WASHINGTON, D.C. 20549
Remark Holdings, Inc.
800 S. Commerce St.
The accompanying proxy statement sets forth additional information regarding the AnnualSpecial Meeting, and provides you with detailed information regarding the business to be considered at the AnnualSpecial Meeting. We encourage you to read the proxy statement carefully and in its entirety.
REMARK HOLDINGS, INC.
800 S. Commerce St.
Remark Holdings, Inc. (“Remark,” “we,” “us” or “our”), is making this proxy statement (this(the “Proxy Statement”) available to you on or about April 29, 2022 in connection with the solicitation of proxies by our board of directors (the “Board” or “Board of Directors”) for our 2022 AnnualSpecial Meeting of Stockholders (the “Annual“Special Meeting”). The proxy materials, which you can find at www.envisionreports.com/MARK, include theThis Proxy Statement our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”), and the accompanying notice and form of proxy. References in the Proxy Statementproxy are first being mailed to the Annual Meeting also refer to any adjournments, postponementsstockholders on or changes in location of the meeting, to the extent applicable.about October 24, 2022.
Pursuant to the rules of the Securities and Exchange Commission (the “SEC”), we are providing access to our proxy materials over the Internet rather than printing and mailing them to all stockholders. We believe electronic delivery will expedite the receipt of these materials, reduce the environmental impact of our annualspecial meeting materials and will help lower our costs. Therefore, we are mailing a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) to stockholders (or e-mailing, in the case of stockholders that have previously requested to receive proxy materials electronically) starting on or about April 29,October 24, 2022. The Notice of Internet Availability will provide instructions as to how stockholders may access and review the proxy materials on the website referred to in the Notice of Internet Availability or, alternatively, how to request that a copy of the proxy materials, including a proxy card, be sent to them by mail. The Notice of Internet Availability will also provide voting instructions. In addition, stockholders may request to receive the proxy materials in printed form by mail or electronically by e-mail on an ongoing basis for future stockholder meetings. Please note that, although our proxy materials are available on our website, no other information contained on the website is incorporated by reference in or considered to be a part of this Proxy Statement.
All Stockholders are entitled to cast one vote per share on all matters. Please follow the voting instructions provided on the Notice of Internet Availability.proxy card or voting instruction card. If you choose to vote your shares at the AnnualSpecial Meeting by proxy and you indicate your voting choices, your shares will be voted as you instructed. If you execute a proxy without indicating your vote, your shares will be voted in accordance with the Board’s recommendations noted in the table above and in accordance with the best judgment of the named proxies on any other matters properly brought before the AnnualSpecial Meeting.
If you are a registered Stockholder, we must receive your vote by proxy before the polls close at the Annual Meeting, except that votes submitted via the Internet or telephone must be received by 1:00 p.m. ET on June 15, 2022.Special Meeting.
If you are the beneficial owner of shares of our Common Stock, please follow the instructions provided by your broker or nominee regarding how to provide your voting instructions. Because a beneficial owner is not the stockholder of record, you may not vote these shares in personvirtually at the meeting unless you obtain a “legal proxy”
If you do not provide voting instructions to your broker or nominee, they can still vote your shares with respect to certain “discretionary” items, but they cannot vote your shares with respect to certain “non-discretionary” items. The proposal to ratify the appointment of Weinberg as our independent registered public accounting firm for fiscal 2022Reverse Stock Split Proposal is considered a discretionary item while the election of directors and other proposals aretherefore, your broker or nominee will be able to vote your shares at its discretion with respect to such proposal if you do not provide voting instructions on such proposal and there will not be any broker non-votes with respect to such proposal. The Nasdaq Proposal is a non-discretionary items.item. Regarding non-discretionary items, the number of shares for which you do not provide voting instructions to your broker or nominee will be counted as “broker non-votes”.non-votes.” Broker non-votes are shares which are held on behalf of a beneficial owner by a broker or nominee which indicates on its proxy that it did not have or did not exercise discretionary authority to vote on a particular matter. In tabulating the voting results for the Nasdaq Proposal, shares that constitute broker non-votes will have no effect on the outcome of the proposals,proposal, assuming that a quorum is present. You may vote your beneficially-owned shares in personvirtually at the AnnualSpecial Meeting only if at the AnnualSpecial Meeting you present a legal proxy provided to you by your broker or nominee.
Proxy instructions, ballots and voting tabulations that identify individual Stockholders are handled in a manner that protects the voting privacy of such individual Stockholders. Stockholders’ votes will not be disclosed either within Remark or to third parties, except: (1) as necessary to meet applicable legal requirements; (2) to allow for the tabulation of votes and certification of the vote; and (3) to facilitate a successful proxy solicitation.
If you are a registered Stockholder, you may revoke your proxy and your voting instructions at any time before it is voted at the AnnualSpecial Meeting by:
If you are the beneficial owner of shares of our Common Stock, you may submit new voting instructions by contacting your broker or nominee. You may also vote via the Internet at the AnnualSpecial Meeting as described in the previous section. Virtual attendance at the AnnualSpecial Meeting will not, by itself, revoke a proxy.
The following table and paragraphs set forth information regarding our executive officers and directors, including the business experience for the past five years (and, in some instances, for prior years) of each such executive officer and director.
| | | | | | | | |
| | | | 3 | |
Name | | Age | | Position |
Kai-Shing Tao | | 45 | | Chief Executive Officer and Chairman of the Board |
Theodore P. Botts | | 76 | | Director and Chairman of the Audit Committee |
Elizabeth Xu | | 57 | | Director |
Brett Ratner | | 53 | | Director and Chairman of the Compensation Committee |
Daniel Stein | | 46 | | Director and Chairman of the Nominating and Governance Committee |
advantageous to our Company and our stockholders. Notwithstanding approval of the Reverse Stock Split Proposal by our stockholders, our Board of Directors will have the sole authority to elect whether, and when, to amend our Certificate of Incorporation to effect the Reverse Stock Split. If the Reverse Stock Split Proposal is approved by our stockholders, our Board of Directors will make a determination as to whether effecting the Reverse Stock Split is in the best interests of our Company and our stockholders in light of, among other things, our ability to increase the trading price of our Common Stock to meet the minimum per share bid price requirement of the Nasdaq Capital Market without effecting the Reverse Stock Split, the per share price of the Common Stock immediately prior to the Reverse Stock Split and the expected stability of the per share price of the Common Stock following the Reverse Stock Split. If our Board of Directors determines that it is in the best interests of our Company and our stockholders to effect the Reverse Stock Split, it will hold a board meeting to determine the exact ratio of the Reverse Stock Split.
The text of the proposed amendment to the Certificate of Incorporation to effect the Reverse Stock Split is included as Annex A to this proxy statement (the “Charter Amendment”). If the Reverse Stock Split Proposal is approved by our stockholders, we will have the authority to file the Charter Amendment with the Secretary of State of the State of Delaware, which will become effective upon its filing; provided, however, that the Charter Amendment is subject to revision to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as our Board of Directors deems necessary and advisable. Our Board of Directors has determined that the Charter Amendment is advisable and in the best interests of our company and our stockholders and has submitted the Charter Amendment for consideration by our stockholders at the Special Meeting.
Executive Officer
Kai-Shing Tao has served as our Chief Executive Officer since December 2012, previously serving as Co-Chief Executive Officer since October 2012, and as a member of our Board since 2007 and Chairman ofReasons for the Board since October 2012. Mr. Tao also has served as Chairman and Chief Investment Officer of Pacific Star Capital Management, L.P. (“Pacific Star Capital”), a private investment group, since January 2004. Prior to founding Pacific Star Capital, Mr. Tao was a Partner at FALA Capital Group, a single-family investment office, where he headed the global liquid investments outside the operating companies. Mr. Tao has been a director of Paradise Entertainment Limited (SEHK: 1180), a Hong-Kong-Stock-Exchange-traded company engaged in casino services and the development, supply and sales of electronic gaming systems, since April 2014. Mr. Tao previously was a director of Playboy Enterprises, Inc. from May 2010 to March 2011. Mr. Tao is a graduate of the New York University Stern School of Business.Proposed Reverse Stock Split
Non-Employee DirectorsWe are submitting this proposal to our stockholders for approval to increase the trading price of our Common Stock to meet the minimum per share bid price requirement and avoid the delisting of our Common Stock from The Nasdaq Stock Market (“Nasdaq”).
Theodore P. Botts has served asOn February 25, 2022, we received written notice from Nasdaq’s Listing Qualifications Department notifying us that, for a memberperiod of 30 consecutive business days, the bid price of our Board since 2007. Mr. Botts has beenCommon Stock had closed below the Presidentminimum of Kensington Gate$1.00 per share required for continued listing on the Nasdaq Capital LLC,Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we had 180 calendar days, or until August 24, 2022, to regain compliance with the Bid Price Rule.
On August 30, 2022, we received a private corporate finance advisory firm, since April 2001. Previously, Mr. Bottsstaff determination letter from Nasdaq stating that we did not regain compliance with the Bid Price Rule and we were not eligible for a second 180-day grace period because we did not comply with the minimum $5,000,000 Stockholders’ Equity initial listing requirement for the Nasdaq Capital Market. We appealed Nasdaq’s delisting determination to a Hearings Panel (the “Panel”), which heard our presentation at a hearing held on October 6, 2022.
On October 17, 2022, we received a written decision from the Panel granting our request for continued listing on Nasdaq, subject to the conditions that, on January 11, 2023, we will have demonstrated compliance with the Bid Price Rule by evidencing a closing price of $1.00 or more per share for a minimum of 10 consecutive trading sessions, and that we provide prompt notification of any significant events that occur during the period ending on January 11, 2023 that may affect our compliance with Nasdaq rules.
We believe that if our Common Stock is delisted from Nasdaq, it would be undesirable for our stockholders and detrimental to our business. Among other things, delisting from Nasdaq could make trading our Common Stock more difficult for investors, potentially leading to further declines in our share price and liquidity. Without a Nasdaq listing, stockholders may have a difficult time getting a quote for the sale or purchase of our Common Stock, the sale or purchase of our Common Stock would likely be made more difficult, and the trading volume and liquidity of our Common Stock could decline. Delisting from the Nasdaq could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our Common Stock as currency or the value accorded our Common Stock by other parties. We believe that the Reverse Stock Split is our best option to meet the criteria to satisfy the Bid Price Rule for continued listing on the Nasdaq Capital Market. A decrease in the number of outstanding shares of our Common Stock resulting from the Reverse Stock Split should, absent other factors, assist in ensuring that the per share market price of our Common Stock remains above the requisite price for continued listing. However, we cannot provide any assurance that the bid price of our Common Stock would remain above the minimum bid price requirement of the Nasdaq Capital Market following the Reverse Stock Split.
served as Chief Financial Officer of StereoVision Entertainment, Inc., a film entertainment company, from July 2007 until September 2008. Prior to 2000, Mr. Botts served in executive capacities at UBS Group and Goldman Sachs in London and New York. Mr. Botts also served on the board of directors and as chairman of the audit committee of INTAC International, Inc. from 2002 until its merger with a predecessor of Remark in 2006. Mr. Botts served as a member of the board and chairman of both the compensation and audit committees of Crystal Peak Minerals (CPMMF) from 2012 to 2018. Mr. Botts is currently a member of the board of Essentia Analytics, a privately held English company which develops and provides behavioral analytics to active portfolio managers. He served from 2003 to 2012 as a member of the Board of Trustees and head of development for REACH Prep, a non-profit organization serving the educational needs of underprivileged African-American and Latino children in Fairfield and Westchester counties. Mr. Botts graduated with highest honors from Williams College and received an MBA from the New York University Stern School of Business.
Brett Ratner has been a memberPotential Consequences if the Reverse Stock Split Proposal is Not Approved.
If the Reverse Stock Split Proposal is not approved by our stockholders, our Board will not have the authority to effect the Reverse Stock Split. Any inability of our Board since March 2017. Mr. Ratner is one of Hollywood's most successful filmmakers. His films have grossed more than $2 billion atDirectors to effect the global box office. He has served as an executive producer on films such as the Golden-Globe-winning and Oscar-winning The Revenant, starring Leonardo DiCaprio, executive producer and director of the Golden Globe-nominated FOX series Prison Break, and executive producer of the television series Rush Hour, based on his hit films. Mr. Ratner, along with his business partner James Packer, formed RatPac Entertainment, a film finance and media company, in 2013. Since inception, RatPac Entertainment has co-financed 63 theatrically-released motion pictures exceeding $11.6 billion in worldwide box office receipts. In 2017, he received a coveted star on the Hollywood Walk of Fame. Mr. Ratner received a Bachelor in Fine Arts degreeReverse Stock Split could expose us to delisting from New York University’s Tisch School of the Arts. He is currently attending Harvard University’s Business School Graduate Program.
Daniel Stein has served as a member of our Board since March 2017. Daniel Stein is currently Senior Vice President of Partnerships, Crossix Analytics (which is part of Veeva Systems) where he oversees all media, enablement and product partnerships. He previously served since 2012 as Senior Vice President of Analytics Services & Product Strategy at Crossix Solutions, Inc., a healthcare and analytics and data company, where he was responsible for driving innovation across the Crossix product suite, including digital and TV-based solutions. Prior to joining Crossix, Mr. Stein spent eight years at Digitas and Digitas Health, an advertising agency, where he led the Strategy and Analysis group in New York. At Digitas Health, he built a team focused on leveraging analytics to help pharmaceutical and health-focused clients optimize their marketing plans and partnerships. Mr. Stein brings over 20 years of media, marketing, healthcare and agency experience focusing on products, marketing and innovation. Previously, he worked at Scholastic, where he developed interactive and direct marketing plans to support teachers and parents, and he gained additional healthcare experience at PricewaterhouseCoopers, where he designed and built comprehensive health & welfare systems for large companies. Mr. Stein graduated from the University of Pennsylvania with a B.A. in Economics. He has not served on any other boards or committees in the last five years.
Dr. Elizabeth Xu has served as a member of our Board since 2020. She is the Chief Executive Officer of A2C Leadership Group, Inc., a private leadership education firm, and chairperson of Be the Change Foundation, a public non-profit organization that has been helping K-12 students and working professionals establish their leadership skills. Dr. Xu was named as one of the top 50 diversity leaders in 2020, as one of the Silicon Valley Women of Influence in 2015, as a Female of Executive Year, and has received more than 10 other awards from various organizations. Dr. Xu is an international transformational technology leader and senior business executive with more than 20 years of experience that includes digital transformation through the application of artificial intelligence, Internet-of-Things, and other enterprise technology in multiple businesses. She was a Stanford University lecturer for several years, and she currently serves as an Innovation and Entrepreneurship Advisor at the MIT Sloan School of Management and she sits on the advisory board of Women in Technology International. From 2018 to 2019, Dr. Xu served as the Group CTO at Thailand-based Charoen Pokphand Group (CP Group), one of the world's largest conglomerates, where she drove the company's technology strategy and advancement and oversaw workforce re-training for more than 200 of the company's subsidiaries in various industries. During that time period, she also served as CEO of the CP Group subsidiaries in Thailand and the United States that conducted CP Group's research and development. From 2014 to 2017, Dr. Xu held several leadership roles, including serving as CTO of BMC Software, Inc., a global leader in information technology service management. At BMC, she was responsible for the company's Central Technology Organization and Digital Service Management BU Engineering Organization.Nasdaq.
Risks Associated with the Reverse Stock Split
The Reverse Stock Split May Not Increase the Price of our Common Stock over the Long Term.
As noted above, the principal purpose of the Reverse Stock Split is to increase the trading price of our Common Stock to comply with the Bid Price Rule. However, the effect of the Reverse Stock Split on the market price of our Common Stock cannot be predicted with any certainty, and we cannot assure you that the Reverse Stock Split will accomplish this objective for any meaningful period of time, or at all. While we expect that the reduction in the number of outstanding shares of Common Stock will proportionally increase the market price of our Common Stock, we cannot assure you that the Reverse Stock Split will increase the market price of our Common Stock by a multiple of the Reverse Stock Split ratio selected by our Board, or result in any permanent or sustained increase in the market price of our Common Stock. The market price of our Common Stock may be affected by other factors which may be unrelated to the number of shares outstanding, including our business and financial performance, general market conditions, and prospects for future success.
The Reverse Stock Split May Decrease the Liquidity of our Common Stock.
The Reverse Stock Split may result in an increase in the market price of our Common Stock, which could lead to increased interest in our Common Stock and possibly promote greater liquidity for our stockholders. However, the Reverse Stock Split will also reduce the total number of outstanding shares of Common Stock, which may lead to reduced trading and a smaller number of market makers for our Common Stock, particularly if the price per share of our Common Stock does not increase as a result of the Reverse Stock Split.
The Reverse Stock Split May Result in Some Stockholders Owning “Odd Lots” That May Be More Difficult to Sell or Require Greater Transaction Costs per Share to Sell.
If the Reverse Stock Split is implemented, it will increase the number of stockholders who own “odd lots” of less than 100 shares of Common Stock. A purchase or sale of less than 100 shares of Common Stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their Common Stock.
The Reverse Stock Split May Lead to a Decrease in our Overall Market Capitalization.
The Reverse Stock Split may be viewed negatively by the market and, consequently, could lead to a decrease in our overall market capitalization. If the per share market price of our Common Stock does not increase in proportion to the Reverse Stock Split ratio, or following such increase does not maintain or exceed such price, then the value of our Company, as measured by our market capitalization, will be reduced. Additionally, any reduction in our market capitalization may be magnified as a result of the smaller number of total shares of Common Stock outstanding following the Reverse Stock Split.
Board Discretion to Effect the Reverse Stock Split
If the Reverse Stock Split is approved by our stockholders, our Board of Directors will have the discretion to implement the Reverse Stock Split or to not effect the Reverse Stock Split at all. Our Board of Directors currently intends to effect the Reverse Stock Split. If the trading price of our Common Stock increases without effecting the
Director Qualifications
The Board comprises a diverse groupReverse Stock Split, the Reverse Stock Split may not be necessary. Following the Reverse Stock Split, if implemented, there can be no assurance that the market price of leadersour Common Stock will rise in their respective fields. Someproportion to the reduction in the number of outstanding shares resulting from the Reverse Stock Split or as noted above, that the market price of the current directors have senior leadership experience at major domestic and international corporations. In these positions, they have gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. Some ofpost-split Common Stock can be maintained above $1.00. There also can be no assurance that our directors also have experience serving on boards of directors and board committees ofCommon Stock will not be delisted from Nasdaq for other public companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different business processes, challenges, and strategies. Other directors have experience as principals in private investment and advisory firms, which brings financial expertise and unique perspectives to the Board. Our directors also have other experience that makes them valuable members, such as experience managing technology and media companies, or developing and pursuing investment or business opportunities in international markets, which provides insight into strategic and operational issues faced by Remark.
The Nominating and Governance Committee believes that the above-mentioned attributes, along with the leadership skills and other experiences of the directors described below, provide us with a diverse range of perspectives and judgment necessary to guide our strategies and monitor their execution.
reasons.
Kai-Shing Tao
•KnowledgeIf our stockholders approve the Reverse Stock Split at the Special Meeting, the Reverse Stock Split will be effected, if at all, only upon a determination by our Board of Directors that the Reverse Stock Split is in the best interests of our Company and experience regarding Remark from serving as our Chief Executive Officer since December 2012stockholders at that time. No further action on the part of the stockholders will be required to either effect or abandon the Reverse Stock Split. If our Board of Directors determines not to implement the Reverse Stock Split following stockholder approval of this proposal, the authority granted in this proposal to implement the Reverse Stock Split will terminate and the Charter Amendment will be abandoned.
•Global financial industryThe market price of our Common Stock is dependent upon our performance and investment experienceother factors, some of which are unrelated to the number of shares outstanding. If the Reverse Stock Split is effected and extensive knowledgethe market price of Asian marketsour Common Stock declines, the percentage decline as Chief Investment Officeran absolute number and as a percentage of Pacific Star Capital and a former memberour overall market capitalization may be greater than would occur in the absence of the U.S.-ChinaReverse Stock Split. Furthermore, the reduced number of shares that will be outstanding after the Reverse Stock Split could significantly reduce the trading volume and U.S.-Taiwan Business Councilotherwise adversely affect the liquidity of our Common Stock.
•Outside public company board experience asWe have not proposed the Reverse Stock Split in response to any effort of which we are aware to accumulate our shares of Common Stock or obtain control of our Company, nor is it a former directorplan by management to recommend a series of Playboy Enterprises, Inc.similar actions to our Board of Directors or our stockholders. Notwithstanding the decrease in the number of outstanding shares of Common Stock following the Reverse Stock Split, our Board of Directors does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Theodore P. Botts
•Global financial advisory experience and extensive knowledgeEffects of the technology sector as President of Kensington Gate Capital, LLCReverse Stock Split
•Outside board experience as a director and chairmanEffects of the audit committee of INTAC InternationalReverse Stock Split on Issued and Outstanding Shares
•Global financial industry experienceIf the Reverse Stock Split is effected, each stockholder will own a reduced number of shares of Common Stock. This would affect all of our stockholders uniformly and would not affect any stockholder’s percentage ownership in the Company, except to the extent that the Reverse Stock Split would result in an adjustment to a stockholder’s ownership of Common Stock due to the treatment of fractional shares in the Reverse Stock Split. Therefore, voting rights and other rights and preferences of the holders of Common Stock will not be affected by the Reverse Stock Split (other than as an executive at UBS Groupa result of the treatment of fractional shares). Common Stock issued pursuant to the Reverse Stock Split will remain fully paid and Goldman Sachsnonassessable, and the par value per share of the Common Stock will remain $0.001.
Brett Ratner
•Extensive experienceOur Certificate of Incorporation presently authorizes the issuance of One Hundred Seventy-Six Million (176,000,000) shares, of which One Hundred Seventy-Five Million (175,000,000) shares shall be Common Stock and One Million (1,000,000) shares shall be Preferred Stock (the “Preferred Stock”). The Reverse Stock Split would not change the number of authorized shares of Common Stock or Preferred Stock. Therefore, because the number of issued and outstanding shares of Common Stock would decrease, the number of shares remaining available for issuance by us in the entertainment industry,future would increase. These additional shares would be available for issuance from time to time for corporate purposes such as issuances of Common Stock in connection with capital-raising transactions as well as for issuance upon conversion or exercise of securities such as convertible debt, warrants, or options convertible into or exercisable for Common Stock. We believe that the availability of the additional shares will provide us with flexibility to meet business needs as they arise, to take advantage of favorable opportunities, and to respond effectively in a changing corporate environment. If we issue additional shares for any of these purposes, the aggregate ownership interest of our current stockholders, and the interest of each such existing stockholder, would be diluted, possibly substantially. While we are currently not party to any agreements providing for the issuance of the additional authorized but unissued and unreserved shares of Common Stock that would be created by the Reverse Stock Split, we regularly consider our capital requirements and may conduct securities offerings, including co-founding and operating a successful film finance and media company
Daniel Stein
•Operational experience leading data monetization efforts for analytics companies, leveraging partnerships with top digital, television and media companies
•Oversees all product strategy for Crossix, a leading technology company currently focusedequity and/or equity linked offerings, in healthcare
•More than 20 years of media, marketing and agency experience focusing on innovation
the future.
Elizabeth Xu
•Senior executive experienceThe increased number of available authorized but unissued shares as former Group CTO of CP Group and CEO of CP R&D Thailand and USA companies
•Global business experience in operational and governance roles for technology businesses
•Harvard Business School certified board member
Family Relationships
There are no family relationships among our executive officers and directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Under §16(a)a result of the Exchange ActReverse Stock Split would also give our Board and management more flexibility to resist or impede a third-party takeover bid. Although not designed or intended for such purposes, the effect of 1934, as amendedthe increased available shares might be to make more difficult or to discourage an attempt to take over or otherwise acquire control of the Company (for example, by permitting issuances that would dilute the stock ownership of a person or entity seeking to effect a change in the composition of the board of directors or contemplating a tender offer or other change in control transaction). Any such anti-takeover effect of a reverse stock split would be in addition to existing anti-takeover provisions of the Certificate of Incorporation and the Amended and Restated Bylaws (the “Exchange Act”“Bylaws”),. Our Board is not presently aware of any attempt, or contemplated attempt, to acquire control of the Company, and the Reverse Stock Split Proposal is not part of any plan by our directors, executive officers and holdersBoard to recommend or implement a series of more than 10% of our Common Stock, must file initial reports of ownership and reports of changes in ownership with the SEC, and under SEC regulations, they must furnish us with copies of all §16(a) forms filed.anti-takeover measures.
Delinquent Section 16(a) Reports. To our knowledge, based solely upon our reviewEffects of the copies of the forms furnished to us, we believe that our directors, executive officersReverse Stock Split on Outstanding Equity Incentive Awards and holders of more than 10% of our Common Stock complied with all §16(a) filing requirements during 2021.Plans
Certain RelationshipsIf the Reverse Stock Split is effected, all outstanding equity awards granted under our 2010 Equity Incentive Plan, 2014 Incentive Plan, 2017 Incentive Plan and Related Transactions2022 Incentive Plan (collectively, the “Incentive Plans”) will be proportionately reduced in accordance with the terms of the applicable Incentive Plan in the same ratio as the reduction in the number of shares of outstanding Common Stock (subject to the treatment of fractional shares as described below). The per share exercise price of any outstanding options will be correspondingly increased in direct proportion to the Reverse Stock Split ratio, such that the aggregate dollar amount payable for the purchase of shares subject to the options will remain unchanged (subject to the treatment of fractional shares as described below). In addition, the total number of shares of Common Stock available for future grants under the Incentive Plans will be proportionately reduced as a result of the Reverse Stock Split.
All related-party transactions are required to be reviewed and approved byAs of October 11, 2022, the Audit Committee. Such policy and procedures are set forth in the Audit Committee charter.
Vote Required
Each nominee receiving a plurality of the affirmative (“FOR”) votes present in person or represented by proxy will be elected to the Board (meaning that the five director nominees who receive the highest number of shares voted “for” their election are elected). “Withhold” votes and broker non-votes will have no effect on the electionof Common Stock that remained available for future issuance under each of the nominees.
Recommendation of2010 Equity Incentive Plan, 2014 Incentive Plan, the Board
The Board unanimously recommends a vote “FOR”2017 Incentive Plan and the election of each of its nominees to the Board to serve until the 2023 Annual Meeting of Stockholders2022 Incentive Plan is: zero; 1,476,102; 1,850,143 and until their successors are duly elected and qualify.10,000,000; respectively.
Proposal 2: RatificationEffects of Appointment of Independent Registered Public Accounting Firmthe Reverse Stock Split on Outstanding Warrants
The Audit CommitteeIn addition, we have issued (i) warrants to purchase 4,237,290 shares of Common Stock at an exercise price of $1.35 per share to Armistice Capital Master Fund Ltd. (the “Armistice Warrants”), (ii) warrants to purchase an aggregate of 127,118 shares of Common Stock at an exercise price of $1.35 per share to A.G.P./Alliance Global Partners and its designees (the “Financial Advisor Warrants”), (iii) warrants as part of the Board has appointed Weinberg asconsideration for our independent registered public accounting firmacquisition of assets of China Branding Group Limited (“CBG”), providing for the fiscal year ending December 31, 2022. Although this appointment does not require ratification,right to purchase 40,000 shares of Common Stock at an exercise price of $10.00 per share (the “CBG Acquisition Warrants”), and (iv) warrants pursuant to a settlement agreement that we entered into with CBG and its joint official liquidators, providing for the Board has directedright to purchase 5,710,000 shares of Common Stock at an exercise price of $6.00 per share (the “CBG Settlement Warrants” and collectively with the Armistice Warrants, the Financial Advisor Warrants and the CBG Acquisition Warrants, the “Outstanding Warrants”).
If the Reverse Stock Split is effected, the number of shares of Common Stock issuable upon exercise of each of the Warrants will be proportionately decreased in the same ratio as the reduction in the number of shares of outstanding Common Stock and the per share exercise price applicable for each of the Warrants will be correspondingly increased such that the appointmentaggregate exercise price payable upon exercise of Weinberg be submitted to stockholders for ratification duethe Warrants shall remain unchanged (subject to the significancetreatment of fractional shares as described below).
Effects of the appointment.Reverse Stock Split on Outstanding Convertible Debenture
We also have outstanding a convertible subordinated debenture (the “Debenture”) in the original principal amount of $2,778,000 that we issued to Ionic Ventures, LLC. The terms of the Debenture are described in more detail in Proposal 2. If stockholders do not ratify the appointmentReverse Stock Split is effected, the per share conversion price of Weinberg, the Audit CommitteeDebenture will considerbe proportionately increased in the appointmentsame ratio as the reduction in the number of another independent registered public accounting firm.shares of outstanding Common Stock from the Reverse Stock Split.
Weinberg has served as our independent registered public accounting firm since 2020. We do not expect a representative of Weinberg to be present at the Annual Meeting.
Audit Committee Policies and ProceduresEffective Time of the Reverse Stock Split
The Audit Committee must pre-approve all auditing services and permitted non-audit services (includingIf the fees and terms thereof) to be performed for usproposed Reverse Stock Split is approved by our independent auditors, subjectstockholders and our Board elects to proceed with the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) ofReverse Stock Split, the Exchange Act, which should nonetheless be approved by the Board prior to the completion of the audit. Each year, the Audit Committee approves the independent auditor’s retention to audit our financial statements, including the associated fee, beforeReverse Stock Split would become effective upon the filing of the previous year’s Annual Report on Form 10-K. AtCharter Amendment with the beginningoffice of the fiscal year, the Audit Committee will evaluate other known potential engagementsSecretary of State of the independent auditor, including the scopeState of work proposed to be performed and the proposed fees, and approve or reject each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management. At each such subsequent meeting, the auditor and management may present subsequent services for approval. Typically, these would be services, such as due diligence for an acquisition, that would not have been known at the beginningDelaware (the “Effective Time”). However, notwithstanding approval of the year.
Each new engagementReverse Stock Split by our stockholders, our Board of Weinberg has been approved in advance byDirectors will have the Board,sole authority to elect whether, and nonewhen, to amend our Certificate of those engagements made use ofIncorporation to effect the de minimus exception to the pre-approval contained in Section 10A(i)(1)(B) of the Exchange Act.Reverse Stock Split.
Fees BilledTreatment of Fractional Shares in the Reverse Stock Split
We do not intend to issue fractional shares in the event that a stockholder owns a number of shares of Common Stock that is not evenly divisible by the Reverse Stock Split ratio. Instead, if the Reverse Stock Split is effected, any holder of a fractional share of Common Stock will be entitled to receive cash for such fractional share based upon the closing sales price of the Common Stock as reported on the Nasdaq Capital Market, as of the date the Charter Amendment is filed with the Secretary of State of the State of Delaware.
The terms of our Incentive Plans do not allow for the 2021issuance of fractional shares. With respect to the 2010 Equity Incentive Plan, any holder of an equity award issued under such plan will be entitled to receive cash in lieu of fractional shares in an amount equal to the fair market value of such fractional shares, as determined by our Board or Compensation Committee. With respect to the other Incentive Plans, our Compensation Committee will have the discretion to determine whether cash, additional shares or other property will be issued or paid in lieu of fraction shares. Additionally, the terms of our Outstanding Warrants do not permit the issuance of fractional shares upon the exercise of the Warrants. With respect to the Armistice Warrants and 2020 Fiscal YearsFinancial Advisor Warrants, we may elect to either pay the warrant holder a cash adjustment in respect to any fractional share in an amount equal to such fraction multiplied by the then applicable exercise price or round up to the next whole share. With respect to the CBG Acquisition Warrants or CBG Settlement Warrants, we will pay to the warrant holder an amount in cash equal to the fraction (calculated to the nearest 1/100th of a share) multiplied by the then effective exercise price on the date the exercise notice is received by the Company. The terms of the Debenture also do not permit the issuance of any fractional share upon conversion of the Debenture. If a conversion would result in the issuance of a fraction of a share, we will round such fraction of a share up to the nearest whole share.
Exchange of Stock Certificates
If the Reverse Stock Split is effected, each certificate representing pre-Reverse Stock Split shares of Common Stock will be deemed for all corporate purposes to evidence ownership of post-Reverse Stock Split Common Stock at the Effective Time. As soon as practicable after the Effective Time of the Reverse Stock Split, the Transfer Agent will mail a letter of transmittal to our stockholders containing instructions on how a stockholder should surrender its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock to the Transfer Agent in exchange for certificate(s) representing post-Reverse Stock Split shares of Common Stock. No certificate(s) representing post-Reverse Stock Split shares of Common Stock will be issued to a stockholder until such stockholder has surrendered all certificate(s) representing pre-Reverse Stock Split shares of Common Stock, together with a properly completed and executed letter of transmittal, to the Transfer Agent. No stockholder will be required to pay a transfer or other fee to exchange its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock for certificate(s) representing post-Reverse Stock Split shares of Common Stock registered in the same name.
Stockholders who hold uncertificated shares of Common Stock electronically in “book-entry” form will have their holdings electronically adjusted by the Transfer Agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the Reverse Stock Split. If any certificate(s) or book-entry statement(s) representing pre-Reverse Stock Split shares of Common Stock to be exchanged contain a restrictive legend or notation, as applicable, the certificate(s) or book-entry statement(s) representing post-Reverse Stock Split shares of Common Stock will contain the same restrictive legend or notation.
Any stockholder whose share certificate(s) representing pre-Reverse Stock Split shares of Common Stock has been lost, stolen or destroyed will only be issued post-Reverse Stock Split Common Stock after complying with the requirements that we and the Transfer Agent customarily apply in connection with lost, stolen or destroyed certificates. STOCKHOLDERS SHOULD NOT DESTROY STOCK CERTIFICATES REPRESENTING PRE-
REVERSE STOCK SPLIT SHARES OF COMMON STOCK AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATES REPRESENTING PRE-REVERSE STOCK SPLIT SHARES OF COMMON STOCK UNTIL THEY ARE REQUESTED TO DO SO.
Appraisal Rights
Under the DGCL, our stockholders do not have a right to dissent and are not entitled to appraisal rights with respect to the proposed Charter Amendment to effect the Reverse Stock Split, and we will not independently provide our stockholders with any such rights
Certain Material U.S. Federal Income Tax Consequences
The following table presentssummary describes certain material U.S. federal income tax consequences of the aggregate fees billed, by typeReverse Stock Split to holders of fee,our Common Stock, but is not intended to be a complete analysis of all potential federal, state, local and non-U.S. tax consequences relevant to a holder’s particular circumstances, including the impact of the Medicare contribution tax. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) in relationeffect as of the date of this Proxy Statement. Any of these authorities may change or be subject to services provided to us by Weinberg (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 |
| Audit | $ | 330 | | | $ | 305 | |
| All other | 38 | | | 15 | |
| Total | $ | 368 | | | $ | 320 | |
differing interpretations, and any such change may be applicable retroactively in a manner that could adversely affect a holder of our Common Stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance that the IRS or a court will not take a contrary position regarding the tax consequences of the Reverse Stock Split.
The fees billedThis discussion is limited to holders that hold our Common Stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). In addition, it does not address consequences relevant to holders subject to special rules, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by stockholders, and it does not address the tax consequences to (i) persons that may be subject to special treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, traders in the all other category for 2021 primarily represent work relatedsecurities that elect to preparation of two registrations statementsmark to market and associated amendments, while for 2020 the fees billeddealers in such category primarily represent work related to preparationsecurities or currencies, (ii) persons that hold our Common Stock as part of a registration statement.position in a “straddle” or as part of a “hedging,” “conversion” or other integrated investment transaction for federal income tax purposes, or (iii) persons that do not hold our Common Stock as capital assets or acquired our Common Stock through the exercise of employee stock options or otherwise as compensation.
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT.
Vote Required
The affirmative (“FOR”) voteFor purposes of this discussion, a majority“U.S. holder” is a beneficial owner of our Common Stock who is for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the votes cast onUnited States; (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the matter is required to ratify the appointment of Weinberg as our independent registered public accounting firm for the fiscal year ending December 31, 2022 (meaning the number of shares voted “for” this proposal must exceed the number of shares voted “against” this proposal). Abstentions will have no effect on the resultslaws of the vote on this proposal,United States, any state thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust, (A) if a court within the United States is able to exercise primary supervision over the administration of such trust and since this proposalone or more “United States Persons” (within the meaning of the Code) have the authority to control all substantial decisions of such trust or (B) that has a valid election in effect to be treated as “United States Persons” for U.S. federal income tax purposes.
If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is a routine proposal on which a broker or other nominee is generally empowered to vote in the absence of voting instructions from the beneficial owner broker non-votes are unlikely to result fromof our Common Stock, the voting.
RecommendationU.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the Board
The Board unanimously recommends a vote “FOR”partner and the ratificationactivities of the appointmentpartnership. Partnerships that hold our Common Stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of Weinberg as our independent registered public accounting firm for the fiscal year ending December 31, 2022.Reverse Stock Split.
Proposal 3: Advisory Vote on Executive CompensationTax Consequences to U.S. Holders
The Reverse Stock Split is intended to be treated as a “recapitalization” for U.S. federal income tax purposes. Subject to the discussion below with respect to cash received in lieu of fractional shares, a U.S. holder generally will not recognize gain or loss upon a transaction that qualifies as recapitalization for U.S. federal income tax purposes. In accordance with Section 14Asuch case, a U.S. holder’s aggregate tax basis in the shares of our Common Stock received pursuant to the Reverse Stock Split should equal the U.S. holder’s aggregate tax basis of the Exchange Act, we are providing stockholders withold shares of our Common Stock exchanged therefor (excluding the opportunity to vote to approve, on an advisory, non-binding basis, the compensationportion of the named executive officers as disclosedtax basis that is allocable to any fractional share), and the U.S. holder’s holding period for the new shares should include the holding period for the old shares. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of shares of Common Stock surrendered in a recapitalization to shares received in the Proxy Statement in accordance with the SEC’s rules. We are asking stockholders to indicate their support for the compensationrecapitalization. U.S. holders who have acquired shares of our named executive officers named inCommon Stock on different dates or at different prices should consult their tax advisors regarding the “Summary Compensation Table” included inallocation of the Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives stockholders the opportunity to express their views on the compensationtax basis and holding period of our named executive officers. Accordingly, we will ask stockholders to vote “FOR” the following resolution at the Annual Meeting:such shares.
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensationA U.S. holder who receives cash in lieu of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2022 Annual Meetinga fractional share of Stockholdersour Common Stock pursuant to the compensation disclosure rulesReverse Stock Split generally should recognize capital gain or loss in an amount equal to the difference between the amount of cash received and the portion of the Securities and Exchange Commission, includingU.S. holder’s tax basis in the Summary Compensation Table andold shares that is allocated to such fractional share of our Common Stock. Such capital gain or loss will be long-term capital gain or loss if the other related tables and disclosure.”U.S. holder has held the old shares for more than one year as of the effective date of the Reverse Stock Split. The deductibility of capital losses is subject to limitations.
Under certain circumstances, cash received by a U.S. holder in lieu of fractional shares could be treated as a dividend for U.S. federal income tax purposes instead of capital gain. We recommend that U.S. holders of our Common Stock consult their own tax advisors to determine the extent to which their receipts of cash in lieu of fractional shares could be treated as dividends.
U.S. Information Reporting and Backup Withholding
Payments of cash made to a U.S holder in lieu of a fractional share of our Common Stock may be subject to information reporting. In addition, U.S. holders may be subject to backup withholding at the rate specified in the Code on the payment of such cash if they do not provide their taxpayer identification numbers in the manner required, or otherwise fail to comply with applicable backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit against the U.S. holder’s federal income tax liability, if any, provided the required information is timely furnished to the IRS.
Tax Consequences to Non-U.S. Holders
Generally, a beneficial owner of our Common Stock that is neither a U.S. holder nor a partnership (or an entity treated as a partnership for U.S. federal income tax purposes) (a “non-U.S. holder”) should not recognize any gain or loss upon the Reverse Stock Split. Any gain or loss with respect to cash received in lieu of a fractional share of our Common Stock should also generally not be subject to U.S. federal income or withholding tax unless (a) such gain or loss is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment maintained by the non-U.S. holder), (b) the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the Reverse Stock Split and certain other conditions are met, or (c) our Common Stock constitutes a U.S. real property interest by reason of our status as U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the Reverse Stock Split and the non-U.S. holder’s holding period for our Common Stock. We believe that we are not currently, and were not at any time during the five-year period preceding the Reverse Stock Split, a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our other business assets, there can be no assurance that we are not or were not at any time a USRPHC.
Gain described in clause (a) above generally will be subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a U.S. holder. A non-U.S. holder that is a foreign corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax
treaty) on such effectively connected gain, as adjusted for certain items. A non-U.S. holder described in clause (b) above will be subject to U.S. federal income tax at a rate of 30% (or, if applicable, a lower treaty rate) on the gain realized with respect to cash received in lieu of a fractional share, which may be offset by certain U.S. source capital losses, even though the non-U.S. holder is not considered a resident of the United States. With respect to clause (c) above, if we are a USRPHC, a Non-U.S. holder may qualify for an exemption if our Common Stock is regularly traded on an established securities market and the non-U.S. holder does not actually or constructively hold more than 5% of such regularly traded Common Stock at any time within the shorter of the five-year period preceding the Reverse Stock Split and the non-U.S. holder’s holding period for our Common Stock. If no exemption is available and we are a USRPHC, a Non-U.S. holder’s cash received in lieu of a fractional share will generally be subject to withholding at a rate of 15% and such Non-U.S. holder will generally be taxed on any gain in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally should not apply to such gain. Non-U.S. holders should consult with their tax advisors on the availability of any exemption in the event of we become a USRPHC.
Under certain circumstances the cash received by a non-U.S. holder in lieu of fractional shares could be treated as a dividend for U.S. federal income tax purposes (which could be subject to U.S. federal income or withholding tax) instead of capital gain. Non-U.S. holders of our Common Stock should consult their own tax advisors to determine the extent to which their receipts of cash in lieu of fractional shares could be treated as dividends.
U.S. Information Reporting and Backup Withholding Tax
In general, backup withholding and information reporting will not apply to payments of cash in lieu of a fractional share of our Common Stock to a non-U.S. holder pursuant to the Reverse Stock Split if the non-U.S. holder certifies under penalties of perjury that it is a non-U.S. holder and the applicable withholding agent does not have actual knowledge to the contrary. Under certain circumstances the amount of cash paid to a non-U.S. holder in lieu of a fractional share of our Common Stock, the name and address of the beneficial owner and the amount, if any, of tax withheld may be reported to the IRS.
Vote Required
The say-on-payaffirmative (“FOR”) vote of the holders of at least a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting is advisory,required to approve the Reverse Stock Split Proposal. Abstentions will have the same effect as votes “AGAINST” this proposal. A vote on this proposal is considered a discretionary item. Therefore, we do not expect any broker non-votes on this proposal and thereforea failure to instruct your broker, bank or other nominee on how to vote your shares will not bindingnecessarily count as a vote against this proposal.
Recommendation of the Board
The Board unanimously recommends a vote “FOR” the approval of the Reverse Stock Split Proposal
Proposal 2: Nasdaq Proposal
Background
On October 6, 2022, we entered into a debenture purchase agreement (the “Debenture Purchase Agreement”) with Ionic Ventures, LLC (“Ionic”), pursuant to which we issued a convertible subordinated debenture in the original principal amount of $2,778,000 (the “Debenture”) to Ionic for a purchase price of $2,500,000.
The Debenture accrues interest at a rate of 8% per annum. The interest rate on the Debenture increases to a rate of 15% per annum if the Debenture is not fully paid or converted by February 6, 2023 (the “Trigger Date”) or upon Remark, the Compensation Committeeoccurrence of certain trigger events (the “Trigger Events”), including, without limitation, the suspension from trading or the Board. The Boarddelisting of our Common Stock from Nasdaq and the Compensation Committeeoccurrence of any material adverse effect. In addition, if the Debenture is not fully paid or converted by the Trigger Date, the original principal amount of the Debenture will be deemed to have been $3,334,000 from the issuance date. The Debenture matures on June 6, 2023.
The Debenture automatically converts into shares of Common Stock at the earlier of (i) the effectiveness of a registration statement registering the resale of certain Registrable Securities as such term is defined in the Registration Rights Agreement (as defined below), including, without limitation, the shares issuable upon conversion of the Debenture (such registration statement, the “Resale Registration Statement”), and (ii) 181 days after the issuance date of the Debenture. The number of shares of Common Stock issuable upon conversion of the Debenture shall be determined by dividing the outstanding balance under the Debenture (including all accrued and unpaid interest and accrued and unpaid late charges, if any) by a conversion price that is the lower of (x) 80% (or 70% if our Common Stock is not then trading on Nasdaq) of the average of the 10 lowest volume-weighted average prices (“VWAPs”) over a specified measurement period following the conversion date, and (y) $0.50 (the “Fixed Conversion Price”), subject to full ratchet anti-dilution protection in the event we issue certain equity securities at a price below the then Fixed Conversion Price. The Debenture further provides that we will not effect the conversion of any portion of the Debenture, and the holder thereof will not have the right to a conversion of any portion of the Debenture, to the extent that after giving effect to such conversion, the holder together with its affiliates would beneficially own more than 4.99% of the outstanding shares of our Common Stock immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”).
Also, on October 6, 2022, we entered into a purchase agreement (the “ELOC Purchase Agreement”) with Ionic, which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right to direct Ionic to purchase up to an aggregate of $50,000,000 of shares of our Common Stock over the 36-month term of the ELOC Purchase Agreement. Under the ELOC Purchase Agreement, after the satisfaction of certain commencement conditions, including, without limitation, the effectiveness of the Resale Registration Statement and that the Debenture shall have been fully converted into shares of Common Stock or shall otherwise have been fully redeemed and settled in all respects in accordance with the terms of the Debenture, we have the right to present Ionic with a purchase notice (each, a “Purchase Notice”) directing Ionic to purchase any amount up to $3,000,000 of our Common Stock per trading day, at a per share price (the “Purchase Price”) equal to 90% (or 80% if our Common Stock is not then trading on Nasdaq) of the average of the 5 lowest VWAPs over a specified measurement period. With each purchase under the ELOC Purchase Agreement, we are required to deliver to Ionic an additional number of shares equal to 2.5% of the number of shares of Common Stock deliverable upon such purchase. The number of shares that we can issue to Ionic from time to time under the ELOC Purchase Agreement shall be subject to the Beneficial Ownership Limitation.
In addition, Ionic will not be required to buy any shares of our Common Stock pursuant to a Purchase Notice on any trading day on which the closing trade price of our Common Stock is below $0.25. We will control the timing and amount of sales of our Common Stock to Ionic. Ionic has no right to require any sales by us, and is obligated to make purchases from us as directed solely by us in accordance with the ELOC Purchase Agreement. The ELOC Purchase Agreement provides that we will not be required or permitted to issue, and Ionic will not be required to purchase, any shares under the ELOC Purchase Agreement if such issuance would violate Nasdaq rules, and we may, in our sole discretion, determine whether to obtain stockholder approval to issue shares in excess of 19.99% of our outstanding shares of Common Stock if such issuance would require stockholder approval under Nasdaq rules. Stockholder approval of this proposal would constitute such approval under Nasdaq rules.
Concurrently with entering into the Debenture Purchase Agreement and the ELOC Purchase Agreement, we also entered into a registration rights agreement with Ionic (the “Registration Rights Agreement”) to provide Ionic with resale registration rights for the shares of Common Stock issuable under the Debenture, the ELOC Purchase Agreement and the Registration Rights Agreement. If we fail to file or have the Resale Registration Statement declared effective by the specified deadlines set forth therein, then in each instance, we will issue to Ionic 150,000 shares of our Common Stock within 2 trading days after such failure.
Why We Need Stockholder Approval
Our Common Stock is listed on the Nasdaq Capital Market and, as such, we are subject to the Nasdaq Listing Rules. Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approval for a transaction, other than a public offering, involving an issuance of 20% or more of our Common Stock or 20% or more of the voting power outstanding before the issuance (the “Exchange Cap”) at a price less than the minimum price (as defined in Nasdaq Listing Rule 5635(d)(1)(A)). We had 106,407,769 shares of Common Stock outstanding immediately prior to the transactions described above, 20% of which is 21,281,552 shares.
Our Board has determined that our ability to issue the shares in connection with the transactions described above in excess of the Exchange Cap is in the best interests of the Company and its stockholders because our ability to issue and sell shares to Ionic provides us with a reliable source of capital for working capital and general corporate purposes. If stockholders do not approve this proposal, our issuance of shares of Common Stock under the ELOC Purchase Agreement, together with any shares we are required to issue upon conversion of the Debenture, will remain subject to limitation under the Exchange Cap, and we will not be able to sell the full $50,000,000 available under the ELOC Purchase Agreement. Our ability to successfully implement our business plans and ultimately generate value for our stockholders is dependent on our ability to maximize capital raising opportunities. If we were unsuccessful in raising additional capital, we would be required to curtail our current business plans and instead reduce operating expenses, dispose of assets, as well as seek extended terms on our obligations, the opinionseffect of which would adversely impact future operating results.
Effect on Current Stockholders
If stockholder approve this proposal, we will be able to issue shares upon conversion of the Debenture and under the ELOC Purchase Agreement without regard to the Exchange Cap. The issuance of such shares may result in significant dilution to our stockholders and afford our stockholders a smaller percentage interest in the voting power, liquidation value and aggregate book value of Remark. Because the number of shares that may be issued to Ionic pursuant to the extent there is any significant vote against the named executive officer compensation as disclosed in the Proxy Statement, we will consider our stockholders’ concernsDebenture and the Compensation Committee will evaluate whether any actions are necessaryELOC Purchase Agreement is determined based on the market price at the time of issuance, the exact magnitude of the dilutive effect cannot be conclusively determined. Additionally, the issuance and subsequent resale of shares sold under the Debenture and the ELOC Purchase Agreement may cause the market price of our Common Stock to address those concerns. We expect that the next say-on-pay vote will occur at our 2025 annual meeting of stockholders.decline.
Vote Required
The affirmative (“FOR”) vote of a majority of the votes cast on the matter is required to approve the compensation of our named executive officers on a non-binding, advisory basisthis proposal (meaning the number of shares voted “for” this proposal must exceed the number of shares voted “against” this proposal). Abstentions and broker non-votes will have no effect on the results of the vote on this proposal.
Recommendation of the Board
The Board unanimously recommends a vote “FOR” the adoption of the resolution approving the compensation of our named executive officers.
Proposal 4: Adoption and Approval of 2022 Incentive Plan
On April 25, 2022, the Board accepted the recommendation of the Compensation Committee and approved the 2022 Incentive Plan (the “Plan”), subject to adoption and approval by our stockholders, and authorized submission of the Plan to stockholders for consideration at the Annual Meeting. Stockholders are being asked to adopt and approve the Plan in order to meet requirements of Nasdaq rules, satisfy requirements of tax law to help preserve our ability to claim tax deductions for compensation to executive officers, and provide for favorable tax treatment to certain optionholders.
Summary of the Plan
The following is a summary of the material terms of the Plan. The summary is not complete and is qualified in its entirety by reference to the full text of the Plan attached to this Proxy Statement as Appendix A.
Purpose
The purpose of the Plan is to promote our long-term success by attracting, motivating and retaining employees and directors, as well as advisors and consultants we use, through the use of competitive incentives that are tied to stockholder value. The Plan seeks to align the interests of participants in the Plan with those of our stockholders by
providing shares of Common Stock and other incentives to those whose judgment, initiative, and efforts influence the financial success and growth of the business and on whom we largely depend.
Administration
The Plan is administered by our Compensation Committee, which consists of two or more directors, each of whom qualifies as (i) an independent director under criteria established by the applicable listing standards of Nasdaq and other applicable laws and regulations, (ii) a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended and (iii) an “outside director” as defined in Treasury Regulations Section 1.162-27(e)(3) under the Internal Revenue Code of 1986, as amended (referred to herein as the Code), or if the Compensation Committee does not exist or is unable to act for any reason, the Board. The Compensation Committee has complete authority to determine all provisions of all awards under the Plan, to interpret the Plan, and to make any other determination that it believes necessary and advisable for the proper administration of the Plan. The Compensation Committee’s decisions on matters relating to the Plan will be final and conclusive. The Compensation Committee also has the authority to terminate, amend, suspend or modify the terms of any outstanding awards under the Plan in any manner permitted by the Plan; provided, however, that any recipient of an award adversely affected in any material way by such amended or modified terms has consented to such amendment or modification.
Eligibility and Participation
Eligible participants in the Plan include employees and nonemployee directors, as well as advisors and consultants we use. The Compensation Committee may select from all eligible individuals those to whom awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each award. In making this determination, the Compensation Committee may consider any factors it deems relevant, including without limitation, the office or position held by a participant or the participant’s relationship to Remark, the participant’s degree of responsibility for and contribution to our growth and success, and the participant’s length of service, promotions and potential. Approximately 32 employees, four nonemployee directors, and nine advisors or consultants currently are eligible to participate in the Plan.
Types of Awards
Types of awards that may be granted under the Plan include cash-based awards, incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other stock-based awards. The terms of any award will be evidenced by an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Compensation Committee which sets forth the terms and conditions of an award at the time the award is granted (the “Evidence of Award”). In the event of any inconsistency between the terms of the Evidence of Award and the Plan, the terms of the Plan will govern.
Available Shares
Subject to adjustment upon certain corporate transactions or events, a maximum of 10,000,000 shares of our Common Stock may be issued under the Plan. In addition, subject to adjustment upon certain corporate transactions or events, a participant may not receive awards with respect to more than 2,000,000 shares of Common Stock in any year. If an option or other award granted under the Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards.
Awards Under the Plan
Options. An option granted under the Plan is designated at the time of grant as either an incentive stock option or as a non-qualified stock option, provided that incentive stock options may be granted only to our eligible employees (as permitted under Sections 422 and 424 of the Code). Upon the grant of an option to purchase shares of Common Stock, the Compensation Committee will specify the option price, the maximum duration of the option,
the number of shares of Common Stock to which the option pertains, the conditions upon which an option shall become vested and exercisable, and such other provisions as the Compensation Committee shall determine which are not inconsistent with the terms of the Plan. The purchase price of each share of Common Stock purchasable under an option will be determined by the Compensation Committee at the time of grant, but may not be less than 100% of the fair market value of such share of Common Stock on the date the option is granted. No option shall be exercisable later than the tenth anniversary date of its grant.
Stock Appreciation Rights (SARs). SARs will be exercisable at such time or times and subject to such terms and conditions as determined by the Compensation Committee. The term of SARs granted under the Plan shall be determined by the Compensation Committee, in its sole discretion, and except as determined otherwise by the Compensation Committee, no stock appreciation right shall be exercisable later than the tenth anniversary date of its grant.
Restricted Stock and Restricted Stock Units. Shares of restricted stock and/or restricted stock units may be granted under the Plan aside from, or in association with, any other award and will be subject to certain conditions and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Compensation Committee deems desirable. The Compensation Committee may provide in an Evidence of Award that the award of restricted stock is conditioned upon the participant making or refraining from making an election with respect to the award under Section 83(b) of the Code. If a participant makes an election pursuant to Section 83(b) of the Code concerning a restricted stock award, the participant shall be required to file promptly a copy of such election with Remark.
Performance Units/Performance Shares. Subject to the terms and provisions of the Plan, the Compensation Committee, at any time and from time to time, may grant performance units and/or performance shares to participants in such amounts and upon such terms as the Compensation Committee shall determine. Each performance unit shall have an initial value that is established by the Compensation Committee at the time of grant. Each performance share shall have an initial value equal to the fair market value of a share of Common Stock on the date of grant. The Compensation Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of performance units/performance shares that will be paid out to the participant.
Cash-Based Awards and Other Stock-Based Awards. Subject to the provisions of the Plan, the Compensation Committee may grant cash-based awards or other types of equity-based or equity-related awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted shares of Common Stock) in such amounts and subject to such terms and conditions, as the Compensation Committee shall determine. Such awards may involve the transfer of actual shares of Common Stock to participants, or payment in cash or otherwise of amounts based on the value of shares of Common Stock and may include, without limitation, awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States. Each cash-based award shall specify a payment amount or payment range as determined by the Compensation Committee. Each other stock-based award shall be expressed in terms of shares of Common Stock or units based on shares of Common Stock, as determined by the Compensation Committee.
Restrictions on Transferability
Except as otherwise permitted by the Compensation Committee, the awards granted under the Plan are not transferable and may be exercised solely by a participant during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution or as otherwise required by law. Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, any award contrary to the provisions set forth in the Plan will be void and ineffective and will give no right to the purported transferee.
Amendment and Termination
Unless sooner terminated as provided therein, the Plan shall terminate ten years from the date that we obtain shareholder approval for the Plan. The Compensation Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Evidence of Award in whole or in part; provided, however, that, without the prior approval of our stockholders and except as provided in instances of adjustments in authorized
shares, options or SARs issued under the Plan will not be repriced, replaced, or re-granted through cancellation, or by lowering the option price of a previously granted option or the grant price of a previously granted SAR, and no amendment of the Plan shall be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule.
Change in Control
Upon the occurrence of a change in control (as defined under the Plan), the Compensation Committee may accelerate the vesting and exercisability (as applicable) of any outstanding awards, in whole or in part, as determined by the Compensation Committee in its sole discretion. In its sole discretion, the Compensation Committee may also determine that, upon the occurrence of a change in control, each outstanding option or SAR shall terminate within a specified number of days after notice to the participant, and each such participant shall receive, with respect to each share subject to such option or SAR, an amount equal to the excess of the fair market value of such share immediately prior to such change in control over the applicable option price or grant price, which amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or a combination thereof, as the Compensation Committee shall determine in its sole discretion.
U.S. Federal Income Tax Consequences
The following is a brief summary of certain material federal income tax consequences of the equity-related awards that may be granted under the Plan. The summary is based upon current federal income tax laws and interpretations thereof, all of which are subject to change at any time, possibly with retroactive effect. The summary is not intended to be exhaustive and, among other things, does not describe state, local or foreign tax consequences, or any other consequences due to a participant’s particular circumstances. The tax treatment of transactions under the Plan will vary depending upon the specific facts and circumstances involved, and participants are advised to consult their personal tax advisors with regard to all consequences arising from the grant or exercise of awards and the disposition of any acquired shares.
Incentive Stock Options
In general, a participant does not recognize taxable income at the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. However, upon exercise, the difference between the fair market value of the shares and the exercise price is treated as an item of tax adjustment for purposes of the alternative minimum tax. If a participant does not dispose of shares acquired through the exercise of an incentive stock option in a “disqualifying disposition” (i.e., no disposition occurs within two years from the date of grant nor within one year from the date of exercise of that incentive stock option), then the participant will be taxed only upon the sale of such shares, and any gain or loss then recognized will be taxable as long term capital gain or loss. There is no corresponding tax deduction for the Company on the exercise of an incentive stock option or, if the above holding period requirements are met, on the sale of the underlying shares.
If there is a disqualifying disposition (i.e., one of the holding period requirements is not met), then at the time of disposition the participant will generally recognize taxable ordinary income equal to the lesser of (a) the excess of the stock’s fair market value on the date of exercise over the exercise price, or (b) the participant’s actual gain, if any, on the purchase and sale. The participant’s additional gain (or any loss) upon the disqualifying disposition will be a capital gain (or loss), which will be long-term or short-term depending on whether the stock was held for more than one (1) year. To the extent the participant recognizes ordinary income by reason of a disqualifying disposition, the Company will generally be entitled to a corresponding business expense deduction in the tax year in which the disqualifying disposition occurs.
Nonqualified Stock Options
Options not designated or qualifying as incentive stock options will be nonqualified stock options. In general, there are no federal income tax consequences at the time a nonqualified stock option is granted to a participant. Upon exercise of a nonqualified stock option, the participant will generally recognize ordinary income an amount equal to the difference between the option exercise price and the fair market value of the shares on the exercise
date, and the Company will generally be entitled to a corresponding tax deduction equal to the amount of ordinary income recognized by the participant. Any subsequent sale or other disposition of the shares will be capital gain or loss to the participant, and will not result in any deduction for the Company.
Stock Appreciation Rights
In general, no income will be recognized by the participant in connection with the grant of any SAR, and no tax deduction is available to the Company with respect to such grant. The participant will generally include in ordinary income the amount of cash or the fair market value of the shares received on the date of the exercise of the SAR, and the Company generally should be entitled to a corresponding tax deduction equal to the amount of ordinary income recognized by the participant.
Restricted Stock
The grant of restricted stock will, generally, not constitute a taxable event for either a participant or the Company, unless the recipient makes a special election to treat the stock as vested upon the date of grant. Upon vesting (i.e., the shares are no longer subject to a substantial risk of forfeiture or they become transferrable), or deemed vesting upon grant if the special election is made, the participant will recognize ordinary income in an amount equal to the difference between the fair market value of the shares as of such time and the price paid, if any, for the shares, and the Company will generally be entitled to a corresponding tax deduction equal to the amount of ordinary income recognized by the participant. Any subsequent sale or other disposition (including forfeiture) of the shares will be capital gain or loss to the participant, and there will be no corresponding deduction for the Company.
Restricted Stock Units
If a participant is granted a restricted stock unit, the participant generally will not be required to recognize any taxable income at the time of grant. Upon distribution of shares or cash in respect of a restricted stock unit, the fair market value of those shares or the amount of that cash will be taxable to the participant as ordinary income, and the Company will generally be entitled to a corresponding tax deduction equal to the amount of ordinary income recognized by the participant. Any subsequent sale or other disposition of the shares will be capital gain or loss to the participant, and there will be no corresponding deduction for the Company.
Performance Awards
A participant who has been granted a performance award generally will not recognize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. When an award is paid, whether in cash or shares, the participant generally will recognize ordinary income, and the Company will be entitled to a corresponding deduction
Other Types of Awards
With respect to other awards under the Plan, generally, a participant will recognize ordinary income in an amount equal to the payment of cash and/or the fair market value of any other property received, and the Company will generally be entitled to a corresponding and contemporaneous tax deduction.
Section 409A of the Code
It is our intent that most of the awards under the Plan comply with or are exempt from Section 409A of the Code. Moreover, there is no assurance as to whether any award hereunder could be subject to or comply with Section 409A of the Code.
Existing Awards under the Plan
As of April 25, 2022, no shares of our Common Stock, options to purchase shares of our Common Stock or other awards have been granted under the Plan.
New Plan Benefits
Awards under the Plan will be granted at the discretion of the Compensation Committee and, accordingly, are not yet determinable. In addition, benefits under the Plan will depend on a number of factors, including the fair market value of our Common Stock on future dates, and actual company performance against performance goals established with respect to performance awards, among other things. Consequently, it is not possible to determine the exact benefits or number of shares subject to awards that may be granted in the future to persons eligible for participation in the Plan.
As of April 25, 2022, the fair market value of a share of our Common Stock was $0.61.
Vote Required
The affirmative (“FOR”) vote of a majority of the votes cast on the matter is required to approve the adoption and approval of 2022 Incentive Plan (meaning the number of shares voted “for” this proposal must exceed the number of shares voted “against” this proposal). Abstentions and broker non-votes will have no effect on the results of the vote on this proposal.
Recommendation of the Board
The Board unanimously recommends a vote “FOR” the adoption and approval of the 2022 Incentive Plan.Nasdaq Proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information with respect to the beneficial ownership of our Common Stock as of April 25,October 11, 2022, by:
•each person, or group of affiliated persons, known to us to beneficially own more than 5% of the outstanding Common Stock;
•each of our directors and named executive officers (“NEOs”); and
•all of our directors and executive officers as a group.
The amounts and percentages of beneficially-owned Common Stock are reported based upon SEC rules governing the determination of beneficial ownership of securities. The SEC rules:
•deem a person a “beneficial owner” of a security if that person has or shares voting power, which includes the power to vote or direct the voting of a security, or if that person has or shares investment power, which includes the power to dispose of or to direct the disposition of a security;
•deem a person a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days, and securities that can be so acquired are deemed to be outstanding for
purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s ownership percentage; and
•may deem more than one person a beneficial owner of the same securities, and may deem a person a beneficial owner of securities as to which such person has no economic interest.
Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of Common Stock. The information relating to our 5% beneficial owners is based on information we received from such holders. The percentage of beneficial ownership is based on 105,157,769106,407,769 shares of Common Stock outstanding as of April 25,October 11, 2022.
Except as otherwise noted below, the address of persons listed in the following table is:
c/o Remark Holdings, Inc.
800 S. Commerce St.
Las Vegas, Nevada 89106
| | | | Number of Common Stock Shares | | Percentage of Outstanding Common Stock Shares | | | Number of Common Stock Shares | | Percentage of Outstanding Common Stock Shares | |
| Persons known to beneficially own more than 5% | Persons known to beneficially own more than 5% | | | | | Persons known to beneficially own more than 5% | | | | |
Lawrence Rosen 1 | Lawrence Rosen 1 | 6,104,893 | | | 5.8 | % | | Lawrence Rosen 1 | 6,104,893 | | | 5.7 | % | |
Digipac LLC 2 | Digipac LLC 2 | 5,246,314 | | | 5.0 | % | | Digipac LLC 2 | 5,246,314 | | | 4.9 | % | |
| Directors and NEOs | Directors and NEOs | | | Directors and NEOs | | |
Kai-Shing Tao 3 | Kai-Shing Tao 3 | 10,200,634 | | | 9.3 | % | | Kai-Shing Tao 3 | 10,200,634 | | | 9.2 | % | |
Theodore Botts 4 | Theodore Botts 4 | 519,184 | | | * | | Theodore Botts 4 | 519,184 | | | * | |
Brett Ratner 5 | Brett Ratner 5 | 350,000 | | | * | | Brett Ratner 5 | 350,000 | | | * | |
Daniel Stein 5 | Daniel Stein 5 | 300,000 | | | * | | Daniel Stein 5 | 300,000 | | | * | |
Elizabeth Xu 5 | Elizabeth Xu 5 | 150,000 | | | * | | Elizabeth Xu 5 | 150,000 | | | * | |
All executive officers and directors as a group (5 persons) 6 | All executive officers and directors as a group (5 persons) 6 | 11,519,818 | | | 10.4 | % | | All executive officers and directors as a group (5 persons) 6 | 11,519,818 | | | 10.3 | % | |
|
* Represents holdings of less than 1% of shares outstanding.
1.Consists of shares of Common Stock. The address of Mr. Rosen is 1578 Sussex Turnpike (Bldg. 5), Randolph, NJ 07869. This disclosure is based on information contained in a Schedule 13G/A filed by Mr. Rosen with the SEC on February 14, 2022.
2.Consists of shares of Common Stock. Mr. Tao, as the manager and a member of Digipac, LLC (“Digipac”), may be deemed to beneficially own the shares of Common Stock beneficially owned by Digipac. Mr. Tao disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The address of Digipac is One Hughes Center Drive, Unit 1601, Las Vegas, Nevada 89169.
3.Consists of (i) 234,749 shares of Common Stock held by Mr. Tao, (ii) 4,422,750 shares of Common Stock issuable upon exercise of options held by Mr. Tao, (iii) 5,246,314 shares of Common Stock held by Digipac, (iv) 275,000 shares of Common Stock held by Pacific Star Capital and (v) 21,821 shares of Common Stock held by Pacific Star HSW LLC (“Pacific Star HSW”). Mr. Tao, as the manager and a member of Digipac, the Chief Investment Officer and sole owner of Pacific Star Capital, and the control person of Pacific Star HSW, may be deemed to beneficially own the shares of Common Stock beneficially owned by Digipac, Pacific Star Capital and Pacific Star HSW. Mr. Tao disclaims beneficial ownership of the shares of Common Stock beneficially owned by Digipac and Pacific Star HSW, except to the extent of his pecuniary interest therein.
4.Includes 477,857 shares of Common Stock issuable upon exercise of options.
5.Consists of shares of Common Stock issuable upon exercise of options.
6.Consists of 5,819,211 shares of Common Stock and 5,700,607 shares of Common Stock issuable upon exercise of options.
CORPORATE GOVERNANCE
Director Independence
The Board has determined that all of our current non-employee directors are independent within the meaning of SEC and Nasdaq rules. The Board has also determined that all directors serving on the Audit Committee, Nominating and Governance Committee and Compensation Committee are independent within the meaning of SEC and Nasdaq rules.
Board and Committee Meetings
During the fiscal year ended December 31, 2021:
•the Board held four meetings;
•the Audit Committee held four meetings;
•the Compensation Committee held one meeting; and
•the Nominating and Governance Committee held one meeting.
Each of the directors attended at least 75% of the aggregate of (i) the total number of meetings of the Board held during the period in which such individual served as a director, and (ii) the total number of meetings held by all committees of the Board on which such director served, during the period in which such individual served as a director. We have no written policy regarding director attendance at annual meetings of stockholders. Of our directors, only the Chairman of the Board attended last year’s annual meeting of stockholders.
Board Diversity Matrix (As of April 25, 2022)
| | | | | | | | | | | | | | |
| Total Number of Directors | | | | 5 |
| Part I. Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender |
| Directors | 1 | 3 | | 1 |
| Part II. Demographic Background | | | | |
| African American or Black | | | | |
| Alaskan Native or Native American | | | | |
| Asian | 1 | 1 | | |
| Hispanic or Latinx | | | | |
| Native Hawaiian or Pacific Islander | | | | |
| White | | 2 | | |
| Two or More Races or Ethnicities | | | | |
| LGBTQ+ | | | | |
| Did Not Disclose Demographic Background | | | | 1 |
Board Committees
Our Board has three standing committees to assist it with its responsibilities. We describe the three committees, the charters of which are available on our website at http://ir.remarkholdings.com/corporate-governance, below.
Audit Committee. The Audit Committee is comprised of directors who satisfy the SEC and Nasdaq audit committee membership requirements, and is governed by a Board-approved charter that contains, among other things, the committee’s membership requirements and responsibilities. The committee’s responsibilities include, but are not limited to:
•appointing, overseeing the work of, determining compensation for, and terminating or retaining the independent registered public accounting firm which audits our financial statements, including assessing such firm’s qualifications and independence;
•establishing the scope of the annual audit, and approving any other services provided by public accounting firms;
•providing assistance to the Board in fulfilling the Board’s oversight responsibility to the stockholders, the investment community and others relating to the integrity of our financial statements and our compliance with legal and regulatory requirements;
•overseeing our system of disclosure controls and procedures, and our system of internal controls regarding financial accounting, legal compliance and ethics, which management and our Board established; and
•maintaining free and open communication with our independent auditors, our internal accounting function and our management.
Our Audit Committee is comprised of Messrs. Botts and Stein and Dr. Xu, each of whom is independent under applicable Nasdaq listing standards. Mr. Botts serves as Chairman of the Audit Committee.
The Board determined that Mr. Botts is the committee’s financial expert, as defined under the Exchange Act. The Board made a qualitative assessment of Mr. Botts’ level of knowledge and experience based on a number of factors, including his experience as a financial professional.
Compensation Committee. The Compensation Committee’s responsibilities include, but are not limited to:
•determining all compensation for our CEO;
•reviewing and approving corporate goals relevant to the compensation of our CEO, and evaluating the CEO’s performance in light of those goals and objectives;
•reviewing and approving the compensation of other executive officers;
•reviewing and approving objectives relevant to the compensation of other executive officers, and the executive officers’ performance in light of those objectives;
•administering our equity incentive plans;
•approving severance arrangements and other applicable agreements for executive officers, and consulting generally with management on matters concerning executive compensation and on pension, savings and welfare benefit plans where Board or stockholder action is contemplated with respect to the adoption of or amendments to such plans; and
•making recommendations on organization, succession, the election of officers, use of consultants and similar matters where Board approval is required.
Our Compensation Committee is comprised of Mr. Ratner and Dr. Xu, each of whom is independent under applicable Nasdaq listing standards. Mr. Ratner serves as Chairman of the Compensation Committee.
Nominatingand Governance Committee. The Nominating and Governance Committee considers and makes recommendations on matters related to the practices, policies and procedures of the Board and takes a leadership role in shaping our corporate governance. The committee’s responsibilities include, but are not limited to:
•assessing the size, structure and composition of the Board and its committees;
•coordinating evaluation of the Board’s performance and reviewing the Board’s compensation; and
•screening candidates considered for election to the Board.
When screening candidates for Board membership, the committee concerns itself with the composition of the Board with regard to depth of experience, balance of professional interests, required expertise and other factors. The committee evaluates prospective nominees that it identifies or which are referred to it by other Board members, management, stockholders or external sources, as well as evaluating all self-nominated candidates.
The committee has not formally established any specific, minimum qualifications that each candidate for the Board must meet, or specific qualities or skills that one or more directors must possess. However, the committee, when considering a candidate, will factor into its determination the following qualities of a candidate:
•educational background
•diversity of professional experience, including whether the person is a current or former CEO or CFO of a public company or the head of a division of a large international organization
•knowledge of our business
•integrity
•professional reputation
•strength of character
•mature judgment
•relevant technical experience
•diversity
•independence
•wisdom
•ability to represent the best interests of our stockholders
The committee may also consider such other factors as it may deem to be in the best interests of Remark and its stockholders.
The committee uses the same criteria for evaluating candidates nominated by stockholders and self-nominated candidates as it does for those proposed by other Board members, management and search companies. For more information on how stockholders can nominate candidates for election as directors, see “Stockholder Proposals” below.
The committee identifies nominees by first evaluating incumbent directors, with skills and experience that are relevant to our business and who are willing to continue in service. Such a practice balances the value of continuity of service with that of obtaining a new perspective. If an incumbent director up for re-election at an upcoming annual meeting of stockholders does not wish to continue in service, the committee identifies the skills and experience desired of a new nominee in light of the criteria above. Current members of the committee and Board will be polled for suggested candidates. Research may also be performed to identify qualified individuals. If the committee believes that the Board requires additional candidates for nomination, it may explore alternative sources for identifying additional candidates, including, if appropriate, a third-party search firm.
Our Nominating and Governance Committee is comprised of Messrs. Ratner and Stein and Dr. Xu, each of whom is independent under applicable Nasdaq listing standards. Mr. Stein serves as Chairman of the Nominating and Governance Committee.
Board Leadership Structure
Kai-Shing Tao, our Chairman of the Board and CEO, leads the Board. Our governing documents provide the Board with flexibility to determine the appropriate leadership structure for the Board and for Remark, including but not limited to whether it is appropriate to separate the roles of Chairman of the Board and Chief Executive Officer. In making these determinations, the Board considers numerous factors, including our specific needs and our strategic direction and the size and membership of the Board at the time. The Board has determined that having one person serve as both the Chairman of the Board and the Chief Executive Officer is presently in the best interest of Remark and its stockholders given our transformational and growth needs. At present, the Board believes that its current structure effectively maintains independent oversight of management and that having a lead independent director is unnecessary. The Board has the ability to quickly adjust its leadership structure should business or managerial conditions change.
Board Role in Risk Oversight
Senior management is responsible for assessing and managing our various exposures to risk on a day-to-day basis, including the creation of appropriate risk management programs and policies. The Board is responsible for overseeing management in the execution of its responsibilities and for assessing our approach to risk management. The Board exercises these responsibilities periodically as part of its meetings and also through the Board’s three committees, each of which examines various components of enterprise risk as part of its responsibilities. Members of each committee report to the full Board at the next Board meeting regarding risks discussed by such committee. In addition, an overall review of risk is inherent in the Board’s consideration of our long-term strategies and in the transactions and other matters presented to the Board, including capital expenditures, acquisitions and divestitures, and financial matters.
Hedging and Pledging Policies
Remark maintains a policy on insider trading that prohibits Remark directors, officers and employees from directly or indirectly entering into any hedging or monetization transactions with respect to Remark securities, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. The insider trading policy does allow directors, officers and employees to place Remark securities in a margin account as collateral for a margin loan or pledge Remark securities as collateral for a loan, provided, however, that they submit a request for pre-approval to the Company's compliance officer at least 3 business days prior to the proposed execution of documents evidencing such pledge or placement in a margin account. Pre-approval may be granted by the compliance officer where the director, officer, or employee clearly demonstrates the financial capacity to repay the loan without resort to the Remark securities being pledged or held in the margin account.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our employees, officers and directors. A copy of the Code of Ethics is publicly available on our website at http://
ir.remarkholdings.com/corporate-governance. Amendments to the Code of Ethics or any grant of a waiver from a provision of the Code of Ethics requiring disclosure under applicable SEC rules will also be disclosed on our website.
Stockholder Communications with the Board
Stockholders who wish to do so may communicate directly with the Board or specified individual directors by writing to:
Board of Directors (or name of individual director)
c/o Corporate Secretary
Remark Holdings, Inc.
800 S. Commerce St.
Las Vegas, Nevada 89106
We will forward all communications from security holders and interested parties to the full Board, to non-management directors, to an individual director or to the chairperson of the Board committee that is most closely related to the subject matter of the communication, except for the following types of communications: (i) communications that advocate that we engage in illegal activity; (ii) communications that, under community standards, contain offensive or abusive content; (iii) communications that have no relevance to our business or operations; and (iv) mass mailings, solicitations and advertisements. The Corporate Secretary will determine when a communication is not to be forwarded. Our acceptance and forwarding of communications to directors does not imply that directors owe or assume any fiduciary duties to persons submitting the communications.
Additionally, the Audit Committee has established procedures for the receipt, retention and confidential treatment of complaints received by Remark regarding accounting, internal accounting controls or auditing matters, including procedures for confidential, anonymous submissions by employees with respect to such matters. Employees and stockholders may raise a question or concern to the Audit Committee regarding accounting, internal accounting controls or auditing matters by writing to:
Chairman, Audit Committee
c/o Corporate Secretary
Remark Holdings, Inc.
800 S. Commerce St.
Las Vegas, Nevada 89106
AUDIT COMMITTEE REPORT
The Audit Committee reviews Remark’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements, the public reporting process and establishing and maintaining an effective system of internal control over financial reporting. Remark’s independent registered public accounting firm is engaged to audit and express opinions on the conformity of Remark’s financial statements to generally accepted accounting principles and applicable rules and regulations, and the effectiveness of Remark’s internal control over financial reporting.
In this context, the Audit Committee has reviewed and discussed the consolidated financial statements and related footnotes for the fiscal year ended December 31, 2021, together with the results of the assessment of the internal control over financial reporting with management and with Weinberg, Remark’s independent registered public accounting firm. In its discussion, management has represented to the Audit Committee that Remark’s consolidated financial statements and related footnotes for the fiscal year ended December 31, 2021 were prepared in accordance with generally accepted accounting principles.
The Audit Committee meets with Weinberg, with and without management present, to discuss the results of their examinations, their evaluations of Remark’s internal controls over financial reporting and the overall quality of Remark’s financial reporting. The Audit Committee has discussed with Weinberg the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board. Weinberg reported to the Audit Committee regarding the critical accounting estimates and practices and the estimates and assumptions used by management in the preparation of the audited consolidated financial statements as of December 31, 2021 and for the fiscal year then ended, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of use of such alternative treatments and the treatment preferred by Weinberg.
Weinberg provided a report to the Audit Committee describing Weinberg’s internal quality-control procedures and related matters. Weinberg also provided to the Audit Committee the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding Weinberg’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with Weinberg its independence. When considering Weinberg’s independence, the Audit Committee considered, among other matters, whether Weinberg’s provision of non-audit services to Remark is compatible with maintaining the independence of Weinberg. All audit and permissible non-audit services in 2021 and 2020 were pre-approved pursuant to these procedures.
Based on the reviews and discussions noted above, the Audit Committee recommended to the Board that the audited consolidated financial statements and related footnotes be included in Remark’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Audit Committee
Theodore P. Botts (Chairman)
Daniel Stein
Elizabeth Xu
EXECUTIVE COMPENSATION
Kai-Shing Tao, our Chief Executive Officer, was our only NEO for 2021.
Summary Compensation Table
The following table presents the dollar amounts of compensation earned by Mr. Tao during the years noted:
| | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | | Salary | | | | | | | | Total |
Kai-Shing Tao (Chairman and CEO) | 2021 | | $ | 350,000 | | | | | | | | | $ | 350,000 | |
| 2020 | | 350,000 | | | | | | | | | 350,000 | |
Employment Agreements
Mr. Tao is an “at will” employee and we do not have employment agreements with Mr. Tao.
Outstanding Equity Awards at Fiscal Year-End
The following table presents information regarding Mr. Tao’s unexercised options to purchase our Common Stock as of December 31, 2021 (all stock awards to Mr. Tao were fully vested as of December 31, 2021):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | |
| Name | | Number of Securities Underlying Unexercised Options Exercisable | | | | Option Exercise Price | | Option Expiration Date | | | | |
| Kai-Shing Tao | | 1,300,000 | | | | | $ | 7.81 | | | 01/19/2028 | | | | |
| | 180,000 | | | | | 1.99 | | | 06/20/2027 | | | | |
| | 1,500,000 | | | | | 4.04 | | | 11/09/2026 | | | | |
| | 350,000 | | | | | 4.10 | | | 08/18/2025 | | | | |
| | 650,000 | | | | | 4.29 | | | 07/28/2025 | | | | |
| | 442,750 | | | | | 6.30 | | | 02/17/2024 | | | | |
Equity Incentive Plans
We have granted stock options and restricted stock under our 2010 Equity Incentive Plan adopted June 15, 2010, our 2014 Incentive Plan adopted on February 17, 2014 and amended on December 23, 2014 and January 11, 2016, and our 2017 Incentive Plan adopted on January 19, 2018. The amount of stock options or shares of stock we grant to recipients generally depends upon their particular position with Remark and their achievement of certain performance metrics established by the Board. The Compensation Committee must approve all grants.
Director Compensation
The Compensation Committee periodically awards our non-employee directors with equity-based compensation. The non-employee directors did not receive any awards during the year ended December 31, 2021. As of December 31, 2021, each non-employee director owned no unvested shares of restricted stock and options to purchase shares of Common Stock as noted in the following table:
| | | | | |
| Number of Common Stock Shares Issuable Upon Exercise of Outstanding Stock Options |
Theodore Botts | 477,857 | |
Brett Ratner | 350,000 | |
Daniel Stein | 300,000 | |
Elizabeth Xu | 150,000 | |
STOCKHOLDER PROPOSALS
We must receive proposals of stockholders intended to be presented at the 2023 Annual Meeting of Stockholders (the “2023 Annual Meeting”) no later than December 30, 2022, so we may include such proposals in our proxy statement and form of proxy relating to the 2023 Annual Meeting.
Under SEC rules, if we do not receive notice of a stockholder proposal at least 45 days prior to the first anniversary of the date of mailing of the prior year’s proxy statement, then we will be permitted to use our discretionary voting authority when the proposal is raised at the annual meeting, without any discussion of the matter in the proxy statement. In connection with the 2023 Annual Meeting, if we do not receive notice of a stockholder proposal on or before March 15, 2023, we will be permitted to use our discretionary voting authority as outlined above.
Our Bylaws provide that, for stockholder nominations related to director elections or other business proposed by a stockholder to be properly brought before any annual or special meeting of our stockholders, written notice generally must be delivered to our Corporate Secretary not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting. Our Bylaws also contain certain procedures that must be followed relating to a stockholder director nomination and other proposals of stockholders.
In addition to the requirements contained in our Bylaws, to comply with the universal proxy rules, (when effective), stockholders who intend to solicit proxies in support of director nominees other than our nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 16, 2023 (the 60th day prior to the first anniversary of the annual meeting for the preceding year’s annual meeting).
PROXY SOLICITATION
We are making thishave engaged InvestorCom, Inc. (“InvestorCom”), an independent proxy solicitation offirm, to assist in soliciting proxies on behalfour behalf. We have agreed to pay InvestorCom a fee of the Board$10,000 plus $2,500 per adjournment, if necessary, plus costs and expenses, for soliciting proxies on our behalf. In addition, we will bear the cost of soliciting proxies. Proxies may be solicited through the mailhave agreed to indemnify InvestorCom and through telephonic or telegraphic communicationscertain related persons against certain liabilities relating to or by meetings with, stockholders or their representatives by directors, officers and otherarising out of our employees who will receive no additional compensation therefor.engagement of InvestorCom.
We request persons such as brokers, nominees and fiduciaries holding stock in their names for others, or holding stock for others who have the right to give voting instructions, to forward proxy material to their principals and to request authority for the execution of the proxy. We will reimburse such persons for their reasonable expenses.
Remark Holdings Vote Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. 2022 AnnualSpecial Meeting of Stockholders IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proposals — The Board of Directors recommends a vote FOR all nomineesProposal 1 and FOR Proposals 2, 3Proposal 2. 1. Approve an amendment to our Amended and 4. 1. ElectionRestated Certificate of Directors: 01 - Theodore P. Botts 02 - Elizabeth Xu 03 - Brett Ratner 04 - Daniel Stein 05 - Kai-Shing Tao For Withhold 2. RatificationIncorporation to effect a reverse stock split of all of the appointment of Weinberg & Company, P.A. as our independent public accounting firm for 2022. 3. Approval of a non-binding, advisory resolution regarding the compensationoutstanding shares of our named executive officers.common stock at a ratio of not less than 1-for-10 and not more than 1-for-20, with the exact ratio to be set at a whole number within this range by our Board of Directors in its sole discretion. For Against Abstain 4. AdoptionApprove, in accordance with Nasdaq Rule 5635(d), the potential issuance of 20% or more of our common stock pursuant to our convertible subordinated debenture and approvalequity line of the 2022 Incentive Plan. Bcredit with Ionic Ventures, LLC. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. 1UPX 03N1HC
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IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — Remark Holdings, Inc. Notice of 2022 AnnualSpecial Meeting of Stockholders Proxy Solicited by Board of Directors for AnnualSpecial Meeting – June 15,December 6, 2022 We are very pleased to virtually host this year’s Annual Meeting online,the special meeting of stockholders, which will be conducted solely online via live audio webcast. You will be able to attend and participate in the AnnualSpecial Meeting online, vote your shares electronically and submit your questions prior to and during the meeting by visiting: meetnow.global/MAHAKYXMMLLH52 at the meeting date and time described in the accompanying proxy statement. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. There is no physical location for the AnnualSpecial Meeting.
The undersigned stockholder of Remark Holdings, Inc., a Delaware corporation, hereby acknowledges receipt of the Notice of AnnualSpecial Meeting of Stockholders and Proxy Statement, each dated April 29,October 24, 2022, and hereby appoints Kai-Shing Tao as 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 2022 AnnualSpecial Meeting of Stockholders of Remark Holdings, Inc., to be held on June 15,December 6, 2022 at 1:00 p.m., ET, via the Internet at meetnow.global/MAHAKYXMMLLH52 and any adjournment(s) thereof, and to vote all common stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth on the reverse side. The undersigned stockholder hereby revokes any proxy or proxies heretofore given by the undersigned for the 2022 AnnualSpecial Meeting of Stockholders. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the ProxiesProxy will have authority to vote FOR all nomineesProposals 1 and FOR Proposals 2, 3 and 4.2. In their discretion, the Proxies areProxy is authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side.)
APPENDIX APROPOSED
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REMARK HOLDINGS, INC.
REMARK HOLDINGS, INC. (the “
Remark Holdings, Inc.
2022 Incentive Plan
ARTICLE 1
Establishment, Purpose,Corporation”), a corporation organized and Durationexisting under the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows:
1.1Establishment1. The name of the Plan.Corporation is Remark Holdings, Inc., a Delaware corporation (together with any successor thereto as provided in Article 17, hereinafter referred to as the “Company”), hereby establishes an incentive compensation plan to be known as the 2022 Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document. The Plan permits the grantAmended and Restated Certificate of Cash-Based Awards, Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Stock-Based Awards (each as defined below).
The Plan is adopted and is effective as of [_______] (the “Effective Date”) and shall remain in effect as provided in Section 1.3; provided, however, no Option (as defined below) may be exercised and no other Award (as defined below) may be exercised or otherwise paid until the Plan has been approved by the Company’s stockholders at a meeting at which approvalIncorporation of the Plan is considered.
1.2PurposeCorporation was filed with the Secretary of State of the PlanState of Delaware on December 23, 2014 and amended on January 12, 2016, June 7, 2016, April 6, 2017 and July 9, 2021 (as amended, the “. The purposeCertificate of the Plan is to promote the interests of the Company and its stockholders by aligning the interests of the Participants, through the ownership of Shares (as defined below) and through other incentives, with the interests of the Company’s stockholders, and by providing flexibility to the Company to attract, motivate, and retain Employees (as defined below), Directors (as defined below), consultants and advisors upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend.
1.3IncorporationDuration of the Plan”).. Unless sooner terminated as provided herein, the Plan shall terminate 10 years from the Effective Date. After the Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions.
ARTICLE 2
Definitions
Whenever used in2. Article IV of the Plan,Certificate of Incorporation is hereby amended by adding the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.new Section:
2.1Section 3. “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the General Rules and Regulations of the Exchange Act.
2.2“Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3.
2.3“Award” means, individually or collectively, a grant under the Plan of Cash-Based Awards, NonqualifiedReverse Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or Other Stock-Based Awards, in each case subject to the terms of the Plan.
2.4“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 promulgated under the General Rules and Regulations under the Exchange Act.
2.5“Board” or “Board of Directors” means the Board of Directors of the Company.
2.6“Cash-Based Award” means an Award granted to a Participant as described in Article 10.
2.7“Change in Control” means a Change in Control as defined in Article 14.
2.8“Code” means the Internal Revenue Code of 1986, as amended from time to time.
2.9“Committee” means the Compensation Committee of the Board, or any other committee designated by the Board to administer the Plan. The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board. The Committee shall consist solely of two or more directors who are “nonemployee directors” under Rule 16b-3 promulgated under the Exchange Act and “independent directors” under the listing requirements of the Nasdaq Stock Market, or any similar rule or listing requirement that may be applicable to the Company from time to time.
2.10“Company” has the meaning set forth in Section 1.1.
2.11“Covered Employee” means a Participant who is a “covered employee,” as defined in Section 162(m) of the Code.
2.12“Digipac” means Digipac, LLC, a Delaware limited liability company, and its Affiliates.
2.13“Director” means a member of the Board of Directors of the Company, its Affiliates and/or Subsidiaries.
2.14“Effective Date” has the meaning set forth in Section 1.1.
2.15“Employee” means any employee of the Company, its Affiliates and/or Subsidiaries.
2.16“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
2.17“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.18“Evidence of Award” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee which sets forth the terms and conditions of an Award. An Evidence of Award may be in any electronic medium, may be limited to a notation on the books and records of the Company and, with the approval of the Committee, need not be signed by a representative of the Company or a Participant.
2.19“Fair Market Value” or “FMV” means the last sales price reported for the Shares on the applicable date as reported on the principal national securities exchange in the United States on which it is then traded, or, if such date is not a trading day, the last prior day on which the Shares were so traded; or if not so listed, the mean between the closing bid and asked prices of publicly traded Shares in the over-the-counter market, or, if such bid and asked prices shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the Committee in a manner consistent with the provisions of the Code. If, however, the required accounting standards used to account for equity Awards granted to Participants are substantially modified subsequent to the Effective Date such that fair value accounting for such Awards becomes required, the Committee shall have the ability to determine an Award’s FMV based on the relevant facts and circumstances, but with respect to any Options or SARs in a manner that would not subject an otherwise exempt award to the Section 409A Rules.
2.20“Full Value Award” means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Shares.
2.21“Freestanding SAR” means a SAR that is granted independently of any Options, as described in Article 7.
2.22“Grant Price” means the price established at the time of grant of a SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.
2.23“Incentive Stock Option” means an Option that is intended to qualify as an “incentive stock option” under Section 422 of the Code.
2.24“Nonqualified Stock Option” means an Option that is not intended to meet the requirements of Section 422 of the Code, or that otherwise does not meet such requirements.
2.25“Option” means the right to purchase Shares granted to a Participant in accordance with Article 6. Options granted under the Plan may be Nonqualified Stock Options, Incentive Stock Options or a combination thereof.
2.26“Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.27“Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of the Plan, granted pursuant to Article 10.
2.28“Participant” means any eligible person as set forth in Section 5.1 to whom an Award is granted.
2.29“Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.
2.30“Performance Share” means an Award granted to a Participant, as described in Article 9.
2.31“Performance Unit” means an Award granted to a Participant, as described in Article 9.
2.32“Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.
2.33“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, including a “group” as defined in Section 13(d) thereof.
2.34“Plan” has the meaning set forth in Section 1.1.
2.35“Plan Year” means the Company’s fiscal year that begins January 1 and ends December 31.
2.36“Restricted Stock” means Shares granted or sold to a Participant pursuant to Article 8 as to which the Period of Restriction has not lapsed.
2.37“Restricted Stock Unit” means a unit granted or sold to a Participant pursuant to Article 8 as to which the Period of Restriction has not lapsed.
2.38“Section 409A Rules” means the rules promulgated pursuant to Section 409A of the Code.
2.39“Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor act thereto.
2.40“Share” means a share of common stock of the Company, $0.001 par value per share.
2.41“Stock Appreciation Right” or “SAR” means an Award, designated as a SAR and granted pursuant to the terms of Article 7 herein.
2.42“Subsidiary” means a corporation, company or other entity (i) more than 50% of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50% of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company, except that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which at the time the Company owns or controls, directly or indirectly, more than 50% of the total combined voting power represented by all classes of stock issued by such corporation.
ARTICLE 3
Administration
3.1General. The Committee shall be responsible for administering the Plan, subject to this Article 3 and the other provisions of the Plan. The act or determination of a majority of the Committee shall be the act or determination of the Committee and any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority at a meeting duly held. The Committee may employ attorneys, consultants, accountants, agents, and other persons, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested persons.
3.2Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of the Plan and any Evidence of Award or other agreement or document ancillary to or in connection with the Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in an Evidence of Award, and, subject to Article 15, adopting modifications and amendments to the Plan or any Evidence of Award, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries operate. If the Committee does not exist or is unable to act for any reason, then the Plan shall be administered by the Board, and references herein to the Committee (except in the proviso to this sentence) shall be deemed to be references to the Board.
ARTICLE 4
Shares Subject to the Plan and Maximum Awards
4.1Number of Shares Available for Awards.
(a)Subject to adjustment as provided in Section 4.4 herein, the maximum number of Shares available for issuance to Participants under the Plan shall be 10,000,000 Shares, all of which can be Incentive Stock Options.
(b)Of the Shares reserved for issuance under Section 4.1(a) of the Plan, all of the reserved Shares may be issued pursuant to Full Value Awards.
4.2Share Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares (other than SARs settled in cash), or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under the Plan. Moreover, if the Option Price of any Option granted under the Plan or the tax withholding requirements with respect to any Award granted under the Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if a SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan and any Shares so tendered shall again be available for issuance under the Plan. To the extent any SAR is settled, in whole or in part, in cash, the number of Shares available for issuance under this Section shall not be reduced. The maximum number of Shares available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Restricted Stock, Restricted Stock Units, Performance Shares, or Other Stock-Based Awards. The Shares available for issuance under the Plan may be authorized and unissued Shares, treasury Shares or a combination thereof.
4.3Annual Award Limits. Subject to the terms of Section 4.1 hereof, the maximum number of Shares that may be subject to Awards granted in any Plan Year to any individual Participant shall be 3,000,000, all of which can be Options or SARs.
4.4Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change in the shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split-up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under the Plan, may substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and/or other value determinations applicable to outstanding Awards.
The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under the Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.
Subject to the provisions of Article 15, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under the Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with the rules under Section 422 of the Code and the Section 409A Rules, where applicable.
ARTICLE 5
Eligibility and Participation
5.1Eligibility. Individuals eligible to participate in the Plan include all Employees and nonemployee Directors, and all consultants and advisors to the Company, its Affiliates and/or Subsidiaries.
5.2Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible individuals, those to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award. In making this determination, the Committee may consider any factors it deems relevant, including without limitation, the office or position held by a Participant or the Participant’s relationship to
the Company, the Participant’s degree of responsibility for and contribution to the growth and success of the Company or any Subsidiary or Affiliate, the Participant’s length of service, promotions and potential.
ARTICLE 6
Options
6.1Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that Incentive Stock Options may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted under Sections 422 and 424 of the Code).
6.2Evidence of Award. Each Option grant shall be evidenced by an Evidence of Award that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan. The Evidence of Award also shall specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.
6.3Option Price. The Option Price for each grant of an Option under the Plan shall be as determined by the Committee and shall be specified in the Evidence of Award. The Option Price may not be less than 100% of the Fair Market Value of the Shares on the date of grant. With respect to a Participant who owns, directly or indirectly, more than 10% of the total combined voting power of all classes of the capital stock of the Company, or any parent or subsidiary corporation of the Company, as defined in Section 424 of the Code, the Option Price of Shares subject to an Incentive Stock Option may not be less than 110% of the Fair Market Value of a Share on the date of grant.
6.4Duration of Options. Except as otherwise provided in Section 422 of the Code with respect to any Incentive Stock Option, each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant and specify in the Evidence of Award; provided, however, that no Option shall be exercisable later than the 10th anniversary date of its grant. In the case of an Incentive Stock Option, with respect to a Participant who owns, directly or indirectly, more than 10% of the total combined voting power of all classes of the capital stock of the Company, or any parent or subsidiary corporation of the Company, as defined in Section 424 of the Code, no Option shall be exercisable later than the 5th anniversary of its date of grant.
6.5Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve and specify in the Evidence of Award, which terms and restrictions need not be the same for each grant or for each Participant. After an Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the Option.
6.6Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price; (c) by a combination of (a) and (b); or (d) any other method approved or accepted by the Committee in its sole discretion, including, without limitation, if the Committee so determines, (i) a cashless (broker-assisted) exercise, or (ii) a reduction in the number of Shares that would otherwise be issued by such number of Shares having in the aggregate a Fair Market Value at the time of exercise equal to the portion of the Option Price being so paid.
Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
6.7Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable and specify in the Evidence of Award, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.
6.8Termination of Employment. To the extent consistent with the Section 409A Rules, each Evidence of Award shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
6.9Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition prior to the end of the calendar year in which such disposition occurred.
6.10Transferability of Options. Except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, no Option granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise required by law; provided that the Board or Committee may permit further transferability, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability. Further, except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, or unless the Board or Committee decides to permit further transferability, all Options granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant. With respect to those Options, if any, that are permitted to be transferred to another person, references in the Plan to exercise or payment of the Option Price by the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
ARTICLE 7
Stock Appreciation Rights
7.1Grant of SARs. Subject to the terms and conditions of the Plan, SARs, including Freestanding SARs, may be granted to Participants at any time and from time to time as shall be determined by the Committee. Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.
The Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Evidence of Award. The Grant Price may include (but not be limited to) a Grant Price based on 100% of the FMV of the Shares on the date of grant, a Grant Price that is set at a premium to the FMV of the Shares on the date of grant, or is indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion to the extent consistent with the Section 409A Rules.
7.2SAR Agreement. Each SAR Award shall be evidenced by an Evidence of Award that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.
7.3Term of SAR. The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Evidence of Award, no SAR shall be exercisable later than the 10th anniversary date of its grant.
7.4Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes and specifies in the Evidence of Award.
7.5Payment of SAR AmountSplit. Upon the exerciseeffectiveness of a SAR, a Participantthe filing of this Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Corporation (the “Effective Time”), each [ten (10) to twenty (20)]1 shares of Common Stock issued and outstanding immediately prior to the Effective Time shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Common Stock (the “Reverse Stock Split”). No fractional shares shall be issued and, in lieu thereof, any holder of less than one (1) share of Common Stock shall be entitled to receive payment fromcash for such holder’s fractional share based upon the Company in an amount determined by multiplying:
(a)the excessclosing sales price of the Fair Market Value of a ShareCommon Stock as reported on the date of exercise over the Grant Price; by
(b)the number of Shares with respect to which the SAR is exercised.
At the discretionNasdaq Capital Market, as of the Committee,date this Certificate of Amendment is filed with the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the formSecretary of SAR payout shall be set forth in the Evidence of Award pertaining to the grantState of the SAR.
7.6TerminationState of EmploymentDelaware.. To the extent consistent with the Section 409(A) Rules, each Evidence of Award shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
7.7Nontransferability of SARs. Except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise required by law. Further, except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. With respect to those SARs, if any, that are permitted to be transferred to another person, references in the Plan to exercise of the SAR by the Participant or payment of any amount to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
7.8Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of a SAR for a specified period of time.
ARTICLE 8
Restricted Stock and Restricted Stock Units
8.1Grant3. This Certificate of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall represent the right of a Participant to receive payment upon the lapse of the Period of Restriction.
8.2Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Evidence of Award that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine.
8.3Transferability. Except as provided in the Plan or an Evidence of Award, the Shares of Restricted Stock and/or Restricted Stock Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Evidence of Award (and in the case of Restricted Stock Units until the date of delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and set forth in the Evidence of Award or otherwise at any time by the Committee. All rights with respect to the Restricted Stock and/or Restricted Stock Units granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant, except as otherwise provided in an Evidence of Award or at any time by the Committee.
8.4Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.
In the event that the vesting date occurs on a date which is not a trading day on the principal securities exchange on which the Shares are then traded, the Fair Market Value on the last prior trading date will be utilized for cost basis.
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.
8.5Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.4, each certificate representing Shares of Restricted Stock granted pursuant to the Plan may bear a legend as determined by the Committee in its sole discretion.
8.6Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Evidence of Award, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
8.7Termination of Employment. To the extent consistent with the Section 409A Rules, each Evidence of Award shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
8.8Section 83(b) Election. The Board may provide in an Evidence of Award that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.
ARTICLE 9
Performance Units/Performance Shares
9.1Grant of Performance Units/Performance Shares. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.
9.2Value of Performance Units/Performance Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant.
9.3Earning of Performance Units/Performance Shares. Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
9.4Form and Timing of Payment of Performance Units/Performance Shares. Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Evidence of Award. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period, but not later than the expiration of the deferral period for such Award under the Section 409A Rules. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Evidence of Award pertaining to the grant of the Award.
9.5Termination of Employment. To the extent consistent with the Section 409A Rules, each Evidence of Award shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Evidence of Award entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
9.6Nontransferability. Except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, Performance Units/Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as otherwise required by law. Further, except as otherwise provided in a Participant’s Evidence of Award or otherwise at any time by the Committee, a Participant’s rights under the Plan shall be exercisable during his or her lifetime only by such Participant.
ARTICLE 10
Cash-Based Awards and Other Stock-Based Awards
10.1Grant of Cash-Based Awards. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.
10.2Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.3Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee.
10.4Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be madeAmendment was duly adopted in accordance with the termsprovisions of Section 242 of the Award, in cash, Shares or a combination thereof, asDGCL by the Committee determines.
10.5Termination of Employment. To the extent consistent with the Section 409A Rules, the Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards following terminationdirectors and stockholders of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
10.6Nontransferability. Except as otherwise determined by the Committee, neither Cash-Based Awards nor Other Stock-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, a Participant’s rights under the Plan, if exercisable, shall be exercisable during his or her lifetime only by such Participant. With respect to those Cash-Based Awards or Other Stock-Based Awards, if any, that are permitted to be transferred to another person, references in the Plan to exercise or payment of such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
ARTICLE 11
Beneficiary DesignationCorporation.
Each Participant underIN WITNESS WHEREOF, the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in caseundersigned has executed this Certificate of his or her death before he or she receives any or allAmendment this ___ day of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
11___________________, 2022.
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ARTICLE 12
Deferrals
To the extent permitted by the Section 409A Rules, the Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock or Restricted Stock Units, or the satisfaction of any requirements or performance goals with respect to Performance Shares, Performance Units, Cash-Based Awards or Other Stock-Based Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals, consistent with the Section 409A Rules.
ARTICLE 13
Rights of Participants
13.1Employment. Nothing in the Plan or an Evidence of Award shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment or service on the Board at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his or her employment or service for any specified period of time.
Neither an Award nor any benefits arising under the Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 15, the Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.
13.2Participation. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive a future Award.
13.3Rights as a Stockholder. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
ARTICLE 14
Change in Control
14.1Change in Control. For purposes of the Plan, a “Change in Control” shall mean the occurrence during the term of any of the following events:
(a)In connection with a sale or series of sales of securities of the Company, one Person (including an entity) or more than one Person acting as a group acquires securities of the Company that results in Beneficial Ownership of more than 50% of the outstanding securities entitled to vote generally in the election of directors of the Company;
(b)All or substantially all (meaning having a total gross fair market value equal to more than 50% of the total gross fair market value of all of the Company’s assets immediately before such acquisition or acquisitions) of the assets of the Company are acquired by one Person (including an entity) or more than one Person acting as a group (during a 12-month period ending on the date of the most recent acquisition by such Person or Persons); or
(c)The Company is merged, consolidated, or reorganized into or with another corporation or entity during a 12-month period with the result that upon the conclusion of the transaction less than 50% of the outstanding securities entitled to vote generally in the election of directors or other
capital interests of the surviving, resulting or acquiring corporation are Beneficially Owned by the stockholders of the Company immediately prior to the completion of the transaction.
Notwithstanding the foregoing, a Change in Control will not be deemed to have occurred (i) as a result of the issuance of stock by the Company in connection with any public offering of its stock or (ii) due to Beneficial Ownership of securities of the Company by Kai-Shing Tao or Digipac.
14.2Acceleration of Vesting and Exercisability. Upon the occurrence of a Change in Control, the Committee may accelerate the vesting and exercisability (as applicable) of any outstanding Awards, in whole or in part, as determined by the Committee in its sole discretion. In its sole discretion, the Committee may also determine that, upon the occurrence of a Change in Control, each outstanding Option or SAR shall terminate within a specified number of days after notice to the Participant, and each such Participant shall receive, with respect to each Share subject to such Option or SAR, an amount equal to the excess of the Fair Market Value of such Share immediately prior to such Change in Control over the applicable Option Price or Grant Price, which amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or a combination thereof, as the Committee shall determine in its sole discretion.
ARTICLE 15
Amendment, Modification, Suspension, and Termination
15.1Amendment, Modification, Suspension, and Termination. Subject to Sections 15.3 and 15.4, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Evidence of Award in whole or in part; provided, however, that, without the prior approval of the Company’s stockholders and except as provided in Section 4.4, Options or SARs issued under the Plan will not be repriced, replaced, or regranted through cancellation, or by lowering the Option Price of a previously granted Option or the Grant Price of a previously granted SAR, and no amendment of the Plan shall be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule.
15.2Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments, consistent with the Code and the Section 409A Rules, in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.
15.3Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary (other than Section 15.4), no termination, amendment, suspension, or modification of the Plan or an Evidence of Award shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.
15.4Amendment to Conform to Law. Notwithstanding any other provision of the Plan to the contrary, the Board may amend the Plan or an Evidence of Award, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an Evidence of Award to any present or future law relating to plans of this or similar nature (including, but not limited to, the Section 409A Rules), and to the administrative regulations and rulings promulgated thereunder.
ARTICLE 16
Withholding
16.1Tax Withholding. As determined by the Company in good faith, the Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, any foreign, federal, state, or local tax required by law to be withheld with respect to any taxable event arising as a result of the Plan.
16.2Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an Award granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the amount of any foreign, federal, state, or local tax required by law to be withheld on the transaction as determined by the Company in good faith. All such elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
ARTICLE 17
Successors
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
ARTICLE 18
General Provisions
18.1Forfeiture Events.
(a)The Committee may specify in an Evidence of Award that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for cause, termination of the Participant’s provision of services to the Company, its Affiliate, and/or its Subsidiary, violation of material Company, Affiliate, and/or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, its Affiliates, and/or its Subsidiaries.
(b)If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement.
18.2Legend. The certificates for Shares may include any legend, which the Committee deems appropriate in its sole discretion to reflect any restrictions on transfer of such Shares.
18.3Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
18.4Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent that any provision of the Plan would prevent any Option that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision shall be null and void with respect to such Option. Such provision, however, shall remain in effect for other Options and there shall be no further effect on any provision of the Plan.
18.5Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
18.6Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:
(a)Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b)Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
18.7Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
18.8Investment Representations. The Committee may require any person receiving Shares pursuant to an Award under the Plan to represent and warrant in writing that the person is acquiring the securities for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.
18.9Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
18.10Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries, and/or Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. The Plan is not subject to ERISA.
18.11No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
18.12Retirement and Welfare Plans. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards will be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any of its Subsidiaries’ or Affiliates’ retirement plans
(both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.
18.13Nonexclusivity of the Plan. The adoption of the Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
18.14No Constraint on Corporate Action. Nothing in the Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s or any of its Subsidiaries’ or Affiliates’ right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Company or any of its Subsidiaries or Affiliates to take any action which such entity deems to be necessary or appropriate.
18.15Governing Law. The Plan and each Evidence of Award shall be governed by the laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Evidence of Award, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of New York, to resolve any and all issues that may arise out of or relate to the Plan or any related Evidence of Award.
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| REMARK HOLDINGS, INC. |
| |
| By: | |
| | Name: | Kai-Shing Tao |
| | Title: | Chief Executive Officer |
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1 Exact number to be fixed at the discretion of the board of directors.
