UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE l4A
(Rule 14a-101)
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule l4a-l2
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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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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth in the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Form, Schedule or Registration Statement No.:
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Date Filed:
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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
12, 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 12, 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 13, 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 28, 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 12,
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 12, 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.
Ashok Amritraj, 65, has been a member of
the Board since August 2021. He has been Chairman and CEO of Hyde Park Entertainment, Inc. since 2000 and is an internationally renowned
award-winning film producer, having made over 100 films during the span of his 35-year career. Mr. Amritraj is involved with philanthropic
causes, and was appointed a United Nations India Goodwill Ambassador in 2016 and, in 2018, by decree of the President of the Republic
of France, was appointed a Chevalier (Knight) of the Ordre National du Merité. Mr. Amritraj serves on the Producers A2025 Committee
to advance inclusion and equitable opportunities at the Academy of Motion Picture Arts and Sciences as well as on the advisory board for
the Dodge Film School at Chapman University. Mr. Amritraj’s extensive experience in the film production and movie industry provides
the Board with valuable knowledge, insight and network relevant to the Company’s business.
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 any Bison designee 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
4,000,000 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 18,098,270.
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 August 9, 2021, 2,700,731 shares had been issued under the 2017 Plan (upon stock
grants and settlements of PSU and RSU grants) and 10,754,753 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 642,786 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 4,000,000 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 75,000,000 shares to 275,000,000 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 275,000,000, 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, 2021.
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. Amritraj, Brown 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. Amritraj, Brown 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. Amritraj, Brown 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. Amritraj,
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. Amritraj, 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 August 9, 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 August 9,
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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%
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Gary S. Loffredo
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537,537
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(d)
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*
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Erick Opeka
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513,965
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(e)
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*
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Ashok Amritraj
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132,630
|
|
|
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*
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Peter C. Brown
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345,086
|
(f)
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*
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Patrick W. O’Brien
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378,327
|
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|
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*
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Peixin Xu
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|
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21,723,009
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(g)
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12.8
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%
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Mingtai Investment LP
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9,005,772
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(h)
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5.4
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%
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All directors and executive officers as a group (7 persons)
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27,214,627
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(i)
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15.8
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%
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(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 167,921,627 shares of Class A Common Stock outstanding as of August 9, 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 August 9, 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 August 9, 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 $1,000,000 in value.
Our Class A common stock is listed for trading
on the Nasdaq under the symbol “CIDM”.
The following table sets forth certain information
concerning outstanding equity awards of the Company’s NEOs at the end of the Last Fiscal Year. All outstanding stock awards reported
in this table represent restricted stock that vests in equal annual installments over three years. At the end of the Last Fiscal Year,
there were no unearned equity awards under performance-based plans.
OUTSTANDING EQUITY AWARDS AT MARCH 31, 2021
OPTION AWARDS (1)
|
|
STOCK AWARDS
|
|
Name
|
|
Number of Securities Underlying
Unexercised Options Exercisable
(#)
|
|
|
Number of Securities Underlying
Unexercised Options Unexercisable
(#)
|
|
|
Option Exercise Price
($)
|
|
|
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
|
|
Ashok Amritraj (1)
|
|
|
--
|
|
|
|
--
|
|
|
|
-
|
|
Tom Bu (2)
|
|
|
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 (3)
|
|
|
37,500
|
|
|
|
25,000
|
|
|
|
62,500
|
|
|
(1)
|
Joined the Board on August 9, 2021.
|
|
(2)
|
Resigned from the Board on August 6, 2021.
|
|
(3)
|
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
Ashok Amritraj
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. _, 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 18,098,270 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 18,098,270 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 two hundred ninety million (290,000,000) shares as follows: (i)
two hundred seventy-five million (275,000,000) shares of common stock, of which two hundred seventy-five million (275,000,000) 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 fourteen million nine hundred ninety-nine thousand nine hundred eighty (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.
|
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