Notice):
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1.
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To
elect five (5) members of the Company’s Board of Directors to serve until the 2022
Annual Meeting of Stockholders (or until successors are elected or directors resign or are
removed).
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2.
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To
approve, by non-binding advisory vote, executive compensation.
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3.
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To
approve an amendment to the Company's 2017 Equity Incentive Plan to increase the total number
of shares of Class A Common Stock available for issuance thereunder.
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4.
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To
approve an amendment to the Company’s Fifth Amended and Restated Certificate of Incorporation
to increase the total number of shares of Class A Common Stock authorized for issuance.
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5.
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To
approve an amendment to the Company’s Certificate of Incorporation to effect a reverse
stock split and to reduce the number of authorized shares of the Company’s Class A
Common Stock, subject to the Board’s discretion.
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6.
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To
ratify the appointment of EisnerAmper LLP as our independent registered public accounting
firm for the fiscal year ending March 31, 2022.
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7.
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To
transact such other business as may properly come before the Annual Meeting or any adjournment
thereof.
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Only
stockholders of record at the close of business on July 28, 2021 are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
Important
Notice Regarding Availability of Proxy Materials for the Annual Meeting on September 21, 2021:
Cinedigm Corp.’s Notice of
Annual Meeting of Stockholders, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended March 31, 2021 are available
at www.proxyvote.com.
YOUR
VOTE IS VERY IMPORTANT. WE HOPE YOU WILL ATTEND THIS ANNUAL MEETING IN PERSON. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE PROMPTLY VOTE YOUR SHARES VIA THE INTERNET OR THE TOLL-FREE NUMBER AS DESCRIBED IN THE ENCLOSED MATERIALS. IF YOU RECEIVED A PROXY
CARD BY MAIL, PLEASE SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED. IF YOU RECEIVED MORE THAN ONE PROXY CARD, IT IS AN INDICATION
THAT YOUR SHARES ARE REGISTERED IN MORE THAN ONE ACCOUNT. PLEASE COMPLETE, DATE, SIGN AND RETURN EACH PROXY CARD YOU RECEIVE.
IF YOU ATTEND THE ANNUAL MEETING AND VOTE IN PERSON, YOUR VOTE BY PROXY WILL NOT BE USED.
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BY ORDER OF THE BOARD OF DIRECTORS
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Christopher J. McGurk
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Chairman of the Board of Directors
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New
York, New York
Date:
August [__], 2021
CINEDIGM
CORP.
237
West 35th Street, Suite 605
New
York, New York 10001
(212)
206-8600
PROXY
STATEMENT
2021
ANNUAL MEETING OF STOCKHOLDERS
September
21, 2021
GENERAL
This
Proxy Statement is being furnished to the stockholders of CINEDIGM CORP. (the “Company”) in connection with the solicitation
of proxies by the Board of Directors of the Company (the “Board”). The proxies are for use at the 2021 Annual Meeting of
Stockholders of the Company to be held virtually on September 21, 2021, at 2:00 p.m. Pacific time, or at any adjournment thereof (the
virtual “Annual Meeting”). The virtual Annual Meeting can be accessed via the internet by visiting www.virtualshareholdermeeting.com/CIDM2021
and entering the control number included in the Notice of Internet Availability or proxy card that you receive. At the virtual Annual
Meeting, you will be able to listen to the meeting live, submit questions, and vote online. You will not be able to attend the Annual
Meeting in person.
The
shares represented by your proxy will be voted at the Annual Meeting as therein specified (if the proxy is properly executed and returned,
and not revoked).
The
shares represented by your proxy will be voted as indicated on your properly executed proxy. If no directions are given on the proxy,
the shares represented by your proxy will be voted:
FOR
the election of the director nominees named herein (Proposal One), unless you specifically withhold authority to vote for one or
more of the director nominees.
FOR
the approval of the non-binding advisory vote on executive compensation (Proposal Two).
FOR
authorizing an amendment to the Company's 2017 Equity Incentive Plan to increase the total number of shares of Class A Common Stock
available for issuance thereunder. (Proposal Three).
FOR
authorizing an amendment to the Company’s Fifth Amended and Restated Certificate of Incorporation to increase the total number
of shares of Class A Common Stock authorized for issuance (Proposal Four).
FOR
authorizing an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split and to reduce the number
of authorized shares of the Company’s Class A Common Stock, subject to the Board’s discretion (Proposal Five).
FOR
ratifying the appointment of EisnerAmper LLP as our independent registered public accounting firm for the fiscal year ending March
31, 2022 (Proposal Six).
The
Company knows of no other matters to be submitted to the Annual Meeting. If any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the accompanying form of proxy to vote the shares they represent as the Board may recommend.
These
proxy solicitation materials are first being mailed or made available to the stockholders on or about August [__], 2021.
VIRTUAL
MEETING
This
year, as last year, the Annual Meeting will be held virtually in light of health and safety concerns regarding COVID-19 that we and our
stockholders may have and the protocols and travel restrictions that have been imposed. We believe hosting the Annual Meeting virtually
provides the safest forum for a meeting under current circumstances and that the virtual Annual Meeting format will provide stockholders
with a similar level of transparency to the traditional in-person meeting format. If we experience technical difficulties at the virtual
Annual Meeting and are not able to resolve them within a reasonable amount of time, we will adjourn the Annual Meeting to a later date
and will provide notice of the date and time of such adjourned meeting on a Current Report on Form 8-K that we will file with the SEC.
VOTING
SECURITIES
Stockholders of record at the close of business
on July 28, 2021 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
167,800,341 shares of the Company’s Class A Common Stock, $0.001 par value (“Class A Common Stock”), were issued and
outstanding.
Each
holder of Class A Common Stock is entitled to one vote for each share of Class A Common Stock held as of the Record Date.
QUORUM;
ABSTENTIONS; BROKER NON-VOTES
A
majority of the aggregate voting power of the outstanding shares of Class A Common Stock as of the Record Date must be present, in person
or by proxy, at the Annual Meeting in order to have the required quorum for the transaction of business. If the aggregate voting power
of the shares of Class A Common Stock present, in person and by proxy, at the Annual Meeting does not constitute the required quorum,
the Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum.
Shares
of Class A Common Stock that are voted “FOR,” “AGAINST” or “ABSTAIN” are treated as being present
at the Annual Meeting for purposes of establishing a quorum. Shares that are voted “FOR,” “AGAINST” or “ABSTAIN”
with respect to a matter will also be treated as shares entitled to vote at the Annual Meeting (the “Votes Cast”) with respect
to such matter. Abstentions will be counted for purposes of quorum and will have the same effect as a vote “AGAINST” a proposal.
Broker
non-votes (i.e., votes for shares of Class A Common Stock held as of the Record Date by brokers or other custodians as to which the beneficial
owners have given no voting instructions) will be counted as “shares present” at the Annual Meeting for purposes of determining
the presence or absence of a quorum for the transaction of business so long as the broker can vote on any proposal being considered.
However, brokers cannot vote on their clients’ behalf on “non-routine” proposals for which they have not received voting
instructions from their clients for such proposals. The vote on Proposals One, Two, Three and Five are considered “non-routine.”
Accordingly, broker non-votes will not have any effect with respect to Proposals One, Two, Three and Five as shares that constitute broker
non-votes are not considered entitled to vote on these matters.
Brokers
do have authority to vote uninstructed shares for or against “routine” proposals. Proposals Four and Six constitute “routine”
proposals. Accordingly, a broker may vote uninstructed shares “FOR” or “AGAINST” Proposals Four and Six.
DEADLINE
FOR RECEIPT OF STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
In
order for any stockholder proposal submitted pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), to be included in the Company’s Proxy Statement to be issued in connection with the 2020 Annual
Meeting of Stockholders, such stockholder proposal must be received by the Company no later than April [__], 2022. Any such stockholder
proposal submitted, including any accompanying supporting statement, may not exceed 500 words, as per Rule 14a-8(d) of the Exchange Act.
Any such stockholder proposals submitted outside the processes of Rule 14a-8 promulgated under the Exchange Act, which a stockholder
intends to bring forth at the Company’s 2021 Annual Meeting of Stockholders, will be untimely for purposes of Rule 14a-4 of the
Exchange Act if received by the Company after June [__], 2022. All stockholder proposals must be made in writing addressed to the Company’s
Secretary, Mr. Loffredo, at 237 West 35th Street, Suite 605, New York, New York 10001.
REVOCABILITY
OF PROXY
Any
proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Company’s
Secretary, Mr. Loffredo, a written notice of revocation, a duly executed proxy bearing a later date or by attending the Annual Meeting
and voting in person. Attending the Annual Meeting in and of itself will not constitute a revocation of a proxy.
DISSENTERS’
RIGHT OF APPRAISAL
Under
Delaware General Corporation Law and the Company’s Fifth Amended and Restated Certificate of Incorporation (the “Certificate
of Incorporation”), stockholders are not entitled to any appraisal or similar rights of dissenters with respect to any of the proposals
to be acted upon at the Annual Meeting.
SOLICITATION
Proxies
may be solicited by certain of the Company’s directors, executive officers and regular employees, without additional compensation,
in person, or by telephone, e-mail or facsimile. The cost of soliciting proxies will be borne by the Company. The Company expects to
reimburse brokerage firms, banks, custodians and other persons representing beneficial owners of shares of Class A Common Stock for their
reasonable out-of-pocket expenses in forwarding solicitation material to such beneficial owners.
Some
banks, brokers and other record holders have begun the practice of “householding” notices, proxy statements and annual reports.
“Householding” is the term used to describe the practice of delivering a single set of notices, proxy statements and annual
reports to any household at which two or more stockholders reside if a company reasonably believes the stockholders are members of the
same family. This procedure reduces the volume of duplicate information stockholders receive and also reduces a company’s printing
and mailing costs. The Company will promptly deliver an additional copy of any such document to any stockholder who writes or calls the
Company. Alternatively, if you share an address with another stockholder and have received multiple copies of our notices, proxy statements
and annual reports, you may contact us to request delivery of a single copy of these materials. Any such written request should be directed
to Investor Relations at 237 West 35th Street, Suite 605, New York, New York 10001 or (212) 206-8600.
AVAILABILITY
OF PROXY MATERIALS
Our
proxy materials are primarily available to stockholders on the Internet, as permitted by the rules of the Securities and Exchange Commission
(the “SEC”). A Notice of Internet Availability of Proxy Materials will be mailed to stockholders beginning approximately
August [__], 2020, and this Proxy Statement and form of proxy, together with our Annual Report on Form 10-K (the “Annual Report”),
are first being made available to stockholders beginning approximately August [__], 2021. The Annual Report, which has been posted along
with this Proxy Statement, is not a part of the proxy solicitation materials. Upon receipt of a written request, the Company will furnish
to any shareholder, without charge, a copy of such Annual Report (without exhibits). Upon request and payment of $0.10 (ten cents) per
page, copies of any exhibit to such Annual Report will also be provided. Any such written request should be directed to the Company’s
Secretary at 237 West 35th Street, Suite 605, New York, New York 10001 or (212) 206-8600. These documents are also included
in our filings with the SEC, which you can access electronically at the SEC's website at http://www.sec.gov.
ELECTRONIC
ACCESS TO PROXY MATERIALS
This
year we are pleased to apply the SEC rule that allows companies to furnish proxy materials to stockholders primarily over the Internet.
We believe this method should expedite receipt of your proxy materials, lower costs of our Annual Meeting and help conserve natural resources.
We encourage you to vote via the Internet by following the links to the Proxy Statement and Annual Report, which are both available at
www.proxyvote.com. This Proxy Statement and the Annual Report are also available on the Company’s website at http://www.cinedigm.com/
.
PROPOSAL
ONE
ELECTION OF DIRECTORS
The
Board currently consists of five (5) directors. All of the current members of the Board have been nominated for re-election. Stockholders
and their proxies cannot vote for more than five (5) nominees at the Annual Meeting. Each nominee has consented to being named as a nominee
for election as a director and has agreed to serve if elected; however, if a nominee should withdraw his or her name from consideration
for any reason or otherwise become unable to serve before the Annual Meeting, the Board reserves the right to substitute another person
as nominee, and the persons named on your proxy card as proxies will vote for any substitute nominated by the Board. At the Annual Meeting,
directors will be elected to serve one-year terms expiring at the next annual meeting of stockholders or until their successors are elected
or until their earlier resignation or removal. This Proposal One relates to the election of directors to take effect immediately upon
the Annual Meeting.
The
directors shall be elected by a majority of the Votes Cast at the Annual Meeting in accordance with our by-laws. If any nominee is not
available for election at the time of the Annual Meeting (which is not anticipated), the proxy holders named in the proxy, unless specifically
instructed otherwise in the proxy, will vote for the election of such other person as the existing Board may recommend, unless the Board
decides to reduce the number of directors of the Company. Certain information about the nominees to the Board is set forth below.
Christopher
J. McGurk, 64, has been the Company’s Chief Executive Officer and Chairman of the Board since January 2011. Mr. McGurk was
the founder and Chief Executive Officer of Overture Films from 2006 until 2010 and also the Chief Executive Officer of Anchor Bay Entertainment,
which distributed Overture Films’ products to the home entertainment industry. From 1999 to 2005, Mr. McGurk was Vice Chairman
of the Board and Chief Operating Officer of Metro-Goldwyn-Mayer Inc. (“MGM”), acting as the company’s lead operating
executive until MGM was sold for approximately $5 billion to a consortium of investors. Mr. McGurk joined MGM from Universal Pictures,
where he served in various executive capacities, including President and Chief Operating Officer, from 1996 to 1999. From 1988 to 1996,
Mr. McGurk served in several senior executive roles at The Walt Disney Studios, including Studios Chief Financial Officer and President
of The Walt Disney Motion Picture Group. Mr. McGurk currently serves on the board of IDW Media Holdings, Inc. (Pink:IDWM) and has previously
served on the boards of BRE Properties, Inc., DivX Inc., DIC Entertainment, Pricegrabber.com, LLC and MGM Studios, Inc. Mr. McGurk’s
extensive career in various sectors of the theatrical production and exhibition industry will provide the Company with the benefits of
his knowledge of and experience in this field, as well as his wide-spread contacts within the industry.
Fan
“Tom” Bu, 41, has been a member of the Board since March 2020. He served as an Audit/Financial Director for Bison Finance
Group Ltd. (HK:00888) from June 2017 through May 2021. From October 2017 through June 2019, he was the Chief Financial Officer of Xynomic
Pharmaceuticals Holdings, Inc., f/k/a Bison Capital Acquisition Corp. (OTC:XYN). From December 2013 to May 2017, Mr. Bu served as an
audit manager at KPMG Huazhen LLC. From October 2010 to December 2013, Mr. Bu served as the audit manager at KPMG Advisory (China) Limited.
Mr. Bu graduated from Shandong Economic University with a Bachelor’s Degree in International Trade in June 2007 and graduated from
Ocean University of China with a Master’s Degree in Economics in June 2010. Mr. Bu is a certified public accountant in China (CICPA).
Mr. Bu is a designee of Bison in accordance with the Stock Purchase Agreement (the “Bison Agreement”) dated as of June 29,
2017, by and between the Company and Bison Entertainment Investment Limited, a wholly owned subsidiary of Bison. Mr. Bu brings knowledge
of doing business in China, as well as financial and accounting experience, to the Board.
Peter
C. Brown, 62, has been a member of the Board since September 2010. He is Chairman of Grassmere Partners, LLC, a private investment
firm, which he founded in 2009. Prior to founding Grassmere Partners, Mr. Brown served as Chairman of the Board, Chief Executive Officer
and President of AMC Entertainment Inc. (“AMC”), one of the world’s leading theatrical exhibition companies, from July
1999 until his retirement in February 2009. He joined AMC in 1990 and served as AMC’s President from January 1997 to July 1999
and Senior Vice President and Chief Financial Officer from 1991 to 1997. Mr. Brown currently serves on the board of EPR Properties (NYSE:
EPR), a specialty real estate investment trust (REIT). Mr. Brown also serves as a director of CenturyLink (NYSE: CTL), a global leader
in communications, hosting, cloud and IT services. Past additional public company boards include: National CineMedia, Inc., Midway Games,
Inc., LabOne, Inc., and Protection One, Inc. Mr. Brown’s extensive experience in the theatrical exhibition and entertainment industry
and other public company boards provides the Board with valuable knowledge and insight relevant to the Company’s business.
Patrick
W. O’Brien, 74, has been a member of the Board since July 2015. He currently serves as the Managing Director & Principal
of Granville Wolcott Advisors, a company he formed in 2009 which provides business consulting, due diligence and asset management services
for public and private clients. From 2005 to 2009, Mr. O’Brien was a Vice President - Asset Management for Bentall-Kennedy Associates
Real Estate Counsel where he represented pension fund ownership interests in hotel real estate investments nationwide. Mr. O’Brien
has previously served as Chairman of the Board and CEO of Livevol, Inc., a private company that was a leader in equity and index options
technology which was successfully sold to CBOE Holdings. During the past five years, Mr. O’Brien has also served on the boards
of LVI Liquidation Corp., Creative Realities, Inc., ICPW Liquidation Trust, and Merriman Holdings, Inc. Mr. O’Brien brings to the
Board his seasoned executive and business expertise in private and public companies with an emphasis on financial analysis and business
development.
Peixin
Xu, 49, has been a member of the Board since November 2017. Mr. Xu founded Bison, an investment company with a focus on the media
and entertainment, healthcare and financial service industries, in 2014 and has been serving as a partner and director since then. From
2013 to the present, Mr. Xu has been serving on the board of directors of Airmedia Group Inc. (Nasdaq: AMCN). Mr. Xu is a designee of
Bison in connection with the Bison Agreement. Mr. Xu brings to the Board investment experience, including in the media industry, in the
United States and in China.
In
connection with the consummation of the transactions contemplated by the Bison Agreement, certain members of the Board and management,
representing approximately 1.45% of the shares of Class A common stock available to be voted at the Annual Meeting, agreed to vote shares
of Common Stock owned or controlled by each such holder in favor of Bison’s designees to the Board of Directors.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEES NAMED ABOVE.
PROPOSAL
TWO
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
SEC
rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010 (the “Dodd-Frank
Act”), enable our stockholders to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers
as disclosed in this proxy statement.
As
described in detail in the section entitled “Compensation Discussion and Analysis”, we believe that executive compensation
should be focused on promoting Company performance and stockholder value. To achieve these goals our executive compensation program emphasizes
pay for performance and aligning the interests of our executives with those of our stockholders through the use of long-term incentives
and the encouragement of equity ownership. In addition, our executive compensation program is designed to allow us to recruit, retain
and motivate employees who play a significant role in our current and future success. Please read the Compensation Discussion and Analysis,
the 2021 Summary Compensation Table and the other related tables and accompanying narrative for a detailed description of the fiscal
year 2021 compensation of our named executive officers. We believe that the 2021 compensation of each of our named executive officers
was reasonable and appropriate and aligned with the Company’s 2021 results and the achievement of the objectives of our executive
compensation program.
The
vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the overall compensation
of our named executive officers. This vote is advisory only and is not binding on the Company or the Board. Although the vote is non-binding,
our Board values the opinions of our stockholders and the Board and the Compensation Committee will consider the outcome of the vote
when making future compensation decisions for our named executive officers.
This
proposal requires approval by a majority of the Votes Cast on this Proposal Two at the Annual Meeting.
Accordingly,
we ask our stockholders to vote in favor of the following resolution:
“RESOLVED,
that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in
the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the
Securities and Exchange Commission.”
THE
BOARD RECOMMENDS A VOTE “FOR” APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
PROPOSAL
THREE
AMENDMENT
TO 2017 EQUITY INCENTIVE PLAN TO INCREASE THE TOTAL NUMBER OF SHARES OF CLASS A COMMON STOCK AVAILABLE FOR ISSUANCE THEREUNDER
Our
Board adopted the Company's 2017 Equity Incentive Plan (the “2017 Plan"), on August 7, 2017 and, in on August 31, 2017, our
stockholders approved the 2017 Plan at an annual meeting of stockholders. Under the 2017 Plan, we may grant incentive and nonqualified
stock options, stock, restricted stock, restricted stock units ("RSUs"), stock appreciation rights ("SARs"), performance
awards including performance stock units (“PSUs”) and other equity-based awards. The 2017 Plan is administered by the Compensation
Committee and currently has an expiration date of August 31, 2027.
The
2017 Plan originally authorized up to 2,108,270 shares of the Company's Class A Common Stock for issuance pursuant to awards made under
the 2017 Plan. In December 2019, the 2017 Plan was amended to increase the number of shares authorized for issuance thereunder to 4,098,270,
and in October 2020, the 2017 Plan was amended to increase the number of shares authorized for issuance thereunder to 14,098,270. The
Company believes that the availability of an additional [____________] shares of the Company's Class A Common Stock under the 2017 Plan
is in the best interests of the Company and its stockholders because the availability of an adequate equity incentive program is an important
factor in attracting and retaining qualified officers, directors and employees essential to the success of the Company (whether through
acquisitions or otherwise) and in aligning their long-term interests with those of the stockholders. The increase in the number of shares
of Class A Common Stock available for issuance under the 2017 Plan will permit the Company to continue the operation of the 2017 Plan
for the benefit of new participants (either new hires to current operations, employees of acquired companies, or new directors who will
receive an initial grant of shares of restricted stock upon joining the Board), as well as to allow additional awards to current participants.
Participants under the 2017 Plan may include officers, directors and employees of the Company, as well as consultants to the Company
under certain circumstances.
Pursuant
to this proposal, in the form of the amendment attached hereto as Appendix A, the Board proposes to amend the 2017 Plan to increase
the number of shares of Class A Common Stock authorized for issuance under the 2017 Plan from 14,098,270 to [_____________].
This
proposal requires approval by a majority of the Votes Cast on this Proposal Three at the Annual Meeting. If approved by stockholders,
the proposed amendment to the 2017 Plan would become effective promptly after such approval. As of July 28, 2021, 2,568,101 shares had
been issued under the 2017 Plan (upon stock grants and settlements of PSU and RSU grants) and 10,170,753 shares were subject to outstanding
awards (although it is unknown whether all such awards will be earned and/or vest and such shares will be issued). Accordingly, only
1,359,416 shares remain available for future grants under the 2017 Plan. If the proposed amendment to the 2017 Plan is not approved,
the 2017 Plan will continue as currently in effect unless and until otherwise amended in accordance with its terms.
Administration
The
Compensation Committee administers the 2017 Plan. The Compensation Committee has the authority to select the individuals who will participate
in the 2017 Plan (“Participants”) and to grant options, SARs, restricted stock and restricted stock units, performance shares
and performance units and cash-based and other stock-based awards upon such terms (not inconsistent with the terms of the 2017 Plan)
as the Compensation Committee considers appropriate. In addition, the Compensation Committee has complete authority to interpret all
provisions of the 2017 Plan, to prescribe the form of notices or agreements evidencing awards under the 2017 Plan (each, an “Award
Agreement”), to adopt, amend and rescind rules and regulations pertaining to the administration of the 2017 Plan and to make all
other determinations necessary or advisable for the administration of the 2017 Plan, including revising the terms of the 2017 Plan as
they apply to non-U.S. employees, to comply with local law.
The
Compensation Committee may delegate its authority to administer the 2017 Plan to one of the Company’s officers. The Compensation
Committee, however, may not delegate its authority with respect to individuals who are subject to Section 16 of the Exchange Act. As
used in this summary, the term “Administrator” means the Compensation Committee and any delegate, as appropriate.
Eligibility
Any
employee of the Company or an affiliate is eligible to participate in the 2017 Plan if the Administrator, in its sole discretion, determines
that such person has contributed significantly or can be expected to contribute significantly to the profits or growth of the Company
or its affiliates. A non-employee director of the Company or other third-party service provider to the Company may also be granted awards
under the 2017 Plan so long as they do not promote or maintain a market for the Company’s securities and their services are not
in connection with the Company’s offering securities in a capital raising transaction. The Company is not able to estimate the
number of individuals that the Administrator will select to participate in the 2017 Plan or the type or size of awards that the Administrator
will approve. Therefore, the benefits to be allocated to any individual or to various groups of individuals are not presently determinable.
Non-employee
Director Awards
If
the 2017 Plan is approved by stockholders, it is anticipated that each non-employee director will receive, following the date of each
annual meeting of stockholders, a restricted stock award valued at $90,000, based on the trailing 20-day volume weighted average price
(“VWAP”) of the Class A Common Stock as of the date of such annual meeting. These restricted stock awards will vest on a
quarterly basis, so long as the director remains continuously in service. In addition, new non-employee directors will receive a grant
of restricted stock valued at $180,000 based on the trailing 20-day VWAP of the Class A Common Stock as of the grant date (the date the
director begins Board service), and such shares will vest in three equal installments on the first three anniversaries of the date of
grant. Non-employee directors will also be eligible to receive other types of awards under the 2017 Plan, but such awards are discretionary.
Awards
Options.
Options granted under the 2017 Plan may be incentive stock options (“ISOs”) or nonqualified stock options. An option entitles
the Participant to purchase shares of Class A Common Stock from the Company at the option price. The option price will be fixed by the
Administrator at the time the option is granted, but the price cannot be less than the per share fair market value on the date of grant
(or, with respect to ISOs, in the case of a holder of more than 10 percent of outstanding voting securities, 110 percent of the per share
fair market value). The option price may be paid in cash, a cash equivalent acceptable to the Administrator, with shares of Class A Common
Stock, by a cashless broker-assisted exercise, or a combination thereof, or any other method accepted by the Compensation Committee.
Options
may be exercised in whole or in part at such times and subject to such conditions as may be prescribed by the Administrator, provided
that an option shall be exercisable after a period of time specified by the Administrator which may not be less than one year, except
as the Administrator may provide in an Award Agreement. The maximum period in which an option may be exercised will be fixed by the Administrator
at the time the option is granted but cannot exceed 10 years (five years for ISOs granted to a holder of more than 10 percent of the
Company’s outstanding voting securities). The Award Agreement will set forth the extent to which a Participant may exercise the
option following termination of employment (which for non-employee directors and other third-party service providers shall mean a termination
of the performance of services to the Company; references in this description of the new Plan to a “termination of employment”
shall mean a termination of the performance of services where the award holder is a non-employee director or other third-party service
provider to the Company). No employee may be granted ISOs that are first exercisable in a calendar year for Common Stock having an aggregate
fair market value (determined as of the date the option is granted) exceeding $100,000.
SARs.
Under the 2017 Plan, a stock appreciation right (“SAR”) generally entitles the Participant to receive with respect to each
share of Class A Common Stock encompassed by the exercise of the SAR, the excess of the fair market value of a share of Common Stock
on the date of exercise over the initial value of the SAR. The initial value of the SAR is the fair market value of a share of Class
A Common Stock on the date of grant.
SARs
may be exercised at such times and subject to such conditions as may be prescribed by the Administrator, provided that an SAR shall be
exercisable after a period of time specified by the Administrator which may not be less than one year, except as the Administrator may
provide in an Award Agreement. The maximum period in which an SAR may be exercised will be fixed by the Administrator at the time the
SAR is granted, but cannot exceed 10 years for awardees within the U.S. The Award Agreement shall set forth the extent to which a Participant
may exercise the SAR following termination of employment. The amount payable upon the exercise of an SAR may, in the Administrator’s
discretion, be settled in cash, Class A Common Stock, or a combination thereof, or any other manner approved by the Administrator. The
form in which the SAR will be paid out to a Participant after exercise, as well as any conditions on any shares of Class A Common Stock
received upon exercise of an SAR, will be set forth in the Award Agreement pertaining to the SAR grant.
Restricted
Stock and Restricted Stock Units. The 2017 Plan permits the grant of restricted stock and restricted stock units. Restricted stock
units are similar to restricted stock except that no shares of Class A Common Stock are actually granted on the grant date of the award.
An award of restricted stock or restricted stock units will be forfeitable, or otherwise restricted, until conditions established at
the time of the grant are satisfied. These conditions may include, for example, a requirement that the Participant complete a specified
period of service or the attainment of certain performance objectives. Any restrictions imposed on an award of restricted stock or restricted
stock units will be prescribed by the Administrator. Restricted stock and restricted stock units shall vest over a period of at least
one year, except as the Administrator may provide in an Award Agreement. The Award Agreement shall set forth the extent to which a Participant
may retain restricted stock or restricted stock units following termination of employment. Restricted stock will become freely transferrable
by the Participant after all conditions and restrictions have been satisfied. Vested restricted stock units may, in the Administrator’s
discretion, be settled in cash, Class A Common Stock, or a combination of cash and Class A Common Stock or any other manner approved
by the Administrator.
Performance
Units and Performance Shares. The 2017 Plan provides for the award of performance units and performance shares. A performance share
award entitles a Participant to receive a payment equal to the fair market value of a specific number of shares of Class A Common Stock.
A performance unit award is similar to a performance share award except that a performance unit award is not necessarily tied to the
value of Class A Common Stock. The Administrator will prescribe the conditions that must be satisfied before an award of performance
units or performance shares is earned. These conditions may include, for example, a requirement that the Participant complete a specified
period of service or the attainment of certain performance objectives which, under the terms of the 2017 Plan, must be for a period of
at least one year, except as the Administrator may provide in an Award Agreement. The Award Agreement shall set forth the extent to which
a Participant may retain performance units and performance shares following termination of employment. To the extent that performance
units or performance shares are earned and vested, the obligation may be settled in cash, Class A Common Stock or a combination of cash
and Class A Common Stock. If the award is settled in shares of Class A Common Stock, the shares may be subject to additional restrictions
deemed appropriate by the Administrator.
Cash-Based
and Other Stock-Based Awards. The 2017 Plan also allows the Administrator to make cash-based and other stock and equity-based awards
to Participants on such terms and conditions as the Administrator prescribes. The Award Agreement shall set forth the extent to which
a Participant may retain cash-based and other stock and equity-based awards following termination of employment. To the extent that any
cash-based and other stock and equity-based awards are granted, they may, in the Administrator’s discretion, be settled in cash
or Class A Common Stock.
Transferability
In
general, awards available under the 2017 Plan will be nontransferable except by will or the laws of descent and distribution.
Performance
Objectives
The
Compensation Committee may prescribe that (1) an option or SAR is exercisable, (2) an award of restricted stock or restricted stock units
is vested or transferable or both, (3) performance units or performance shares are earned, or (4) payment under a cash-based or other
stock-based award is earned, only upon the attainment of certain performance objectives. Such performance objectives may be used to measure
the performance of any Participant, the Company, an affiliate, a subsidiary, as a whole or any business unit or line of business, or
any combination thereof. The performance objectives may be measured on an absolute, gross, total, net per share, average, adjusted or
relative basis (or measure based on changes therein), including as compared to the performance of a group of comparator companies or
index. The performance objectives will be based on one or more of (a) net earnings or net income (before or after taxes); (b) earnings
per share (basic or diluted); (c) net sales or revenue growth; (d) net operating profit; (e) return measures (including, but not limited
to, return on assets, capital, invested capital, equity, sales, or revenue); (f) cash flow (including, but not limited to, throughput,
operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); (g) earnings before or after taxes,
interest, depreciation, and/or amortization; (h) earnings before taxes; (i) gross or operating margins; (j) corporate value measures;
(k) capital expenditures; (l) unit volumes; (m) productivity ratios; (n) share price (including, but not limited to, growth measures
and total shareholder return); (o) cost or expense; (p) margins (including, but not limited to, debt or profit); (q) operating efficiency;
(r) market share; (s) customer satisfaction; (t) working capital targets or any element thereof; (u) economic value added or EVA®
(net operating profit after tax minus the sum of capital multiplied by the cost of capital); (v) health, safety and environmental performance;
(w) corporate advocacy metrics; (x) strategic milestones (including, but not limited to, debt reduction, improvement of cost of debt,
equity or capital, completion of projects, achievement of synergies or integration objectives, or improvements to credit rating, inventory
turnover, weighted average cost of capital, implementation of significant new processes, productivity or production, product quality,
and any combination of the foregoing); (y) strategic sustainability metrics (including, but not limited to, corporate governance, enterprise
risk management, employee development, and portfolio restructuring); and (z) stockholder equity or net worth.
Change
in Control
Unless
otherwise provided in an Award Agreement, upon a Change in Control of the Company the following shall occur:
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Unearned
performance awards shall be (i) earned on a pro-rata basis at the higher of actual or target performance and (ii) measured as of
the end of the calendar quarter before the change in control date or, if the award is stock-price based, as of the effective date
of the change in control;
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Earned
but unvested performance awards shall be immediately vested and payable as of the change in control;
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For
awards other than performance awards, a Replacement Award (that is, a comparable award from the surviving entity after the change
in control) may be issued.
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If
a Replacement Award is not issued, awards shall be immediately payable or exercisable.
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Other
than with respect to outstanding performance awards, the Compensation Committee may cancel outstanding awards and award holders will
receive shares or cash equal to the difference between the payments shareholders receive in connection with the change in control
and the purchase price per share, if any.
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To
the extent the Class A Common Stock continues to be publically traded after a qualifying change in control, awards that are not performance
awards shall continue under their applicable terms.
Except
as may be provided in a severance compensation agreement between the Company and the Participant, if, in connection with a change in
control, a Participant’s payment of any awards will cause the Participant to be liable for federal excise tax levied on certain
“excess parachute payments,” then either (i) all payments otherwise due; or (ii) the reduced payment amount to avoid an excess
parachute payment, whichever will provide the Participant with the greater after-tax economic benefit taking into account any applicable
excise tax, shall be paid to the Participant, and in no event will any Participant be entitled to receive any kind of gross-up payment
or reimbursement for any excise taxes payable in connection with change in control payments.
Share
Authorization
The
maximum aggregate number of shares of Class A Common Stock that may be issued under the 2017 Plan, consisting of Class A Common Stock
issued and Class A Common Stock underlying outstanding awards granted on or after the date the 2017 Plan is approved by shareholders,
is 14,098,270 shares, which includes 128,270 unused shares carried over from the 2000 Equity Incentive Plan. This limitation will be
adjusted as the Compensation Committee determines is appropriate in the event of a change in the number of outstanding shares of Class
A Common Stock by reason of a stock dividend, stock split, combination, reclassification, recapitalization or other similar event. The
terms of outstanding awards and the limitations on individual grants also will be adjusted as the Compensation Committee determines is
appropriate to reflect such changes.
If
an award entitles the holder to receive or purchase shares of Class A Common Stock, the shares covered by such award or to which the
award relates shall be counted against the aggregate number of shares available for awards under the 2017 Plan as follows:
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With
respect to any awards, the number of shares available for awards shall be reduced by one
share for each share covered by such award or to which the award relates; and
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Awards
that do not entitle the holder to receive or purchase shares and awards that are settled
in cash shall not be counted against the aggregate number of shares available for awards
under the 2017 Plan.
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In
addition, any shares related to awards which terminate by expiration, forfeiture, cancellation, or otherwise without issuance of shares
shall be available again for grant under the 2017 Plan.
In
no event, however, will the following shares again become available for awards or increase the number of shares available for grant under
the 2017 Plan: (i) shares tendered by the Participant in payment of the exercise price of an option; (ii) shares withheld from exercised
awards for tax withholding purposes; (iii) shares subject to a SAR that are not issued in connection with the settlement of that SAR;
and (iv) shares repurchased by the Company with proceeds received from the exercise of an option.
Amendment
and Termination
No
award may be granted under the 2017 Plan after 10 years from the date the 2017 Plan was approved by stockholders. The Compensation Committee,
may, without further action by stockholders, amend or terminate the 2017 Plan or an Award Agreement in whole or in part including adjustments
in the terms and conditions of an Award in recognition of unusual or nonrecurring events, except that no material amendment of the 2017
Plan, or an amendment that increases the number of shares of Class A Common Stock that may be issued under the 2017 Plan or otherwise
requires stockholder approval under applicable rules or law, will become effective, and no option or SAR will be repriced, replaced,
repurchased (including a cash buyout), or regranted through cancellation, unless and until approved by stockholders. Any amendment of
the 2017 Plan must comply with the rules of The Nasdaq Stock Market and shall not have any material adverse effect with respect to any
previously granted Award absent written consent of the Award holder.
Federal
Income Tax Consequences
The
Company has been advised by counsel regarding the federal income tax consequences of the 2017 Plan. No income is recognized by a Participant
at the time an option or SAR is granted. If the option is an ISO, no income will be recognized upon the Participant’s exercise
of the option (except that the alternative minimum tax may apply). Income is recognized by a Participant when he disposes of shares acquired
under an ISO. The exercise of a nonqualified stock option or SAR generally is a taxable event that requires the Participant to recognize,
as ordinary income, the difference between the shares’ fair market value and the option price. If a Participant disposes of shares
acquired under an ISO before two years after the ISO was granted, or before one year after the ISO was exercised, this is a “disqualifying
disposition” and the Participant will recognize ordinary income equal to the excess of the amount received for the shares over
the option price.
Income
is recognized on account of the award of restricted stock and performance shares when the shares first become transferable or are no
longer subject to a substantial risk of forfeiture unless the Participant makes an election to recognize income currently under Section
83(b) of the Code. At the applicable time, the Participant recognizes income equal to the fair market value of the Class A Common Stock.
With
respect to awards of performance units, restricted stock units, and cash-based awards, a Participant will recognize ordinary income equal
to any cash that is paid and the fair market value of Class A Common Stock that is received in settlement of an award.
The
Company generally will be entitled to claim a federal income tax deduction on account of the exercise of a nonqualified stock option
or SAR or upon the taxability to the recipient of restricted stock and performance shares, the settlement of a performance unit or restricted
stock unit, and the payment of a cash-based or other stock-based award (subject to tax limitations on the Company’s deductions
in any year that certain remuneration paid to certain executives exceeds $1 million). The amount of the deduction is equal to the ordinary
income recognized by the Participant. The Company will not be entitled to a federal income tax deduction on account of the grant or the
exercise of an ISO unless the Participant has made a “disqualifying disposition” of the shares acquired on exercise of the
ISO, in which case the Company will be entitled to a deduction at the same time and in the same amount as the Participant’s recognition
of ordinary income.
Our
Class A Common Stock is listed for trading on The Nasdaq Global Market ("Nasdaq") under the symbol "CIDM". The last
reported closing price per share of our Class A Common Stock as reported by Nasdaq on July 28, 2021 was $1.61 per share.
The
Company does not have any plans, proposals or arrangements to make grants or issue any of the shares of Common Stock that would become
newly available for issuance under the 2017 Plan following the increase proposed in this Proposal Three, other than grants and issuances
made in the ordinary course.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE AMENDMENT TO THE 2017 PLAN TO INCREASE THE TOTAL
NUMBER OF SHARES OF CLASS A COMMON STOCK AVAILABLE FOR ISSUANCE THEREUNDER.
PROPOSAL
FOUR
AMENDMENT
OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO
INCREASE THE AMOUNT OF CLASS A COMMON STOCK AUTHORIZED
The Company’s Certificate of Incorporation
currently authorizes the issuance of a total of 215,000,000 shares of capital stock. Of such shares, 200,000,000 are designated as Class
A Common Stock and 15,000,000 are designated as preferred stock. As of July 28, 2021, there were 167,800,341 shares of Class A Common
Stock issued and outstanding. With respect to the 15,000,000 shares of authorized preferred stock, 20 are designated as Series A 10% non-voting
cumulative preferred stock, of which seven (7) are issued and outstanding and one (1) was issued but is no longer outstanding.
In addition to the 167,800,341 shares of Class
A Common Stock outstanding, as of July 28, 2021, the Company had reserved for issuance (i) 11,530,169 shares of Class A Common Stock
pursuant to the 2017 Plan, (ii) 12,500 shares of Common Stock upon exercise of inducement stock options, (iii) 265,877 shares of Class
A Common Stock pursuant to options that remain outstanding under our 2010 Second Amended and Restated Equity Incentive Plan, (iv) 1,698,519
shares of Common Stock with respect to outstanding warrants and (v) 1,313,836 shares of Common Stock held in the treasury of the Company.
The aggregate number of outstanding and reserved
shares of Class A Common Stock is 181,307,406, leaving only 18,692,594 shares of Class A Common Stock available for future issuances.
Such future issuances could include the sale of securities in order to raise capital, the payment of consideration for acquisitions,
additional shares issued in connection with grants made to employees under new or expanded existing compensation plans or arrangements,
and other uses not currently anticipated. If Proposal Three is approved, the Company will reserve an additional [____________] shares
of Class A Common Stock under the 2017 Plan. Accordingly, the Company is proposing to increase the number of authorized shares of Class
A Common Stock, so that the number of shares of Class A Common Stock would increase by [___________] shares to [____________] shares.
This would allow the Company to reserve the additional shares under the 2017 Plan and have sufficient additional shares of Class A Common
Stock available for future uses, although no such future uses are contemplated at this time. The Company believes that such increase
is in the best interests of the Company and its stockholders, as it would provide the Company with flexibility and alternatives in structuring
future transactions.
This
amendment would not change any of the rights, restrictions, terms or provisions relating to the Class A Common Stock or the preferred
stock. Under the General Corporation Law of the State of Delaware, stockholders are not entitled to appraisal rights with respect to
this amendment. The Company will not independently provide stockholders with any such right. Additionally, holders of Class A Common
Stock do not have any preemptive rights with respect to the issuance of Class A Common Stock.
Future
issuances of Class A Common Stock could affect stockholders. Any future issuance of Class A Common Stock, other than on a pro-rata basis,
would dilute the percentage ownership and voting interest of the then current stockholders.
Based
upon NYSE guidance, this Proposal Four is characterized as a “routine” matter because although it relates to an amendment
to a certificate of incorporation to increase the authorized shares, such increase is not being sought in order to enable the consummation
of a specific transaction. Accordingly, broker non-votes may be counted toward this Proposal Four.
If
this Proposal Four is approved, regardless of whether the other proposals presented in the proxy statement are approved, the Company
will file an amendment to our Fifth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of
Class A Common Stock to [_____________], a copy of which amendment is attached hereto as Appendix B, unless the Board determines
otherwise.
This
proposal requires approval by a majority of the votes entitled to vote at the Annual Meeting.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION
TO INCREASE THE AMOUNT OF CLASS A COMMON STOCK AUTHORIZED.
PROPOSAL
FIVE
APPROVAL
TO AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION
TO
EFFECT A REVERSE STOCK SPLIT AND TO REDUCE THE NUMBER OF
AUTHORIZED
SHARES OF THE COMPANY’S CLASS A COMMON STOCK, SUBJECT TO
THE
BOARD’S DISCRETION
The
Board has approved, and is hereby soliciting stockholder approval of, an amendment to the Company’s Certificate of Incorporation
to effect a reverse stock split of the Company’s Class A Common Stock at a ratio of not less than one-for-two and not more than
one-for-ten, subject to the Board’s discretion to determine, without any further action by stockholders, not to proceed with a
reverse stock split if it determines that a reverse stock split is no longer in the best interest of the Company and its stockholders.
The language of the new Section 4.1 of the Certificate of Incorporation which would be contained in an amendment is set forth in Appendix
C to this Proxy Statement (the “Reverse Stock Split Amendment”). A vote for this Proposal Five will constitute approval
of the Reverse Stock Split Amendment providing for the combination of any whole number of shares of Class A Common Stock between and
including two and ten into one share of Class A Common Stock and will grant the Board the authority to select which of the approved exchange
ratios within that range will be implemented. If stockholders approve this proposal, the Board will have the authority, but not the obligation,
in its sole discretion and without further action on the part of the stockholders, to select one of the approved reverse stock split
ratios and effect the approved reverse stock split by filing the Reverse Stock Split Amendment with the Secretary of State of the State
of Delaware at any time after the approval of the Reverse Stock Split Amendment. If the Reverse Stock Split Amendment is approved by
stockholders and has not been filed with the Secretary of State of the State of Delaware by the close of business on the first anniversary
of the date on which the stockholders approved it, the Board will abandon the Reverse Stock Split Amendment. If the reverse stock split
is implemented, the Reverse Stock Split Amendment also would reduce the number of authorized shares of our Class A Common Stock as set
forth below but would not change the par value of a share of our Class A Common Stock. Except for any changes as a result of the treatment
of fractional shares, each stockholder will hold the same percentage of Class A Common Stock outstanding immediately following the reverse
stock split as such stockholder held immediately prior to the reverse stock split.
The
Board believes that stockholder approval of an exchange ratio range (rather than an exact exchange ratio) provides the Board with maximum
flexibility to achieve the purposes of the reverse stock split. If the stockholders approve this Proposal Five, the reverse stock split
will be effected, if at all, only upon a determination by the Board that the reverse stock split is in the Company’s and its stockholders’
best interests at that time. In connection with any determination to effect the reverse stock split, the Board will set the time for
such a split and select a specific ratio within the range. These determinations will be made by the Board with the intention to create
the greatest marketability for our Class A Common Stock based upon prevailing market conditions at that time.
The
Board reserves its right to elect to abandon the reverse stock split if it determines, in its sole discretion, that this proposal is
no longer in the best interest of the Company and its stockholders.
In
October 2020, at the 2020 annual meeting of stockholders, the stockholders authorized the Board to effect a reverse stock split at its
discretion (the “Prior Approval”). The Board has thus far determined not to effect a reverse split. The Prior Approval will
expire on October 23, 2020.
Purpose
of the Reverse Stock Split Amendment
The
purpose of the reverse stock split is to increase the per share trading value of the Class A Common Stock. The Board intends to effect
the proposed reverse stock split only if it believes that a decrease in the number of shares outstanding is likely to improve the trading
price for the Class A Common Stock, and only if the implementation of a reverse stock split is determined by the Board to be in the best
interests of the Company and its stockholders. The Board may exercise its discretion not to implement a reverse stock split.
The
Class A Common Stock on the Nasdaq Global Market has traded at prices both above and below $1 per share during 2021. If the closing bid
price of the Class A Common Stock is below $1 for 30 consecutive trading days, the Company may no longer meet the requirement to maintain
a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5450(a)(1).
The
Board has determined that a reverse stock split may be the best option for the Company if it needs to bring the bid price for the Class
A Common Stock above the $1 threshold in accordance with Nasdaq Listing Rule 5450(a)(1). The Board has been monitoring, and will continue
to monitor, the trading price of the Class A Common Stock.
Furthermore,
the Board believes that a reverse stock split would allow a broader range of institutions to invest in the Class A Common Stock (namely,
funds that are prohibited from buying stocks with a price below a certain threshold), potentially increasing the trading volume and liquidity
of the Class A Common Stock. A reverse stock split would also help increase analyst and broker interest in the Class A Common Stock,
as their policies can discourage them from following or recommending companies with lower stock prices. Because of the trading volatility
often associated with lower-priced stock, many brokerage houses and institutional investors have adopted internal policies and practices
that either prohibit or discourage them from investing in such stocks or recommending them to their customers. Some of those policies
and practices may also function to make the processing of trades in lower-priced stocks economically unattractive to brokers.
Impact
of the Reverse Stock Split Amendment if Implemented
If
approved and effected, the reverse stock split will be realized simultaneously and in the same ratio for all of the Class A Common Stock.
The reverse stock split will affect all holders of the Class A Common Stock uniformly and will not affect any stockholder’s percentage
ownership interest, or voting power, in the Company (subject to the treatment of fractional shares). As described below, holders of Class
A Common Stock otherwise entitled to a fractional share as a result of the reverse stock split will receive a cash payment in lieu of
such fractional share. These cash payments will reduce the number of post-reverse stock split holders of the Class A Common Stock to
the extent there are at the time the reverse stock split is effected, stockholders who would otherwise receive less than one share of
Class A Common Stock after the reverse stock split. In addition, the reverse stock split will not affect any stockholder’s proportionate
voting power (subject to the treatment of fractional shares).
The
principal effects of the Reverse Stock Split Amendment will be that:
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depending
on the ratio for the reverse stock split selected by the Board, each two or ten shares of Class A Common Stock owned by a stockholder,
or any whole number of shares of Class A Common Stock between two and ten, as determined by the Board, will be combined into one
new share of Class A Common Stock;
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the
number of shares of Class A Common Stock issued and outstanding will be reduced from approximately 167,000,000 to a range of approximately
83,500,000 to 16,700,000, depending upon the reverse stock split ratio selected by the Board;
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the
number of authorized shares of Class A Common Stock will be reduced from 200,000,000 to a range of approximately 100,000,000 to 20,000,000,
depending upon the reverse stock split ratio chosen by the Board (without giving effect to an increase in the number of authorized
shares of Class A Common Stock if Proposal Four is approved);
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based
upon the reverse stock split ratio selected by the Board, proportionate adjustments will be made to the per share exercise price
and/or the number of shares issuable upon the exercise or conversion of all outstanding options, warrants, and other convertible
or exchangeable securities entitling the holders thereof to purchase, exchange for, or convert into, shares of Class A Common Stock,
which will result in approximately the same aggregate price being required to be paid for such options and restricted stock awards
and units upon exercise immediately preceding the reverse stock split; and
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the
number of shares reserved for issuance or pursuant to the securities or plans described in the immediately preceding bullet will
be reduced proportionately based upon the reverse stock split ratio selected by the Board.
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The
table below illustrates the effect (without giving effect to an increase in the number of authorized shares of Class A Common Stock if
Proposal Four is approved), as of July 28, 2021, of a reverse stock split at certain ratios on (i) the shares of Class A Common Stock
outstanding; (ii) the shares of Class A Common Stock reserved for issuance, (iii) the reduced number of total authorized shares of Class
A Common Stock under our certificate of incorporation, and (iv) the resulting number of shares of Class A Common Stock available for
issuance:
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Shares
Outstanding
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Shares
Reserved for
Issuance
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Total Authorized
Shares
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Shares Authorized and
Available
(% of total
authorized)
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Prior to Reverse
Stock Split
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167,800,341
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13,507,065
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200,000,000
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18,692,594
(9.3%)
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One-for-two
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83,900,171
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6,753,533
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100,000,000
|
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9,346,296
(9.3%)
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One-for-five
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33,560,068
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2,701,413
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40,000,000
|
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3,738,519
(9.3%)
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One-for-ten
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16,780,034
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1,350,707
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20,000,000
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1,869,259
(9.3%)
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Certain
Risks Associated with the Reverse Stock Split
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If
the reverse stock split is effected and the market price of the Class A Common Stock declines, the percentage decline may be greater
than would occur in the absence of a reverse stock split. The market price of the Class A Common Stock will, however,
also be based on performance and other factors, which are unrelated to the number of shares outstanding.
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There
can be no assurance that the reverse stock split will result in any particular price for the Class A Common Stock. As
a result, the trading liquidity of the Class A Common Stock may not necessarily improve.
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There
can be no assurance that the market price per share of the Class A Common Stock after a reverse stock split will increase in proportion
to the reduction in the number of shares of the Class A Common Stock outstanding before the reverse stock split. For example,
based on the closing price of the Class A Common Stock on July 28, 2021 of $1.61 per share, if the reverse stock split were implemented
and approved for a reverse stock split ratio of one-for-five, there can be no assurance that the post-split market price of the Class
A Common Stock would be $8.05, or greater. Accordingly, the total market capitalization of the Class A Common Stock after
the reverse stock split may be lower than the total market capitalization before the reverse stock split. Moreover, in
the future, the market price of the Class A Common Stock following the reverse stock split may not exceed or remain higher than the
market price prior to the reverse stock split.
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Because
the number of issued and outstanding shares of Class A Common Stock would decrease as result of the reverse stock split, the number
of authorized but unissued shares of Class A Common Stock may increase on a relative basis. If the Company issues additional
shares of Class A Common Stock, then the ownership interest of the Company’s current stockholders would be diluted, possibly
substantially.
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The
reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares of Class A Common Stock. Odd
lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat
higher than the costs of transactions in “round lots” of even multiples of 100 shares.
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The
Board intends to effect the reverse stock split only if it believes that a decrease in the number of shares is likely to improve the
trading price of the Class A Common Stock and if the implementation of the reverse stock split is determined by the Board to be in the
best interests of the Company and its stockholders.
Effective
Time
The
proposed reverse stock split would become effective as of 11:59 p.m., Eastern Time (the “Effective Time”), on the date of
filing the Reverse Stock Split Amendment with the office of the Secretary of State of the State of Delaware. Except as explained below
with respect to fractional shares, at the Effective Time, all shares of the Class A Common Stock issued and outstanding immediately prior
thereto will be combined, automatically and without any action on the part of stockholders, into a lesser number of shares of the Class
A Common Stock calculated in accordance with the reverse stock split ratio determined by the Board.
After
the Effective Time, the Class A Common Stock will have a new committee on uniform securities identification procedures (“CUSIP”)
number, which is a number used to identify the Company’s equity securities, and stock certificates with the older CUSIP number
will need to be exchanged for stock certificates with the new CUSIP number by following the procedures described below.
After
the Effective Time, the Company will continue to be subject to periodic reporting and other requirements of the Exchange Act. The Class
A Common Stock will continue to be listed on the Nasdaq Global Market under the symbol “CIDM”, although Nasdaq will add the
letter “D” to the end of the trading symbol for a period of 20 trading days after the Effective Date to indicate that the
reverse stock split has occurred.
Board
Discretion to Implement the Reverse Stock Split Amendment
If
the reverse stock split is approved by the Company’s stockholders, it will be effected, if at all, only upon a determination by
the Board that a reverse stock split (at a ratio determined by the Board as described above) is in the best interests of the Company
and the stockholders. The Board’s determination as to whether the reverse stock split will be effected and, if so, at what ratio,
will be based upon certain factors, including existing and expected marketability and liquidity of the Class A Common Stock, prevailing
market conditions and the likely effect on the market price of the Class A Common Stock. If the Board determines to effect the reverse
stock split, the Board will consider various factors in selecting the ratio including the overall market conditions at the time and the
recent trading history of the Class A Common Stock.
Fractional
Shares
Stockholders
will not receive fractional post-reverse stock split shares in connection with the reverse stock split. Instead, the Company’s
transfer agent for the registered stockholders will aggregate all fractional shares of Class A Common Stock and arrange for them to be
sold as soon as practicable after the Effective Time at the then prevailing prices on the open market on behalf of those stockholders
who would otherwise be entitled to receive a fractional share. The Company expects that the transfer agent will cause the sale to be
conducted in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares
of Class A Common Stock. After completing the sale, stockholders will receive a cash payment from the transfer agent in an amount equal
to the stockholder’s pro rata share of the total net proceeds of these sales. No transaction costs will be assessed on the sale.
However, the proceeds will be subject to certain taxes as discussed below. In addition, stockholders will not be entitled to receive
interest for the period of time between the Effective Time and the date a stockholder receives payment for the cashed-out shares. The
payment amount will be paid to the stockholder in the form of a check in accordance with the procedures outlined below.
After
the reverse stock split, stockholders will have no further interests in the Company with respect to their cashed-out fractional shares.
A person otherwise entitled to a fractional interest will not have any voting, dividend or other rights except to receive payment as
described above.
Effect
on Beneficial Holders of Class A Common Stock (i.e., stockholders who hold in “street name”)
Upon
the reverse stock split, we intend to treat shares held by stockholders in “street name,” through a bank, broker or other
nominee, in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or other nominees will
be instructed to effect the reverse stock split for their beneficial holders holding the Class A Common Stock in “street name.”
However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse
stock split and making payment for fractional shares. If a stockholder holds shares of the Class A Common Stock with a bank, broker or
other nominee and has any questions in this regard, stockholders are encouraged to contact their bank, broker or other nominee.
Effect
on Registered “Book-Entry” Holders of Class A Common Stock (i.e., stockholders that are registered on the transfer agent’s
books and records but do not hold stock certificates)
Certain
of the Company’s registered holders of Class A Common Stock may hold some or all of their shares electronically in book-entry form
with the transfer agent. These stockholders do not have stock certificates evidencing their ownership of the Class A Common Stock. They
are, however, provided with a statement reflecting the number of shares registered in their accounts.
If
a stockholder holds registered shares in book-entry form with the transfer agent, no action needs to be taken to receive post-reverse
stock split shares or cash payment in lieu of any fractional share interest, if applicable. If a stockholder is entitled to post-reverse
stock split shares, a transaction statement will automatically be sent to the stockholder’s address of record indicating the number
of shares of Class A Common Stock held following the reserve stock split.
If
a stockholder is entitled to a payment in lieu of any fractional share interest, a check will be mailed to the stockholder’s registered
address as soon as practicable after the Effective Time. By signing and cashing the check, stockholders will warrant that they owned
the shares of Class A Common Stock for which they received a cash payment. The cash payment is subject to applicable federal and state
income tax and state abandoned property laws. In addition, stockholders will not be entitled to receive interest for the period of time
between the Effective Time of the reverse stock split and the date payment is received.
Effect
on Certificated Shares
Stockholders
holding shares of Class A Common Stock in certificate form will be sent a transmittal letter by the transfer agent after the Effective
Time. The letter of transmittal will contain instructions on how a stockholder should surrender their certificate(s) representing shares
of the Class A Common Stock (“Old Certificates”), to the transfer agent in exchange for certificates representing the appropriate
number of whole shares of post-reverse stock split Class A Common Stock (“New Certificates”). No New Certificate will be
issued to a stockholder until such stockholder has surrendered all Old Certificates, together with a properly completed and executed
letter of transmittal, to the transfer agent. No stockholder will be required to pay a transfer or other fee to exchange their Old Certificates.
Stockholders
will then receive a New Certificate(s) representing the number of whole shares of Class A Common Stock to which they are entitled as
a result of the reverse stock split. Until surrendered, the Company will deem outstanding Old Certificates held by stockholders to be
cancelled and only to represent the number of whole shares of post-reverse stock split Class A Common Stock, as applicable, to which
these stockholders are entitled.
Any
Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged
for new certificates. If an Old Certificate has a restrictive legend on its back, the New Certificate will be issued with the same restrictive
legends that are on the back of the Old Certificate. If a stockholder is entitled to a payment in lieu of any fractional share interest,
such payment will be made as described above under “Fractional Shares.”
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Accounting
Matters
The
reverse stock split will not affect the par value of a share of the Class A Common Stock. As a result, as of the Effective Time of the
reverse stock split, the stated capital attributable to Class A Common Stock on the Company’s balance sheet will be reduced proportionately
based on the reverse stock split ratio (including a retroactive adjustment of prior periods), and the additional paid-in capital account
will be credited with the amount by which the stated capital is reduced. Reported per share net income or loss will be higher because
there will be fewer shares of Class A Common Stock outstanding.
No
Appraisal Rights
Under
the Delaware General Corporation Law, stockholders are not entitled to appraisal rights with respect to the reverse stock split, and
the Company will not independently provide stockholders with any such right.
Certain
United States Federal Income Tax Considerations
The
following is a summary of certain U.S. federal income tax consequences of the reverse stock split to holders of the Class A Common Stock.
This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated
thereunder, judicial authorities, published positions of the Internal Revenue Service (the “IRS”) and other applicable authorities,
all as currently in effect and all of which are subject to change or differing interpretations (possibly with retroactive effect). This
discussion is limited to U.S. holders (as defined below) that hold their shares of Class A Common Stock as capital assets for U.S. federal
income tax purposes (generally, assets held for investment). This discussion does not address all of the tax consequences that may be
relevant to a particular stockholder or to stockholders that are subject to special treatment under U.S. federal income tax laws, such
as:
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stockholders
that are not U.S. holders;
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financial
institutions;
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insurance
companies;
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tax-exempt
organizations;
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dealers
in securities or foreign currencies;
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persons
whose functional currency is not the U.S. dollar;
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traders
in securities that elect to use a mark to market method of accounting;
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persons
who own more than 5% of the Company’s outstanding stock;
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persons
that hold the Class A Common Stock as part of a straddle, hedge, constructive sale, conversion or other integrated transaction; and
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U.S.
holders who acquired their shares of Class A Common Stock through the exercise of an employee stock option or otherwise as compensation.
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If
a partnership or other entity taxed as a partnership holds Class A Common Stock, the tax treatment of a partner in the partnership generally
will depend upon the status of the partners and the activities of the partnership. Partnerships and partners in such a partnership should
consult their tax advisors about the tax consequences of the reverse stock split to them.
This
discussion does not address the tax consequences of the reverse stock split under state, local or foreign tax laws. No assurance can
be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth
below.
Holders
of the Class A Common Stock are urged to consult with their own tax advisors as to the tax consequences of the reverse stock split in
their particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local or foreign
and other tax laws and of changes in those laws.
For
purposes of this section, the term “U.S. holder” means a beneficial owner of the Class A Common Stock that for U.S. federal
income tax purposes is:
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an
individual that is a citizen or resident of the United States;
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a
corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the
laws of the United States or any State or the District of Columbia;
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an
estate that is subject to U.S. federal income tax on its income regardless of its source; or
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a
trust, the substantial decisions of which are controlled by one or more U.S. persons and which is subject to the primary supervision
of a U.S. court, or a trust that validly has elected under applicable Treasury regulations to be treated as a U.S. person for U.S.
federal income tax purposes.
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Tax
Consequences of the Reverse Stock Split Generally
Except
as provided below with respect to cash received in lieu of fractional shares, a U.S. holder will not recognize any gain or loss as a
result of the reverse stock split.
Cash
Received in Lieu of Fractional Shares
A
U.S. holder that receives cash in lieu of a fractional share of Class A Common Stock in the reverse stock split will generally be treated
as if the U.S. holder had participated in a redemption to the extent of the cash. The tax treatment of the receipt of cash could depend
in part on the percentage of the Company’s stock owned by the U.S. holder before and after the reverse stock split, and it is therefore
possible that the tax treatment of the receipt of the cash by some U.S. holders will differ from the tax treatment of the receipt of
the cash by other U.S. holders. Some U.S. holders may recognize capital gain or loss in an amount equal to the difference between the
amount of cash received and the portion of the basis of the pre-reverse stock split Class A Common Stock allocable to the fractional
interest. Such gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period in the Class A
Common Stock exchanged therefor was greater than one year as of the date of the exchange. In the case of other U.S. holders, the cash
might instead be treated as a return of capital or, if the Company has current or accumulated earnings and profits, a dividend. U.S.
holders should consult with their own tax advisors to determine the proper tax treatment of the receipt of cash in lieu of a fractional
share.
Tax
Basis and Holding Period
A
U.S. holder’s aggregate tax basis in the Class A Common Stock received in the reverse stock split will equal such stockholder’s
aggregate tax basis in the Class A Common Stock surrendered in the reverse stock split reduced by any amount allocable to a fractional
share of post-reverse stock split Class A Common Stock for which cash is received. The holding period for the shares of the Class A Common
Stock received in the reverse stock split generally will include the holding period for the shares of the Class A Common Stock exchanged
therefor.
The
Company does not have any plans, proposals or arrangements to issue for any purpose, including future acquisitions and/or financings,
any of the authorized shares of Class A Common Stock that would become newly available for issuance following the reverse stock split.
This
proposal requires approval by a majority of the votes entitled to vote at the Annual Meeting.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION TO EFFECT
A REVERSE STOCK SPLIT AND TO REDUCE THE NUMBER OF SHARES OF THE COMPANY’S AUTHORIZED CLASS A COMMON STOCK, AT THE BOARD’S
DISCRETION.
PROPOSAL
SIX
RATIFICATION
OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board has selected the firm of EisnerAmper LLP as our independent registered public accounting firm for the fiscal year ending March
31, 2022, subject to ratification by our stockholders at the Annual Meeting. EisnerAmper LLP has been our independent registered public
accounting firm since the fiscal year ended March 31, 2005. No representative of EisnerAmper LLP is expected to be present at the Annual
Meeting.
This
proposal requires approval by a majority of the Votes Cast on this Proposal Six at the Annual Meeting.
More
information about our independent registered public accounting firm is available under the heading “Independent Registered Public
Accounting Firm” on page 42 below.
THE
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS OUR INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2022.
OTHER
MATTERS
The
Board does not know of any other matters that may be brought before the Annual Meeting. However, if any such other matters are properly
brought before the Annual Meeting, the proxies may use their own judgment to determine how to vote your shares.
MATTERS
RELATING TO OUR GOVERNANCE
Board
of Directors
The
Board oversees the Company’s risk management including understanding the risks the Company faces and what steps management is taking
to manage those risks, as well as understanding what level of risk is appropriate for the Company. The Board’s role in the Company’s
risk oversight process includes receiving regular updates from members of senior management on areas of material risk to the Company,
including operational, financial, legal and regulatory, human resources, employment, and strategic risks.
The
Company’s leadership structure currently consists of the combined role of Chairman of the Board and Chief Executive Officer and
a separate Lead Independent Director. Mr. O’Brien serves as our Lead Independent Director. The Lead Independent Director’s
responsibilities include presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of
the independent directors, serving as a liaison between the Chairman and the independent directors, reviewing information sent to the
Board, consulting with the Nominating Committee with regard to the membership and performance evaluations of the Board and Board committee
members, calling meetings of and setting agendas for the independent directors, and serving as liaison for communications with stockholders.
The
Board intends to meet at least quarterly and the independent directors serving on the Board intend to meet in executive session (i.e.,
without the presence of any non-independent directors and management) immediately following regularly scheduled Board meetings. During
the Last Fiscal Year, the Board held five (5) meetings and acted sixteen (16) times by unanimous written consent in lieu of holding a
meeting. Each current member of the Board, who was then serving, attended at least 75% of the total number of meetings of the Board,
except for Mr. Xu, and of the committees of the Board on which they served in the Last Fiscal Year. No individual may be nominated for
election to the Board after his or her 73rd birthday. Messrs. Brown, Bu and O’Brien are considered “independent” under
the rules of the SEC and Nasdaq.
The
Company does not currently have a policy in place regarding attendance by Board members at the Company’s annual meetings.
The
Board has three standing committees, consisting of an Audit Committee, a Compensation Committee and a Nominating Committee.
Audit
Committee
The
Audit Committee consists of Messrs. Brown, Bu and O’Brien. Mr. Brown is the Chairman of the Audit Committee. The Audit Committee
held four (4) meetings in the Last Fiscal Year. The Audit Committee has met with the Company’s management and the Company’s
independent registered public accounting firm to review and help ensure the adequacy of its internal controls and to review the results
and scope of the auditors’ engagement and other financial reporting and control matters. Mr. Brown is financially literate, and
Mr. Brown is financially sophisticated, as those terms are defined under the rules of Nasdaq. Mr. Brown is also a financial expert, as
such term is defined under the Sarbanes-Oxley Act of 2002. Messrs. Brown, Bu and O’Brien are considered “independent”
under the rules of the SEC and Nasdaq.
The
Audit Committee has adopted a formal written charter (the “Audit Charter”). The Audit Committee is responsible for ensuring
that the Company has adequate internal controls and is required to meet with the Company’s auditors to review these internal controls
and to discuss other financial reporting matters. The Audit Committee is also responsible for the appointment, compensation and oversight
of the auditors. Additionally, the Audit Committee is responsible for the review and oversight of all related party transactions and
other potential conflict of interest situations between the Company and its officers, directors, employees and principal stockholders.
The Audit Charter is available on the Company’s Internet website at www.cinedigm.com.
Compensation
Committee
The
Compensation Committee consists of Messrs. Brown and O’Brien. Mr. O’Brien is the Chairman of the Compensation Committee.
The Compensation Committee met ten (10) times during the Last Fiscal Year and acted one (1) time by unanimous written consent in lieu
of holding a meeting. The Compensation Committee approves the compensation package of the Company’s Chief Executive Officer and,
based on recommendations by the Company’s Chief Executive Officer, approves the levels of compensation and benefits payable to
the Company’s other executive officers, reviews general policy matters relating to employee compensation and benefits and recommends
to the entire Board, for its approval, stock option and other equity-based award grants to its executive officers, employees and consultants
and discretionary bonuses to its executive officers and employees. The Compensation Committee has the authority to appoint and delegate
to a sub-committee the authority to make grants and administer bonus and compensation plans and programs. Messrs. Brown and O’Brien
are considered “independent” under the rules of the SEC and the Nasdaq.
The
Compensation Committee has adopted a formal written charter (the “Compensation Charter”). The Compensation Charter sets forth
the duties, authorities and responsibilities of the Compensation Committee. The Compensation Charter is available on the Company’s
Internet website at www.cinedigm.com.
The
Compensation Committee, when determining executive compensation (including under the executive compensation program, as discussed below
under the heading Compensation Discussion and Analysis), evaluates the potential risks associated with the compensation policies and
practices. The Compensation Committee believes that the Company’s compensation programs are designed with an appropriate balance
of risk and reward in relation to the Company’s overall compensation philosophy and do not encourage excessive or unnecessary risk-taking
behavior. In general, the Company compensates its executives in a combination of cash and equity awards. The equity awards contain either
or both performance targets and vesting provisions, both of which encourage the executives, on a long-term basis, to strive to enhance
the value of such compensation as measured by the trading price of the Class A common stock or other performance metrics. The Compensation
Committee does not believe that this type of compensation encourages excessive or unnecessary risk-taking behavior. As a result, we do
not believe that risks relating to our compensation policies and practices for our employees are reasonably likely to have a material
adverse effect on the Company. The Company intends to recapture compensation if and as required under the Sarbanes-Oxley Act. However,
there have been no instances where it needed to recapture any compensation.
During
the Last Fiscal Year, the Compensation Committee engaged Aon, a compensation consulting firm. The consultant met with the Compensation
Committee multiple times during the Last Fiscal Year and provided guidance for cash and equity bonus compensation to executive officers
and directors, which the Compensation Committee considered in reaching its determinations of such compensation. In addition, the consultant
was available to respond to specific inquiries throughout the year.
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee currently consists of Messrs. Brown and O’Brien. Mr. O’Brien is the Chairman of the Compensation Committee.
None of such members was, at any time during the Last Fiscal Year or at any previous time, an officer or employee of the Company.
None
of the Company’s directors or executive officers serves as a member of the board of directors or compensation committee of any
other entity that has one or more of its executive officers serving as a member of the Company’s board of directors. No member
of the Compensation Committee had any relationship with us requiring disclosure under Item 404 of Securities and Exchange Commission
Regulation S-K.
Nominating
Committee
The
Nominating Committee consists of Messrs. Brown and O’Brien. Mr. Brown is the Chairman of the Nominating Committee. The Nominating
Committee held one (1) meeting during the Last Fiscal Year. The Nominating Committee evaluates and approves nominations for annual election
to, and to fill any vacancies in, the Board and recommends to the Board the directors to serve on committees of the Board. The Nominating
Committee also approves the compensation package of the Company’s directors. Messrs. Brown and O’Brien are considered “independent”
under the rules of the SEC and the Nasdaq.
The
Nominating Committee has adopted a formal written charter (the “Nominating Charter”). The Nominating Charter sets forth the
duties and responsibilities of the Nominating Committee and the general skills and characteristics that the Nominating Committee employs
to determine the individuals to nominate for election to the Board. The Nominating Charter is available on the Company’s Internet
website at www.cinedigm.com.
The
Nominating Committee will consider any candidates recommended by stockholders. In considering a candidate submitted by stockholders,
the Nominating Committee will take into consideration the needs of the Board and the qualifications of the candidate. Nevertheless, the
Board may choose not to consider an unsolicited recommendation if no vacancy exists on the Board and/or the Board does not perceive a
need to increase the size of the Board.
There
are no specific minimum qualifications that the Nominating Committee believes must be met by a Nominating Committee-recommended director
nominee. However, the Nominating Committee believes that director candidates should, among other things, possess high degrees of integrity
and honesty; have literacy in financial and business matters; have no material affiliations with direct competitors, suppliers or vendors
of the Company; and preferably have experience in the Company’s business and other relevant business fields (for example, finance,
accounting, law and banking). The Nominating Committee considers diversity together with the other factors considered when evaluating
candidates but does not have a specific policy in place with respect to diversity.
Members
of the Nominating Committee meet in advance of each of the Company’s annual meetings of stockholders to identify and evaluate the
skills and characteristics of each director candidate for nomination for election as a director of the Company. The Nominating Committee
reviews the candidates in accordance with the skills and qualifications set forth in the Nominating Charter and the rules of the Nasdaq.
There are no differences in the manner in which the Nominating Committee evaluates director nominees based on whether or not the nominee
is recommended by a stockholder.
Stock
Ownership Guidelines
The
Board has adopted stock ownership guidelines for its non-employee directors, pursuant to which the non-employee directors are required
to acquire, within three (3) years, and maintain until separation from the Company, shares equal in value to a minimum of three (3) times
the value of the annual cash retainer (not including committee or per-meeting fees) payable to such director. Shares acquired as Board
retainer fees and shares owned by an investment entity with which a non-employee director is affiliated may be counted toward the stock
ownership requirement.
Environmental,
Social and Governance (ESG)
The
Company is committed to responsible and sustainable business practices. We are currently in the process of building our ESG strategy,
with the goal of transparently communicating about our most material ESG impacts and initiatives.
Sustainability
The
Company is committed to working in a responsible and sustainable way to produce as few negative environmental effects as possible from
our operations. Our core business does not result in any significant negative environmental effects. We note our leading role in the
conversion, starting in 2005, from using analog films, which had to be shipped to theatre destinations, causing greenhouse gas emissions
and ultimately waste of the film after use, to digital projection of virtually all major and independent studio films, which are now
electronically delivered to theatre destinations. In addition, our current CEG business concentrates on digital and streaming distribution
of content, which again is environmentally-friendly. This conversion and streaming approach significantly reduces the carbon footprint
associated with the film exhibition industry.
Social
We
are committed to diverse representation across all levels of our workforce to reflect the vibrant and thriving diversity of the communities
which make up our customers, stockholders and home communities. Fostering a work environment that is culturally diverse, inclusive and
equitable is important to us.
We
encourage our employees to give back to the community. In 2021, we initiated a Community Service Policy that provides paid time off to
employees volunteering with qualified charitable organizations or causes (which organizations or causes may not discriminate based on
creed, race, color, national origin, religion, age, disability, sex, gender, identity, sexual orientation, pregnancy or any other legally
protected classification). In addition, we have implemented a summer internship program in conjunction with C5 Youth Foundation of Southern
California, a non-profit inner-city youth program. This 8-week program will provide for four college students to rotate through four
departments at Cinedigm.
Code
of Business Conduct and Ethics
We
have adopted a code of ethics applicable to all members of the Board, executive officers and employees. Such code of ethics is available
on our Internet website, www.cinedigm.com. We intend to disclose any amendment to, or waiver of, a provision of our code of ethics by
filing a Current Report on Form 8-K with the SEC.
Stockholder
Communications
The
Board currently does not provide a formal process for stockholders to send communications to the Board. In the opinion of the Board,
it is appropriate for the Company not to have such a process in place because the Board believes there is currently not a need for a
formal policy due to, among other things, the limited number of stockholders of the Company. While the Board will, from time to time,
review the need for a formal policy, at the present time, stockholders who wish to contact the Board may do so by submitting any communications
to the Company’s Secretary, Mr. Loffredo, 237 West 35th Street, Suite 605, New York, NY 10001, with an instruction to forward the
communication to a particular director or the Board as a whole. Mr. Loffredo will receive the correspondence and forward it to any individual
director or directors to whom the communication is directed.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of July 28, 2021, the Company’s directors,
executive officers, and principal stockholders beneficially own, directly or indirectly, in the aggregate, approximately 15.8% of its
outstanding Class A common stock. These stockholders have significant influence over the Company’s business affairs, with the ability
to control matters requiring approval by the Company’s stockholders.
The following table sets forth as of July 28,
2021, certain information with respect to the beneficial ownership of the Class A common stock as to (i) each person known by the Company
to beneficially own more than 5% of the outstanding shares of the Class A common stock, (ii) each of the Company’s directors, (iii)
each of the Company’s Chief Executive Officer and its two other most highly compensated individuals who were serving as executive
officers at the end of the Last Fiscal Year, for services rendered in all capacities during the Last Fiscal Year (the “Named Executive
Officers”), and (iv) all of the company’s directors and executive officers as a group.
CLASS A COMMON STOCK
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Shares Beneficially Owned (b)
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Name (a)
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Number
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Percent
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Christopher J. McGurk
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3,584,073
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(c)
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2.1
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%
|
Gary S. Loffredo
|
|
|
537,537
|
(d)
|
|
|
*
|
|
Erick Opeka
|
|
|
513,965
|
(e)
|
|
|
*
|
|
Peter C. Brown
|
|
|
345,086
|
(f)
|
|
|
*
|
|
Tom Bu
|
|
|
113,257
|
|
|
|
*
|
|
Patrick W. O’Brien
|
|
|
378,327
|
|
|
|
*
|
|
Peixin Xu
|
|
|
21,723,009
|
(g)
|
|
|
12.8
|
%
|
Mingtai Investment LP
|
|
|
9,005,772
|
(h)
|
|
|
5.4
|
%
|
All directors and executive officers as a group (7 persons)
|
|
|
27,195,254
|
(i)
|
|
|
15.8
|
%
|
(a)
|
Unless
otherwise indicated, the business address of each person named in the table is c/o Cinedigm Corp., 237 West 35th Street, Suite 605,
New York, New York 10001.
|
(b)
|
Applicable
percentage of ownership is based on 167,800,341 shares of Class A Common Stock outstanding as of July 28, 2021 together with all
applicable options, warrants and other securities convertible into shares of our Class A Common Stock for such stockholder. Beneficial
ownership is determined in accordance with the rules of the SEC, and includes voting and investment power with respect to shares.
Shares of Class A Common Stock subject to options, warrants or other convertible securities exercisable within 60 days after July
28, 2021 are deemed outstanding for computing the percentage ownership of the person holding such options, warrants or other convertible
securities, but are not deemed outstanding for computing the percentage of any other person. Except as otherwise noted, the named
beneficial owner has the sole voting and investment power with respect to the shares of Class A Common Stock shown. Certain information
is based on the numbers of shares reported in the most recent Schedule 13D or Schedule 13G, as amended, as applicable, filed by stockholders
with the SEC through July 28, 2021 and information provided by holders or otherwise known to the Company
|
(c)
|
Includes
(i) 150,000 shares of Class A common stock underlying currently exercisable options and (ii) 1,950,000 shares of Class A common stock
underlying currently exercisable stock appreciation rights.
|
(d)
|
Includes
65,000 shares of Class A common stock underlying currently exercisable options and 271,740 shares of Class A common stock underlying
currently exercisable stock appreciation rights.
|
(e)
|
Includes
(i) 12,000 shares of Class A common stock underlying currently exercisable options and (ii) 355,000 shares of Class A common stock
underlying currently exercisable stock appreciation rights.
|
(f)
|
Includes
92,067 shares owned by Grassmere Partners LLC, of which Mr. Brown is Chairman. Mr. Brown disclaims beneficial ownership
of such shares except to the extent of any pecuniary interest therein.
|
(g)
|
Includes
(i) 152,255 shares of Class A Common Stock owned directly, (ii) 1,400,000 shares of Class A Common Sock subject to issuance upon
exercise of currently exercisable warrants held by Bison Entertainment and Media Group (“BEMG”), (iii) 9,005,772
shares of Class A Common Stock held by Mingtai Investment LP (“Mingtai”), (iv) 3,898,615 shares of Class A Common Stock
held by Antai Investment LP (“Antai”), and (v) 7,266,367 shares of Class A Common Stock held by Shangtai Asset Management
LP (“Shangtai”). BEMG is wholly-owned by Bison Capital Holding Company Limited. Mr. Xu’s spouse, Fengyun Jiang,
is the sole owner of Bison Capital Holding Company Limited. Mingtai is indirectly managed by a subsidiary of Bison Finance Group
Limited (“BFGL”), which is controlled by Mr. Xu. Shangtai is indirectly managed by a subsidiary of BFGL. Mr. Xu controls
the manager of the general partner of Antai. The business address of Mr. Xu is 609-610 21st Century Tower, No. 40 Liangmaqiao Road,
Chaoyang District, Beijing, China, 100016.
|
(h)
|
The
business address of Mingtai Investment LP is 609-610 21st Century Tower, No. 40 Liangmaqiao Road, Chaoyang District, Beijing, China,
100016.
|
(i)
|
Includes
a total of 4,194,740 shares that are not currently outstanding, consisting of (i) 227,000 shares of Class A common stock underlying
currently exercisable options, (ii) 2,567,740 shares of Class A common stock underlying currently exercisable stock appreciation
rights, and (iii) 1,400,000 shares of Class A common stock subject to issuance upon exercise of currently exercisable warrants.
|
|
|
|
|
|
|
EXECUTIVE
OFFICER AND DIRECTOR COMPENSATION
Executive
Officers
The
Company’s executive officers are Christopher J. McGurk, Chief Executive Officer and Chairman of the Board, Gary S. Loffredo, President,
Chief Operating Officer, General Counsel, and Secretary, and Erick Opeka, Executive Vice President and President of Cinedigm Digital
Networks. Biographical information for Mr. McGurk is included above.
Gary
S. Loffredo, 56, has been the Company’s President since December 2020, Chief Operating Officer since February 2019, and General
Counsel and Secretary since October 2011. He had previously served as President of Digital Cinema since 2011, as Senior Vice President
- Business Affairs, General Counsel and Secretary since 2000, as Interim Co-Chief Executive Officer from June 2010 through December 2010,
and was a member of the Board from September 2000 - October 2015. From March 1999 to August 2000, he had been Vice President, General
Counsel and Secretary of Cablevision Cinemas d/b/a Clearview Cinemas. Mr. Loffredo was an attorney at the law firm of Kelley Drye &
Warren LLP from September 1992 to February 1999. Having been with the Company since its inception and with Clearview Cinemas prior thereto,
Mr. Loffredo has over two decades of experience in the cinema exhibition industry, both on the movie theatre and studio sides, as well
as legal training and general business experience, which skills and understanding are beneficial to the Company. As part of his role
as Chief Operating Officer of the Company, the Company’s finance team reports directly to Mr. Loffredo.
Erick
Opeka, 47, has been the Company’s Chief Strategy Officer since December 2020 and President of Cinedigm Networks since joining
the Company in 2014, when, as EVP of Digital Networks, he oversaw the distribution of Cinedigm’s OTT networks online, as well as
on mobile devices, gaming consoles, and connected TVs. Mr. Opeka was integral in the development and launch of the Company’s flagship
digital first networks, further expanding the Company’s growth through landmark partnerships with leading platforms such as Sling
TV, XUMO, and Twitch, among others. Prior to joining Cinedigm, Mr. Opeka served as Senior Vice President and head of New Video Digital,
which he grew into the largest global aggregator of independent digital content for more than 850 content partners including A&E
Networks, The Jim Henson Company, Berman Braun, and others.
Key
Employees
The
Company’s key employee, other than executive officers, Yolanda Macías, Chief Content Officer of Cinedigm Entertainment Group.
Yolanda
Macías, 56, joined Cinedigm in 2013 and has been the Chief Content Officer of Cinedigm Entertainment Group since December
2020, in connection with which she is responsible for acquiring global content rights for all distribution and streaming platforms and
oversees all third party digital sales and marketing. Previously, Ms. Macías has over 25 years of entertainment distribution experience,
including executive positions at Vivendi/Universal from 2004 to 2012, DIRECTV from 1996 to 2003, and The Walt Disney Company from 1992
to 1995.
Related
Party Transactions
The
Audit Committee, pursuant to its charter, is responsible for the review and oversight of all related party transactions and other potential
conflict of interest situations, by review in advance or ratification afterward. The Audit Committee charter does not set forth specific
standards to be applied; rather, the Audit Committee reviews each transaction individually on a case-by-case, facts and circumstances
basis.
On
July 12, 2019, the Company issued the Bison Convertible Note to Bison Global Investment SPC for and on behalf of Global Investment SPC-Bison
Global No. 1 (“Bison Global”), pursuant to which the Company borrowed from Bison Global $10.0 million. On April 15, 2020,
the Company executed a letter amendment to the Bison Convertible Note, which, among other things, amended the Bison Convertible Note,
effective as of March 4, 2020, to change the maturity date to March 4, 2021. During the fiscal year ended March 2021, with respect to
the Bison Convertible Note, (i) the largest aggregate amount of principal outstanding was $10.0 million, (ii) no principal was paid,
and (iii) no interest was paid. On September 11, 2020, the Bison Convertible Note was converted into 6,666,667 shares of Class A common
stock in accordance with its terms, and as of March 31, 2021, no principal amount was outstanding. A subsidiary of Bison Finance
Group Limited (“BFGL”), which is controlled by Peixin Xu, one of our directors, acts as manager of Bison Global.
On
October 9, 2018, the Company issued the Convertible Note to Mingtai. On October 9, 2019, the Company exercised its option to extend the
Convertible Note held by Mingtai for an additional year to October 9, 2020. During the fiscal year ended March 2020, with respect to
the Convertible Note, (i) the largest aggregate amount of principal outstanding was $5,000,000, (ii) no principal was paid, and
(iii) no interest was paid. On September 11, 2020, the Convertible Note was converted into 3,333,333 shares of Class A common stock in
accordance with its terms, and as of March 31, 2021, no principal amount was outstanding. Mingtai is indirectly managed by
a subsidiary of BFGL, which is controlled by Peixin Xu, one of our directors.
On
April 10, 2020, the Company entered into the April Stock Purchase Agreement with Bison Global, Huatai Investment LP (“Huatai”),
Antai, Mingtai and Shangtai, to buy an aggregate of 223,380,000 outstanding Starrise ordinary shares from them and for the Company to
issue to them an aggregate of 29,855,081 shares of Common Stock in consideration therefor. On April 15, 2020, this transaction was consummated.
Mingtai is indirectly managed by a subsidiary BFGL, which is controlled by Peixin Xu, one of our directors. BFGL’s subsidiary acts
as manager of Bison Global. Shangtai and Huatai are indirectly managed by a subsidiary of BFGL. Peixin Xu controls the manager of the
general partner of Antai.
COMPENSATION
DISCUSSION AND ANALYSIS
This
section describes the compensation program and related decisions for our Named Executive Officers (“NEOs”) in our fiscal
year ended March 31, 2021 (“Fiscal 2021”). As a “smaller reporting company,” as that term is defined under
SEC rules, we are not required to include a “Compensation Discussion and Analysis” and are permitted to exclude certain executive
compensation tables from our disclosure.
We
have elected to include this Compensation Discussion & Analysis (“CD&A”) as well as additional tables required under
Item 402 of Regulation S-K on a voluntary basis. As permitted under Item 402, we are not including pay ratio disclosure in light of our
status as a smaller reporting company. This CD&A is intended to be read in conjunction with the tables beginning on page 33, which
provide historical compensation information for the following NEOs:
NEOs
|
|
Title
|
Christopher
J. McGurk
|
|
Chairman
and Chief Executive Officer
|
Gary
S. Loffredo
|
|
President,
Chief Operating Officer, General Counsel and Secretary
|
Erick
Opeka
|
|
Chief
Strategy Officer and President of Cinedigm Digital Networks
|
Quick
CD&A Reference Guide
Compensation Program Overview
|
Section I
|
Compensation Philosophy and Objectives
|
Section II
|
Pay Mix
|
Section III
|
Competitive Positioning
|
Section IV
|
Elements of Compensation
|
Section V
|
Additional Compensation Practices and Policies
|
Section VI
|
I.
Compensation Program Overview
The
Company’s executive compensation program is designed to attract, motivate and retain highly skilled and experienced individuals
to attain the Company’s corporate goals. To do so, the program provides competitive compensation packages that motivate executive
officers, links pay to performance and aligns executive officers’ interests with those of the Company and its shareholders over
the long term.
The
executive compensation program for the NEOs is administered by the Compensation Committee, all of the members of which are independent.
The Compensation Committee annually reviews the executive compensation elements and assesses the integrity of the compensation program
as a whole to ensure that it continues to be aligned with the Company’s compensation objectives and supports the attainment of
Company goals.
As
the Company has evolved, so too has the compensation program. During the last several years, Cinedigm’s executive compensation
for NEOs has been transitioning to a more performance-oriented program. The Company aims to improve both shareholder returns and its
cash position. To help achieve these goals, the Compensation Committee has designed the compensation program to reward the Chief Executive
Officer (“CEO”) and other employees for achieving strategic goals and increasing shareholder value by linking a portion of
pay to performance through annual cash and equity, and long-term equity incentives.
The
Company’s executive compensation program is designed to attract, motivate and retain highly skilled and experienced individuals
to attain the Company’s corporate goals. To do so, the program provides competitive compensation packages that motivate executive
officers, links pay to performance and aligns executive officers’ interests with those of the Company and its shareholders over
the long term.
The
executive compensation program for the NEOs is administered by the Compensation Committee, all of the members of which are independent.
The Compensation Committee annually reviews the executive compensation elements and assesses the integrity of the compensation program
as a whole to ensure that it continues to be aligned with the Company’s compensation objectives and supports the attainment of
Company goals.
As
the Company has evolved, so too has the compensation program. During the last several years, Cinedigm’s executive compensation
for NEOs has been transitioning to a more performance-oriented program. The Company aims to improve both shareholder returns and its
cash position. To help achieve these goals, the Compensation Committee has designed the compensation program to reward the Chief Executive
Officer (“CEO”) and other employees for achieving strategic goals and increasing shareholder value by linking a portion of
pay to performance through annual cash and equity, and long-term equity incentives.
II.
Compensation Philosophy and Objectives
Cinedigm’s
executive compensation program is focused on enabling the Company to hire and retain qualified and motivated executives, motivating them
to meet its business needs and objectives. The executive compensation program has been designed around the following objectives:
|
●
|
Provide
competitive compensation levels to enable the recruitment and retention of highly qualified
executives.
|
|
●
|
Strengthen
the link between pay and corporate and business unit performance encouraging and rewarding
excellence and contributions to support Cinedigm’s success.
|
|
●
|
Align
the interests of executives with those of shareholders through grants of equity-based compensation
that promote increasing shareholder value and also provide opportunities for ongoing executive
share ownership.
|
An
overarching principle in delivering on these objectives is to ensure that compensation decisions are made in the Company’s best
financial interests such that incentive awards are both affordable and reasonable, taking into account Company performance and circumstances
and considering the interests of all stakeholders.
III.
Pay Mix
The
Company’s pay philosophy has evolved from an emphasis on fixed pay to one that is based on the belief that a substantial portion
of each executive’s compensation should be at risk and dependent upon performance. While the Compensation Committee has not adopted
a targeted mix of either long-term to short-term, fixed to variable, or equity and non-equity compensation, it has taken steps to increase
the portion of variable compensation. Steps in this direction include the continuation of the performance-based annual incentive program
(MAIP) and more regular equity grants.
IV.
Compensation Determination Process
The
Compensation Committee designs the executive compensation program with the intention of accomplishing the goals described above. In determining
executive compensation, the Compensation Committee obtains input and advice from its independent compensation consultant. The Compensation
Committee reviews and approves compensation and performance awards to the CEO and executive officers and considers financial, operational
and share price performance to determine appropriate executive compensation parameters. The Compensation Committee also considers the
results of the prior stockholders’ advisory vote on executive compensation. To date, the stockholders have approved, on a non-binding
advisory basis, of executive compensation.
Role
of the Independent Compensation Consultant
The
Compensation Committee has selected and retained Aon as its independent compensation consultant to assist it in the performance of its
duties and responsibilities. While the Compensation Committee took into consideration the review and recommendations of this independent
consultant when making decisions about the Company’s executive and director compensation practices, the Compensation Committee
ultimately made its own independent decisions about these matters.
Competitive
Assessment
The
Compensation Committee used comparative compensation information from a relevant group of peer companies as one of several factors considered
as part of setting compensation for our CEO and our other NEOs. The Compensation Committee has not defined a target pay positioning relative
to the peer group for the CEO or the other NEOs, nor does it commit to providing total compensation at a specific percentile or within
a specific pay range. During Fiscal 2021, Mr. McGurk’s employment agreement was extended and his base salary was moderately increased.
In connection with such extension, Mr. McGurk’s compensation was not significantly increased and accordingly the Compensation Committee
did not believe a new peer group comparison was necessary in connection therewith. However, also in Fiscal 2021, the Company entered
into a new employment agreement with Mr. Loffredo and amended Mr. Opeka’s employment agreement, both of which were in connection
with promotions. In connection therewith, the Compensation Committee developed a peer group with the assistance of Aon. The Compensation
Committee retains discretion in determining the nature and extent of the use of peer group data. The Compensation Committee periodically
reassesses the companies within the peer groups and makes changes as appropriate, considering mergers and acquisitions involving peer
companies, changes in the Company’s business and other factors.
In
connection with Mr. Loffredo’s and Mr. Opeka’s employment agreements, the Compensation Committee selected a peer group that
consisted of the following companies:
Avid Technology
|
|
Leaf Group Ltd.
|
Ballantyne Strong, Inc.
|
|
Limelight Networks, Inc.
|
Brightcove Inc.
|
|
LiveXLive Media, Inc.
|
Chicken Soup for the Soul Entertainment, Inc.
|
|
National Cinemedia, Inc.
|
Dolphin Entertainment, Inc.
|
|
NTN Buzztime, Inc.
|
Gaia, Inc.
|
|
Reading International, Inc.
|
Glu Mobile Inc.
|
|
RealNetworks, Inc.
|
Harmonic Inc.
|
|
TechTarget, Inc.
|
IMAX Corp.
|
|
TravelZoo
|
V.
Elements of Compensation
Compensation
for executive officers is comprised primarily of three main components:
|
●
|
annual
incentive awards; and
|
|
●
|
long-term
incentive equity grants.
|
These
components support the core principles of our executive officer compensation philosophy of pay for performance and alignment of executive
officers’ interests with those of Cinedigm and its shareholders by emphasizing short- and long-term incentives. Our compensation
program encourages our employees to remain focused on both our short-term and long-term goals: our annual incentive (MAIP) measures and
rewards business and individual performance on an annual basis, while our equity awards typically vest in installments of several years
and increase in value with any share price appreciation, encouraging our executives to focus on the long-term performance of our company.
Base
Salary
Base
salaries are fixed compensation with the primary function of aiding in attraction and retention. Base salaries vary among executive officers,
and are individually determined according to each executive officer’s areas of responsibility, role and experience. The Compensation
Committee reviews the salaries for our NEOs periodically, as well as at the time of a promotion, change in responsibilities, or when
employment arrangements and/or agreements are renewed. Any increases are based on an evaluation of the performance of the Company and
the executive, the relative strategic importance of the position, market conditions, and competitive pay levels (though, as noted earlier,
the Compensation Committee does not target a specific percentile or range).
During
fiscal 2021, the Compensation Committee adjusted the base salary of all of the NEOs in connection with their employment agreement amendments
or new agreement.
Annual
Incentive Awards
The
annual cash incentive component aims to ensure that our executive officers are aligned in reaching our short- and long-term goals. Annual
cash incentives are designed to provide a significant pay-for-performance element of our executive compensation package, through the
formal performance-based MAIP. The MAIP incorporates predetermined, specific target award levels and performance metrics and goals that
the Compensation Committee deemed rigorous and challenging. The MAIP goals are critical to Cinedigm’s future success and are designed
to reward the collaboration across divisions and segments required to achieve corporate financial goals.
All
NEOs have a target bonus set at a fixed percentage of their base salary. The program also established threshold and maximum levels of
incentive awards defined as a percentage of a participant’s salary. The Compensation Committee generally establishes the individual
payout targets for each NEO based on the executive’s position, level of responsibility and a review of the competitive market.
Threshold,
target and maximum annual incentive opportunities for our NEOs for Fiscal 2021 were as follows:
MAIP
Potential Awards
Executive Officer
|
|
Threshold
|
|
|
Target
(as a % of base salary)
|
|
|
Maximum
|
|
Chris McGurk
|
|
|
37.5
|
%
|
|
|
100
|
%
|
|
|
150
|
%
|
Gary S. Loffredo
|
|
|
29
|
%
|
|
|
70
|
%
|
|
|
100
|
%
|
Erick Opeka
|
|
|
25
|
%
|
|
|
60
|
%
|
|
|
100
|
%
|
For
Fiscal 2021, the Compensation Committee established performance measures and goals set forth in the table below. The measures include
a Company and/or division component with a performance measure and an individual component. Mr. Loffredo and Mr. Opeka, who each led
a division in fiscal 2021, have a portion of their measurement determined by that division’s performance as compared to goals established
at the beginning of the fiscal year.
|
|
Company
|
|
|
|
|
Executive Officers
|
|
Cinedigm
|
|
|
Division
|
|
|
Individual
|
|
Chris McGurk
|
|
|
80
|
%
|
|
|
--
|
|
|
|
20
|
%
|
Gary Loffredo
|
|
|
60
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
Erick Opeka
|
|
|
60
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
We
do not disclose performance targets, division targets or individual goals, as we believe that such disclosure would result in competitive
harm. Based on our experience, we believe these targets were rigorous and challenging, and were set sufficiently high to provide incentive
to achieve a high level of performance. We believe it is difficult, although not unattainable, for the targets to be reached and, therefore,
no more likely than unlikely that the targets will be reached.
Long-Term
Incentive Awards
The
Compensation Committee uses equity-based compensation to reward future performance, as reflected by the market price of our shares and/or
other performance criteria. The Compensation Committee annually considers long-term incentive awards, for which it has the authority
to grant a variety of equity-based awards. The primary objective of such awards is to align the interests of executives with those of
the Company and its shareholders by offering incentives to achieve performance goals believed to be linked to increasing shareholder
value, increasing executive share ownership and fostering a long-term focus. In recent years, the earning and vesting of such awards
have been assessed and determined after fiscal year end in order to permit consideration of year-end performance.
We
currently maintain the 2017 Equity Incentive Plan (“2017 Plan”). The 2017 Plan is administered by the Compensation Committee.
Under the 2017 Plan, the Compensation Committee or the Board has authority to grant awards of non-qualified stock options, incentive
stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance shares, performance
units, cash-based awards, or other stock-based awards to employees, non-employee directors, and third-party consultants.
The
Compensation Committee determines the executive officers’ equity-based awards, taking into account pay mix and the executive officer’s
contribution to Company performance. The mix of equity-based vehicles is structured to enhance the executive officers’ commitment
to increasing shareholder value.
Performance
Units
In
connection with the NEO employment agreement amendments or new arrangements during Fiscal 2021, under the 2017 Plan, the NEOs were awarded
new grants of performance units, subject to Earnings before Income Tax, Depreciation and Amortization (“EBITDA”) targets
to be determined in the sole and absolute discretion of the Compensation Committee and such other terms as the Compensation Committee
shall determine, with 50% of such shares to vest based on such targets for the period April 1, 2021 to March 31, 2022 and the other 50%
of such shares to vest based on such targets for the period April 1, 2022 to March 31, 2023. The Company was given discretion to pay
such awards in cash or in stock. Mr. McGurk was granted 250,000 performance units, Mr. Loffredo was granted 150,000 performance units,
and Mr. Opeka was granted 150,000 performance units.
SARs
In
connection with the NEO employment agreement amendments or new arrangements during Fiscal 2021, the Compensation Committee granted SARs
to the NEOs under the 2017 Plan. Mr. McGurk was granted 2,500,000 SARs, and Mr. Loffredo and Mr. Opeka were each granted 1,200,000 SARs.
The SARs granted to Mr. McGurk have an exercise price of $.54, and one-half (1/2) of which vested on November 19, 2020 and one-half (1/2)
of which will vest on March 31, 2023. The SARs granted to Mr. Loffredo have an exercise price of $.64 and will vest as follows: 500,000
SARs will vest on March 31, 2022, 500,000 SARS will vest on March 31, 2023, and 200,000 SARs will vest on June 30, 2023. The SARs granted
to Mr. Opeka have an exercise price of $.64 and will vest as follows: 500,000 SARs will vest on March 31, 2022, 500,000 SARS will vest
on March 31, 2023, and 200,000 SARs will vest on December 31, 2023.
VI.
Additional Compensation Arrangements, Policies and Practices
Mr.
McGurk’s Compensation Arrangements
Mr.
McGurk joined Cinedigm in January 2011 as CEO and Chairman of the Board. Accordingly, Mr. McGurk’s compensation package was created
in line with the Company’s current compensation philosophy of a base salary coupled with variable compensation including a large
portion of equity-based compensation, through stock options, linked to stock price performance. When negotiating Mr. McGurk’s employment
agreement, the Company sought to provide salary and bonus amounts that were in line with peer group amounts and that would provide incentive
for Mr. McGurk with a view toward increasing stockholder value.
A
summary of Mr. McGurk’s compensation package is located under the heading “Employment Agreements and Arrangements Between
the Company and Named Executives” below.
Employment
Agreement with Mr. McGurk and Employment Arrangements for other NEOs
The
Company currently has employment agreements with Mr. McGurk, Mr. Loffredo and Mr. Opeka for retention during periods of uncertainty and
operational challenge. Additionally, the employment agreements include non-compete and non-solicitation provisions. The provisions for
severance benefits are at typical competitive levels. See “Employment Agreements and Arrangements Between the Company and Named
Executives” below for a description of the material terms of Messrs. McGurk’s, Loffredo’s and Opeka’s employment
agreements.
Personal
Benefits and Perquisites
In
addition to the benefits provided to all employees and grandfathered benefits (provided to all employees hired before January 1, 2005),
the CEO and NEOs are eligible for an annual physical and supplemental life insurance coverage of $200,000.
It
is the Company’s policy to provide minimal and modest perquisites to the CEO and NEOs. With the new employment arrangements, most
perquisites previously provided, including automobile allowances, have been eliminated.
Policy
on Deductibility of Compensation
Section
162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1 million paid to certain executive officers
named in this proxy statement. Pursuant to the Tax Cuts and Jobs Act of 2017, for taxable years beginning after December 31, 2017, the
exemption from the deduction limit that was previously available for “performance-based compensation” is no longer available.
Consequently, for fiscal years beginning after December 31, 2017, all remuneration in excess of $1 million paid to a specified executive
will not be deductible. Given the Company’s net operating losses, Section 162(m) is not currently a material factor in designing
compensation.
Recoupment
(“Clawback”) Policy
The
Company intends to recapture compensation as currently required under the Sarbanes-Oxley Act. However, there have been no instances to
date where it needed to recapture any compensation.
Additionally,
we recognize that our compensation program will be subject to the forthcoming amendments to stock exchange listing standards required
by Section 954 of the Dodd-Frank Act, which requires that stock exchange listing standards be amended to require issuers to adopt a policy
providing for the recovery from any current or former executive officer of any incentive-based compensation (including stock options)
awarded during the three-year period prior to an accounting restatement resulting from material noncompliance of the issuer with financial
reporting requirements. We intend to adopt such a clawback policy which complies with all applicable standards when such rules are adopted.
Restriction
on Speculative Transactions
The
Company’s Insider Trading and Disclosure Policy restricts employees and directors of the Company from engaging in speculative transactions
in Company securities, including short sales, and discourages employees and directors of the Company from engaging in hedging transactions,
including “cashless” collars, forward sales, and equity swaps, that may indirectly involve short sales. Pre-clearance by
the Company is required for all equity transactions.
COMPENSATION
COMMITTEE REPORT
The
following report does not constitute soliciting material and is not considered filed or incorporated by reference into any other filing
by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The
Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis that precedes this Report as required by Item
402(b) of the SEC’s Regulation S-K. Based on its review and discussions with management, the Compensation Committee recommended
to the Board the inclusion of the Compensation Discussion and Analysis in this proxy statement.
The
Compensation Discussion and Analysis discusses the philosophy, principles, and policies underlying the Company’s compensation programs
that were in effect during fiscal 2021.
Respectfully
submitted,
The
Compensation Committee of the Board of Directors
Patrick
W. O’Brien, Chairman
Peter
C. Brown
Named
Executive Officers
The
following table sets forth certain information concerning compensation received by the Company’s NEOs, consisting of the Company’s
Chief Executive Officer and its two other most highly compensated individuals who were serving as executive officers at the end of the
Last Fiscal Year, plus up to two additional persons for whom disclosures would have been provided but for the fact that they were not
serving as executive officers at the end of the Last Fiscal Year, for services rendered in all capacities during the Last Fiscal Year.
SUMMARY
COMPENSATION TABLE
Name and Principal Position(s)
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Option
Awards
($)(2)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)(3)
|
|
|
All Other
Compensation
($)(4)
|
|
|
Total
($)
|
|
Christopher J. McGurk
|
|
2021
|
|
|
600,000
|
|
|
|
600,000
|
|
|
|
1,498,866
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,553
|
|
|
|
2,508,848
|
|
Chief Executive Officer and Chairman
|
|
2020
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,722
|
|
|
|
631,722
|
|
|
|
2019
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
700,000
|
|
|
|
—
|
|
|
|
43,697
|
|
|
|
1,743,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary S. Loffredo
|
|
2021
|
|
|
436,250
|
|
|
|
255,000
|
|
|
|
875,664
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,121
|
|
|
|
1,128,269
|
|
President, Chief Operating Officer,
|
|
2020
|
|
|
425,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44,541
|
|
|
|
469,541
|
|
General Counsel and Secretary
|
|
2019
|
|
|
367,424
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
407,610
|
|
|
|
—
|
|
|
|
43,697
|
|
|
|
918,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erick Opeka
|
|
2021
|
|
|
343,750
|
|
|
|
113,750
|
|
|
|
875,664
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,553
|
|
|
|
911,023
|
|
Chief Strategy Officer and President of Digital Networks
|
|
2020
|
|
|
325,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,611
|
|
|
|
340,611
|
|
|
|
2019
|
|
|
292,295
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
355,000
|
|
|
|
—
|
|
|
|
7,537
|
|
|
|
754,831
|
|
|
(1)
|
Includes
shares issued in November 2020 for fiscal year 2019 under performance share units (“PSUs”) to be paid during fiscal year
2021. See above for a description of the material terms of the PSUs.
|
|
(2)
|
The
amounts in this column reflect the grant date fair value for all fiscal years presented in accordance with FASB ASC Topic 718. Assumptions
used in the calculation of these amounts are included in footnote 2 to the Company’s audited financial statements for the fiscal
years ended March 31, 2020 and 2019, included in the 2020 Annual Report on Form 10-K (the “Form 10-K”).
|
|
(3)
|
The
amounts in this column reflect amounts earned under annual incentive awards. See below for a description of the material terms of the
annual incentive plan for each NEO.
|
|
(4)
|
Includes
life and disability insurance premiums paid by the Company and certain medical expenses paid by the Company for each NEO, (a) for the
fiscal year ended March 31, 2019: for Mr. McGurk, $1,107 and 42,590; for Mr. Loffredo, $1.107 and $42,590; and for Mr. Opeka, $830 and
$6,706, (b) for the fiscal year ended March 31, 2020: for Mr. McGurk, $1,104 and $30,618; for Mr. Loffredo, $1,104 and $43,437; and for
Mr. Opeka, $1,104 and $14,507, and (c) for the fiscal year ended March 31, 2021: for Mr. McGurk, $1,094 and $32,459; for Mr. Loffredo,
$1,094 and $46,027; and for Mr. Opeka, $1,094 and $32,459.
|
Employment
agreements and arrangements between the Company and Named Executives
Christopher
J. McGurk. On August 22, 2013, the Company entered into a new employment agreement with Mr. McGurk (the “2013 McGurk Employment
Agreement”) which superseded his initial employment agreement, pursuant to which McGurk continued to serve as the Chief Executive
Officer and Chairman of the Board of the Company. The term of the 2013 McGurk Employment Agreement commenced on January 3, 2011 and ended
on March 31, 2017. Pursuant to the 2013 McGurk Employment Agreement, Mr. McGurk received an annual base salary of $600,000 subject to
annual reviews and increases in the sole discretion of the Compensation Committee. Mr. McGurk was entitled to receive a bonus of $250,000.
In addition, Mr. McGurk was entitled to receive a retention bonus of $750,000, payable in three equal installments on March 31 of each
of 2015, 2016 and 2017 in cash or shares of Class A Common Stock, or a combination thereof, at the Compensation Committee’s discretion.
Under the MAIP, Mr. McGurk’s target bonus for fiscal years 2015, 2016 and 2017 was $600,000.
Also
pursuant to the 2013 McGurk Employment Agreement, Mr. McGurk received a grant of non-statutory options to purchase 1,500,000 shares of
Common Stock, which options have an exercise price of $1.40 and a term of ten (10) years, and one-third (1/3) of which vested on March
31 of each of 2015, 2016 and 2017.
The
2013 McGurk Employment Agreement further provided that Mr. McGurk is entitled to participate in all benefit plans provided to senior
executives of the Company. In addition, if the Company terminated Mr. McGurk’s employment without cause or he resigned with good
reason, the 2013 McGurk Employment Agreement provided that he would be entitled to receive his base salary through the later of March
31, 2017 or twelve (12) months following such termination, as well as payment of any bonus earned and approved by the Compensation Committee,
reimbursement of expenses incurred, and payment of benefits accrued, in each case, prior to the termination date. If such termination
or resignation occurred within two years after a change in control, then in lieu of receiving his base salary as described above, Mr.
McGurk would have been entitled to receive a lump sum payment equal to the sum of his then base salary and target bonus amount, multiplied
by the greater of (i) two, or (ii) a fraction, the numerator of which would be the number of months remaining in the term (but no less
than twelve (12)), and the denominator of which is twelve. Upon a change in control, any unvested options shall immediately vest provided
that Mr. McGurk is an employee of the Company on such date.
On
January 4, 2017, Mr. McGurk and the Company amended the 2013 McGurk Employment Agreement to extend the term to March 31, 2018.
On
June 7, 2018, Mr. McGurk and the Company entered into an amendment (the “2018 Amendment”) to the 2013 McGurk Employment Agreement.
Pursuant to the 2018 Amendment, Mr. McGurk will continue to serve as the Chief Executive Officer and Chairman of the Board of the Company
through March 31, 2021. The 2018 Amendment also provides that (i) if Mr. McGurk’s employment continues after March 31, 2021 without
an extension or renewal of the Employment Agreement, as amended, or entry into another employment agreement, then such employment will
be at-will and, for the duration of the at-will employment, Mr. McGurk will be entitled to receive the his base salary and participate
in the bonus, stock incentive, and benefit programs in effect at the expiration of the Term (as defined in the 2018 Amendment).
The
2018 Amendment also provides that Mr. McGurk is eligible for (i) under the MAIP, a target bonus opportunity percentage of 100% of the
Base Salary, to be adjusted higher or lower at the sole and absolute discretion of the Compensation Committee consistent with goals established
from time to time by the Compensation Committee, (ii) under the 2017 Plan, performance share units for up to 640,000 shares of Class
A common stock, subject to the EBITDA targets to be determined in the sole and absolute discretion of the Compensation Committee, with
50% of such shares to vest on March 31 of each of 2019 and 2020, and (iii) under the 2017 Plan, 700,000 SARs having an exercise price
of $1.47 and a term of ten (10) years, and one-third (1/3) of which will vest on March 31 of each of 2019, 2020 and 2021.
The
2018 Amendment also provides that, in the event of a termination without Cause, Mr. McGurk shall be entitled to payment of (i) the greater
of any Base Salary for the remainder of the Term or one year’s Base Salary and (ii) an amount equivalent to the average of the
last three (3) bonus payments under the MAIP, if any, under the Employment Agreement. In addition, the Amendment provides that the existing
severance terms in connection with a Change in Control apply if all conditions to such payment occur prior to March 31, 2020, and that
if such conditions apply occur thereafter, then Mr. McGurk shall be entitled to the payments described in the first sentence of this
paragraph instead.
All
terms of the 2013 McGurk Employment Agreement that were not affected by the Amendment remain in full force and effect.
On
November 19, 2020, the Company entered into an employment agreement with Mr. McGurk (the “2020 McGurk Employment Agreement”).
The 2020 McGurk Employment Agreement took effect on April 1, 2021, after the 2013 McGurk Employment Agreement, as amended by the 2018
Amendment, terminated on March 31, 2021, and has a term ending on March 31, 2023, with a one-time automatic renewal for one year unless
either party provides written notice to the other no later than ninety days prior to the expiration of the initial term. Pursuant to
the 2020 McGurk Employment Agreement, Mr. McGurk will continue to serve as the Chief Executive Officer and Chairman of the Board of the
Company.
The
2020 McGurk Employment Agreement provides that Mr. McGurk will receive an annual base salary of $650,000 and will be eligible for (i)
under the Company’s Management Annual Incentive Plan, a target bonus opportunity of $650,000 (the “Target Bonus”) consistent
with goals established annually by the Compensation Committee, (ii) under the Company’s 2017 Plan, performance share units for
up to 250,000 shares of Class A common stock, subject to EBITDA targets to be determined in the sole and absolute discretion of the Compensation
Committee and such other terms as the Compensation Committee shall determine, and (iii) under the 2017 Plan, 2,500,000 SARs having an
exercise price of $.54 and a term of ten (10) years, one-half (1/2) of which vested on November 19, 2020 and one-half (1/2) of which
will vest on March 31, 2023. Mr. McGurk will also be entitled to participate in all benefit plans and programs that the Company provides
to its senior executives.
The
2020 McGurk Employment Agreement provides that, in the event of a termination without Cause (as defined in the 2020 McGurk Employment
Agreement) or a resignation for Good Reason (as defined in the 2020 McGurk Employment Agreement), Mr. McGurk shall be entitled to payment
of (i) the greater of any Base Salary for the remainder of the Term or eighteen (18) months’ Base Salary at the time of termination
and (ii) an amount equivalent to one and one-half (1.5) times the average of the last two (2) bonus payments under the MAIP, if any,
under the Employment Agreement. In the event of, on or after April 1, 2020 and within two (2) years after a Change in Control (as defined
in the 2017 Plan), a termination without Cause (other than due to Mr. McGurk’s death or disability) or a resignation for Good Reason,
then in lieu of receiving the amounts described above, Mr. McGurk would be entitled to receive a lump sum payment equal to three (3)
times the sum of (a) his then-current annual Base Salary and (b) his Target Bonus for the year of termination.
On
December 10, 2020, the Company entered into an amended employment agreement, effective as of November 19, 2020, with Mr. McGurk (the
“2020 A&R McGurk Employment Agreement”). The 2020 A&R McGurk Employment Agreement restated the 2020 McGurk Employment
Agreement, except that in the event of, on or after April 1, 2020 and within two (2) years after a Change in Control (as defined in the
2017 Plan), a termination without Cause (other than due to Mr. McGurk’s death or disability), a resignation for Good Reason, or
upon notice by the Company that it does not wish to renew the Term (as defined in the McGurk Employment Agreement), then in lieu of receiving
the amounts for severance other than in connection with a Change in Control, Mr. McGurk would be entitled to receive a lump sum payment
equal to three (3) times the sum of (a) his then-current annual Base Salary and (b) his Target Bonus (as defined in the 2020 A&R
McGurk Employment Agreement) for the year of termination.
Gary
S. Loffredo. On October 13, 2013, the Company entered into an employment agreement with Mr. Loffredo (the “2013 Loffredo Employment
Agreement”). Pursuant to the 2013 Loffredo Employment Agreement, Loffredo served as the Executive Vice President, Business Affairs,
General Counsel and Secretary of the Company and President of Digital Cinema Operations. The 2013 Loffredo Employment Agreement ended
on October 3, 2015, and upon such expiration, Mr. Loffredo became an at-will employee. Pursuant to the 2013 Loffredo Employment Agreement,
Mr. Loffredo received an annual base salary of $340,000 subject to increase at the discretion of the Compensation Committee. In addition,
Mr. Loffredo was eligible for a target bonus equal to 50% of his base salary for each fiscal year, payable based on Company performance
with goals to be established annually by the Compensation Committee.
Also
pursuant to the 2013 Loffredo Employment Agreement, Mr. Loffredo received a grant of non-statutory options to purchase 350,000 shares
of Common Stock, one-third (1/3) of which vested on March 31 of each of the first three anniversaries of the grant date.
The
2013 Loffredo Employment Agreement further provided that if the Company terminated Mr. Loffredo’s employment without cause or he
resigned with good reason, he would be entitled to receive his base salary for the longer of the remainder of the term or the (twelve)
12 months following the termination, as well as payment of salary and bonus(es) earned, reimbursement of expenses incurred, and payment
of benefits accrued, in each case, prior to the termination date. If such termination or resignation occurs within two years after a
change in control, then in lieu of receiving his base salary as described above, Mr. Loffredo would be entitled to receive a lump sum
payment equal to two times the sum of his then base salary and target bonus amount.
On
February 28, 2019, in connection with Mr. Loffredo’s promotion to Chief Operating Officer, Mr. Loffredo’s annual base salary
was increased to $425,000 and he became eligible for a target bonus equal to 60% of his base salary under the MAIP, consistent with goals
established annually by the Compensation Committee.
On
December 23, 2020, the Company entered into a new employment agreement with Mr. Loffredo (the “2020 Loffredo Employment Agreement”),
which replaced the surviving terms of the 2013 Loffredo Employment Agreement, took effect on January 1, 2021 and has a term ending on
March 31, 2023, with a one-time automatic renewal for one year unless either party provides written notice to the other no later than
ninety days prior to the expiration of the initial term. Pursuant to the 2020 Loffredo Employment Agreement, Mr. Loffredo serves as President,
and continues to serve as the Chief Operating Officer, General Counsel and Secretary, of the Company.
The
2020 Loffredo Employment Agreement provides that Mr. Loffredo will receive an annual base salary of $460,000 (as subject to adjustment,
the “Loffredo Base Salary”) and will be eligible for (i) under the Company’s Management Annual Incentive Plan, a target
bonus opportunity of $322,000 (the “Loffredo Target Bonus”) consistent with goals established annually by the Compensation
Committee, (ii) under the 2017 Plan, performance share units for up to 150,000 shares of the Company’s Class A common stock, subject
to EBITDA targets to be determined in the sole and absolute discretion of the Compensation Committee and such other terms as the Compensation
Committee shall determine, and (iii) under the Plan, 1,200,000 SARs having an exercise price of $.64 and a term of ten (10) years, and
vesting as follows: 500,000 SARs vest on March 31, 2022, 500,000 SARS vest on March 31, 2023, and 200,000 SARs vest on June 30, 2023.
Mr. Loffredo will also be entitled to participate in all benefit plans and programs that the Company provides to its senior executives.
The
2020 Loffredo Employment Agreement provides that, in the event of a termination without Cause (as defined in the 2020 Loffredo Employment
Agreement) or a resignation for Good Reason (as defined in the 2020 Loffredo Employment Agreement), Mr. Loffredo shall be entitled to
payment of twelve (12) months’ Loffredo Base Salary at the time of termination. In the event, within two (2) years after a Change
in Control (as defined in the Plan), of a termination without Cause (other than due to Mr. Loffredo’s death or disability), a resignation
for Good Reason, or upon notice by the Company that it does not wish to renew the Term (as defined in the Loffredo Employment Agreement),
then in lieu of receiving the amounts described above, Mr. Loffredo would be entitled to receive a lump sum payment equal to two (2)
times the sum of (a) his then-current annual Loffredo Base Salary and (b) the Loffredo Target Bonus for the year of termination.
Erick
Opeka. On September 15, 2018, the Company entered into an employment agreement with Mr. Opeka (the “2018 Opeka Employment Agreement”),
pursuant to which Mr. Opeka served as President Networks of the Company. The term of the 2018 Opeka Employment Agreement is from September
15, 2018 through September 15, 2021 and upon such expiration Mr. Opeka will become an at-will employee. As outlined in the 2018 Opeka
Employment Agreement, Mr. Opeka will receive an annual base salary of $325,000 subject to annual reviews and increase for subsequent
years in the sole discretion of the Compensation Committee, and Mr. Opeka shall participate in the MAIP with a target bonus equal to
35% of his base salary.
Pursuant
to the 2018 Opeka Employment Agreement, on September 28, 2018 Mr. Opeka was granted 355,000 SARs. Each SAR entitles the participant to
receive, upon exercise, an amount equal to the excess of the market price per share of the Class A common stock on the exercise date,
over $1.16, being not less than the market price per share of the Class A common stock on the grant date, in cash, common stock, or a
combination of both cash and common stock, at the option of the Company. These SARs expire ten years from the grant date and vest 118,333
shares on each of March 31, 2019 and March 31, 2020, and 118,334 shares on March 31, 2021.
On
December 23, 2020, the Company entered into an employment agreement with Mr. Opeka (the “2020 Opeka Employment Agreement”),
which replaced the 2018 Opeka employment Agreement, took effect on January 1, 2021 and has a term ending on September 15, 2023, with
a one-time automatic renewal for one year unless either party provides written notice to the other no later than ninety days prior to
the expiration of the initial term. Pursuant to the 2020 Opeka Employment Agreement, Mr. Opeka will serve as Chief Strategy Officer of
the Company and continue to serve as President of Cinedigm Networks.
The
2020 Opeka Employment Agreement provides that Mr. Opeka will receive an annual base salary of $400,000 (as subject to adjustment, the
“Opeka Base Salary”) and will be eligible for (i) under the MAIP, a target bonus opportunity of $240,000 (the “Opeka
Target Bonus”) consistent with goals established annually by the Compensation Committee, (ii) under the Plan, performance share
units for up to 150,000 shares of Class A common stock, subject to EBITDA targets to be determined in the sole and absolute discretion
of the Compensation Committee and such other terms as the Compensation Committee shall determine, and (iii) under the Plan, 1,200,000
SARs having an exercise price of $.64 and a term of ten (10) years, and vesting as follows: 500,000 SARs vest on March 31, 2022, 500,000
SARs vest on March 31, 2023, and 200,000 SARs vest on December 31, 2023. Mr. Opeka will also be entitled to participate in all benefit
plans and programs that the Company provides to its senior executives.
The
2020 Opeka Employment Agreement provides that, in the event of a termination without Cause (as defined in the 2020 Opeka Employment Agreement)
or a resignation for Good Reason (as defined in the 2020 Opeka Employment Agreement), Mr. Opeka shall be entitled to payment of twelve
(12) months’ Opeka Base Salary at the time of termination. In the event, within two (2) years after a Change in Control (as defined
in the Plan), of a termination without Cause (other than due to Mr. Opeka’s death or disability), a resignation for Good Reason,
or upon notice by the Company that it does not wish to renew the Term (as defined in the Opeka Employment Agreement), then in lieu of
receiving the amounts described above, Mr. Opeka would be entitled to receive a lump sum payment equal to two (2) times the sum of (a)
his then-current annual Opeka Base Salary and (b) the Opeka Target Bonus for the year of termination.
Equity
Compensation Plans
The
following table sets forth certain information, as of March 31, 2021, regarding the shares of Cinedigm’s Class A common stock authorized
for issuance under Cinedigm’s equity compensation plan.
Plan
|
|
Number of
shares of Class A common stock issuable upon exercise of outstanding options, warrants or rights (1)
|
|
|
Weighted
average of exercise price of outstanding
|
|
|
Number of
shares of Class A common stock remaining available for future issuance
|
|
Cinedigm Second Amended and Restated 2000 Equity Incentive Plan (“the 2000 Plan”) approved by shareholders
|
|
|
261,587
|
|
|
$
|
14.99
|
|
|
|
—
|
|
Cinedigm 2017 Equity Incentive Plan (the “2017 Plan”)
|
|
|
9,154,933
|
|
|
$
|
1.04
|
|
|
|
1,359,416
|
|
Cinedigm compensation plans not approved by shareholders (2)
|
|
|
12,500
|
|
|
$
|
17.50
|
|
|
|
—
|
|
|
(1)
|
Shares
of Cinedigm Class A Common Stock
|
|
(2)
|
Reflects
stock options which were not granted under the 2000 Plan or the 2017 Plan.
|
The
2000 Plan
Our
Board originally adopted the 2000 Plan on June 1, 2000 and our shareholders approved the 2000 Plan by written consent in July 2000. Certain
terms of the Plan were last amended and approved by our shareholders in September 2016. Under the 2000 Plan, we may grant incentive and
non-statutory stock options, stock, restricted stock, restricted stock units (RSUs), stock appreciation rights, and performance awards
to our employees, non-employee directors and consultants. The primary purpose of the 2000 Plan is to enable us to attract, retain and
motivate our employees, non-employee directors and consultants. The term of the 2000 Plan expires on June 1, 2020. The 2000 Plan has
been replaced by the 2017 Plan, and no new awards will be granted from the 2000 Plan; however, the adoption of the 2017 Plan did not
affect awards already granted under the 2000 Plan.
Options
granted under the 2000 Plan expire ten years following the date of grant (or such shorter period of time as may be provided in a stock
option agreement or five years in the case of incentive stock options granted to stockholders who own greater than 10% of the total combined
voting power of the Company) and are subject to restrictions on transfer. Options granted under the Plan generally vest over periods
of up to three or four years. The 2000 Plan is administered by the Compensation Committee, and may be amended or terminated by the Board,
although no amendment or termination may adversely affect the right of any individual with respect to any outstanding option without
the consent of such individual. The 2000 Plan provides for the granting of incentive stock options with exercise prices of not less than
100% of the fair market value of the Company’s Class A Common Stock on the date of grant. Incentive stock options granted to stockholders
of more than 10% of the total combined voting power of the Company must have exercise prices of not less than 110% of the fair market
value of the Company’s Class A Common Stock on the date of grant. Incentive and non-statutory stock options granted under the 2000
Plan are subject to vesting provisions, and exercise is generally subject to the continuous service of the optionee, except for consultants.
The exercise prices and vesting periods (if any) for non-statutory options may be set at the discretion of the Board or the Compensation
Committee. Upon a change of control of the Company, all options (incentive and non-statutory) that have not previously vested will vest
immediately and become fully exercisable. Options covering no more than 50,000 shares may be granted to one participant during any calendar
year unless pursuant to a multi-year award, in which case no more than options covering 50,000 shares per year of the award may be granted,
and during which period no additional options may be granted to such participant.
Grants
of restricted stock and restricted stock units are subject to vesting requirements, generally vesting over periods up to three years,
determined by the Compensation Committee and set forth in notices to the participants. Grants of stock, restricted stock and restricted
stock units shall not exceed 40% of the total number of shares available to be issued under the 2000 Plan.
SARs
consist of the right to the monetary equivalent of the increase in value of a specified number of shares over a specified period of time.
Upon exercise, SARs may be paid in cash or shares of Class A common stock or a combination thereof. Grants of SARs are subject to vesting
requirements, similar to those of stock options, determined by the Compensation Committee and set forth in agreements between the Company
and the participants. RSUs shall be similar to restricted stock except that no Class A common stock is actually awarded to the Participant
on the grant date of the RSUs and the Compensation Committee shall have the discretion to pay such RSUs upon vesting in cash or shares
of Class A common stock or a combination thereof.
Performance
awards consist of awards of stock and other equity-based awards that are valued in whole or in part by reference to, or are otherwise
based on, the market value of the Class A Common Stock, or other securities of the Company, and may be paid in shares of Class A Common
Stock, cash or another form of property as the Compensation Committee may determine. Grants of performance awards shall entitle participants
to receive an award if the measures of performance established by the Committee are met. Such measures shall be established by the Compensation
Committee but the relevant measurement period for any performance award must be at least 12 months. Grants of performance awards shall
not cover the issuance of shares that would exceed 20% of the total number of shares available to be issued under the 2000 Plan, and
no more than 50,000 shares pursuant to any performance awards shall be granted to one participant in a calendar year unless pursuant
to a multi-year award. The terms of grants of performance awards would be set forth in agreements between the Company and the participants.
The
2017 Plan
Our
Board adopted the 2017 Plan on August 7, 2017 and our stockholders approved the 2017 Plan on August 31, 2017. Under the 2017 Plan, we
may grant incentive and non-statutory stock options, stock, restricted stock, restricted stock units (RSUs), stock appreciation rights,
performance awards and other equity-based awards to our employees, non-employee directors and consultants. The primary purpose of the
2017 Plan is to enable us to attract, retain and motivate our employees, non-employee directors and consultants.
Options
granted under the 2017 Plan expire ten years following the date of grant (or such shorter period of time as may be provided in a stock
option agreement, or five years in the case of incentive stock options granted to stockholders who own greater than 10% of the total
combined voting power of the Company) and are subject to restrictions on transfer. The 2017 Plan is administered by the Compensation
Committee, and may be amended or terminated by the Committee, although no amendment or termination may have a material adverse effect
on the rights of any individual with respect to any outstanding option, without the consent of such individual. The exercise prices of
stock options granted must be not less than 100% of the fair market value of the Company’s Class A Common Stock on the date of
grant. Incentive stock options granted to stockholders of more than 10% of the total combined voting power of the Company must have exercise
prices of not less than 110% of the fair market value of the Company’s Class A common stock on the date of grant. Incentive and
non-statutory stock options granted under the 2017 Plan may be subject to vesting provisions, and exercise is generally subject to the
continuous service of the optionee, except for consultants. The exercise prices and vesting periods (if any) for non-statutory options
may be set at the discretion of the Board or the Compensation Committee. Upon a change of control of the Company, where the Class A common
stock does not continue to be publicly traded, unless replacement awards are issued in connection with the transaction, all options (incentive
and non-statutory) that have not previously vested will vest immediately and become fully exercisable. SARs consist of the right to the
monetary equivalent of the increase in value of a specified number of shares over a specified period of time. Upon exercise, SARs may
be paid, at the discretion of the Compensation Committee, in cash or shares of Class A common stock or a combination thereof. Grants
of SARs are subject to terms determined by the Compensation Committee and set forth in agreements between the Company and the participants.
Grants
of restricted stock and restricted stock units are subject to vesting requirements, generally vesting over periods up to three years,
determined by the Compensation Committee and set forth in notices to the participants.
RSUs
shall be similar to restricted stock except that no Class A Common Stock is actually awarded to the Participant on the grant date of
the RSUs and the Compensation Committee shall have the discretion to pay such RSUs upon vesting in cash or shares of Class A common stock
or a combination thereof.
Performance
awards consist of awards of stock and other equity-based awards that are valued in whole or in part by reference to, or are otherwise
based on, the market value of the Class A common stock, or other securities of the Company, and may be paid in shares of Class A common
stock, cash or another form of property as the Compensation Committee may determine. Grants of performance awards shall entitle participants
to receive an award if the measures of performance established by the Committee are met. Such measures shall be established by the Compensation
Committee but the relevant measurement period for any performance award must be at least 12 months. The terms of grants of performance
awards would be set forth in agreements between the Company and the participants.
With
respect to limits on Award grants under the 2017 Plan, aggregate shares granted to non-employee directors in any year may not exceed
300,000.
Our
Class A common stock is listed for trading on the Nasdaq under the symbol “CIDM”.
The
following table sets forth certain information concerning outstanding equity awards of the Company’s NEOs at the end of the Last
Fiscal Year. All outstanding stock awards reported in this table represent restricted stock that vests in equal annual installments over
three years. At the end of the Last Fiscal Year, there were no unearned equity awards under performance-based plans.
OUTSTANDING
EQUITY AWARDS AT MARCH 31, 2021
OPTION AWARDS (1)
|
|
STOCK AWARDS
|
|
Name
|
|
Number of Securities
Underlying Unexercised Options Exercisable (#)
|
|
|
Number of Securities Underlying
Unexercised Options Unexercisable (#)
|
|
Option Exercise Price
($)
|
|
|
Option Expiration Date
|
|
Number of Shares or
Units of Stock That Have Not Vested (#)
|
|
|
Market Value of
Shares or Units of Stock That Have Not Vested ($)
|
|
Christopher J. McGurk
|
|
|
150,000
|
(2)
|
|
—
|
|
|
14.00
|
|
|
8/22/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
|
700,000
|
(3)
|
|
—
|
|
|
1.47
|
|
|
6/7/2028
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,250,000
|
(4)
|
|
—
|
|
|
0.54
|
|
|
11/19/2030
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary S. Loffredo
|
|
|
22,500
|
(5)
|
|
—
|
|
|
14.90
|
|
|
8/16/2021
|
|
|
—
|
|
|
|
—
|
|
|
|
|
7,500
|
(6)
|
|
—
|
|
|
30.00
|
|
|
8/16/2021
|
|
|
—
|
|
|
|
—
|
|
|
|
|
35,000
|
(7)
|
|
—
|
|
|
15.40
|
|
|
10/13/2023
|
|
|
—
|
|
|
|
—
|
|
|
|
|
271,740
|
(8)
|
|
135,870
|
(8)
|
|
1.47
|
|
|
12/10/2028
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
1,200,000
|
(9)
|
|
0.64
|
|
|
12/23/2030
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erick Opeka
|
|
|
4,000
|
(10)
|
|
—
|
|
|
15.10
|
|
|
4/20/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
|
8,000
|
(11)
|
|
—
|
|
|
18.10
|
|
|
9/2/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
|
355,000
|
(3)
|
|
|
|
|
1.16
|
|
|
9/28/2028
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
1,200,000
|
(12)
|
|
0.64
|
|
|
12/23/2030
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects
stock options granted under the 2000 Plan and SARs granted under the 2017 Plan.
|
|
(2)
|
Of
such total options, 1/3 vested on March 31 of each 2015, 2016 and 2017.
|
|
(3)
|
Consists
of stock appreciation rights which vested as to 1/3 on March 31 of each of 2019, 2020 and 2021.
|
|
(4)
|
Consists
of stock appreciation rights of which 1,250,000 vested on November 19, 2020, and 1,250,000 will vest on March 31, 2023.
|
|
(5)
|
Such
options vested on August 17, 2012.
|
|
(6)
|
Of
such total options, 1/4 vested on August 17 of each 2012, 2013, 2014 and 2015.
|
|
(7)
|
Of
such total options, 1/3 vested on October 13 of each 2014, 2015 and 2016.
|
|
(8)
|
Consists
of stock appreciation rights which vest as to 1/3 on December 10 of each of 2019, 2020 and 2021.
|
|
(9)
|
Consists
of stock appreciation rights which vest as to 500,000, on March 31, 2022, as to 500,000, on March 31, 2023, and as to 200,000, on June
30, 2023.
|
|
(10)
|
1,000
of such options vested on April 20 of each of 2013, 2014, 2015 and 2016.
|
|
(11)
|
2,000
of such options vested on September 2 of each of 2015, 2016, 2017 and 2018.
|
|
(12)
|
Consists
of stock appreciation rights which vest as to 500,000, on March 31, 2022, as to 500,000, on March 31, 2023, and as to 200,000, on December
31, 2023.
|
Directors
The
following table sets forth certain information concerning compensation earned by the Company’s non-employee directors for services
rendered as a director during the Last Fiscal Year.
Name
|
|
Cash Fees
Earned ($)
|
|
|
Stock
Awards ($)
|
|
|
Total ($)
|
|
Peter C. Brown
|
|
$
|
61,250
|
|
|
$
|
50,000
|
|
|
$
|
111,250
|
|
Tom Bu
|
|
|
53,750
|
|
|
|
50,000
|
|
|
|
103,750
|
|
Patrick W. O’Brien ( Lead Independent Director)
|
|
|
72,750
|
|
|
|
62,000
|
|
|
|
134,750
|
|
Peixin Xu
|
|
|
52,500
|
|
|
|
50,000
|
|
|
|
102,500
|
|
Zvi M. Rhine (1)
|
|
|
37,500
|
|
|
|
25,000
|
|
|
|
62,500
|
|
|
(1)
|
Resigned
from the Board on November 3, 2020.
|
In
the past, each director who is not an employee of the Company was compensated for services as a director by receiving an annual cash
retainer for Board service of $50,000, payable quarterly in arrears, and an annual stock grant of restricted shares of Class A common
stock equal in value to $50,000 as of the last day of the fiscal quarter during which the Company’s annual meeting occurs, which
restricted shares shall vest on a quarterly basis during the year of service. In addition to the cash and stock retainers paid to all
non-employee Directors for Board service, the Lead Independent Director received a fixed amount to be determined by the Nominating and
Governance Committee. The directors may elect to receive any annual cash retainer in shares of vested Class A common stock, in lieu of
cash, based on the stock price as of the date of the cash payment. The Company requires that Directors agree to retain 100% of their
net after tax shares received for board service until separation from the Company. In addition, the Directors are reimbursed by the Company
for expenses of traveling on Company business, which to date has consisted of attending Board and Committee meetings.
In
February 2021, the Board amended the compensation package to non-employee directors. Commencing the quarter ended March 31, 2021, the
annual cash retainer amount increased to $60,000, and commencing with the shares to be issued in connection with the Company’s
2021 annual meeting of stockholders, the annual stock grant of restricted shares of Class A common stock amount will increase to $90,000
based on the trailing 20-day volume weighted average price (“VWAP”) of the Class A common stock as of the date of the most
recent prior annual shareholder’s meeting. In addition, non-employee directors receive annual committee fees of $15,000 for service
as a committee chair and of $5,000 for service on a committee (other than as chair). In addition to the cash and stock retainers paid
to all non-employee directors for Board service, the Lead Independent Director receives an annual cash fee of $20,000. Finally, new non-employee
directors will receive a grant of restricted stock valued at $180,000 based on the trailing 20-day VWAP of the Class A common stock as
of the grant date (the director joins the Board), and such shares will vest in three equal installments on the first three anniversaries
of the date of grant.
The
Company has adopted Stock Ownership Guidelines for its non-employee directors as discussed under MATTERS RELATING TO OUR GOVERNANCE,
above.
DELINQUENT
SECTION 16(a) REPORTS
Section
16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own more than 10% of
its Class A common stock to file reports of ownership and changes in ownership with the Commission and to furnish the Company with copies
of all such reports they file. Based on the Company’s review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that none of its directors, executive officers or persons who beneficially own more
than 10% of the Company’s Class A common stock failed to comply with Section 16(a) reporting requirements during the fiscal year
ended March 31, 2021 (the “Last Fiscal Year”), except for Mr. Xu, who had multiple late Form 4 filings reporting multiple
transactions, and Mr. Brown and Mr. O’Brien, each of whom had one late Form 4 filing reporting one transaction.
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The
Audit Committee oversees the Company’s financial reporting process on behalf of the Board. In fulfilling its oversight responsibilities,
the Audit Committee reviewed and discussed with management the audited financial statements in the Form 10-K, including a discussion
of the acceptability of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the
financial statements.
The
Audit Committee reviewed and discussed with the independent registered public accounting firm, which is responsible for expressing an
opinion on the conformity of those audited financial statements with the standards of the Public Company Accounting Oversight Board,
the matters required to be discussed by Statements on Auditing Standards (SAS 61), as may be modified or supplemented, and their judgments
as to the acceptability of the Company’s accounting principles and such other matters as are required to be discussed with the
Audit Committee under the standards of the Public Company Accounting Oversight Board.
In
addition, the Audit Committee has discussed with the independent registered public accounting firm their independence from management
and the Company, including receiving the written disclosures and letter from the independent registered public accounting firm as required
by the Independence Standards Board Standard No. 1, as may be modified or supplemented, and has considered the compatibility of any non-audit
services with the auditors’ independence.
The
Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for their
audit. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss
the results of their examinations and the overall quality of the Company’s financial reporting.
In
reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, that
the audited financial statements be included in the Form 10-K for the year ended March 31, 2021 for filing with the SEC.
Respectfully
submitted,
The
Audit Committee of the Board of Directors
Peter
C. Brown, Chairman
Tom
Bu
Patrick
W. O’Brien
THE
FOREGOING AUDIT COMMITTEE REPORT SHALL NOT BE “SOLICITING MATERIAL” OR BE DEEMED “FILED” WITH THE SEC, NOR SHALL
SUCH INFORMATION BE INCORPORATED BY REFERENCE INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE ACT, EXCEPT
TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES IT BY REFERENCE INTO SUCH FILING.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
EisnerAmper
LLP served as the independent registered public accounting firm to audit the Company’s consolidated financial statements since
the fiscal year ended March 31, 2005 and the Board has appointed EisnerAmper LLP to do so again for the fiscal year ending March 31,
2022.
The
Company’s Audit Committee has adopted policies and procedures for pre-approving all non-audit work performed by EisnerAmper LLP
for the fiscal years ended March 31, 2021 and 2020. In determining whether to approve a particular audit or permitted non-audit
service, the Audit Committee will consider, among other things, whether the service is consistent with maintaining the independence of
the independent registered public accounting firm. The Audit Committee will also consider whether the independent registered public accounting
firm is best positioned to provide the most effective and efficient service to our Company and whether the service might be expected
to enhance our ability to manage or control risk or improve audit quality. Specifically, the Audit Committee has pre-approved the use
of EisnerAmper LLP for detailed, specific types of services within the following categories of non-audit services: acquisition due diligence
and audit services; tax services; and reviews and procedures that the Company requests EisnerAmper LLP to undertake on matters not required
by laws or regulations. In each case, the Audit Committee has required management to obtain specific pre-approval from the Audit Committee
for any engagements.
The
aggregate fees billed for professional services by EisnerAmper LLP for these various services were:
|
|
|
|
For the fiscal years ended
March 31,
|
|
Type of Fees
|
|
2021
|
|
|
2020
|
|
(1)
|
|
Audit Fees
|
|
$
|
492,000
|
|
|
$
|
315,000
|
|
(2)
|
|
Audit-Related Fees
|
|
|
—
|
|
|
|
—
|
|
(3)
|
|
Tax Fees
|
|
|
—
|
|
|
|
—
|
|
(4)
|
|
All Other Fees
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
$
|
492,000
|
|
|
$
|
315,000
|
|
In
the above table, in accordance with the SEC’s definitions and rules, “audit fees” are fees the Company paid EisnerAmper
LLP for professional services for the audit of the Company’s consolidated financial statements for the fiscal years ended March
31, 2021 and 2020 included in Form 10-K and review of consolidated financial statements incorporated by reference into Form S-3 and Form
S-8 and included in Form 10-Qs and for services that are normally provided by the accountant in connection with statutory and regulatory
filings or engagements; “audit-related fees” are fees for assurance and related services that are reasonably related to the
performance of the audit or review of the Company’s consolidated financial statements; “tax fees” are fees for tax
compliance, tax advice and tax planning; and “all other fees” are fees for any services not included in the first three categories.
All of the services set forth in sections (1) through (4) above were approved by the Audit Committee in accordance with the Audit Committee
Charter.
For
the fiscal years ended March 31, 2021 and 2020, the Company retained a firm other than EisnerAmper LLP for tax compliance, tax advice
and tax planning.
*
* * * * * *
APPENDIX
A
AMENDMENT
NO. _
TO
CINEDIGM
CORP. 2017 EQUITY INCENTIVE PLAN
AMENDMENT
NO. 3, dated as of ____________, 20__ (this “Amendment”), to the 2017 Equity Incentive Plan (as amended, the “Plan”)
of Cinedigm Corp., a Delaware corporation (the “Corporation”).
WHEREAS,
the Corporation maintains the Plan, effective as of August 31, 2017; and
WHEREAS,
the Board of Directors of the Corporation deems it to be in the best interest of the Corporation and its stockholders to amend the Plan
in order to increase the maximum number of shares of the Corporation’s Class A Common Stock, par value $.001 per share, which may be
issued and sold under the Plan from 14,098,270 shares to _____________ shares.
NOW,
THEREFORE, BE IT RESOLVED the Plan is hereby amended as follows:
|
1.
|
The
first sentence of Section 4.1(a) shall be revised and amended to read as follows:
|
“The
maximum number of Shares available for issuance to Participants under this Plan, inclusive of Shares issued and Shares underlying outstanding
awards granted on or after the Effective Date, is _____________ Shares, which includes 128,270 unused Shares carried over from the Existing
Incentive Plan.”
|
2.
|
This
Amendment shall be effective as of the date first set forth above.
|
|
3.
|
In
all respects not amended, the Plan is hereby ratified and confirmed and remains in full force and effect.
|
|
CINEDIGM CORP.
|
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
APPENDIX
B
CERTIFICATE
OF AMENDMENT
TO
FIFTH
AMENDED AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
CINEDIGM
CORP.
The
undersigned, being the Chief Executive Officer of Cinedigm Corp., a Delaware corporation (the “Corporation”), pursuant to
Section 242 of the General Corporation Law of the State of Delaware, as amended (the “DGCL”), does hereby certify as follows:
|
1.
|
Pursuant
to action duly take by the Board of Directors of the Corporation (the “Board”), the Board adopted resolutions (the “Amending
Resolutions”) to further amend the Corporation’s Fifth Amended and Restated Certificate of Incorporation of the Corporation
(the “Certificate of Incorporation”), as filed with the Delaware Secretary of State on October 31, 2017;
|
|
|
|
|
2.
|
Pursuant
to a majority action by the Corporation’s Shareholders in accordance with Section 228 of the DGCL, the holders of the Corporation’s
outstanding capital stock approved the Amending Resolutions; and
|
|
3.
|
The
Amending Resolutions were duly adopted in accordance with Section 242 of the DGCL.
|
NOW,
THEREFORE, to effect the Amending Resolutions, Section 4.1 of the Certificate of Incorporation shall be deleted in its entirety and replaced
as follows:
“Section
4.1 Authorized Shares.
The
total number of shares of capital stock that the Corporation shall have authority to issue is [__________________________ (____________)]
shares as follows: (i) [___________________________ (_______________)] shares of common stock, of which [_________________________ (______________)]
shares shall be Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”); and (ii) fifteen million (15,000,000)
shares of preferred stock, par value $0.001 per share (the “Preferred Stock”) of which twenty (20) shares shall be “Series
A Preferred Stock,” and 14,999,980 of which the Board of Directors shall have the authority by resolution or resolutions to fix
all of the powers, preferences and rights, and the qualifications, limitations and restrictions of the Preferred Stock permitted by the
Delaware General Corporation Law and to divide the Preferred Stock into one or more class and/or classes and designate all of the powers,
preferences and rights, and the qualifications, limitations and restrictions of each class permitted by the Delaware General Corporation
Law.”
Except
as specifically set forth herein, the Certificate of Incorporation shall not be amended, modified or otherwise altered by this Certificate
of Amendment.
*
* *
[Signature
page follows]
IN
WITNESS WHEREOF, the Corporation has caused this Amendment to the Certificate of Incorporation of Cinedigm Corp. to be signed by Christopher
J. McGurk, its Chief Executive Officer, this ___ day of __________, 202_, who acknowledges that the foregoing is the act and deed of
the Corporation and that the facts stated herein are true.
|
By:
|
|
|
Name:
|
Christopher
J. McGurk
|
|
Title:
|
Chief
Executive Officer
|
APPENDIX
C
Language
of New Section 4.1:
“FOURTH:
CAPITALIZATION
Section
4.1 Authorized Shares.
The
total number of shares of capital stock that the Corporation shall have authority to issue is [_________] (______) shares as follows:
(i) [_________] (______) shares of common stock, of which [_________] (______) shares shall be Class A Common Stock, par value $0.001
per share (the “Class A Common Stock”); and (ii) Fifteen Million (15,000,000) shares of preferred stock, par value $0.001
per share (the “Preferred Stock”), of which the Board of Directors shall have the authority by resolution or resolutions
to fix all of the powers, preferences and rights, and the qualifications, limitations and restrictions of the Preferred Stock permitted
by the Delaware General Corporation Law and to divide the Preferred Stock into one or more class and/or classes and designate all of
the powers, preferences and rights, and the qualifications, limitations and restrictions of each class permitted by the Delaware General
Corporation Law.
Upon
this Certificate of Amendment becoming effective pursuant to the DGCL (the “Effective Time”), each [___]1 shares
of Class A Common issued and outstanding or held by the Company in treasury immediately prior to the Effective Time (collectively, the
“Old Common Stock”) shall automatically without further action on the part of the Company or any holder of Old Common Stock,
be reclassified, combined and changed into one fully paid and nonassessable share of new Class A Common Stock (collectively, the “New
Common Stock”). From and after the Effective Time, certificates representing the Old Common Stock shall represent the number of
whole shares of New Common Stock into which such Old Common Stock shall have been reclassified pursuant to this Certificate of Amendment;
provided, however, that each holder of record of a certificate that represented shares of Old Common Stock shall receive, upon surrender
of such certificate, a new certificate representing the number of whole shares of New Common Stock into which the shares of Old Common
Stock represented by such certificate shall have been reclassified pursuant to this Certificate of Amendment, as well as any cash in
lieu of fractional shares of New Common Stock to which such holder may be entitled as set forth below. There shall be no fractional shares
issued with respect to the New Common Stock. In lieu thereof, the aggregate of all fractional shares otherwise issuable to the holders
of record of Old Common Stock shall be issued to American Stock Transfer & Trust Company, or such other entity serving as the transfer
agent of the Corporation (the “Transfer Agent”), as agent, for the accounts of all holders of record of Old Common Stock
otherwise entitled to have a fraction of a share issued to them. The sale of all fractional interests will be effected by the Transfer
Agent as soon as practicable after the Effective Time on the basis of prevailing market prices of the applicable New Common Stock at
the time of sale. After such sale and upon the surrender of the stockholders’ stock certificates, the Transfer Agent will pay to
such holders of record their pro rata share of the net proceeds derived from the sale of the fractional interests.”
|
1
|
The
exact ratio will be within the range of two to ten, and will be determined by the Board prior
to the Effective Time and publicly announced by the Corporation.
|
C-1
Cinedigm (NASDAQ:CIDM)
Historical Stock Chart
From Jun 2024 to Jul 2024
Cinedigm (NASDAQ:CIDM)
Historical Stock Chart
From Jul 2023 to Jul 2024