dpdm_pre14a.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy Statement
Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934
Filed by the
Registrant ☒
Filed by a Party
other than the Registrant ☐
Check the
appropriate box:
☐
Preliminary Proxy Statement
☐
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material Pursuant to §240.14a-12
DOLPHIN DIGITAL MEDIA, INC.
(Name of Registrant
as Specified in its Charter)
Payment of Filing
Fee (Check the appropriate box):
☒
No fee required.
☐
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title of each class
of securities to which transaction applies: Not
applicable
(2)
Aggregate number of
securities to which transaction applies: Not
applicable
(3)
Per unit or other
underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): Not
applicable
(4)
Proposed maximum
aggregate value of transaction: Not
applicable
(5)
Total fee
paid: Not applicable
☐
Fee paid previously with Preliminary materials.
☐
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing fee for which the
offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1)
Amount Previously
Paid:
(2)
Form, Schedule or
Registration Statement No.
DOLPHIN
DIGITAL MEDIA, INC.
2151 Le Jeune Road,
Suite 150-Mezzanine
Coral Gables,
Florida 33134
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 19,
2017
Dear
Shareholder:
It is my pleasure
to invite you to attend the annual meeting of the shareholders of
Dolphin Digital Media, Inc. (the “Annual
Meeting”). The Annual Meeting will be held on June
29, 2017, at 11:00 a.m. local time at the law offices of Greenberg
Traurig, located at 333 S.E. 2nd Avenue, Suite 4400, Miami, FL
33131. At the meeting, you will be asked
to:
●
Elect seven
directors to hold office until the 2018 annual meeting of
shareholders or until their successors are elected and
qualified;
●
Approve the Dolphin
Digital Media, Inc. 2017 Equity Incentive Plan;
●
Approve the Second
Amended and Restated Articles of Incorporation (the
“Amendment”);
●
Ratify the
selection of BDO USA, LLP as our independent registered public
accounting firm for the 2017 fiscal year; and
●
Transact
such other business as may properly come before the Annual Meeting
and any adjournment or postponement of the Annual
Meeting.
Only shareholders
of record as of the close of business on April 20, 2017 may vote at
the Annual Meeting.
It is important
that your shares be represented at the Annual Meeting, regardless
of the number you may hold. Whether or not you plan to attend, please vote
using the Internet, by telephone, by fax or by mail, in each case
by following the instructions in our proxy
statement. This will not prevent you from voting
your shares in person if you are present.
I look forward to
seeing you on June 29, 2017.
|
Sincerely,
/s/ William O’Dowd,
IV
WILLIAM
O’DOWD, IV
Chief Executive
Officer
|
We mailed a Notice
of Internet Availability of Proxy Materials containing instructions
on how to access our proxy statement and our 2016 annual report on
Form 10-K on or about May 19, 2017.
Our
proxy statement and our 2016 annual report on Form 10-K are
available online at www.iproxydirect.com/DPDM.
TABLE OF CONTENTS
QUESTIONS AND
ANSWERS ABOUT OUR ANNUAL MEETING
|
2
|
PROPOSAL
1—ELECTION OF DIRECTORS
|
6
|
CORPORATE
GOVERNANCE
|
9
|
Board Leadership
Structure and Role in Risk Oversight
|
9
|
Meetings
|
9
|
Director
Independence
|
9
|
Board
Committees
|
9
|
Director
Compensation
|
10
|
Involvement in
Certain Legal Proceedings
|
10
|
Arrangements
|
10
|
Code of
Ethics
|
10
|
Certain
Relationships and Related Transactions
|
11
|
EXECUTIVE
COMPENSATION
|
13
|
PROPOSAL
2—APPROVAL OF THE 2017 PLAN
|
14
|
PROPOSAL
3—APPROVAL OF THE AMENDMENT
|
24
|
PROPOSAL
4—RATIFICATION OF INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTING FIRM
|
26
|
Audit Committee
Report
|
27
|
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
28
|
OTHER
MATTERS
|
31
|
ANNEX A: DOLPHIN
DIGITAL MEDIA, INC. 2017 EQUITY INCENTIVE PLAN
|
A-i
|
ANNEX B: SECOND
AMENDED AND RESTATED ARTICLES OF INCORPORATION
|
B-i
|
DOLPHIN
DIGITAL MEDIA, INC.
2151 Le Jeune Road,
Suite 150-Mezzanine
Coral Gables,
Florida 33134
PROXY STATEMENT
Proxy
Statement for Annual Meeting of Shareholders to be held on June 29,
2017
You are receiving
this proxy statement because you own shares of common stock of
Dolphin Digital Media, Inc. (sometimes referred to as
“we”, “us”, or the “Company”),
that entitle you to vote at the Annual Meeting. Our
Board of Directors (sometimes referred to as the
“Board”), is soliciting proxies from shareholders who
wish to vote at the meeting. By use of a proxy, you can
vote even if you do not attend the meeting. This proxy
statement describes the matters on which you are being asked to
vote and provides information on those matters so that you can make
an informed decision.
We are utilizing
the Securities and Exchange Commission (the “SEC”) rule
allowing companies to furnish proxy materials to their shareholders
over the Internet. In accordance with this rule, on or about May
19, 2017, we sent our shareholders at the close of business on
April 20, 2017 a Notice of Internet Availability of Proxy Materials
for the Annual Meeting (the “Notice”). The Notice
contains instructions on how to access our proxy statement and 2016
annual report on Form 10-K and vote online. If you received a
Notice and would like to receive a printed copy of our proxy
materials from us instead of downloading a printable version from
the Internet, please follow the instructions included in the Notice
for requesting such materials at no charge.
Dolphin Digital Media | 2017 Proxy
Statement 1
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL
MEETING
Q: When and
where will the Annual Meeting take place?
A: The
Annual Meeting will be held on June 29, 2017 at 11:00 a.m., local
time, at the law offices of Greenberg Traurig, located at 333 S.E.
2nd Avenue, Suite 4400, Miami, FL 33131.
Q: Who may
vote at the Annual Meeting?
A: Only
holders of record of shares of our common stock, par value $0.015
per share, (the “common stock”) at the close of
business on April 20, 2017 (the “record date”), are
entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement of the Annual Meeting. On
the record date, we had 18,755,865 shares of our common stock
outstanding and entitled to be voted at the Annual
Meeting.
Q: How many
votes do I have?
A: You
may cast one vote for each share of our common stock held by you as
of the record date on all matters presented at the Annual
Meeting. Holders of our common stock do not possess
cumulative voting rights.
Q: How do I
vote?
A: If
you are a shareholder of record as of the record date, there are
five ways you can vote:
Method
|
Process
for Voting
|
By
Internet
|
You may vote over
the Internet by going to www.iproxydirect.com/DPDM and entering
your Control ID and following the instructions for
voting.
|
By
Telephone
|
You may vote by
telephone by calling 1-866-752-VOTE (8683) and following the
recorded instructions. If you vote by telephone, you
will also need your Control ID referred to above.
|
By Fax
|
You may vote by fax
by filling out the proxy card and faxing to
202-521-3464.
|
By
Mail
|
You may vote by
mail by filling out the proxy card and returning it in the enclosed
envelope.
|
In
Person
|
You may vote in
person at the Annual Meeting.
|
If you are a
beneficial owner of shares, you must follow the voting procedures
of your nominee included with your proxy materials. If
your shares are held by a nominee and you intend to vote at the
Annual Meeting, please bring with you evidence of your ownership as
of the record date (such as a recent brokerage statement showing
your ownership of the shares as of the record date or a letter from
the broker or nominee confirming such ownership), and a form of
personal identification.
Q: What is
the difference between a shareholder of record and a beneficial
owner?
A: If
your shares are registered directly in your name with our transfer
agent, Nevada Agency and Transfer Company, you are considered the
“shareholder of record” with respect to those
shares.
Dolphin Digital Media | 2017 Proxy
Statement 2
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL
MEETING
|
If your shares are held by a
brokerage firm, bank, trustee or other agent, which we refer to as
a nominee, you are considered the “beneficial owner” of
shares held in street name. As the beneficial owner, you
have the right to direct your nominee on how to vote your shares by
following its instructions for voting by internet, telephone, fax
or the voting instruction card included in the enclosed proxy
materials.
Q: What
constitutes a quorum, and why is a quorum
required?
A: We
are required to have a quorum of shareholders present to conduct
business at the Annual Meeting. The presence at the
Annual Meeting, in person or by proxy, of the holders of a majority
of the shares entitled to vote on the record date will constitute a
quorum, permitting us to conduct the business of the Annual
Meeting. Proxies received but marked as
“ABSTAIN” or “WITHHOLD”, if any, and broker
non-votes (described below), if applicable, will be included in the
calculation of the number of shares considered to be present at the
Annual Meeting for quorum purposes. If a quorum is not present, we
will be required to reconvene the Annual Meeting at a later
date.
Q: What am I
being asked to vote on?
A: At
the Annual Meeting you will be asked to vote on the following four
proposals. Our Board recommendation for each of these
proposals is set forth below.
Proposal
|
Board
Recommendation
|
1.
Election of
Directors
|
FOR
each director nominee
|
2.
Approval of the
2017 Plan
|
FOR
|
3.
Approval of the
Amendment
|
FOR
|
4.
Ratification of BDO
as Auditors
|
FOR
|
Q:
What happens if additional matters are presented at the Annual
Meeting?
A: Other
than the items of business described in this proxy statement, we
are not aware of any other business to be acted upon at the Annual
Meeting. If you grant a proxy, the proxy holder, William
O’Dowd, IV, will have the discretion to vote your shares on
any additional matters properly presented for a vote at the meeting
in accordance with Florida law and our Bylaws.
Q: How many
votes are needed to approve each proposal?
Proposal
|
Description
of Votes Needed
|
Proposal
1:
Election
of Directors
|
The seven nominees
for election as directors will be elected by a
“plurality” of the votes cast at the Annual
Meeting. This means that the seven nominees who receive
the highest number of “FOR” votes will be elected as
the directors to serve until the next annual meeting of
shareholders or until their successors are elected and qualified,
even if those nominees do not receive a majority of the votes
cast. Abstentions will not have any effect on the
election of directors.
|
Proposal
2:
Approval
of the 2017 Plan
|
The 2017 Plan will
be approved if the number of votes cast “FOR” the
proposal exceeds the number of votes cast “AGAINST” the
proposal. Abstentions will not have any effect on
whether this proposal is approved.
|
Dolphin Digital Media | 2017 Proxy
Statement 3
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL
MEETING
|
Proposal
3:
Approval
of the Amendment
|
The Amendment will
be approved if the number of votes cast “FOR” the
proposal exceeds the number of votes cast “AGAINST” the
proposal. Abstentions will not have any effect on
whether this proposal is approved.
|
Proposal
4:
Ratification
of Independent Registered Public Accounting Firm
|
The appointment of
BDO as our independent registered public accounting firm will be
ratified if the number of votes cast “FOR” the proposal
exceeds the number of votes cast “AGAINST” the
proposal. Abstentions will not have any effect on
whether this proposal is approved.
|
Q: What if I
sign and return my proxy without making any
selections?
A: If
you sign and return your proxy without making any selections, your
shares will be voted “FOR” the director nominees in
proposal 1 and for proposals 2, 3 and 4. If other matters properly
come before the meeting, the proxy holder will have the authority
to vote on those matters for you at the proxy holder’s
discretion.
Q: What if I
am a beneficial shareholder and I do not give the nominee voting
instructions?
A: If
you are a beneficial shareholder and your shares are held in the
name of a broker, the broker has the authority to vote shares for
which you do not provide voting instructions only with respect to
certain “routine” matters. A broker non-vote
occurs when a nominee who holds shares for another does not vote on
a particular matter because the nominee does not have discretionary
voting authority for that matter and has not received instructions
from the beneficial owner of the shares. Broker
non-votes are included in the calculation of the number of votes
considered to be present at the Annual Meeting for purposes of
determining the presence of a quorum but are not counted as votes
cast with respect to a matter on which the nominee has expressly
not voted.
The table below
sets forth, for each proposal on the ballot, whether a broker can
exercise discretion and vote your shares absent your instructions
and if not, the impact of such broker non-vote on the approval of
the proposal.
Proposal
|
|
Can Brokers Vote
Absent Instructions?
|
|
Impact
of
Broker Non-Vote
|
1.
Election of Directors
|
|
No
|
|
None
|
2.
Approval of the 2017 Plan
|
|
No
|
|
None
|
3.
Approval of the Amendment
|
|
No
|
|
None
|
4.
Ratification of BDO as Auditors
|
|
Yes
|
|
Not Applicable
|
Q: Can I
change my vote after I have delivered my proxy?
A: Yes. If
you are a shareholder of record, you may revoke your proxy at any
time before its exercise by:
●
Written notice to
Mirta A. Negrini at Dolphin Digital Media, Inc., 2151 Le Jeune
Road, Suite 150-Mezzanine, Coral Gables, FL
33134;
●
Executing and
delivering to Ms. Negrini a proxy with a later date (which may be
done by internet, fax or mail); or
●
Attending the
Annual Meeting and voting in person.
If you are a
beneficial shareholder, you must contact your nominee to change
your vote or obtain a proxy to vote your shares if you wish to cast
your vote in person at the Annual Meeting.
Dolphin Digital Media | 2017 Proxy
Statement 4
QUESTIONS AND ANSWERS ABOUT OUR ANNUAL
MEETING
|
Q: What does
it mean if I receive more than one proxy card?
A: If
you receive more than one proxy card, it means that you hold shares
of the Company in more than one account. To ensure that
all your shares are voted, sign and return each proxy
card. Alternatively, if you vote by internet, telephone
or fax, you will need to vote once for each proxy card you
receive.
Q: Who can
attend the Annual Meeting?
A: Only
shareholders and our invited guests are invited to attend the
Annual Meeting. To gain admittance, you must bring a
form of personal identification to the Annual Meeting, where your
name will be verified against our shareholder list. If a
broker or nominee holds your shares and you plan to attend the
Annual Meeting, you should bring a recent brokerage statement
showing your ownership of the shares as of the Record Date or a
letter from the broker or nominee confirming such ownership, and a
form of personal identification.
Q: If I plan
to attend the Annual Meeting, should I still vote by
proxy?
A: Yes. Casting
your vote in advance does not affect your right to attend the
Annual Meeting.
Q: Where can
I find voting results of the Annual Meeting?
A: We
will announce the results for the proposals voted upon at the
Annual Meeting and publish final detailed voting results in a Form
8-K filed within four business days after the Annual
Meeting.
Q: Who should
I call with other questions?
A: If
you have additional questions about this proxy statement or the
Annual Meeting or would like additional copies of this proxy
statement or the enclosures herein, please
contact: Dolphin Digital Media, Inc., 2151 Le Jeune
Road, Suite 150-Mezzanine, Coral Gables, FL 33134,
Attention: Mirta A. Negrini, Telephone: (305)
774-0407.
Dolphin Digital Media | 2017 Proxy
Statement 5
PROPOSAL 1—ELECTION OF DIRECTORS
Under our Bylaws,
directors are elected at Annual Meetings or until their successors
are elected and qualified. Our current directors are
William O’Dowd, IV, Michael Espensen, Nelson Famadas, Mirta
A. Negrini and Nicholas Stanham. Our Board recommends
that Messrs. O’Dowd, Espensen, Famadas and Stanham and
Ms. Negrini be nominated for re-election, and that Allan Mayer and
Justo Pozo be nominated as new Board members, each to serve until
the next annual meeting of shareholders or until their successors
are elected and qualified, and each has consented to
serve.
We believe that
each of these individuals possesses the experience, skills and
qualities to fully perform his or her duties as a director and
contribute to our success. As more specifically
described in the biographies set forth below, our directors and
director nominees possess relevant knowledge and experience,
industry-specific and otherwise, in the family entertainment,
Internet networking, entertainment marketing, legal, and business
fields, which we believe enhances the Board’s ability to
oversee, evaluate and direct our overall corporate
strategy. In addition, our directors were nominated
because each is of high ethical character, accomplished in his or
her field with solid credentials and recognition, has the ability
to exercise sound business judgment, and is able to dedicate
sufficient time to fulfilling his or her obligations as a
director. Each director nominee’s principal
occupation and other pertinent information about particular
experience, qualifications, attributes and skills that led our
Board to conclude that such person should serve as a director, is
described below.
William
O’Dowd, IV, 48, has served as our Chief Executive
Officer and Chairman of the Board since June
2008. Mr. O’Dowd founded Dolphin
Entertainment, Inc. (“Dolphin Entertainment”) in 1996
and has served as its President since that date. In 2016, we
acquired Dolphin Films, Inc., a content producer of motion
pictures, from Dolphin Entertainment. Past television series
credits for Mr. O’Dowd include serving as Executive Producer
of Nickelodeon’s worldwide top-rated series Zoey101 (Primetime Emmy-Award
nominated) and Ned’s
Declassified School Survival Guide, as well as
Nickelodeon’s first ever musical, Spectacular! In addition, Mr.
O’Dowd produced the first season of Raising Expectations, a 26-episode
family sitcom. Raising
Expectations won the 2017 KidScreen Award for Best New
Tween/Teen Series, the global children’s television
industry’s highest honor.
Qualifications. The Board
nominated Mr. O’Dowd to serve as a director because of his
current and prior senior executive and management experience at the
Company and his significant industry experience, including having
founded Dolphin Entertainment, a leading entertainment company
specializing in children’s and young adult’s
live-action programming.
Michael
Espensen, 67, has served on our Board since June
2008. From 2009 to 2014, Mr. Espensen served as Chief
Executive Officer of Keraplast Technologies, LLC
(“Keraplast”), a private multi-million dollar
commercial-stage biotechnology company. From 2009 to
present, Mr. Espensen has also served as Chairman of the Board of
Keraplast. While serving as Chief Executive Officer, Mr.
Espensen was responsible for overseeing and approving
Keraplast’s annual budgets and financial
statements. Mr. Espensen is also a producer and
investor in family entertainment for television and feature
films. Between 2006 and 2009, Mr. Espensen was
Executive or Co-Executive Producer of twelve made-for-television
movies targeting children and family audiences. As
Executive Producer, he approved production budgets and then closely
monitored actual spending to ensure that productions were not over
budget. Mr. Espensen has also been a real estate
developer and investor for over thirty years.
Qualifications. The Board
nominated Mr. Espensen to serve as a director because of his
business management and financial oversight experience both as the
current Chairman and former Chief Executive Officer of a
multi-million dollar company and as a former Executive Producer in
the made-for-television movie industry, as well as his valuable
knowledge of our industry.
Dolphin Digital Media | 2017 Proxy
Statement 6
PROPOSAL
1 – ELECTION OF DIRECTORS
|
Nelson
Famadas, 44, has served on our Board since December
2014. Since 2015, he has served as President of Cien, a
marketing firm that serves the Hispanic market. Prior to
Cien, Mr. Famadas served as Senior Vice President of National
Latino Broadcasting (“NLB”) from July 2011 to May
2015. NLB is an independent Hispanic media company that
owns and operates two satellite radio channels on
SiriusXM. From July 2010 to March 2012, Mr. Famadas
served as our Chief Operating Officer, where he was responsible for
daily operations including public filings and investor
relations. Mr. Famadas began his career at MTV
Networks, specifically MTV Latin America, ultimately serving as New
Business Development Manager. From 1995 through 2001, he
co-founded and managed Astracanada Productions, a television
production company that catered mostly to the Hispanic audience,
creating over 1,300 hours of programming. As Executive
Producer, he received a Suncoast EMMY in 1997 for Entertainment
Series for A Oscuras Pero
Encendidos. Mr. Famadas has over 20 years of
experience in television and radio production, programming,
operations, sales and marketing.
Qualifications. The Board
nominated Mr. Famadas to serve as a director because of his
significant prior management experience as a co-founder and former
manager of a television production company and senior vice
president of a broadcasting firm, as well as his current management
experience with a marketing firm.
Allan Mayer, 67, has served as the Co-Chief Executive
Officer of our subsidiary 42West, LLC (“42West”), an
entertainment public relations agency since March 2017.
Previously, he served as Principal of 42West from October 2006
until its acquisition by our Company in March
2017. Previously, from 1997 until October 2006,
Mr. Mayer was managing director and head of the entertainment
practice at the crisis communications firm Sitrick and Company.
Mr. Mayer began his professional life as a journalist, working
as a staff reporter for The Wall
Street Journal; a writer, foreign correspondent and senior
editor for Newsweek, and
the founding editor (and later publisher) of Buzz magazine. He also served as
editorial director of Arbor House Publishing Co. and senior editor
of Simon & Schuster. Mr. Mayer has authored two books
Madam Prime Minister: Margaret
Thatcher and Her Rise to Power (Newsweek Books, 1980) and
Gaston's War (Presidio
Press, 1987)—and is co-author, with Michael S. Sitrick, of
Spin: How To Turn The Power of the
Press to Your Advantage (Regnery, 1998). In addition, he has
written for a wide variety of national publications, ranging from
The New York Times Magazine
to Vogue. Mr. Mayer is a
recipient of numerous professional honors, including the National
Magazine Award, the Overseas Press Club Citation of Excellence, and
six William Allen White Awards. Mr. Mayer serves on the board of
directors of Film Independent and has lectured on crisis management
and communications at UCLA’s Anderson School of Business and
USC's Annenberg School of Communication. From December
2007 to January 2016, Mr. Mayer served as a director and member of
the compensation and nominating and governance committees
of American Apparel Inc., a public company.
Qualifications. The Board
nominated Mr. Mayer based on his management experience as a
founding principal of 42West as well as his significant experience
in the entertainment marketing and public relations
industry.
Mirta A.
Negrini, 53, has served on our Board since December 2014 and
as our Chief Financial and Operating Officer since October 2013.
Ms. Negrini has over thirty years of experience in both private and
public accounting. Immediately prior to joining the Company, she
served since 1996 as a named partner in Gilman & Negrini, P.A.,
an accounting firm of which the Company was a client. Ms. Negrini
is a Certified Public Accountant licensed in the State of
Florida.
Qualifications. The Board
nominated Ms. Negrini to serve as a director because of her
significant accounting experience gained as a named partner at an
accounting firm.
Justo Pozo,
60, is the Chairman of Pozo Capital Partners, LLC, a family-owned
equity investment fund, focusing in the areas of entertainment,
finance and real estate. Previously, until May 2012, Mr.
Pozo was Co-Founder and President of Preferred Care Partners, Inc.,
(“Preferred”) one of the largest privately owned
Healthcare Maintenance Organizations in Florida until it was
acquired by United Healthcare Services, Inc. Under his
leadership, Preferred became one of South Florida’s fastest
growing private companies in 2003, being ranked 67 out of 500
privately held companies in South Florida by South Florida CEO magazine in
2007. Preferred was also the recipient of South
Florida’s Good to Great Award given by the Greater Miami
Chamber of Commerce. During his tenure at Preferred, he
received numerous recognitions including the induction into Florida
International University’s
College of Business Entrepreneurial Hall of Fame and the Miami Dade
College Hall of Fame. He was selected by the
South Florida Business
Journal as a Heavy Hitter in the Health Care industry and
was a finalist for the same publications Excellence in Health Care
Award. In 2008, he received the prestigious Torch Award
for Distinguished Alumnus for the College of Business
Administration of Florida International University. Mr. Pozo is a
Certified Public Accountant licensed in the State of
Florida. In March 2015, he was appointed by the Florida
Board of Governors, as Trustee to the Florida International
University Board of Trustees.
Dolphin Digital Media | 2017 Proxy
Statement 7
PROPOSAL
1 – ELECTION OF DIRECTORS
|
Qualifications. The Board
nominated Mr. Pozo to serve as a director because of his leadership
experience as a founder and President of an entity that experienced
significant growth and because of his background in
accounting.
Nicholas Stanham,
Esq., 49, has served on our Board since December 2014. Mr.
Stanham is a founding partner of R&S International Law Group,
LLP in Miami, Florida, which was founded in January 2008. His
practice is focused primarily in real estate and corporate
structuring. Mr. Stanham has over 20 years of experience in real
estate purchases and sales of residential and commercial
properties. Since 2004, Mr. Stanham has been a member of the
Christopher Columbus High School board of directors. In addition,
he serves as a director of ReachingU, a foundation that promotes
initiatives and supports organizations that offer educational
opportunities to Uruguayans living in poverty.
Qualifications. The Board
nominated Mr. Stanham to serve as a director because of his
experience as a founding partner at a law firm as well as his
business management experience at that firm.
Recommendation of the Board of Directors
Our Board of
Directors recommends a vote “FOR” each of the director
nominees.
Dolphin Digital Media | 2017 Proxy
Statement 8
CORPORATE GOVERNANCE
Board
Leadership Structure and Role in Risk Oversight
Our Board has not
adopted a formal policy regarding the need to separate or combine
the offices of Chairman of the Board and Chief Executive Officer
and instead our Board remains free to make this determination in a
manner it deems most appropriate for our
Company. Currently, we combine the positions of Chief
Executive Officer and Chairman of the Board. We believe
that the combined role of Chief Executive Officer and Chairman of
the Board promotes strategy development and
execution. Mr. O’Dowd currently serves as
Chief Executive Officer and Chairman of the Board. We
believe Mr. O’Dowd is suited to serve both roles,
because he is the director most familiar with our business and
industry, and most capable of effectively identifying strategic
priorities and leading the discussion and execution of
strategy. Currently, our Board does not perform a risk
oversight function.
Meetings
During the last
fiscal year, our Board held a total of four
meetings. Each incumbent director attended at least 75%
of the aggregate of (1) the total number of meetings of our Board
during the period in which he or she was a director and (2) the
total number of meetings of the Committee on which he served during
the period in which he was a director. It is the policy
of our Board to encourage its members to attend our annual meeting
of shareholders when held. We did not hold an annual
meeting of shareholders for the prior year.
Director
Independence
We are not listed
on a national securities exchange; however, we have elected to use
the definition of independence under the NASDAQ listing
requirements in determining the independence of our directors and
nominees for director. In 2017, our Board undertook a
review of director independence, which included a review of each
director and director nominee’s responses to questionnaires
inquiring about any relationships with us. This review
was designed to identify and evaluate any transactions or
relationships between a director, or director nominee or any member
of his or her immediate family and us, or members of our senior
management or other members of our Board, and all relevant facts
and circumstances regarding any such transactions or
relationships. Based on its review, our Board determined
that Messrs. Espensen, Famadas, Pozo and Stanham are
independent. Messrs. O’Dowd and Mayer and Ms.
Negrini are not independent under NASDAQ’s independence
standards, its compensation committee independence standards or its
nominations committee independence standards.
In making a
determination of independence with respect to director nominee, Mr.
Pozo, our Board considered (i) Mr. Pozo’s various past
investments in the Company’s digital productions (the
“Investments”) and his receipt of interest income from
such investments, as well as the fact that Mr. Pozo is in the
business of making investments to other companies similar to the
Company, and has participated in such Investments on substantially
similar terms as all other investors and has not received any
preferential terms or payment arrangements and (ii) Mr.
Pozo’s beneficial ownership of approximately 13% of the
Company’s outstanding common stock as of April 17,
2017. Our Board determined that such Investments and
beneficial ownership would not impair Mr. Pozo’s independence
from the Company.
Board
Committees
Audit
Committee
Our Board currently
has a standing Audit Committee consisting of two directors,
Nicholas Stanham and Michael Espensen, who serves as
Chairman. Our Audit Committee operates pursuant to an
Audit Committee Charter, which was adopted by our Board, setting
forth the responsibilities of the Audit Committee. The
Audit Committee Charter can be found at our website at
www.dolphindigitalmedia.com by clicking on Investor Relations and
then Audit Committee Charter.
The Audit
Committee’s responsibilities include, but are not limited to,
assisting the Board in overseeing the:
●
accounting and
financial reporting practices and policies and systems of internal
controls over financial reporting of the
Company;
●
integrity of the
Company’s consolidated financial statements and the
independent audit thereof;
Dolphin Digital Media | 2017 Proxy
Statement 9
●
compliance of the
Company with legal and regulatory requirements;
and
●
performance of the
independent registered public accounting firm and assessment of the
auditors’ qualifications and
independence.
The Audit Committee
Chairman reports on Audit Committee actions and recommendations at
Board meetings. The Audit Committee may, in its
discretion, delegate its duties and responsibilities to a
subcommittee of the Committee as it deems appropriate. Our Board
has determined that each member of the Audit Committee meets the
independence requirements under NASDAQ’s Marketplace Rules
and the enhanced independence standards for audit committee members
required by the SEC. In addition, our Board has
determined that Mr. Espensen meets the requirements of an audit
committee financial expert under the rules of the SEC.
In 2016, the Audit
Committee held four meetings, which were all attended by each
member.
Compensation Committee and Nominating Committee
Functions
Our Board currently
does not have a standing nominating committee or compensation
committee, or committee performing similar
functions. Our Board has determined, given the
relatively small size of the Company and the relatively small size
of its Board, to perform these functions. However, as
our Company and our Board grow, our Board may consider establishing
a separate nominating committee and compensation
committee.
Nominations for
Director
Our Board currently
does not have a charter or other written policy with regard to the
nomination process, or a formal policy with respect to the
consideration of director candidates.
In connection with
our acquisition of 42West in March 2017, our Board determined that
it was in the best interests of our Company and our shareholders to
nominate 42West’s Co-Chief Executive Officer, Mr. Mayer to
the Board. In addition, our Board appointed Mr. Pozo as
a director nominee, based on its consideration of the significant
qualifications and experience of Mr. Pozo and the potential
benefits of such qualifications and experience to our Company and
our shareholders.
Director
Compensation
In 2016, we did not
pay compensation to any of our directors in connection with their
service on our Board.
Involvement
in Certain Legal Proceedings
No director or
director nominee is a party to any legal proceeding adverse to us
or any of our subsidiaries or has a material interest adverse to us
or any of our subsidiaries.
Arrangements
No director or
director nominee has an arrangement or understanding between the
director or director nominee and any other person (other than an
understanding with directors or officers of our Company acting
solely in their capacity as such) pursuant to which such individual
was selected as a director or nominee. In addition,
there are no family relationships between any of our directors,
director nominees or executive officers.
Code
of Ethics
Our Board of
Directors has adopted our Code of Ethics for Senior Financial
Officers (“Code of Ethics”) which we plan to
periodically revise to reflect best corporate governance practices
and changes in applicable rules. Our Code of Ethics sets
forth standards of conduct applicable to our Chief Executive
Officer and our Chief Financial and Operating Officer to promote
honest and ethical conduct, proper disclosure in our periodic
filings, and compliance with applicable laws, rules and
regulations. Our Code of Ethics is available to view at
our website, www.dolphindigitalmedia.com by clicking on Investor
Relations and then Code of Ethics. We intend to provide
disclosure of any amendments or waivers of our Code of Ethics on
our website within four business days following the date of the
amendment or waiver.
Dolphin Digital Media | 2017 Proxy
Statement 10
Certain
Relationships and Related Transactions
William O’Dowd, IV
On December 31,
2011, we issued an unsecured revolving promissory note (the
“Revolving Promissory Note”) to Dolphin Entertainment,
an entity wholly owned by our CEO, Mr. O’Dowd. The
Revolving Promissory Note accrued interest at a rate of 10% per
annum. Dolphin Entertainment had the right at any time to demand
that all outstanding principal and accrued interest be repaid with
a ten day notice to us. During the year ended December 31, 2015,
Dolphin Entertainment advanced $2,797,000 and was repaid $3,267,000
in principal. During the year ended December 31, 2016, Dolphin
Entertainment advanced $270,000. On March 4, 2016, we
entered into a subscription agreement with Dolphin Entertainment,
pursuant to which we and Dolphin Entertainment agreed to convert
$1,920,600 of principal balance and $1,152,809 of accrued interest
outstanding under the Revolving Promissory Note into 614,682 shares
of common stock. The shares were converted at a price of
$5.00 per share. During the years ended December 31,
2016 and 2015, $32,008 and $340,050, respectively, were expensed in
interest and we recorded accrued interest of $5,788 and $1,126,
related to the Revolving Promissory Note, on our consolidated
balance sheets as of December 31, 2016 and 2015,
respectively. As of December 31, 2016 and 2015, the
outstanding balances under the Revolving Promissory Note were $0
and $1,982,267, respectively. The largest aggregate balance
that the Company owed to Dolphin Entertainment during 2016 and 2015
was $3,073,410 and $5,056,496,
respectively.
Dolphin
Entertainment has previously advanced funds for working capital to
Dolphin Films, Inc. (“Dolphin Films”), its former
subsidiary which we acquired in March 2016. During the year ended
December 31, 2015, Dolphin Films agreed to enter into second loan
and security agreements with certain of Dolphin
Entertainment’s debtholders, pursuant to which the
debtholders exchanged their Dolphin Entertainment notes for notes
issued by Dolphin Films totaling $8,774,327. The amount of debt
assumed by Dolphin Films was applied against amounts owed to
Dolphin Entertainment by Dolphin Films. On October 1,
2016, Dolphin Films entered into a promissory note with Dolphin
Entertainment (the “DE Note”) in the principal amount
of $1,009,624. The DE Note is payable on demand and
bears interest at a rate of 10% per annum. As of
December 31, 2016 and 2015, Dolphin Films owed Dolphin
Entertainment $434,326 and $1,612,357, respectively, of
principal and $19,652 and $1,305,166, respectively of accrued
interest, that was recorded on the condensed consolidated
balance sheets. Dolphin Films recorded interest expense of $83,551
and $148,805, respectively for the years ended December 31, 2016
and 2015.
On September 7,
2012, we entered into an employment agreement with Mr.
O’Dowd, which was subsequently renewed for a period of two
years, effective January 1, 2015. The agreement provided
for an annual salary of $250,000 and a one-time bonus of
$1,000,000. Unpaid compensation accrues interest at a
rate of 10% per annum. As of December 31, 2016 and 2015,
we had a balance of $735,211 and $523,145, respectively of accrued
interest and $2,250,000 and $2,000,000, of accrued compensation
related to this agreement. We recorded $212,066 and
$186,513 of interest expense for the years ended December 31, 2016
and 2015. The largest
aggregate balance Dolphin Films owed Dolphin Entertainment during
2016 and 2015 was $2,658,800 and $6,527,600,
respectively.
During 2015, we
agreed to pay Dolphin Entertainment $250,000 for a script that it
had developed for a web series that we produced during
2015.
As previously
mentioned, on March 29, 2016, we acquired Dolphin Films from
Dolphin Entertainment. As consideration, we issued to
Dolphin Entertainment 2,300,000 shares of Series B Convertible
Preferred Stock, par value $0.10 per share (“Series B
Convertible Preferred Stock”) and 1,000,000 shares of Series
C Convertible Preferred Stock, par value $0.001 per share
(“Series C Convertible Preferred Stock”). On
November 15, 2016, Dolphin Entertainment converted the Series B
Convertible Preferred Stock into 2,185,000 shares of our common
stock. As Mr. O’Dowd is the sole owner of Dolphin
Entertainment, he is deemed the beneficial owner of such shares of
common stock.
Justo
Pozo
During 2016, we
entered into three separate debt exchange agreements with entities
under the control of director nominee, Justo Pozo, to exchange
promissory notes with an aggregate principal and interest balance
of $8,178,145 into 1,629,628 shares of our Common Stock at $5.00
per share. The promissory notes accrued interest at
rates ranging from 11.25% to 12.5% per annum. Mr. Pozo
was the holder of a convertible note that mandatorily and
automatically converted into common stock, at the conversion price
of $5.00 per share, upon the average market price per share of
common stock being greater than or equal to the conversion price
for twenty trading days. During 2016, such triggering
event occurred and the convertible note was converted into 632,800
shares of our common stock.
Dolphin Digital Media | 2017 Proxy
Statement 11
Nicholas Stanham
In March 2016, we
entered into a debt exchange agreement with our director, Mr.
Stanham, pursuant to which we exchanged a promissory note in the
amount of $50,000 for 11,128 shares of our common stock, as payment
in full of the promissory note. The promissory note
accrued interest at a rate of 10% per
annum. The shares of common stock were converted at a
price of $5.00 per share.
T Squared Partners LP
In connection with
the merger whereby we acquired Dolphin Films, we entered into a
preferred stock exchange agreement with T Squared Partners LP
(previously T Squared Investments, LLC) (“T Squared”)
pursuant to which, on March 7, 2016, we issued 950,000 shares of
Series B Convertible Preferred Stock to T Squared in exchange
for 1,042,753 shares of Series A Convertible Preferred Stock,
previously issued to T Squared. On November 16, 2016, T
Squared converted the Series B Convertible Preferred Stock into
950,000 shares of our common stock.
On November 4,
2016, we issued Class G, Class H and Class I Warrants (the
“Warrants”) to T Squared that entitles T Squared to
purchase up to 2,500,000 shares of our common stock. The
Warrants have a maximum exercise provision that prohibit T Squared
from exercising warrants that would cause it to exceed 9.99% of our
outstanding shares of common stock, unless the restriction is
waived or amended, by the mutual consent of us and T
Squared.
On March 31, 2017,
T Squared partially exercised Class E Warrants and acquired 325,770
shares of our common stock pursuant to the cashless exercise
provision in the related warrant agreement. T Squared
had previously paid down $1,675,000 for these shares.
Stephen L. Perrone
In December 2016,
we and entities affiliated with Stephen L. Perrone entered into:
(i) a debt exchange agreement to exchange promissory notes in the
aggregate amount of $6,470,990 for shares of our common stock and
(ii) a purchase agreement to acquire a 25% membership interest of
Dolphin Kids Clubs owned by the affiliated entity. The promissory
notes accrued interest at rates ranging from 11.25% to $13.25% per
annum. Pursuant to the agreements, we issued a Class J
Warrant that entitled Mr. Perrone to purchase up to 2,170,000
shares of our common stock at a price of $0.015 per share through
December 29, 2020. In addition, we issued to an entity
affiliated with Mr. Perrone a Class K Warrant as consideration to
terminate an equity finance agreement in the amount of
$564,000. The Class K Warrant entitled Mr. Perrone to
purchase up to 170,000 shares of our common stock at a price of
$0.015 per share prior to December 29, 2020. On March
31, 2017, Mr. Perrone’s affiliated entities exercised the
Class J and Class K Warrants at an aggregate purchase price of
$35,100 and acquired 2,340,000 shares of our common
stock.
Alvaro and
Lileana De Moya
During 2016, we
entered into two separate debt exchange agreements with Alvaro and
Lileana De Moya (the “De Moya’s”) to convert two
promissory notes with an aggregate balance of $3,437,414 of
principal and interest into 687,483 shares of our common stock at a
price of $5.00 per share. The promissory notes accrued interest at
rates ranging from 11.25% to 12.5% per annum. In
addition, we entered into a subscription agreement with the De
Moya’s in which they purchased 520,000 shares of our common
stock at $5.00 per share.
Dolphin Digital Media | 2017 Proxy
Statement 12
EXECUTIVE COMPENSATION
The following table
presents summary information for the fiscal years ended December
31, 2016 and 2015 concerning compensation earned for services
rendered in all capacities by our Chief Executive Officer and our
Chief Financial and Operating Officer.
Summary Compensation Table
Name and Principal Position
|
|
|
|
|
|
|
William
O’Dowd, IV, (1)
|
|
2016
|
250,000
|
—
|
377,403(2)
|
627,403
|
Chairman and
Chief
Executive
Officer
|
|
2015
|
250,000
|
—
|
574,947
|
824,947
|
|
|
|
|
|
|
Mirta A.
Negrini,
|
|
2016
|
200,000
|
—
|
—
|
200,000
|
Chief Financial
and
Operating
Officer
|
|
2015
|
150,000
|
50,000
|
—
|
200,000
|
____________________________
(1)
For 2016, we
accrued the full amount of Mr. O’Dowd’s salary of
$250,000 but did not make any payments on this amount.
(2)
This amount
includes life insurance in the amount of $48,384, interest paid on
accrued and unpaid compensation in the amount of $212,066 and
interest paid on the Revolving Promissory Note in the amount of
$116,953 for the fiscal year ended December 31, 2016. In March
2016, Dolphin Entertainment exchanged $3,073,410 aggregate amount
of principal and interest outstanding under the
Revolving Promissory Note
for shares of our common stock. For additional information on the
Revolving Promissory Note, please see “Certain Relationships
and Related Transactions”.
Outstanding Equity Awards at Fiscal Year-End
None of the
executive officers named in the table above had any outstanding
equity awards as of December 31, 2016 and 2015.
Mirta A. Negrini Employment Arrangement
On October 21,
2013, the Company appointed Ms. Negrini as its Chief Financial and
Operating Officer, at an annual base salary of
$150,000. In 2016, Ms. Negrini’s annual base
salary was increased to $200,000. The terms of Ms. Negrini’s
employment arrangement do not provide for any payments in
connection with her resignation, retirement or other termination,
or a change in control, or a change in her responsibilities
following a change in control.
Information
Concerning Executive Officers
Set forth below is
certain information relating to our current executive officers, Mr.
O’Dowd and Ms. Negrini. Biographical information
with respect to Mr. O’Dowd and Ms. Negrini is set forth above
under “Proposal 1 – Election of
Directors.”
NAME
|
|
AGE
|
|
PRINCIPAL
OCCUPATION
|
|
|
|
|
|
|
|
|
|
Chief Financial and
Operating Officer
|
Dolphin Digital Media | 2017 Proxy
Statement 13
PROPOSAL 2—APPROVAL OF THE 2017
PLAN
On May 9, 2017, our
Board approved the adoption of the Dolphin Digital Media, Inc. 2017
Equity Incentive Plan (the “2017 Plan”), subject to
approval by our shareholders. Our Board adopted the 2017 Plan as a
flexible incentive compensation plan that would allow us to use
different forms of compensation awards to attract new employees,
executives and directors, to further the goal of retaining and
motivating existing personnel and directors and to further align
such individuals’ interests with those of our shareholders.
Accordingly, our Board is seeking shareholder approval of the 2017
Plan.
General
Plan Information
The 2017 Plan is
intended to replace the 2012 Omnibus Incentive Compensation Plan
(the “2012 Plan”). The 2012 Plan was
approved by our shareholders in September 2012, however, no awards
were granted under the Plan. If the 2017 Plan is
approved, the number of shares of the Company’s common stock
(the “Shares”) that will be available for issuance
under the 2017 Plan pursuant to any form of equity awards permitted
under the Plan, as described below, will be equal to 2,000,000
Shares.
The following
information regarding the 2017 Plan is being provided to you in
connection with the solicitation of proxies for the approval of the
adoption of the 2017 Plan. The following description of the 2017
Plan is a summary only and does not purport to be complete. The
summary is qualified in its entirety by reference to the 2017 Plan.
The text of the 2017 Plan is attached as Annex A to this proxy
statement. You are urged to read the 2017 Plan.
Plan
Summary
Shares Available for Awards; Annual Per-Person
Limitations.
Under the 2017
Plan, the total number of shares of our common stock (the
“Shares”) reserved and available for delivery under the
2017 Plan (“Awards”) at any time during the term of the
2017 Plan will be 2,000,000 Shares.
If any Shares
subject to an Award are forfeited, expire or otherwise terminate
without issuance of such Shares, or is settled for cash or
otherwise does not result in the issuance of all or a portion of
the Shares subject to such Award, the Shares to which those Awards
were subject, will, to the extent of such forfeiture, expiration,
termination, non-issuance or cash settlement, again be available
for delivery with respect to Awards under the 2017
Plan.
Substitute Awards
will not reduce the Shares authorized for delivery under the 2017
Plan or authorized for delivery to a participant in any
period. Additionally, in the event that a company
acquired by the Company or any subsidiary or with which the Company
or any subsidiary combines has shares available under a
pre-existing plan approved by its shareholders and not adopted in
contemplation of such acquisition or combination, the shares
available for delivery pursuant to the terms of such pre-existing
plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Awards under the
2017 Plan and will not reduce the Shares authorized for delivery
under the 2017 Plan; provided, that Awards using such available
shares will not be made after the date awards or grants could have
been made under the terms of the pre-existing plan, absent the
acquisition or combination, and will only be made to individuals
who were not employees or directors of the Company or its
subsidiaries prior to such acquisition or combination.
The 2017 Plan
imposes individual limitations on the amount of certain Awards, in
part with the intention to comply with Section 162(m) of the Code.
Under these limitations, in any fiscal year of the Company during
any part of which the 2017 Plan is in effect, no participant may be
granted (i) stock options or stock appreciation rights with respect
to more than 600,000 Shares, or (ii) performance shares (including
shares of restricted stock, restricted stock units, and other stock
based-awards that are subject to satisfaction of performance goals)
that the Committee intends to be exempt from the deduction
limitations under Section 162(m) of the Code, with respect to more
than 600,000 Shares, in each case, subject to adjustment in certain
circumstances. The maximum amount that may be paid out to any one
participant as performance units that the Committee intends to be
exempt from the deduction limitations under Section 162(m) of the
Code, with respect to any 12-month performance period is $1,000,000
(pro-rated for any performance period that is less than 12 months),
and with respect to any performance period that is more than 12
months, $2,000,000.
Dolphin Digital Media | 2017 Proxy
Statement 14
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
The aggregate fair
market value of Shares on the date of grant underlying incentive
stock options that can be exercisable by any individual for the
first time during any year cannot exceed $100,000 (or such other
amount as specified in Section 422 of the
Code). Any excess will be treated as a non-qualified
stock option.
The maximum number
of Shares that may be delivered under the 2017 Plan as a result of
the exercise of incentive stock options is 2,000,000 Shares,
subject to certain adjustments.
The Committee is
authorized to adjust the limitations on the number of Shares
available for issuance under the 2017 Plan and the individual
limitations on the amount of certain Awards (other than the
$100,000 limitation described above with respect to incentive stock
option awards) and is authorized to adjust outstanding Awards
(including adjustments to exercise prices of options and other
affected terms of Awards) to the extent it deems equitable in the
event that a dividend or other distribution (whether in cash,
Shares or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange or other similar corporate
transaction or event affects the Shares so that an adjustment is
appropriate. See the sections called “Acceleration of
Vesting; Change in Control” and “Other
Adjustments” below for a summary of certain additional
adjustment provisions of the 2017 Plan. As of April 17, 2017,
there were approximately 97 officers, employees, consultants and
service providers of the Company and its related entities and 3
non-employee directors of the Company who are eligible to
participate in the 2017 Plan.
Eligibility.
The persons
eligible to receive Awards under the 2017 Plan are the officers,
directors, employees, consultants and other persons who provide
services to the Company or any related entity. The
foregoing notwithstanding, only employees of the Company, or any
related entity of the Company (as those terms are defined in
Sections 424(e) and (f) of the Code, respectively), are eligible
for purposes of receiving any incentive stock options that are
intended to comply with the requirements of Section 422 of the Code
(“ISOs”). An employee on leave of absence
may be considered as still in the employ of the Company or a
related entity for purposes of eligibility for participation in the
2017 Plan.
Administration.
The 2017 Plan is to
be administered by the Committee of the Board (defined as a
committee designated by the Board to administer the Plan; provided,
however, that if the Board fails to designate a committee or if
there are no longer any members on the committee so designated by
the Board, or for any other reason determined by the Board, then
the Board shall serve as the Committee), provided, however, that
except as otherwise expressly provided in the 2017 Plan, the
independent members of the Board may elect to exercise any power or
authority granted to the Committee under the 2017 Plan. Subject to
the terms of the 2017 Plan, the Committee is authorized to select
eligible persons to receive Awards, grant Awards, determine the
type, number and other terms and conditions of, and all other
matters relating to, Awards, prescribe Award agreements (which need
not be identical for each participant) and the rules and
regulations for the administration of the 2017 Plan, construe and
interpret the 2017 Plan and Award agreements, correct defects,
supply omissions or reconcile inconsistencies therein, and make all
other decisions and determinations as the Committee may deem
necessary or advisable for the administration of the 2017
Plan. Decisions of the Committee shall be final,
conclusive and binding on all persons or entities, including the
Company, any subsidiary or any participant or beneficiary, or any
transferee under the 2017 Plan or any other person claiming rights
from or through any of the foregoing persons or
entities.
Stock Options and Stock Appreciation Rights.
The Committee is
authorized to grant (i) stock options, including both ISOs, which
can result in potentially favorable tax treatment to the
participant, and non-qualified stock options, and (ii) stock
appreciation rights, entitling the participant to receive the
amount by which the fair market value of a Share on the date of
exercise exceeds the grant price of the stock appreciation
right. The exercise price per share subject to an option
and the grant price of a stock appreciation right are determined by
the Committee. The exercise price per share of an option
and the grant price of a stock appreciation right may not be less
than 100% of the fair market value of a Share on the date the
option or stock appreciation right is granted. An option
granted to a person who owns or is deemed to own stock representing
10% or more of the voting power of all classes of stock of the
Company or any parent or subsidiary company (sometimes referred to
as a “10% owner”) will not qualify as an ISO unless the
exercise price for the option is not less than 110% of the fair
market value of a Share on the date the ISO is
granted.
Dolphin Digital Media | 2017 Proxy
Statement 15
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
For purposes of the
2017 Plan, the term “fair market value” means the fair
market value of Shares, Awards or other property as determined by
the Committee or under procedures established by the Committee.
Unless otherwise determined by the Committee, the fair market value
of a Share as of any given date is the closing sales price per
Share as reported on the principal stock exchange or market on
which Shares are traded on the date as of which such value is being
determined (or as of such later measurement date as determined by
the Committee on the date the Award is authorized by the
Committee), or, if there is no sale on that date, then on the last
previous day on which a sale was reported. The maximum term of each
option or stock appreciation right, the times at which each option
or stock appreciation right will be exercisable, and provisions
requiring forfeiture of unexercised options or stock appreciation
rights at or following termination of employment or service
generally are fixed by the Committee, except that no option or
stock appreciation right may have a term exceeding ten years, and
no ISO granted to a 10% owner (as described above) may have a term
exceeding five years (to the extent required by the Code at the
time of grant). Methods of exercise and settlement and
other terms of options and stock appreciation rights are determined
by the Committee. Accordingly, the Committee may permit
the exercise price of options awarded under the 2017 Plan to be
paid in cash, Shares, other Awards or other property (including
loans to participants).
The Company may
grant stock appreciation rights in tandem with options, which we
refer to as “Tandem stock appreciation rights”, under
the 2017 Plan. A Tandem stock appreciation right may be
granted at the same time as the related option is granted or, for
options that are not ISOs, at any time thereafter before exercise
or expiration of such option. A Tandem stock appreciation right may
only be exercised when the related option would be exercisable and
the fair market value of the Shares subject to the related option
exceeds the option’s exercise price. Any option related to a
Tandem stock appreciation right will no longer be exercisable to
the extent the Tandem stock appreciation right has been exercised
and any Tandem stock appreciation right will no longer be
exercisable to the extent the related option has been
exercised.
Restricted Stock and Restricted Stock Units.
The Committee is
authorized to grant restricted stock and restricted stock units.
Restricted stock is a grant of Shares which are subject to such
risks of forfeiture and other restrictions as the Committee may
impose, including time or performance restrictions or both. A
participant granted restricted stock generally has all of the
rights of a shareholder of the Company (including voting and
dividend rights), unless otherwise determined by the Committee. An
Award of restricted stock units confers upon a participant the
right to receive Shares or cash equal to the fair market value of
the specified number of Shares covered by the restricted stock
units at the end of a specified deferral period, subject to such
risks of forfeiture and other restrictions as the Committee may
impose. Prior to settlement, an Award of restricted stock units
carries no voting or dividend rights or other rights associated
with Share ownership, although dividend equivalents may be granted,
as discussed below.
Dividend Equivalents.
The Committee is
authorized to grant dividend equivalents conferring on participants
the right to receive, currently or on a deferred basis, cash,
Shares, other Awards or other property equal in value to dividends
paid on a specific number of Shares or other periodic payments.
Dividend equivalents may be granted alone or in connection with
another Award, may be paid currently or on a deferred basis and, if
deferred, may be deemed to have been reinvested in additional
Shares, Awards or otherwise as specified by the
Committee. Notwithstanding the foregoing, dividend
equivalents credited in connection with an award that vests based
on the achievement of performance goals will be subject to
restrictions and risk of forfeiture to the same extent as the award
with respect to which such dividend equivalents have been
credited.
Bonus Stock and Awards in Lieu of Cash
Obligations.
The Committee is
authorized to grant Shares as a bonus free of restrictions, or to
grant Shares or other Awards in lieu of Company obligations to pay
cash under the 2017 Plan or other plans or compensatory
arrangements, subject to such terms as the Committee may
specify.
Dolphin Digital Media | 2017 Proxy
Statement 16
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
Other Stock-Based Awards.
The Committee is
authorized to grant Awards that are denominated or payable in,
valued by reference to, or otherwise based on or related to
Shares. The Committee determines the terms and
conditions of such Awards.
Performance Awards.
The Committee is
authorized to grant performance Awards to participants on terms and
conditions established by the Committee. The performance
criteria to be achieved during any performance period and the
length of the performance period will be determined by the
Committee upon the grant of the performance
Award. Performance Awards may be valued by reference to
a designated number of Shares (in which case they are referred to
as performance shares) or by reference to a designated amount of
property including cash (in which case they are referred to as
performance units). Performance Awards may be settled by
delivery of cash, Shares or other property, or any combination
thereof, as determined by the Committee.
Unless otherwise
specified by the Committee, the provisions that are intended to
qualify Awards as “performance-based compensation” not
subject to the limitation on tax deductibility by the Company under
Section 162(m) of the Code will apply to any performance Award if
it is granted to a participant who is, or is likely to be, as of
the end of the tax year in which the Company would claim a tax
deduction in connection with such Award, a “covered
employee” (as defined below). The term
“covered employee” means the Company’s chief
executive officer and each other person whose compensation is
required to be disclosed in the Company’s filings with the
SEC by reason of that person being among the three highest
compensated officers of the Company (other than the Company’s
chief executive officer or principal financial officer) as of the
end of a taxable year. If and to the extent required under Section
162(m) of the Code, any power or authority relating to a
performance Award intended to qualify under Section 162(m) of the
Code is to be exercised by the Committee and not the
Board.
If and to the
extent that the Committee determines that the foregoing provisions
of the 2017 Plan are to be applicable to any Award, one or more of
the following business criteria for the Company, on a consolidated
basis, and/or for subsidiaries, or for business or geographical
units of the Company and/or a subsidiary (except with respect to
the total shareholder return and earnings per share criteria), are
to be used by the Committee in establishing performance goals for
Awards under the 2017 Plan: (1) earnings per share; (2) revenues or
margins; (3) cash flow (including operating cash flow, free cash
flow, discounted return on investment and cash flow in excess of
cost of capital); (4) operating margin; (5) return on assets,
sales, investment, capital, or equity; (6) economic value added;
(7) direct contribution; (8) net income; pretax earnings; earnings
before interest and taxes; earnings before interest, taxes,
depreciation and amortization; earnings after interest expense and
before extraordinary or special items; operating income or income
from operations; income before interest income or expense, unusual
items and income taxes, local, state or federal and excluding
budgeted and actual bonuses which might be paid under any ongoing
bonus plans of the Company; (9) working capital; (10) management of
fixed costs or variable costs; (11) completion of production or
stages of production within specified time and/or budget
parameters; (12) identification or consummation of investment
opportunities or completion of specified projects in accordance
with corporate business plans, including strategic mergers,
acquisitions or divestitures; (13) total shareholder return; (14)
debt reduction; (15) market share; (16) entry into new markets,
either geographically or by business unit; (17) client retention
and satisfaction; (18) strategic plan development and
implementation, including turnaround plans; and/or (19) the Fair
Market Value of a Share. Any of the above goals may be determined
on an absolute or relative basis or as compared to the performance
of a published or special index deemed applicable by the Committee
including, but not limited to, the Standard & Poor’s 500
Stock Index or a group of companies that are comparable to the
Company. In determining the achievement of the performance goals,
the Committee may, at the time the performance goals are set,
require that those goals be determined by excluding the impact of
(i) restructurings, discontinued operations, and extraordinary
items (as defined pursuant to generally accepted accounting
principles), and other unusual or non-recurring charges, (ii)
change in accounting standards required by generally accepted
accounting principles; or (iii) such other exclusions or
adjustments as the Committee specifies at the time the Award is
granted.
Dolphin Digital Media | 2017 Proxy
Statement 17
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
After the end of
each performance period, the Committee will determine and certify
whether the performance goals have been achieved. In
determining the achievement of such performance goals, the
Committee may, at the time the performance goals are set, require
that those goals be determined by excluding the impact of (i)
restructurings, discontinued operations, extraordinary items (as
defined pursuant to generally accepted accounting principles), and
other unusual or non-recurring charges, (ii) change in accounting
standards required by generally accepted accounting principles; or
(iii) such other exclusions or adjustments as the Committee
specifies at the time the Award is granted.
The Committee may,
in its discretion, determine that the amount payable as a
performance Award will be reduced from the amount of any potential
Award.
Other Terms of Awards.
Awards may be
settled in the form of cash, Shares, other Awards or other
property, in the discretion of the Committee. The Committee may
require or permit participants to defer the settlement of all or
part of an Award in accordance with such terms and conditions as
the Committee may establish, including payment or crediting of
interest or dividend equivalents on deferred amounts, and the
crediting of earnings, gains and losses based on deemed investment
of deferred amounts in specified investment vehicles. The Committee
is authorized to place cash, Shares or other property in trusts or
make other arrangements to provide for payment of the
Company’s obligations under the 2017 Plan. The Committee may
condition any payment relating to an Award on the withholding of
taxes and may provide that a portion of any Shares or other
property to be distributed will be withheld (or that previously
acquired Shares or other property be surrendered by the
participant) to satisfy withholding and other tax obligations.
Awards granted under the 2017 Plan generally may not be pledged or
otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated
beneficiary upon the participant’s death, except that the
Committee may, in its discretion, permit transfers, subject to any
terms and conditions the Committee may impose pursuant to the
express terms of an Award agreement. A beneficiary,
transferee, or other person claiming any rights under the 2017 Plan
from or through any participant will be subject to all terms and
conditions of the 2017 Plan and any Award agreement applicable to
such participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or
appropriate by the Committee.
Awards under the
2017 Plan generally are granted without a requirement that the
participant pay consideration in the form of cash or property for
the grant (as distinguished from the exercise), except to the
extent required by law. The Committee may, however, grant Awards in
exchange for other Awards under the 2017 Plan, awards under other
Company plans, or other rights to payment from the Company, and may
grant Awards in addition to and in tandem with such other Awards,
rights or other awards.
Acceleration of Vesting; Change in Control.
Subject to certain
limitations, the Committee may, in its discretion, accelerate the
exercisability, the lapsing of restrictions or the expiration of
deferral or vesting periods of any Award. In the event
of a “change in control” of the Company, as defined in
the 2017 Plan, and only to the extent provided in any employment or
other agreement between the participant and the Company or any
Related Entity, or in any Award agreement, or to the extent
otherwise determined by the Committee in its sole discretion in
each particular case, (i) any option or stock appreciation
right that was not previously vested and exercisable at the time of
the “change in control” will become immediately vested
and exercisable; (ii) any restrictions, deferral of settlement
and forfeiture conditions applicable to a restricted stock award,
restricted stock unit award or another stock-based award subject
only to future service requirements will lapse and such Awards will
be deemed fully vested; and (iii) with respect to any
outstanding Award subject to achievement of performance goals and
conditions under the 2017 Plan, the Committee may, in its
discretion, consider such Awards to have been earned and payable
based on achievement of performance goals or based upon target
performance (either in full or pro-rata based on the portion of the
performance period completed as of the “change in
control”).
Dolphin Digital Media | 2017 Proxy
Statement 18
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
Subject to any
limitations contained in the 2017 Plan relating to the vesting of
Awards in the event of any merger, consolidation or other
reorganization in which the Company does not survive, or in the
event of any “change in control,” the agreement
relating to such transaction and/or the committee may provide for:
(i) the continuation of the outstanding Awards by the Company, if
the Company is a surviving entity, (ii) the assumption or
substitution for outstanding Awards by the surviving entity or its
parent or subsidiary pursuant to the provisions contained in the
2017 Plan, (iii) full exercisability or vesting and accelerated
expiration of the outstanding Awards, or (iv) settlement of the
value of the outstanding Awards in cash or cash equivalents or
other property followed by cancellation of such. The
foregoing actions may be taken without the consent or agreement of
a participant in the 2017 Plan and without any requirement that all
such participants be treated consistently.
Other Adjustments.
The Committee is
authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards (i) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions
and dispositions of businesses and assets) affecting the Company,
any subsidiary or any business unit, or the financial statements of
the Company or any subsidiary, (ii) in response to changes in
applicable laws, regulations, accounting principles, tax rates and
regulations or business conditions or (iii) in view of the
Committee's assessment of the business strategy of the Company, any
subsidiary or business unit thereof, performance of comparable
organizations, economic and business conditions, personal
performance of a participant, and any other circumstances deemed
relevant. However, the Committee may not make any
adjustment described in this paragraph if doing so would cause any
Award granted under the 2017 Plan to participants
designated by the Committee as “covered employees” and
intended to qualify as “performance-based compensation”
under Section 162(m) of the Code to otherwise fail to qualify as
“performance-based compensation.”
Clawback of Benefits.
The Company may (i)
cause the cancellation of any Award, (ii) require reimbursement of
any Award by a participant or beneficiary, and (iii) effect any
other right of recoupment of equity or other compensation provided
under the 2017 Plan or otherwise in accordance with any Company
policies that currently exist or that may from time to time be
adopted or modified in the future by the Company and/or applicable
law, which we refer to each as a “clawback
policy.” In addition, a participant may be
required to repay to the Company certain previously paid
compensation, whether provided under the 2017 Plan or an Award
agreement or otherwise, in accordance with any clawback
policy. By accepting an Award, a participant is also
agreeing to be bound by any existing or future clawback policy
adopted by the Company, or any amendments that may from time to
time be made to the clawback policy in the future by the Company in
its discretion (including without limitation any clawback policy
adopted or amended to comply with applicable laws or stock exchange
requirements) and is further agreeing that all of the
participant’s Award agreements (and/or awards issued under
the Prior Plans) may be unilaterally amended by the Company,
without the participant’s consent, to the extent that the
Company in its discretion determines to be necessary or appropriate
to comply with any clawback policy.
Amendment and Termination.
The Board may
amend, alter, suspend, discontinue or terminate the 2017 Plan or
the Committee’s authority to grant Awards without the consent
of shareholders or participants or beneficiaries, except that
shareholder approval must be obtained for any amendment or
alteration if such approval is required by law or regulation or
under the rules of any stock exchange or quotation system on which
Shares may then be listed or quoted; provided that, except as
otherwise permitted by the 2017 Plan or an Award agreement, without
the consent of an affected participant, no such Board action may
materially and adversely affect the rights of such participant
under the terms of any previously granted and outstanding
Award. The Committee may waive any conditions or rights
under, or amend, alter, suspend, discontinue or terminate any Award
theretofore granted and any Award agreement relating thereto,
except as otherwise provided in the 2017 Plan; provided that,
except as otherwise permitted by the 2017 Plan or Award agreement,
without the consent of an affected participant, no such Committee
or the Board action may materially and adversely affect the rights
of such participant under terms of such Award. The 2017
Plan will terminate at the earliest of (i) such time as no Shares
remain available for issuance under the 2017 Plan, (ii) termination
of the 2017 Plan by the Board, or (iii) the tenth anniversary of
the effective date of the 2017 Plan. Awards outstanding
upon expiration of the 2017 Plan will remain in effect until they
have been exercised or terminated, or have expired.
Dolphin Digital Media | 2017 Proxy
Statement 19
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
Federal Income Tax Consequences of Awards.
The 2017 Plan is
not qualified under the provisions of section 401(a) of the Code
and is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974.
Nonqualified Stock Options.
An optionee
generally is not taxable upon the grant of a nonqualified stock
option granted under the 2017 Plan. On exercise of a
nonqualified stock option granted under the 2017 Plan, an optionee
will recognize ordinary income equal to the excess, if any, of the
fair market value on the date of exercise of the Shares acquired on
exercise of the option over the exercise price. If the optionee is
an employee of the Company or a subsidiary, that income will be
subject to the withholding of Federal income tax. The
optionee’s tax basis in those Shares will be equal to their
fair market value on the date of exercise of the option, and his or
her holding period for those Shares will begin on that
date.
If an optionee pays
for Shares on exercise of an option by delivering Shares, the
optionee will not recognize gain or loss on the Shares delivered,
even if their fair market value at the time of exercise differs
from the optionee’s tax basis in them. The
optionee, however, otherwise will be taxed on the exercise of the
option in the manner described above as if he or she had paid the
exercise price in cash. If a separate identifiable stock
certificate or other indicia of ownership is issued for that number
of Shares equal to the number of Shares delivered on exercise of
the option, the optionee’s tax basis in the Shares
represented by that certificate or other indicia of ownership will
be equal to his or her tax basis in the Shares delivered, and his
or her holding period for those Shares will include his or her
holding period for the Shares delivered. The
optionee’s tax basis and holding period for the additional
Shares received on exercise of the option will be the same as if
the optionee had exercised the option solely in exchange for
cash.
The Company
generally will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income taxable to the
optionee, provided that amount constitutes an ordinary and
necessary business expense for the Company and is reasonable in
amount, and either the employee includes that amount in income or
the Company timely satisfies its reporting requirements with
respect to that amount.
Incentive Stock Options.
Under the Code, an
optionee generally is not subject to tax upon the grant or exercise
of an ISO. In addition, if the optionee holds a Share
received on exercise of an ISO for at least two years from the date
the option was granted and at least one year from the date the
option was exercised, which we refer to as the Required Holding
Period, the difference, if any, between the amount realized on a
sale or other taxable disposition of that Share and the
holder’s tax basis in that Share will be long-term capital
gain or loss.
If an optionee
disposes of a Share acquired on exercise of an ISO before the end
of the Required Holding Period, which we refer to as a
Disqualifying Disposition, the optionee generally will recognize
ordinary income in the year of the Disqualifying Disposition equal
to the excess, if any, of the fair market value of the Share on the
date the ISO was exercised over the exercise price. If,
however, the Disqualifying Disposition is a sale or exchange on
which a loss, if realized, would be recognized for Federal income
tax purposes, and if the sales proceeds are less than the fair
market value of the Share on the date of exercise of the option,
the amount of ordinary income recognized by the optionee will not
exceed the gain, if any, realized on the sale. If the
amount realized on a Disqualifying Disposition exceeds the fair
market value of the Share on the date of exercise of the option,
that excess will be short-term or long-term capital gain, depending
on whether the holding period for the Share exceeds one
year.
An optionee who
exercises an ISO by delivering Shares acquired previously pursuant
to the exercise of an ISO before the expiration of the Required
Holding Period for those Shares is treated as making a
Disqualifying Disposition of those Shares. This rule
prevents “pyramiding” or the exercise of an ISO (that
is, exercising an ISO for one Share and using that Share, and
others so acquired, to exercise successive ISOs) without the
imposition of current income tax.
Dolphin Digital Media | 2017 Proxy
Statement 20
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
For purposes of the
alternative minimum tax, the amount by which the fair market value
of a Share acquired on exercise of an ISO exceeds the exercise
price of that option generally will be an adjustment included in
the optionee’s alternative minimum taxable income for the
year in which the option is exercised. If, however,
there is a Disqualifying Disposition of the Share in the year in
which the option is exercised, there will be no adjustment with
respect to that Share. If there is a Disqualifying
Disposition in a later year, no income with respect to the
Disqualifying Disposition is included in the optionee’s
alternative minimum taxable income for that year. In
computing alternative minimum taxable income, the tax basis of a
Share acquired on exercise of an ISO is increased by the amount of
the adjustment taken into account with respect to that Share for
alternative minimum tax purposes in the year the option is
exercised.
The Company is not
allowed an income tax deduction with respect to the grant or
exercise of an ISO or the disposition of a Share acquired on
exercise of an ISO after the Required Holding
Period. However, if there is a Disqualifying Disposition
of a Share, the Company generally is allowed a deduction in an
amount equal to the ordinary income includible in income by the
optionee, provided that amount constitutes an ordinary and
necessary business expense for the Company and is reasonable in
amount, and either the employee includes that amount in income or
the Company timely satisfies its reporting requirements with
respect to that amount.
Stock Awards.
Generally, the
recipient of a stock award will recognize ordinary compensation
income at the time the Shares are received equal to the excess, if
any, of the fair market value of the Shares received over any
amount paid by the recipient in exchange for the
Shares. If, however, the Shares are not vested when they
are received under the 2017 Plan (for example, if the recipient is
required to work for a period of time in order to have the right to
sell the Shares), the recipient generally will not recognize income
until the Shares become vested, at which time the recipient will
recognize ordinary compensation income equal to the excess, if any,
of the fair market value of the Shares on the date they become
vested over any amount paid by the recipient in exchange for the
Shares. A recipient may, however, file an election with
the Internal Revenue Service, within 30 days of his or her receipt
of the Award, to recognize ordinary compensation income, as of the
date the recipient receives the Award, equal to the excess, if any,
of the fair market value of the Shares on the date the Award is
granted over any amount paid by the recipient in exchange for the
Shares.
The
recipient’s basis for the determination of gain or loss upon
the subsequent disposition of Shares acquired as Awards will be the
amount paid for the Shares plus any ordinary income recognized
either when the Shares are received or when the Shares become
vested. Upon the disposition of any Shares received as a
Share Award under the 2017 Plan, the difference between the sales
price and the recipient’s basis in the Shares will be treated
as a capital gain or loss and generally will be characterized as
long-term capital gain or loss if the Shares have been held for
more the one year from the date as of which he or she would be
required to recognize any compensation income.
The Company
generally will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income taxable to the
recipient, provided that amount constitutes an ordinary and
necessary business expense for the Company, is reasonable in
amount, and is not precluded by the deduction limitations imposed
by Section 162(m) of the Code, and either the recipient includes
that amount in income or the Company timely satisfies its reporting
requirements with respect to that amount.
Stock Appreciation Rights.
The Company may
grant stock appreciation rights, separate from any other Award,
which we refer to as Stand-Alone stock appreciation rights, or
Tandem stock appreciation rights, under the 2017
Plan. Generally, the recipient of a Stand-Alone stock
appreciation right will not recognize any taxable income at the
time the Stand-Alone stock appreciation right is
granted.
With respect to
Stand-Alone stock appreciation rights, if the recipient receives
the appreciation inherent in the stock appreciation rights in cash,
the cash will be taxable as ordinary compensation income to the
recipient at the time that the cash is received. If the
recipient receives the appreciation inherent in the stock
appreciation rights in Shares, the recipient will recognize
ordinary compensation income equal to the excess of the fair market
value of the Shares on the day they are received over any amounts
paid by the recipient for the Shares.
Dolphin Digital Media | 2017 Proxy
Statement 21
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
With respect to
Tandem stock appreciation rights, if the recipient elects to
surrender the underlying option in exchange for cash or Shares
equal to the appreciation inherent in the underlying option, the
tax consequences to the recipient will be the same as discussed
above relating to the Stand-Alone stock appreciation
rights. If the recipient elects to exercise the
underlying option, the holder will be taxed at the time of exercise
as if he or she had exercised a nonqualified stock option
(discussed above), i.e., the recipient will recognize ordinary
income for Federal tax purposes measured by the excess of the then
fair market value of the Shares over the exercise
price.
In general, there
will be no Federal income tax deduction allowed to the Company upon
the grant or termination of Stand-Alone stock appreciation rights
or Tandem stock appreciation rights. Upon the exercise
of either a Stand-Alone stock appreciation right or a Tandem stock
appreciation right, however, the Company generally will be entitled
to a deduction for Federal income tax purposes equal to the amount
of ordinary income that the employee is required to recognize as a
result of the exercise, provided that the deduction is not
otherwise disallowed under the Code.
Dividend Equivalents.
Generally, the
recipient of a dividend equivalent award will recognize ordinary
compensation income at the time the dividend equivalent award is
received equal to the fair market value of the amount
received. The Company generally will be entitled to a
deduction for Federal income tax purposes equal to the amount of
ordinary income that the recipient is required to recognize as a
result of the dividend equivalent award, provided that the
deduction is not otherwise disallowed under the Code.
Section 162 Limitations.
Section 162(m) to
the Code, generally disallows a public company’s tax
deduction for compensation to covered employees in excess of $1
million in any tax year. Compensation that qualifies as
“performance-based compensation” is excluded from the
$1 million deductibility cap, and therefore remains fully
deductible by the company that pays it. We intend that
Awards granted to participants under the 2017 Plan whom the
Committee expects to be covered employees at the time a deduction
arises in connection with such Awards, may, if and to the extent so
intended by the Committee, be granted in a manner that will qualify
as such “performance-based compensation,” so that such
Awards would not be subject to the Section 162(m) of the Code
deductibility cap of $1 million. However, the Committee
may, in its discretion, grant Awards that are not intended to be
exempt from the deduction limitations imposed by Section 162(m) of
the Code. In addition, future changes in Section 162(m)
of the Code or the regulations thereunder may adversely affect our
ability to ensure that Awards under the 2017 Plan will qualify as
“performance-based compensation” that are fully
deductible by us under Section 162(m) of the Code.
Section 409A of the Code
The 2017 Plan is
intended to comply with Section 409A of the Code to the extent
that such section would apply to any Award under the 2017 Plan.
Section 409A of the Code governs the taxation of deferred
compensation. Any participant that is granted an Award that is
deemed to be deferred compensation, such as a grant of restricted
stock units that does not qualify for an exemption from Section
409A of the Code, and does not comply with Section 409A of the
Code, could be subject to taxation on the Award as soon as the
Award is no longer subject to a substantial risk of forfeiture
(even if the Award is not exercisable) and an additional 20% tax
(and a further additional tax based upon an amount of interest
determined under Section 409A of the Code) on the value of the
Award.
Importance of Consulting Tax Adviser.
The information set
forth above is a summary only and does not purport to be
complete. In addition, the information is based upon
current Federal income tax rules and therefore is subject to change
when those rules change. Moreover, because the tax
consequences to any recipient may depend on his or her particular
situation, each recipient should consult his or her tax adviser as
to the Federal, state, local, foreign and other tax consequences of
the grant or exercise of an Award or the disposition of Shares
acquired as a result of an Award.
Dolphin Digital Media | 2017 Proxy
Statement 22
PROPOSAL
2 – APPROVAL OF THE 2017 PLAN
|
New
Plan Benefits Table
A new plan benefits
table for the 2017 Plan and the benefits or amounts that would have
been received by or allocated to certain participants for the last
completed fiscal year under the 2017 Plan if the 2017 Plan was then
in effect, as described in the federal proxy rules, is not provided
because all awards made under the 2017 Plan will be made at the
Board’s or Committee’s discretion, as applicable.
Therefore, the benefits and amounts that would be received or
allocated under the 2017 Plan are not determinable at this
time.
Equity
Compensation Plan
Information
As previously
discussed, in September 2012, our Board and our shareholders
approved the 2012 Plan. The 2012 Plan was adopted as a means of
attracting and retaining exceptional employees and consultants by
enabling them to share in the long term growth and financial
success of the Company. The 2012 Plan is administered by the Board
or a committee designated by the Board. The Board designated
500,000 shares of common stock (post-split) for the 2012 Plan. No
awards have been issued under the 2012 Plan since its
adoption.
Recommendation of the Board of Directors
Our Board of
Directors recommends a vote “FOR” the proposal to approve the
2017 Plan.
Dolphin Digital Media | 2017 Proxy
Statement 23
PROPOSAL 3—APPROVAL OF THE
AMENDMENT
On May 9, 2017, our
Board approved, and directed that there be submitted to our
shareholders for approval, a proposed amendment and restatement of
our Amended Articles of Incorporation (the “Second Amended
and Restated Articles of Incorporation”) to: (i) change the
name of our Company from Dolphin Digital Media, Inc. to Dolphin
Entertainment, Inc.; (ii) cancel the designations of our Series A
Convertible Preferred Stock and Series B Convertible Preferred
Stock, none of which is outstanding; and (iii) adjust the number of
Series C Convertible Preferred Stock outstanding in light of our
20-to-1 reverse stock split and clarify the voting rights of the
Series C Convertible Preferred Stock. The text of the proposed
Second Amended and Restated Articles of Incorporation is set forth
in Annex B to this proxy statement and is incorporated by reference
into this proxy statement. If the Amendment is approved
by our shareholders, we will file the Second Amended and Restated
Articles of Incorporation with the Secretary of State of the State
of Florida to effectuate the Amendment.
Change of Name to Dolphin Entertainment, Inc.
Our Board believes
that it is in the best interests of our Company to change our name
from Dolphin Digital Media, Inc. to Dolphin Entertainment, Inc. as
it believes this name change will be more reflective of our
business, which has expanded beyond digital media production to
include motion picture and television productions and entertainment
public relations and marketing. The new name will also
allow for continued expansion, without limiting the image of our
company to the public, as new opportunities in the entertainment
industry may emerge.
The name Dolphin
Entertainment, Inc. is currently held by an entity wholly owned by
Mr. O’Dowd (“Current DE”). If the
Amendment is approved by our shareholders, Current DE plans to
change its name from Dolphin Entertainment, Inc. to a different
name and our Company will change our name from Dolphin Digital
Media, Inc. to Dolphin Entertainment, Inc. The proposed
name change will in no way effect a change of control, merger,
consolidation or any similar type of transaction between Current DE
and our Company.
If the Amendment is
approved by our shareholders, our Board will amend our Bylaws to
replace any references to “Dolphin Digital Media, Inc.”
with “Dolphin Entertainment, Inc.”
Cancellation of Series A and Series B Convertible Preferred Stock
Designations
Pursuant to the
authority granted to and vested in our Board in accordance with the
provisions of the Amended Articles of Incorporation, our Board
designated our Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock and Series C Convertible Preferred
Stock. The Certificates of Designation for each series of preferred
stock stated the designation and number of shares, and fixed the
relative rights, preferences and limitations of each series of
shares. As of May 9, 2017, there were no shares of Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock
outstanding. Our Board has determined that it is in the
best interests of our Company to retire such designations since the
Company does not intend to issue any shares of Series A Convertible
Preferred Stock or Series B Convertible Preferred Stock in the
future.
Clarifications and Adjustments to Series C Convertible Preferred
Stock
As of May 9, 2017,
there are 1,000,000 shares of Series C Convertible Preferred Stock
outstanding, which are owned by Dolphin Entertainment, an entity
wholly owned by our CEO, Mr. O’Dowd. As discussed
previously, Dolphin Entertainment received the shares of Series C
Convertible Preferred Stock as consideration in the merger whereby
we acquired Dolphin Films from Dolphin
Entertainment. The Certificate of Designation provided
that each share of Series C Convertible Preferred Stock would be
convertible into one share of common stock, subject to adjustment
as provided in the Certificate of Designation. As
a result of the 20-to-1 reverse stock split that was approved by
our shareholders and became effective on May 10, 2016, the Board
has approved, and recommends to our shareholders that they approve,
an amendment to reduce the number of shares of Series C Convertible
Preferred Stock currently outstanding from 1,000,000 to 50,000
shares.
Dolphin Digital Media | 2017 Proxy
Statement 24
PROPOSAL
3—APPROVAL OF THE AMENDMENT
|
In addition, the
Board has approved an amendment to clarify its intent that, except
as required by law, holders of Series C Convertible Preferred Stock
will only have voting rights once the independent directors of the
Board determine that an optional conversion threshold (as defined
below) has occurred. Only upon such determination, will the Series
C Convertible Preferred Stock be entitled or permitted to vote on
all matters required or permitted to be voted on by the holders of
common stock and will be entitled to that number of votes equal to
three votes for the number of Conversion Shares (as defined in the
Certificate of Designation) into which such Holder’s shares
of the Series C Convertible Preferred Stock could then be
converted.
The Second Amended
and Restated Articles of Incorporation, like our current Amended
Articles of Incorporation, will provide that each share of Series C
Convertible Preferred Stock will be convertible into one share of
common stock, subject to adjustment for each issuance of common
stock (but not upon issuance of common stock equivalents) that
occurred, or occurs, from the date of issuance of the Series C
Convertible Preferred Stock (the “issue date”) until
the fifth (5th) anniversary of the issue date (i) upon the
conversion or exercise of any instrument issued on the issued date
or thereafter issued (but not upon the conversion of the Series C
Convertible Preferred Stock), (ii) upon the exchange of debt for
shares of common stock, or (iii) in a private placement, such that
the total number of shares of common stock held by an
“Eligible Class C Preferred Stock Holder” (based on the
number of shares of common stock held as of the date of issuance)
will be preserved at the same percentage of shares of common stock
outstanding held by such Eligible Class C Preferred Stock Holder on
such date. An Eligible Class C Preferred Stock Holder means any of
(i) Dolphin Entertainment for so long as Mr. O’Dowd continues
to beneficially own at least 90% and serves on the board of
directors or other governing entity, (ii) any other entity in which
Mr. O’Dowd beneficially owns more than 90%, or a trust for
the benefit of others, for which Mr. O’Dowd serves as trustee
and (iii) Mr. O’Dowd individually. Series C Convertible
Preferred Stock will only be convertible by the Eligible Class C
Preferred Stock Holder upon the Company satisfying one of the
“optional conversion thresholds”. Specifically, a
majority of the independent directors of the Board, in its sole
discretion, must have determined that the Company accomplished any
of the following (i) EBITDA of more than $3.0 million in any
calendar year, (ii) production of two feature films, (iii)
production and distribution of at least three web series, (iv)
theatrical distribution in the United States of one feature film,
or (v) any combination thereof that is subsequently approved by a
majority of the independent directors of the Board based on the
strategic plan approved by the Board. While certain events may have
occurred that could be deemed to have satisfied this criteria, the
independent directors of the Board have not yet determined that an
optional conversion threshold has occurred.
If, in the judgment
of the Board, any circumstances exist that would make consummation
of the proposed Amendment inadvisable, then, and notwithstanding
approval of the proposed Amendment by our shareholders, the Board
may abandon or delay such proposed Amendment, either before or
after approval thereof by our shareholders, at any time prior to
the effectiveness of the filing of the Second Amended and Restated
Articles of Incorporation with the Secretary of State of the State
of Florida.
Recommendation
of the Board of Directors
Our Board of
Directors recommends a vote “FOR” the proposal to approve the
Amendment.
Dolphin Digital Media | 2017 Proxy
Statement 25
PROPOSAL
4—RATIFICATION OF INDEPENDENT
REGISTERED
CERTIFIED PUBLIC ACCOUNTING FIRM
Introduction
The Audit Committee
has selected BDO USA, LLP (“BDO”) to continue to serve
as our independent registered public accounting firm for the 2017
fiscal year. BDO has served as our independent
registered public accounting firm since May 2014. In
connection with the selection of BDO, the Audit Committee annually
reviews and negotiates the terms of the engagement letter entered
into with BDO. This letter sets forth important terms regarding the
scope of the engagement, associated fees, payment terms and
responsibilities of each party.
The Audit Committee
and our Board believe that the continued retention of BDO as our
independent registered public accounting firm is in the best
interest of the Company and our shareholders, and we are asking our
shareholders to ratify the selection of BDO as our independent
registered public accounting firm for 2017. Although ratification
is not required by our Bylaws or otherwise, we are submitting the
selection of BDO to our shareholders for ratification because we
value our shareholders’ views on our Company’s
independent registered public accounting firm and as a matter of
good corporate governance. The Audit Committee will consider the
outcome of our shareholders’ vote in connection with the
Audit Committee’s selection of our independent registered
public accounting firm in the next fiscal year, but is not bound by
the shareholders’ vote. Even if the selection is ratified,
the Audit Committee may, in its discretion, direct the appointment
of a different independent registered public accounting firm at any
time if it determines that a change would be in the best interests
of our Company and our shareholders.
We expect a
representative of BDO to attend the Annual Meeting. The
representative will have an opportunity to make a statement if he
or she desires and also will be available to respond to appropriate
questions.
Fees
Paid to BDO
|
|
|
Audit
Fees(1)
|
$128,875
|
$134,600
|
Audit-Related
Fees
|
—
|
18,500(2)
|
Tax
Fees
|
—
|
—
|
All Other
Fees
|
—
|
—
|
Total
|
$128,875
|
$153,100
|
(1)
Audit Fees—
this category includes the audit of our annual financial
statements, review of financial statements included in the
Company’s Form 10-Q Quarterly Reports and services that are
normally provided by the independent auditors in connection with
engagements for those fiscal years.
(2)
Audit-Related Fees
— this category consists of assurance services by the
independent auditors in connection with the Company’s pro
forma financial statements related to the acquisition of Dolphin
Films in 2016.
The Audit Committee
reviews, and in its sole discretion pre-approves, our independent
auditors’ annual engagement letter including proposed fees
and all auditing services provided by the independent auditors.
Accordingly, our Audit Committee approved all services rendered by
BDO during fiscal year 2016, as described above. The Audit
Committee has not implemented a policy or procedure which delegates
the authority to approve, or pre-approve, audit or permitted
non-audit services to be performed by BDO. Our Board may
not engage the independent auditors to perform the non-audit
services proscribed by law or regulation.
Dolphin Digital Media | 2017 Proxy
Statement 26
Audit
Committee Report
The Audit Committee
oversees the accounting and financial reporting processes of the
Company on behalf of the Board. Management has primary
responsibility for our financial statements, financial reporting
process and internal controls over financial
reporting. The independent auditors are responsible for
performing an independent audit of our financial statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States) and evaluating the effectiveness of
internal controls and issuing reports thereon. The Audit
Committee’s responsibility is to select the independent
auditors and monitor and oversee our accounting and financial
reporting processes, including our internal controls over financial
reporting, and the audits of our financial statements.
In 2016, the Audit
Committee met and held discussions with management and the
independent auditors. In the discussions related to our
financial statements for fiscal year 2016, management represented
to the Audit Committee that such financial statements were prepared
in accordance with U.S. generally accepted accounting
principles. The Audit Committee reviewed and discussed
with management the financial statements for fiscal year
2016. In fulfilling its responsibilities, the Audit
Committee discussed with the independent auditors those matters
required to be discussed by the auditors with the Audit Committee
under the rules adopted by the Public Company Accounting Oversight
Board. In addition, the Audit Committee received from
the independent auditors the written disclosures and letter
required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
auditor’s communications with the audit committee concerning
independence, and the Audit Committee discussed with the
independent auditors that firm’s independence.
Based upon the
Audit Committee’s discussions with management and the
independent auditors and the Audit Committee’s review of the
representations of management and the written disclosures and
letter of the independent auditors provided to the Audit Committee,
the Audit Committee recommended to the Board of Directors that the
audited consolidated financial statements for the year ended
December 31, 2016 be included in the Company’s 2016 annual
report on Form 10-K, for filing with the SEC.
|
The Audit
Committee:
Michael
Espensen
Nicholas
Stanham
|
Notwithstanding anything to the contrary set forth in any of our
previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) that might incorporate future filings,
including this proxy statement, in whole or in part, the Audit
Committee Report above shall not be incorporated by reference into
this proxy statement.
Dolphin Digital Media | 2017 Proxy
Statement 27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The table below
shows the beneficial ownership as of April 17, 2017, of our common
stock and our Series C Convertible Preferred Stock held by each of
our directors, director nominees, named executive officers, all
current directors and executive officers as a group and each person
known to us to be the beneficial owner of more than 5% of our
outstanding common stock of 5% of our Series C Convertible
Preferred Stock. The percentages in the table below are based on
18,755,865 shares of common stock outstanding and 1,000,000 shares
of Series C Convertible Preferred Stock outstanding as of April 17,
2017. Shares of common stock that will be issuable upon conversion
of the Series C Convertible Preferred Stock are not included in
such calculation as the Board has not determined that an optional
conversion threshold (as defined below) has occurred. The Series C
Convertible Preferred Stock is convertible in accordance with the
terms set forth in our Amended Articles of Incorporation, a
conformed copy of which was filed with our Form 10-Q for the
quarter ended March 31, 2016 with the SEC.
Beneficial
ownership is determined in accordance with Rule 13d-3 promulgated
under the Exchange Act. Except as indicated by footnote and subject
to community property laws, where applicable, to our knowledge the
persons named in the table below have sole voting and investment
power with respect to all shares of common stock that are shown as
beneficially owned by them. In computing the number of shares owned
by a person and the percentage ownership of that person, any such
shares subject to warrants or other convertible securities held by
that person that were exercisable as of April 17, 2017 or that will
become exercisable within 60 days thereafter are deemed outstanding
for purposes of that person’s percentage ownership but not
deemed outstanding for purposes of computing the percentage
ownership of any other person. Except as required by law, holders
of Series C Convertible Preferred Stock will only have voting
rights once the independent directors of the Board determine that
an optional conversion threshold has occurred.
|
Name and Address of Owner(1)
|
# of Shares
of
Common
Stock
|
% of
Class
(Common
Stock)
|
Directors and Executive Officers
|
|
|
William
O’Dowd, IV(2)
|
3,251,687
|
17.3%
|
|
555
|
*
|
Nelson
Famadas
|
3,685
|
*
|
|
353,045
|
1.9%
|
|
––
|
*
|
Justo
Pozo(3)
|
2,366,909
|
12.6%
|
Nicholas Stanham,
Esq.(4)
|
28,667
|
*
|
All Directors and
Executive Officers as a Group (5 persons)
|
3,284,594
|
17.5%
|
5% Holders
|
|
|
Stephen L.
Perrone(5)
|
4,050,000
|
21.2%
|
T Squared Partners
LP(6)
|
2,082,000
|
9.9%
|
Alvaro and Lileana
de Moya(7)
|
1,207,483
|
6.4%
|
Series
C Convertible Preferred Stock
|
Name and Address of Owner(1)
|
# of Shares
of
Preferred
Stock
|
% of
Class
(Preferred
Stock)
|
William
O’Dowd, IV(8)
|
1,000,000
|
100%
|
* Less than 1% of
outstanding shares.
Dolphin Digital Media | 2017 Proxy
Statement 28
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
(1)
Unless otherwise
indicated, the address of each shareholder is c/o Dolphin Digital
Media, Inc., 2151 Le Jeune Road, Suite 150, Mezzanine, Coral
Gables, Florida, 33134.
(2)
The amount shown
includes (1) 1,242,104 shares of common stock held by Dolphin
Digital Media Holdings LLC, which is wholly-owned by Mr.
O’Dowd, (2) 1,055,682 shares of common stock held by Dolphin
Entertainment, which is wholly-owned by Mr. O’Dowd and (3)
953,900 shares of common stock held by Mr. O’Dowd
individually. Does not include shares of common stock that are
issuable upon conversion of the Series C Convertible Preferred
Stock upon the determination by the independent directors of the
Board that an optional conversion threshold has occurred. In
accordance with the terms of our Amended Articles of Incorporation,
each share of Series C Convertible Preferred Stock will be
convertible into one-twentieth (1/20) of a share of common stock,
subject to adjustment for each issuance of common stock (but not
upon issuance of common stock equivalents) that occurred, or
occurs, from the date of issuance of the Series C Convertible
Preferred Stock (the “issue date”) until the fifth
(5th) anniversary of the issue date (i) upon the conversion or
exercise of any instrument issued on the issued date or thereafter
issued (but not upon the conversion of the Series C Convertible
Preferred Stock), (ii) upon the exchange of debt for shares of
common stock, or (iii) in a private placement, such that the total
number of shares of common stock held by an “Eligible Class C
Preferred Stock Holder” (based on the number of shares of
common stock held as of the date of issuance) will be preserved at
the same percentage of shares of common stock outstanding held by
such Eligible Class C Preferred Stock Holder on such date. An
Eligible Class C Preferred Stock Holder means any of (i) Dolphin
Entertainment for so long as Mr. O’Dowd continues to
beneficially own at least 90% and serves on the board of directors
or other governing entity, (ii) any other entity in which Mr.
O’Dowd beneficially owns more than 90%, or a trust for the
benefit of others, for which Mr. O’Dowd serves as trustee and
(iii) Mr. O’Dowd individually. Series C Convertible Preferred
Stock will only be convertible by the Eligible Class C Preferred
Stock Holder upon the Company satisfying one of the “optional
conversion thresholds”. Specifically, a majority of the
independent directors of the Board, in its sole discretion, must
have determined that the Company accomplished any of the following
(i) EBITDA of more than $3.0 million in any calendar year, (ii)
production of two feature films, (iii) production and distribution
of at least three web series, (iv) theatrical distribution in the
United States of one feature film, or (v) any combination thereof
that is subsequently approved by a majority of the independent
directors of the Board based on the strategic plan approved by the
Board. While certain events may have occurred that could be deemed
to have satisfied this criteria, the independent directors of the
Board have not yet determined that an optional conversion threshold
has occurred.
(3)
The amount shown
includes: (i) 1,018,888 shares held by Pozo Opportunity Fund I;
(ii) 632,800 shares held by Pozo Opportunity Fund II; (iii) 1,875
shares held by Justo Pozo, Trustee FBO Zulita Pina Irrevocable
Trust; (iv) 1,750 shares held by Justo Pozo ACF Ricardo S. Pozo
U/FI/UTMA; (v) 49,706 shares held by Justo Luis and Sylvia E. Pozo;
and (vi) 661,890 held by Pozo Capital Partners LLP. Mr. Pozo is the
beneficial owner of all of the shares and has sole voting and
dispositive power with respect to all of the
shares.
(4)
Mr. Stanham shares
voting and dispositive power with respect to all of the shares of
common stock with his spouse.
(5)
The amount shown
includes: (i) 2,470,000 shares held by KCF Investments LLC; (ii)
770,000 shares held by BBCF 2011 LLC; (iii) 450,000 shares held by
BBCD LLC; and (iv) 10,000 shares held by Mr. Perrone as an
individual. The amount shown also includes 350,000 shares issuable
upon the exercise of a common stock purchase warrant that is
exercisable within 60 days after April 17, 2017. Stephen L. Perrone
(4450 US Highway #1, Vero Beach, FL 32967) is the beneficial owner
of all of the shares and has sole voting and dispositive power with
respect to all of the shares.
Dolphin Digital Media | 2017 Proxy
Statement 29
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
(6)
The amount shown is
based upon: (i) 24,230 shares issuable upon the exercise of a Class
E Warrant; (ii) 350,000 shares issuable upon the exercise of a
Class F Warrant; (iii) 1,500,000 shares issuable upon the exercise
of a Class G Warrant; (iv) 500,000 shares issuable upon the
exercise of a Class H Warrant; (v) 500,000 shares issuable upon the
exercise of a Class I Warrant; and (vi) 30,177 shares held by Mark
Jensen and/or Thomas M. Suave and related entities owned by Mark
Jensen and/or Thomas M. Suave. Each of the warrants is
convertible/exercisable within 60 days after April 17, 2017, to the
extent that after giving effect to such conversion/exercise, the
holder (together with the holder’s affiliates) would not
beneficially own in excess of 9.9% of the number of shares of
common stock outstanding immediately after giving effect to such
conversion/exercise. Mark Jensen and Thomas M. Suave are both
principals of T Squared Partners LP (P.O. Box 606, Fishers, IN
46038) and are each deemed to have beneficial ownership of all the
shares. Mr. Jensen and Mr. Suave have shared voting and dispositive
power over all shares beneficially owned by T Squared Partners
LP.
(7)
The amount shown
includes: (i) 150,000 shares held by the Alvaro de Moya Revocable
Trust; (ii) 150,000 shares held by the Lileana de Moya Revocable
Trust; (iii) 200,000 shares held by the Lileana de Moya Lifetime
Trust; (iv) 20,000 shares held by the Alvaro de Moya Grantor
Retained Annuity Trust and (v) 687,483 held by Alvaro and Lileana
de Moya.
(8)
The Series C
Convertible Preferred Stock are held by Dolphin Entertainment which
is wholly-owned by Mr. O’Dowd.
Dolphin Digital Media | 2017 Proxy
Statement 30
OTHER MATTERS
Compliance with Section
16(a) of the Exchange Act
Section 16(a) of
the Exchange Act requires our directors and certain officers, and
persons who own more than 10% of our common stock, to file with the
SEC reports of ownership and changes in ownership of our common
stock and other equity securities. Based solely on a
review of such reports that were filed with the SEC, all filings
required of directors and Section 16 officers and persons who own
more than 10% of our common stock in 2016 were made on a timely
basis, with the exception of William O’Dowd, IV who reported
two late transactions on a Form 4 and Nelson Famadas who reported
one late transaction on a Form 4, in each case due to an
administrative oversight.
Shareholder
Proposals for 2018 Annual Meeting of
Shareholders
Shareholder
proposals should be sent to the Company at the address set forth in
the Notice. To be considered for inclusion in the
Company’s proxy statement for the 2018 Annual Meeting of
Shareholders, the deadline for submission of shareholder proposals,
pursuant to Rule 14a-8 of the Exchange Act is January 19,
2018.
Transaction
of Other Business
At the date of this
proxy statement, the only business which our Board intends to
present or knows that others will present at the Annual Meeting is
as set forth above. If any other matter or matters are
properly brought before the Annual Meeting, or an adjournment or
postponement thereof, it is the intention of the person named in
the accompanying form of proxy to vote the proxy on such matters in
accordance with his best judgment.
List
of Shareholders Entitled To Vote at the Annual
Meeting
The names of
shareholders of record entitled to vote at the Annual Meeting will
be available at our corporate office for a period of 10 days prior
to the Annual Meeting and continuing through the Annual
Meeting.
Expenses Relating to this
Proxy Solicitation
We will pay all
expenses relating to this proxy solicitation. In
addition to this solicitation by mail, our officers, directors, and
employees may solicit proxies by telephone or personal call without
extra compensation for that activity.
Communication with the
Company’s Board of Directors
Shareholders may
communicate with the Board by directing their communications in a
hard copy (i.e., non-electronic) written form to the following
address: Board of Directors, Dolphin Digital Media,
Inc., 2151 Le Jeune Road, Suite 150-Mezzanine, Coral Gables, FL
33134. A shareholder communication must include a
statement that the author of such communication is a beneficial or
record owner of shares of stock of the Company. Our
Corporate Secretary or an officer of the Company will review all
communications meeting the requirements discussed above and will
remove any communications relating to (i) the purchase or sale
of products or services, (ii) communications from landlords
relating to our obligations or the obligations of one of our
subsidiaries under a lease, (iii) communications from
suppliers or vendors relating to our obligations or the obligations
of one of our subsidiaries to such supplier or vendor,
(iv) communications from opposing parties relating to pending
or threatened legal or administrative proceedings regarding matters
not related to securities law matters or fiduciary duty matters,
and (v) any other communications that the Corporate Secretary
or officer of the Company deems, in his or her reasonable
discretion, unrelated to the business of the
Company. The Corporate Secretary or officer of the
Company will compile all communications not removed in accordance
with the procedure described above and will distribute such
qualifying communications to the intended
recipient(s). A copy of any qualifying communications
that relate to our accounting and auditing practices will also be
sent directly to the Audit Committee whether or not it was directed
to such persons.
Dolphin Digital Media | 2017 Proxy
Statement 31
We maintain an
internet website at www.dolphindigitalmedia.com. Copies
of the Audit Committee Charter and our Code of Ethics, can be found
on our website, www.dolphindigitalmedia.com, by clicking on
Investor Relations, and such information is also available in print
to any shareholder who requests it by writing to the Company at the
address below.
We will furnish
without charge to each person whose proxy is being solicited, upon
request of any such person, a copy of the 2016 annual report on
Form 10-K as filed with the SEC, including the financial statements
and schedules thereto, but not the exhibits. In addition, such
report is available, free of charge, through our website,
www.dolphindigitalmedia.com, by clicking on Investor Relations and
then SEC Filings. A request for a copy of such report should be
directed to Dolphin Digital Media, Inc., 2151 Le Jeune Road, Suite
150-Mezzanine, Coral Gables, FL 33134, Attention: Mirta
A Negrini, Telephone: (305) 774-0407. A copy of any
exhibit to the 2016 annual report on Form 10-K will be forwarded
following receipt of a written request to the Company.
Electronic
Delivery
We have elected to
take advantage of the SEC’s rule that allows us to furnish
proxy materials to you online. We believe electronic delivery will
expedite shareholders’ receipt of materials, while lowering
costs and reducing the environmental impact of our Annual Meeting
by reducing printing and mailing of full sets of materials. We
mailed the Notice containing instructions on how to access our
proxy statement and 2016 annual report on Form 10-K online on or
about May 19, 2017. If you would like to receive a
paper copy of the proxy materials, the Notice contains instructions
on how to receive a paper copy.
We have adopted a
procedure approved by the SEC called
“householding.” Under this procedure,
shareholders of record who have the same address and last name will
receive only one copy of our proxy statement, unless one or more of
these shareholders notifies us that they wish to continue receiving
individual copies. This procedure will reduce our
printing costs and postage fees.
If you are eligible
for householding, but you and other shareholders of record with
whom you share an address currently receive multiple copies of
materials from the Company, or if you hold stock in more than one
account, and in either case you wish to receive only a single copy
of materials from the Company for your household, please contact
our transfer agent, Nevada Agency and Transfer Company in writing
at 50 West Liberty Street, Suite 880, Reno, Nevada 8950, or by
telephone at (775) 322-0626.
If you participate
in householding and wish to receive a separate copy of the proxy
statement, or if you do not wish to participate in householding and
prefer to receive separate copies of materials from the Company in
the future, please contact our transfer agent as indicated
above. Beneficial shareholders can request information
about householding from their nominee.
Dolphin Digital Media | 2017 Proxy
Statement 32
ANNEX A
DOLPHIN
DIGITAL MEDIA, INC.
2017
EQUITY INCENTIVE PLAN
Page A-
1
|
Purpose
|
1
|
2
|
Definitions
|
1
|
3
|
Administration.
|
5
|
4
|
Shares Subject to
Plan.
|
6
|
5
|
Eligibility;
Per-Participant Limitations
|
7
|
6
|
Specific Terms of
Awards.
|
7
|
7
|
Certain Provisions
Applicable to Awards.
|
11
|
8
|
Code Section 162(m)
Provisions.
|
13
|
9
|
Change in
Control.
|
14
|
10
|
General
Provisions.
|
16
|
Dolphin Digital Media | 2017 Proxy
Statement i
DOLPHIN
DIGITAL MEDIA, INC.
2017
EQUITY INCENTIVE PLAN
1. Purpose. The
purpose of this 2017 EQUITY INCENTIVE PLAN (the “Plan”)
is to assist Dolphin Digital Media, Inc., a Florida corporation and
its Related Entities (as hereinafter defined) in attracting,
motivating, retaining and rewarding high-quality executives and
other employees, officers, directors, consultants and other persons
who provide services to the Company or its Related Entities by
enabling such persons to acquire or increase a proprietary interest
in the Company in order to strengthen the mutuality of interests
between such persons and the Company’s shareholders, and
providing such persons with performance incentives to expend their
maximum efforts in the creation of shareholder value.
2. Definitions. For
purposes of the Plan, the following terms shall be defined as set
forth below, in addition to such terms defined in Section 1 hereof
and elsewhere herein.
(a) “Award” means
any Option, Stock Appreciation Right, Restricted Stock Award,
Restricted Stock Unit Award, Share granted as a bonus or in lieu of
another Award, Dividend Equivalent, Other Stock-Based Award or
Performance Award, together with any other right or interest
relating to Shares or other property (including cash), granted to a
Participant under the Plan.
(b) “Award
Agreement” means any written agreement, contract or
other instrument or document evidencing any Award granted by the
Committee hereunder.
(c) “Beneficiary”
means the person, persons, trust or trusts that have been
designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the
benefits specified under the Plan upon such Participant’s
death or to which Awards or other rights are transferred if and to
the extent permitted under Section 10(b) hereof. If,
upon a Participant’s death, there is no designated
Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the Participant’s estate.
(d) “Beneficial
Owner” and “Beneficial
Ownership” shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act and any successor to such
Rule.
(e) “Board” means
the Company’s Board of Directors.
(f) “Cause” shall,
with respect to any Participant, have the meaning specified in the
Award Agreement. In the absence of any definition in the
Award Agreement, “Cause” shall have the equivalent
meaning or the same meaning as “cause” or “for
cause” set forth in any employment, consulting, or other
agreement for the performance of services between the Participant
and the Company or a Related Entity or, in the absence of any such
agreement or any such definition in such agreement, such term shall
mean (i) the failure by the Participant to perform, in a reasonable
manner, his or her duties as assigned by the Company or a Related
Entity, (ii) any violation or breach by the Participant of his or
her employment, consulting or other similar agreement with the
Company or a Related Entity, if any, (iii) any violation or breach
by the Participant of any non-competition, non-solicitation,
non-disclosure and/or other similar agreement with the Company or a
Related Entity, (iv) any act by the Participant of dishonesty or
bad faith with respect to the Company or a Related Entity, (v) use
of alcohol, drugs or other similar substances in a manner that
adversely affects the Participant’s work performance, or (vi)
the commission by the Participant of any act, misdemeanor, or crime
reflecting unfavorably upon the Participant or the Company or any
Related Entity. The good faith determination by the
Committee of whether the Participant’s Continuous Service was
terminated by the Company for “Cause” shall be final
and binding for all purposes hereunder.
(g) “Change in
Control” means a Change in Control as defined in
Section 9(b) of the Plan.
(h) “Code” means
the Internal Revenue Code of 1986, as amended from time to time,
including regulations thereunder and successor provisions and
regulations thereto.
Dolphin Digital Media | 2017 Proxy
Statement A-1
(i) “Committee”
means a committee designated by the Board to administer the Plan;
provided, however, that if the Board fails to designate a committee
or if there are no longer any members on the committee so
designated by the Board, or for any other reason determined by the
Board, then the Board shall serve as the Committee. While it is
intended that the Committee shall consist of at least two
directors, each of whom shall be (i) a “non-employee
director” within the meaning of Rule 16b-3 (or any
successor rule) under the Exchange Act, unless administration of
the Plan by “non-employee directors” is not then
required in order for exemptions under Rule 16b-3 to apply to
transactions under the Plan, (ii) an “outside director”
within the meaning of Section 162(m) of the Code, and (iii)
“Independent”, the failure of the Committee to be so
comprised shall not invalidate any Award that otherwise satisfies
the terms of the Plan.
(j) “Company” means
Dolphin Digital Media, Inc., a Florida corporation, and any
successor thereto.
(k) “Consultant”
means any consultant or advisor who provides services to the
Company or any Related Entity, so long as (i) such person renders
bona fide services that are not in connection with the offer and
sale of the Company’s securities in a capital-raising
transaction, (ii) such person does not directly or indirectly
promote or maintain a market for the Company’s securities,
and (iii) the identity of such person would not preclude the
Company from offering or selling securities to such person pursuant
to the Plan in reliance on either the exemption from registration
provided by Rule 701 under the Securities Act of 1933 or, if the
Company is required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act, registration on a Form S-8 Registration
Statement under the Securities Act of 1933.
(l) “Continuous
Service” means the uninterrupted provision of services
to the Company or any Related Entity in any capacity of Employee,
Director, Consultant or other service
provider. Continuous Service shall not be considered to
be interrupted in the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entities, or any
successor entities, in any capacity of Employee, Director,
Consultant or other service provider, or (iii) any change in status
as long as the individual remains in the service of the Company or
a Related Entity in any capacity of Employee, Director, Consultant
or other service provider (except as otherwise provided in the
Award Agreement). An approved leave of absence shall
include sick leave, military leave, or any other authorized
personal leave.
(m) “Covered
Employee” means the Person who, as of the end of the
taxable year, either is the principal executive officer of the
Company or is serving as the acting principal executive officer of
the Company, and each other Person whose compensation is required
to be disclosed in the Company’s filings with the Securities
and Exchange Commission by reason of that person being among the
three highest compensated officers (other than the chief financial
officer) of the Company as of the end of a taxable year, or such
other person as shall be considered a “covered
employee” for purposes of Section 162(m) of the
Code.
(n) “Director”
means a member of the Board or the board of directors of any
Related Entity.
(o) “Disability”
means a permanent and total disability (within the meaning of
Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(p) “Dividend
Equivalent” means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Shares, other Awards or
other property equal in value to dividends paid with respect to a
specified number of Shares, or other periodic
payments.
(q) “Effective
Date” means the effective date of the Plan, which
shall be the date on which this Plan is approved by shareholders of
the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Sections 162(m) (if
applicable) and 422 of the Code, Rule 16b-3 under the Exchange Act
(if applicable), applicable requirements under the rules of any
securities exchange or automated quotation system on which the
Shares may be listed or quoted, and any other laws, regulations and
obligations of the Company applicable to the Plan.
Dolphin Digital Media | 2017 Proxy
Statement A-2
(r) “Eligible
Person” means each officer, Director, Employee,
Consultant and other person who provides services to the Company or
any Related Entity. The foregoing notwithstanding, only
Employees of the Company, or any parent corporation or subsidiary
corporation of the Company (as those terms are defined in Sections
424(e) and (f) of the Code, respectively), shall be Eligible
Persons for purposes of receiving any Incentive Stock
Options. An Employee on leave of absence may, in the
discretion of the Committee, be considered as still in the employ
of the Company or a Related Entity for purposes of eligibility for
participation in the Plan.
(s) “Employee”
means any person, including an officer or Director, who is an
employee of the Company or any Related Entity, or is a prospective
employee of the Company or any Related Entity (conditioned upon and
effective not earlier than, such person becoming an employee of the
Company or any Related Entity). The payment of a
director’s fee by the Company or a Related Entity shall not
be sufficient to constitute “employment” by the
Company.
(t) “Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to
time, including rules thereunder and successor provisions and rules
thereto.
(u) “Fair Market
Value” means the fair market value of Shares, Awards
or other property on the date as of which the value is being
determined, as determined by the Committee, or under procedures
established by the Committee, subject to the
following:
(i) If, on such date,
the Shares are listed on a national or regional securities exchange
or market system, the Fair Market Value of a Share shall be the
closing price of a Share (or the mean of the closing bid and asked
prices of a Share if the Share is so quoted instead) as quoted on
the Nasdaq National Market, The Nasdaq Small Cap Market or such
other national or regional securities exchange or market system
constituting the primary market for the Share, as reported in The
Wall Street Journal or such other source as the Company deems
reliable. If the relevant date does not fall on a day on
which the Share has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be
established shall be the last day on which the Share was so traded
prior to the relevant date, or such other appropriate day as shall
be determined by the Board, in its discretion.
(ii) If, on such date,
the Share are not listed on a national or regional securities
exchange or market system, the Fair Market Value of a Share shall
be as determined by the Board in good faith without regard to any
restriction other than a restriction which, by its terms, will
never lapse.
(v) “Incentive Stock
Option” means any Option intended to be designated as
an incentive stock option within the meaning of Section 422 of the
Code or any successor provision thereto.
(w) “Independent”,
when referring to either the Board or members of the Committee,
shall have the same meaning as used in the rules of the Listing
Market.
(x) “Incumbent
Board” means the Incumbent Board as defined in Section
9(b)(ii) hereof.
(y)
“Listing
Market” means any national securities exchange on
which any securities of the Company are listed for trading, and if
not listed for trading, by the rules of the Nasdaq Stock
Market.
(z) “Option” means
a right granted to a Participant under Section 6(b) hereof, to
purchase Shares or other Awards at a specified price during
specified time periods.
(aa) “Optionee”
means a person to whom an Option is granted under this Plan or any
person who succeeds to the rights of such person under this
Plan.
(bb) “Other Stock-Based
Awards” means Awards granted to a Participant under
Section 6(i) hereof.
Dolphin Digital Media | 2017 Proxy
Statement A-3
(cc) “Parent” means
any corporation (other than the Company), whether now or hereafter
existing, in an unbroken chain of corporations ending with the
Company, if each of the corporations in the chain (other than the
Company) owns stock possessing 50% or more of the combined voting
power of all classes of stock in one of the other corporations in
the chain.
(dd) “Participant”
means a person who has been granted an Award under the Plan which
remains outstanding, including a person who is no longer an
Eligible Person.
(ee) “Performance
Award” means any Award granted pursuant to Section
6(h) hereof.
(ff) “Performance
Period” means that period established by the Committee
at the time any Performance Award is granted or at any time
thereafter during which any performance goals specified by the
Committee with respect to such Award are to be
measured.
(gg) “Person” shall
have the meaning ascribed to such term in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof, and
shall include a “group” as defined in Section 13(d)
thereof.
(hh) “Prior Plan”
means the Dolphin Digital Media, Inc. 2012 Omnibus Incentive
Compensation Plan.
(ii) “Related
Entity” means any Parent or Subsidiary, and any
business, corporation, partnership, limited liability company or
other entity designated by the Committee in which the Company, a
Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly and with respect to which the Company may
offer or sell securities pursuant to the Plan in reliance upon
either Rule 701 under the Securities Act of 1933 or, if the Company
is required to file reports pursuant to Section 13 or 15(d) of the
Exchange Act, registration on a Form S-8 Registration Statement
under the Securities Act of 1933.
(jj) “Restricted
Stock” means any Share issued with such risks of
forfeiture and other restrictions as the Committee, in its sole
discretion, may impose (including any restriction on the right to
vote such Share and the right to receive any dividends), which
restrictions may lapse separately or in combination at such time or
times, in installments or otherwise, as the Committee may deem
appropriate.
(kk) “Restricted Stock
Award” means an Award granted to a Participant under
Section 6(d) hereof.
(ll) “Restricted Stock
Unit” means a right to receive Shares, including
Restricted Stock, cash measured based upon the value of Shares, or
a combination thereof, at the end of a specified deferral
period.
(mm) “Restricted Stock Unit
Award” means an Award of Restricted Stock Units
granted to a Participant under Section 6(e) hereof.
(nn)
“Restriction
Period” means the period of time specified by the
Committee that Restricted Stock Awards shall be subject to such
restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose.
(oo) “Rule 16b-3”
means Rule 16b-3, as from time to time in effect and applicable to
the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange
Act.
(pp) “Shares” means
the shares of common stock of the Company, par value $0.015 per
share, and such other securities as may be substituted (or
resubstituted) for Shares pursuant to Section 10(c)
hereof.
(qq) “Stock Appreciation
Right” means a right granted to a Participant under
Section 6(c) hereof.
Dolphin Digital Media | 2017 Proxy
Statement A-4
(rr) “Subsidiary”
means any corporation or other entity in which the Company has a
direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or
interests of such corporation or other entity entitled to vote
generally in the election of directors or in which the Company has
the right to receive 50% or more of the distribution of profits or
50% or more of the assets on liquidation or
dissolution.
(ss) “Substitute
Awards” means Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for,
Awards previously granted, or the right or obligation to make
future Awards, by a company (i) acquired by the Company or any
Related Entity, (ii) which becomes a Related Entity after the date
hereof, or (iii) with which the Company or any Related Entity
combines.
3. Administration.
(a) Authority of the
Committee. The Plan shall be administered by the
Committee, except to the extent (and subject to the limitations
imposed by Section 3(b) hereof) the Board elects to administer the
Plan, in which case the Plan shall be administered by only those
members of the Board who are Independent members of the Board, in
which case references herein to the “Committee” shall
be deemed to include references to the Independent members of the
Board. The Committee shall have full and final
authority, subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant
Awards, determine the type, number and other terms and conditions
of, and all other matters relating to, Awards, prescribe Award
Agreements (which need not be identical for each Participant) and
rules and regulations for the administration of the Plan, construe
and interpret the Plan and Award Agreements and correct defects,
supply omissions or reconcile inconsistencies therein, and to make
all other decisions and determinations as the Committee may deem
necessary or advisable for the administration of the
Plan. In exercising any discretion granted to the
Committee under the Plan or pursuant to any Award, the Committee
shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person or
Participant in a manner consistent with the treatment of any other
Eligible Persons or Participants. Decisions of the
Committee shall be final, conclusive and binding on all persons or
entities, including the Company, any Related Entity or any
Participant or Beneficiary, or any transferee under Section 10(b)
hereof or any other person claiming rights from or through any of
the foregoing persons or entities.
(b) Manner of Exercise of
Committee Authority. The Committee, and not the
Board, shall exercise sole and exclusive discretion (i) on any
matter relating to a Participant then subject to Section 16 of
the Exchange Act with respect to the Company to the extent
necessary in order that transactions by such Participant shall be
exempt under Rule 16b-3 under the Exchange Act, (ii) with respect
to any Award that is intended to qualify as
“performance-based compensation” under Section 162(m),
to the extent necessary in order for such Award to so
qualify. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not
be construed as limiting any power or authority of the
Committee. The Committee may delegate to members of the
Board, or officers or managers of the Company or any Related
Entity, or committees thereof, the authority, subject to such terms
and limitations as the Committee shall determine, to perform such
functions, including administrative functions as the Committee may
determine to the extent that such delegation will not result in the
loss of an exemption under Rule 16b-3(d)(1) for Awards granted to
Participants subject to Section 16 of the Exchange Act in respect
of the Company and will not cause Awards intended to qualify as
“performance-based compensation” under Code Section
162(m) to fail to so qualify. The Committee may appoint
agents to assist it in administering the Plan.
(c) Limitation of
Liability. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act
upon any report or other information furnished to him or her by any
officer or Employee, the Company’s independent auditors,
Consultants or any other agents assisting in the administration of
the Plan. Members of the Committee and the Board, and
any officer or Employee acting at the direction or on behalf of the
Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to
the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such
action or determination.
Dolphin Digital Media | 2017 Proxy
Statement A-5
4. Shares
Subject to Plan.
(a) Limitation on Overall
Number of Shares Available for Delivery Under
Plan. Subject to adjustment as provided in
Section 10(c) hereof, the total number of Shares reserved and
available for delivery under the Plan shall be 2,000,000 Shares.
Any Shares delivered under the Plan may consist, in whole or in
part, of authorized and unissued shares or treasury
shares.
(b) Application of Limitation
to Grants of Awards. No Award may be granted if
the number of Shares to be delivered in connection with such an
Award exceeds the number of Shares remaining available for delivery
under the Plan, minus the number of Shares that would be counted
against the limit upon settlement of or relating to then
outstanding Awards. The Committee may adopt reasonable
counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute
awards) and make adjustments if the number of Shares actually
delivered differs from the number of Shares previously counted in
connection with an Award.
(c) Availability of Shares Not
Delivered under Awards and Adjustments to
Limits.
(i) If any Shares
subject to an Award are forfeited, expire or otherwise terminate
without issuance of such Shares, or any Award is settled for cash
or otherwise does not result in the issuance of all or a portion of
the Shares subject to such Award, the Shares to which those Awards
were subject, shall, to the extent of such forfeiture, expiration,
termination, non-issuance or cash settlement, again be available
for delivery with respect to Awards under the Plan, subject to
Section 4(c)(iii) and (iv) below.
(ii) In the event that
any Option or other Award granted under this Plan is exercised
through the tendering of Shares (either actually or by attestation)
or by the withholding of Shares by the Company, or withholding tax
liabilities arising from such Option or other Award, are satisfied
by the tendering of Shares (either actually or by attestation) or
by the withholding of Shares by the Company, then only the number
of Shares issued net of the Shares tendered or withheld shall be
counted for purposes of determining the maximum number of
Shares available for grant under the Plan.
(iii) Substitute Awards
shall not reduce the Shares authorized for delivery under the Plan
or authorized for delivery to a Participant in any
period. Additionally, in the event that an entity
acquired by the Company or any Related Entity or with which the
Company or any Related Entity combines has shares available under a
pre-existing plan approved by its shareholders and not adopted in
contemplation of such acquisition or combination, the shares
available for delivery pursuant to the terms of such pre-existing
plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Awards under the
Plan and shall not reduce the Shares authorized for delivery under
the Plan if and to the extent that the use of such Shares would not
require approval of the Company’s shareholders under the
rules of the Listing Market. Awards using such available
shares shall not be made after the date awards or grants could have
been made under the terms of the pre-existing plan, absent the
acquisition or combination, and shall only be made to individuals
who were not Employees or Directors prior to such acquisition or
combination.
(iv) Any Share that
again becomes available for delivery pursuant to this Section 4(c)
shall be added back as one (1) Share.
(v) Notwithstanding
anything in this Section 4(c) to the contrary but subject to
adjustment as provided in Section 10(c) hereof, the maximum
aggregate number of Shares that may be delivered under the Plan as
a result of the exercise of the Incentive Stock Options shall be
2,000,000 Shares. In no event shall any Incentive Stock
Options be granted under the Plan after the tenth anniversary of
the date on which the Board adopts the Plan.
(d) No Awards Under Prior
Plan. In light of the adoption of this Plan, no
awards shall be made under the Prior Plan after the Effective
Date.
Dolphin Digital Media | 2017 Proxy
Statement A-6
5. Eligibility;
Per-Participant Limitations
. Awards
may be granted under the Plan only to Eligible
Persons. Subject to adjustment as provided in Section
10(c) of this Plan, in any fiscal year of the Company during any
part of which the Plan is in effect, no Participant may be granted
(i) Options and/or Stock Appreciation Rights with respect to more
than 600,000 Shares or (ii) Restricted Stock and/or Other
Stock-Based Awards payable in Shares and that are subject to
Section 8 hereof, with respect to more than 600,000
Shares. In addition, the maximum dollar value payable to
any one Participant with respect to any Awards that are subject to
Section 8 hereof, and that are payable in cash or other property
other than Shares is (x) $1,000,000 with respect to any 12 month
Performance Period (pro-rated for any Performance Period that is
less than 12 months based upon the ratio of the number of days in
the Performance Period as compared to 365), and (y) with respect to
any Performance Period that is more than 12 months,
$2,000,000.
6. Specific
Terms of Awards.
(a) General. Awards
may be granted on the terms and conditions set forth in this
Section 6. In addition, the Committee may impose on any
Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 10(e) hereof), such additional terms and
conditions, not inconsistent with the provisions of the Plan, as
the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of the Participant’s
Continuous Service and terms permitting a Participant to make
elections relating to his or her Award. Except as
otherwise expressly provided herein, the Committee shall retain
full power and discretion to accelerate, waive or modify, at any
time, any term or condition of an Award that is not mandatory under
the Plan. Except in cases in which the Committee is
authorized to require other forms of consideration under the Plan,
or to the extent other forms of consideration must be paid to
satisfy the requirements of Florida law, no consideration other
than services may be required for the grant (as opposed to the
exercise) of any Award.
(b) Options. The
Committee is authorized to grant Options to any Eligible Person on
the following terms and conditions:
(i) Exercise
Price. Other than in connection with Substitute
Awards, the exercise price per Share purchasable under an Option
shall be determined by the Committee, provided that such exercise
price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant of the Option and shall not, in any
event, be less than the par value of a Share on the date of grant
of the Option. If an Employee owns or is deemed to own
(by reason of the attribution rules applicable under Section 424(d)
of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent corporation or
subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f) of the Code, respectively) and an
Incentive Stock Option is granted to such Employee, the exercise
price of such Incentive Stock Option (to the extent required by the
Code at the time of grant) shall be no less than 110% of the Fair
Market Value of a Share on the date such Incentive Stock Option is
granted.
(ii) Time and Method of
Exercise. The Committee shall determine the time
or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the method
by which notice of exercise is to be given and the form of exercise
notice to be used, the time or times at which Options shall cease
to be or become exercisable following termination of Continuous
Service or upon other conditions, the methods by which the exercise
price may be paid or deemed to be paid (including in the discretion
of the Committee a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Shares (including
without limitation the withholding of Shares otherwise deliverable
pursuant to the Award), other Awards or awards granted under other
plans of the Company or a Related Entity, or other property
(including notes or other contractual obligations of Participants
to make payment on a deferred basis provided that such deferred
payments are not in violation of Section 13(k) of the Exchange Act,
or any rule or regulation adopted thereunder or any other
applicable law), and the methods by or forms in which Shares will
be delivered or deemed to be delivered to
Participants.
(iii) Form of
Settlement. The Committee may, in its
sole discretion, provide that the Shares to be issued upon exercise
of an Option shall be in the form of Restricted Stock or other
similar securities.
Dolphin Digital Media | 2017 Proxy
Statement A-7
(iv) Incentive Stock
Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code. Anything in the
Plan to the contrary notwithstanding, no term of the Plan relating
to Incentive Stock Options (including any Stock Appreciation Right
issued in tandem therewith) shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the
Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the
Participant has first requested, or consents to, the change that
will result in such disqualification. Thus, if and to
the extent required to comply with Section 422 of the Code, Options
granted as Incentive Stock Options shall be subject to the
following special terms and conditions:
(A) the Option shall
not be exercisable for more than ten years after the date such
Incentive Stock Option is granted; provided, however, that if a
Participant owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company (or any parent
corporation or subsidiary corporation of the Company, as those
terms are defined in Sections 424(e) and (f) of the Code,
respectively) and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be (to
the extent required by the Code at the time of the grant) for no
more than five years from the date of grant;
(B) the aggregate Fair
Market Value (determined as of the date the Incentive Stock Option
is granted) of the Shares with respect to which Incentive Stock
Options granted under the Plan and all other option plans of the
Company (and any parent corporation or subsidiary corporation of
the Company, as those terms are defined in Sections 424(e) and (f)
of the Code, respectively) that become exercisable for the first
time by the Participant during any calendar year shall not (to the
extent required by the Code at the time of the grant) exceed
$100,000; and
(C) if Shares acquired
by exercise of an Incentive Stock Option are disposed of within two
years following the date the Incentive Stock Option is granted or
one year following the transfer of such Shares to the Participant
upon exercise, the Participant shall, promptly following such
disposition, notify the Company in writing of the date and terms of
such disposition and provide such other information regarding the
disposition as the Committee may reasonably require.
(c) Stock Appreciation
Rights. The Committee may grant Stock
Appreciation Rights to any Eligible Person in conjunction with all
or part of any Option granted under the Plan or at any subsequent
time during the term of such Option (a “Tandem Stock
Appreciation Right”), or without regard to any Option (a
“Freestanding Stock Appreciation Right”), in each case
upon such terms and conditions as the Committee may establish in
its sole discretion, not inconsistent with the provisions of the
Plan, including the following:
(i) Right to
Payment. A Stock Appreciation Right shall confer
on the Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one
Share on the date of exercise over (B) the grant price of the Stock
Appreciation Right as determined by the Committee. The
grant price of a Stock Appreciation Right shall not be less than
100% of the Fair Market Value of a Share on the date of grant, in
the case of a Freestanding Stock Appreciation Right, or less than
the associated Option exercise price, in the case of a Tandem Stock
Appreciation Right.
(ii) Other
Terms. The Committee shall determine at the date
of grant or thereafter, the time or times at which and the
circumstances under which a Stock Appreciation Right may be
exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or
times at which Stock Appreciation Rights shall cease to be or
become exercisable following termination of Continuous Service or
upon other conditions, the method of exercise, method of
settlement, form of consideration payable in settlement, method by
or forms in which Shares will be delivered or deemed to be
delivered to Participants, whether or not a Stock Appreciation
Right shall be in tandem or in combination with any other Award,
and any other terms and conditions of any Stock Appreciation
Right.
Dolphin Digital Media | 2017 Proxy
Statement A-8
(iii) Tandem Stock Appreciation
Rights. Any Tandem Stock Appreciation Right may
be granted at the same time as the related Option is granted or,
for Options that are not Incentive Stock Options, at any time
thereafter before exercise or expiration of such
Option. Any Tandem Stock Appreciation Right related to
an Option may be exercised only when the related Option would be
exercisable and the Fair Market Value of the Shares subject to the
related Option exceeds the exercise price at which Shares can be
acquired pursuant to the Option. In addition, if a
Tandem Stock Appreciation Right exists with respect to less than
the full number of Shares covered by a related Option, then an
exercise or termination of such Option shall not reduce the number
of Shares to which the Tandem Stock Appreciation Right applies
until the number of Shares then exercisable under such Option
equals the number of Shares to which the Tandem Stock Appreciation
Right applies. Any Option related to a Tandem Stock Appreciation
Right shall no longer be exercisable to the extent the Tandem Stock
Appreciation Right has been exercised, and any Tandem Stock
Appreciation Right shall no longer be exercisable to the extent the
related Option has been exercised.
(d) Restricted Stock
Awards. The Committee is authorized to grant
Restricted Stock Awards to any Eligible Person on the following
terms and conditions:
(i) Grant and
Restrictions. Restricted Stock Awards shall be
subject to such restrictions on transferability, risk of forfeiture
and other restrictions, if any, as the Committee may impose, or as
otherwise provided in this Plan during the Restriction
Period. The terms of any Restricted Stock Award granted
under the Plan shall be set forth in a written Award Agreement
which shall contain provisions determined by the Committee and not
inconsistent with the Plan. The restrictions may lapse
separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or
otherwise, as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the
terms of the Plan and any Award Agreement relating to a Restricted
Stock Award, a Participant granted Restricted Stock shall have all
of the rights of a shareholder, including the right to vote the
Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed
by the Committee). During the period that the Restricted
Stock Award is subject to a risk of forfeiture, subject to Section
10(b) below and except as otherwise provided in the Award
Agreement, the Restricted Stock may not be sold, transferred,
pledged, hypothecated, margined or otherwise encumbered by the
Participant or Beneficiary.
(ii) Forfeiture. Except
as otherwise determined by the Committee, upon termination of a
Participant’s Continuous Service during the applicable
Restriction Period, the Participant’s Restricted Stock that
is at that time subject to a risk of forfeiture that has not lapsed
or otherwise been satisfied shall be forfeited and reacquired by
the Company; provided that the Committee may provide, by resolution
or other action or in any Award Agreement, or may determine in any
individual case, that forfeiture conditions relating to Restricted
Stock Awards shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may
in other cases waive in whole or in part the forfeiture of
Restricted Stock.
(iii) Certificates for
Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock
are registered in the name of the Participant, the Committee may
require that such certificates bear an appropriate legend referring
to the terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession of
the certificates, and that the Participant deliver a stock power to
the Company, endorsed in blank, relating to the Restricted
Stock.
(iv) Dividends and
Splits. As a condition to the grant of a
Restricted Stock Award, the Committee may require or permit a
Participant to elect that any cash dividends paid on a Share of
Restricted Stock be automatically reinvested in additional Shares
of Restricted Stock or applied to the purchase of additional Awards
under the Plan, or except as otherwise provided in the last
sentence of Section 6(h) hereof, may require that payment be
delayed (with or without interest at such rate, if any, as the
Committee shall determine) and remain subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock with
respect to which such cash dividend is payable, in each case in a
manner that does not violate the requirements of Section 409A of
the Code. Unless otherwise determined by the Committee,
Shares distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent
as the Restricted Stock with respect to which such Shares or other
property have been distributed.
Dolphin Digital Media | 2017 Proxy
Statement A-9
(e) Restricted Stock Unit
Award. The Committee is authorized to grant
Restricted Stock Unit Awards to any Eligible Person on the
following terms and conditions:
(i) Award and
Restrictions. Satisfaction of a Restricted Stock
Unit Award shall occur upon expiration of the deferral period
specified for such Restricted Stock Unit Award by the Committee
(or, if permitted by the Committee, as elected by the Participant
in a manner that does not violate the requirements of Section 409A
of the Code). In addition, a Restricted Stock Unit Award
shall be subject to such restrictions (which may include a risk of
forfeiture) as the Committee may impose, if any, which restrictions
may lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance
goals and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee may
determine. A Restricted Stock Unit Award may be
satisfied by delivery of Shares, cash equal to the Fair Market
Value of the specified number of Shares covered by the Restricted
Stock Units, or a combination thereof, as determined by the
Committee at the date of grant or thereafter. Prior to
satisfaction of a Restricted Stock Unit Award, a Restricted Stock
Unit Award carries no voting or dividend or other rights associated
with Share ownership. Prior to satisfaction of a
Restricted Stock Unit Award, except as otherwise provided in an
Award Agreement and as permitted under Section 409A of the Code, a
Restricted Stock Unit Award may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant
or any Beneficiary.
(ii) Forfeiture. Except
as otherwise determined by the Committee, upon termination of a
Participant’s Continuous Service during the applicable
deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award Agreement evidencing the Restricted
Stock Unit Award), the Participant’s Restricted Stock Unit
Award that is at that time subject to a risk of forfeiture that has
not lapsed or otherwise been satisfied shall be forfeited; provided
that the Committee may provide, by resolution or other action or in
any Award Agreement, or may determine in any individual case, that
forfeiture conditions relating to a Restricted Stock Unit Award
shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of any Restricted
Stock Unit Award.
(iii) Dividend
Equivalents. Unless otherwise determined by the
Committee at the date of grant, and except as otherwise provided in
the last sentence of Section 6(h) hereof, any Dividend Equivalents
that are granted with respect to any Restricted Stock Unit Award
shall be either (A) paid with respect to such Restricted Stock Unit
Award at the dividend payment date in cash or in Shares of
unrestricted stock having a Fair Market Value equal to the amount
of such dividends, or (B) deferred (with or without interest as
determined by the Committee in its sole discretion) with respect to
such Restricted Stock Unit Award and may require or permit the
amount or value thereof automatically deemed reinvested in
additional Restricted Stock Units, other Awards or other investment
vehicles, as the Committee shall determine or permit the
Participant to elect. The applicable Award Agreement
shall specify whether any Dividend Equivalents shall be paid at the
dividend payment date, deferred or deferred at the election of the
Participant. If the Participant may elect to defer the
Dividend Equivalents, such election shall be made within 30 days
after the grant date of the Restricted Stock Unit Award, but in no
event later than 12 months before the first date on which any
portion of such Restricted Stock Unit Award vests (or at such other
times prescribed by the Committee as shall not result in a
violation of Section 409A of the Code).
(f) Bonus Stock and Awards in
Lieu of Obligations. The Committee is authorized
to grant Shares to any Eligible Persons as a bonus, or to grant
Shares or other Awards in lieu of obligations to pay cash or
deliver other property under the Plan or under other plans or
compensatory arrangements, provided that, in the case of Eligible
Persons subject to Section 16 of the Exchange Act, the amount of
such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Shares or other
Awards are exempt from liability under Section 16(b) of the
Exchange Act. Shares or Awards granted hereunder shall
be subject to such other terms as shall be determined by the
Committee.
Dolphin Digital Media | 2017 Proxy
Statement A-10
(g) Dividend
Equivalents. The Committee is authorized to grant
Dividend Equivalents to any Eligible Person entitling the Eligible
Person to receive cash, Shares, other Awards, or other property
equal in value to the dividends paid with respect to a specified
number of Shares, or other periodic payments. Dividend
Equivalents may be awarded on a free-standing basis or in
connection with another Award. The Committee may provide
that Dividend Equivalents shall be paid or distributed when accrued
or at some later date, or whether such Dividend Equivalents shall
be deemed to have been reinvested in additional Shares, Awards, or
other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may
specify. Any such determination by the Committee shall
be made at the grant date of the applicable
Award. Notwithstanding the foregoing, Dividend
Equivalents credited in connection with an Award that vests based
on the achievement of performance goals shall be subject to
restrictions and risk of forfeiture to the same extent as the Award
with respect to which such Dividend Equivalents have been
credited.
(h) Performance
Awards. The Committee is authorized to grant
Performance Awards to any Eligible Person payable in cash, Shares,
or other Awards, on terms and conditions established by the
Committee, subject to the provisions of Section 8 if and to the
extent that the Committee shall, in its sole discretion, determine
that an Award shall be subject to those provisions. The
performance criteria to be achieved during any Performance Period
and the length of the Performance Period shall be determined by the
Committee upon the grant of each Performance
Award. Except as provided in Section 9 or as may be
provided in an Award Agreement, Performance Awards will be
distributed only after the end of the relevant Performance
Period. The performance goals to be achieved for each
Performance Period shall be conclusively determined by the
Committee and may be based upon the criteria set forth in Section
8(b), or in the case of an Award that the Committee determines
shall not be subject to Section 8 hereof, any other criteria that
the Committee, in its sole discretion, shall determine should be
used for that purpose. The amount of the Award to be
distributed shall be conclusively determined by the
Committee. Performance Awards may be paid in a lump sum
or in installments following the close of the Performance Period
or, in accordance with procedures established by the Committee, on
a deferred basis in a manner that does not violate the requirements
of Section 409A of the Code.
(i) Other Stock-Based
Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to any Eligible Person
such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related
to, Shares, as deemed by the Committee to be consistent with the
purposes of the Plan. Other Stock-Based Awards may be
granted to Participants either alone or in addition to other Awards
granted under the Plan, and such Other Stock-Based Awards shall
also be available as a form of payment in the settlement of other
Awards granted under the Plan. The Committee shall
determine the terms and conditions of such
Awards. Shares delivered pursuant to an Award in the
nature of a purchase right granted under this Section 6(i) shall be
purchased for such consideration, (including without limitation
loans from the Company or a Related Entity provided that such loans
are not in violation of Section 13(k) of the Exchange Act or any
rule or regulation adopted thereunder or any other applicable law)
paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Shares, other Awards or other
property, as the Committee shall determine.
7. Certain
Provisions Applicable to Awards.
(a) Stand-Alone, Additional,
Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution
or exchange for, any other Award or any award granted under another
plan of the Company, any Related Entity, or any business entity to
be acquired by the Company or a Related Entity, or any other right
of a Participant to receive payment from the Company or any Related
Entity. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award
is granted in substitution or exchange for another Award or award,
the Committee shall require the surrender of such other Award or
award in consideration for the grant of the new
Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable under
other plans of the Company or any Related Entity, in which the
value of Shares subject to the Award is equivalent in value to the
cash compensation (for example, Restricted Stock or Restricted
Stock Units), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying
Shares minus the value of the cash compensation surrendered (for
example, Options or Stock Appreciation Right granted with an
exercise price or grant price “discounted” by the
amount of the cash compensation surrendered), provided that any
such determination to grant an Award in lieu of cash compensation
must be made in a manner intended to be exempt from or comply with
Section 409A of the Code.
Dolphin Digital Media | 2017 Proxy
Statement A-11
(b) Term of
Awards. The term of each Award shall be for such
period as may be determined by the Committee; provided that in no
event shall the term of any Option or Stock Appreciation Right
exceed a period of ten years (or in the case of an Incentive Stock
Option such shorter term as may be required under Section 422 of
the Code).
(c) Form and Timing of Payment
Under Awards; Deferrals. Subject to the terms of
the Plan and any applicable Award Agreement, payments to be made by
the Company or a Related Entity upon the exercise of an Option or
other Award or settlement of an Award may be made in such forms as
the Committee shall determine, including, without limitation, cash,
Shares, other Awards or other property, and may be made in a single
payment or transfer, in installments, or on a deferred basis,
provided that any determination to pay in installments or on a
deferred basis shall be made by the Committee at the date of
grant. Any installment or deferral provided for in the
preceding sentence shall, however, subject to the terms of the
Plan, be subject to the Company’s compliance with the
provisions of the Sarbanes-Oxley Act of 2002, as amended, the rules
and regulations adopted by the Securities and Exchange Commission
thereunder, all applicable rules of the Listing Market and any
other applicable law, and in a manner intended to be exempt from or
otherwise satisfy the requirements of Section 409A of the
Code. Subject to Section 7(e) of this Plan, the
settlement of any Award may be accelerated, and cash paid in lieu
of Shares in connection with such settlement, in the sole
discretion of the Committee or upon occurrence of one or more
specified events (in addition to a Change in
Control). Any such settlement shall be at a value
determined by the Committee in its sole discretion, which, without
limitation, may in the case of an Option or Stock Appreciation
Right be limited to the amount if any by which the Fair Market
Value of a Share on the settlement date exceeds the exercise or
grant price. Installment or deferred payments may be
required by the Committee (subject to Section 7(e) of this Plan,
including the consent provisions thereof in the case of any
deferral of an outstanding Award not provided for in the original
Award Agreement) or permitted at the election of the Participant on
terms and conditions established by the Committee. The
acceleration of the settlement of any Award, and the payment of any
Award in installments or on an deferred basis, all shall be done in
a manner that is intended to be exempt from or otherwise satisfy
the requirements of Section 409A of the Code. The
Committee may, without limitation, make provision for the payment
or crediting of a reasonable interest rate on installment or
deferred payments or the grant or crediting of Dividend Equivalents
or other amounts in respect of installment or deferred payments
denominated in Shares.
(d) Exemptions from Section
16(b) Liability. It is the intent of the Company
that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall
be exempt from Section 16 pursuant to an applicable exemption
(except for transactions acknowledged in writing to be non-exempt
by such Participant). Accordingly, if any provision of
this Plan or any Award Agreement does not comply with the
requirements of Rule 16b-3 then applicable to any such transaction,
such provision shall be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3
so that such Participant shall avoid liability under Section
16(b).
(e) Code Section
409A.
(i) The Award Agreement
for any Award that the Committee reasonably determines to
constitute a “nonqualified deferred compensation plan”
under Section 409A of the Code (a “Section 409A Plan”),
and the provisions of the Section 409A Plan applicable to that
Award, shall be construed in a manner consistent with the
applicable requirements of Section 409A of the Code, and the
Committee, in its sole discretion and without the consent of any
Participant, may amend any Award Agreement (and the provisions of
the Plan applicable thereto) if and to the extent that the
Committee determines that such amendment is necessary or
appropriate to comply with the requirements of Section 409A of the
Code.
(ii) If any Award
constitutes a Section 409A Plan, then the Award shall be subject to
the following additional requirements, if and to the extent
required to comply with Section 409A of the Code:
Dolphin Digital Media | 2017 Proxy
Statement A-12
(A) Payments under the
Section 409A Plan may be made only upon (u) the Participant’s
“separation from service”, (v) the date the Participant
becomes “disabled”, (w) the Participant’s death,
(x) a “specified time (or pursuant to a fixed
schedule)” specified in the Award Agreement at the date of
the deferral of such compensation, (y) a “change in the
ownership or effective control of the corporation, or in the
ownership of a substantial portion of the assets” of the
Company, or (z) the occurrence of an “unforeseeble
emergency”;
(B) The time or
schedule for any payment of the deferred compensation may not be
accelerated, except to the extent provided in applicable Treasury
Regulations or other applicable guidance issued by the Internal
Revenue Service;
(C) Any elections with
respect to the deferral of such compensation or the time and form
of distribution of such deferred compensation shall comply with the
requirements of Section 409A(a)(4) of the Code; and
(D) In the case of any
Participant who is “specified employee”, a distribution
on account of a “separation from service” may not be
made before the date which is six months after the date of the
Participant’s “separation from service” (or, if
earlier, the date of the Participant’s death).
For purposes of the
foregoing, the terms in quotations shall have the same meanings as
those terms have for purposes of Section 409A of the Code, and the
limitations set forth herein shall be applied in such manner (and
only to the extent) as shall be necessary to comply with any
requirements of Section 409A of the Code that are applicable to the
Award.
(iii) Notwithstanding the
foregoing, or any provision of this Plan or any Award Agreement,
the Company does not make any representation to any Participant or
Beneficiary that any Awards made pursuant to this Plan are exempt
from, or satisfy, the requirements of, Section 409A of the Code,
and the Company shall have no liability or other obligation to
indemnify or hold harmless the Participant or any Beneficiary for
any tax, additional tax, interest or penalties that the Participant
or any Beneficiary may incur in the event that any provision of
this Plan, or any Award Agreement, or any amendment or modification
thereof, or any other action taken with respect thereto, is deemed
to violate any of the requirements of Section 409A of the
Code.
8. Code
Section 162(m) Provisions.
(a) Covered
Employees. Unless otherwise specified by the
Committee, the provisions of this Section 8 shall be applicable to
any Restricted Stock Award, Restricted Stock Unit Award,
Performance Award, or Other Stock-Based Award if it is granted to
an Eligible Person who is, or is likely to be, as of the end of the
tax year in which the Company would claim a tax deduction in
connection with such Award, a Covered Employee, and is intended to
qualify as “performance-based compensation” that is
exempt from the deduction limitations imposed under Section 162(m)
of the Code.
Dolphin Digital Media | 2017 Proxy
Statement A-13
(b) Performance
Criteria. If a Performance Award is subject to this Section
8, then the payment or distribution thereof or the lapsing of
restrictions thereon and the distribution of cash, Shares or other
property pursuant thereto, as applicable, shall be contingent upon
achievement of one or more objective performance goals. Performance
goals shall be objective and shall otherwise meet the requirements
of Section 162(m) of the Code and regulations thereunder including
the requirement that the level or levels of performance targeted by
the Committee result in the achievement of performance goals being
substantially uncertain. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for
Related Entities, or for business or geographical units of the
Company and/or a Related Entity (except with respect to the total
shareholder return and earnings per share criteria), shall be used
by the Committee in establishing performance goals for such Awards:
(1) earnings per share; (2) revenues or margins; (3) cash flow; (4)
operating margin; (5) return on net assets, investment, capital, or
equity; (6) economic value added; (7) direct contribution; (8) net
income; pretax earnings; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization;
earnings after interest expense and before extraordinary or special
items; operating income or income from operations; income before
interest income or expense, unusual items and income taxes, local,
state or federal and excluding budgeted and actual bonuses which
might be paid under any ongoing bonus plans of the Company; (9)
working capital; (10) management of fixed costs or variable costs;
(11) completion of production or stages of production within
specified time and/or budget parameters; (12) identification or
consummation of investment opportunities or completion of specified
projects in accordance with corporate business plans, including
strategic mergers, acquisitions or divestitures; (13) total
shareholder return; (14) debt reduction; (15) market share; (16)
entry into new markets, either geographically or by business unit;
(17) client retention and satisfaction; (18) strategic plan
development and implementation, including turnaround plans; and/or
(19) the Fair Market Value of a Share. Any of the above goals may
be determined on an absolute or relative basis or as compared to
the performance of a published or special index deemed applicable
by the Committee including, but not limited to, the Standard &
Poor’s 500 Stock Index or a group of companies that are
comparable to the Company. In determining the achievement of the
performance goals, the Committee may, at the time the performance
goals are set, require that those goals be determined by excluding
the impact of (i) restructurings, discontinued operations, and
extraordinary items (as defined pursuant to generally accepted
accounting principles), and other unusual or non-recurring charges,
(ii) change in accounting standards required by generally accepted
accounting principles; or (iii) such other exclusions or
adjustments as the Committee specifies at the time the Award is
granted.
(c) Performance Period; Timing
For Establishing Performance Goals. Achievement
of performance goals in respect of Awards subject to this Section 8
shall be measured over a Performance Period no shorter than 3
months, or no shorter than 12 months with respect to Covered
Employees, and no longer than five years, as specified by the
Committee. Performance goals shall be established not
later than 90 days after the beginning of any Performance Period
applicable to Awards, subject to this Section 8, or at such other
date as may be required or permitted for “performance-based
compensation” under Section 162(m) of the Code.
(d) Adjustments. The
Committee may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with Awards subject to this
Section 8, but may not exercise discretion to increase any such
amount payable to a Covered Employee in respect of an Award subject
to this Section 8. The Committee shall specify the
circumstances in which such Awards shall be paid or forfeited in
the event of termination of Continuous Service by the Participant
prior to the end of a Performance Period or settlement of
Awards.
(e) Committee
Certification. No Participant shall receive any
payment under the Plan that is subject to this Section 8
unless the Committee has certified, by resolution or other
appropriate action in writing, that the performance criteria and
any other material terms previously established by the Committee or
set forth in the Plan, have been satisfied to the extent necessary
to qualify as “performance based compensation” under
Section 162(m) of the Code.
9. Change
in Control.
(a) Effect of “Change in
Control.” If and only to the extent
provided in any employment or other agreement between the
Participant and the Company or any Related Entity, or in any Award
Agreement, or to the extent otherwise determined by the Committee
in its sole discretion and without any requirement that each
Participant be treated consistently, and except as otherwise
provided in Section 9(a)(iv) hereof, upon the occurrence of a
“Change in Control,” as defined in Section
9(b):
Dolphin Digital Media | 2017 Proxy
Statement A-14
(i) Any Option or Stock
Appreciation Right that was not previously vested and exercisable
as of the time of the Change in Control, shall become immediately
vested and exercisable, subject to applicable restrictions set
forth in Section 10(a) hereof.
(ii) Any restrictions,
deferral of settlement, and forfeiture conditions applicable to a
Restricted Stock Award, Restricted Stock Unit Award or an Other
Stock-Based Award subject only to future service requirements
granted under the Plan shall lapse and such Awards shall be deemed
fully vested as of the time of the Change in Control, except to the
extent of any waiver by the Participant and subject to applicable
restrictions set forth in Section 10(a) hereof.
(iii) With respect to any
outstanding Award subject to achievement of performance goals and
conditions under the Plan, the Committee may, in its discretion,
consider such Awards to have been earned and payable based on
achievement of performance goals or based upon target performance
(either in full or pro-rata based on the portion of the Performance
Period completed as of the Change in Control), except to the extent
of any waiver by the Participant and subject to applicable
restrictions set forth in Section 10(a).
(b) Definition of “Change
in Control”. Unless otherwise specified in
any employment or other agreement for services between the
Participant and the Company or any Related Entity, or in an Award
Agreement, a “Change in Control” shall mean the
occurrence of any of the following:
(i) The acquisition by
any Person, other than William O’Dowd, of Beneficial
Ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than thirty percent (30%) of either
(A) the value of then outstanding equity securities of the Company
(the “Outstanding Company Stock”) or (B) the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the “Outstanding Company Voting Securities”) (the
foregoing Beneficial Ownership hereinafter being referred to as a
“Controlling Interest”); provided, however, that for
purposes of this Section 9(b), the following acquisitions shall not
constitute or result in a Change in Control: (v) any
acquisition directly from the Company; (w) any acquisition by the
Company; (x) any acquisition by any Person that as of the Effective
Date owns Beneficial Ownership of a Controlling Interest; (y) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Related Entity; or
(z) any acquisition by any entity pursuant to a transaction which
complies with clauses (1), (2) and (3) of subsection (iii) below;
or
(ii) During any period
of two (2) consecutive years (not including any period prior to the
Effective Date) individuals who constitute the Board on the
Effective Date (the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
Effective Date whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
Dolphin Digital Media | 2017 Proxy
Statement A-15
(iii) Consummation of (A)
a reorganization, merger, statutory share exchange or consolidation
or similar transaction involving (x) the Company or (y) any of its
Related Entities, but in the case of this clause (y) only if
equity securities of the Company are issued or issuable in
connection with the transaction (each of the events referred to in
this clause (A) being hereinafter referred to as a
“Business Reorganization”), or (B) a sale or other
disposition of all or substantially all of the assets of the
Company, or the acquisition of assets or equity of another entity
by the Company or any of its Related Entities (each an “Asset
Sale”), in each case, unless, following such Business
Reorganization or Asset Sale, (1) all or substantially all of the
individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Stock and Outstanding
Company Voting Securities immediately prior to such Business
Reorganization or Asset Sale beneficially own, directly or
indirectly, more than thirty percent (30%) of the value of the then
outstanding equity securities and the combined voting power of the
then outstanding voting securities entitled to vote generally in
the election of members of the board of directors (or comparable
governing body of an entity that does not have such a board), as
the case may be, of the entity resulting from such Business
Reorganization or Asset Sale (including, without limitation, an
entity which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) (the
“Continuing Entity”) in substantially the same
proportions as their ownership, immediately prior to such Business
Reorganization or Asset Sale, of the Outstanding Company Stock and
Outstanding Company Voting Securities, as the case may be
(excluding any outstanding equity or voting securities of the
Continuing Entity that such Beneficial Owners hold immediately
following the consummation of the Business Reorganization or Asset
Sale as a result of their ownership, prior to such consummation, of
equity or voting securities of any company or other entity involved
in or forming part of such Business Reorganization or Asset Sale
other than the Company), (2) no Person (excluding any employee
benefit plan (or related trust) of the Company or any Continuing
Entity or any entity controlled by the Continuing Entity or any
Person that as of the Effective Date owns Beneficial Ownership of a
Controlling Interest) beneficially owns, directly or indirectly,
thirty percent (30%) or more of the value of the then outstanding
equity securities of the Continuing Entity or the combined voting
power of the then outstanding voting securities of the Continuing
Entity except to the extent that such ownership existed prior to
the Business Reorganization or Asset Sale and (3) at least a
majority of the members of the Board of Directors or other
governing body of the Continuing Entity were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Reorganization or Asset Sale; or
(iv) Approval by the
shareholders of the Company of a complete liquidation or
dissolution of the Company.
10. General
Provisions.
(a) Compliance With Legal and
Other Requirements. The Company may, to the
extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Shares or payment of other benefits under
any Award until completion of such registration or qualification of
such Shares or other required action under any federal or state
law, rule or regulation, listing or other required action with
respect to the Listing Market, or compliance with any other
obligation of the Company, as the Committee, may consider
appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be
subject to such other conditions as it may consider appropriate in
connection with the issuance or delivery of Shares or payment of
other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other
obligations.
Dolphin Digital Media | 2017 Proxy
Statement A-16
(b) Limits on Transferability;
Beneficiaries. No Award or other right or
interest granted under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or
liability of such Participant to any party, or assigned or
transferred by such Participant otherwise than by will or the laws
of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable
shall be exercised during the lifetime of the Participant only by
the Participant or his or her guardian or legal representative,
except that Awards and other rights (other than Incentive Stock
Options and Stock Appreciation Rights in tandem therewith) may be
transferred to one or more Beneficiaries or other transferees
during the lifetime of the Participant, and may be exercised by
such transferees in accordance with the terms of such Award, but
only if and to the extent such transfers are permitted by the
Committee pursuant to the express terms of an Award Agreement
(subject to any terms and conditions which the Committee may impose
thereon), are by gift or pursuant to a domestic relations order,
and are to a “Permitted Assignee” that is a permissible
transferee under the applicable rules of the Securities and
Exchange Commission for registration of securities on a Form S-8
registration statement. For this purpose, a Permitted
Assignee shall mean (i) the Participant’s spouse, children or
grandchildren (including any adopted and step children or
grandchildren), parents, grandparents or siblings, (ii) a trust for
the benefit of one or more of the Participant or the persons
referred to in clause (i), (iii) a partnership, limited liability
company or corporation in which the Participant or the persons
referred to in clauses (i) and (ii) are the only partners, members
or shareholders, or (iv) a foundation in which any person or entity
designated in clauses (i), (ii) or (iii) above control the
management of assets. A Beneficiary, transferee, or
other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the
Plan and any Award Agreement applicable to such Participant, except
as otherwise determined by the Committee, and to any additional
terms and conditions deemed necessary or appropriate by the
Committee.
(c) Adjustments.
(i) Adjustments to
Awards. In the event that any extraordinary
dividend or other distribution (whether in the form of cash,
Shares, or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution
or other similar corporate transaction or event affects the Shares
and/or such other securities of the Company or any other issuer,
then the Committee shall, in such manner as it may deem appropriate
and equitable, substitute, exchange or adjust any or all of
(A) the number and kind of Shares which may be delivered in
connection with Awards granted thereafter, (B) the number and
kind of Shares by which annual per-person Award limitations are
measured under Section 4 hereof, (C) the number and kind of
Shares subject to or deliverable in respect of outstanding Awards,
(D) the exercise price, grant price or purchase price relating
to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award, and (E) any other
aspect of any Award that the Committee determines to be appropriate
in order to prevent the reduction or enlargement of benefits under
any Award.
Dolphin Digital Media | 2017 Proxy
Statement A-17
(ii) Adjustments in Case of
Certain Transactions. In the event of any merger,
consolidation or other reorganization in which the Company does not
survive, or in the event of any Change in Control (and subject to
the provisions of Section 9 of this Plan relating to the vesting of
Awards in the event of any Change in Control), any outstanding
Awards may be dealt with in accordance with any of the following
approaches, without the requirement of obtaining any consent or
agreement of a Participant as such, as determined by the agreement
effectuating the transaction or, if and to the extent not so
determined, as determined by the Committee: (A) the continuation of
the outstanding Awards by the Company, if the Company is a
surviving entity, (B) the assumption or substitution for, as those
terms are defined below, the outstanding Awards by the surviving
entity or its parent or subsidiary, (C) full exercisability or
vesting and accelerated expiration of the outstanding Awards, or
(D) settlement of the value of the outstanding Awards in cash or
cash equivalents or other property followed by cancellation of such
Awards (which value, in the case of Options or Stock Appreciation
Rights, shall be measured by the amount, if any, by which the Fair
Market Value of a Share exceeds the exercise or grant price of the
Option or Stock Appreciation Right as of the effective date of the
transaction). For the purposes of this Plan, an Option,
Stock Appreciation Right, Restricted Stock Award, Restricted Stock
Unit Award, Performance Award or Other Stock-Based Award shall be
considered assumed or substituted for if following the applicable
transaction the Award confers the right to purchase or receive, for
each Share subject to the Option, Stock Appreciation Right,
Restricted Stock Award, Restricted Stock Unit Award, Performance
Award or Other Stock-Based Award immediately prior to the
applicable transaction, on substantially the same vesting and other
terms and conditions as were applicable to the Award immediately
prior to the applicable transaction, the consideration (whether
stock, cash or other securities or property) received in the
applicable transaction by holders of Shares for each Share held on
the effective date of such transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the applicable
transaction is not solely common stock of the successor company or
its parent or subsidiary, the Committee may, with the consent of
the successor company or its parent or subsidiary, provide that the
consideration to be received upon the exercise or vesting of an
Option, Stock Appreciation Right, Restricted Stock Award,
Restricted Stock Unit Award, Performance Award or Other Stock-Based
Award, for each Share subject thereto, will be solely common stock
of the successor company or its parent or subsidiary substantially
equal in fair market value to the per share consideration received
by holders of Shares in the applicable transaction. The
determination of such substantial equality of value of
consideration shall be made by the Committee in its sole discretion
and its determination shall be conclusive and
binding. The Committee shall give written notice of any
proposed transaction referred to in this Section 10(c)(ii) a
reasonable period of time prior to the closing date for such
transaction (which notice may be given either before or after the
approval of such transaction), in order that Participants may have
a reasonable period of time prior to the closing date of such
transaction within which to exercise any Awards that are then
exercisable (including any Awards that may become exercisable upon
the closing date of such transaction). A Participant may
condition his or her exercise of any Awards upon the consummation
of the transaction.
(iii) Other
Adjustments. The Committee (and the Board if and
only to the extent such authority is not required to be exercised
by the Committee to comply with Section 162(m) of the Code) is
authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards (including Awards subject to
satisfaction of performance goals, or performance goals and
conditions relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions
and dispositions of businesses and assets) affecting the Company,
any Related Entity or any business unit, or the financial
statements of the Company or any Related Entity, or in response to
changes in applicable laws, regulations, accounting principles, tax
rates and regulations or business conditions or in view of the
Committee’s assessment of the business strategy of the
Company, any Related Entity or business unit thereof, performance
of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances
deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the
making of such adjustment would cause Options, Stock Appreciation
Rights, Performance Awards granted pursuant to Section 8(b) hereof
to Participants designated by the Committee as Covered Employees
and intended to qualify as “performance-based
compensation” under Code Section 162(m) and the regulations
thereunder to otherwise fail to qualify as “performance-based
compensation” under Code Section 162(m) and regulations
thereunder.
Dolphin Digital Media | 2017 Proxy
Statement A-18
(d) Award
Agreements. Each Award Agreement shall either be
(a) in writing in a form approved by the Committee and executed by
the Company by an officer duly authorized to act on its behalf, or
(b) an electronic notice in a form approved by the Committee and
recorded by the Company (or its designee) in an electronic
recordkeeping system used for the purpose of tracking one or more
types of Awards as the Committee may provide; in each case and if
required by the Committee, the Award Agreement shall be executed or
otherwise electronically accepted by the recipient of the Award in
such form and manner as the Committee may require. The
Committee may authorize any officer of the Company to execute any
or all Award Agreements on behalf of the Company. The
Award Agreement shall set forth the material terms and conditions
of the Award as established by the Committee consistent with the
provisions of the Plan.
(e) Taxes. The
Company and any Related Entity are authorized to withhold from any
Award granted, any payment relating to an Award under the Plan,
including from a distribution of Shares, or any payroll or other
payment to a Participant, amounts of withholding and other taxes
due or potentially payable in connection with any transaction
involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company or any Related Entity and
Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any
Award. This authority shall include authority to
withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of a
Participant’s tax obligations, either on a mandatory or
elective basis in the discretion of the Committee. The
amount of withholding tax paid with respect to an Award by the
withholding of Shares otherwise deliverable pursuant to the Award
or by delivering Shares already owned shall not exceed the maximum
statutory withholding required with respect to that Award (or such
other limit as the Committee shall impose, including without
limitation, any limit imposed to award or limit any financial
accounting expense relating to the Award).
(f) Changes to the Plan and
Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan, or the Committee’s
authority to grant Awards under the Plan, without the consent of
shareholders or Participants, except that any amendment or
alteration to the Plan shall be subject to the approval of the
Company’s shareholders not later than the annual meeting next
following such Board action if such shareholder approval is
required by any federal or state law or regulation (including,
without limitation, Rule 16b-3 or Code Section 162(m)) or the rules
of the Listing Market, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to
shareholders for approval; provided that, except as otherwise
permitted by the Plan or Award Agreement, without the consent of an
affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under the terms of
any previously granted and outstanding Award. The
Committee may waive any conditions or rights under, or amend,
alter, suspend, discontinue or terminate any Award theretofore
granted and any Award Agreement relating thereto, except as
otherwise provided in the Plan; provided that, except as otherwise
permitted by the Plan or Award Agreement, without the consent of an
affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant
under terms of such Award.
(g) Clawback of
Benefits.
(i) The Company may (A)
cause the cancellation of any Award, (B) require reimbursement of
any Award by a Participant or Beneficiary, and (C) effect any other
right of recoupment of equity or other compensation provided under
this Plan or otherwise in accordance with any Company policies that
currently exist or that may from time to time be adopted or
modified in the future by the Company and/or applicable law (each,
a “Clawback Policy”). In addition, a
Participant may be required to repay to the Company certain
previously paid compensation, whether provided under this Plan or
an Award Agreement or otherwise, in accordance with any Clawback
Policy. By accepting an Award, a Participant is also
agreeing to be bound by any existing or future Clawback Policy
adopted by the Company, or any amendments that may from time to
time be made to the Clawback Policy in the future by the Company in
its discretion (including without limitation any Clawback Policy
adopted or amended to comply with applicable laws or stock exchange
requirements) and is further agreeing that all of the
Participant’s Award Agreements may be unilaterally amended by
the Company, without the Participant’s consent, to the extent
that the Company in its discretion determines to be necessary or
appropriate to comply with any Clawback Policy.
Dolphin Digital Media | 2017 Proxy
Statement A-19
(ii) If the Participant,
without the consent of the Company, while employed by or providing
services to the Company or any Related Entity or after termination
of such employment or service, violates a non-competition,
non-solicitation or non-disclosure covenant or agreement or
otherwise engages in activity that is in conflict with or adverse
to the interest of the Company or any Related Entity, as determined
by the Committee in its sole discretion, then (i) any outstanding,
vested or unvested, earned or unearned portion of the Award may, at
the Committee’s discretion, be canceled and (ii) the
Committee, in its discretion, may require the Participant or other
person to whom any payment has been made or Shares or other
property have been transferred in connection with the Award to
forfeit and pay over to the Company, on demand, all or any portion
of the gain (whether or not taxable) realized upon the exercise of
any Option or Stock Appreciation Right and the value realized
(whether or not taxable) on the vesting or payment of any other
Award during the time period specified in the Award Agreement or
otherwise specified by the Committee
(h) Limitation on Rights
Conferred Under Plan. Neither the Plan nor any
action taken hereunder or under any Award shall be construed as
(i) giving any Eligible Person or Participant the right to
continue as an Eligible Person or Participant or in the employ or
service of the Company or a Related Entity; (ii) interfering
in any way with the right of the Company or a Related Entity to
terminate any Eligible Person’s or Participant’s
Continuous Service at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the
Plan or to be treated uniformly with other Participants and
Employees, or (iv) conferring on a Participant any of the
rights of a shareholder of the Company or any Related Entity
including, without limitation, any right to receive dividends or
distributions, any right to vote or act by written consent, any
right to attend meetings of shareholders or any right to receive
any information concerning the Company’s or any Related
Entity’s business, financial condition, results of operation
or prospects, unless and until such time as the Participant is duly
issued Shares on the stock books of the Company or any Related
Entity in accordance with the terms of an Award. None of
the Company, its officers or its directors shall have any fiduciary
obligation to the Participant with respect to any Awards unless and
until the Participant is duly issued Shares pursuant to the Award
on the stock books of the Company in accordance with the terms of
an Award. Neither the Company, nor any Related Entity,
nor any of the their respective officers, directors,
representatives or agents is granting any rights under the Plan to
the Participant whatsoever, oral or written, express or implied,
other than those rights expressly set forth in this Plan or the
Award Agreement.
(i) Unfunded Status of Awards;
Creation of Trusts. The Plan is intended to
constitute an “unfunded” plan for incentive and
deferred compensation. With respect to any payments not
yet made to a Participant or obligation to deliver Shares pursuant
to an Award, nothing contained in the Plan or any Award Agreement
shall give any such Participant any rights that are greater than
those of a general creditor of the Company or Related Entity that
issues the Award; provided that the Committee may authorize the
creation of trusts and deposit therein cash, Shares, other Awards
or other property, or make other arrangements to meet the
obligations of the Company or Related Entity under the
Plan. Such trusts or other arrangements shall be
consistent with the “unfunded” status of the Plan
unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in
alternative investments, subject to such terms and conditions as
the Committee may specify and in accordance with applicable
law.
(j) Nonexclusivity of the
Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the
power of the Board or a committee thereof to adopt such other
incentive arrangements as it may deem desirable including incentive
arrangements and awards which do not qualify under Section 162(m)
of the Code.
(k) Payments in the Event of
Forfeitures; Fractional Shares. Unless otherwise
determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such
cash or other consideration. No fractional Shares shall
be issued or delivered pursuant to the Plan or any
Award. The Committee shall determine whether cash, other
Awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
Dolphin Digital Media | 2017 Proxy
Statement A-20
(l) Governing
Law. Except as otherwise provided in any Award
Agreement, the validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award Agreement shall
be determined in accordance with the laws of the State of Florida
without giving effect to principles of conflict of laws, and
applicable federal law.
(m) Non-U.S.
Laws. The Committee shall have the authority to
adopt such modifications, procedures, and subplans as may be
necessary or desirable to comply with provisions of the laws of
foreign countries in which the Company or its Related Entities may
operate to assure the viability of the benefits from Awards granted
to Participants performing services in such countries and to meet
the objectives of the Plan.
(n) Plan Effective Date;
Termination of Plan. The Plan shall become
effective on the Effective Date. The Plan shall
terminate at the earliest of (a) such time as no Shares remain
available for issuance under the Plan, (b) termination of this
Plan by the Board, or (c) the tenth anniversary of the Effective
Date. Awards outstanding upon expiration of the Plan
shall remain in effect until they have been exercised or
terminated, or have expired.
(o) Construction and
Interpretation. Whenever used herein, nouns in
the singular shall include the plural, and the masculine pronoun
shall include the feminine gender. Headings of Articles and
Sections hereof are inserted for convenience and reference and
constitute no part of the Plan.
(p) Severability. If
any provision of the Plan or any Award Agreement shall be
determined to be illegal or unenforceable by any court of law in
any jurisdiction, the remaining provisions hereof and thereof shall
be severable and enforceable in accordance with their terms, and
all provisions shall remain enforceable in any other
jurisdiction.
Dolphin Digital Media | 2017 Proxy
Statement A-21
ANNEX B
SECOND
AMENDED ARTICLES OF INCORPORATION
Dolphin Digital Media | 2017 Proxy
Statement i
SECOND
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
DOLPHIN
ENTERTAINMENT, INC.
ARTICLE I.
Name,
Principal Place of Business and
Registered
Agent and Office
The name of the
Corporation is Dolphin Entertainment, Inc. The principal
place of business and mailing address of this Corporation shall be
2151 Le Jeune Road, Suite 150-Mezzanine, Coral Gables, Florida
33134.
The street address
of the registered office of this Corporation is Dolphin
Entertainment, Inc., 2151 Le Jeune Road, Suite 150-Mezzanine, Coral
Gables, Florida 33134. The name of the registered agent
of this Corporation at such address is Mirta A.
Negrini.
ARTICLE II.
Purpose
and Powers
The purpose for
which the Corporation is organized is to engage in or transact any
and all lawful activities or business for which a corporation may
be incorporated under the laws of the State of
Florida. The Corporation shall have all of the corporate
powers enumerated in the Florida Business Corporation
Act.
ARTICLE III.
Capital
Stock
A. AUTHORIZED
SHARES
The total number of
shares of all classes of stock that the Corporation shall have the
authority to issue is Four Hundred Ten Million (410,000,000)
shares, of which Four Hundred Million (400,000,000) shares shall be
Common Stock, par value $0.015 per share (“Common
Stock”) and Ten Million (10,000,000) shares shall be
Preferred Stock, having a par value of $0.001 per share
(“Preferred Stock”). The Board of Directors
is expressly authorized to provide for the classification and
reclassification of any unissued shares of Common Stock or
Preferred Stock and the issuance thereof in one or more classes or
series without the approval of the stockholders of the
Corporation. Of the Preferred Stock, 50,000 shares have
been designated Series C Convertible Preferred Stock, par value
$0.001 per share.
On the close of
business on May 10, 2016 (the “Effective Date”), each
twenty (20) shares of Common Stock issued and outstanding or held
by the Corporation in treasury stock immediately prior to the
Effective Date, automatically and without any action on the part of
the respective holders thereof or the Company, was combined and
converted into one (1) share of Common Stock, subject to the
treatment of fractional share interests as described below (the
“Reverse Stock Split”). No fractional shares
of Common Stock were issued in connection with the Reverse Stock
Split. Rather, fractional shares created as a result of
the Reverse Stock Split were rounded up to the next whole number,
such that, in lieu of fractional shares, each shareholder who would
have otherwise been entitled to receive a fractional share of
Common Stock as a result of the Reverse Stock Split was instead
entitled to receive a whole share of Common Stock in respect
thereof.
B. PROVISIONS
RELATING TO COMMON STOCK
1. Relative Rights. The
Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in
the certificate of designations filed to establish the respective
series of Preferred Stock. Except as provided in this
Article III.B, each share of Common Stock shall have the same
relative rights and shall be identical in all respects as to all
matters.
Dolphin Digital Media | 2017 Proxy
Statement B-1
2. Voting Rights. Each
holder of shares of Common Stock shall be entitled to attend all
special and annual meetings of the stockholders of the
Corporation. On all matters upon which stockholders are
entitled or permitted to vote, every holder of Common Stock shall
be entitled to cast one (1) vote in person or by proxy for each
outstanding share of Common Stock standing in such holder’s
name on the transfer books of the Corporation. Holders
of Common Stock shall not possess cumulative voting
rights. Except as otherwise provided in these Articles
of Incorporation or by applicable law, the holders of shares of
Common Stock shall vote subject to any voting rights which may be
granted to holders of Preferred Stock.
3. Dividends. Whenever
there shall have been paid, or declared and set aside for payment,
to the holders of shares of any class of stock having preference
over the Common Stock as to the payment of dividends, the full
amount of dividends and of sinking fund or retirement payments, if
any, to which such holders are respectively entitled in preference
to the Common Stock, and any class or series of stock entitled to
participate therewith as to dividends, shall be entitled to receive
dividends, when, as, and if declared by the Board of Directors, out
of any assets legally available for the payment of dividends
thereon.
4. Dissolution, Liquidation, Winding
Up. In the event of any dissolution, liquidation
or winding up of the Corporation, whether voluntary or involuntary,
the holders of record of the Common Stock then outstanding, and all
holders of any class or series of stock entitled to participate
therewith, in whole or in part, as to distribution of assets, shall
become entitled to participate equally on a per share basis in the
distribution of any assets of the Corporation remaining after the
Corporation shall have paid or provided for payment of all debts
and liabilities of the Corporation, and shall have paid, or set
aside for payment, to the holders of any class of stock having
preference over the Common Stock in the event of dissolution,
liquidation or winding up, the full preferential amounts (if any)
to which they are entitled.
C. PROVISIONS
RELATING TO PREFERRED STOCK
1. Issuance, Designations, Powers,
etc. The Board of Directors expressly is
authorized, subject to limitations prescribed by the Florida
Business Corporation Act and the provisions of these Articles of
Incorporation, to provide, by resolution for the issuance from time
to time of the shares of Preferred Stock in one or more series, to
establish from time to time the number of shares to be included in
each such series, and to fix the designation, powers, preferences
and other rights of the shares of each such series and to fix the
qualifications, limitations and restrictions thereon, including,
but without limiting the generality of the foregoing, the
following:
(a) The number of
shares constituting that series and the distinctive designation of
that series;
(b) The dividend rate
on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of
that series;
(c) Whether that series
shall have voting rights, in addition to the voting rights provided
by law, and, if so, the terms of such voting rights;
(d) Whether that series
shall have conversion privileges, and, if so, the terms and
conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors
shall determine;
(e) Whether or not the
shares of that series shall be redeemable, and, if so, the terms
and conditions of such redemption, including the dates upon or
after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under
different conditions and at different redemption
dates;
(f) Whether that series
shall have a sinking fund for the redemption or purchase of shares
of that series, and, if so, the terms and amount of such sinking
fund;
Dolphin Digital Media | 2017 Proxy
Statement B-2
(g) The rights of the
shares of that series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that
series; and
(h) Any other relative
powers, preferences, and rights of that series, and qualifications,
limitations or restrictions on that series.
2. Dissolution, Liquidation, Winding
Up. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary,
the holders of Preferred Stock of each series shall be entitled to
receive only such amount or amounts as shall have been fixed by the
resolution or resolutions of the Board of Directors providing for
the issuance of such series.
D. PROVISIONS
RELATING TO SERIES C CONVERTIBLE PREFERRED STOCK
1. Designation; Amount Limitation of
Issuances. There shall be a series of Preferred
Stock that shall be designated as “Series C Convertible Preferred
Stock,” and the number of shares constituting such
series shall be 50,000. The number of shares
constituting the Series C Convertible Preferred Stock may be
increased or decreased by resolution of the Board of Directors;
provided,
however, that no
decrease shall reduce the number of shares of Series C Convertible
Preferred Stock to less than the number of shares then issued and
outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Company.
The Company may
issue shares of Class C Preferred Stock only to an Eligible Class C
Preferred Stock Holder, who may transfer such shares only to
another Eligible Class C Preferred Stock Holder.
2. Definitions.
Unless the context
otherwise requires, each of the terms defined in this Section 2
shall have, for all purposes of this Certificate of Designation,
the meaning herein specified (with terms defined in the singular
having comparable meanings when used in the plural):
“Articles of
Incorporation” means the Company’s Articles of
Incorporation, as in effect on the date of this Certificate of
Designation.
“Board of
Directors” means the Board of Directors of the
Company.
“Business
Day” means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or
required by law to close.
“By-Laws”
means the Company’s By-Laws, as amended, as in effect on the
date of this Certificate of Designation.
“Capital
Stock” means any and all shares, interests, participations or
other equivalents in the equity interest (however designated) in
the Company.
“Common Share
Equivalents” means securities, options, warrants,
derivatives, debt instruments or other rights convertible into, or
exercisable or exchangeable for, or entitling the holder thereof to
receive directly or indirectly, Common Stock.
“Common
Stock” means the common stock, $0.015 par value per share, of
the Company or any other Capital Stock into which such shares of
common stock shall be reclassified or changed.
“Common Stock
Transfer Agent” has the meaning set forth in Section 6(c)
hereof.
Dolphin Digital Media | 2017 Proxy
Statement B-3
“Company’s
Organizational Documents” means the Articles of
Incorporation, this Certificate of Designations, any other
certificate of designations issued pursuant to the Articles of
Incorporation, and the By-Laws.
“Conversion
Number” has the meaning set forth in Section 6(a)
hereof.
“Conversion
Shares” has the meaning set forth in Section 6(a)
hereof.
“Converted
Shares” has the meaning set forth in Section 6(c)
hereof.
“Converting
Shares” has the meaning set forth in Section 6(c)
hereof.
“Dilutive
Issuance” has the meaning set forth in Section 6(i)
hereof.
“Eligible
Class C Preferred Stock Holder” means any of (i) Dolphin
Entertainment, Inc., for so long as Bill O’Dowd continues to
beneficially own at least 90% and serves at the board of directors
or other governing entity, (ii) any other entity that Bill
O’Dowd beneficially owns more than 90%, or a trust for the
benefit of others, for which Bill O’Dowd serves as trustee
and (iii) Bill O’Dowd individually.
“Holders”
means the record holders of the shares of Series C Convertible
Preferred Stock, as shown on the books and records of the
Company.
“Junior
Stock” has the meaning set forth in Section 3
hereof.
“Liquidation
Event” means (i) any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, (ii) the consummation of
a merger or consolidation in which the stockholders of the Company
prior to such transaction own less than a majority of the voting
securities of the entity surviving such transaction, or (iii) the
sale, distribution or other disposition of all or substantially all
of the Company’s assets.
“Liquidation
Preference” has the meaning set forth in Section 5(a)
hereof.
“Market
Price” means the last reported sale price of the Common Stock
on the primary U.S. national securities exchange, automated
quotation system or inter-dealer quotation system upon which the
Common Stock is then traded or quoted.
“Optional
Conversion Threshold” shall mean that the Company has
accomplished, as determined by the vote of the majority of the
independent directors of the Board in its sole discretion, any of
the following (i) EBITDA of more than $3.0 million in any calendar
year, (ii) production of two feature films, (iii) production and
distribution of at least three web series, (iv) theatrical
distribution in the United States of one feature film, or (v) any
combination thereof that is subsequently approved by the majority
of the independent directors of the Board based on the strategic
plan approved by the Board.
“Parity
Stock” has the meaning set forth in Section 3
hereof.
“Person”
includes all natural persons, corporations, business trusts,
limited liability companies, associations, companies, partnerships,
joint ventures and other entities, as well as governments and their
respective agencies and political subdivisions.
“Senior
Stock” has the meaning set forth in Section 3
hereof.
“Series C
Convertible Preferred Stock” has the meaning set forth in
Section 1 hereof.
“Stated
Value” means $0.001 per share of Series C Convertible
Preferred Stock, as may be adjusted for any stock split, reverse
stock split, dividend or similar event relating to the Series C
Convertible Preferred Stock.
Dolphin Digital Media | 2017 Proxy
Statement B-4
“Transfer
Agent” means the entity designated from time to time by the
Company to act as the registrar and transfer agent for the Series C
Convertible Preferred stock or, if no entity has been so designated
to act in such capacity, the Company.
3. Ranking.
The Series C
Convertible Preferred Stock shall, with respect to rights on the
liquidation, winding-up and dissolution of the Company (as provided
in Section 5 below), rank (a) senior to all classes of Common Stock
and to each other class of Capital Stock or series of Preferred
Stock established hereafter by the Board of Directors the terms of
which expressly provide that such class ranks junior to the Series
C Convertible Preferred Stock as to rights on the liquidation,
winding-up and dissolution of the Company (collectively referred to
as the “Junior
Stock”), (b) on a parity with each other class of
Capital Stock or series of Preferred Stock established hereafter by
the Board of Directors as to rights on the liquidation, winding-up
and dissolution of the Company (collectively referred to as the
“Parity
Stock”) and (c) junior to any future class of
Preferred Stock established hereafter by the Board of Directors,
the terms of which expressly provide that such class ranks senior
to the Series C Convertible Preferred Stock as to rights on the
liquidation, winding-up and dissolution of the Company
(collectively referred to as the “Senior
Stock”).
The Series C
Convertible Preferred Stock shall, with respect to rights to
dividends (as provided in Section 4 below), rank on a parity with
each class of Common Stock.
4. Dividends.
The Company shall
not declare, pay or set aside any dividends on shares of Common
Stock (other than dividends on shares of Common Stock payable
solely in shares of Common Stock) unless (in addition to the
obtaining of any consents required elsewhere in the Company’s
Organizational Documents) the Holders simultaneously receive a
dividend on each outstanding share of Series C Convertible
Preferred Stock in an amount equal to that dividend per share of
Series C Convertible Preferred Stock as would equal the product of
the dividend payable on each share of Common Stock and the number
of shares of Common Stock then issuable upon conversion of one
share of Series C Convertible Preferred Stock, in each case
calculated on the record date for determination of holders entitled
to receive such dividend and without regard to any limitation on
conversion set forth in Section 6(b) hereof.
5. Liquidation
Preference.
(a) Except as otherwise
provided in Section 6(h), upon any Liquidation Event, each Holder
shall be entitled to be paid out of the assets of the Company
available for distribution to its stockholders, on account of each
share of Series C Convertible Preferred Stock held by such Holder,
(i) prior to the holders of any class or series of Common Stock and
Junior Stock, (ii) pro rata with the holders of any Parity Stock
and (iii) after the holders of any Senior Stock, an amount (such
amount, the “Liquidation Preference”)
equal to the Stated Value.
(b) Except as otherwise
provided in Section 6(h), upon any Liquidation Event, after the
payment of the Liquidation Preference the remaining assets of the
Company available for distribution to its stockholders shall be
distributed first to satisfy any preference of any other Preferred
Stock that was junior to the Series C Convertible Preferred Stock
and then among the Holders and the holders of the shares of Capital
Stock, pro rata, based on the number of shares held by each such
holder, treating for this purpose all such securities as if they
had been converted to Common Stock pursuant to the terms of this
Certificate of Designation (or any other applicable certificate of
designation) immediately prior to such Liquidation Event without
regard to any limitation on conversion set forth in Section 6(b)
hereof.
Dolphin Digital Media | 2017 Proxy
Statement B-5
6. Conversion.
(a) Holder’s Right to
Convert. Upon the Board’s determination
that an Optional Conversion Threshold has been met, subject to the
provisions of Section 6(c) hereof, each Holder shall have the
right, upon the delivery of a written notice to the Company, to
convert any share of Series C Convertible Preferred Stock held by
it into that number of fully paid and nonassessable shares of
Common Stock (“Conversion Shares”) equal
to the Conversion Number at the time in effect. Any
Holder may convert all or less than all of the shares of Series C
Convertible Preferred Stock held by it at any time after such
determination. Any Holder’s conversion of shares
of Series C Convertible Preferred Stock under this Section 6(a)
shall not be effective unless such Holder has also complied with
the provisions set forth in Section 6(c) hereof at the time of
delivery of its aforesaid written notice to the
Company. The initial “Conversion Number” per
share of Series C Convertible Preferred Stock shall be one (1);
provided, however, that the Conversion Number in effect from time
to time shall be subject to adjustment as provided
hereinafter.
(b) Automatic
Conversion. The Class C Preferred Stock shall
automatically be converted upon the occurrence of any of the
following events:
(i) Each outstanding
share of Class C Preferred Stock which is transferred to any holder
other than an Eligible Class C Preferred Stock Holder shall
automatically convert into that number of fully paid and
nonassessable Conversion Shares equal to the Conversion Number at
the time in effect.
(ii) If the aggregate
number of shares of Common Stock plus Conversion Shares (issuable
upon conversion of the Class B Convertible Preferred Stock and the
Class C Convertible Preferred Stock) held by the Eligible Class C
Preferred Stock Holders in the aggregate constitute 10% or less of
the sum of (x) the outstanding shares of Common Stock of the
Company plus (y) all Conversion Shares held by the Eligible Class C
Preferred Stock Holders, then each outstanding Class C Convertible
Preferred Stock then outstanding will automatically convert into
that number of fully paid and nonassessable Conversion Shares equal
to the Conversion Number at the time in effect.
(iii) At such time as a
Holder of Class C Preferred Stock ceases to be an Eligible Class C
Preferred Stock Holder, each share of Class C Preferred Stock held
by such person or entity shall immediately convert into that number
of fully paid and nonassessable Conversion Shares equal to the
Conversion Number at the time in effect.
(c) Conversion
Procedures. Each conversion of shares of Series C
Convertible Preferred Stock into shares of Common Stock shall be
effected by the surrender of the certificate(s) evidencing the
shares of Series C Convertible Preferred Stock to be converted (the
“Converting
Shares”) at the principal office of the Company (or
such other office or agency of the Company as the Company may
designate by notice in writing to the Holders of the Series C
Convertible Preferred Stock) at any time during its usual business
hours, together with written notice by the holder of such
Converting Shares, (i) stating that the Holder desires to convert
the Converting Shares, or a specified number of such Converting
Shares, evidenced by such certificate(s) into shares of Common
Stock (the “Converted Shares”), and
(ii) giving the name(s) (with addresses) and denominations in which
the Converted Shares should either be registered with the
Company’s transfer agent and registrar for the Common Stock
(the “Common Stock
Transfer Agent”) on its records in book-entry form
under The Direct Registration System or certificated, and, in
either case, instructions for the delivery of a statement
evidencing book-entry ownership of the Converted Shares or the
certificates evidencing the Converted Shares. Upon
receipt of the notice described in the first sentence of this
Section 6(c), together with the certificate(s) evidencing the
Converting Shares, the Company shall be obligated to, and shall,
cause to be issued and delivered in accordance with such
instructions, as applicable, either (x) a statement from the Common
Stock Transfer Agent evidencing ownership of the Converted Shares,
registered in the name of the Holder or its designee on the Common
Stock Transfer Agent’s records in book-entry form under The
Direct Registration System or (y) certificate(s) evidencing the
Converted Shares and, if applicable, a certificate (which shall
contain such applicable legends, if any, as were set forth on the
surrendered certificate(s)) representing any shares which were
represented by the certificate(s) surrendered to the Company in
connection with such conversion but which were not Converting
Shares and, therefore, were not converted. All or some
Converted Shares so issued whether in book-entry form under the
Direct Registration System or in certificated form may be subject
to restrictions on transfer as required by applicable federal and
state securities laws. Any such Converted Shares subject
to restrictions on transfer under applicable federal and state
securities laws shall be encumbered by stop transfer orders and
restrictive legends (or equivalent encumbrances). Such
conversion, to the extent permitted by law, shall be deemed to have
been effected as of the close of business on the date on which such
certificate(s) shall have been surrendered and such written notice
shall have been received by the Company unless a later date has
been specified by such Holder, and at such time the rights of the
Holder of such Converting Shares as such Holder shall cease, and
the Person(s) in whose name or names the Converted Shares are to be
issued either in book-entry form or certificated form, as
applicable, upon such conversion shall be deemed to have become the
holder(s) of record of the Converted Shares.
Dolphin Digital Media | 2017 Proxy
Statement B-6
(d) Effect of
Conversion. Upon the issuance of the Converted
Shares in accordance with Section 6, such shares shall be deemed to
be duly authorized, validly issued, fully paid and
non-assessable.
(e) Adjustments for Common Stock Dividends
and Distributions. If the Company at any time or
from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of
Common Stock, in each such event the Conversion Number then in
effect shall be increased as of the time of such issuance or, in
the event such record date is fixed, as of the close of business on
such record date, by multiplying the Conversion Number then in
effect by a fraction (i) the numerator of which is the total number
of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution and (ii) the denominator
of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the
close of business on such record date. To the extent an
adjustment is made in respect of the foregoing pursuant to Section
6(f) or the Holder actually receives the dividend to which any such
adjustment relates, an adjustment shall not be made pursuant to
this Section 6(e).
(f) Conversion Number Adjustments for
Subdivisions, Combinations or Consolidations of Common
Stock.
(i) In the event the
Company should at any time or from time to time fix a record date
for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of shares of
Common Stock entitled to receive a dividend or other distribution
payable in additional Common Share Equivalents, without payment of
any consideration by such holder for additional Common Share
Equivalents (including the additional Common Stock issuable upon
conversion, exchange or exercise thereof), then, as of such record
date (or the date of such dividend, distribution, split or
subdivision if no record date is fixed), the Conversion Number then
in effect shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each such share of
such Series C Convertible Preferred Stock shall be increased in
proportion to such increase of outstanding shares of Common Stock
and shares issuable with respect to Common Share
Equivalents.
(ii) If the number of
shares of Common Stock outstanding at any time is decreased by a
combination, consolidation, reclassification or reverse stock split
of the outstanding shares of Common Stock or other similar event,
then, following the record date of such combination, the Conversion
Number then in effect shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each
such share of such Series C Convertible Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares of
Common Stock.
(g) Recapitalizations. If
at any time or from time to time there shall be a recapitalization
of the Common Stock (other than a subdivision, combination, merger
or sale of assets transaction provided for elsewhere in this
Section 6), provision shall be made so that the Holders shall
thereafter be entitled to receive upon conversion of the Series C
Convertible Preferred Stock the number of shares of Capital Stock
or other securities or property of the Company to which a holder of
Common Stock would have been entitled on
recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of
this Section 6 with respect to the rights of the Holders after the
recapitalization to the end that the provisions of this Section 6
(including adjustment of the Conversion Number then in effect and
the number of shares issuable upon conversion of the Series C
Convertible Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
(h) Mergers and Other
Reorganizations. If at any time or from time to
time there shall be a reclassification of the Common Stock (other
than a subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section 6) or a merger or
consolidation of the Company with or into another entity or the
sale of all or substantially all of the Company’s properties
and assets to any other Person, then, as a part of and as a
condition to the effectiveness of such reclassification, merger,
consolidation or sale, lawful and adequate provision shall be made
so that the Holders shall thereafter be entitled to receive upon
conversion of the Series C Convertible Preferred Stock the number
of shares of Capital Stock or other securities or property, if any,
of the Company or of the successor entity resulting from such
reclassification, merger or consolidation or sale, to which a
holder of Common Stock deliverable upon conversion would have been
entitled in connection with such reclassification, merger,
consolidation or sale. In any such case, appropriate
provision shall be made with respect to the rights of the Holders
after the reclassification, merger, consolidation or sale to the
end that the provisions of this Section 6 (including, without
limitation, provisions for adjustment of the Conversion Number and
the number of shares purchasable upon conversion of the Series C
Convertible Preferred Stock) shall thereafter be applicable, as
nearly as may be, with respect to any shares of Capital Stock,
securities or property to be deliverable thereafter upon the
conversion of the Series C Convertible Preferred
Stock.
Dolphin Digital Media | 2017 Proxy
Statement B-7
Each Holder, upon
the occurrence of a reclassification, merger or consolidation of
the Company or the sale of all or substantially all its assets and
properties, as such events are more fully set forth in the first
paragraph of this Section 6(h), shall have the option of electing
treatment of its shares of Series C Convertible Preferred Stock
under either this Section 6(h) or Section 5 hereof, notice of which
election shall be submitted in writing to the Company at its
principal offices no later than ten (10) days before the effective
date of such event, provided that any such notice of election shall
be effective if given not later than fifteen (15) days after the
date of the Company’s notice pursuant to Section 6(i) hereof
with respect to such event, and, provided, further, that if any
Holder fails to give the Company such notice of election, the
provisions of this Section 6(h) shall govern the treatment of such
Holder’s shares of Series C Convertible Preferred Stock upon
the occurrence of such event.
(i) Issuances of Common
Stock. If the Company, prior to the fifth (5th)
anniversary of the issuance of the first share of Series C
Convertible Preferred Stock issues shares of Common Stock (but not
upon the issuance of Common Stock Equivalents) either (i) upon the
conversion or exercise of any instrument currently or hereafter
issued (but not upon the conversion of the Series C Convertible
Preferred Stock), (ii) upon the exchange of debt for shares of
common stock or (iii) in a private placement (a “Dilutive Issuance”), then
the Conversion Number shall be adjusted to equal then the
Conversion Number shall be adjusted to equal the sum of the amounts
created by each individual Dilutive Issuance, wherein for each
Dilutive Issuance the amount is determined from the result
of:
1)
The Product of the
number of shares of Common Stock owned by the Eligible Series C
Preferred Holder upon the issuance of the first share of Series C
Convertible Preferred Stock divided by the aggregate number of
shares of Common Stock outstanding upon the issuance of the first
share of Series C Convertible Preferred Stock;
2)
Then this Product
Multiplied by the
individual Dilutive Issuance;
3)
Then this Product
Divided by the amount
created when the percentage created in step one is Subtracted from 100
percent;
4)
Then this Product
Divided by the number of
shares of Series C Convertible Preferred Stock then
outstanding.
(j) Notices of Record
Date. In the event (i) the Company fixes a
record date to determine the holders of Common Stock who are
entitled to receive any dividend or other distribution, or
(ii) there occurs any capital reorganization of the Company,
any reclassification or recapitalization of the Common Stock of the
Company, any merger or consolidation of the Company, or any
voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each Holder at least ten
(10) days prior to the record date specified therein, a notice
specifying (a) the date of such record date for the purpose of
such dividend or distribution and a description of such dividend or
distribution, (b) the date on which any such reorganization,
reclassification, consolidation, merger, dissolution, liquidation
or winding up is expected to become effective, and (c) the
time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock or other securities) for securities or
other property deliverable upon such reorganization,
reclassification, consolidation, merger, dissolution, liquidation
or winding up.
(k) No Impairment. The
Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such actions as may be necessary
or appropriate in order to protect the conversion rights of the
Holders against impairment.
(l) Fractional Shares and Certificate as
to Adjustments. In lieu of any fractional shares
to which a Holder would otherwise be entitled upon conversion, the
Company shall pay cash equal to such fraction multiplied by the
Market Price of one share of Common Stock, as determined in good
faith by the Board of Directors. Whether or not
fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series C
Convertible Preferred Stock of each Holder at the time converting
into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
Dolphin Digital Media | 2017 Proxy
Statement B-8
Upon the occurrence
of each adjustment or readjustment of the Conversion Number of any
share of Series C Convertible Preferred Stock pursuant to this
Section 6, the Company, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any Holder,
furnish or cause to be furnished to such Holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the
Conversion Number at the time in effect, and (C) the number of
shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of such
Holder’s shares of Series C Convertible Preferred
Stock. The provisions of Section 6(e), (f), (g), (h) and
(i) shall apply to any transaction and successively to any series
of transactions that would require any adjustment pursuant
thereto.
(m) Reservation of Stock Issuable Upon
Conversion. The Company shall at all times
reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series C Convertible Preferred Stock(taking into
account the adjustments required by this Section 6), such number of
its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series C
Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares
of the Series C Convertible Preferred Stock, in addition to such
other remedies as shall be available to the Holders, the Company
will, as soon as is reasonably practicable, take all such action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
7. Voting Rights. Upon
the Board’s determination that an Optional Conversion
Threshold has been met, each Holder, except as otherwise required
under the FBCA or as set forth herein, shall be entitled or
permitted to vote on all matters required or permitted to be voted
on by the holders of Common Stock of the Company and shall be
entitled to that number of votes equal to three votes for the
number of Conversion Shares into which such Holder’s shares
of the Series C Convertible Preferred Stock could then be
converted, pursuant to the provisions of Section 6 hereof, at the
record date for the determination of stockholders entitled to vote
on such matter or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is
solicited. Except as otherwise expressly provided herein or as
otherwise required by law, the Series C Convertible Preferred Stock
and the Common Stock shall vote together (or render written
consents in lieu of a vote) as a single class on all matters upon
which the Common Stock is entitled to vote.
8. Reissuance of Shares of Series C
Convertible Preferred Stock.
Shares of Series C
Convertible Preferred Stock that have been issued and reacquired in
any manner, including shares purchased, redeemed, converted or
exchanged, shall (upon compliance with any applicable provisions of
the FBCA) be permanently retired or cancelled and shall not under
any circumstances be reissued. The Company shall from
time to time take such appropriate action as may be required by
applicable law to reduce the authorized number of shares of Series
C Convertible Preferred Stock by the number of shares that have
been so reacquired.
9. Notices.
Any and all
notices, consents, approval or other communications or deliveries
required or permitted to be provided under this Certificate of
Designation shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of receipt, if such
notice, consent, approval or other communication is delivered by
hand (with written confirmation of receipt) or via facsimile to the
Company or the Holders, as applicable, at the facsimile number
specified in the register of Holders of Series C Convertible
Preferred Stock maintained by the Transfer Agent prior to 5:00 p.m.
(New York City time) on a Business Day, (b) the next Business Day
after the date of receipt, if such notice, consent, approval or
other communication is delivered via facsimile to the Company or
the Holder, as applicable, at the facsimile number specified in the
register of Holders of Series C Convertible Preferred Stock
maintained by the Transfer Agent on a day that is not a Business
Day or later than 5:00 p.m. (New York City time) on any Business
Day, or (c) the third Business Day following the date of deposit
with a nationally recognized overnight courier service for next
Business Day delivery and addressed to the Company or the Holder,
as applicable, at the address specified in the register of Holders
of Series C Convertible Preferred Stock maintained by the Transfer
Agent.
Dolphin Digital Media | 2017 Proxy
Statement B-9
10. Headings.
The headings of the
various sections and subsections hereof are for convenience of
reference only and shall not affect the interpretation of any of
the provisions hereof.
11. Severability of
Provisions.
If any powers,
preferences and relative, participating, optional and other special
rights of the Series C Convertible Preferred Stock and the
qualifications, limitations and restrictions thereof set forth in
this Certificate of Designation (as it may be amended from time to
time) is invalid, unlawful or incapable of being enforced by reason
of any rule or law or public policy, all other powers, preferences
and relative, participating, optional and other special rights of
the Series C Convertible Preferred Stock and the qualifications,
limitations and restrictions thereof set forth in this Certificate
of Designation (as so amended) which can be given effect without
the invalid, unlawful or unenforceable powers, preferences and
relative, participating, optional and other special rights of the
Series C Convertible Preferred Stock and the qualifications,
limitations and restrictions thereof shall, nevertheless, remain in
full force and effect, and no powers, preferences and relative,
participating, optional or other special rights of the Series C
Convertible Preferred Stock and the qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent
upon any other such powers, preferences and relative,
participating, optional or other special rights of Preferred Stock
and qualifications, limitations and restrictions thereof unless so
expressed herein.
ARTICLE IV.
Existence
The Corporation
shall exist perpetually unless sooner dissolved according to
law.
ARTICLE V.
Management
of the Corporation
The following
provisions are inserted for the management of the business and the
conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the
Corporation and of its directors and shareholders:
A. BOARD
OF DIRECTORS
The business and
affairs of the Corporation shall be managed by or under the
direction of the Board of Directors. In addition to the
powers and authority expressly conferred upon them by Statute or by
these Articles of Incorporation or the Bylaws of the Corporation,
the directors are hereby empowered to exercise all such powers and
do all such acts and things as may be exercised or done by the
Corporation. A director shall hold office until the
annual meeting of the shareholders or until his successors shall be
elected and qualified, subject, however, to the director’s
prior death, resignation, retirement, disqualification or removal
from office.
B. SPECIAL
MEETINGS CALLED BY BOARD OF DIRECTORS OR SHAREHOLDERS
Special Meetings of
Shareholders of the Corporation may be called by the Board of
Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board for adoption) (the
“Full Board”), or by the holders of not less than forty
percent (40%) of all the votes entitled to be cast on any issue at
the proposed special meeting if such holders of stock sign, date
and deliver to the Corporation’s Secretary one or more
written demands for the meeting describing the purpose or purposes
for which the special meeting is to be held. The Bylaws
of the Corporation shall fully set forth the manner in which
Special Meetings of Shareholders of the Corporation may be
called.
Dolphin Digital Media | 2017 Proxy
Statement B-10
ARTICLE VI.
Number
of Directors
The number of
directors may be either increased or diminished from time to time
in the manner provided in the Bylaws, but shall never be less than
one (1).
ARTICLE VII.
Indemnification
Provided the person
proposed to be indemnified satisfies the requisite standard of
conduct for permissive indemnification by a corporation as
specifically set forth in the applicable provisions of the Florida
Business Corporation Act (currently, Section 607.0850(7) of the
Florida Statutes), as the same may be amended from time to time,
the Corporation shall indemnify its officers and directors, and may
indemnify its employees and agents, to the fullest extent provided,
authorized, permitted or not prohibited by the provisions of the
Florida Business Corporation Act and the Bylaws of the Corporation,
as the same may be amended and supplemented, from and against any
and all of the expenses or liabilities incurred in defending a
civil or criminal proceeding, or other matters referred to in or
covered by said provisions, including advancement of expenses prior
to the final disposition of such proceedings and amounts paid in
settlement of such proceedings, both as to action in his or her
official capacity and as to action in another capacity while an
officer, director, employee or other agent. The
indemnification provided for herein shall not be deemed exclusive
of any other rights to which those indemnified may be entitled
under any bylaw, agreement, vote of shareholders or Disinterested
Directors or otherwise. Such indemnification shall
continue as to a person who has ceased to be a director, officer,
employee or agent, and shall inure to the benefit of the heirs and
personal representatives of such a person. Except as
otherwise required by law, an adjudication of liability shall not
affect the right to indemnification for those
indemnified.
ARTICLE VIII.
Amendment
The Corporation
reserves the right to amend or repeal any provision contained in
these Articles of Incorporation in the manner prescribed by the
laws of the State of Florida and all rights conferred upon
shareholders are granted subject to this reservation.
Dolphin Digital Media | 2017 Proxy
Statement B-11
Dolphin Digital Media, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - JUNE 29, 2017 AT 11:00 AM
EST
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CONTROL ID:
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REQUEST ID:
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The
undersigned shareholder(s) of Dolphin Digital Media, Inc., a
Florida corporation (the “Company”), hereby
acknowledge(s) receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement of the Company, each dated on or
around May 19, 2017, and hereby appoint(s) William O’Dowd, IV
(the “Proxy”) proxy and attorney-in-fact, with full
power of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2017 Annual
Meeting of Shareholders of the Company, to be held on June 29,
2017, at 11:00 a.m. local time at the law offices of Greenberg
Traurig, located at 333 S.E. 2nd Avenue, Suite 4400, Miami, FL
33131, and at any adjournment or postponement thereof, and to vote
all shares of the Company that the undersigned would be entitled to
vote if then and there personally present, on the matters set forth
on the reverse side, and all such other business as may properly
come before the meeting. You hereby revoke all proxies previously
given.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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FAX:
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Complete the
reverse portion of this Proxy Card and Fax to 202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/DPDM
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL MEETING OF THE SHAREHOLDERS OF DOLPHIN DIGITAL MEDIA,
INC.
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PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE: ☒
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS A
VOTE “FOR
ALL” FOR PROPOSAL 1 AND “FOR” PROPOSALS 2, 3 AND 4
BELOW
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Proposal 1
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FOR ALL
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AGAINST
ALL
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FOR ALL
EXCEPT
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Election of Directors:
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☐
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William
O’Dowd, IV
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☐
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Michael
Espensen
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☐
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CONTROL ID:
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Nelson
Famadas
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☐
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REQUEST ID:
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Allan
Mayer
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☐
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Mirta
A. Negrini
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☐
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Justo
Pozo
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☐
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Nicholas
Stanham, Esq.
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☐
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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Approve the Dolphin Digital Media, Inc. 2017 Equity Incentive
Plan.
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☐
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☐
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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Approve the Second Amended and Restated Articles of
Incorporation.
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☐
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☐
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☐
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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Ratify the selection of BDO USA, LLP as our independent registered
public accounting firm for the 2017 fiscal year.
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☐
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☐
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MARK “X” HERE IF YOU PLAN
TO ATTEND THE MEETING: ☐
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Note: Such other business as
may properly come before the Annual Meeting and any adjournment or
postponement thereof.
This proxy, when properly executed will be voted as provided above,
or if no contrary direction is indicated, it will be voted
“For All” for Proposal 1 and “For”
Proposals 2, 3 and 4, and for all such other business as may
properly come before the meeting in the sole determination of the
Proxy.
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MARK HERE FOR ADDRESS CHANGE ☐ New Address (if applicable):
__________________________
__________________________
__________________________
IMPORTANT: Please sign exactly
as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
Dated: ________________________, 2017
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(Print Name of Shareholder and/or Joint Tenant)
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(Signature of Shareholder)
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(Second Signature if held jointly)
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