DEFM14A 1 a2236846zdefm14a.htm DEFM14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

LOGO

RLJ ENTERTAINMENT, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
    (5)   Total fee paid:
        
 

ý

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
    (3)   Filing Party:
        
 
    (4)   Date Filed:
        
 

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RLJ ENTERTAINMENT, INC.
8515 Georgia Avenue, Suite 650
Silver Spring, Maryland 20910

LOGO

Dear Fellow Stockholders:

        You are cordially invited to attend a special meeting ("Special Meeting") of the common stockholders ("Stockholders") of RLJ Entertainment, Inc., a Nevada corporation ("Company"), on Wednesday, October 31, 2018, starting at 9:30 a.m., local time, at the offices of RLJ Entertainment, Inc. located at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910. At the Special Meeting, you will be asked to consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of July 29, 2018, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated October 2, 2018, and as may be further amended from time to time (the "Merger Agreement"), by and among the Company, AMC Networks Inc., a Delaware corporation ("AMC"), Digital Entertainment Holdings LLC, a Delaware limited liability company and wholly owned subsidiary of AMC ("Parent"), and River Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Parent ("Merger Sub"). Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the "Merger").

        Upon completion of the Merger, each share of common stock issued and outstanding at the effective time of the Merger, other than shares held by Parent and its affiliates, which shares will be cancelled for no consideration, and shares held by our founder, Mr. Robert L. Johnson, and his affiliates, which shares will be exchanged for equity interests in Parent, will be converted into the right to receive $6.25 per share in cash, without interest thereon and less any applicable withholding taxes.

        After careful consideration, all of the members of a Special Committee of the Board of Directors of the Company composed entirely of independent, non-employee directors ("Special Committee"), which has been granted the authority of the Board of Directors with respect to the Merger, have determined that the Merger Agreement and the Merger are advisable, fair to and in the best interests of the Company and its Stockholders (other than Parent and its affiliates and Mr. Johnson and his affiliates) and has adopted the Merger Agreement and the Merger.

        The Special Committee recommends that you vote "FOR" approval of the Merger Agreement and "FOR" approval of the adjournment of the Special Meeting, from time to time, if necessary or advisable (as determined by the Company). The Board of Directors recommends that you vote "FOR" approval, by non-binding advisory vote, of certain compensation that will or may become payable to the Company's Chief Executive Officer and Principal Financial and Accounting Officer in connection with the Merger.

        In considering the recommendation of the Special Committee, you should be aware that some of the Company's directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of the Stockholders generally. As of the date of this Proxy Statement, the Company's founder and his affiliates owned an aggregate of 6,794,465 shares of the Company's outstanding common stock, which constituted approximately 29.9% of the Company's outstanding common stock as of such date, and have agreed, pursuant to the terms of a Contribution Agreement entered into on July 29, 2018, to contribute to Parent, immediately prior to the effective time of the Merger, all of their shares of the Company's common stock in exchange for newly issued equity interests of Parent. Such persons have also agreed, pursuant to the terms of a Voting and Transaction Support Agreement entered into on July 29, 2018, to vote all of their shares of the Company's common stock "for" the approval of the Merger Agreement at the Special Meeting.


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        Approval of the Merger Agreement requires the affirmative vote of holders (in person or by proxy) of a majority of the outstanding shares of the Company's common stock entitled to vote thereon at the Special Meeting. As of the date of this Proxy Statement, AMC, through DEH, owns approximately 51.9% of the outstanding shares of the Company's common stock. AMC has notified the Company that it will vote all shares of common stock owned by AMC in favor of approval of the Merger Agreement at the Special Meeting. Accordingly, AMC has the requisite voting power and ability at the Special Meeting to unilaterally cause the approval of the Merger Agreement by the requisite vote of the Company's stockholders (without any need for any additional votes by any other Company stockholder).

        The accompanying Notice of Special Meeting of Stockholders and Proxy Statement describe in more detail information about the Merger Agreement, the Merger and the Special Meeting and provide important information that you should consider when deciding how to vote your shares. A copy of the Merger Agreement is attached as Annex A to the Proxy Statement. We encourage you to read the Proxy Statement and its annexes, including the Merger Agreement, carefully and in their entirety. You may also obtain additional information about the Company from documents we have filed with the Securities and Exchange Commission.

        Thank you for your continued support.

Sincerely,    

Robert L. Johnson

 

Miguel Penella
Chairman of the Board   Chief Executive Officer

        NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

        THIS PROXY STATEMENT IS DATED OCTOBER 5, 2018 AND IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT OCTOBER 5, 2018


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RLJ ENTERTAINMENT, INC.
8515 Georgia Avenue, Suite 650
Silver Spring, Maryland 20910

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on October 31, 2018

To the Holders of Our Capital Stock:

        A special meeting ("Special Meeting") of the common stockholders ("Stockholders") of RLJ Entertainment, Inc., a Nevada corporation (the "Company"), will be held on Wednesday, October 31, 2018, starting at 9:30 a.m., local time, at the offices of RLJ Entertainment, Inc. located at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910.

        The Special Meeting will be held for the following purposes:

    1.
    To consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of July 29, 2018, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated October 2, 2018, and as may be further amended from time to time (the "Merger Agreement"), by and among the Company, AMC Networks Inc., a Delaware corporation ("AMC"), Digital Entertainment Holdings LLC, a Delaware limited liability company and wholly owned subsidiary of AMC ("Parent"), and River Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Parent ("Merger Sub"). Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the "Merger"). A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement (the "Proxy Statement") (Proposal 1);

    2.
    To consider and vote on the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable to the Company's executive officers in connection with the Merger (Proposal 2);

    3.
    To approve the adjournment of the Special Meeting from time to time, if necessary or advisable (as determined by the Company in accordance with the terms of the Merger Agreement) (Proposal 3); and

    4.
    To discuss and resolve any other matters that properly come before the Special Meeting.

        The Board of Directors (the "Board") has fixed the close of business on October 2, 2018 as the record date ("Record Date") for determining Stockholders entitled to notice of and to vote at the Special Meeting.

        Even if you plan to attend the Special Meeting in person, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy by telephone or the Internet in accordance with the instructions printed on the enclosed proxy card prior to the Special Meeting, to ensure that your shares will be represented at the Special Meeting if you are unable to attend.

        Approval of the Merger Agreement requires the affirmative vote of holders (in person or by proxy) of a majority of the outstanding shares of common stock of the Company ("Common Stock") entitled to vote thereon at the Special Meeting. As of the date of this Proxy Statement, AMC, through DEH, owns approximately 51.9% of the outstanding shares of Common Stock. AMC has notified the Company that it will vote all shares of Common Stock owned by AMC in favor of approval of the Merger Agreement at the Special Meeting. Accordingly, AMC has the requisite voting power and ability at the Special Meeting to unilaterally cause the approval of the Merger Agreement by the requisite vote of Company's stockholders (without any need for any additional votes by any other Company stockholder).


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        The Special Committee of the Board (the "Special Committee"), which has been granted the authority of the full Board with respect to the Merger, has determined unanimously that the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of the Company and the Non-Affiliate Common Stockholders, adopted the Merger Agreement and the Merger and recommended that the Stockholders vote affirmatively to approve the Merger Agreement at the Special Meeting.

        Pursuant to Nevada Revised Statutes ("NRS") 92A.390(1), there are no rights of dissent available to the Stockholders in connection with the Merger. However, in connection with the Merger, holders of the Company's outstanding preferred stock will be entitled to assert dissenter's rights pursuant to and only in accordance with NRS 92A.300 to 92A.500, inclusive (the "Dissenter's Rights Statutes"), a copy of which is attached hereto as Annex D, and, in lieu of receiving the consideration for such shares available pursuant to the Merger Agreement, obtain payment of the "fair value" (as defined in NRS 92A.320) of such preferred stockholder's shares of preferred stock. In order to exercise such dissenter's rights, a preferred stockholder must comply with all of the procedural requirements of the Dissenter's Rights Statutes, including, without limitation, delivering to the Company pursuant to NRS 92A.420, before the Stockholder vote on the Merger is taken at the Special Meeting, written notice of such preferred stockholder's intent to demand payment pursuant to the Dissenter's Rights Statutes if the Merger is effectuated.

  By order of the Board,

 

Miguel Penella
Chief Executive Officer


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ABOUT THIS PROXY STATEMENT

        This statement constitutes the proxy statement ("Proxy Statement") of RLJ Entertainment, Inc., a Nevada corporation ("RLJE" or the "Company"), under Section 14(a) of the Securities Exchange Act of 1934, as amended. In addition, it constitutes a notice of meeting with respect to the special meeting ("Special Meeting") of the common stockholders of the Company ("Stockholders").

        The Company, AMC Networks Inc., a Delaware corporation ("AMC"), Digital Entertainment Holdings LLC, a Delaware limited liability company and wholly owned subsidiary of AMC ("Parent"), and River Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Parent ("Merger Sub") have entered into an Agreement and Plan of Merger, dated as of July 29, 2018 (as it may be amended or supplemented from time to time, the "Merger Agreement"). Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the "Merger"). Accordingly, unless otherwise expressly stated herein, all discussions in this Proxy Statement concerning the Merger, the Merger Agreement, and all transaction documentation, including all discussions concerning the events leading thereto, the applicable proceedings of the Special Committee of the Board of Directors of the Company (the "Special Committee"), the fairness opinion of the financial advisor to the Special Committee, and all other considerations, all relate to the Merger Agreement and the transactions contemplated thereby, including the Merger.

        No one has been authorized to provide you with information that is different from that contained in this Proxy Statement. This Proxy Statement is dated October 5, 2018. You should not assume that the information contained in this Proxy Statement is accurate as of any date other than that date. The mailing of this Proxy Statement to Stockholders will not create any implication to the contrary.

        This Proxy Statement will not constitute an offer to sell, or the solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation.

        Unless otherwise indicated or as the context otherwise requires, all references in this Proxy Statement to:

    "2015 Warrant Consideration" refers to an amount in cash, without interest, equal to the product of (i) the number of Shares issuable upon exercise of such Eligible 2015 Warrant immediately prior to the Effective Time multiplied by (ii) the excess of (A) the Per Share Merger Consideration minus (B) the exercise price per Share of such Eligible 2015 Warrant.

    "2015 Warrants" means the warrants to purchase Shares with an initial exercise date of May 20, 2015;

    "Affiliates" refers to means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made (for purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise); provided, that (i) with respect to Parent, the term "Affiliate" means only Ultimate Parent and its Subsidiaries (and, for the avoidance of doubt, does not include the Company or its Subsidiaries or any other Persons that are not controlled by Ultimate Parent) and (ii) with respect to the Company, the term "Affiliate" includes (among other Persons) Agatha Christie Limited and Agatha Christie Productions Limited, but does not include Ultimate Parent or its Subsidiaries;

    "AMC" or "Ultimate Parent" refers to AMC Networks Inc., a Delaware corporation;

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    "AMC Warrants" refers to the Class A, Class B and Class C warrants held by Parent to purchase Shares with an initial exercise date of October 14, 2016;

    "Board" or "Board of Directors" refers to the Board of Directors of the Company;

    "Closing" refers to the closing of the Merger;

    "Closing Date" refers to the date on which the Closing occurs;

    "Common Stock" refers to the common stock of RLJ Entertainment, par value $0.001 per share;

    "Company Bylaws" refers to the bylaws of the Company, as amended effective July 30, 2018, as in effect immediately prior to the Effective Time;

    "Company Charter" refers to the amended and restated articles of incorporation of the Company as in effect immediately prior to the Effective Time;

    "Company Option" refers to any outstanding option to purchase shares of Company Stock granted under the Incentive Plan;

    "Company PSU" refers to any outstanding performance stock unit granted under the Incentive Plan;

    "Company Restricted Share" refers to any outstanding restricted stock award granted under the Incentive Plan;

    "Company RSU" refers to any outstanding restricted stock unit granted under the Incentive Plan;

    "Contribution Agreement" refers to the Contribution Agreement, dated as of July 29, 2018, by and between the Johnson Entities and Parent;

    "Conversion Amount" means with respect to each share of Preferred Stock, as of the applicable date of determination, the sum of (1) the Stated Value plus (2) all accrued and unpaid dividends on such share, whether or not declared (other than Capitalized Dividends, as defined in the certificate of designation for such share) and any accrued and unpaid Late Charge (as defined in the certificate of designation for such share);

    "Converted Option Award" means the right to receive, on the earlier of (x) the date on which each such Company Option is scheduled to vest (subject to the achievement of the vesting conditions) and (y) the first anniversary of the Closing Date (subject to continued employment through that date), the Option Consideration, subject to the terms and conditions (including vesting conditions) that applied to the Company Option immediately prior to the Effective Time;

    "Converted PSU Award" means the right to receive, on the earlier of (x) the date on which such PSU is scheduled to vest (subject to the achievement of the vesting conditions) and (y) the first anniversary of the Closing Date, subject to continued employment through that date, an amount in cash, without interest and subject to applicable withholding tax, equal to the product of (i) the number of shares underlying such Converted PSU Award multiplied by (ii) the Per Share Merger Consideration, subject to the terms and conditions (including vesting conditions) that applied to the Company PSU immediately prior to the Effective Time;

    "Converted RSU Award" means the right to receive, on the earlier of (x) the date on which each such RSU is scheduled to vest (subject to the achievement of the vesting conditions) and (y) the first anniversary of the Closing Date, subject to continued employment through that date, an amount in cash, without interest and subject to applicable withholding taxes, equal to the product of (i) the number of shares underlying such RSU immediately prior to the Effective Time multiplied by (ii) the Per Share Merger Consideration, subject to the terms and conditions (including vesting conditions) that applied to the Company RSU immediately prior to the Effective Time;

    "Dissenter's Rights Statutes" means NRS 92A.300 to 92A.500, inclusive;

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    "Dissenting Shares" means any shares of Preferred Stock owned by holder who has duly demanded and perfected, and has not withdrawn or otherwise waived or lost, dissenter's rights pursuant to and in accordance with the NRS;

    "Effective Time" refers to the date and time that the Articles of Merger have been duly filed with and accepted by the Nevada Secretary of State, or at such later date and time as the Company and Parent may agree and as specified in the Articles of Merger;

    "Eligible 2015 Warrant" refers to each 2015 Warrant issued and outstanding immediately prior to the Effective Time other than 2015 Warrants owned by Ultimate Parent, Parent, Merger Sub or any other Affiliate of Parent;

    "Eligible Preferred Share" refers to each share of Preferred Stock issued and outstanding immediately prior to the Effective Time other than Dissenting Shares and shares of Preferred Stock owned by Ultimate Parent, Parent, Merger Sub or any other Affiliate of Parent;

    "Exchange Act" refers to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

    "Excluded Shares" refers to, collectively, (a) the Shares (including Shares underlying the Preferred Stock, 2015 Warrants and AMC Warrants) owned by Ultimate Parent, Parent, Merger Sub or any other Affiliate of Parent, and (b) any Shares directly or indirectly owned by the Company or any controlled Affiliate of the Company, in each case not held on behalf of third parties;

    "Greenberg Traurig" refers to Greenberg Traurig, LLP, counsel to the Special Committee;

    "Governmental Entity" refers to any U.S., non-U.S., or supranational governmental (including public international organizations), quasi-governmental, regulatory or self-regulatory authority, agency, commission, body, department or instrumentality, or any court, tribunal or arbitrator or other entity or subdivision thereof or other legislative, executive or judicial entity or subdivision thereof, in each case of competent jurisdiction;

    "Incentive Plan" refers to the Company's 2012 Incentive Compensation Plan, as amended;

    "Indemnified Parties" refers to, collectively, each present and former (determined as of the Effective Time) director or officer of the Company or any of its Subsidiaries, in each case, when acting in such capacity;

    "Investment Agreement" refers to the Investment Agreement, dated as of August 19, 2016, by and between the Company and Parent;

    "Johnson Entities" refers, collectively, to Robert L. Johnson, The RLJ Companies, LLC, and RLJ SPAC Acquisition, LLC;

    "Merger" refers to the merger of Merger Sub with and into RLJ Entertainment;

    "Merger Sub" refers to River Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Parent;

    "Non-Affiliate Common Stockholders" refers to Stockholders other than AMC, the Johnson Entities, the Company's officers and directors, and their respective Affiliates.

    "NRS" refers to the Nevada Revised Statutes;

    "Option Consideration" refers to an amount in cash, without interest and subject to applicable withholding taxes equal to the product of (i) the number of Shares issuable upon exercise of such Company Option(s) immediately prior to the Effective Time multiplied by (ii) the excess of (A) the Per Share Merger Consideration minus (B) the exercise price of such Company Option(s);

    "Outside Date" refers to February 28, 2019;

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    "Organizational Documents" refers to (a) with respect to any Person that is a corporation, its articles or certificate of incorporation, memorandum and articles of association, as the case may be, and bylaws, or comparable documents, (b) with respect to any Person that is a partnership, its certificate of partnership, if any, and partnership agreement, or comparable documents, (c) with respect to any Person that is a limited liability company, its certificate of formation or articles of organization and limited liability company or operating agreement, or comparable documents and (d) with respect to any other Person that is not an individual, its comparable organizational documents;

    "Parent" refers to Digital Entertainment Holdings LLC, a Delaware limited liability company and a wholly owned subsidiary of Ultimate Parent;

    "Paying Agent" refers to the U.S. bank or trust company appointed by Parent to act as paying agent, in trust for the benefit of the holders of the Common Stock;

    "Per Share Merger Consideration" refers to the right to receive $6.25 per Share in cash, without interest;

    "Person" refers to any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature;

    "Preferred Stock" means the preferred stock of the Company, par value $0.001 per share;

    "Preferred Stock Consideration" refers to an amount in cash, without interest, equal to the greater of (i) the product of (A) 125% multiplied by (b) the product of (1) the Conversion Amount being redeemed multiplied by (2) the quotient of the Per Share Merger Consideration divided by $3.00 or (ii) such greater amount determined pursuant to the terms of Section 7(b) of the certificate of designation in respect of the Preferred Stock;

    "Representative" refers to, with respect to any Person, any director, principal, partner, manager, member (if such Person is a member-managed limited liability company or similar entity), employee (including any officer), consultant, investment banker, financial advisor, legal counsel, authorized attorneys-in-fact, accountant or other advisor, agent or representative of such person, in each case acting in their capacity as such;

    "Requisite Company Vote" refers to the approval of the Merger Agreement by the holders of a majority of the outstanding Shares entitled to notice of and to vote on such matter at a meeting of the holders of Common Stock duly called and held for such purpose;

    "RLJE", "RLJ Entertainment", the "Company", "we" "our" or "us" refers to RLJ Entertainment, Inc., a Nevada corporation;

    "RLJ SPAC" refers to RLJ SPAC Acquisition, LLC.

    "Rollover Shares" refers to the shares of Common Stock and 2015 Warrants owned by the Johnson Entities that will be contributed to Parent immediately prior to consummation of the Merger pursuant to the Contribution Agreement;

    "SEC" refers to the U.S. Securities and Exchange Commission;

    "Share" refers to a share of Common Stock;

    "Special Committee" refers to the special committee of independent and disinterested directors of the Board heretofore constituted, established and authorized pursuant to duly adopted resolutions of the Board and NRS 78.125(1) for the purpose of, among other things, considering, negotiating and making a dispositive and binding determination on behalf of the Company and the Board to approve or disapprove of the Merger Agreement and the other transaction contemplated thereby;

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    "Stated Value" means, with respect to each share of Preferred Stock, the sum of (i) $1,000 per share and (ii) any Capitalized Dividends (as defined in the certificate of designation for such share) with respect to such share of Preferred Stock, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the initial issuance date of such share.

    "Stock Unit Consideration" refers to an amount in cash, without interest and subject to applicable withholding taxes equal to the product of (i) the number of Shares issuable upon exercise of such Company PSUs or Company RSUs immediately prior to the Effective Time multiplied by (ii) the Per Share Merger Consideration.

    "Subsidiaries" refers to, with respect to any Person, any other Person of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other individuals performing similar functions is directly or indirectly owned or controlled by such Person and/or by one or more of its Subsidiaries, provided, that with respect to Ultimate Parent and its Subsidiaries, the term "Subsidiary" does not include the Company;

    "S&C" refers to Sullivan & Cromwell LLP, counsel to AMC, Parent and Merger Sub.

    "Voting Agreement" refers to the Voting and Transaction Support Agreement, dated as of July 29, 2018, by and among Parent, the Johnson Entities and the Company.

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SUMMARY TERM SHEET

    1  

The Parties to the Merger Agreement

   
1
 

The Merger

   
2
 

The Special Meeting

   
2
 

Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger

   
4
 

Interests of the Company's Directors and Executive Officers in the Merger

   
5
 

Material U.S. Federal Income Tax Consequences of the Merger

   
6
 

The Merger Agreement

   
7
 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

   
13
 

SPECIAL FACTORS

   
21
 

Background of the Merger

   
21
 

Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger

   
47
 

Opinion of Financial Advisor

   
54
 

Position of the AMC Entities and the Johnson Entities as to Fairness of the Merger

   
61
 

Purposes and Reasons of the Company for the Merger

   
65
 

Purposes and Reasons of the AMC Entities and the Johnson Entities for the Merger

   
65
 

Plans for the Company after the Merger

   
66
 

Certain Effects of the Merger

   
66
 

Projected Financial Information

   
67
 

Financing of the Merger

   
70
 

Interests of the Company's Directors and Executive Officers in the Merger

   
71
 

Advisory Vote on Merger-Related Compensation

   
76
 

Material U.S. Federal Income Tax Consequences of the Merger

   
77
 

Regulatory Approvals

   
80
 

Fee and Expenses

   
80
 

Effective Time of Merger

   
80
 

Payment of Merger Consideration and Surrender of Stock Certificates; Payment for Company Stock Awards

   
80
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

   
82
 

THE PARTIES TO THE MERGER AGREEMENT

   
84
 

The Parties to the Merger Agreement

   
84
 

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  Page  

THE SPECIAL MEETING

    85  

Time, Place and Purpose of the Special Meeting

   
85
 

Special Committee Recommendation of the Merger Agreement

   
85
 

Record Date and Quorum

   
85
 

Attendance

   
86
 

Vote Required

   
86
 

Proxies and Revocation

   
89
 

Adjournments and Postponements

   
90
 

Anticipated Date of Completion of the Merger

   
90
 

Solicitation of Proxies

   
90
 

Questions and Additional Information

   
90
 

THE MERGER AGREEMENT

   
91
 

Explanatory Note Regarding the Merger Agreement

   
91
 

Structure of the Merger; Charter and Bylaws; Directors and Officers

   
91
 

Terms of the Merger Agreement

   
92
 

Effect of the Merger on the Common Stock; Preferred Stock; 2015 Warrants

   
92
 

Treatment of Company Options; Company Restricted Shares; Company RSUs; Company PSUs

   
93
 

Representations and Warranties

   
93
 

Other Covenants and Agreements

   
96
 

Conditions to the Merger

   
105
 

Termination

   
106
 

Termination Fees

   
107
 

Specific Performance

   
108
 

Ultimate Parent Guarantee

   
108
 

Governing Law

   
108
 

The Voting Agreement

   
108
 

PROVISIONS FOR NON-AFFILIATE COMMON STOCKHOLDERS

   
109
 

IMPORTANT INFORMATION REGARDING THE COMPANY

   
109
 

Company Background

   
109
 

Directors and Executive Officers

   
113
 

Management's Discussion and Analysis of Financial Condition and Results of Operations

   
116
 

Market Price of the Common Stock and Dividend Information

   
148
 

Security Ownership of Certain Beneficial Owners and Management

   
149
 

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SUMMARY TERM SHEET

        This Summary Term Sheet discusses the material information contained in this Proxy Statement, including with respect to the Merger Agreement, the Merger and the other agreements entered into in connection with the Merger. We encourage you to read carefully this entire Proxy Statement, including its annexes and the documents referred to in this Proxy Statement, as this Summary Term Sheet may not contain all of the information that may be important to you in deciding how to vote your shares of Common Stock. The items in this Summary Term Sheet include page references directing you to a more complete description of that topic in this Proxy Statement.

The Parties to the Merger Agreement (Page 84)

RLJ Entertainment, Inc.
8515 Georgia Avenue
Suite 650
Silver Spring, MD 20910
(301) 608-2115

        RLJE is a premium digital channel company serving distinct audiences through its proprietary subscription-based digital channels, Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and international mysteries and dramas. UMC showcases compelling urban programming including feature films, documentaries, original series, stand-up comedy and other exclusive content for African-American and urban audiences.

AMC Networks Inc.
11 Penn Plaza
New York, New York 10001
(646) 273-3606

        AMC owns and operates several of cable television's most recognized brands delivering high quality content to audiences and a valuable platform to distributors and advertisers. AMC manages its business through two operating segments: (i) National Networks, which principally includes AMC, WE tv, BBC AMERICA, IFC and SundanceTV; and AMC Studios, AMC's television production business; and (ii) International and Other, which principally includes AMC Networks International, AMC's international programming business; IFC Films, AMC's independent film distribution business; and AMC's owned subscription streaming services, Sundance Now and Shudder.

Digital Entertainment Holdings LLC
11 Penn Plaza
New York, New York 10001
(646) 273-3606

        Parent is a Delaware limited liability company and a wholly owned subsidiary of AMC that was formed by AMC solely for the purpose of lending funds to RLJE and holding its interest in RLJE.

River Merger Sub Inc.
11 Penn Plaza
New York, New York 10001
(646) 273-3606

        Merger Sub is a Nevada corporation and a wholly owned subsidiary of Parent that was formed by Parent solely for the purpose of facilitating the Merger in accordance with the terms and subject to the conditions of the Merger Agreement. To date, Merger Sub has not conducted any activities other than

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those related to its formation and completion of the transactions contemplated by the Merger Agreement. At the Effective Time, Merger Sub will cease to exist.

The Merger Agreement (Page 91)

        In the Merger, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) will be converted into the right to receive the Per Share Merger Consideration. At the Effective Time, the Company will become a wholly owned subsidiary of Parent.

The Special Meeting (Page 85)

Time, Place and Purpose of the Special Meeting (Page 85)

        The Special Meeting will be held on Wednesday, October 31, 2018, starting at 9:30 a.m. local time, at the offices of RLJ Entertainment, Inc. located at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910. At the Special Meeting, you will be asked to vote on the proposal to approve the Merger Agreement. The Merger Agreement provides that at the Effective Time of the Merger, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the "Surviving Corporation"). Our Stockholders will also be asked to (i) approve by non-binding, advisory vote, certain compensation that will or may become payable to the Company's executive officers in connection with the Merger and (ii) approve the proposal to adjourn the Special Meeting, if necessary or appropriate (as determined by the Company).

Record Date and Quorum (Page 85)

        You are entitled to receive notice of, and to vote at, the Special Meeting if you owned shares of Common Stock at the close of business on October 2, 2018, which we have fixed as the record date for the Special Meeting (the "Record Date"). Each share of Common Stock that you owned on the Record Date entitles you to one vote. As of the Record Date, there were 22,723,887 shares of Common Stock issued and outstanding and entitled to vote at the Special Meeting. Holders of a majority of the votes entitled to be cast at the Special Meeting must be present, in person or by proxy, at the Special Meeting to achieve the required quorum for the transaction of business at the Special Meeting. Therefore, the presence in person or by proxy of our Stockholders holding at least 11,361,944 shares of Common Stock will be required to establish a quorum.

        If less than a majority of outstanding shares of Common Stock entitled to vote is represented at the Special Meeting, a majority of the shares represented may adjourn the Special Meeting and reschedule it for another date, time or place. If the new date, time or place is announced at the Special Meeting before an adjournment is taken, we do not need to give notice of the new date, time or place. However, if the Special Meeting is adjourned or postponed to a date more than 60 days later than the original meeting date, we must fix a new record date and deliver another notice of meeting.

Vote Required (Page 86)

        If a quorum is present, approval of the proposal to approve the Merger Agreement requires the affirmative vote of holders (in person or by proxy) of a majority of the outstanding shares of Common Stock entitled to vote thereon at the Special Meeting.

        If a quorum is present, the proposal to approve, by non-binding, advisory vote, of certain compensation that will or may become payable to the Company's executive officers in connection with the Merger will be approved if the number of votes cast at the special in favor of such proposal

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exceeds the number of votes cast opposing such proposal. The outcome of this vote is not binding on the Company.

        If a quorum is present, approval of the proposal to adjourn the Special Meeting, if necessary or appropriate, requires that the number of votes cast at the Special Meeting, whether in person or by proxy, in favor of adjournment exceeds the number of votes cast opposing adjournment.

        AMC has notified the Company that it will vote all shares of Common Stock owned by AMC in favor of approval of the Merger Agreement at the Special Meeting. Accordingly, AMC has the requisite voting power and ability at the Special Meeting to unilaterally cause the approval of the Merger Agreement by the requisite vote of the Company's stockholders (without any need for any additional votes by any other Company stockholder).

Special Committee Recommendation of the Merger Agreement (Page 85)

        The Board has granted to the Special Committee the full authority of the Board with respect to the Merger Agreement and the Merger. The Special Committee recommends that you vote "FOR" approval of the proposal to approve the Merger Agreement and "FOR" approval of the proposal to adjourn the Special Meeting, if necessary or appropriate (as determined by the Company). The Board recommends that you vote "FOR" approval of the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable to the Company's executive officers in connection with the Merger.

Proxies and Revocation (Page 89)

        Any Stockholder of record entitled to vote at the Special Meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the Special Meeting. If your shares of Common Stock are held in "street name" by your bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or to vote in person at the Special Meeting, or do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, your shares of Common Stock will not be voted on any of the proposals described in this Proxy Statement, which will have the same effect as a vote "AGAINST" the proposal to approve the Merger Agreement, but will not affect the outcome of any other proposal.

        If you are a Stockholder of record, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is voted at the Special Meeting by:

    delivering written notice to our Corporate Secretary at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910;

    executing and delivering to our Corporate Secretary at the address above a proxy bearing a later date;

    attending the Special Meeting in person, at which time the powers of the proxy holders with respect to your shares will be revoked if you so request; or

    submitting a vote by telephone or via the Internet with a later date.

        Your attendance at the Special Meeting will not by itself revoke a previously granted proxy.

        If you hold your shares of Common Stock in street name, you may submit new voting instructions by contacting your bank, brokerage firm or other nominee. You may also vote in person at the Special Meeting if you obtain a legal proxy from your bank, brokerage firm or other nominee.

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Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger (Page 47)

        After careful consideration of various factors described in the section "Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger" beginning on page 47 of this Proxy Statement, at a meeting held on July 29, 2018, all of the independent, non-employee directors that comprise the Special Committee, which has been granted the authority of the Board with respect to the Merger, has determined, by unanimous vote, that the Merger Agreement and the Merger are advisable, fair to and in the best interests of the Company and its Stockholders (other than Parent and its affiliates and Mr. Johnson and his affiliates), adopted the Merger Agreement and the Merger, directed that the Merger Agreement be submitted for approval by a vote of the Stockholders at the Special Meeting, and recommended that the Stockholders approve the Merger Agreement. See "Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger" beginning on page 47 of this Proxy Statement.

        In considering the recommendation of the Special Committee with respect to the proposal to approve the Merger Agreement, you should be aware of certain interests that certain of our directors and executive officers may have in the Merger (aside from their interests as Stockholders of the Company) that may be different from, or in addition to, your interests as a Stockholder generally. The Special Committee was aware of these interests, considered them and took them into account, together with other factors, in determining whether to approve the Merger Agreement and recommend that you vote for approval of the Merger Agreement. See "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" beginning on page 71 of this Proxy Statement.

Opinion of Financial Advisor (Page 54)

        The Special Committee engaged Allen & Co. as financial advisor in connection with the proposed Merger. In connection with this engagement, the Special Committee requested that Allen & Co. render an opinion to the Special Committee as to the fairness, from a financial point of view, to the Unaffiliated RLJE Stockholders (as defined in the Merger Agreement) of the Per Share Merger Consideration to be received by such holders pursuant to the Merger Agreement. On July 29, 2018, at a meeting of the Special Committee held to evaluate the Merger, Allen & Co. rendered an oral opinion, which was confirmed by delivery of a written opinion dated July 29, 2018, to the Special Committee to the effect that, as of that date and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken described in such opinion, the consideration to be received the Unaffiliated RLJE Stockholders pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

        The full text of Allen & Co.'s written opinion, dated July 29, 2018, which describes the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken, is attached as Annex B and is incorporated by reference herein in its entirety. The description of Allen & Co.'s opinion set forth in this Proxy Statement is qualified in its entirety by reference to the full text of Allen & Co.'s opinion. Allen & Co.'s opinion was intended for the exclusive benefit and use of the Special Committee (in its capacity as such) in connection with its evaluation of the Per Share Merger Consideration from a financial point of view and did not address any other terms, aspects or implications of the Merger. Allen & Co.'s opinion did not constitute a recommendation as to the course of action that RLJE (or the Special Committee) should pursue in connection with the Merger or otherwise address the merits of the underlying decision by RLJE to engage in the Merger, including in comparison to other strategies or transactions that might be available to RLJE or which RLJE might engage in or consider. Allen & Co.'s opinion does not constitute advice or a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the Merger or otherwise.

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Interests of the Company's Directors and Executive Officers in the Merger (Page 71)

        Aside from their interests as Stockholders of the Company, certain of our directors and executive officers have certain interests in the Merger that may be different from, or in addition to, your interests as a Stockholder generally. In considering the recommendation of the Special Committee that you vote to approve the Merger Agreement, you should be aware of these interests. The Special Committee was aware of these interests, considered them and took them into account, together with other factors, in determining whether to approve the Merger Agreement and recommend that you vote for approval of the Merger Agreement. See "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" beginning on page 71 of this Proxy Statement.

        In particular, as is described elsewhere in this Proxy Statement, pursuant to the terms of the Contribution Agreement, the Johnson Entities have agreed to exchange, immediately prior to the Effective Time, all of their shares of Common Stock and 2015 Warrants, constituting the Rollover Shares, for equity interests of Parent in connection with the Merger. As a result, the Rollover Shares will not be converted into the right to receive the Per Share Merger Consideration at the Effective Time. See "Special Factors—The Contribution Agreement and Rollover Shares of Johnson Entities" beginning on page 74 of this Proxy Statement.

        In addition to the terms of the Contribution Agreement, the interests of our directors and executive officers in the Merger that may be different from, or in addition to, those of other Stockholders of the Company, include, but are not limited to:

    with respect to Company Options (which are held by our Chief Executive Officer), at the Effective Time, (1) each (A) outstanding award of Company Options (or portion thereof) that is vested and exercisable and (B) outstanding and unvested award of Company Options scheduled to vest before 2020 will be cancelled and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Option Consideration, and (2) each outstanding and unvested award of Company Options scheduled to vest after 2019 will be cancelled and converted into a Converted Option Award (See "The Merger Agreement—Treatment of Company Options; Company Restricted Shares; Company RSUs; Company PSUs" beginning on page 93 of this Proxy Statement);

    with respect to Company PSUs (which are held by our Chief Executive Officer), at the Effective Time:

    each unvested Company PSU that is earned based on performance as of the Effective Time, as determined in accordance with the Merger Agreement and the applicable award agreement, will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and,

    a prorated portion (as calculated in accordance with the applicable award agreement) of any Company PSUs that are not earned at the Effective Time will be cancelled and converted into a Converted PSU Award.

    any Company PSUs that do not vest or convert into a Converted PSU Award will be forfeited at the Effective Time for no consideration (See "The Merger Agreement—Treatment of Company Options; Company Restricted Shares; Company RSUs; Company PSUs" beginning on page 93 of this Proxy Statement);

    with respect to Company RSUs (which are held by certain of our employees, including our Chief Executive Officer and our Principal Financial and Accounting Officer), at the Effective Time:

    each unvested Company RSU that is scheduled to vest before 2020 will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and

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      each unvested Company RSU that is scheduled to vest after 2019 will be cancelled and converted into a Converted RSU Award (See "The Merger Agreement—Treatment of Company Options; Company Restricted Shares; Company RSUs; Company PSUs" beginning on page 93 of this Proxy Statement);

    with respect to Company Restricted Shares (which are held by our Chief Executive Officer and our directors), at the Effective Time, each Company Restricted Share that is outstanding immediately prior to the Effective Time will become fully vested and will be entitled to receive the Per Share Merger Consideration, less any applicable withholding taxes (See "The Merger Agreement—Treatment of Company Options; Company Restricted Shares; Company RSUs; Company PSUs" beginning on page 93 of this Proxy Statement);

    conversion, at the Effective Time, of Eligible 2015 Warrants, beneficially owned by Wolverine Flagship Fund Trading Limited and Sudbury Capital Fund, L.P., who are represented on the Board by John Ziegelman and Dayton Judd, respectively, into the right to receive the 2015 Warrant Consideration (See "The Merger Agreement—Effect of the Merger on the Common Stock; Preferred Stock; 2015 Warrants" beginning on page 92 of this Proxy Statement); and

    payment of compensation to the Special Committee members, not to exceed in the aggregate $100,000 per member, in connection with their services to the Company with respect to the Merger (which compensation is not conditioned on the consummation of the Merger).

        In addition, all Eligible Preferred Shares for which a change-of-control purchase election has been made by their record holders pursuant to the applicable certificates of designation, will be entitled to elect to receive an amount in cash, without interest, equal to the Preferred Stock Consideration. Any holder of Preferred Stock that does not make such election within 180 days following the Effective Time will be entitled to receive, in respect of each Eligible Preferred Share for which the holder fails to make such election, a security to be issued by the Surviving Corporation, as provided in the applicable certificate of designation. See "The Merger Agreement—Effect of the Merger on the Common Stock; Preferred Stock; 2015 Warrants" beginning on page 92 of this Proxy Statement. Most of the Eligible Preferred Shares are beneficially owned by Wolverine Flagship Fund Trading Limited and Sudbury Capital Fund, L.P., who are represented on the Board by John Ziegelman and Dayton Judd, respectively.

Material U.S. Federal Income Tax Consequences of the Merger (Page 77)

        The exchange of shares of Common Stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder (as defined below under the heading "Special Factors—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 77 of this Proxy Statement) who receives cash in exchange for shares of Common Stock pursuant to the Merger will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before the deduction of any withholding tax) and the Stockholder's adjusted tax basis in the shares exchanged for cash pursuant to the Merger.

        Payments made to a Non-U.S. Holder (as defined below under the heading "Special Factors—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 77 of this Proxy Statement) with respect to the shares of Common Stock that are exchanged for cash pursuant to the Merger generally will not be subject to U.S. federal income or withholding tax, subject to certain exceptions. You should read "Special Factors—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 77 of this Proxy Statement for definitions of "U.S. Holder" and "Non-U.S. Holder," and for a more detailed discussion of the U.S. federal income tax consequences of the Merger. You should consult your own tax advisor regarding the particular tax consequences (including

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the state, local or non-U.S. tax consequences) of the Merger to you in light of your own particular circumstances.

The Merger Agreement (Page 91)

Treatment of Common Stock, Preferred Stock and 2015 Warrants (Page 93)

        Common Stock—At the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) automatically will be converted into the right to receive the Per Share Merger Consideration. All such shares when so converted will no longer be outstanding and automatically will be cancelled and will cease to exist, and each holder of a certificate (or evidence of shares in book-entry form) that immediately prior to the Effective Time represented any such shares will cease to have any rights with respect thereto, except the right to receive the Per Share Merger Consideration.

        Preferred Stock—The Merger Agreement provides that each Eligible Preferred Share for which a change-of-control cash purchase election has been made by the record holder thereof pursuant to Section 7(b) of the certificate of designation applicable to such Preferred Share will be entitled to receive the Preferred Stock Consideration. If any holder of Eligible Preferred Shares does not make such election and surrender such shares in exchange for the Preferred Stock Consideration within 180 days following the Closing Date, such holder will be entitled to receive, in respect of each Eligible Preferred Share for which the holder fails to make such election, a security to be issued by Surviving Corporation, as provided in the applicable certificate of designation. Parent is also required to comply with the notice and other obligations set forth in the certificates of designation in respect of the Preferred Stock, to the extent applicable, after the date of the Merger Agreement and prior to the Effective Date.

        2015 Warrants—The Merger Agreement provides that, at the Effective Time, each Eligible 2015 Warrant will be converted into the right to receive, as promptly as practicable after the Effective Time, the 2015 Warrant Consideration.

Treatment of Equity Awards (Page 93)

        Company Options—At the Effective Time, (1) each (A) outstanding award of Company Options (or portion thereof) that is vested and exercisable and (B) outstanding and unvested award of Company Options scheduled to vest before 2020 will be cancelled and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Option Consideration, and (2) each outstanding and unvested award of Company Options scheduled to vest after 2019 will be cancelled and converted into a Converted Option Award.

        Company Restricted Shares—At the Effective Time, each Company Restricted Share that is outstanding immediately prior to the Effective Time will become fully vested and will be entitled to receive the Per Share Merger Consideration, less any applicable withholding taxes.

        Company RSUs—At the Effective Time, each unvested Company RSU that is scheduled to vest before 2020 will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and each unvested Company RSU that is scheduled to vest after 2019 will be cancelled and converted into a Converted RSU Award.

        Company PSUs—At the Effective Time, each unvested Company PSU that is earned based on performance as of the Effective Time, as determined in accordance with the Merger Agreement and the applicable award agreement, will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and a prorated portion (as calculated in accordance with the applicable award agreement) of any Company PSUs that

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are not earned at the Effective Time will be cancelled and converted into in a Converted PSU Award. Any Company PSUs that do not vest or convert into a Converted PSU Award will be forfeited at the Effective Time for no consideration.

Company Non-Solicitation Covenant and Permitted Response to Acquisition Proposals (Page 97)

        Under the Merger Agreement, the Company is not permitted to (i) initiate, solicit, propose or knowingly encourage or otherwise knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an "Acquisition Proposal" (as such term is defined below under the heading "The Merger Agreement—Other Covenants and Agreements—No Solicitation and the Company's Fiduciary Exceptions Thereto" beginning on page 94) of this Proxy Statement, (ii) engage in, continue or otherwise participate in any discussions or negotiations relating to any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal, (iii) provide any information or data concerning the Company or its subsidiaries or access to their properties, books and records to any person in connection with any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal, (iv) enter into any "Alternative Acquisition Agreement" (as such term is defined below under the heading "The Merger Agreement—Other Covenants and Agreements—No Solicitation and the Company's Fiduciary Exceptions Thereto" beginning on page 97 of this Proxy Statement), (v) take any action to exempt any third party from the restrictions on "business combinations" or acquisitions or voting of Common Stock under any applicable takeover statutes, or (vi) grant any waiver, amendment or release under any standstill or confidentiality agreement concerning an Acquisition Proposal.

        However, prior to obtaining stockholder approval of the Merger Agreement, in response to an unsolicited, bona fide written Acquisition Proposal, the Company may (subject to certain requirements regarding confidentiality and providing certain notifications, information and materials to Parent) (i) provide non-public information and access to the Company's and its subsidiaries' properties, books and records to the person who made such Acquisition Proposal, (ii) engage in or otherwise participate in any discussions or negotiations with any such Person regarding such Acquisition Proposal (including to request clarification of the terms and conditions of such Acquisition Proposal) and (iii) take the actions described in clauses (v) and (vi) of the preceding paragraph of this Proxy Statement, if, and only if, prior to the taking of any such action, the Special Committee determines in good faith, after consultation with outside legal counsel that, based on the information then available and after consultation with its financial advisor, such Acquisition Proposal either constitutes a "Superior Proposal" (as such term is defined in the Merger Agreement) or is reasonably expected to result in a Superior Proposal, and that, based on the information then available (including the terms and conditions of such Acquisition Proposal and the Merger Agreement), the failure to take such action would be inconsistent with the fiduciary duties of the Special Committee directors under Nevada law.

        AMC has advised the Special Committee that it will not vote any Common Stock owned by AMC in favor of approval of any Acquisition Proposal. AMC beneficially owns at least 50.1% of the outstanding Common Stock, which is sufficient to disapprove any Acquisition Proposal. Therefore, the Company believes it is unlikely that any Acquisition Proposal will be received by the Company.

Change in Recommendation (Page 99)

        None of the Board, the Special Committee or any other committee of the Board may (i) withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify) the Special Committee's recommendation that the Company's stockholders vote in favor of the Merger (the "Company Recommendation"), in a manner adverse to Parent, (ii) fail to include the Company Recommendation in the Company's proxy statement to be mailed to the Company's stockholders in connection with the Merger, (iii) at any time following the receipt of an Acquisition Proposal (other than a tender or exchange offer that has been publicly disclosed), fail to reaffirm its approval or

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recommendation of the Merger Agreement and the Merger as promptly as practicable (but in any event within five business days) after receipt of any written request to do so from Parent, (iv) fail to recommend rejection of any tender offer or exchange offer for outstanding shares of Common Stock that has been commenced by any person on or prior to the 10th business day after such commencement, or (v) approve, authorize or recommend (or determine to approve, authorize or recommend) or publicly declare advisable any Acquisition Proposal or other proposal that would reasonably be expected to lead to an Acquisition Proposal or any Alternative Acquisition Agreement (any such action, a "Recommendation Change").

        However, prior to obtaining stockholder approval of the Merger Agreement, the Special Committee may make a Recommendation Change and terminate the Merger Agreement if (i) an unsolicited, bona fide written Acquisition Proposal that was not obtained in breach of the Company's non-solicitation covenants is received by the Company and not withdrawn and (ii) the Special Committee determines in good faith, after consultation with outside legal counsel and its financial advisor, that such Acquisition Proposal constitutes a Superior Proposal. However, such a Recommendation Change and termination of the Merger Agreement may not be made unless and until (A) prior to taking such action, the Company gives Parent four business days' advance written notice that the Special Committee intends to consider or take any action with respect to making such Recommendation Change, together with a reasonably detailed description of the Superior Proposal, (B) during the pendency of such four-business-day-period, if requested by Parent, the Special Committee and its representatives negotiate in good faith with Parent and its representatives to revise the Merger Agreement (in the form of a binding amendment) to enable the Special Committee to determine in good faith, after consultation with its outside legal counsel and its financial advisor, that after giving effect to such modifications, such Acquisition Proposal would no longer constitute a Superior Proposal, and (iii) at the expiration of such four-business-day period, the Special Committee, after having taken into account the modifications to the Merger Agreement proposed by Parent, has determined in good faith, after consultation with outside legal counsel and its financial advisor, that a failure to make a Recommendation Change and terminate the Merger Agreement and abandon the Merger would be inconsistent with the fiduciary duties of the Special Committee directors under Nevada law.

        The Special Committee may also make a Recommendation Change and terminate the Merger Agreement if (i) an Intervening Event (as such term is defined in the Merger Agreement, has occurred and is continuing and (ii) the Special Committee determines in good faith, after consultation with its outside legal counsel and its financial advisor, that failure to make a Recommendation Change as a result of such Intervening Event would be inconsistent with the fiduciary duties of the Company's directors under Nevada law. However, such a Recommendation Change and termination of the Merger Agreement may not be made unless and until the Special Committee provides Parent with the same matching rights as described above.

Conditions to the Merger (Page 105)

        The Merger Agreement provides that the obligations of the Company, Parent and Merger Sub to consummate the Merger are subject to customary closing conditions, including, among other things, the satisfaction (or waiver) at or prior to the Effective Time of the following conditions: (i) the Requisite Company Vote shall have been duly obtained; and (ii) no order or law (whether temporary, preliminary or permanent) shall be in effect which enjoins, prevents or otherwise prohibits, restrains or makes unlawful consummation of the Merger and the other transactions contemplated by the Merger Agreement. There is no financing condition to the Merger.

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        The Merger Agreement provides that the obligations of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions:

    Each of the representations and warranties made by us in the Merger Agreement is true and correct as of the date of the Merger Agreement and as of the Closing Date, with certain materiality qualifiers and limitations;

    We have performed in all material respects all obligations required to be performed by us under the Merger Agreement on or prior to the Closing Date;

    Since the date of the Merger Agreement, there has not occurred any event, change development, circumstance, fact or effect that has had a Material Adverse Effect and that remains in effect; and

    We have delivered to Parent a certificate signed on our behalf by the our Chief Executive Officer certifying that conditions set forth in the foregoing three bullet points have been satisfied.

        The Merger Agreement provides that the obligations of the Company to consummate the Merger are subject to the satisfaction at or prior to the Effective Time of the following additional conditions:

    Each of the representations and warranties made by Parent and Merger Sub in the Merger Agreement is true and correct as of the date of the Merger Agreement and as of the Closing Date, with certain materiality qualifiers and limitations;

    Each of Parent and Merger Sub has performed in all material respects all obligations required to be performed by them under the Merger Agreement on or prior to the Closing Date;

    Parent has delivered to us a certificate signed on behalf of Parent and Merger Sub by an executive officer of Merger Sub certifying that conditions set forth in the foregoing two bullet points have been satisfied.

Termination; Termination Fees (Page 106)

        The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Requisite Company Vote has been obtained:

    (a)
    by the mutual written consent of us and Parent;

    (b)
    by either us or Parent, if the Merger is not consummated on or before the Outside Date or if any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger has become final and non-appealable.

    (c)
    by us, if Parent or Merger Sub has breached any representation, warranty, covenant or agreement of Parent or Merger Sub set forth in the Merger Agreement, or if any representation or warranty of Parent or Merger has become untrue, in each case, such that the closing conditions would not be satisfied and such breach is either not curable prior to the Outside Date or has not been cured within the earlier of 30 days of written notice thereof and three business days prior to the Outside Date;

    (d)
    by us, prior to the time the Requisite Company Vote is obtained, following a Recommendation Change, but only if we are not then in material breach of our non-solicitation obligations under the Merger Agreement and such Recommendation Change is made in accordance with the applicable terms and conditions of the Merger Agreement;

    (e)
    by Parent, if we have breached any representation, warranty, covenant or agreement made by us in the Merger Agreement, or if any representation or warranty made by us has become

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      untrue, in each case, such that the closing conditions would not be satisfied and such breach is either not curable prior to the Outside Date or has not been cured within the earlier of 30 days of written notice thereof and three business days prior to the Outside Date; or

    (f)
    by Parent, following a Recommendation Change, if the Requisite Company Vote has not yet been obtained at the Special Meeting.

        Under the Merger Agreement, the Company is required to pay to Parent a cash termination fee equal to $6.75 million if (i) the Merger Agreement is terminated by either the Company or Parent due to the failure of the parties to consummate the Merger by the Outside Date, any Person has made and publicly announced an Acquisition Proposal and, within 12 months of such termination, the Company has entered into or consummated an Alternative Acquisition Agreement with respect to an Acquisition Proposal or (ii) the Merger Agreement is terminated by either Parent or the Company as a result of a Recommendation Change made in connection with a Superior Proposal.

        The Company is required to pay to Parent a cash termination fee equal to the documented, out-of-pocket expenses of Parent incurred in connection with the Merger Agreement and the transactions contemplated thereby, up to a maximum of $3.0 million, if the Merger Agreement is terminated by Parent or the Company as a result of a Recommendation Change made in connection with an Intervening Event.

Market Price of Our Common Stock (Page 148)

        The closing price of our Common Stock on the Nasdaq Capital Market on July 27, 2018, the last trading day prior to the public announcement of the Merger Agreement, was $4.87 per share. The Per Share Merger Consideration of $6.25 per share represents a premium of approximately 28.3% over the closing price per share on July 27, 2018. On October 4, 2018, the most recent practicable date before this Proxy Statement was mailed to our Stockholders, the closing price for our Common Stock on the Nasdaq Capital Market was $6.20 per share. You are encouraged to obtain current market quotations for our Common Stock in connection with voting your Common Stock.

No Dissenter's or Appraisal Rights for Holders of Common Stock (Page 157)

        Pursuant to NRS 92A.390, holders of a class or series of stock that is listed on a national securities exchange are generally not entitled to dissenter's rights in connection with a merger unless (i) the articles of incorporation of the corporation provide that such exception is not available, (ii) the resolution of the board of directors approving the plan of merger expressly provides otherwise or (iii) the holders of the class or series of stock are required under the plan of merger or exchange to accept for the shares anything except cash, shares of stock listed on a national securities exchange, or a combination of cash and such shares. The Common Stock is traded on Nasdaq, and the Company Charter does not provide for dissenter's rights in addition to those provided by the NRS. Accordingly, because the Per Share Merger Consideration consists of only cash, the holders of Common Stock will not have dissenter's rights in connection with the Merger.

Dissenter's Rights for Holders of Preferred Stock (Page 157)

        The Preferred Stock is not traded on a national securities exchange. Therefore, in connection with the Merger, holders of the Company's outstanding Preferred Stock will be entitled to assert dissenter's rights pursuant to and only in accordance with the Dissenter's Rights Statutes, a copy of which is attached hereto as Annex D, and, in lieu of receiving the consideration for such shares available pursuant to the Merger Agreement, obtain payment of the "fair value" (as defined in NRS 92A.320) of such preferred stockholder's shares of preferred stock. In order to exercise such dissenter's rights, a preferred stockholder must comply with all of the procedural requirements of the Dissenter's Rights Statutes, including, without limitation, delivering to the Company pursuant to NRS 92A.420, before the

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Stockholder vote on the Merger is taken at the Special Meeting, written notice of such preferred stockholder's intent to demand payment pursuant to the Dissenter's Rights Statutes if the Merger is effectuated.

        THE FOREGOING STATEMENT REGARDING DISSENTER'S RIGHTS IN RESPECT OF HOLDERS OF THE COMPANY'S OUTSTANDING PREFERRED STOCK IS INCLUDED IN THIS PROXY STATEMENT SOLELY FOR THE PURPOSE OF COMPLYING WITH THE REQUIREMENTS OF ITEM 3 OF SCHEDULE 14A AND THE PROVISIONS OF THE DISSENTER'S RIGHTS STATUTES. THE HOLDERS OF THE COMPANY'S PREFERRED STOCK ARE NOT ENTITLED TO VOTE AT THE SPECIAL MEETING ON ANY MATTER. THE COMMON STOCK IS THE ONLY CLASS OF THE COMPANY'S CAPITAL STOCK THAT HAS THE RIGHT TO VOTE AT THE SPECIAL MEETING.

Delisting and Deregistration of Our Common Stock (Page 157)

        If the Merger is completed, our Common Stock will be delisted from the Nasdaq Capital Market and deregistered under the Exchange Act and we will no longer be required to file periodic reports with the SEC on account of our Common Stock.

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

        The following questions and answers are intended to address briefly some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that may be important to you as a Stockholder of the Company. Please refer to the "Summary Term Sheet" and the more detailed information contained elsewhere in this Proxy Statement, the annexes to this Proxy Statement and the documents referred to in this Proxy Statement, which you should read carefully and in their entirety.

Q.
What is the proposed transaction and what effects will it have on the Company?

A.
The proposed transaction involves the acquisition of the Company by Parent in accordance with the terms and subject to the conditions set forth in the Merger Agreement.

    If the proposal to approve the Merger Agreement is approved by our Stockholders at the Special Meeting and the other closing conditions under the Merger Agreement have been satisfied or, to the extent permitted by the Merger Agreement and applicable law, waived, Merger Sub will merge with and into the Company. Upon completion of the Merger, the Company will be the Surviving Corporation in the Merger and will continue to exist and conduct business following the Merger. As a result of the Merger, we will become a wholly owned subsidiary of Parent and will no longer be a publicly traded corporation, and you will no longer have any equity interest in the Company or any financial interest in our future earnings or growth.

Q.
What will I receive if the Merger is completed?

A.
Upon completion of the Merger, you will be entitled to receive the Per Share Merger Consideration of $6.25 in cash, without interest thereon and less any required withholding taxes, for each share of our Common Stock that you own. For example, if you own 100 shares of Common Stock, you will receive $625 in cash in exchange for your shares, less any required withholding taxes. You will not own any shares of capital stock of the Surviving Corporation.

Q.
When do you expect the Merger to be completed?

A.
We and Parent have agreed in the Merger Agreement to complete the Merger as soon as practicable. If the Merger Agreement is approved at the Special Meeting then, assuming timely satisfaction or, to the extent permitted by the Merger Agreement and applicable law, waiver of the other necessary closing conditions, we anticipate that the Merger will be completed promptly thereafter.

Q.
What happens if the Merger is not completed?

A.
If the Merger Agreement is not completed for any reason, you will not receive any payment for your shares of Common Stock. Instead, we will remain an independent public company, and our Common Stock will continue to be listed and traded on the Nasdaq Capital Market.

    If, to the extent permitted by the Merger Agreement, (i) the Merger Agreement is terminated by either us or Parent due to the failure to consummate the Merger by the Outside Date, any Person has made and publicly announced an Acquisition Proposal and, within 12 months of such termination, we have entered into or consummated an Alternative Acquisition Agreement with respect to an Acquisition Proposal or (ii) the Merger Agreement is terminated by either Parent or us as a result of a Recommendation Change made in connection with a Superior Proposal, the Company must pay or cause to be paid to Parent a termination fee equal to $6.75 million, as described under "The Merger Agreement—Terms of the Merger Agreement—Termination Fees" beginning on page 106 of this Proxy Statement.

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    If, to the extent permitted by the Merger Agreement, the Merger Agreement is terminated by either Parent or us as a result of a Recommendation Change made in connection with an Intervening Event, the Company must pay or cause to be paid to Parent a cash termination fee equal to the documented, out-of-pocket expenses of Parent incurred in connection with the Merger Agreement and the transactions contemplated thereby, up to a maximum of $3 million, as described under "The Merger Agreement—Terms of the Merger Agreement—Termination Fees" beginning on page 106 of this Proxy Statement.

Q.
Is the Merger expected to be taxable to me?

A.
Yes. The exchange of shares of Common Stock for the Merger Consideration in the Merger will be a taxable transaction to U.S. Holders for U.S. federal income tax purposes. In general, a U.S. Holder who receives cash in exchange for shares of Common Stock pursuant to the Merger will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before the deduction of any withholding tax) and the Stockholder's adjusted tax basis in the shares of Common Stock exchanged for cash pursuant to the Merger. Backup withholding may also apply to the cash payments made pursuant to the Merger unless the U.S. Holder or other payee provides a taxpayer identification number, certifies that such number is correct and otherwise complies with the backup withholding rules.

    Payments made to a Non-U.S. Holder who receives cash in exchange for shares of Common Stock pursuant to the Merger will generally be exempt from U.S. federal income tax, subject to certain exceptions. A Non-U.S. Holder may, however, be subject to backup withholding with respect to the cash payments made pursuant to the Merger, unless the holder certifies that it is not a U.S. person or otherwise establishes a valid exemption from backup withholding tax.

    See "Special Factors—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 77 of this Proxy Statement for definitions of "U.S. Holder" and "Non-U.S. Holder," and for a more detailed discussion of the U.S. federal income tax consequences of the Merger.

    You should consult your own tax advisor regarding the particular tax consequences (including the state, local or non-U.S. tax consequences) of the Merger to you in light of your own particular circumstances.

Q.
How many votes do I have?

A.
You will have one vote for each share of Common Stock that you owned on the Record Date.

Q.
What will I be voting on?

A.
You will be voting on the following:

Proposal 1:  The approval of the Merger Agreement, which provides that, at the effective time, Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent;

Proposal 2:  The proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable to the Company's executive officers in connection with the Merger; and

Proposal 3:  The proposal to adjourn the Special Meeting, if necessary or appropriate (as determined by the Company).

Q.
What are the voting recommendations of the Special Committee?

A.
The Special Committee has unanimously determined that the Merger Agreement and the Merger are advisable, fair to, and in the best interests of, the Company and its Non-Affiliate Common

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    Stockholders and adopted the Merger Agreement and the Merger. The Special Committee recommends that you vote "FOR" approval of the Merger Agreement (Proposal 1) "and "FOR" approval of the proposal to adjourn the Special Meeting, if necessary or appropriate (as determined by the Company) (Proposal 3). The Board recommends that you vote FOR" approval, by non-binding advisory vote, of certain compensation that will or may become payable to the Company's executive officers in connection with the Merger (Proposal 2).

Q.
How do I vote?

A.
If you are a Stockholder of record (that is, if your shares of Common Stock are registered in your name with Computershare Trust Company, N.A., our transfer agent), then you may vote in any of the following four ways:

By telephone;

By the internet;

By mail; or

By vote at the Meeting

    Telephone and Internet voting is convenient, provides postage and mailing cost savings and is recorded immediately, minimizing the risk that postal delays may cause votes to arrive late and therefore not be counted.

    Even if you plan to attend the Special Meeting, you are encouraged to vote your shares by proxy. You may still vote your shares in person at the meeting even if you have previously voted by proxy. If you are present at the meeting and desire to vote in person, your previous vote by proxy will not be counted.

Q.
What if I hold my shares in "street name"?

A.
If you are a beneficial owner of shares held in "street name" and do not provide the broker, nominee, fiduciary or other custodian through which you hold your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. We believe that the proposals set forth in this Proxy Statement will not be considered to be routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform us that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a "broker non-vote." When we tabulate the votes for any particular matter, broker non-votes will be counted for purposes of determining whether a quorum is present. Your broker or nominee will usually provide you with the appropriate instruction form at the time you receive this Proxy Statement. We encourage you to provide voting instructions to the organization that holds your shares by carefully following the instructions in the voting instruction form.

    If you do not instruct your bank, brokerage firm or other nominee to vote your shares of Common Stock, your shares will not be voted on any of the proposals described in this Proxy Statement, which will have the same effect as a vote "AGAINST" the proposal to approve the Merger Agreement.

Q.
How many votes must be present to hold the meeting?

A.
Nevada law and our Bylaws require that a quorum exist for the transaction of business at a Stockholder meeting. A quorum for the actions to be taken at the Special Meeting will consist of a

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    majority of the voting power of the outstanding shares of stock that are entitled to vote at the Special Meeting. Proxies marked as abstaining, and any proxies returned by brokers as "broker non-votes" on behalf of shares held in "street name" because beneficial owners' discretion has been withheld as to one or more matters on the agenda for the Special Meeting, will be treated as present and entitled to vote and will count towards the establishment of a quorum. Our founder, Robert L. Johnson, and his affiliates, who collectively own approximately 43.5% of the outstanding Common Stock, have agreed to be present at the Special Meeting for the purpose of establishing a quorum.

Q.
What vote is required to approve each proposal?

A.
Approval required for Proposal 1:    If a quorum is present at the Special Meeting, the approval of the Merger Agreement requires the affirmative vote of holders (in person or by proxy) of a majority of the outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Because the affirmative vote required to approve the proposal to approve the Merger Agreement is based upon the total number of outstanding shares of Common Stock, if you fail to submit a proxy or vote in person at the Special Meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, this will have the same effect as a vote "AGAINST" the proposal to approve the Merger Agreement.

    AMC has notified the Company that it will vote all shares of common stock owned by AMC in favor of approval of the Merger Agreement at the Special Meeting. Accordingly, AMC has the requisite voting power and ability at the Special Meeting to unilaterally cause the approval of the Merger Agreement by the requisite vote of the Company's stockholders (without any need for any additional votes by any other Company stockholder).

    Approval required for Proposal 2:    If a quorum is present, approval, by non-binding, advisory vote, of certain compensation that will or may become payable to the Company's executive officers in connection with the Merger will be approved if the number of votes cast at the special in favor of such proposal exceeds the number of votes cast opposing such proposal. The outcome of this vote is not binding on the Company.

    Approval required for Proposal 3:    If a quorum is present, approval of the proposal to adjourn the Special Meeting, if necessary or appropriate (as determined by the Company), whether in person or by proxy, in favor of adjournment exceeds the number of votes cast opposing adjournment.

Q.
What are the effects of abstentions and broker non-votes?

A.
Abstentions

    Pursuant to Nevada law, abstentions are counted as present for purposes of determining the presence of a quorum; however, abstentions will not be counted as votes cast "FOR" or "AGAINST" any proposal. Because the proposal to approve the Merger Agreement requires the affirmative vote of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting, an abstention will have the same effect as a vote "AGAINST" the proposal to approve the Merger Agreement.

    Abstentions will have no effect on the voting results for any other proposal described in this Proxy Statement.

    Broker "non-votes"

    Under applicable exchange rules, if a broker, bank or other institution that holds shares in "street name" for a customer does not receive voting instructions from that customer, the broker may vote on only certain "routine" matters. For "non-routine" matters, which include all proposals

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    contained in this Proxy Statement, a broker may not vote on such matters unless it receives voting instructions from the customer for whom it holds shares of Common Stock. A broker "non-vote" occurs when a broker does not receive such voting instructions from its customer on "non-routine" matters. Broker non-votes are counted for purposes of determining the presence of a quorum; however, they will not be counted as votes cast "FOR" or "AGAINST" any proposal and will have no effect on the voting results for any proposal, other than the proposal to approve the Merger Agreement, for which a broker non-vote will have the effect of a vote "AGAINST" approval of the Merger Agreement.

    Because all proposals in this Proxy Statement are considered "non-routine" matters under applicable exchange rules, we urge you to give voting instructions to your broker.

    If any "routine" matters are properly brought before the Special Meeting, then brokers holding shares in street name may vote those shares in their discretion for any such routine matters.

Q.
Can I change my mind after I vote?

A.
If you are the record owner of your shares, you may revoke your proxy at any time before it is voted at the Special Meeting by:

delivering written notice to our Corporate Secretary at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910;

executing and delivering to our Corporate Secretary at the address above a proxy bearing a later date;

attending the Special Meeting in person, at which time the powers of the proxy holders with respect to your shares will be revoked if you so request; or

submitting a vote by telephone or via the Internet with a later date.

    Please note that attendance at the Special Meeting will not, by itself, constitute revocation of your proxy.

    If you hold your shares in "street name," the broker, nominee, fiduciary or other custodian through which you hold your shares will instruct you as to how you may revoke or change your vote.

Q.
Who will count the votes?

A.
A representative of Computershare Trust Company, N.A. will count the votes and will serve as the independent inspector of elections.

Q.
What does it mean if I receive more than one proxy card?

A.
It means that you have multiple accounts with brokers or our transfer agent. Please vote all of these shares of Common Stock. We encourage you to register all of your shares of Common Stock in the same name and address. You may do this by contacting your broker or our transfer agent. Our transfer agent may be reached at 1-800-586-1305 or at the following address:

    Computershare Trust Company, N.A.
    Computershare Inc.
    250 Royall Street
    Canton, Massachusetts 02021

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Q.
Will my shares of Common Stock be voted if I do not provide my proxy?

A.
If you are the Stockholder of record and you do not vote or provide a proxy, your shares of Common Stock will not be voted.

    If your shares of Common Stock are held in "street name", they may not be voted if you do not provide the bank, brokerage firm or other nominee with voting instructions. Currently, banks, brokerage firms or other nominees have the authority under the Nasdaq Capital Market rules to vote shares of Common Stock for which their customers do not provide voting instructions on certain "routine" matters.

    However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, which include all proposals described in this Proxy Statement, and, as a result, absent specific instructions from the beneficial owner of shares of Common Stock held in street name, banks, brokerage firms or other nominees are not empowered to vote those shares.

Q.
May Stockholders ask questions?

A.
Yes. Our representatives will answer Stockholders' appropriate questions of general interest following the Special Meeting consistent with the rules distributed at the Special Meeting.

Q.
Have any Stockholders already agreed to vote "FOR" approval of the Merger Agreement?

A.
As of the date of this Proxy Statement, AMC, through DEH, owns a majority of the voting power attributable to all of the outstanding Common Stock. AMC has notified the Special Committee that it will vote all Common Stock owned by AMC in favor of approval of the Merger Agreement and the transaction contemplated thereby, at the Special Meeting. Accordingly, because the Merger Agreement does not require an affirmative vote of a majority of the Non-Affiliate Common Stockholders, AMC has the requisite voting power and ability at the Special Meeting to unilaterally cause the approval of the Merger Agreement by the Stockholders (without any need for any additional votes by any other Stockholder).

    Concurrently with the execution of the Merger Agreement and as a condition and inducement to Ultimate Parent's, Parent's and Merger Sub's willingness to enter into the Merger Agreement, the Johnson Entities entered into a Voting Agreement with Parent, pursuant to which, subject to certain exceptions, such Stockholders have agreed to, among other things, vote all of their respective shares of Common Stock in favor of the approval of the Merger Agreement. The shares of Common Stock subject to the Voting Agreement comprise approximately 29.9% of the issued and outstanding shares of Common Stock as of the date of this Proxy Statement. The Voting Agreement will terminate upon certain circumstances, including upon termination of the Merger Agreement.

Q.
Do any of the directors or officers of the Company have interests in the Merger that may differ from or be in addition to my interests as a Stockholder?

A.
Yes. In considering the recommendation of the Special Committee that you vote to approve the Merger Agreement, you should be aware that certain of our directors and executive officers have certain interests in the Merger that may be different from, or in addition to, your interests as a Stockholder generally. The Special Committee was aware of these interests, considered them and took them into account, together with other factors, in determining whether to approve the Merger Agreement and recommend that you vote for approval of the Merger Agreement. See "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" beginning on page 71 of this Proxy Statement.

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Q.
Who will pay for this proxy solicitation?

A.
We will pay the cost of preparing, assembling and mailing this Proxy Statement, the notice of meeting and the enclosed proxy card. Our directors, officers and employees may solicit proxies in person or by telephone, mail, e-mail or facsimile. These persons will not be paid additional remuneration for their efforts. We may request banks, brokers and other custodians, nominees and fiduciaries to forward copies of the proxy materials to the beneficial owners of our Common Stock and to request authority for the execution of proxies, and we may reimburse such persons for their expenses incurred in connection with these activities.

    In addition, we have retained MacKenzie Partners, Inc. to assist in the solicitation. We will pay a fee of $10,000 plus reasonable out-of-pocket expenses for their assistance. We will indemnify MacKenzie Partners, Inc. against any losses arising out of its proxy soliciting services on our behalf.

Q.
Will any other matters be voted on at the Special Meeting?

A.
As of the date of this Proxy Statement, our management knows of no other matter that will be presented for consideration at the Special Meeting other than those matters discussed in this Proxy Statement.

Q.
What is the Company's website address?

A.
Our website address is www.rljentertainment.com. We make this Proxy Statement, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available on our website in the Investors-SEC Filings section, as soon as reasonably practicable after electronically filing such material with the SEC. Information contained on, or accessible through, our website is not a part of this Proxy Statement and is not incorporated by reference.

    This information is also available free of charge at www.sec.gov, an Internet site maintained by the SEC that contains reports, proxy and information statements, and other information regarding issuers that is filed electronically with the SEC. Stockholders may also read and copy any reports, statements and other information filed by us with the SEC at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC's website for further information on its public reference room. In addition, Stockholders may obtain free copies of the documents filed with the SEC by contacting us at (301) 608-2115 or by sending a written request to RLJ Entertainment, Inc., 8515 Georgia Avenue, Suite 650 Silver Spring, Maryland 20910.

    Our SEC filings are available in print to any Stockholder who requests a copy at the phone number or address listed above.

Q.
What happens if I sell my shares of Common Stock before the Special Meeting?

A.
The Record Date for Stockholders entitled to vote at the Special Meeting is earlier than both the date of the Special Meeting and the consummation of the Merger. If you transfer your shares of Common Stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies us in writing of such special arrangements, you will retain your right to vote such shares at the Special Meeting but will transfer the right to receive the Per Share Merger Consideration to the person to whom you transfer your shares.

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Q.
What do I need to do now?

A.
Even if you plan to attend the Special Meeting, after carefully reading and considering the information contained in this Proxy Statement, please vote promptly to ensure that your shares of Common Stock are represented at the Special Meeting. If you hold your shares of Common Stock in your own name as the Stockholder of record, please vote your shares by (i) completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope, (ii) using the telephone number printed on your proxy card or (iii) using the Internet voting instructions printed on your proxy card. If you decide to attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.

Q.
Should I send in my stock certificates now?

A.
No. You will be sent a letter of transmittal promptly after the completion of the Merger, describing how you may exchange your shares of Common Stock for the Merger Consideration. If your shares of Common Stock are held in "street name" by your bank, brokerage firm or other nominee, you will receive instructions from your bank, brokerage firm or other nominee as to how to effect the surrender of your "street name" shares in exchange for the Merger Consideration. Please do NOT return your stock certificate(s) with your proxy.

Q.
Who can help answer my other questions?

A.
If you have questions regarding the Special Meeting, please contact MacKenzie Partners at

GRAPHIC

1407 Broadway, 27th Floor

New York, New York 10018

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

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SPECIAL FACTORS

Background of the Merger

        On August 19, 2016, the Company entered into an Investment Agreement (the "Investment Agreement") with Parent, pursuant to which the Company agreed to (i) enter into a Credit and Guaranty Agreement with Parent (the "Credit Agreement"), pursuant to which Parent would provide to the Company a $60 million seven-year term loan and a $5 million one-year term loan and (ii) issue to Parent warrants to purchase shares of Common Stock (the "AMC Warrants") that, if exercised in full, would provide Parent with at least 50.1% of the outstanding Common Stock (on a fully diluted basis) and, therefore, a majority of the total voting power attributable to all outstanding shares of Common Stock (the "AMC Transaction"). The AMC Warrants are exercisable, in whole or in part, at any time in Parent's discretion. On October 1, 2018, Parent exercised certain of the AMC Warrants, resulting in AMC beneficially owning, in the aggregate, a majority of the voting power attributable to all of the outstanding Common Stock.

        Pursuant to the Investment Agreement, for so long as Parent owns the AMC Warrants, or any amounts remain outstanding in respect of the term loans, Parent has the right to designate two directors for election to the Board and, upon the exercise of the AMC Warrants, in full, Parent will have the right to designate a majority of the directors for election to the Board. Two such director designees of Parent currently serve on the Board. In addition, the Investment Agreement provides that the Company may not, directly or indirectly, entertain or solicit acquisition proposals, participate in any discussions or negotiations with any person regarding any acquisition proposal, provide non-public information to any person in connection with any acquisition proposal, enter into any agreement with any person relating to any acquisition proposal, grant any waiver, amendment or release under any standstill or confidentiality agreement concerning an acquisition proposal, or otherwise facilitate any effort or attempt to make an acquisition proposal. These restrictions remained in effect following the consummation of the transactions contemplated by the Investment Agreement and have been waived by Parent solely to facilitate the ability of the Company to take certain actions in respect of unsolicited Acquisition Proposals under the Merger Agreement, as described in more detail under "The Merger Agreement—Other Covenants and Agreements—No Solicitation and the Company's Fiduciary Exceptions Thereto" beginning on page 97 of this Proxy Statement.

        In connection with the Investment Agreement, holders of the Company's Series A-1, A-2, B-1 and B-2 preferred stock and holders of the 2015 Warrants exchanged their securities for shares of Preferred Stock and 2015 Warrants with revised terms. For holders of the Company's Series A-1, A-2 and B-1 preferred stock, the revised terms of their 2015 Warrants included a reduced exercise price of $1.50 per share, and for certain holders of the Company's Series B-2 preferred stock, the revised terms of their 2015 Warrants included a reduced exercise price of $2.37 per share. Also, on August 19, 2016, substantially all of the holders of the Company's Series A-1, A-2, B-1 and B-2 preferred stock and 2015 Warrants entered into Waiver Agreements with the Company, whereby they waived all payment rights, rights of acceleration or redemption and any other rights or preferences to which they were entitled that could be triggered in connection with the transactions contemplated by the Investment Agreement. In particular, under the Waiver Agreements, holders of the Company's Series A-1 and A-2 preferred stock agreed that the size of the Board could be increased in connection with AMC's right to designate directors to the Board upon the closing of the transactions contemplated under the Investment Agreement.

        Furthermore, in connection with the Investment Agreement, on August 19, 2016, the Company, Robert L. Johnson (the Company's Chairman) and certain of the Company's other directors, executives, principal stockholders and their affiliates, who in the aggregate held approximately 47% of the outstanding Common Stock as of such date, entered into a Voting Agreement with AMC (the "Voting Agreement"), pursuant to which such parties agreed to vote all of their shares of Common Stock in

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favor of (i) the AMC Transaction and appointed AMC as their proxy for purposes of voting on the AMC Transaction and (ii) from and after the consummation of the AMC Transaction, the election to the Board of the director-nominees designated by AMC.

        The issuance of the AMC Warrants and the other transactions contemplated by the Investment Agreement were approved by the holders of Common Stock at the Company's annual meeting of stockholders held on October 14, 2016. Upon consummation of the AMC Transaction, (i) the Company issued to Parent the AMC Warrants and (ii) the Company and Parent entered into the Credit Agreement (which was subsequently amended on January 30, 2017, June 16, 2017, June 5, 2018 and August 9, 2018), pursuant to which Parent provided to the Company term loans in an aggregate principal amount of $65 million (which principal amount was subsequently increased to an aggregate of $78 million), which term loans mature in tranches until the final maturity date of October 14, 2023. Pursuant to the Credit Agreement, the interest payable by the Company to Parent in respect of the outstanding term loans is payable quarterly, in arrears, in shares of Common Stock.

        The AMC investment refinanced the Company's previously existing senior credit facility, added working capital, reduced the cost of capital through lower interest rates and provided revised covenants allowing for increased operating flexibility. AMC's support and investment was intended to accelerate the Company's distribution and development of diverse content and independent films.

        In connection with the consummation of the transactions contemplated by the Investment Agreement, on October 14, 2016, Robert L. Johnson, RLJ SPAC Acquisition LLC ("RLJ SPAC"), Peter Edwards, Morris Goldfarb (collectively, the "Principal Stockholders") and the Company entered into a Stockholders' Agreement with Parent (the "Stockholders' Agreement"), pursuant to which (i) the Principal Stockholders granted Parent certain rights of first refusal with respect to the transfer of their equity securities in the Company, (ii) the Principal Stockholders and Parent granted each other certain "tag-along" rights and "drag-along" rights with respect to certain sales by them of the Company's outstanding equity securities and (iii) the Company granted the Principal Stockholders and Parent certain preemptive rights to purchase, on a pro rata basis, equity securities of the Company in certain future offerings thereof by the Company and its wholly owned subsidiaries.

        During the period from October 2016 through the date of this Proxy Statement, the Company has issued to Parent an aggregate of 2,691,073 shares of Common Stock in the form of interest payments due to Parent in respect of the outstanding term loans. During the same period, Parent purchased from various stockholders of the Company (i) an aggregate of 738,256 shares of Common Stock, (ii) 7,479.432 shares of Series D-1 Preferred Stock of the Company, which were convertible into 2,893,693 shares of Common Stock at the time of the purchase, and (iii) additional warrants to purchase up to an aggregate of 747,945 shares of Common Stock. In addition, during the same period, Parent, as previously noted above, added term loan debt under the Credit Agreement and partially exercised certain of the AMC Warrants and purchased 1,667,000 shares of Common Stock. Parent funded such exercise by surrendering to the Company for cancellation $5,001,000 principal amount of its outstanding term loan obligations. On October 1, 2018, Parent exercised the remainder of its Class A warrant to acquire 3,333,000 shares of Common Stock and exercised a portion of its Class B warrant to acquire 3,362,571 shares of Common Stock in exchange for the cancellation of $20,086,713 principal amount of its outstanding term loan obligations.

        On February 26, 2018, AMC delivered a letter to the Company (which was publicly disclosed in an amendment to AMC's Schedule 13D filed with the SEC on such date), pursuant to which AMC proposed to acquire all of the outstanding shares of Common Stock not then-owned by AMC, Robert L. Johnson or any of their respective affiliates, for $4.25 per share in cash (the "Initial Proposal"). The Initial Proposal indicated that it was the intention of AMC for the Company to become a privately owned subsidiary of AMC, with a minority stake held by Mr. Johnson and his affiliates. The Initial Proposal stated that the $4.25 price indication represented a 10% premium to the

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closing sale price of the Common Stock as reported on Nasdaq on February 23, 2018, the last Nasdaq trading day preceding the date of the Initial Proposal, a 12% premium to the volume weighted average trading price of the Common Stock over the 10 Nasdaq trading days preceding the date of the Initial Proposal, and a 126% premium to the closing sale price of the Common Stock on the day prior to the public announcement of AMC's initial investment in the Company. AMC stated that it expected the Board to form a special committee of independent directors to evaluate, consider and negotiate the Initial Proposal and that Mr. Johnson and the directors of the Company nominated by AMC and its affiliates would not participate in the Company's evaluation of the proposal. The Initial Proposal was subject to AMC's satisfactory completion of business, financial and legal due diligence, and AMC stated that it was interested only in acquiring the publicly held (non-affiliate) shares of the Company and would not sell its equity stake in the Company to any third party or participate in any other transaction process.

        AMC retained Citigroup Global Markets Inc. ("Citi") as its financial advisor in connection with the delivery of the Initial Proposal and its consideration of the proposed going-private merger transaction. AMC selected Citi because it is an internationally recognized investment banking firm that has substantial M&A advisory experience, including in the media and telecommunications industries, and because of the firm's longstanding relationship as a financial advisor to AMC. Citi also served as AMC's financial advisor in connection with the AMC Transaction. AMC has paid Citi $1.71 million in fees over the last two years, and AMC's engagement letter with Citi provides for a fee of $3 million to be paid upon completion of the proposed going-private transaction. Over the course of AMC's consideration of the proposed going-private merger transaction, periodically following the closing of the AMC Transaction and until the signing of the Merger Agreement, AMC discussed with representatives of Citi certain performance metrics with respect to the Company—including the Company's historical price performance, recent earnings and summary financials—as well as valuation information with respect to the Company for purposes of AMC's consideration of an appropriate per share purchase price, and Citi provided materials to AMC in connection with these discussions on September 12, 2017, October 24, 2017, February 26, 2018, April 20, 2018, May 2, 2018, July 27, 2018 and July 28, 2018, as described below. None of these discussion materials related to the fairness of the consideration provided for in the Merger Agreement to the Non-Affiliate Common Stockholders. Citi did not receive specific or additional instructions from AMC with respect to these discussion materials. These discussion materials were based on Citi's review of, among other things, certain projections and financial information provided to Citi by the Company, publicly available historical business and financial information about the Company and publicly available information about select peer companies and prior going-private transactions. Citi relied on the accuracy and completeness of such data in order to conduct financial analyses as it deemed necessary and appropriate to summarize the Company's past and projected financial performance, the Company's financial position, the Company's firm value at different prices, the total cost of various proposals to AMC and how these proposals would compare to similar precedent transactions. These discussion materials were intended to assist AMC with its evaluation of the proposed going-private merger transaction, and Citi was not requested to provide, and did not provide, any opinion as to the fairness of the proposed transaction, any valuation for the purpose of assessing fairness of the consideration or any recommendation as to how a stockholder should vote on the proposed transaction. Citi was not otherwise limited in the scope of its analysis or investigation.

        On September 12, 2017, representatives of Citi provided AMC management with discussion materials (the "September 12 Materials") containing a summary of the recent stock price and financial performance of the Company, the Company's management's projections of the Company's financial performance from 2018 to 2022 and an illustrative comparison of the value of the Company at prices of $3.25, $3.50 and $3.75 per share. Included in the materials was an illustrative analysis of the proceeds due to major shareholders at different offer prices, the sources and uses under different illustrative cash and stock consideration mixes and the current capitalization of the Company. The September 12

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Materials also included a summary of the premiums paid in 27 prior going-private transactions, showing that the median and average premiums paid relative to the unaffected price one month prior to announcement in these going-private transactions were 33% and 48%, respectively.

        On October 24, 2017, representatives of Citi provided AMC management with discussion materials (the "October 24 Materials") containing an update on the Company's recent stock price and financial performance, an analysis of the Company's volume weighted average price over 3, 6, 9 and 12 month periods, the estimated cost basis of key shareholders, and an illustrative comparison of the value of the Company and the ownership and value attributable to major shareholders at share prices of $3.35, $3.75, $4.00 and $4.25. The October 24 Materials also included an updated illustrative analysis of the sources and uses, pro forma capitalization and estimated ownership of AMC and the Company following a potential acquisition of all the outstanding shares of the Company common stock not already owned by AMC or its affiliates at a price of $4.00 per share assuming an all-stock or an all-cash transaction. The October 24 Materials also included an illustrative term sheet for the acquisition of the Company shares not owned by AMC and its affiliates, an estimated process timeline and a sample letter to the board communicating an offer for the Company by AMC. The October 24 Materials also included a summary of the premiums paid in 30 prior going-private transactions, including all-stock and all-cash transactions, which showed that, for these transactions, the average premium to the unaffected price one month prior to announcement paid in all-cash transactions was 49%, in all-stock transactions was 33% and in all 30 transactions was 50%. The October 24 Materials also included an overview of the terms of the outstanding Company preferred stock, warrants, options and debt securities.

        On February 26, 2018, representatives of Citi provided AMC management with discussion materials (the "February 26 Materials") that included an illustrative analysis of the cash cost to AMC of a $4.25 per share offer for the outstanding common shares of the Company not held by AMC, Robert Johnson or their affiliates, the pro forma impact of an acquisition of the Company at a price of $4.25 per share for all cash, including pro forma ownership, revenue, EBITDA, free cash flow per share and earnings per share. The February 26 Materials also included an overview of the U.S. paid subscriber totals of similar over-the-top ("OTT") products, the market valuation of certain publicly traded companies with video subscription businesses similar to the Company's business and an analysis of the Company at the then-current market price of $3.87 per share and the proposed offer price of $4.25 per share, including the firm value to revenue, firm value to EBITDA and firm value to subscriber metrics for the Company at these prices and for the peer companies at their then-current trading prices. The February 26 Materials also provided detailed calculations for the premium of a $4.25 per share offer price to the closing price on February 23, 2018, the 10-day volume weighted average price and the closing price on August 18, 2016, the day prior to AMC's entry into an investment agreement with the Company.

        Also on February 26, 2018, Robert L. Johnson, RLJ SPAC and The RLJ Companies, LLC (collectively, the "RLJ Companies") filed an amendment to their Schedule 13D, in which they disclosed that Mr. Johnson had reached an agreement-in-principle with AMC with respect to certain liquidity and corporate governance matters and his role at the company following the consummation of the transaction contemplated by the Initial Proposal, if it occurs.

        Later that same day, the Board held a telephonic meeting that was attended by all members of the Board and a representative of Arent Fox LLP ("Arent Fox"), outside counsel to the Company and Mr. Johnson, to consider and appoint a special committee of independent directors to address the Initial Proposal. Following discussion, the Board determined to appoint a special committee comprised entirely of independent directors to review, consider, evaluate and negotiate the Initial Proposal. It was determined that Messrs. Laszlo and Royster—who (other than in their capacity as directors of the Company) had no commercial, financial or business affiliations or relationships with any of AMC, Robert L. Johnson or any of their respective affiliates and (other than certain annual grants of equity

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awards and quarterly cash compensation payments made by the Company to all non-employee directors of the Company) had no material pecuniary interests in the going-private merger transaction contemplated by the Initial Proposal—qualified as independent and disinterested directors. Accordingly, the Board resolved to constitute Messrs. Laszlo and Royster as the exclusive members of a special committee of independent and disinterested directors (the "Special Committee") with the authority to evaluate the Initial Proposal, to negotiate directly with AMC and the holders of Preferred Stock and warrants with respect to the Initial Proposal and to approve or disapprove (i.e., "say no" to) any transaction proposed by AMC. The Board also authorized the Special Committee to retain independent legal counsel and financial advisors at the Company's expense.

        On February 27, 2018, the Company issued a press release announcing the appointment of the Special Committee to consider, review and evaluate the Initial Proposal.

        Also on February 27, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee. The Special Committee discussed its plan and timetable for identifying, interviewing and ultimately retaining qualified independent professional advisors to assist the Special Committee in connection with a potential transaction with AMC. The members of the Special Committee discussed their respective relationships with well-regarded, national law firms specializing in public M&A transactions of a nature similar to the going-private transaction proposed by AMC, as well as their relationships with well-regarded financial advisory/investment banking firms with a history of executing such transactions in the media and telecommunications industry. The Special Committee established a timetable over the following two weeks to interview and select a team of independent professional advisors and outlined its plan to identify and elicit the background information needed from independent legal and financial advisor candidates, formulate and script questions to ascertain that information, establish the overall criteria for evaluating candidates, and interview a number of highly-qualified law firms and financial advisory/investment banking firms.

        On February 28, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee. The Special Committee discussed its role in view of the authority granted to the Special Committee by the full Board with respect to the Initial Proposal, as well as its fiduciary obligations in connection therewith and in view of the stock ownership, creditor and other controlling interests in the Company held by AMC, Robert L. Johnson and their respective affiliates. The Special Committee also discussed the need to identify and engage independent professional advisors with no current or recent past relationships or other affiliations with the Company, AMC or Mr. Johnson to assist the Special Committee with valuing the Company and, if the Special Committee deemed it appropriate to pursue a going-private merger transaction with AMC, to structure such potential transaction, negotiate the price and other terms of a potential transaction, prepare and negotiate transaction documents, conduct due diligence and execute such transaction.

        During the period from February 28, 2018 to March 10, 2018, the Special Committee interviewed six prominent law firms. At the conclusion of such interview process, the Special Committee determined to engage international law firm, Greenberg Traurig, LLP ("Greenberg Traurig"), as its independent legal counsel. In selecting Greenberg Traurig, the Special Committee considered, among other things, the firm's overall reputation and deal execution experience and, specifically, the reputation, qualifications and significant public company M&A experience of the M&A partner leading the Greenberg Traurig deal team who interviewed with the Special Committee. The Special Committee also considered the fact that Greenberg Traurig previously represented, on a one-off basis, RLJ Acquisition, Inc., a special purpose acquisition company (SPAC) controlled by Robert L. Johnson, in connection with the acquisition by RLJ Acquisition, Inc. of Image Entertainment, Inc. and Acorn Media Group, Inc. in 2012, which transaction resulted in the creation of the Company. The Special Committee concluded that, in view of the fact that, since the consummation of such acquisition,

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Greenberg Traurig did not perform any continuing work for the Company or for Robert L. Johnson or any of his affiliates, the prior (six-year old) relationship with Mr. Johnson would not impair Greenberg Traurig's ability to serve as independent legal counsel to the Special Committee in connection with the Initial Proposal and the transactions contemplated thereby. It was also noted that Greenberg Traurig had no recent or current M&A advisory or other engagement relationship with AMC or any of its affiliates.

        During the same approximately two-week period, the Special Committee also interviewed seven prominent financial advisory/investment banking firm candidates. At the conclusion of such interview process, the Special Committee engaged Allen & Company LLC ("Allen & Co.") as its financial advisor to assist in connection with the Special Committee's review and evaluation of the Initial Proposal, including a financial valuation by Allen & Co. of the Company. The Special Committee selected Allen & Co. based upon such firm's experience and reputation as a leading independent financial advisory firm regularly engaged to provide M&A advisory services in connection with transactions similar to the going-private transaction proposed by AMC, as well as its specialization in the media and telecommunications sector. The Special Committee also considered the qualifications and significant public M&A transaction experience of the senior managing director leading the Allen & Co. deal team who interviewed with the Special Committee. The Special Committee also noted that, in 2012, Allen & Co. had represented Acorn Media Group, Inc. in the sale of such business to the Company. The Special Committee determined that in view of the fact that Allen & Co. was adverse to the Company, Robert L. Johnson and his affiliates in such transaction and had no advisory or engagement relationship in the past two years with AMC, Robert L. Johnson or any of their respective affiliates, such prior sale engagement with Acorn TV would not impair Allen & Co.'s independence regarding the proposed going-private merger transaction between the Company and AMC. The Special Committee also considered Allen & Co.'s familiarity with Acorn TV and the Company's business a positive factor with respect to its decision to hire Allen & Co.

        On March 16, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Greenberg Traurig provided a presentation on the fiduciary duties of the members of the Special Committee, both generally and in the context of the transactions contemplated by the Initial Proposal. It was noted that the Special Committee was constituted to function as the exclusive bargaining agent and guardian of the investment interests of the Non-Affiliate Common Stockholders. Greenberg Traurig and Allen & Co. also discussed the anticipated due diligence process, including the scope and nature of information that Greenberg Traurig and Allen & Co. would need to review in order to assess the Company's intrinsic value and understand the Company's business segments, the execution risks of management's business plan, competition in the sector, the Company's prospects, the Company's organizational and capital structure, the impact of the proposed going-private merger transaction on certain Company contracts and obligations, and a variety of related issues and considerations. The anticipated due diligence that AMC was expected to perform was also discussed.

        At the Special Committee's request, Greenberg Traurig also addressed the provisions contained in the respective certificates of designation for the outstanding Preferred Stock that would be implicated by the transactions contemplated by the Initial Proposal. In consultation with Greenberg Traurig, the Special Committee determined that it would be appropriate to amend the February 26, 2018 Board resolutions establishing the Special Committee to delete the current mandate regarding the Special Committee's negotiation of the proposed AMC transaction with the Company's preferred stockholders (in that their rights were preexisting and wholly contractual and outside the context of the Special Committee's fiduciary obligations) and to make certain other clarifications regarding the Special Committee's authority, function and role in respect of any potential transaction with AMC and its affiliates. Additionally, it was determined that the Special Committee should seek to obtain authority to

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explore alternative strategic transactions, including the solicitation of potential third-party buyers and business combination candidates who may be interested in pursuing a transaction with the Company and its controllers, and to obtain from AMC in connection therewith, any necessary waivers of the restrictions on such solicitation activities currently prohibited by the terms of the no-shop covenant in the Investment Agreement. Following further discussion, the Special Committee requested that Greenberg Traurig prepare a draft of amended and restated resolutions establishing the Special Committee to be presented to the full Board for discussion and consideration.

        After the representatives of Allen & Co. left the meeting, Greenberg Traurig also discussed with the Special Committee the terms of Allen & Co.'s draft engagement letter. The Special Committee authorized Greenberg Traurig to work with Allen & Co.'s outside counsel to finalize the terms of the engagement letter.

        At the meeting, the Special Committee also discussed proposed compensation for the members of the Special Committee for the work they would be required to perform in respect of evaluating, negotiating and determining whether to pursue the Initial Proposal or any alternative transaction with AMC or otherwise. Various compensation methodologies were discussed, with Greenberg Traurig noting that there could be no compensation payable upon consummation of a transaction or based on the outcome of any transaction process with AMC or the terms thereof, and that instead, any compensation should be structured as fixed monthly payments, subject to an aggregate monetary cap. Following discussion, the Special Committee determined to request from the full Board its authorization for the Company to pay to each member of the Special Committee compensation, as follows: $25,000 payable as of March 5, 2018, $25,000 payable as of April 5, 2018, $10,000 payable on the fifth day of each month thereafter commencing on May 5, 2018, subject to a monetary cap of $100,000.

        On March 19, 2018, the Special Committee and Allen & Co. executed an engagement letter, pursuant to which the Special Committee formally retained Allen & Co. as financial advisor to the Special Committee in connection with the Initial Proposal and any alternative potential transaction with AMC.

        Later that same day, the Company issued a press release announcing that the Special Committee had retained Allen & Co. as its financial advisor and Greenberg Traurig as its legal counsel to assist the Special Committee in connection with its consideration, review, evaluation and negotiation of the Initial Proposal and any alternative potential transaction with AMC.

        On March 20, 2018, Sullivan & Cromwell LLP ("S&C"), legal counsel to AMC, delivered to Greenberg Traurig an initial comprehensive due diligence request list in connection with AMC's proposed due diligence review of the Company.

        On March 29, 2018, a draft of the proposed resolutions prepared by Greenberg Traurig at the request of the Special Committee to amend and restate the authority of the Special Committee consistent with the changes discussed during the March 16, 2018 meeting of the Special Committee was distributed to all members of the Board for adoption by unanimous written consent without a meeting.

        Later that same day, the Special Committee received a letter signed by Mr. John Hsu, a senior executive of AMC and a member of the Board nominated by AMC, in response to the request that he received in his capacity as a director of the Company to execute the unanimous written consent to amend and restate the authority of the Special Committee. In the letter, Mr. Hsu reiterated on behalf of AMC that, as stated in the Initial Proposal delivered by AMC to the Company on February 26, 2018 (and as publicly disclosed in AMC's amendment to Schedule 13D), AMC would not support a transaction to sell the Company to any party, at any price, or support any other strategic transaction involving the Company. The letter stated that if Special Committee were to explore other strategic transaction alternatives (i.e., "shop the Company"), doing so would be an exercise in futility, given

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AMC's beneficial ownership (assuming the exercise, in full, of the AMC Warrants) of more than 50% of the Company's total outstanding voting power, the Company's preexisting no-shop covenant in effect under the Investment Agreement and AMC's status as lender for all of the Company's outstanding senior debt. The letter also reiterated that AMC would negotiate only with the Special Committee in respect of the Initial Proposal, and that holders of the Preferred Stock would be paid consideration based on the value paid by AMC for the Common Stock, calculated in accordance with the formula therefor set forth in the certificates of designation for the various outstanding series of the outstanding classes of Preferred Stock.

        On April 2, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee discussed the upcoming meeting of the Board scheduled for April 3, 2018, which was called at the request of the Special Committee to consider, among other things, the proposed resolutions to amend and restate the authority of the Special Committee. The Special Committee also discussed the letter received from AMC on March 29, 2018, in which AMC made clear that it was only a buyer of the Company and not a seller.

        Greenberg Traurig provided an overview of the fiduciary duties of the Special Committee members, both generally and in the context of a potential transaction with AMC. Following discussion, the Committee members determined that in light of AMC's reiterated statement that it was only a buyer of the Company and the Company's previously agreed to no-shop covenant contained in the Investment Agreement, it would not be productive for the Special Committee to conduct a market check of the Company. Moreover, in view of the fact that AMC's position on these matters had been publicly disclosed in its amendment to Schedule 13D, it was determined that there was essentially no likelihood that alternative transaction candidates would surface or be interested, willing or able to submit alternative (or competing) transaction proposals. The Special Committee also discussed with its advisors the due diligence process to be conducted by Allen & Co. and Greenberg Traurig and the anticipated scope and timing thereof, as well as the anticipated due diligence review to be conducted by AMC and its representatives. The Special Committee directed Allen & Co. to complete its preliminary valuation of the Company prior to providing AMC full due diligence access to certain non-public Company information. It was further noted that the Special Committee considered the Initial Proposal as merely an "opening bid" and invitation to negotiate and that such price was materially inadequate and not a sufficient basis upon which the Special Committee would proceed to negotiate the overall terms and documentation for a transaction.

        On April 3, 3018, the full Board held a special meeting to consider the request from the Special Committee to amend and restate the authority granted to it by the Board and to discuss the letter from Mr. John Hsu to the Special Committee received on March 29, 2018. The Board discussed the proposed resolutions prepared by Greenberg Traurig at the request of the Special Committee. Following discussion, in view of Mr. Hsu's letter to the Special Committee reiterating that AMC would not support a transaction to sell the Company to any third party, at any price, or support any alternative strategic transaction, and AMC's affirmative statement that were the Special Committee to seek to explore other strategic alternatives such undertaking would be an exercise in futility, the Board determined not to approve any changes to the resolutions regarding the Special Committee's ability to shop the Company and explore strategic alternatives and directed Arent Fox to communicate the Board's views with Greenberg Traurig. The Board conceptually agreed to all of the other changes and clarifications regarding the Special Committee's authority, function and role set forth in the resolutions prepared by Greenberg Traurig. AMC's designated directors recused themselves from the foregoing discussion.

        On April 4, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as

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representatives of Greenberg Traurig and Allen & Co. The Special Committee discussed the events that took place at the full Board meeting held on April 3, 2018. Representatives of Greenberg Traurig reported that they had discussed these matters with Arent Fox. The Special Committee discussed with Allen & Co. and Greenberg Traurig the anticipated timing of receipt from Allen & Co. of its preliminary financial valuation analysis of the Company. The Special Committee also discussed the anticipated timing of furnishing to Citi access to management's five-year base case financial forecasts and assumptions and communicating to AMC the Special Committee's view that the proposed purchase price of $4.25 per share set forth in the Initial Proposal materially undervalued the Common Stock and was not an acceptable basis upon which to proceed with a substantive discussion and negotiation of overall deal terms or the preparation and negotiation of any transaction documents. It was noted that such base case forecasts were prepared for internal budget and financial planning purposes only and, to that extent, were somewhat aggressive in nature. It was further noted that AMC's designated directors, including Mr. John Hsu, had already received from management and reviewed such base case forecasts in their capacity as directors of the Company.

        The Special Committee instructed Allen & Co. to discuss with management whether a more reliable and alternative set of five-year financial forecasts should be prepared by management that would better address the risks inherent in the execution of management's business plan. In the following weeks, Allen & Co. discussed with members of management potential adjustments to be made to the base case projections to assemble management's adjusted case financial forecasts for 2018-2022. Allen & Co. communicated to the Company's management the Special Committee's concerns that the growth projections for certain new initiatives of the Company might be difficult to achieve on the anticipated timetables. Based upon these discussions, management began considering and incorporating certain business plan adjustments to its base case forecast, applying more conservative revenue growth and paid-subscriber growth rate estimates and related cost assumptions.

        The Special Committee next discussed the anticipated process for providing to AMC and its advisors access to the Company's other non-public information. Representatives of Greenberg Traurig stated that they would contact each of S&C and Arent Fox regarding proposed amendments to the Non-Disclosure Agreement, dated as of October 14, 2016 (the "Non-Disclosure Agreement"), previously entered into by the Company and Rainbow Media Holdings, LLC, a wholly owned subsidiary of AMC, to expand the scope of such agreement, and the overall process by which the Special Committee was prepared to provide to AMC due diligence access to the Company and its management team.

        On April 5, 2018, Allen & Co. had a telephone conversation with Citi during which, as instructed by the Special Committee, Allen & Co. informed Citi that the purchase price of $4.25 per share proposed by AMC in the Initial Proposal significantly undervalued the Common Stock and, therefore, such price indication did not provide a sufficient basis upon which the Special Committee would commence substantive discussions and negotiations of a potential transaction, and that the Special Committee would consider engaging in such a process only if AMC submitted a "meaningfully higher offer." Accordingly, at the Special Committee's direction, Allen & Co. indicated to Citi that the Special Committee would permit AMC to begin its financial due diligence so it could revert to the Special Committee with a meaningfully higher price proposal for consideration by the Special Committee.

        Later that same day, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Allen & Co. reported the substance of its conversation with representatives of Citi. Representatives of Greenberg Traurig also updated the Special Committee regarding their recent conversations with representatives of S&C regarding the rights of the Company's preferred stockholders in the case of a "Change of Control" and a "Fundamental Transaction" (as such terms are defined in the certificates of designation governing the

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outstanding classes of Preferred Stock) and with respect to Greenberg Traurig's proposed amendments to the Non-Disclosure Agreement.

        On April 6, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Allen & Co. reviewed with the Special Committee management's quarterly cash flow projections as of March 31, 2018 that were recently provided to AMC in the Company's electronic data room. It was noted that such projections were provided by management to the full Board, including AMC's designated directors in their capacity as such. The Special Committee discussed with Allen & Co. and Greenberg Traurig the impact, if any, that the Company's failure to maintain the Minimum Cash Balance requirement under the Credit Agreement (as defined therein) could have on the Company's ability to timely and successfully execute on its current business plan and achieve management's base case forecasts.

        On April 7, 2018, Mr. Royster, a member of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co., participated in a telephone conference. Mr. Laszlo, the other member of the Special Committee, was not available to participate in the call. Allen & Co. provided an update on its recent discussions with Miguel Penella, Chief Executive Officer of the Company, regarding the Company's ability to maintain the Minimum Cash Balance requirement under the Credit Agreement (as defined therein), in which Mr. Penella advised Allen & Co. that he was closely monitoring the Company's cash position and attempting to spread out the timing of the payment of certain expenses given the risk of the Company not complying with the Minimum Cash Balance requirement under the Credit Agreement. He noted that as of March 31, 2018, the Company's cash on hand was in excess of the cash projections for the fiscal quarter ended March 31, 2018 contained in management's 2018 base case forecast.

        On April 9, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee discussed, among other things, convening, at the request of the holders of the Preferred Stock, a meeting with such holders solely to receive their views with respect to the implied value of the Common Stock and the Company's overall performance prospects. It was noted that the purpose of such meeting was for the Special Committee members to be in "listening mode" only, that the rights of the holders of Preferred Stock in respect of a Change of Control or a Fundamental Transaction were preexisting and solely contractual in nature, that the holders of Preferred Stock had no right to vote on any proposed merger transaction, and that, if the Special Committee determined to pursue a transaction with AMC, the Special Committee's fiduciary obligations were owed exclusively to the Non-Affiliate Common Stockholders. Representatives of Greenberg Traurig also reported on their negotiations with S&C regarding proposed amendments to the Non-Disclosure Agreement, including the need for a "clean team" agreement to withhold from AMC and quarantine certain digital programming business segment information that the Company deemed highly sensitive, competitive and proprietary. The nature of such sensitive information had been previously discussed among representatives of Greenberg Traurig, the Company's Chief Executive Officer and the Company's in-house counsel.

        On April 10, 2018, the full Board, acting by unanimous written consent in lieu of a meeting (which consent was previously circulated to entire Board for their review and execution), formally adopted revised resolutions prepared by Greenberg Traurig to amend and restate the authority of the Special Committee to, among other things, (i) clarify the Special Committee's authority to consider, negotiate and approve alternative transactions with AMC (and not just the price and other terms set forth in the Initial Proposal) and (ii) eliminate any requirement to negotiate any proposed AMC transaction on behalf of and with the holders of the outstanding Preferred Stock (which the Special Committee believed was inappropriate in view of its function as bargaining agent solely for the Non-Affiliate Common Stockholders). The revised resolutions stated that the Special Committee is granted the full

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and plenary authority and power of the full Board under NRS 78125.1 with respect to the AMC Proposal or any alternative transaction with AMC. Pursuant to NRS 78125.1, this authority includes, among other things, authority to make the disclosures and filings required by Schedule 13E-3 on behalf of the Company, including a determination as to the fairness of any such transaction to the Non-Affiliate Common Stockholders.

        On April 13, 2018, the Company and an affiliate of AMC executed the proposed amendment to the Non-Disclosure Agreement. In addition, the Company and AMC entered into a Clean Team Non-Disclosure Agreement dated as of April 13, 2018 (the "Clean Team Agreement"), pursuant to which the Company agreed to grant AMC's outside professional advisors and certain designated (permitted) employees of AMC limited and restricted access to certain highly competitive, sensitive, proprietary and confidential information, upon the terms and in accordance with the procedures set forth in the Clean Team Agreement.

        On April 14, 2018, Allen & Co. delivered to Citi a five-year base case financial forecast for the Company for fiscal years 2018-2022 prepared by the Company's management, together with associated assumptions for such forecast period and supplemental financial and operating information provided by the Company's management. Allen & Co. subsequently delivered to Citi an updated base case financial forecast for the Company for fiscal years 2018-2022 prepared by the Company's management, which reflected an updated forecast for Agatha Christie Ltd. as well as the Company's actual Q1 2018 performance. The Company's adjusted case financial forecast, once prepared, was not provided to AMC or its representatives prior to execution of the Merger Agreement.

        Also on April 14, 2018, certain designated employees of AMC and its outside professional advisors were granted access to certain confidential materials of the Company via a virtual data room.

        On April 18, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Allen & Co. reported on certain pending information necessary for its preliminary financial valuation analysis of the Company. Representatives of Allen & Co. also reported that Citi's representatives inquired whether the Special Committee would be willing to provide AMC with "price guidance" (in the form of a specific counter-proposal to AMC's $4.25 opening bid price) but that, as instructed by the Special Committee, Allen & Co. declined to do so and reiterated to Citi that AMC's price indication of $4.25 per share substantially undervalued the Common Stock, and that AMC should complete its financial due diligence and analysis of management's five-year forecasts and growth plan.

        On April 20, 2018, representatives of Citi provided AMC management with discussion materials (the "April 20 Materials") containing a trading update on the Company's stock, including an analysis of the volume traded since the announcement of AMC's $4.25 per share offer for the Company within different price intervals. The April 20 Materials also contained a description of the Company's long-range plan (the "2018 LRP") received on April 14, 2018, including commentary on the assumptions of the 2018 LRP, areas for possible further diligence, and a comparison of financials metrics in the 2018 LRP against the projections in the prior LRP received by AMC in January 2017 (the "2017 LRP"). Included in the comparison of the 2018 LRP and the 2017 LRP was a comparison of revenue, adjusted EBITDA, free cash flow, content investment, subscribers and the results of the paid subscription video on demand ("PSVOD") and wholesale business segments. The April 20 Materials also included a summary of the premiums paid and the number of price increases observed in 25 prior U.S. minority squeeze-outs, which showed that in these prior transactions, acquirors increased their offer an average of 3 times, resulting in an average 23% increase from the initial offer. The April 20 Materials also included an analysis of the Company's firm value and the cash cost to AMC of an all-cash offer for the Company at various share prices from $4.25 per share up to $5.50 per share.

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        On April 25, 2018, representatives of AMC and Citi convened a telephonic conference with members of the Company's senior management, in which they discussed the base case forecast and certain other items relating to AMC's financial due diligence.

        On April 26, 2018, Mr. Dayton Judd and Mr. John Ziegelman (representing the preferred stockholders of the Company), Mr. Laszlo and Allen & Co. convened a telephonic conference in which Mr. Judd and Mr. Ziegelman expressed their views, on behalf of the Company's preferred stockholders, as to appropriate valuation multiples for companies such as the Company.

        On May 2, 2018, representatives of Allen & Co. and Citi held an in-person meeting at Allen & Co.'s offices, at which Citi presented its financial valuation analysis of the Company and stated that AMC would be willing to pay $4.92 per non-affiliate share of Common Stock, subject to the completion of AMC's business, financial and legal due diligence.

        At this meeting, Citi provided Allen & Co, with discussion materials (the "May 2 Materials") containing an updated offer of $4.92 per share for the Company shares not currently owned by AMC or its affiliates. The May 2 Materials were also provided to AMC. The May 2 Materials included a summary of the premiums and firm value to EBITDA multiple implied by the $4.92 per share offer for the Company, a summary of the volume weighted average share price of the Company over periods ranging from the last 30 days to the last three years, and an analysis of the volume of the Company's stock traded in $0.50 intervals ranging from $1.00 to $5.50 since AMC's initial investment in October 2016, over the last twelve months and since AMC's $4.25 per share offer (made on February 26, 2018). The May 2 Materials also included a summary of 17 prior U.S. minority squeeze-out transactions that had occurred since 2010 with an equity value greater than $50mm and in which the acquiror already held at least 40% of the voting rights in the target. This analysis showed that the price paid in these transactions represented an average premium of 40% to the unaffected price one month prior to announcement and 34% to the unaffected price one day prior to announcement. The May 2 Materials also included a summary of six media transactions in which over 50% of the voting ownership was acquired that occurred between January 1, 2016 and April 27, 2018 where the target or acquiror was domiciled in the U.S., illustrating that for these transactions the firm value to one year forward EBITDA estimate multiple ranged from 8.5x to 12.4x. The May 2 Materials also included a comparison of the Company's financial projections contained in the 2018 LRP against an adjusted plan that reflected AMC's more conservative assumptions, including lower UMC subscriber growth, higher UMC content spend, greater declines in wholesale segment revenue in 2021 and 2022, higher PSVOD marketing spend in 2021 and 2022 and greater cash outflows for net working capital at the Company for each year from 2018 to 2022. The May 2 Materials also included an illustrative analysis of the Company's firm value at the unaffected price of $3.87, at AMC's prior offer of $4.25 per share, at the market price as of April 27, 2018 of $4.55 per share, and at the new offer price of $4.92 per share including the firm value to 2018 and 2019 EBITDA multiples implied by each firm value using both the 2018 LRP and AMC's adjusted plan for the Company.

        Later that same day, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee and its financial and legal advisors discussed AMC's increased price indication of $4.92 per share (the "Increased Price"). Allen & Co. presented to the Special Committee its preliminary financial valuation analysis of the Company, including summaries of background and economics of the transaction as well as an overview of the Company. As part of the discussion, Allen & Co. reviewed with the Special Committee various methodologies used for the preliminary financial valuation analysis, which included (i) WholeCo selected public companies analysis, (ii) selected precedent transactions analysis, (iii) discounted cash flow analysis, and (iv) sum-of-the-parts selected public companies analysis, as well as certain additional information (for further information see "RLJE Financial Analyses" beginning on page 57 of this Proxy Statement). Allen & Co. received no instructions from the Special Committee regarding the valuation

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analysis and methodologies utilized and no limitation was imposed by the Special Committee on the scope of Allen & Co.'s investigation.

        On May 4, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee and such advisors continued their discussion of the Increased Price, including the impact of the Company's results of operations for the fiscal quarter ended March 31, 2018 on the implied value of the Common Stock. The Special Committee concluded that the Increased Price materially undervalued the Common Stock and, therefore, was inadequate. The Special Committee instructed Allen & Co. to advise Citi that the Increased Price materially undervalued the Common Stock and, therefore, it was substantially below the price per share at which the Special Committee would be willing to engage in a process to negotiate the overall terms of a possible going-private merger transaction with AMC. Greenberg Traurig discussed the Special Committee's fiduciary duties in the context of the proposed transaction process and reiterated that the Special Committee had full authority to just "say no" and reject any transaction proposed by AMC if the Special Committee did not believe that such transaction was advisable, fair to and in the best interests of the Non-Affiliate Common Stockholders.

        On May 7, 2018, Allen & Co. and Citi convened a telephonic conference to further discuss the Increased Price and AMC's possible acquisition of the outstanding non-affiliate shares of Common Stock. Allen & Co. also communicated the Special Committee's position on the Increased Price to Citi.

        On May 9, 2018, the Board held a meeting at which the Special Committee provided an update on the Increased Price. AMC's designated directors recused themselves from the meeting.

        On May 12, 2018, Allen & Co. and Citi convened a telephonic conference to discuss the various valuation and financial assumptions underlying the base case forecast and Citi's internal adjustments to the base case forecast.

        On May 15, 2018, Mr. Andor Laszlo, a member of the Special Committee, met in person in New York City with Mr. John Hsu, one of AMC's designated directors and AMC's lead negotiator for a possible transaction, to discuss the Increased Price. Mr. Hsu communicated AMC's view on the Company's financial prospects, business execution risks and the implied value of the Common Stock. Mr. Hsu expressed some concern that a protracted transaction process could adversely impact the business of the Company, due principally to management distraction. Mr. Laszlo and Mr. Hsu also discussed the Company's operating performance for the fiscal quarter ended March 31, 2018, as compared to management's estimates for such fiscal quarter, the Company's Q2 performance trend to date and the Company's anticipated performance for the remainder of 2018. Mr. Hsu stated that he would like to meet again in the near-term with both members of the Special Committee to try to reach an agreement on price, and he indicated a willingness to consider a further increase to the Increased Price (although such potential increase was not quantified). Mr. Laszlo indicated that he would set up the next meeting.

        On May 16, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Mr. Laszlo reported the discussion that he had with Mr. Hsu during their in-person meeting on May 15, 2018, including Mr. Hsu's desire to meet in person with both members of the Special Committee to try to reach an agreement on a further increased price. It was agreed that the Special Committee members would meet with Mr. Hsu to learn of such further price increase in order to seek to obtain the highest price and best overall deal terms attainable for the Non-Affiliate Common Stockholders. The Special Committee further reviewed management's five-year base case and adjusted case financial forecasts for 2018-2022 and the preliminary financial valuation analyses of the Company previously provided to the Special Committee by Allen & Co. on May 2, 2018. The Special Committee noted that management's adjusted case

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forecasts presented a more realistic and reliable estimate of revenue growth and paid-subscriber growth rates in relation to management's more aggressive base case forecasts, especially in the post-2018 forecast years. The Special Committee next consulted with Allen & Co. and Greenberg Traurig regarding messaging strategies and the Special Committee's views on the implied value of the Common Stock and concluded that the Special Committee would inform Mr. Hsu in advance of the next in-person meeting that it would be very difficult for the Special Committee to proceed with the negotiation and documentation of a potential transaction unless AMC's price exceeded $6.00 per share, and that the Special Committee would need to obtain a firm price per share that was not subject to any reduction based on AMC's completion of business, financial and legal due diligence.

        On May 17, 2018, Mr. Andor Laszlo, a member of the Special Committee, had a telephone conversation with Mr. John Hsu and advised Mr. Hsu that it would be very difficult for the Special Committee to support any potential going-private merger transaction with AMC unless AMC's price was at least $6.00 per share. Mr. Laszlo further informed Mr. Hsu that the Special Committee required a firm price per share that was not subject to any reduction based on AMC's completion of business, financial and legal due diligence. Mr. Hsu indicated that he looked forward to meeting in-person with both members of the Special Committee.

        On May 21, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee further discussed with Allen & Co. various methodologies for the implied valuation of the non-affiliate shares of Common Stock in connection with the impending in-person meeting between the Special Committee and Mr. John Hsu of AMC. The Special Committee also discussed the lack of any viable strategic and financial alternatives currently available to the Company by reason of AMC's ability to acquire majority voting control of the Company through the exercise in full, at any time in its discretion, of the AMC Warrants, as well as AMC's previous private and publicly disclosed statements that it was only a buyer (and not a seller) of the Company and the inability of the Special Committee as a practical matter to "shop" the Company to potential third-party buyers and business combination candidates. Greenberg Traurig also discussed the Special Committee's fiduciary duties in undertaking a cash-out merger of the Company's minority (public) stockholders in lieu of a decision to continue the execution of management's business plan and operating strategy as a controlled company. Discussion continued with respect to the likely impact on the price of the Common Stock if a proposed transaction with AMC was publicly withdrawn, and the historical illiquidity of the Common Stock.

        On May 22, 2018, the members of the Special Committee attended an in-person meeting in New York City with Mr. John Hsu, who noted that he had been given full authority by AMC to negotiate price with the Special Committee. After discussion regarding the Company's business, historical performance and prospects, as well as conditions in the industry, Mr. Hsu indicated that AMC was prepared to offer $5.95 per share of Common Stock (representing an increase of $1.70 per share and 40% over the Initial Proposal). Messrs. Laszlo and Royster informed Mr. Hsu that, as previously indicated to him, the Special Committee would not proceed with the negotiation of an overall transaction unless AMC's price offer was at least $6.00 per share and, therefore, they rejected AMC's $5.95 offer. After some further discussion, Mr. Hsu offered $6.00 per share, and Messrs. Lazslo and Royster left the meeting to consider the same and the meeting was adjourned.

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        When the meeting resumed, and following further discussion of the Company's business and prospects and further negotiation of price, Messrs. Lazslo and Royster informed Mr. Hsu that they would be prepared to accept a price of $6.25 per share. After some further discussion, Mr. Hsu agreed to offer $6.25 per share, subject to completion of due diligence and the preparation and negotiation of definitive merger documentation and the negotiation by AMC of various post-closing arrangements with Robert L. Johnson. Messrs. Laszlo and Royster then informed Mr. Hsu that such $6.25 per share price must be firm and not be subject to reduction based on the completion of AMC's remaining business, financial and legal due diligence investigation of the Company. Mr. Hsu agreed that such price was a firm offer price, and the Special Committee informed Mr. Hsu that it would authorize its counsel to commence working with S&C on the preparation and negotiation of definitive merger documentation for the proposed transaction. Mr. Hsu indicated that he would similarly instruct S&C. The participants acknowledged that while the price of $6.25 per share had been agreed as a firm price, there could be no agreement to proceed with a transaction until definitive agreements were negotiated and finalized. Mr. Lazlo also disclosed to Mr. Hsu that Mr. Penella had informed him that compliance with the Minimum Cash Balance requirement under the Credit Agreement (as defined therein) was becoming more difficult to maintain given the expenses incurred in connection with the proposed transaction, and as a result, the Company was delaying certain vendor payments in order to maintain compliance.

        Later on the same day, the Special Committee held a meeting at Allen & Co.'s offices in New York City that was attended in-person by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Allen & Co. Representatives of Greenberg Traurig participated in the meeting by telephone. Messrs. Laszlo and Royster reported the results of their in-person meeting with Mr. John Hsu earlier that day. Representatives of Greenberg Traurig informed the Special Committee that they would contact S&C to coordinate an action plan and to assign various work stream responsibilities to the parties.

        On May 23, 2018, the Board held a meeting at which the Special Committee provided an update on the results of their in-person meeting with Mr. Hsu on the previous day. AMC's designated directors recused themselves from the Board meeting.

        On May 24, 2018, S&C delivered to Greenberg Traurig an updated business, financial and legal due diligence request list in connection with AMC's due diligence review of the Company.

        On May 25, 2018, the Special Committee held a telephonic meeting attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee and Greenberg Traurig discussed the anticipated timeline for the proposed transaction as well as the impact of the proposed transaction on certain provisions of the certificates of designation for the various outstanding classes of the Preferred Stock and on other outstanding contractual and other obligations of the Company. Representatives of Greenberg Traurig also outlined for the Special Committee certain anticipated key subject matter areas of the draft merger documentation that would be the subject of considerable negotiation.

        On May 27, 2018, at the direction of the Special Committee, Allen & Co. sent certain additional due diligence materials to Citi in response to AMC's financial and business due diligence requests.

        On May 31, 2018, S&C delivered to Greenberg Traurig an initial draft of the Merger Agreement proposed to be entered by the parties in connection with the proposed going-private merger transaction.

        Also on May 31, 2018, the Company provided AMC and its advisors with further access to confidential materials via the virtual data room, including certain segregated information for "clean team" access only.

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        On June 5, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee and its legal and financial advisors discussed the proposed deal structure and other issues presented by the draft Merger Agreement delivered by S&C on May 31, 2018, including, among other things, the absence of a condition to closing requiring approval of the Merger Agreement by the holders of a majority of the outstanding non-affiliate shares of the Common Stock. Greenberg Traurig explained the genesis, nature, use and legal and commercial impact of imposing such conditions in controller take-private merger transactions involving Delaware corporations (noting that those are useful, although not dispositive, reference points for transactions involving companies incorporated in Nevada, such as the Company) and indicated that it would include such a condition in its response (revised) draft of the Merger Agreement to be distributed to S&C and AMC. Greenberg Traurig also discussed the equity rollover component of the proposed transaction that AMC would need to definitively negotiate with Robert L. Johnson (and his affiliated entities) prior to the signing of a definitive Merger Agreement. Greenberg Traurig further noted that the initial draft of the Merger Agreement distributed by S&C suggested that AMC would require a voting and support agreement, whereby Mr. Johnson and his controlled affiliates would be obligated to affirmatively vote all of their shares of Common Stock "for" approval of the Merger Agreement and to grant to AMC an irrevocable proxy to secure such voting obligations. Greenberg Traurig next discussed the issues that typically arise in connection with such support agreements, including the termination provisions thereof, and the impact of the irrevocable proxy with respect to certain of Nevada's anti-takeover laws. Greenberg Traurig also outlined for the Special Committee the "deal protection package" and "fiduciary out" (including fiduciary termination and termination fee) provisions included in S&C's draft of the Merger Agreement. Greenberg Traurig then addressed the circumstances in which the Special Committee could withdraw its recommendation of the Merger Agreement and terminate the Merger Agreement, noting that the AMC draft did not provide for the ability of the Special Committee to withdraw its recommendation in the case of a so-called "intervening event" (not constituting a superior proposal) and that Greenberg Traurig would include such provisions in its response (revised) draft of the Merger Agreement. Greenberg Traurig also discussed the provisions relating to the termination fee that would be payable by the Company in the event of a fiduciary termination of the Merger Agreement and provided an overview of the Company's representations and warranties and the definition of Material Adverse Effect, as proposed in the AMC draft of the Merger Agreement, including the scope of such provisions and their interrelationship with the closing conditions and termination provisions in the Merger Agreement. The Special Committee and its advisors also discussed AMC's financing representations, the fact that AMC was a party to the draft Merger Agreement solely in the capacity as guarantor of Parent's and Merger Sub's payment obligations, and the Company's covenants regarding convening the special meeting of stockholders to vote on the proposed Merger Agreement and filing a proxy statement and soliciting votes for the special meeting. The parties' mutual cooperation covenants, and the Company's covenant to cooperate with AMC in seeking a replacement credit facility were also discussed. Greenberg Traurig also described certain key definitions used throughout the Merger Agreement. The Special Committee and its advisors then discussed the anticipated timing for negotiating the Merger Agreement and the status of the due diligence investigation being conducted by AMC and its advisors, which Greenberg Traurig referred to as comprehensive and not confirmatory.

        Also on June 5, 2018, Greenberg Traurig convened a telephone conference with S&C regarding its initial observations and reactions to the draft Merger Agreement and the status of AMC's continuing business, financial and legal due diligence investigation of the Company.

        Also on June 5, 2018, in response to the concern expressed by Mr. Lazlo on May 22, 2018, the Company and Parent entered into the Third Amendment to the Credit Agreement, effective as of May 31, 2018, to reduce the Minimum Cash Balance (as defined in the Credit Agreement) from

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$3,500,000 to $2,000,000 for the period commencing June 1, 2018 and continuing through September 30, 2018.

        On June 7, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee further discussed the draft Merger Agreement delivered by S&C on May 31, 2018. The Special Committee also discussed the status of due diligence being conducted by AMC and its advisors.

        On June 12, 2018, Greenberg Traurig delivered to S&C its revised (second) draft of the Merger Agreement.

        On June 13, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Greenberg Traurig provided a formal presentation to the Special Committee with respect to various open issues and negotiating positions taken in response to the initial draft of the Merger Agreement delivered by S&C on May 31, 2018, including, among other things: (i) the definitions of Acquisition Proposal, Change of Recommendation, Intervening Event, Material Adverse Effect and Superior Proposal (all of which relate to the Company's ability to respond to, investigate and take certain actions in respect of an unsolicited alternative acquisition proposal, the circumstances in which the Special Committee can change or withdraw its recommendation of the Merger Agreement, and the Company's right to terminate the Merger Agreement in certain circumstances); (ii) AMC's deal protection provisions, including the Company's no-solicitation covenant and the "window shop" exceptions thereto, the standard by which the Special Committee could exercise its "fiduciary out" and cause the Company to furnish information to, and to engage in discussions and negotiations with, a person making a post-signing unsolicited alternative acquisition proposal and to terminate the Merger Agreement in certain circumstances, and the circumstances in which the Company would be required to pay Parent a termination fee in connection with a fiduciary termination of the Merger Agreement and the amount and timing of payment of the termination fee; (iii) the parties' mutual and unilateral conditions to closing and the provisions pursuant to which the parties would be permitted to terminate the Merger Agreement, including those termination provisions triggering payment of the termination fee by the Company; (iv) the definition of Requisite Company Vote (and Greenberg Traurig's proposed inclusion of a "majority-of-the-minority" vote condition); (v) the Company's covenants to convene the special meeting of stockholders to vote on the proposed Merger Agreement and to prepare and file with the SEC a proxy statement and Schedule 13E-3; (vi) the Company's obligation to notify Parent of certain adverse changes or events that would result in the failure of the closing conditions; (vii) the scope of the Company's representations and warranties, including the exceptions thereto and materiality and other qualifiers in respect thereof; (viii) the scope of and dollar thresholds relating to the Company's interim operating covenants between signing and closing; (ix) Parent's financing representation and the Company's covenant to cooperate with respect to Parent's Credit Agreement replacement efforts; (x) the director and officer indemnification provisions; (xi) the scope of AMC's obligations under the Merger Agreement as payment-guarantor of Parent and Merger Sub's obligations; (xii) the treatment of the Preferred Stock and outstanding equity awards in the merger, including the accelerated vesting and cash out thereof; (xiii) the impact of the merger on certain license agreements and material contracts of the Company and requirements to obtain necessary third party consents in respect thereof; (xiv) provisions relating to public announcements in connection with the proposed transaction; (xv) the proposed certificate of incorporation and bylaws of the surviving corporation in the merger; and (xvi) various technical drafting points throughout the draft Merger Agreement.

        Greenberg Traurig also explained the features and implications of the voting and support agreement that AMC intended to enter into with Robert L. Johnson and certain of his affiliates as a condition to the transaction, and the share exchange and contribution agreement that needed to be

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negotiated between Robert L. Johnson and his affiliates and AMC in connection with the proposed equity rollover by Mr. Johnson and his affiliates of their shares of Common Stock in exchange for shares of Parent common stock. It was noted that under applicable Nevada law, the holders of Common Stock would not have the right to dissent from the merger and seek a judicial determination by a Nevada court of the fair value of their shares. The Special Committee then further discussed the treatment of the Company's employee equity awards and expressed the view that, if possible under the Company's incentive equity plan and any outstanding individual award agreements, all outstanding options and restricted stock awards should vest at the effective time of the merger. The Special Committee also discussed the status of the due diligence investigation of the Company being conducted by AMC and its advisors. An anticipated timetable for the overall transaction was next discussed.

        Also on June 13, 2018, AMC delivered to Robert L. Johnson initial drafts of (i) a Contribution Agreement (the "Contribution Agreement") and certain related documents (collectively, the "Rollover Documents") proposed to be entered into by Parent and the Johnson Entities in connection with the proposed transaction, and (ii) a Voting and Transaction Support Agreement (the "Voting Agreement") proposed to be entered into by Parent, each of the Johnson Entities and the Company (as a nominal party for certain ministerial acts required to be performed by the Company) in connection with the proposed merger. Mr. Johnson discussed the draft Rollover Documents with Arent Fox, acting in its capacity as counsel to RLJ Companies. Mr. Johnson and Arent Fox determined that the draft Rollover Documents were substantially consistent with the agreement-in-principle that Mr. Johnson had reached with AMC in February 2018 with respect to, among other terms and conditions, his ability to monetize his 17% investment in Parent's common stock, various corporate governance matters, and his title and role at the Company following consummation of the merger. At the request of Greenberg Traurig, a copy of the draft Voting Agreement was delivered by Arent Fox to the Special Committee and to Greenberg Traurig.

        On June 15, 2018, Greenberg Traurig convened a telephone conference with S&C to discuss and commence the negotiation of the issues raised in the revised draft of the Merger Agreement delivered by Greenberg Traurig to S&C on June 13, 2018, including all of the issues discussed by Greenberg Traurig with the Special Committee at the June 5, 2018 and June 13, 2018 meetings thereof. Greenberg Traurig and S&C also discussed the anticipated timetable for the proposed transaction.

        Also on June 15, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee discussed the Company's quarterly (previously annual) grants of equity awards (i.e., RSAs and RSUs) to employees and non-employee directors of the Company expected to be determined by the Company's Compensation Committee in the coming weeks, and the proposed treatment of such equity awards under the current draft of the Merger Agreement. Greenberg Traurig summarized and reported on its discussions and negotiations with S&C earlier that day and the overall status of such negotiations, including the Special Committee's proposal (reflected in the revised draft of the Merger Agreement delivered by Greenberg Traurig to S&C on June 13, 2018) to include a majority-of-the-minority stockholder approval condition and Greenberg Traurig's discussions with S&C regarding the same. Greenberg Traurig also discussed certain statutory and other differences between the laws of Delaware and the laws of Nevada in the context of the proposed deal structure and certain provisions in the current draft of the Merger Agreement (including with respect to AMC's proposed deal protection package and the Special Committee's fiduciary outs) and the judicial review standard likely to be invoked by a Nevada court in the case of any state court litigation regarding the transaction. Greenberg Traurig further summarized the termination fee structure initially proposed by AMC and its response (as reflected in the revised draft of the Merger Agreement delivered by Greenberg Traurig to S&C on June 13, 2018) to delete such termination fee provisions in their entirety. Greenberg Traurig next explained that this remained an open issue and continued to describe to the Special Committee certain issues regarding AMC's deal

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protection package and the Special Committee's fiduciary outs and suggested various alternative and compromise approaches and formulations that could be used in the course of further negotiation of these and other issues presented by the draft Merger Agreement. Greenberg Traurig also reported on the status of AMC's continuing due diligence investigation of the Company and discussed the anticipated timing for the proposed transaction.

        On June 18, 2018, S&C delivered to Greenberg Traurig a further revised (third) draft of the Merger Agreement.

        On June 19, 2018, Greenberg Traurig convened a telephone conference with S&C, Arent Fox, Citi, Allen & Co. and the Company regarding the status of AMC's continuing due diligence investigation of the Company.

        On June 21, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee continued the discussion of the quarterly (previously annual) grants of equity awards (i.e., RSAs and RSUs) to employees and non-employee directors of the Company expected to be made by the Company in July 2018, the proposed treatment of such awards as reflected in Greenberg Traurig's revised draft of the Merger Agreement, and the various means by which the grant and vesting of such quarterly equity grants could be accelerated. The Special Committee also discussed the AMC Warrants, including AMC's stated intention to exercise, in full, such warrants prior to the record date for the special meeting of stockholders to vote on the Merger Agreement and the consequences of such exercise; namely, AMC's acquisition of a majority of the voting power attributable to the outstanding Common Stock and its consequent ability to nominate a majority of the Company's directors for election to the Board. It was noted that AMC intends to pay the aggregate exercise price for the AMC Warrants by surrendering approximately $55 million of the outstanding principal amount of its term loan in exchange for shares of Common Stock.

        Greenberg Traurig then summarized for the Special Committee the changes reflected in the June 18 revised draft of the Merger Agreement distributed by S&C and the overall status of the negotiation thereof. Greenberg Traurig next summarized specifically the negotiating positions taken by the parties in the various drafts of the Merger Agreement that had been exchanged by the parties to date. Greenberg Traurig also explained the significance and consequences of certain negotiating positions taken by the parties (in terms of risk allocation, consummation certainty and fiduciary flexibility for the Special Committee) and discussed its recommendations as to potential methods of compromise for certain issues and its reasons for recommending no compromise on certain other issues. The Special Committee and Greenberg Traurig further discussed AMC's proposed deal protection package, including the Special Committee's fiduciary outs, and the Voting Agreement proposed to be entered into by Parent and the Johnson Entities and Greenberg Traurig's initial comments thereto, which would be communicated to representatives of Arent Fox. The Special Committee also discussed the status of AMC's continuing due diligence investigation of the Company and the anticipated timing for the proposed transaction.

        Also on June 21, 2018, Greenberg Traurig convened a telephone conference with S&C, Arent Fox and the Company regarding the status of AMC's continuing due diligence investigation of the Company.

        On June 22, 2018, Greenberg Traurig delivered to S&C a further revised (fourth) draft of the Merger Agreement.

        Also on June 22, 2018, Arent Fox delivered to S&C Mr. Johnson's comments on the draft Rollover Documents. Mr. Johnson subsequently discussed these comments with AMC.

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        On June 23, 2018, Mr. Scott Royster, a member of the Special Committee, had a telephone conversation with Mr. Dayton Judd, a director of the Company nominated by the holders of the Company's Class C-2 preferred stock, in which Mr. Judd expressed concern that he had not had any substantive discussions to date with representatives of AMC regarding the anticipated timing of the proposed transaction and the form and terms of any substitute preferred stock that would be offered to the holders of the Preferred Stock in the event such holders elected not to participate in the Change of Control ("put") offer (at a cash-out price equal to $7.8125 for each share of Common Stock into which shares of the Preferred Stock are convertible) required to be made by the Company under the certificates of designation governing such Preferred Stock in connection with the proposed merger.

        On June 25, 2018, S&C convened a telephone conference with Arent Fox and the Company regarding AMC's continuing due diligence investigation of the Company.

        On June 26, 2018, S&C convened a telephone conference with Greenberg Traurig, Arent Fox and the Company to discuss the Company's production debt.

        Also on June 26, 2018, Greenberg Traurig convened a telephone conference with S&C to negotiate the material issues raised in the revised draft of the Merger Agreement delivered by Greenberg Traurig to S&C on June 22, 2018, including, among other things, issues relating to the Company's representations and warranties and operating covenants between signing and closing, AMC's proposed deal protection package, the Special Committee's fiduciary outs, the circumstances under which a termination fee vis a vis expense reimbursement would be payable by the Company and the amounts thereof, the provisions relating to AMC as guarantor of Parent's and Merger Sub's payment obligations under the Merger Agreement, the indemnification provisions of the Merger Agreement, and the parties' respective conditions to closing.

        Also on June 26, 2018, Greenberg Traurig convened a telephone conference with Arent Fox, in which Greenberg Traurig informed Arent Fox of Mr. Royster's telephone conversation with Mr. Judd on June 23, 2018. Greenberg Traurig and Arent Fox also discussed Greenberg Traurig's views on the need for and its other comments to the draft Voting Agreement delivered by AMC to Robert L. Johnson on June 13, 2018.

        On June 27, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Greenberg Traurig summarized the material open issues remaining in the continued negotiation of the draft Merger Agreement. The Special Committee and its advisors discussed the impact of such issues on risk allocation and overall transaction consummation certainty, as well as the ability of the Special Committee to take certain fiduciary actions. The Special Committee also discussed the provisions in current (fourth) draft of the Merger Agreement regarding the treatment of the holders of the outstanding Preferred Stock. Mr. Royster also informed the Special Committee of his conversation with Mr. Judd on June 23, 2018.

        On June 27, 2018, Arent Fox delivered to S&C a further revised draft of the Voting Agreement.

        Later that same day, Greenberg Traurig convened a telephone conference with S&C, in which they continued to negotiate the remaining open issues in the Merger Agreement

        On June 28, 2018, S&C delivered to Greenberg Traurig a further revised (fifth) draft of the Merger Agreement.

        During the period between June 28, 2018 and July 3, 2018, Greenberg Traurig had several telephone conferences with S&C, in which they continued to negotiate the remaining open material issues in the draft Merger Agreement. Such issues included (i) the termination fee provisions (i.e., the circumstances in which it would become payable by the Company, the amounts thereof (in the context of both a fiduciary termination to enter into a definitive agreement for a "superior proposal" and in

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connection with an "intervening event") and the methods by which the termination fee would be calculated in such circumstances; (ii) the scope of certain of the Company's representations and warranties; (iii) the director and officer indemnification provisions of the draft Merger Agreement; (iv) the scope of AMC's guaranty of Parent's and Merger Sub's payment obligations under the Merger Agreement; and (v) the scope of certain of the Company's operating covenants between signing and closing. Greenberg Traurig and S&C also negotiated the provisions of the proposed charter and bylaws of the surviving company and discussed the Special Committee's comments on the draft Voting Agreement and certain remaining due diligence requests made by AMC and the timing of AMC's anticipated completion of due diligence. Greenberg Traurig and S&C further discussed the status of AMC's negotiations with Robert L. Johnson of the equity rollover and share contribution agreement.

        On June 29, 2018, Mr. Scott Royster, a member of the Special Committee, had a telephone conversation with Mr. Dayton Judd in which Mr. Judd reiterated his concern, among other things, about the lack of communication to date by AMC's representatives with the holders of the Preferred Stock and his lack of involvement in the transaction process to date. Mr. Royster explained to Mr. Judd the mandate, function and obligations of the Special Committee and the fact that the rights of the holders of the Preferred Stock are purely contractual in nature and that they had no role at the bargaining table with AMC and the Special Committee with respect to the proposed going-private merger transaction, so long as AMC intended to comply with the provisions in the certificates of designation governing the Preferred Stock applicable to such transaction.

        Later that same day, Mr. Royster, a member of the Special Committee, had a telephone conversation with Mr. John Hsu, in which Mr. Hsu expressed concern about the progress made in the Merger Agreement negotiations to date. Mr. Hsu also expressed concern about the apparent slowdown in the Company's subscriber growth, which the Company's CEO suggested was due, in part, to the inherent seasonality in the Company's business. Mr. Royster and Mr. Hsu also discussed the desire expressed by the holders of the Preferred Stock to be more fully informed about the overall transaction process and Mr. Hsu agreed to contact Mr. Judd or to have a representative of S&C contact Mr. Judd's counsel to discuss AMC's intentions regarding the treatment of the outstanding Preferred Stock in the merger.

        On July 2, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Greenberg Traurig updated the Special Committee on the status of its most recent discussions and negotiations with S&C and the overall status of the continuing negotiation of the remaining open issues in the draft Merger Agreement, principally with respect to the termination fee provisions in the context of a superior proposal and the methods by which they should be calculated and expressed. Greenberg Traurig described the circumstances in which the termination fee would be payable in the context of a fiduciary termination of the Merger Agreement due to the occurrence of an intervening event and recommended that the termination fee in such circumstance should be in the nature of reimbursement for AMC's actual, documented out-of-pocket expenses incurred in connection with the proposed transaction, subject an aggregate monetary cap. The Special Committee authorized Greenberg Traurig to communicate these positions to S&C and to deliver a mark-up of the Merger Agreement reflecting such positions, including a $3 million cap on AMC's expense reimbursement in the case of a fiduciary termination resulting from an intervening event. Greenberg Traurig also discussed several more technical "drafting" points that remained open in the Merger Agreement, but noted that these would be expeditiously resolved through compromise and that none of these issues rose to the level of "show stoppers" or having economic or closing certainty significance.

        Mr. Royster also reported to the Special Committee regarding his conversations with Mr. Judd and Mr. Hsu on June 29, 2018. The Special Committee and its advisors discussed the Special Committee's role as bargaining agent for Non-Affiliate Common Stockholders and that AMC's representatives

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should speak directly to Mr. Judd regarding AMC's intentions to comply with the certificates of designation governing the Preferred Stock. Greenberg Traurig also discussed the Special Committee's fiduciary duties in connection with the proposed transaction. Greenberg Traurig also reported on its most recent discussions with S&C and Arent Fox regarding the status of the negotiations of the proposed Rollover Documents to be entered into between Robert L. Johnson and his affiliated entities and AMC. Greenberg Traurig further discussed the anticipated timing of the proposed transaction, including the potential signing and public announcement of the merger, the filing with the SEC of the Company's preliminary merger proxy statement and the anticipated SEC review and comment process, the special meeting process, and hypothetical closing dates for the transaction.

        On July 3, 2018, Mr. John Hsu had a telephone conversation with Mr. Dayton Judd, in which Mr. Judd informed Mr. Hsu that he believed the holders of Preferred Stock should be engaged in the transaction process with AMC. Mr. Hsu informed Mr. Judd that AMC's intentions regarding the treatment of the outstanding Preferred Stock in the proposed merger had not changed and reiterated that the Preferred Stock would be entitled to the cash-out premium provided in the applicable certificates of designation governing the Preferred Stock based on the price payable in the merger to the holders of shares of Common Stock.

        On July 4, 2018, Greenberg Traurig delivered to S&C a further revised (sixth) draft of the Merger Agreement.

        On July 5, 2018, Mr. Scott Royster, a member of the Special Committee, had a telephone conversation with Mr. Dayton Judd, in which Mr. Judd informed Mr. Royster that he had had a telephone conversation with Mr. John Hsu, in which they discussed AMC's intentions regarding the treatment of the outstanding Preferred Stock in the proposed merger. Mr. Judd also informed Mr. Royster that he intended to send a letter to the Company regarding these matters.

        On July 8, 2018, Mr. Dayton Judd delivered a letter to Mr. Robert L. Johnson, Chairman of the Company, and Messrs. Laszlo and Royster, the members of the Special Committee, in which Mr. Judd discussed, among other things, the rights of the Company's preferred stockholders under the certificates of designation governing the various classes of the Preferred Stock and expressed concerns relating to the Company's ability to complete the proposed transaction without first reaching an understanding with the holders of the Preferred Stock as to the treatment of the Preferred Stock in the proposed merger.

        On July 9, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Mr. Royster summarized his telephone conversation with Mr. Dayton Judd on July 5, 2018. The Special Committee discussed the letter received by Messrs. Laszlo and Royster from Mr. Judd on July 8, 2018. Greenberg Traurig reiterated that the rights of the holders of the Preferred Stock (including the holders of the Class C-2 preferred stock) under the applicable certificates of designations were wholly contractual in nature, and further reiterated that the Special Committee's role with respect to the proposed merger has been to date and continues to be that of a vigilant bargaining agent for the economic interests and rights of the Non-Affiliate Common Stockholders. It was noted that the holders of the Preferred Stock are not entitled to anything more than the $7.8125 per share cash out offer or, alternatively, substitute Preferred Stock terms provided for in the certificates of designation and that they had no right or ability to vote on the merger in their capacity as preferred stockholders. Greenberg Traurig also reported that the treatment of the holders of Preferred Stock had been discussed with S&C, that AMC intends to honor the terms of the certificates of designation for the Preferred Stock, and that such treatment had been addressed by Greenberg Traurig and S&C to a certain extent in the current draft of the Merger Agreement. Greenberg Traurig also advised the Special Committee that Mr. Judd's letter

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must be promptly distributed to the full Board. Following the conclusion of the meeting, Mr. Laszlo forwarded Mr. Judd's letter to all Board members.

        Also on July 9, 2018, representatives of Greenberg Traurig convened a telephone conference with S&C regarding the latest proposed termination fee provisions contained in the draft Merger Agreement delivered by Greenberg Traurig to S&C on July 4, 2018. Representatives of S&C indicated that AMC was prepared to agree conceptually to the components of the formula proposed by Greenberg Traurig for calculating the termination fee payable in the case of a fiduciary termination for a superior proposal (which, when calculated, amounted to approximately $6.75 million), but preferred to express the termination fee as a fixed dollar amount equal to $6.75 million (and not as a formula, as provided in Greenberg Traurig's revised (sixth) draft of the Merger Agreement). S&C also informed Greenberg Traurig that AMC would agree to reimbursement of up to $3 million of AMC's documented, out-of-pocket expenses payable in the event of a fiduciary termination for an intervening event, as proposed by Greenberg Traurig in its revised (sixth) draft of the Merger Agreement. Greenberg Traurig and S&C next discussed the issues raised in the July 8, 2018 letter from Mr. Judd, the rights of the holders of the Preferred Stock in connection with the proposed transaction under the certificates of designation, the proposed treatment of the Preferred Stock under the Merger Agreement, and the strategy for communicating with the Company's preferred stockholders with respect to these issues. Greenberg Traurig and S&C acknowledged that their interpretation of the relevant provisions of the certificates of designation were the same.

        Also on July 9, 2018, Mr. Laszlo, a member of the Special Committee, convened a telephone conference with Mr. John Hsu in which they discussed the status of the proposed transaction, the remaining open issues in the draft Merger Agreement (including, among other things, the termination fee payable by the Company to Parent in certain circumstances), and the treatment of the Preferred Stock in connection with the proposed transaction. With respect to the Preferred Stock, Mr. Hsu informed Mr. Laszlo that he had already discussed the matter with Mr. Judd, was perplexed by Mr. Judd's letter of July 8, 2018, and already advised Mr. Judd that it was AMC's intention to comply with the applicable provisions of the certificates of designation governing the Preferred Stock in connection with the merger.

        On July 12, 2018, AMC delivered to Mr. Johnson revised drafts of the Rollover Documents and a draft of the Voting Agreement in substantially execution copy form. Copies thereof were furnished to Greenberg Traurig.

        During the period between July 14, 2018 and July 26, 2018, AMC and Mr. Johnson, and their respective representatives, negotiated and finalized the open issues in the Rollover Documents.

        On July 16, 2018, S&C delivered to Greenberg Traurig a further revised (seventh) draft of the Merger Agreement reflecting the termination fee provisions agreed to by Greenberg Traurig and S&C on July 9, 2018.

        On July 17, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. Greenberg Traurig summarized its most recent conversations with S&C regarding the proposed treatment of the outstanding classes of Preferred Stock in connection with the proposed merger. In particular, Greenberg Traurig reported that AMC confirmed it intention to offer to the holders of the Preferred Stock a cash-out price equal to $7.8125 for each share of Common Stock into which shares of the Preferred Stock are convertible (which amount represents a 125% premium to the Per Share Merger Consideration payable in the merger to the holders of shares of Common Stock), as provided in the applicable certificates of designation governing the Preferred Stock, and, if such offer was rejected by the holders of the Preferred Stock, such holders would receive preferred stock in the surviving corporation having such terms as provided therefor in the applicable certificate of designation. Greenberg Traurig also discussed the amount of the

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termination fee that would be payable by the Company in the event of a fiduciary termination of the Merger Agreement for a superior proposal, noting that the termination fee amount was the only material issue for the Special Committee remaining in the draft Merger Agreement. In particular, Greenberg Traurig reported that AMC had proposed to express the termination fee as a fixed dollar amount equal to $6.75 million (and not as a formula, as Greenberg Traurig had proposed in its most recent (sixth) draft of the Merger Agreement), and that AMC agreed to expense reimbursement of up to $3 million payable in the case of a fiduciary termination for an intervening event. The Special Committee also discussed the proposed treatment in the proposed Merger of Mr. Penella's stock options and the non-director restricted stock awards. Representatives of Greenberg Traurig noted that they had spoken with Mr. Penella about these issues and that Mr. Penella and Mr. John Hsu were scheduled to discuss the resolution thereof over the next few business days. The Special Committee also discussed the status of Mr. Johnson's continuing negotiations with AMC with respect to his post-closing arrangements, as indicated to Greenberg Traurig by S&C and Arent Fox, as well as the anticipated timing for signing a definitive Merger Agreement and publicly announcing the transaction and the various action items and work streams that would need to be completed prior to signing.

        On July 18, 2018, a representative of S&C discussed the treatment of the Preferred Stock in the merger with Mr. Judd and informed Mr. Judd that AMC would comply with the terms of the applicable certificates of designations for the Preferred Stock following any announcement of a definitive transaction.

        During the period from July 25, 2018 to July 27, 2018, Greenberg Traurig and S&C exchanged two additional drafts of the Merger Agreement and various related transaction documentation and prepared proposed execution copies of the same for review and consideration by the Special Committee.

        On July 26, 2018, Mr. Miguel Penella, the Company's Chief Executive Officer, and Mr. John Hsu had a telephone conversation in which they discussed the treatment of Mr. Penella's stock options and the unvested restricted stock awards held by certain employees of the Company.

        On July 27, 2018, representatives of Citi provided AMC management with discussion materials (the "July 27 Materials") containing an analysis of the firm values and equity premiums implied by the market price as of July 19, 2018 of $4.94 per share, the initial AMC offer of $4.25 per share and potential offer prices ranging from $5.50 to $7.75 per share. The analysis showed the premium of each price to the Company's 52-week high and low, to the Company's volume weighted average price over the trailing year, 90 days and since AMC's initial $4.25 offer, to AMC's initial $4.25 per share offer for the Company and to the Company's unaffected price prior to the initial offer of $3.87 per share. The analysis also included the cash cost to AMC at each offer price and the implied firm value to 2018 and 2019 EBITDA multiples implied by each firm value using both the 2018 LRP and AMC's adjusted plan for the Company, previously described in the May 2 Materials. The July 27 Materials also included an analysis of the total cash cost to AMC of potential offer prices ranging from $4.25 per share to $7.75 per share, including a breakdown of the cash payments to holders of the different warrant, option, preferred and common stock securities.

        On July 28, 2018, representatives of Citi provided AMC management with discussion materials (the "July 28 Materials") containing an analysis of the Company's firm value and equity value premium implied by the market price as of July 27, 2018 of $4.87 per share, the initial AMC offer of $4.25 per share and the new offer price of $6.25 per share. The analysis showed the premium of each price to the Company's 52-week high and low, to the Company's volume weighted average price over the trailing year, 90 days and since AMC's initial $4.25 offer, to AMC's initial $4.25 per share offer for the Company and to the Company's unaffected price prior to the initial offer of $3.87 per share. The July 28 Materials also showed the cash cost to AMC of the initial $4.25 per share offer for the Company and of the new $6.25 per share offer for the Company, including the cash paid to preferred

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shareholders assuming a 25% premium due to change of control, and the cash paid to holders of warrant, option and common stock securities.

        On July 29, 2018, the Special Committee held a telephonic meeting that was attended by Messrs. Laszlo and Royster, constituting all members of the Special Committee, as well as representatives of Greenberg Traurig and Allen & Co. The Special Committee reviewed the proposed execution copies of the Merger Agreement and the Voting Agreement. Greenberg Traurig stated that there had been no material changes to the proposed Merger Agreement or Voting Agreement from the previous drafts reviewed by Greenberg Traurig with the Special Committee at the July 17, 2018 meeting.

        Greenberg Traurig then summarized the Special Committee's fiduciary obligations in connection with the proposed merger, noting that the Special Committee has been vested with the plenary authority and power of the full Board under Nevada law to consider, review and evaluate the Initial Proposal delivered to the Company on February 26, 2018 (and all subsequent amendments thereto), to negotiate with AMC the structure and terms thereof on behalf of and as exclusive bargaining agent for the Non-Affiliate Common Stockholders, and to determine and vote (on a binding basis on behalf of the full Board) to approve or disapprove of any transaction proposed by AMC. Greenberg Traurig next reviewed the five-month process that had been undertaken by the Special Committee in performing its duties in connection with the proposed merger since the initial establishment of the Special Committee on February 26, 2018. It was noted that the Special Committee had interviewed and selected, at the Company's expense, its own independent, highly qualified legal and financial advisory team and that the Special Committee convened 27 formal meetings to date. It was further noted that the Special Committee and its professional advisors had additionally engaged in numerous informal communications, correspondences, conference calls and conversations over the preceding five months. It was observed that, during the course of the transaction process to date, the Special Committee reviewed and discussed, among other matters, the Special Committee's role and authority, its fiduciary duties in connection with the proposed transaction, the proposed deal structure, nine drafts of the proposed Merger Agreement (that were prepared and exchanged by Greenberg Traurig and S&C during the negotiation process at the direction of their respective clients), and the various other transaction documents, including the proposed Voting Agreement. Greenberg Traurig observed that throughout the process, the Special Committee had regularly consulted with, and requested, received and reviewed various advice and information from, Greenberg Traurig and Allen & Co. in connection with the Special Committee's review, evaluation and negotiation of the proposed merger. In addition, it was noted that the Special Committee was proactively involved in overseeing and facilitating management's production to AMC of extensive documentation and information in connection with AMC's comprehensive due diligence review of the Company, and that the Special Committee utilized management to conduct its own due diligence review of various aspects of the Company's historical business and financial performance, capital structure, material contracts and prospects that were deemed relevant by the Special Committee and necessary for it to properly satisfy its obligations. The history of AMC's (and its affiliate's) initial investment in the Company was also discussed (including AMC's role as a lender, common stockholder, preferred stockholder and holder of the AMC Warrants). The Special Committee also discussed the fact that AMC made clear, both publicly, and privately to the Special Committee, that it would not support any third-party acquisition proposal, at any price, and further discussed the illiquidity of the Common Stock and the possible impact thereon and on the price of the Common Stock were AMC to publicly withdraw its proposed going-private merger with the Company.

        At the meeting, Allen & Co. next presented to and reviewed with the Special Committee Allen & Co.'s financial valuation analysis of the Company as of July 27, 2018 (the last trading day prior to the meeting) and the proposed Per Share Merger Consideration of $6.25, noting certain changes from Allen & Co.'s preliminary valuation analysis that was presented to the Special Committee on

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May 2, 2018. The updated presentation also provided the Special Committee with a summary of proposed transaction terms and selected premiums paid analysis, as well as updates on background and economics of the transaction.

        At the conclusion of this presentation, and following a question and answer period with respect thereto, Allen & Co. delivered to the Special Committee its oral opinion, which was subsequently confirmed the next day by delivery of its written opinion dated July 29, 2018, to the effect that, as of such date and based upon and subject to the assumptions made with the Company's consent, matters considered and limitations on the review undertaken by Allen & Co. in preparing such opinion, the Per Share Merger Consideration to be received by the Non-Affiliate Common Stockholders pursuant to the Merger Agreement was fair, from a financial point of view, to such holders, as more fully described below in the section "Opinion of Financial Advisor" beginning on page 54 of this Proxy Statement.

        The Special Committee then conducted its final deliberations and discussions, in consultation with Greenberg Traurig and Allen & Co., regarding the proposed definitive terms and conditions of the Merger Agreement. At the request of the Special Committee, Greenberg Traurig also discussed the Special Committee's continuing role following the execution of the Merger Agreement and until consummation of the proposed merger.

        Upon conclusion of such deliberations, upon motion duly made and seconded, the Special Committee determined and resolved that the Merger Agreement and the transactions contemplated thereby are advisable, fair to, and in the best interests of, the Company and the Non-Affiliate Common Stockholders, adopted the Merger Agreement and the transactions contemplated thereby and further resolved to recommend that the holders of Common Stock vote to approve the Merger Agreement.

        Immediately after the conclusion of the meeting, the Company, Parent, Merger Sub and AMC entered into the Merger Agreement. Concurrently with the execution and delivery of the Merger Agreement, Parent, the Johnson Entities and the Company entered into the Voting Agreement, and Parent and the Johnson Entities entered into the Contribution Agreement and related documents.

        Prior to the opening of trading on the Nasdaq Capital Market on July 30, 2018, the Merger Agreement was announced by AMC and the Company via a joint press release. Promptly thereafter, the Company filed with the SEC a Current Report on Form 8-K disclosing the Merger Agreement and the Voting Agreement, and AMC filed with the SEC a Current Report on Form 8-K and an amendment to its Schedule 13D disclosing the Merger Agreement, the Voting Agreement and its arrangements with Mr. Johnson.

        On August 9, 2018, the Company and Parent entered into the Fourth Amendment to the Credit Agreement to eliminate the Minimum Cash Balance requirement (as defined in the Credit Agreement).

        Certain holders of the Preferred Stock followed up with AMC following the execution of the Merger Agreement, and AMC reiterated its position with respect to the treatment of the Preferred Stock in connection with the merger.

        On October 2, 2018, the Company, Parent, Merger Sub and AMC entered into Amendment No. 1 to the Merger Agreement clarifying the calculation of the Preferred Stock Consideration. As clarified in the amendment, Preferred Stock Consideration refers to an amount in cash, without interest, equal to the greater of (i) the product of (A) 125% multiplied by (B) the product of (1) the Conversion Amount being redeemed multiplied by (2) the quotient of the Per Share Merger Consideration divided by $3.00 or (ii) the product of (A) 125% multiplied by (B) the product of (1) the Conversion Amount being redeemed multiplied by (2) the quotient of the greatest closing sale price of the shares of Common Stock during the period beginning on the date of the public announcement of the Merger and ending on the date the holder delivers its redemption notice divided by $3.00. For illustration, as of the date of this Proxy Statement, the Preferred Stock Consideration would be $7.86 per share for each share of Common Stock into which shares of the Preferred Stock are convertible based on the fact that since July 29, 2018, the date of the Merger Agreement, the trading price of the Common Stock has closed as high as $6.29 per share of Common Stock.

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Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger

        In evaluating the Merger Agreement, the merger and the other transactions contemplated thereby, the Special Committee consulted with its legal and financial advisors and the Company's management and considered a number of factors, including, but not limited to, the following potentially positive factors (which are not intended to be exhaustive and are not listed in any intended relative order of importance):

    the fact that the Per Share Merger Consideration consists solely of cash, providing the Non-Affiliate Common Stockholders with certainty of value and immediate liquidity upon consummation of the merger, particularly in light of the relatively limited trading volume of the Common Stock and the risks and uncertainties relating to the Company's prospects and ability to execute on its current business plan and achieve management's forecasts, and the market, economic and other risks and uncertainties inherent in owning an equity interest in a public company (many of which are beyond the Company's control);

    the Special Committee's understanding, following discussions with management, of the Company's business, assets, condition (financial and otherwise) and results of operations, the Company's competitive position, the strategic options and prospects and the risks involved in achieving the Company's prospects, the historical and projected financial performance of the Company and the nature of the industry in which the Company competes, and current macro-economic and market conditions, both on a historical basis and on a prospective basis which, in the Special Committee's belief, makes the merger the best strategic and financial return on investment alternative available to the Company and the Non-Affiliate Common Stockholders at this time;

    the current and historical trading prices for the Common Stock, including the market performance of the Common Stock relative to other participants in the Company's industry, general market indices and the historical volatility of the Common Stock, as compared to the Per Share Merger Consideration, including the fact that the Per Share Merger Consideration of $6.25 represents an approximate premium of:

    61% over the $3.87 closing sale price per share of the Common Stock on the Nasdaq Capital Market on February 23, 2018, the last trading day before the public announcement of AMC's delivery to the Company of the Initial Proposal on February 26, 2018;

    28% over the $4.87 closing sale price per share of the Common Stock on the Nasdaq Capital Market on July 27, 2018, the last trading day before the public announcement of the signing of the Merger Agreement;

    59% to the $3.93 volume weighted average price per share of the Common Stock on the Nasdaq Capital Market for the 30- consecutive trading day period ended February 23, 2018;

    36% to the $4.61 highest trading price per share of the Common Stock on the Nasdaq Capital Market during the 52-week period ended July 27, 2018; and

    195% to the $2.12 lowest trading price per share of the Common Stock on the Nasdaq Capital Market during the 52-week period ended July 27, 2018;

    the fact that the Per Share Merger Consideration of $6.25 is significantly higher than the highest price paid by AMC and its controlled Affiliates for any shares of Common Stock purchased by them during the past two years, as described in more detail under "Important Information Regarding the Company—Transactions in Common Stock During the Past 60 Days," "Important Information about the Company—Transactions in Common Stock During the Past Two Years," "Important Information Regarding the Company—Transactions in Connection with Credit Agreement

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      Amendments" and "Important Information Regarding the Company—Other Transactions" on pages 153 through 157 of this Proxy Statement;

    the arms'-length negotiations conducted over an approximately five-month period by the Special Committee with respect to the Per Share Merger Consideration, which led to increases thereof from $4.25 per share, to $4.92 per share, to $5.95 per share, to $6.00 per share and, ultimately, to $6.25 per share (an overall increase of $2.00 per share or approximately 47% of the Initial Proposal), the Special Committee's determination that the price of $6.25 per share was the highest price that AMC was willing to pay, and the risk that further negotiation or delay created a meaningful risk that AMC might determine not to enter into the Merger Agreement and to terminate negotiations of a potential transaction, in which event the Non-Affiliate Common Stockholders would lose the opportunity to accept the substantial premium being offered;

    the possibility that it could take a considerably long period of time, if ever, for the trading price of the Common Stock to reach $6.25 per share, as adjusted for the time value of money;

    the Special Committee's determination that the merger is reasonably likely to deliver greater value to the Non-Affiliate Common Stockholders, as compared to the Company remaining a controlled public company and pursuing the Company's stand-alone, strategic long-term plan, taking into account the execution risks of management's business plan and the time value of money;

    the fact that the Company's Urban Movie Channel business segment experienced a shortfall of its paid-subscriber growth targets for the Company's fiscal quarter ended June 30, 2018;

    the "Risk Factors" set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017;

    the Special Committee's determination that other strategic alternatives, including pursuing a potential sale of the Company to a third-party financial buyer or a strategic buyer other than AMC at price higher than $6.25 per share, are not realistically available to the Company in light of the fact that AMC indicated in the Initial Proposal delivered to the Company on February 26, 2018, which was publicly disclosed, and subsequently reiterated to the Special Committee by letter dated March 29, 2018, that AMC would not vote for or otherwise support a transaction to sell the Company to any party, at any price, or support any other strategic transaction involving the Company, and that under the Investment Agreement, the Company is prohibited from entertaining or soliciting any acquisition proposals or initiating, encouraging, participating in or otherwise facilitating any discussions or negotiations with any person with respect to any acquisition proposals without AMC's prior consent (which AMC can withhold in its sole and absolute discretion);

    the Special Committee's review of the transaction structure contemplated by the Merger Agreement and the financial and other terms and conditions of the Merger Agreement, including, among others, the following specific terms of the Merger Agreement:

    the high likelihood of consummation of the merger during Q4 2018, including the limited and customary conditions to the parties' obligations to consummate the merger, and the commitment by Parent and Merger Sub to use their reasonable best efforts to take or cause to be taken all actions necessary or advisable to consummate the merger and the transactions contemplated thereby as promptly as practicable;

    the fact that the Merger Agreement does not contain any financing-related contingencies, "outs" or conditions to consummation of the merger, that in order to ensure certainty regarding the financial ability of Parent and Merger Sub to consummate the merger pursuant to the Merger Agreement, AMC has irrevocably and unconditionally guaranteed

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        the due and punctual payment by Parent and Merger Sub of the Per Share Merger Consideration and all other payments contemplated by the Merger Agreement, in each case, as and when due and payable pursuant to the Merger Agreement, that AMC is a substantial net worth entity with more than $5.1 billion in assets as of March 31, 2018, and that the Company has the ability to specifically enforce AMC's payment guaranty and Parent's and Merger Sub's overall obligations to consummate the merger in accordance with the terms of the Merger Agreement;

      the ability of the Company and its representatives, in accordance with the terms of the Merger Agreement, at any time prior to obtaining stockholder approval of the Merger Agreement at the special meeting, to provide non-public information to, and engage in discussions and negotiations with, any person that submits an unsolicited, bona fide written acquisition proposal for the Company, if the Special Committee determines in good faith, after consultation with its legal and financial advisors, that such acquisition proposal constitutes or would reasonably be expected to result in a superior proposal and that the failure to take such action would be inconsistent with the directors' fiduciary duties under applicable law;

      the ability of the Special Committee, in certain circumstances specified in the Merger Agreement, to change in a manner adverse to Parent or withdraw its recommendation that the Company's stockholders vote at the special meeting to approve the Merger Agreement and its ability to terminate the Merger Agreement in order to enter into a definitive agreement with a topping bidder that submits a superior proposal that is not matched by Parent or in response to an intervening event, provided that the Company pays to Parent a termination fee equal to (i) $6.75 million, if the Merger Agreement is terminated by the Company in connection with a superior proposal, or (ii) the documented, out-of-pocket expenses of Parent incurred in connection with the Merger Agreement and the transactions contemplated hereby, up to a maximum of $3.0 million, if the Merger Agreement is terminated by the Company in response to an intervening event;

      the Special Committee's determination that the termination fee of $6.75 million payable by the Company to Parent in the circumstances described above, which amount represents approximately 2.5% of the aggregate enterprise transaction value, is customary and reasonable in the context of obtaining for the Non-Affiliate Common Stockholders the Per Share Merger Consideration of $6.25 in cash, representing a premium of approximately 61% to the closing sale price of the Common Stock on the Nasdaq Capital Market on February 23, 2018 (the last trading day before the public announcement of AMC's delivery to the Company of the Initial Proposal on February 26, 2018), and in light of the overall terms of the Merger Agreement (including the Company's fiduciary outs, maximum closing certainty and the remedies available to the Company against AMC, Parent and Merger Sub in certain circumstances, as described elsewhere in this Proxy Statement); and

      the other terms and conditions of the Merger Agreement that the Special Committee, after consulting with its legal advisors, considered to be generally reasonable, customary and consistent with transactions substantially similar to the proposed going-private merger with AMC;

    the absence of any procedural or substantive antitrust filings or review or other regulatory risks with respect to the transactions contemplated by the Merger Agreement;

    the fact that the Voting Agreement will automatically terminate upon the termination of the Merger Agreement in accordance with its terms, including if the Special Committee withdraws its recommendation that the Company's stockholders vote to approve the Merger Agreement

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      and thereupon terminates the Merger Agreement in order to enter into a definitive agreement to accept a superior proposal or in response to an intervening event;

    the oral opinion of Allen & Co. rendered to the Special Committee on July 29, 2018, which was subsequently confirmed by delivery of a written opinion dated July 29, 2018, to the effect that, as of such date and based upon and subject to the assumptions made with the Company's consent, procedures followed, matters considered and limitations on the review undertaken by Allen & Co. in preparing the opinion, the consideration to be paid to the Unaffiliated RLJE Stockholders (as defined in the Merger Agreement) pursuant to the Merger Agreement was fair, from a financial point of view, to such stockholders, as more fully described below in the section "Opinion of Financial Advisor" beginning on page 54 of this Proxy Statement; and

    the fact that the February 28, 2019 termination date under the Merger Agreement allows for sufficient time to complete the merger.

        The Special Committee also considered a number of factors that are discussed below relating to the procedural safeguards that it believes were and are present to ensure the fairness of the merger and to permit the Special Committee to represent effectively the interests of the Non-Affiliate Common Stockholders. These procedural safeguards, which are not intended to be exhaustive and are not listed in any relative order of importance, are discussed below:

    the fact that the Special Committee consists entirely of independent and disinterested non-employee directors who are not affiliated, or a party to any extraneous business relationships, with AMC or any of its affiliates, Robert L. Johnson or any of his affiliates, or any members of the Company's management;

    the fact that the Special Committee was charged solely with acting as exclusive bargaining agent and representing the interests of the Non-Affiliate Common Stockholders, has been vested with the plenary authority and power of the full Board under Nevada law to consider, review and evaluate the proposed transaction with AMC on behalf of such stockholders, had exclusive and independent control of all substantive discussions and arm's-length negotiations with AMC regarding its proposal to acquire the publicly held shares of Common Stock, the structure of the proposed going-private merger transaction and the terms and conditions of the definitive Merger Agreement, and had definitive and binding authority (on behalf of the Company and the full Board) to determine whether to approve or disapprove of the proposed merger or any alternative transaction with AMC or its affiliates;

    the fact that Greenberg Traurig and Allen & Co. worked directly with the Special Committee and were consulted by the Special Committee throughout the five-month transaction process and were instructed by and updated the Special Committee directly and regularly;

    the procedural fairness of the transaction, including the fact that the transaction was negotiated over a period of approximately five months, with such negotiations designed and conducted by a special committee consisting entirely of independent, non-employee directors who did not have any material financial interest in the merger different from, or in addition to, that of the Company's stockholders who are not affiliated with AMC or any of its affiliates, Robert L. Johnson or any of his affiliates, or any members of the Company's management (other than certain fees not to exceed $100,000 in the aggregate that will be paid to each member of the Special Committee in connection with their services to the Company with respect to the merger, but which are not conditioned on the consummation of the merger and the accelerated vesting and cash out of certain restricted stock awards made to all non-employee director of the Company), and that the Special Committee was advised by highly qualified and experienced M&A legal counsel and financial advisors;

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    the fact that the Special Committee met formally 27 times (and additionally engaged in numerous other correspondences, conference calls and conversations) over the course of approximately five months to evaluate, in consultation with Greenberg Traurig and Allen & Co., AMC's various proposals to acquire the publicly held shares of Common Stock (including consideration ad negotiation of the Initial Proposal, which ultimately led to four price increases and a final offer price of $6.25 per share) and the economic merits and risks of the transactions contemplated by the Merger Agreement, as well as the fact that during these meetings, the Special Committee discussed the advantages and disadvantages of the merger, reviewed with the Special Committee and summarized the issues and negotiating positions raised in nine drafts of the Merger Agreement, designed and oversaw the negotiating strategy, and made various strategic and tactical recommendations relating thereto; and

    the fact that under Nevada law and the Company's Articles of Incorporation, approval of the Merger Agreement requires the affirmative vote "for" the Merger Agreement by the holders of a majority of the voting power attributable to all outstanding classes of the Company's voting securities, that the Common Stock is the only class of the Company's capital stock that has the right to vote in respect of and to approve (or disapprove) the Merger Agreement, and that the Company's Articles of Incorporation do not provide for the ability of stockholders to vote by written consent in lieu of a meeting and, therefore, it is a condition to the consummation of the Merger that the requisite stockholder vote be obtained (in person or by proxy) at the Special Meeting.

        The Special Committee also considered a variety of uncertainties, risks and potentially negative factors in its deliberations concerning the merger, including the factors discussed below, concerning the Merger Agreement and the merger (which are not intended to be exhaustive and are not listed in any intended relative order of importance):

    the fact that following consummation of the merger the equity interests in the Company currently owned by the Non-Affiliate Common Stockholders will be extinguished and, therefore, such former stockholders will no longer participate in the Company's future earnings or growth, if any, or benefit from increases, if any, in the value of the shares of the Common Stock;

    the possibility that AMC could sell part or all of the Company following the merger to one or more purchasers at a valuation higher than the $6.25 per share being paid by AMC in the merger;

    the risks and costs to the Company if the merger is not consummated, including the diversion of management and employee attention, potential employee attrition, the potential disruptive effect on business and customer relationships, as well as the negative impact of a public announcement of the merger on the Company's sales and operating results and the ability of the Company to attract and retain key management, marketing and technical personnel;

    the fact that the Company's directors, officers and employees have expended and will continue to expend extensive efforts to consummate the merger and the other transactions contemplated by the Merger Agreement and that such persons have experienced and will continue to experience distractions from their employment duties during the pendency of such transactions;

    the risk of incurring substantial expenses related to the consummation of the merger, including in connection with potential litigation related to the merger;

    the restrictions in the Merger Agreement on the Company's business operations prior to completion of the merger which, although customary in tenor and scope, may delay or prevent the Company from undertaking certain business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company pending completion of the merger;

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    the fact that certain members of the Board and executive officers of the Company may have interests in the merger that may be different from, or in addition to, those of the Non-Affiliate Common Stockholders, as described in more detail under "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" beginning on page 71 of this Proxy Statement;

    the fact that, when the Special Committee was considering the transactions contemplated by the Merger Agreement, AMC and its affiliates beneficially owned in the aggregate approximately 30% of the outstanding shares of Common Stock, in addition to the AMC Warrants, shares of Preferred Stock and 2015 Warrants, which warrants, if exercised by AMC in full, would have resulted in AMC beneficially owning, in the aggregate, a majority of the voting power attributable to all of the outstanding shares of Common Stock and, therefore, provided AMC with the ability to vote to determine unilaterally whether the Merger Agreement is approved by the Company's stockholders at the Special Meeting (without any need for obtaining any additional votes by any other holders of shares of Common Stock);

    the fact that Robert L. Johnson, the Company's Chairman, and certain of his affiliates that beneficially own, as of the date of this Proxy Statement, in the aggregate approximately 43.5% of the outstanding shares of Common Stock, have entered into the Voting Agreement with Parent, pursuant to which they have agreed, among other things, to affirmatively vote all of their shares of Common Stock at the Special Meeting for the approval of the Merger Agreement and against any alternative acquisition proposal, and have granted to Parent an irrevocable proxy to secure the performance of their voting obligations under the Voting Agreement, as described in more detail under "The Merger Agreement—The Voting Agreement" beginning on page 108 of this Proxy Statement;

    the fact that, by reason of the factors described immediately above, the likelihood of any third party submitting to the Special Committee or the Company (on an unsolicited basis pursuant to the "window shop" exceptions to the Company's no-solicitation covenant in the Merger Agreement) an acquisition proposal constituting or reasonably likely to lead to a Superior Proposal is materially diminished;

    the fact that AMC rejected the Special Committee's proposal to include in the Merger Agreement a so-called "majority-of-the-minority" stockholder approval condition, which would irrevocably condition the consummation of the merger on obtaining at the Special Meeting the affirmative vote for the approval of the Merger Agreement of the holders of a majority of the outstanding shares of Common Stock (other than shares of Common Stock owned by AMC, Robert L. Johnson, members of the Company's management or any of their respective affiliates);

    the fact that the Special Committee was unable to conduct a market check of potential third-party buyers and business combination candidates by reason of the preexisting no-shop covenant of the Company contained in the Investment Agreement, AMC's ability to acquire majority voting control of the Company by means of exercising its previously issued warrants, and AMC's previous statements, made both publicly in its amendment to Schedule 13D filed with the SEC on February 26, 2018 and privately to the Special Committee, that it was only a buyer (and not a seller) of the Company and would not vote for or otherwise support a transaction to sell the Company to any party, at any price, or support any other alternative strategic transaction involving the Company;

    the fact that the termination fee of $6.75 million payable by the Company to Parent in the event of a fiduciary termination of the Merger Agreement to accept a superior proposal, although deemed reasonable by the Special Committee in the overall context of the Merger Agreement and in light of the Per Share Merger Consideration of $6.25, which represents an approximately

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      61% premium to the closing sale price of the Common Stock on the Nasdaq Capital Market on February 23, 2018 (the last trading day before the public announcement of AMC's delivery to the Company of the Initial Proposal on February 26, 2018), could deter third parties from submitting to the Special Committee or the Company an acquisition proposal constituting or reasonably likely to lead to a Superior Proposal;

    the fact that holders of shares of Common Stock have no right under applicable Nevada law or pursuant to the Company's Articles of Incorporation or Bylaws to dissent from the merger and obtain a judicial determination of the fair value of their shares;

    the fact that the gain on an all-cash transaction is 100% taxable to the Company's non-affiliate U.S. stockholders that are U.S. Holders for U.S. federal income tax purposes; and

    the risk that, while the merger is expected to be completed during Q4 2018, there can be no assurance that all conditions to the parties' obligations to complete the merger will be timely satisfied (or satisfied at all) and, as a result, it is possible that the merger may not be completed in a timely manner or at all.

        The Special Committee did not consider the liquidation value or net book value of Company's assets because the Special Committee considers Company to be a viable going-concern that will continue to operate regardless of whether the merger is consummated, where value is derived from cash flows generated from its continuing operations. In addition, the Special Committee believes that the value of Company's assets that might be realized in a liquidation would be significantly less than its going-concern value for the reasons that (i) liquidation sales generally result in proceeds substantially less than the sales of a going-concern; (ii) it is impracticable to determine a liquidation value given the significant execution risk involved in any breakup of a company; (iii) an ongoing operation has the ability to continue to earn profit, while a liquidated company does not, such that the "going-concern value" will be higher than the "liquidation value" of a company because the "going-concern value" includes the liquidation value of a company's tangible assets as well as the value of its intangible assets, such as goodwill; and (iv) a liquidation process would involve additional legal fees, costs of sale and other expenses that would reduce any amounts that stockholders might receive upon liquidation. Furthermore, the Company has no intention of liquidation and the merger will not result in the liquidation of the Company. The Special Committee did not consider net book value, which is an accounting concept, as a factor because the Company's business is not of a nature whose value is traditionally measured as a multiple of book value. Rather, the Company's value is derived primarily from cash flows generated by continuing operations. Therefore, the Special Committee believes that net book value is not a material indicator of the value of the Company as a going concern, but rather is indicative of historical costs. Accordingly, the Special Committee believes that the net book value of the Company is irrelevant to a determination as to whether the Per Share Merger Consideration is fair to the Non-Affiliate Common Stockholders. The Special Committee believes the analyses and additional factors it reviewed provided an indication of the Company's going -concern value. The Special Committee also considered the historical trading prices of the Common Stock. The Special Committee did not seek to determine a pre-merger going-concern value for the Common Stock to determine the fairness of the Per Share Merger Consideration to the Non-Affiliate Common Stockholders. The Special Committee believes that the trading price of the Common Stock at any given time represents the best available indicator of the Company's going-concern value at that time, provided that the trading price at that time is not impacted.

        After considering the foregoing potentially positive and potentially negative factors, the Special Committee concluded that the uncertainties, risks and potentially negative factors relevant to the merger were outweighed by the potential benefits that it expected the Non-Affiliate Common Stockholders would obtain as a result of the merger. Accordingly, the Special Committee has concluded (with respect to both the substantive terms of the Merger Agreement, including the Per Share Merger

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Consideration, and the procedural aspects of the transaction) that the Merger Agreement is advisable, fair to and in the best interest of the Company and the Non-Affiliate Common Stockholders, and has unanimously determined to approve the Merger Agreement and the transactions contemplated thereby, including the merger, and to recommend to the Company's stockholders that they affirmatively vote "for" approval of the Merger Agreement at the Special Meeting.

        The foregoing discussion of information and factors considered by the Special Committee is not intended to be exhaustive and may not include all of the factors considered by the Special Committee. In view of the wide variety of factors considered by the Special Committee, the Special Committee found it impracticable to quantify or otherwise assign relative weights to the foregoing factors in reaching its conclusions. In addition, individual members of the Special Committee may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The Special Committee considered the opinion and analyses of Allen & Co., among other factors considered, in reaching its determination as to the fairness of the transactions contemplated by the Merger Agreement, including the merger. The Special Committee approved the Merger Agreement based upon the totality of the information presented to and considered by it.

        In considering the recommendation of the Special Committee with respect to the proposal to approve the Merger Agreement, you should be aware that certain of our officers and directors have certain interests in the merger that may be different from, or in addition to, your interests as a stockholder generally. The Special Committee was aware of these interests, considered them and took them into account, together with other factors, in determining whether to approve the Merger Agreement and recommending that our stockholders vote for the approval of the Merger Agreement. See the section entitled "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" beginning on page 71. The Special Committee, on behalf of the Company, further believes that the merger is fair to the Company's "unaffiliated security holders," as defined under Rule 13e-3 under the Exchange Act.

        ACCORDINGLY, THE SPECIAL COMMITTEE UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.

Opinion of Financial Advisor

        The Special Committee engaged Allen & Co. as financial advisor in connection with the proposed Merger. In connection with this engagement, the Special Committee requested that Allen & Co. render an opinion to the Special Committee as to the fairness, from a financial point of view, to the Unaffiliated RLJE Stockholders (as defined in the Merger Agreement) of the Per Share Merger Consideration to be received by such holders pursuant to the Merger Agreement. On July 29, 2018, at a meeting of the Special Committee held to evaluate the Merger, Allen & Co. rendered an oral opinion, which was confirmed by delivery of a written opinion dated July 29, 2018, to the Special Committee to the effect that, as of that date and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken described in such opinion, the consideration to be received the Unaffiliated RLJE Stockholders pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

        The full text of Allen & Co.'s written opinion, dated July 29, 2018, which describes the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken, is attached as Annex B and is incorporated by reference herein in its entirety. The description of Allen & Co.'s opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of Allen & Co.'s opinion. Allen & Co.'s opinion was intended for the benefit and use of the Special Committee (in its capacity as such) in connection with its evaluation of the Per Share Merger Consideration from a financial point of view and did not address any other terms, aspects or implications of the Merger. Allen & Co.'s opinion did not constitute a

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recommendation as to the course of action that RLJE (or the Special Committee) should pursue in connection with the Merger or otherwise address the merits of the underlying decision by RLJE to engage in the Merger, including in comparison to other strategies or transactions that might be available to RLJE or which RLJE might engage in or consider. Allen & Co.'s opinion does not constitute advice or a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the Merger or otherwise.

        Allen & Co.'s opinion reflected and gave effect to Allen & Co.'s general familiarity with RLJE as well as information that Allen & Co. received during the course of its assignment, including information provided by the managements of RLJE in the course of discussions relating to the Merger as more fully described below. In arriving at its opinion, Allen & Co. neither conducted a physical inspection of the properties or facilities of RLJE, AMC, Parent or any other entity, nor made or obtained any evaluations or appraisals of the assets or liabilities (contingent, accrued, derivative, off-balance sheet or otherwise) of RLJE, AMC, Parent or any other entity, or conducted any analysis concerning the solvency or fair value of RLJE, AMC, Parent or any other entity.

        In arriving at its opinion, Allen & Co., among other things:

              (i)  reviewed the financial terms and conditions of the Merger as reflected in the Merger Agreement;

             (ii)  reviewed certain publicly available historical business and financial information relating to RLJE and AMC, including public filings of RLJE and AMC, and historical market prices and trading volumes for RLJE common stock;

            (iii)  reviewed certain financial information relating to RLJE provided to or discussed with Allen & Co. by the management of RLJE, including certain internal financial forecasts, estimates and other financial and operating data relating to RLJE prepared by the management of RLJE (such forecasts, the "RLJE Forecasts");

            (iv)  held discussions with the management of RLJE relating to the past and current operations, financial condition and prospects of RLJE;

             (v)  reviewed and analyzed certain publicly available information, including certain stock market data and financial information, relating to selected companies with businesses that Allen & Co. deemed generally relevant in evaluating RLJE;

            (vi)  reviewed and analyzed certain publicly available financial information relating to selected transactions that Allen & Co. deemed generally relevant in evaluating the Merger; and

           (vii)  conducted such other financial analyses and investigations as Allen & Co. deemed necessary or appropriate for purposes of its opinion.

        In rendering its opinion, Allen & Co. relied upon and assumed, with RLJE's consent and without independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information available to Allen & Co. from public sources, provided to or discussed with Allen & Co. by the managements and/or other representatives of RLJE, or otherwise reviewed by Allen & Co. With respect to the RLJE Forecasts that Allen & Co. was directed to utilize for purposes of its analyses, Allen & Co. was advised by the management of RLJE, and Allen & Co. assumed, at the direction of RLJE, that the RLJE Forecasts, estimates and other financial and operating data were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of RLJE, and were a reasonable basis upon which to evaluate, the future financial and operating performance of RLJE and the other matters covered thereby. Allen & Co. also assumed, with the consent of the Special Committee, that the financial results, reflected in the RLJE Forecasts, estimates and other financial and operating data utilized in its analyses would be realized in the amounts and at the times projected. Allen & Co. expressed no

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opinion or view as to the RLJE Forecasts or any of the estimates or other financial or operating data or the assumptions on which they were based.

        Further, Allen & Co.'s opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Allen & Co. as of, the date of its opinion. It should be understood that subsequent developments may affect the conclusion expressed in Allen & Co.'s opinion and that Allen & Co. assumed no responsibility for advising any person of any change in any matter affecting Allen & Co.'s opinion or for updating or revising its opinion based on circumstances or events occurring after the date of its opinion.

        Allen & Co. did not express any opinion as to the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation or other consideration payable to any officers, directors or employees of any party to the Merger or any related entities, or any class of such persons or any other party, relative to the Per Share Merger Consideration or otherwise. Allen & Co. expressed no opinion as to the prices at which shares of RLJE common stock may trade at any time or the value thereof.

        In addition, Allen & Co. expressed no opinion or view as to any tax or other consequences that might result from the Merger, nor did Allen & Co. express any opinion or view as to, and Allen & Co. has relied, at the direction of RLJE, upon the assessments of representatives of RLJE regarding, legal, regulatory, accounting, tax and similar matters relating to RLJE and the Merger, as to which Allen & Co. understood RLJE obtained such advice as it deemed necessary from qualified professionals. Allen & Co. assumed, with the consent of the Special Committee, that the Merger would be consummated in accordance with the terms and conditions of the Merger Agreement and in compliance with all applicable laws, documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that all governmental, regulatory or other consents, approvals, releases and waivers necessary for the consummation of the Merger will be obtained without delay, limitation, restriction or condition, including any divestiture or other requirements that would be meaningful in any respect to its analyses or opinion. Allen & Co. further assumed, with the consent of the Special Committee, that the final executed Merger Agreement would not differ from the draft reviewed by Allen & Co. in any respect meaningful to Allen & Co.'s analyses or opinion.

        Allen & Co.'s opinion was limited to the fairness, from a financial point of view and as of its date, of the Per Share Merger Consideration to be received by the Unaffiliated RLJE Stockholders pursuant to the Merger Agreement. Allen & Co.'s opinion did not address any other term, aspect or implication of the Merger, including the form or structure of the Merger or any agreement, arrangement or understanding entered into in connection with the Merger or otherwise.

        In connection with its opinion, Allen & Co. performed a variety of financial and comparative analyses, including those described below. The summary of the analyses below and certain factors considered is not a comprehensive description of all analyses undertaken or factors considered by Allen & Co. The preparation of a financial opinion or analysis is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion and analyses are not readily susceptible to summary description. Allen & Co. arrived at its opinion based on the results of all analyses undertaken and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Allen & Co. believes that the analyses and factors summarized below must be considered as a whole and in context. Allen & Co. further believes that selecting portions of the analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses and factors, could create a misleading or incomplete view of the processes underlying Allen & Co.'s analyses and opinion.

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        In performing its financial analyses, Allen & Co. considered industry performance, general business and economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of RLJE. No company, business or transaction reviewed is identical or directly comparable to RLJE or their respective businesses or the Merger and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, businesses or transactions reviewed. The estimates of the future performance of RLJE in or underlying Allen & Co.'s analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by such analyses. These analyses were prepared solely as part of Allen & Co.'s analysis of the fairness, from a financial point of view, of the Per Share Merger Consideration and were provided to the Special Committee in connection with the delivery of Allen & Co.'s opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the assumptions and estimates used in, and the ranges of valuations resulting from, any particular analysis described below are inherently subject to substantial uncertainty and should not be taken as the views of Allen & Co. regarding the actual values of RLJE.

        Allen & Co. did not recommend that any specific consideration constituted the only appropriate consideration in the Merger. The type and amount of consideration payable in the Merger was determined through negotiations between RLJE and AMC, rather than by any financial advisor, and was approved by the Special Committee. The decision to enter into the Merger Agreement was solely that of the Special Committee and the AMC board of directors. Allen & Co.'s opinion and analyses were only one of many factors considered by the Special Committee in its evaluation of the proposed Merger and the Per Share Merger Consideration and should not be viewed as determinative of the views of the Special Committee or management with respect to the Merger or the consideration payable in the Merger.

Financial Analyses

        The summary of the financial analyses described in this section entitled "—Financial Analyses" is a summary of the material financial analyses provided by Allen & Co. in connection with its opinion, dated July 29, 2018, to the Special Committee. The summary set forth below is not a comprehensive description of all analyses undertaken by Allen & Co. in connection with its opinion, nor does the order of the analyses in the summary below indicate that any analysis was given greater weight than any other analysis. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by Allen & Co., the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by Allen & Co. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by Allen & Co. Future results may differ from those described and such differences may be material. For purposes of the financial analyses described below in this section of this proxy statement/prospectus, the term (i) "LTM" means last twelve months, (ii) "EBITDA" means earnings before interest, income taxes, depreciation and amortization, excluding certain one-time non-recurring items, as applicable, (iii) "EV" means enterprise value, (iv) "ACL" means Agatha Christie Limited, and (v) "SG&A expenses" means selling, general and administrative expenses.

RLJE Financial Analyses

        WholeCo: Selected Public Companies.    Allen & Co. reviewed publicly available financial and stock market information of six selected publicly traded traditional media companies and four independent

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content production and distribution companies that, given certain business and financial characteristics, Allen & Co. considered generally relevant for purposes of analysis.

        The selected traditional media companies were:

    The Walt Disney Company

    CBS Corporation

    Discovery Inc.

    Viacom Inc.

    ITV plc

    AMC Networks Inc.

        The selected independent content production and distribution companies were:

    Lions Gate Entertainment Corp.

    Entertainment One Ltd.

    Eros International Media Ltd

    DHX Media Ltd.

        Allen & Co. reviewed, among other information, share prices as of July 27, 2018. Allen & Co. calculated the enterprise value as a multiple of LTM EBITDA, 2018 estimated EBITDA, and 2019 estimated EBITDA for the traditional media companies and the independent content production and distribution companies. Financial data of the selected companies was based on public filings, publicly available Wall Street research analysts' estimates and other publicly available information. The results of this analysis for the traditional media companies and the independent content production and distribution companies are summarized below:

 
  Minimum   Median   Mean   Maximum  

LTM EV / EBITDA (Traditional Media)

    7.2x     8.8x     8.8x     11.2x  

2018E EV / EBITDA (Traditional Media)

    7.0x     8.7x     8.6x     10.8x  

2019E EV / EBITDA (Traditional Media)

    6.8x     7.9x     8.2x     10.6x  

LTM EV / EBITDA (Independent Content and Distribution)

    11.5x     11.9x     13.0x     16.5x  

2018E EV / EBITDA (Independent Content and Distribution)

    11.4x     12.0x     12.4x     14.1x  

2019E EV / EBITDA (Independent Content and Distribution)

    10.3x     11.0x     11.0x     11.6x  

        Based upon the foregoing and other factors which it deemed relevant, Allen & Co. applied selected ranges of 2018 estimated adjusted EBITDA of 9.0x to 12.0x and 2019 estimated adjusted EBITDA (using both the base case and adjusted case projections) of 8.0x to 11.0x. This analysis indicated the following implied per share equity value reference ranges for RLJE, as compared to the offer price of $6.25 per share:

Implied Per Share Equity Value Reference Ranges Based on:
2018 Estimated
Adjusted EBITDA
  2019 Estimated Adjusted
EBITDA (Base Case)
  2019 Estimated Adjusted
EBITDA (Adjusted Case)
$4.52 - $5.99   $4.64 - $6.32   $4.42 - $6.03

        Selected Precedent Transactions Analysis.    Using publicly available information, Allen & Co. reviewed financial information relating to the following sixteen selected transactions Allen & Co.

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considered generally relevant for purposes of analysis, which are referred to for purposes of this section of this proxy statement/prospectus as the RLJE selected transactions:

Announced   Target   Acquiror
July 2018   Sky Plc   Comcast Corp
June 2018   21st Century Fox, Inc.   The Walt Disney Company
July 2017   Scripps Networks Interactive, Inc.   Discovery, Inc.
October 2016   Time Warner Inc.   AT&T Inc.
June 2016   Starz   Lions Gate Entertainment Corp.
April 2016   DreamWorks Animation, Inc.   Comcast Corporation
November 2012   The Yankees Entertainment and Sports Network, LLC   News Corporation
October 2012   Lucasfilm Ltd. LLC   The Walt Disney Company
April 2012   Image Entertainment, Inc.   RLJ Acquisition, Inc.
April 2012   Acorn Media Group, Inc.   RLJ Acquisition, Inc.
May 2011   CORE Media Group Inc.   Apollo Global Management, LLC
August 2010   Shed Media Group Limited   Warner Bros. Entertainment Inc.
December 2009   NBCUniversal Media, LLC   Comcast Corporation/General Electric Company
November 2009   Travel Channel, LLC   Scripps Networks Interactive, Inc.
August 2009   Marvel Entertainment, Inc.   The Walt Disney Company
July 2008   The Weather Channel, LLC   NBCUniversal Media, LLC, Bain Capital, LP, Blackstone Group L.P.

        Allen & Co. reviewed, among other information, transaction values of the RLJE selected transactions. Allen & Co. calculated the enterprise values as a multiple of forward estimated EBITDA for the target companies, as of the applicable announcement date of such transaction. Financial data for the RLJE selected transactions was based on public filings, publicly available Wall Street research analysts' estimates and other publicly available information.

        Based upon the foregoing and other factors which it deemed relevant, Allen & Co. applied a selected range of forward estimated EBITDA multiples of 10.0x to 13.0x. This analysis indicated the implied per share equity value reference range was $5.00 to $6.46, as compared to the offer price of $6.25 per share.

        Discounted Cash Flow Analysis.    Allen & Co. performed a discounted cash flow analysis of RLJE by calculating, based on the RLJE Forecasts, the estimated present value (as of June 30, 2018) of the unlevered free cash flows that RLJE was forecasted to generate during the 6-months ending December 31, 2018 through the full year ending December 31, 2022. For purposes of this analysis, stock-based compensation was treated as a cash expense. Allen & Co. applied a selected range of terminal EBITDA multiples of 9.0x to 12.0x to EBITDA for the year ending December 31, 2022 of base case and adjusted case to arrive at terminal values of the base case and adjusted case, respectively. The unlevered free cash flows and terminal values of the base case and of the adjusted case were then discounted to present value (as of June 30, 2018) using discount rates ranging from 15.0% to 18.5% and 14.0% to 17.5%, respectively. This range of discount rates was determined based on Allen & Co.'s analysis of RLJE's weighted average cost of capital.

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        This analysis indicated the following implied per share equity value reference ranges for RLJE, as compared to the offer price of $6.25 per share:

Implied Per Share Equity Value
Reference Ranges Based on:
Base Case   Adjusted Case
$5.81 - $8.25   $4.47 - $6.29

        Sum-of-the-Parts: Selected Public Companies Analysis.    Allen & Co. reviewed the digital channels, IP licensing, and wholesale distribution segments of RLJE and its 64% ownership stake in ACL separately. Allen & Co. examined publicly available financial and stock market information of selected subscription streaming companies that Allen & Co. considered generally relevant to RLJE's digital channels segment for purposes of analysis. These companies were selected on the basis of business model, industry, products, customers, and subscriber and revenue growth rates, among other business and financial characteristics that Allen & Company deemed reasonable based upon its professional judgment. The selected subscription streaming companies were:

    Netflix, Inc.

    Spotify Technology SA

    Gaia, Inc.

        Allen & Co. reviewed, among other information, share prices as of July 27, 2018. Allen & Co. calculated the enterprise value as a multiple of 2018 estimated revenue and 2019 estimated revenue for the subscription streaming companies. Financial data of the subscription streaming companies was based on public filings, publicly available Wall Street research analysts' estimates and other publicly available information. The results of this analysis for the subscription streaming companies are summarized below:

 
  Minimum   Median   Mean   Maximum  

2018E EV / Revenue

    5.4x     6.7x     7.5x     10.4x  

2019E EV / Revenue

    3.8x     4.2x     5.5x     8.4x  

        Allen & Co. examined publicly available financial and stock market information of selected traditional media and independent content and distribution companies that Allen & Co. considered generally relevant to RLJE's wholesale distribution segment and its 64% ownership stake in ACL for purposes of analysis. These companies were selected on the basis of business model, industry, products, customers, revenue growth rates, and EBITDA margins, among other business and financial characteristics that Allen & Company deemed reasonable based upon its professional judgment. The traditional media companies consisted of The Walt Disney Company, CBS Corporation, Discovery, Inc., Viacom Inc., ITV plc and AMC. The independent content and distribution companies consisted of Lions Gate Entertainment Corp, Entertainment One Ltd., Eros International plc and DHX Media Ltd. SG&A expenses were valued at blended multiples of digital channels, IP licensing, and wholesale segments.

        Allen & Co. applied selected ranges to the different segments of RLJE and its 64% ownership stake in ACL for 2018 and 2019 as follow:

 
  Selected Multiples
 
  Digital Channels
(Revenue)
  IP Licensing   Wholesale
(EBITDA)
  64% stake in ACL
(EBITDA)

2018E

  5.5x to 7.5x   Not meaningful   6.5x to 7.5x   9.0x to 12.0x

2019E

  4.0x to 5.5x   Not meaningful   6.5x to 7.5x   8.0x to 11.0x

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        This analysis indicated the following implied per share equity value reference ranges for RLJE, as compared to the offer price of $6.25 per share:

Implied Per Share Equity Value Reference Ranges Based on:
2018 Estimated
Metrics
  2019 Estimated
Metrics (Base Case)
  2019 Estimated Metrics
(Adjusted Case)
$5.48 - $7.17   $5.53 - $7.36   $5.04 - $6.71

Certain Additional Information

        Allen & Co. observed certain additional information that was not considered part of its financial analyses for its opinion but was noted for informational reference, including the historical trading prices of RLJE common shares during the 52-week period ended February 23, 2018 (one-trading day prior to the date of the announcement of AMC's proposal to acquire the remaining shares of RLJE), which indicated during the relevant periods low and high closing prices for RLJE common shares of approximately $2.12 and $4.61 per share, respectively.

Miscellaneous

        The Special Committee selected Allen & Co. as a financial advisor in connection with the Merger based on, among other things, Allen & Co.'s reputation, experience and familiarity with RLJE and the industry in which RLJE operates. Allen & Co., as part of its investment banking business, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, private placements and related financings, bankruptcy reorganizations and similar recapitalizations, negotiated underwritings, secondary distributions of listed and unlisted securities, and valuations for corporate and other purposes. In the ordinary course, Allen & Co. as a broker-dealer and market maker, and certain of Allen & Co.'s affiliates and/or related entities have invested or may invest, hold long or short positions and may trade, either on a discretionary or non-discretionary basis, for their own account or for those of Allen & Co.'s clients, in the debt and equity securities (or related derivative securities) of RLJE, AMC and/or their respective affiliates. The issuance of Allen & Co.'s opinion was approved by Allen & Co.'s fairness opinion Special Committee.

        For Allen & Co.'s financial advisory services, RLJE has agreed to pay Allen & Co. an aggregate fee of $1,500,000, of which $250,000 was payable upon delivery of Allen & Co.'s opinion and $1,100,000 is contingent upon completion of the merger. RLJE also has agreed subject to certain limitations to reimburse Allen & Co.'s reasonable expenses and to indemnify Allen & Co. and related parties against certain liabilities, including liabilities under the federal securities laws, arising out of its engagement.

        During the two years prior to the date of the opinion, Allen & Co. and its affiliates did not provide any financial advisory, capital markets or similar investment banking services to RLJE (other than with respect to RLJE's engagement of Allen & Co.), AMC or any of Mr. Robert L. Johnson, The RLJ Companies, LLC and RLJ SPAC Acquisition, LLC nor received any fees from RLJE, AMC or any of Mr. Robert L. Johnson, The RLJ Companies, LLC and RLJ SPAC Acquisition, LLC.

        The reports, opinions or appraisals referenced in "Special Factors—Opinion of Financial Advisor" beginning on page 54 of this Proxy Statement will be made available for inspection and copying at the principal executive offices of RLJE during its regular business hours by any interested RLJE common stockholders or representative who has been designated in writing.

Position of the AMC Entities and the Johnson Entities as to Fairness of the Merger

        Under the SEC rules governing "going-private" transactions, each of AMC, Parent and Merger Sub (collectively, the "AMC Entities") and the Johnson Entities may be deemed to be an Affiliate of the Company and, therefore, is required to express its belief as to the fairness of the Merger to the

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Non-Affiliate Common Stockholders. Each of the AMC Entities and the Johnson Entities is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The AMC Entities and the Johnson Entities believe that the Merger (which is the Rule 13e-3 transaction for which the Schedule 13E-3 has been filed with the SEC) is substantively and procedurally fair to the Non-Affiliate Common Stockholders on the basis of the factors described under "Special Factors—Reasons for the Merger; Recommendations of the Special Committee; Fairness of the Merger" beginning on page 47 of this Proxy Statement, and the additional factors described below.

        None of the AMC Entities or the Johnson Entities participated in the deliberations of the Special Committee or the vote of the Special Committee regarding, or received advice from Greenberg Traurig or Allen & Co. as to, the fairness of the Merger. As described in the "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" section beginning on page 71 of this Proxy Statement, the AMC Entities and the Johnson Entities have interests in the Merger different from those of the Non-Affiliate Common Stockholders by virtue of the fact that, as a result of the Merger, the Company will become a majority owned subsidiary of each of AMC and Parent, with the Johnson Entities owning a stake of 17% in the Company. Moreover, the Johnson Entities did not participate in the negotiations with the Special Committee with respect to the Merger, including with respect to the price to be paid to the Non-Affiliate Common Stockholders in the Merger.

        The interests of the Non-Affiliate Common Stockholders were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement with the assistance of its legal and financial advisors. None of the AMC Entities or the Johnson Entities have performed, or engaged a financial advisor to perform, any valuation or other analysis for the purpose of assessing the fairness of the Merger to the Non-Affiliate Common Stockholders.

        Based on the AMC Entities' review and the Johnson Entities' knowledge of available information regarding the Company, as well as discussions with members of the Company's management regarding the Company and its business and the factors considered by, and the analysis and resulting conclusions of, the Special Committee described in "Special Factors—Reasons for the Merger; Recommendations of the Special Committee; Fairness of the Merger" beginning on page 47 of this Proxy Statement, the AMC Entities and the Johnson Entities believe that the Merger is substantively fair to the Non-Affiliate Common Stockholders. In particular, the AMC Entities and the Johnson Entities considered the following:

    the Special Committee, consisting solely of non-management, independent directors who are not affiliated with the AMC Entities or the Johnson Entities and who have no financial interest in the Merger that is different from, or in addition to, the interests of the Non-Affiliate Common Stockholders other than their receipt of Special Committee fees (which are not contingent upon the consummation of the Merger or the Special Committee's recommendation or approval of the Merger) and their interests described in "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" section beginning on page 71 of this Proxy Statement, was delegated full authority to review, evaluate and negotiate the terms of the proposed Merger and to decide whether or not to engage in the Merger;

    the Special Committee was advised by its own nationally recognized independent legal and financial advisors, each of which was selected by the Special Committee;

    the Special Committee was aware of the existing relationships among the Company, the AMC Entities and the Johnson Entities and their respective affiliates and could take such relationships into account when conducting the Special Committee process and in considering whether to engage in the Merger;

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    those members of the Board affiliated with the AMC Entities voluntarily recused themselves from all discussions by the Board with respect to a proposed transaction involving the AMC Entities;

    the Per Share Merger Consideration of $6.25, and the other terms and conditions of the Merger Agreement, resulted from extensive negotiations between the AMC Entities and their advisors, on one hand, and the Special Committee and its advisors, on the other hand, including discussions about the five-year financial forecast that Allen & Co. provided to Citi, which Company management viewed as aggressive;

    the Merger will provide consideration to the Stockholders entirely in cash, allowing the Non-Affiliate Common Stockholders to immediately realize a certain and fair value for all of their shares of Common Stock;

    the current and historical market prices of the Common Stock, including the market performance of the Common Stock and the fact that the Per Share Merger Consideration of $6.25 represents an approximate premium of 61% over the $3.87 closing sale price per share of the Common Stock on the Nasdaq Capital Market on February 23, 2018, the last trading day before the public announcement of AMC's delivery to the Company of the Initial Proposal on February 26, 2018, and an approximate premium of 28% over the $4.87 closing sale price per share of the Common Stock on the Nasdaq Capital Market Market on July 27, 2018, the last trading day before the public announcement of the signing of the Merger Agreement;

    the Per Share Merger Consideration of $6.25 is significantly higher than (i) the historical trading prices of the Common Stock, as described in more detail under "Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger" on page 47 of this Proxy Statement, and (ii) the highest price paid by AMC or any of its controlled Affiliates for any shares of Common Stock purchased by them during the past two years, as described in more detail under "Important Information Regarding the Company—Transactions in Common Stock During the Past 60 Days", "Important Information Regarding the Company—Transactions in Common Stock During the Past Two Years", "Important Information Regarding the Company—Transactions in Connection with Credit Agreement Amendments" and "Important Information Regarding the Company—Other Transactions" on pages 153-157 of this Proxy Statement;

    the Per Share Merger Consideration of $6.25 is significant considering that on April 21, 2016 the Company had received a notice from Nasdaq indicating that the Company did not meet the required minimum of $2,500,000 in stockholders' equity needed for continued listing on the Nasdaq Capital Market under Listing Rule 5500(b) (due, in part, to a trading price of less than $1.00 per share on the Nasdaq Capital Market), and in order to maintain the Company's listing on the Nasdaq Capital Market, the Company was required to implement a reverse stock split of its Common Stock on June 24, 2016, pursuant to which every three shares of the Company's issued and outstanding common stock was automatically converted into one issued and outstanding share of the Company's common stock, after which AMC made a significant capital investment in the Company in connection with the AMC Transaction;

    the ability of the Special Committee, in certain circumstances specified in the Merger Agreement, to change in a manner adverse to Parent or withdraw its recommendation that the Company's stockholders vote at the special meeting to approve the Merger Agreement and its ability to terminate the Merger Agreement in order to enter into a definitive agreement with a topping bidder that submits a Superior Proposal (as defined therein) that is not matched by Parent or in response to an Intervening Event (as defined therein), provided that the Company pays to Parent a termination fee equal to (i) $6.75 million, if the Merger Agreement is terminated by the Company in connection with a Superior Proposal, or (ii) the documented, out-of-pocket expenses of Parent incurred in connection with the Merger Agreement and the

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      transactions contemplated hereby, up to a maximum of $3.0 million, if the Merger Agreement is terminated by the Company in response to an Intervening Event;

    the Special Committee was deliberate in its process of analyzing and evaluating the AMC Entities' proposal and negotiating with the AMC Entities, ultimately resulting in a $2.00 increase in the per share consideration being delivered to Stockholders in the Merger over that initially proposed by the AMC Entities;

    the Special Committee requested and received from Allen & Co. an opinion on July 29, 2018, that as of such date and based upon and subject to the assumptions made with the Company's consent, procedures followed, matters considered and limitations on the review undertaken by Allen & Co. in preparing the opinion, the Per Share Merger Consideration to be received by the Non-Affiliate Common Stockholders pursuant to the Merger Agreement was fair from a financial point of view to such Stockholders; and

    the Special Committee determined unanimously that the Merger is advisable, fair to, and in the best interests of, the Company and the Non-Affiliate Common Stockholders.

        In their consideration of the fairness of the Merger, the AMC Entities and the Johnson Entities did not find it practicable to, and did not, appraise the assets of the Company to determine the liquidation value for the Non-Affiliate Common Stockholders because they considered the Company to be a viable going concern and because the Company's business will continue following the Merger. In addition, the AMC Entities and the Johnson Entities did not consider net book value because they believe that net book value does not reflect or have any meaningful impact on the trading price of the Common Stock. Furthermore, the AMC Entities and the Johnson Entities did not separately consider a going concern value for RLJE. They believe that the trading price of the Common Stock represented the best available indicator of the Company's going concern value.

        While representatives of AMC and Parent and Mr. Johnson are directors of the Company, because of their participation in the transaction as described in the "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger" section beginning on page 71 of this Proxy Statement, they did not serve on the Special Committee, nor did they participate on behalf of the Company in, or vote in connection with the Special Committee's evaluation, approval or recommendation of, the Merger Agreement and the Merger.

        The foregoing discussion of the information and factors considered by the AMC Entities and the Johnson Entities in connection with the fairness of the Merger Agreement and the Merger is not intended to be exhaustive but is believed to include all material factors considered by them. The AMC Entities and the Johnson Entities did not find it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their position as to the fairness of the Merger Agreement or the Merger. Rather, the AMC Entities and the Johnson Entities made the fairness determination after consideration of all of the foregoing as a whole. The AMC Entities and the Johnson Entities believe that these factors provide a reasonable basis upon which to form their belief that the Merger is fair to the Non-Affiliate Common Stockholders, even though the Merger Agreement does not require an affirmative vote of a majority of the Non-Affiliate Common Stockholders. This belief should not, however, be construed as a recommendation to any Stockholder to approve the Merger or the Merger Agreement. None of the AMC Entities or the Johnson Entities makes any recommendation as to how Stockholders should vote their shares of Common Stock relating to the Merger. The Merger Agreement does not require an affirmative vote of a majority of the Non-Affiliate Common Stockholders.

        Other than as described in the "Special Factors—Background of the Merger" section beginning on page 21 of this Proxy Statement, neither the AMC Entities nor the Johnson Entities are aware of any firm offers made during the past two years for the merger or consolidation of the Company, the sale or

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other transfer of all or any substantial part of the assets of the Company, or a purchase of the Company's securities that would enable the purchaser to exercise control of the Company.

        The AMC Entities attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the Non-Affiliate Common Stockholders, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to such Stockholders.

Purposes and Reasons of the Company for the Merger

        The Company's purpose for engaging in the Merger is to enable its Stockholders to receive $6.25 per share in cash, without interest and less any applicable withholding taxes, which represents a premium of approximately 61% over the $3.87 closing price per share of the Common Stock on the Nasdaq Capital Market on February 23, 2018, the last trading day before the public announcement of AMC's delivery to the Company of the Initial Proposal on February 26, 2018, 28.3% above the closing price of the Common Stock on July 27, 2018, the last trading day on the Nasdaq Capital Market before the public announcement of the signing of the Merger Agreement, a premium of approximately 59% over the $3.93 volume weighted average price per share of the Common Stock on the Nasdaq Capital Market for the 30-day period ended February 23, 2018, a premium of approximately 36% to the $4.61 highest trading price per share of the Common Stock on the Nasdaq Capital Market during the 52-week period ended July 27, 2018, and a premium of approximately 195% to the $2.12 lowest trading price per share of the Common Stock on the Nasdaq Capital Market during the 52-week period ended July 27, 2018.

        The Company believes its long-term objectives can best be pursued as a private company and an indirect, majority-owned subsidiary of AMC. The Company has determined to undertake the Merger at this time based on the analyses, determinations and conclusions of the Special Committee described in detail above under "Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger" beginning on page 47 of this Proxy Statement.

Purposes and Reasons of the AMC Entities and the Johnson Entities for the Merger

        Under the SEC rules governing "going-private" transactions, each of the AMC Entities and the Johnson Entities may be deemed to be an Affiliate of the Company and, therefore, is required to express its purposes and reasons for the Merger to the Non-Affiliate Common Stockholders. Each of the AMC Entities and the Johnson Entities is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the AMC Entities and the Johnson Entities should not be construed as any recommendation as to how Stockholders should vote their shares of Common Stock relating to the Merger.

        For the AMC Entities and the Johnson Entities, the purpose of the Merger is to enable them to acquire control of the Company, through a transaction in which the Non-Affiliate Common Stockholders will be cashed out for $6.25 per share of Common Stock, and bear the rewards and risks of the ownership of the Company after shares of the Common Stock cease to be publicly traded. AMC wants to continue its relationship with Mr. Johnson, who founded the Company and currently serves as Chairman of the Company. Together, the AMC Entities and the Johnson Entities decided to pursue the Merger because they believed that the Company would operate more effectively as a privately owned company and would have greater flexibility to focus on enhancing long-term value without scrutiny or pressure from the public market. The Merger will further AMC's digital strategy by accelerating its interests in direct-to-consumer ad-free subscription services that it owns and controls and by providing AMC with access to strong intellectual property.

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Plans for the Company after the Merger

        In accordance with the Merger Agreement, upon consummation of the Merger, the Common Stock will be delisted from the Nasdaq Capital Market and deregistered under the Exchange Act, and the Company will no longer be required to file periodic reports with the SEC on account of the Common Stock. Instead, the Company will be a majority owned subsidiary of Parent, with the Johnson Entities owning a stake of 17% in the Company. If the Merger is not consummated for any reason, the Non-Affiliate Common Stockholders will not receive any payment for their shares of Common Stock, and the Company will remain a public company, with its Common Stock continuing to be listed and traded on the Nasdaq Capital Market.

        At the closing of the Merger, the AMC Entities will enter into agreements with RLJ SPAC and Mr. Johnson with respect to Mr. Johnson's liquidity, governance rights and role at the surviving corporation following the closing of the transaction.

        As of the date of this Proxy Statement, except as set forth herein, the AMC Entities and the Johnson Entities have no current plans, proposals or negotiations which would relate to or result in an extraordinary transaction involving the Company's business or management, such as a merger, reorganization, liquidation, relocation of any operations or sale or transfer of a material amount of assets, or the incurrence of any additional indebtedness. Following the Merger, the AMC Entities and the Johnson Entities will continuously evaluate and review the Company's business and operations and may propose or develop new plans and proposals which they consider to be in the best interests of the AMC Entities and the Johnson Entities, including any of the types of extraordinary transactions described above.

Certain Effects of the Merger

        If the Merger Agreement is approved by the requisite vote of the Stockholders and all other conditions to the closing of the Merger are either satisfied or waived, Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent.

        At the Effective Time, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) will be converted into the right to receive the Per Share Merger Consideration. All such shares of Common Stock, when so converted, will no longer be outstanding and will automatically be canceled and will cease to exist, and each holder of a certificate (or evidence of shares in book-entry form) that immediately prior to the Effective Time represented any such shares of Common Stock will cease to have any rights with respect thereto, except the right to receive the Per Share Merger Consideration.

        Each Eligible Preferred Share for which a change-of-control cash purchase election has been made by the record holder thereof pursuant to Section 7(b) of the certificate of designation applicable to such Eligible Preferred Share will be entitled to receive the Preferred Stock Consideration. If any holder of Eligible Preferred Shares does not make such election and surrender such shares to the paying agent in exchange for the Preferred Stock Consideration in accordance with the requirements of the Merger Agreement within 180 days following the Closing Date, such holder will be entitled to receive, in respect of each Eligible Preferred Share for which the holder fails to make such election, a security to be issued by the Surviving Corporation as provided in the applicable certificate of designation.

        At the Effective Time, each Eligible 2015 Warrant will be converted into the right to receive, as promptly as practicable after the Effective Time, the 2015 Warrant Consideration. Any Eligible 2015 Warrant which has an exercise price per Share that is greater than or equal to the Per Share Merger Consideration will be cancelled at the Effective Time for no consideration, payment or right to consideration or payment. As of the Effective Time, each Eligible 2015 Warrant so converted will no

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longer be outstanding and will automatically be cancelled and each holder thereof will cease to have any rights with respect thereto, other than the right to receive the 2015 Warrant Consideration.

        The Common Stock is currently registered under the Exchange Act and is quoted on the Nasdaq Capital Market under the symbol "RLJE." As a result of the Merger, the Company will be a privately held corporation and there will be no public market for its Common Stock. After the Merger, the Common Stock will cease to be quoted on Nasdaq Capital Market and price quotations with respect to sales of Common Stock in the public market will no longer be available. In addition, the registration of the Common Stock under the Exchange Act will be terminated and the Company will no longer be required to file periodic reports with the SEC with respect to the Common Stock. Termination of registration of our Common Stock under the Exchange Act will reduce the information required to be furnished by the Company to our Stockholders and the SEC, and would make certain provisions of the Exchange Act, such as the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with Stockholders' meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company.

        The Non-Affiliate Common Stockholders will be receiving cash consideration in exchange for their shares of Common Stock and will no longer own an interest in the Company upon the completion of the Merger. As a result, while the AMC Entities and the Johnson Entities will benefit from any synergies created from combining RLJE's businesses with other AMC businesses and any growth of the RLJE business going forward, the Non-Affiliate Common Stockholders will not be able to participate in these potential benefits.

        As a result of the Merger, AMC, which is currently a creditor, warrant holder and stockholder of the Company, will become the majority stockholder of the Company, beneficially owning 83% of the privately held Company. If AMC satisfies the requirements for tax consolidation, AMC expects to consolidate RLJE for tax purposes. Following the closing of the Merger, AMC will beneficially own a pro-rata share of the Company's net book value value (approximately $227 million, based on AMC's pro rata share of the $274 million aggregate enterprise transaction value) and net earnings proportionate with its beneficial ownership interest in the Company. For example, approximately $6 million of the Company's net losses in fiscal 2017 would have been attributed to AMC (based on the Company's net loss of approximately $7.28 million attributable to common shareholders in fiscal 2017, as reported in the Company's Form 10-K for the year ended December 31, 2017).

        For a discussion of the federal tax consequences of the Merger to the Non-Affiliate Common Stockholders, see "Special Factors—Material U.S. Federal Income Tax Consequences of the Merger" beginning on page 77 of this Proxy Statement.

Projected Financial Information

        The Company does not, as a matter of course, publicly disclose detailed financial forecasts. However, in connection with the negotiation of the proposed Merger, Company management furnished certain non-public unaudited financial forecasts to the Special Committee, to Parent in connection with its financial due diligence investigation of the Company, and to Allen & Co. for its use and reliance in connection with its financial analyses and opinion.

        Company management provided Parent and Allen & Co. with certain prospective financial information concerning the Company for the five-year period ending December 31, 2022, including projected paid subscription counts, revenues, gross margins, equity earnings, and Adjusted EBITDA for such period. This prospective financial information was comprised of the following:

    (i)
    Management's "base case" financial forecast (the "Base Case Forecast") that was prepared by the Company's management in November 2017 not in connection with or in anticipation of the proposed Merger and solely for internal budget and financial planning purposes and, to

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      the extent, were considered by management to be aggressive in nature (especially in post-2018 forecast years); and

    (ii)
    management's "adjusted case" financial forecast (the "Adjusted Case Forecast"), which was prepared by the Company's management in April-May 2018 to reflect certain business plan adjustments to the Base Case Forecasts, including more conservative revenue growth and paid-subscriber growth rate estimates, that management considered appropriate, based on the most current information then available to management, in order to better address the risks inherent in the execution of management's business plan.

        Although the Special Committee considered the Adjusted Case Forecast to be more reliable than the Base Case Forecast, both the Base Case Forecast and the Adjusted Case Forecast are disclosed in this Proxy Statement.

        The unaudited financial forecasts were not prepared for the purpose of public disclosure, nor were they prepared in compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. The summary of the unaudited financial forecasts is not being included in this Proxy Statement to influence the Stockholders with respect to the approval of the Merger Agreement. The inclusion of the unaudited financial forecasts in this Proxy Statement should not be regarded as an indication that the Company or any of its directors, officers, advisors or other representatives, or any other recipient of the unaudited financial forecasts, considered, or now considers, the forecasts to be material or necessarily predictive of actual future results or events, and the unaudited financial forecasts should not be relied upon as such.

        The unaudited financial forecasts include certain non-GAAP financial measures, including Adjusted EBITDA. Company management included forecasts of Adjusted EBITDA in the unaudited financial forecasts because Company management believes that Adjusted EBITDA is useful in evaluating the future cash flows generated by the Company from operations. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as presented in this Proxy Statement may not be comparable to similarly titled measures used by the Company or other companies. The unaudited financial forecasts were not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for the preparation and presentation of prospective financial information.

        All of the unaudited financial forecasts summarized below were prepared by, and are the responsibility of, Company management. No independent registered public accounting firm has examined, compiled, reviewed or otherwise performed any procedures with respect to the prospective financial information contained in the unaudited financial forecasts and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto, and no independent registered public accounting firm assumes any responsibility for the prospective financial information. The reports of the independent registered public accounting firms included in this Proxy Statement relate solely to the Company's historical financial information. These reports do not extend to the unaudited financial forecasts and should not be read to do so.

        The unaudited financial forecasts do not give effect to the Merger or any changes to the Company's operations or strategy that may be implemented after the completion of the Merger, including any potential synergies realized as a result of the Merger, or to any costs related to, or that may arise in connection with, the Merger, including the effect of any failure of the Merger to occur.

        The unaudited financial forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Company management. In preparing these unaudited financial forecasts, Company management used assumptions that were substantially based on

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and consistent with the Company's recent historical results. These assumptions included assumptions with respect to the growth rate by segment anticipated in each fiscal period, gross and contribution margins, general and administrative expenses, and sales and marketing expenses as a percentage of sales. The Company management believes the unaudited financial forecasts were prepared on a reasonable basis and reflected the best then-currently available estimates and judgments of Company management at that time. Important factors that may affect actual results and cause the unaudited financial forecasts to not be realized include, but are not limited to, the risks, contingencies and other uncertainties described under "Cautionary Note Regarding Forward-Looking Statements" beginning on page 82 of this Proxy Statement. The unaudited financial forecasts are forward-looking in nature. The forecasts relate to expectations of multiple future years' performance, and such information by its nature becomes less predictive with each succeeding year. As a result, actual results may differ materially, and will differ materially if the Merger and the other transactions contemplated by the Merger Agreement are completed, from the unaudited financial forecasts, and there can be no assurance that the forecasts will be realized. None of Company or any of its directors, officers, advisors or other representatives made or makes any representation to any stockholder or other person regarding the Company's ultimate performance compared to the information contained in the unaudited financial forecasts. Except as may be required under applicable law, the Company does not undertake any obligation to update or otherwise revise the unaudited financial forecasts to reflect events or circumstances after the date the forecasts were made, including events or circumstances that may have occurred during the period between that date and the date of this Proxy Statement, or to reflect the occurrence of unanticipated events, even in the event that any or all of the assumptions are not realized.

 
  Base Case Forecasts(1)   Adjusted Case Forecasts  
(In thousands, except for percentages)
  2018F   2019F   2020F   2021F   2022F   2018F   2019F   2020F   2021F   2022F  

Total Paying Subscribers

    1.1     1.4     1.8     2.3     2.9     1.1     1.3     1.6     1.9     2.2  

Paying Subscriber Growth

    58 %   28 %   30 %   24 %   26 %   58 %   20 %   21 %   18 %   20 %

Digital Channel Revenues

  $ 42.4   $ 57.0   $ 75.0   $ 95.1   $ 119.3   $ 42.4   $ 54.8   $ 67.2   $ 80.3   $ 95.9  

Other Segment Revenues

  $ 58.2   $ 58.2   $ 56.0   $ 56.0   $ 56.0   $ 58.2   $ 54.5   $ 49.6   $ 47.2   $ 44.8  

Gross Profit

  $ 48.2   $ 56.3   $ 67.0   $ 79.9   $ 97.4   $ 48.2   $ 53.2   $ 58.0   $ 64.0   $ 73.5  

Gross Margin

    48 %   49 %   51 %   53 %   56 %   48 %   49 %   50 %   50 %   52 %

Equity Earnings(2)

  $ 6.9   $ 6.7   $ 7.6   $ 7.0   $ 7.0   $ 6.9   $ 5.9   $ 5.9   $ 5.9   $ 5.9  

Adjusted EBITDA(3)

  $ 21.3   $ 24.6   $ 32.3   $ 37.2   $ 46.9   $ 21.3   $ 23.5   $ 26.1   $ 28.3   $ 33.2  

(1)
The Base Case Forecast presented herein reflects updates prepared by the Company's management in April-May 2018 to reflect an updated revenue forecast for the Company's Agatha Christie Ltd. subsidiary as well as the Company's actual Q1 2018 performance.

(2)
Adjusted for one-time items.

(3)
Company management defines Adjusted EBITDA as net income (loss) before income taxes, depreciation and amortization, non-cash royalty expense, interest expense, non-cash currency exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants, stock-based compensation, basis difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.

        The Base Case Forecast is based on various assumptions, including the following principal assumptions:

Digital Channels

    (i)
    Revenues are based on forecasted subscribers and an assumed monthly subscription fee. Subscribers are based on the continuation of existing subscriber acquisition efforts. The resulting compounded annual growth rate ("CAGR") for subscribers is 15% for Acorn TV and 82% for UMC. The assumed monthly subscription fee paid by subscribers is consistent with our current pricing.

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    (ii)
    Content acquisition spend that is necessary to support subscriber growth, relative to revenues, is forecasted at average rates ranging between 20% to 30% for Acorn TV. Because UMC is in an earlier stage of development than Acorn TV, its annual forecasted content-spend as a percentage of revenues decreases over time and ranges between 20% to 190% for the forecasted period.

    (iii)
    Gross margins assumed for Acorn TV are relatively constant at approximately 69%. UMC gross margins are forecasted to improve as the channel is further developed. Forecasted gross margins for UMC ranges between 25% to 65% over the forecasted period.

    (iv)
    Per-subscriber acquisition cost is forecasted at $20 to $30 for Acorn TV and $7 to $15 for UMC. Churn rates assumed are consistent with current experience for both channels.

    (v)
    CAGR for operating expenses (excluding marketing expenses) is 9% for the forecasted period.

Other Segments

    (i)
    Revenues are based on existing content acquisition and development efforts as well as current market trends. The resulting CAGR for revenues is (1)% for the forecasted period. The declining CAGR reflects the consumers' shift from owning content to consuming content through subscription services. Assumed content acquisition spend in terms of revenues averages between 45% to 50% for the forecasted period.

    (ii)
    Gross margins assumed is consistent with current margins and ranges between 30% to 35% for the forecasted period.

    (iii)
    Operating expenses (excluding marketing expenses) are assumed to be variable ranging between 12% to 17% of revenues for the forecasted period.

    (iv)
    Equity earnings range between $6.7 million and $7.6 million for the forecasted period.

Other

    Corporate costs are assumed to be 11% of total revenues for the forecasted period.

        When arriving at the Adjusted Case Forecast, Company management projected changed certain assumptions as follows:

    For our digital channels, reduced the subscriber growth rate assumptions resulting in a CAGR of 13% for Acorn TV and 57% for UMC.

    For our other segment revenues, increased the rate of decline resulting from consumers shifting from owning content to consuming content through subscription services. The revised assumption lowered the CAGR for other segment revenues to (7)% for the forecasted period.

    Normalization of ACL's earnings, which resulted in a decrease of forecast ACL equity earnings to a constant $5.9 million beginning in 2019.

        All other assumptions were effectively unchanged.

Financing of the Merger

        Parent plans to provide Merger Sub with the necessary funds to pay for the Merger with Parent's or its affiliates' cash on hand. The Merger Agreement does not contain any financing-related contingencies or financing conditions to the obligations of Parent and Merger Sub to complete the Merger. In order to ensure certainty regarding the financial ability of Parent and Merger Sub to consummate the Merger pursuant to the Merger Agreement, AMC has irrevocably and unconditionally guaranteed the due and punctual payment by Parent and Merger Sub of the Per Share Merger

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Consideration, the Preferred Stock Consideration, the 2015 Warrant Consideration, all payments due to the holders of the Company's outstanding equity awards, and all payments in respect of directors' and officers' indemnification and insurance contemplated by the Merger Agreement, in each case, as and when due and payable pursuant to the Merger Agreement, as described in detail above under "The Merger Agreement—Ultimate Parent Guarantee" beginning on page 108 of this Proxy Statement.

Interests of the Company's Directors and Executive Officers in the Merger

Overview

        The vested shares of Common Stock held by our directors and executive officers (other than the Johnson Entities) will be treated in the same manner as outstanding shares of Common Stock held by our other Stockholders.

        Aside from their interests as Stockholders of the Company, certain of our directors and officers have certain interests in the Merger that may be different from, or in addition to, your interests as a Stockholder generally. In addition, John Hsu and Arlene Manos, AMC's designated directors who currently serve on the Board, have relationships with AMC. John Hsu is employed by Parent and AMC, which, together will control the Company following the Merger. Arlene Manos is a former employee of AMC and has provided consulting services to AMC since January 2017. See "Interests of Directors and Officers in Common Stock" beginning on page 71 of this Proxy Statement for a discussion of the Common Stock held by these individuals. In considering the recommendation of the Special Committee that you vote to approve the Merger Agreement, you should be aware of these interests. The Special Committee was aware of these interests, considered them and took them into account, together with other factors, in determining whether to approve the Merger Agreement and recommend that you vote for approval of the Merger Agreement.

        In particular, as is described elsewhere in this Proxy Statement, pursuant to the terms of the Contribution Agreement, the Johnson Entities have agreed to exchange, immediately prior to the Effective Time, all of their shares of Common Stock and 2015 Warrants, constituting the Rollover Shares, for equity interests of Parent in connection with the Merger. As a result, the Rollover Shares will not be converted into the right to receive the Per Share Merger Consideration at the Effective Time. See "Special Factors—The Contribution Agreement and Rollover Shares of Johnson Entities" beginning on page 74 of this Proxy Statement.

        Other interests of our directors and executive officers in the Merger that may be different from, or in addition to, those of other Stockholders of the Company, include, but are not limited to:

    the treatment of the Company Stock Awards in the Merger, which is described in more detail under "Effect of the Merger on Company Stock Awards" beginning on page 73 of this Proxy Statement;

    conversion, at the Effective Time, of Eligible 2015 Warrants, beneficially owned by Wolverine Flagship Fund Trading Limited and Sudbury Capital Fund, L.P., who are represented on the Board by John Ziegelman and Dayton Judd, respectively, into the right to receive the 2015 Warrant Consideration (See "The Merger Agreement—Effect of the Merger on the Common Stock; Preferred Stock; 2015 Warrants" beginning on page 92 of this Proxy Statement); and

    payment of compensation to the Special Committee members, not to exceed in the aggregate $100,000 per member, in connection with their services to the Company with respect to the Merger (which compensation is not conditioned on the consummation of the Merger).

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        In addition, all Eligible Preferred Shares for which a change-of-control purchase election has been made by their record holders pursuant to the applicable certificates of designation, will be entitled to elect to receive an amount in cash, without interest, equal to the Preferred Stock Consideration. Any holder of Preferred Stock that does not make such election within 180 days following the Effective Time will be entitled to receive, in respect of each Eligible Preferred Share for which the holder fails to make such election, a security to be issued by the Surviving Corporation, as provided in the applicable certificate of designation. See "The Merger Agreement—Effect of the Merger on the Common Stock; Preferred Stock; 2015 Warrants" beginning on page 92 of this Proxy Statement. Most of the Eligible Preferred Shares are beneficially owned by Wolverine Flagship Fund Trading Limited and Sudbury Capital Fund, L.P., who are represented on the Board by John Ziegelman and Dayton Judd, respectively.

        Each of these interests is discussed in more detail below. The dates used below to quantify these interests have been selected for illustrative purposes only. They do not necessarily reflect the dates on which certain events will occur.

Interests of Directors and Officers in Common Stock

        Except as set forth below under the heading "Special Factors—The Contribution Agreement and Rollover Shares of Johnson Entities" on page 74 of this Proxy Statement, all of the Company's executive officers and directors who own Common Stock will receive the same Per Share Merger Consideration, without interest thereon and less any required withholding taxes, and otherwise on the same terms and conditions as all other Stockholders. As of the date of this Proxy Statement, the directors and executive officers together owned 582,331 shares of Common Stock, or approximately 2.56% of the issued and outstanding shares of Common Stock as of such date. The foregoing number of shares of Common Stock held by our executive officers and directors does not include (i) any shares of Common Stock issuable upon conversion of Preferred Stock held by such individuals, (ii) any shares of Common Stock issuable upon exercise of 2015 Warrants held by such individuals or (iii) any shares of Common Stock issuable in respect of Company Stock Awards held by such individuals. For a description of the treatment of Company Stock Awards held by the directors and executive officers, see below under the heading "Effect of the Merger on Company Stock Awards" beginning on page 73 of this Proxy Statement.

        The following table sets forth, as of the Record Date, the cash consideration that our Chief Executive Officer, our Principal Financial and Accounting Officer and each non-employee director (excluding Robert L. Johnson) would be entitled to receive if the Merger is consummated with respect to their shares of Common Stock.

Name
  Position   Number of
Shares
  Aggregate Merger
Consideration
Payable for Shares
 

Miguel Penella

  Director; Chief Executive Officer     252,797   $ 1,579,981.25  

Mark Nunis

  Principal Financial and Accounting Officer     5,648   $ 35,300.00  

Dayton Judd

  Director     53,960   $ 337,250.00  

Andor (Andy) M. Laszlo

  Director     59,344   $ 370,900.00  

Scott R. Royster

  Director     55,562   $ 347,262.50  

H. Van Sinclair

  Director     40,308   $ 251,925.00  

John Ziegelman

  Director          

John Hsu

  Director          

Arlene Manos

  Director     10,344   $ 64,650.00  

Total

        477,963   $ 2,987.268.75  

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Effect of the Merger on Company Stock Awards

        With respect to Company Stock Awards, the Merger Agreement provides that:

    At the Effective Time, (1) each (A) outstanding award of Company Options (or portion thereof) that is vested and exercisable and (B) outstanding and unvested award of Company Options scheduled to vest before 2020 will be cancelled and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Option Consideration, and (2) each outstanding and unvested award of Company Options scheduled to vest after 2019 will be cancelled and converted into a Converted Option Award.

    At the Effective Time, each Company Restricted Share that is outstanding immediately prior to the Effective Time will become fully vested and will be entitled to receive the Per Share Merger Consideration, less any applicable withholding taxes.

    At the Effective Time, each unvested Company RSU that is scheduled to vest before 2020 will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and each unvested Company RSU that is scheduled to vest after 2019 will be cancelled and converted into a Converted RSU Award.

    At the Effective Time, each unvested Company PSU that is earned based on performance as of the Effective Time, as determined in accordance with the Merger Agreement and the applicable award agreement, will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and a prorated portion (as calculated in accordance with the applicable award agreement) of any Company PSUs that are not earned at the Effective Time will be cancelled and converted into in a Converted PSU Award. Any Company PSUs that do not vest or convert into a Converted PSU Award will be forfeited at the Effective Time for no consideration.

Golden Parachute Compensation to Executive Officers

        The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of information about certain compensation for each of the named executive officers that is based on or otherwise relates to the Merger. For purposes of this discussion, "single-trigger" refers to benefits that arise solely as a result of the closing of the Merger and "double-trigger" refers to benefits that require both the closing of the Merger as well as a termination without "cause" or for "good reason" within one year following the closing of the Merger.

Name
  Position   Payment in
Respect of
Company Options ($)(1)
  Payment in
Respect of
Company
Restricted Shares
($)(2)
  Payment in
Respect of
Company
RSUs($)(3)
  Payment in
Respect of
Company
PSUs ($)(4)
  Total  

Miguel Penella

  Chief Executive Chairman and Director   $ 4,787,300   $ 191,300   $ 1,406,250   $ 2,695,313   $ 9,080,163  

Mark Nunis

 

Principal Financial and Accounting Officer

   
            
   
            
 
$

30,631
   
            
 
$

30,631
 

(1)
Represents amounts payable in respect of Company Options in connection with the Merger. For a description of the treatment of Company Stock Awards in the Merger, see "Effect of the Merger on Company Stock Awards" beginning on page 73 of this Proxy Statement. Of this amount, $2,512,300 is attributable to a single-trigger arrangement and $2,275,000 is attributable to a double-trigger arrangement.

(2)
Represents amounts payable in respect of Company Restricted Shares in connection with the Merger. For a description of the treatment of Company Stock Awards in the Merger, see "Effect of the Merger on

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    Company Stock Awards" beginning on page 73 of this Proxy Statement. All of this amount is attributable to a single-trigger arrangement.

(3)
Represents amounts payable in respect of Company RSUs in connection with the Merger. For a description of the treatment of Company Stock Awards in the Merger, see "Effect of the Merger on Company Stock Awards" beginning on page 73 of this Proxy Statement. Of the amount payable to Mr. Penella, $468,750 is attributable to a single-trigger arrangement and $937,500 is attributable to a double-trigger arrangement, and of the amount payable to Mr. Nunis, $15,419 is attributable to a single-trigger arrangement and $15,212 is attributable to a double-trigger arrangement.

(4)
Represents amounts payable in respect of Company PSUs in connection with the Merger. For a description of the treatment of Company Stock Awards in the Merger, see "Effect of the Merger on Company Stock Awards" beginning on page 73 of this Proxy Statement. Of this amount, $937,500 is attributable to a single-trigger arrangement and $1,757,813 is attributable to a double-trigger arrangement, assuming that 150,000 Company PSUs are earned based on performance as of the Effective Time, 281,250 Company PSUs are converted into a Converted PSU Award and all other Company PSUs are forfeited at the Effective Time for no consideration.

Company Stock Awards Payments to Non-Employee Directors

        In connection with the Merger, each Company Restricted Share that is outstanding immediately prior to the Effective Time will become fully vested and will be entitled to receive the Per Share Merger Consideration. Each of Messrs. Laszlo, Royster, Sinclair and Judd and Ms. Manos will receive $92,220 in respect of the Company Restricted Shares that he or she holds. Messrs. Ziegelman and Hsu do not hold any Company Restricted Shares.

Contribution Agreement and Rollover Shares of Johnson Entities

        On July 29, 2018, the Johnson Entities entered into the Contribution Agreement, pursuant to which the Johnson Entities agreed to contribute all of their Common Stock and 2015 Warrants to Parent in exchange for, at the Effective Time, Rollover Shares representing approximately 17% of the Equity Interests in Parent.

        At the closing of the Merger, RLJ SPAC and Mr. Johnson will enter into agreements with respect to Mr. Johnson's liquidity, governance rights and role at the surviving corporation following the closing of the transaction.

Employment Arrangements Following the Merger

        Pursuant to separate agreements which will be entered into after the closing of the Merger, Mr. Johnson will serve as Chairman of the board of directors of Parent following the Merger and will receive a customary payment for his services as Chairman.

        Certain of the executive officers of the Company may enter into arrangements with Parent or its Affiliates regarding the terms of their employment with the Company or Parent following the Merger. The terms of any such arrangement, if any, have not yet been determined. There can be no assurance that any mutually acceptable agreements or arrangements can or will be agreed between management of the Company and Parent and what the terms thereof will be.

Director and Officer Indemnification and Insurance

        Under Nevada law, a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or

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agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding, if he is not liable under the codification of the business judgment rule set forth in NRS 78.138 or acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. However, with respect to actions by or in the right of the corporation, no indemnification will be made with respect to any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless and only to the extent a court determines that, despite the adjudication of liability, such person is fairly and reasonably entitled to indemnity. A director or officer who is successful, on the merits or otherwise, in defense of any proceeding subject to the Nevada corporate statutes' indemnification provisions must be indemnified by the corporation for reasonable expenses incurred in connection therewith, including attorneys' fees. NRS 78.7502.

        The Company's Bylaws provide that we will indemnify and hold harmless to the fullest extent permitted by Nevada law, any person who was or is a party to, or is threatened to be made a party to, or is otherwise involved in, any threatened, pending, or completed action, suit or proceeding (including, without limitation, an action, suit or proceeding by or in the right of the Company), whether civil, criminal, administrative, or investigative ("Proceeding"), by reason of the fact that he or she is or was a director or officer of the Company or member, manager or managing member of a predecessor limited liability company or affiliate of such limited liability company or is or was serving in any capacity at the request of the Company as a director, officer, employee, agent, partner, member, manager or fiduciary of, or in any other capacity for, another corporation or any partnership, joint venture, limited liability company, trust, or other enterprise, against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, taxes, penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by person in connection with any Proceeding; provided that such person either is not liable pursuant to NRS 78.138 or acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any Proceeding that is criminal in nature, had no reasonable cause to believe that his or her conduct was unlawful.

        The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that such person is liable pursuant to NRS 78.138 or did not act in good faith and in a manner in which he or she reasonably believed to be in or not opposed to the best interests of the Company, or that, with respect to any criminal proceeding he or she had reasonable cause to believe that his or her conduct was unlawful.

        We maintain insurance policies insuring our directors and officers, including those of our subsidiaries, against certain liabilities they may incur in their capacity as directors and officers. Under such policies, the insurer, on our behalf, may also pay amounts for which we have granted indemnification to the directors or officers.

Effect of the Merger Agreement on Directors' and Officers' Indemnification and Insurance

        The Merger Agreement provides that, from and after the Effective Time, to the fullest extent permitted under applicable law, the Company's Organizational Documents, the Surviving Corporation will indemnify and hold harmless Indemnified Parties from and against all costs and expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages and liabilities incurred in connection with, arising out of or otherwise related to any proceeding with respect to matters existing or occurring at or prior to the Effective Time (including any Merger-related litigation) arising out of or related to the fact that such Indemnified Party was an officer or director of the Company or a Subsidiary of the Company, whether asserted or claimed prior to, at or after the Effective Time. Parent or Surviving Corporation will also advance expenses as incurred to the fullest extent permitted under

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applicable law; provided that any Person who whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to Indemnification.

        Prior to the Effective Time, the Company will and, if the Company is unable to, Parent will cause the Surviving Corporation to obtain and fully pay the premium for all "run off" or "tail" insurance policies for the extension of (i) the directors' and officers' liability coverage of the Company's existing directors' and officers' insurance policies, and (ii) the Company's existing fiduciary liability insurance policies, for a claims reporting or discovery period of the six-year period following the Effective Time from one or more insurance carriers with the same or better credit rating as the Company's insurance carrier as of the date of the Merger Agreement with respect to directors' and officers' liability insurance and fiduciary liability insurance (collectively, "D&O Insurance") with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as the Company's existing policies with respect to matters existing or occurring at or prior to the Effective Time (including without respect to any Merger-related litigation).

        If the Company and the Surviving Corporation for any reason fail to obtain such "run off" or "tail" insurance policies as of the Effective Time, the Surviving Corporation will, and Parent will cause the Surviving Corporation to, continue to maintain in effect, for a six-year period following the effective time, the D&O Insurance in place as of the date of the Merger Agreement with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as provided in the Company's existing policies as of the date of the Merger Agreement, or the Surviving Corporation will, and Parent will cause the Surviving Corporation to, purchase comparable D&O Insurance for a six-year period following the Effective Time with terms, conditions, retentions and limits of liability that are at least as favorable as provided in the Company's existing policies as of the date of the Merger Agreement. However, in no event will the annual cost of the D&O Insurance exceed during the six-year period following the effective time 300% of the current aggregate annual premium paid by the Company for such purpose. If the cost of such insurance coverage exceeds such amount, the Surviving Corporation will obtain a policy with the greatest coverage available for a cost not exceeding such amount.

        During the six-year period following the Effective Time, all rights to indemnification and exculpation from liabilities for acts or omissions occurring prior to the Effective Time and rights to advancement of expenses relating thereto now existing in favor of any Indemnified Party as provided in the Organizational Documents of the Company and its Subsidiaries or any indemnification agreement between such Indemnified Party and the Company or any of its Subsidiaries, in each case, as in effect on the date of this Agreement, will not be amended, restated, amended and restated, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any such Indemnified Party.

        The foregoing summary is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Annex A hereto.

Advisory Vote on Merger-Related Compensation

        In accordance with Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, the Company is providing its Stockholders with the opportunity to cast an advisory (non-binding) vote on the compensation that will or may become payable to the Chief Executive Officer and the Principal Financial and Accounting Officer of the Company in connection with the Merger, which is summarized and included under the heading "Interests of Company's Directors and Executive Officers in the Merger" beginning on page 71 of this Proxy Statement. That summary includes all compensation that may be paid or become payable to the Company's named executive officers by the Company in connection with the Merger.

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        As required by Section 14A of the Exchange Act, the Company is asking its Stockholders to vote on the adoption of the following resolution:

        "FURTHER RESOLVED, by the Stockholders of the Company, that employment compensation that may be paid or become payable to the Chief Executive Officer and the Principal Financial and Accounting Officer, in connection with the Merger, and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed in "Interests of the Company's Directors and Executive Officers in the Merger," is hereby APPROVED."

        The vote on executive compensation payable in connection with the Merger is a vote separate and apart from the vote on the proposal to approve the Merger Agreement. Accordingly, you may vote to approve the executive compensation and vote not to approve the Merger Agreement and vice versa. Because the vote to approve the executive compensation is advisory in nature only, it will not be binding on either the Company or Parent. Because the Company is contractually obligated to pay such executive compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the proposal to approve the Merger Agreement is approved and regardless of the outcome of the advisory vote.

        Approval of the advisory resolution on executive compensation payable to the Company's Chief Executive Officer and the Principal Financial and Accounting Officer in connection with the Merger requires the affirmative vote of a majority of the votes cast at the Special Meeting. Abstentions will have the same effect as a vote "AGAINST" the proposal, but the failure to vote your shares will have no effect on the outcome of the proposal. Broker non-votes will have no effect on the outcome of the proposal.

        THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

Material U.S. Federal Income Tax Consequences of the Merger

        The following discussion is a summary of material U.S. federal income tax consequences of the Merger to U.S. Holders and certain non-U.S. Holders (each as defined below) whose shares of Common Stock are converted into the right to receive cash in the Merger. This summary is for general information purposes only. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), and applicable Treasury Regulations, rulings, administrative pronouncements and judicial decisions as of the date hereof, all of which are subject to change or differing interpretations at any time with possible retroactive effect. Any such changes could affect the accuracy of the statements and conclusions set forth herein. This summary is not binding on the Internal Revenue Service (the "IRS") or a court, and there can be no assurance that the tax consequences described in this summary will not be challenged by the IRS or that they would be sustained by a court if so challenged. No ruling has been or will be sought from the IRS, and no opinion of counsel has been or will be rendered as to the U.S. federal income tax consequences of the Merger.

        This discussion is limited to the U.S. federal income tax consequences to holders of Common Stock who hold the Common Stock as capital assets within the meaning of Section 1221 of the Code (i.e., generally, held for investment). It does not consider all aspects of U.S. federal income taxation that may be relevant to particular holders in light of their individual circumstances or to certain types of holders subject to special tax rules including, for example, small business investment companies, brokers, dealers in securities or currencies, banks and other financial institutions, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real estate investment trusts, hybrid entities, certain former citizens or residents of the United States, individual retirement and other tax-deferred accounts, tax-exempt entities, insurance companies, partnerships or other pass-through entities or investors in those entities, persons holding Common Stock as a part of a hedging, integrated, conversion or constructive sale transaction or a straddle, U.S. Holders (as defined below) that have a functional currency other than the U.S.

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dollar, controlled foreign corporations, passive foreign investment companies, corporations that accumulate earnings to avoid U.S. federal income tax, persons subject to the alternative minimum tax or who received Common Stock pursuant to Company Restricted Shares or Company RSU grants or pursuant to the exercise of employee stock options or otherwise as compensation. This summary does not purport to address the U.S. federal income tax consequences of the transactions to Stockholders who will actually or constructively (under the rules of Section 318 of the Code) own any stock of the Company, AMC, Parent or Parent's subsidiaries following the Merger, and it does not address the impact of the Medicare contribution tax on net investment income, state, local or foreign tax considerations or any U.S. federal tax considerations other than U.S. federal income tax (for example, U.S. estate or gift tax considerations). Further, this summary does not address any tax consequences of the Merger to holders of warrants, options, shares of restricted stock, performance stock units or restricted stock units. Such holders should consult their tax advisors regarding the tax consequences of the Merger to them.

        For purposes of this discussion, a "U.S. Holder" is a beneficial owner of shares of Common Stock that is, for U.S. federal income tax purposes: (i) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the U.S. federal income tax laws; (ii) a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) that is created or organized in or under the law of the 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 if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or a trust that has made a valid election to be treated as a United States person to the extent provided in applicable Treasury Regulations. A "Non-U.S. Holder" is any beneficial owner of Common Stock who for U.S. federal income tax purposes is a nonresident alien individual or a corporation, trust or estate that is not a U.S. Holder.

        If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Common Stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding Common Stock, you should consult your tax advisor regarding the U.S. federal income tax consequences of the Merger to such partner.

    U.S. Holders

        The exchange of Common Stock for cash pursuant to the Merger generally will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder who receives cash in exchange for Common Stock pursuant to the Merger will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before the deduction of any withholding tax) and the U.S Holder's adjusted tax basis in the Common Stock exchanged for cash pursuant to the Merger. A U.S. Holder's adjusted tax basis in the Common Stock will generally equal the price the U.S. Holder paid for such Common Stock. Gain or loss will be determined separately for each block of Common Stock (that is, Common Stock acquired at the same cost in a single transaction) exchanged for cash pursuant to the Merger. Such gain or loss generally will be long-term capital gain or loss provided that a U.S. Holder's holding period for such Common Stock is more than one year at the time of consummation of the Merger. Long term capital gain recognized by an individual and certain other non-corporate U.S. Holders are generally taxed at preferential U.S. federal income tax rates. A U.S. Holder's ability to deduct capital losses may be limited.

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    Non-U.S. Holders

        Payments made to a Non-U.S. Holder with respect to the Common Stock that are exchanged for cash pursuant to the Merger generally will not be subject to U.S. federal income or withholding tax, unless:

    such Non-U.S. Holder is an individual who was present in the United States for 183 days or more in the taxable year of the Merger and certain other conditions are satisfied, in which case, the Non-U.S. Holder generally will be subject to tax at a rate of 30% (or lower applicable treaty rate) on the amount by which its U.S.-source gains from sales or exchanges of capital assets exceed its U.S.-source losses from such sales or exchanges during its taxable year in which the Merger occurs;

    the gain with respect to the Common Stock is effectively connected with such Non-U.S. Holder's conduct of a trade or business in the United States (and, if an income tax treaty applies and so requires, is attributable to such Stockholder's permanent establishment or fixed base in the United States), in which case, the Non-U.S. Holder generally will be required to pay U.S. federal income tax on the net gain derived from the disposition of Common Stock pursuant to the Merger in the same manner as U.S. Holders, as described above, and if such Non-U.S. Holder is a corporation, it may be subject to a 30% branch profits tax (or lower applicable treaty rate) on its effectively connected earnings and profits attributable to such gain; or

    we are or have been a "United States real property holding corporation" (a "USRPHC") for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the Merger and the period that such Non-U.S. Holder held such Common Stock, and the Non-U.S. Holder owned, actually or constructively, more than 5% of Common Stock at any time during the five-year period preceding the Merger. The determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other trade or business assets and our foreign real property interests. The Company does not believe it is, or has been during the five years preceding the Merger, a USRPHC for U.S. federal income tax purposes.

    Backup Withholding and Information Reporting

        A U.S. Holder whose Common Stock is exchanged for cash pursuant to the Merger may be subject to information reporting and backup withholding tax at the applicable rate, unless the U.S. Holder (i) timely furnishes an accurate taxpayer identification number and otherwise complies with applicable U.S. information reporting or certification requirements (typically by completing and signing an IRS Form W-9, a copy of which will be included as part of the letter of transmittal to be timely returned to the paying agent) or (ii) is a corporation or other exempt recipient and, when required, establishes such fact. Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. Holder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner.

        In general, Non-U.S. Holders whose Common Stock is exchanged for cash pursuant to the Merger will not be subject to U.S. backup withholding and information reporting if they provide the paying agent with an applicable IRS Form W-8 and neither we nor the paying agent has actual knowledge (or reason to know) that the relevant Non-U.S. Holder is a U.S. Holder. If the Common Stock is held through a non-U.S. partnership or other flow-through entity, certain documentation requirements also may apply to the partnership or other flow-through entity. Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules may be refunded or credited against a Non-U.S. Holder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner.

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        THE U.S. FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE ARE NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL OF THE TAX CONSEQUENCES RELATING TO THE MERGER. EACH STOCKHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES (INCLUDING THE STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES) OF THE MERGER TO IT IN LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES.

Regulatory Approvals

        There are no U.S. Governmental Approvals needed to effectuate the Merger or consummate the other transactions contemplated by the Merger Agreement.

Fee and Expenses

        We have retained MacKenzie Partners, Inc., an independent proxy solicitation firm, to assist in the proxy solicitation. We will pay a fee of $10,000 plus reasonable out-of-pocket expenses for their assistance. We will indemnify MacKenzie Partners, Inc. against any losses arising out of its proxy soliciting services on our behalf.

        Whether or not the Merger is completed, in general, all fees and expenses incurred in connection with the Merger will be paid by the party incurring those fees and expenses. Total fees and expenses incurred or to be incurred by the Company in connection with the Merger are estimated at this time to be as follows:

 
  Amount to be
Paid ($)
 

Financial advisory fee and expenses

    1,500,000  

Legal, accounting and other professional fees

    1,840,000  

SEC filings fees

    8,000  

Proxy solicitation, printing and mailing costs

    247,000  

Miscellaneous

    565,000  

Total

    4,160,000  

        These costs and expenses will not reduce the Per Share Merger Consideration to be received by the Non-Affiliate Common Stockholders.

Effective Time of Merger

        If the Merger is approved by our Stockholders at the Special Meeting, then, subject to the satisfaction or, to the extent permitted by applicable law, waiver of certain conditions set forth in the Merger Agreement, we anticipate that the Merger will be completed promptly thereafter. The Effective Time will occur as soon as practicable on the closing date of the Merger upon the filing with and acceptance by the Secretary of State of the State of Nevada of Articles of Merger executed in accordance with the relevant provisions of the NRS (or at such later time as we, Parent and Merger Sub may agree and as specified in the Articles of Merger).

Payment of Merger Consideration and Surrender of Stock Certificates; Payment for Company Stock Awards

        Prior to the Effective Time, Parent will deposit, or cause to be deposited, with the Paying Agent, in trust for the benefit of the Stockholders, an amount in cash in immediately available funds sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments in respect of the Per Share Merger Consideration.

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        Within three business days following the Effective Time, Parent will cause the Paying Agent to mail or otherwise provide each holder of record of Eligible Shares, Eligible Preferred Shares or Eligible 2015 Warrants, a notice advising such holders of the effectiveness of the Merger (including a customary letter of transmittal) and instructions for use in effecting the surrender of certificates that formerly represented shares of Common Stock or non-certificated shares represented by book-entry in exchange for the Per Share Merger Consideration. You will not be entitled to receive the Per Share Merger Consideration until you deliver a duly completed and executed letter of transmittal to the paying agent. If your shares of Common Stock are certificated, you must also surrender your stock certificate or certificates to the Paying Agent. If ownership of your shares of Common Stock is not registered in our transfer records, a check for any cash to be exchanged upon due surrender of any such Common Stock will only be issued if the applicable letter of transmittal is accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable, in each case, in form and substance reasonably satisfactory to Parent and the Paying Agent.

        You should not return your stock certificates with the enclosed proxy card and you should not forward your stock certificates to the Paying Agent without a letter of transmittal.

        As soon as reasonably practicable (but no later than the first regularly scheduled payroll date not less than 10 business days after the Closing Date or later vesting date with respect to Converted Option Awards, Converted RSU Awards and Converted PSU Awards), the Surviving Corporation will, through its payroll system, pay or cause to be paid to the holders of Company Stock Awards the cash amounts described under "Merger Agreement—Treatment of Company Options; Company Restricted Shares; Company RSUs; Company PSUs" beginning on page 93 of this Proxy Statement. To the extent the holder of a Company Stock Award is not and was not at any time during the period in which such Company Stock Award was outstanding an employee of the Company, such amounts will not be paid through the payroll system, and instead will be paid by the Paying Agent, as described above.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This Proxy Statement include "forward-looking statements" which reflect our current views as to future events and financial performance with respect to our operations, the expected completion and timing of the Merger and other information relating to the Merger. All forward-looking statements included in this document are based on information available to the Company on the date hereof. These statements are identifiable because they do not relate strictly to historical or current facts.

        There are forward-looking statements throughout this Proxy Statement, include, but are not limited to, statements under the headings "Summary Term Sheet," "Questions and Answers About the Special Meeting and the Merger," "The Special Meeting," "Special Factors" and "Important Information Regarding the Company," statements regarding the Company's proposed business combination transaction with AMC, all statements regarding the Company's expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans, and objectives of management, and in statements containing words such as "aim," "anticipate," "approximate," "are confident," "believe," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "could," "would," "should," "will," "intend," "may," "potential," "upside," and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance or other future events.

        Such forward-looking statements are inherently uncertain, and Stockholders and other potential investors must recognize that actual results may differ materially from the Company's expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon management's current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause its actual results, performance or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in the Company's filings with the SEC.

        You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date as of which the statements were made. We cannot guarantee any future results, levels of activity, performance or achievements. Although we believe that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, we give no assurance that the actual results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on the business or operations of the Company. In addition to other factors and matters contained in this document, we believe the following risk factors could cause actual results to differ materially from those discussed in the forward-looking statements:

    the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;

    the inability to complete the proposed Merger due to the failure to satisfy other conditions to completion of the proposed Merger;

    risks related to disruption of management's attention from the Company's ongoing business operations due to the pendency of the Merger;

    the outcome of any legal proceedings, licensure proceedings, regulatory proceedings or enforcement matters that have been or may be instituted against the Company and others relating to the Merger Agreement and the transactions contemplated thereby;

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    the risk that the pendency of the Merger disrupts current plans and operations and the potential difficulties in employee retention as a result of the pendency of the Merger;

    the effect of the announcement or completion of the proposed Merger on the Company's relationships with its customers, suppliers, operating results and business generally;

    the amount of the costs, fees, expenses and charges related to the Merger;

    uncertainties as to the timing of completion of the Merger;

    adverse effects on the Company's stock price resulting from the announcement of the Merger or the failure of the Merger to be completed;

    competitive responses to the announcement of the Merger;

    any changes in general economic and/or industry-specific conditions; and

    and additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements, which are discussed in reports we have filed with the SEC, including our most recent filings on Forms 10-Q and 10-K. See "Where You Can Find More Information" beginning on page 169 of this Proxy Statement.

        Many of these risk factors are beyond the Company's control. The Company cautions Stockholders that any forward-looking statements made by it are not guarantees of future performance. Forward-looking statements speak only as of the date of this Proxy Statement. All subsequent written and oral forward-looking statements concerning the Merger or other matters addressed in this Proxy Statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, we disclaim and do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this Proxy Statement or to reflect the occurrence of unanticipated events.

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THE PARTIES TO THE MERGER AGREEMENT

The Parties to the Merger Agreement

RLJ Entertainment, Inc.
8515 Georgia Avenue
Suite 650
Silver Spring, MD 20910
(301) 608-2115

        RLJE is a premium digital channel company serving distinct audiences through its proprietary subscription-based digital channels, Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and international mysteries and dramas. UMC showcases compelling urban programming including feature films, documentaries, original series, stand-up comedy and other exclusive content for African-American and urban audiences.

AMC Networks Inc.
11 Penn Plaza
New York, New York 10001
(646) 273-3606

        AMC owns and operates several of cable television's most recognized brands delivering high quality content to audiences and a valuable platform to distributors and advertisers. AMC manages its business through two operating segments: (i) National Networks, which principally includes AMC, WE tv, BBC AMERICA, IFC and SundanceTV; and AMC Studios, AMC's television production business; and (ii) International and Other, which principally includes AMC Networks International, AMC's international programming business; IFC Films, AMC's independent film distribution business; and AMC's owned subscription streaming services, Sundance Now and Shudder.

Digital Entertainment Holdings LLC
11 Penn Plaza
New York, New York 10001
(646) 273-3606

        Parent is a Delaware limited liability company and a wholly owned subsidiary of AMC that was formed by AMC solely for the purpose of lending funds to RLJE and holding its interest in RLJE.

River Merger Sub Inc.
11 Penn Plaza
New York, New York 10001
(646) 273-3606

        Merger Sub is a Nevada corporation and a wholly owned subsidiary of Parent that was formed by Parent solely for the purpose of facilitating the Merger in accordance with the terms and subject to the conditions of the Merger Agreement. To date, Merger Sub has not conducted any activities other than those related to its formation and completion of the transactions contemplated by the Merger Agreement. At the Effective Time, Merger Sub will cease to exist.

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THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

        This Proxy Statement is being furnished to our Stockholders as part of the solicitation of proxies by the Board of Directors for use at the Special Meeting to be held on Wednesday, October 31, 2018, starting at 9:30 a.m., local time, at the offices of RLJ Entertainment, Inc. located at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910, or at any postponement or adjournment thereof. At the Special Meeting, our Stockholders will be asked to vote on (i) the proposal to approve the Merger Agreement, (ii) the proposal to approve, by non-binding advisory vote, certain compensation that will or may become payable to the Company's Chief Executive Officer and Principal Financial and Accounting Officer in connection with the Merger, and (iii) the proposal to adjourn the Special Meeting, if necessary or appropriate (as determined by the Company).

        A copy of the Merger Agreement is attached as Annex A hereto, which we encourage you to read carefully in its entirety.

Special Committee Recommendation of the Merger Agreement

        The Special Committee, which has been granted the authority of the full Board with respect to the Merger, unanimously: (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and its Non-Affiliate Common Stockholders, (ii) adopted the Merger Agreement and the Merger and (iii) recommended that the Stockholders vote affirmatively to approve the Merger Agreement at the Special Meeting.

        Accordingly, the Special Committee recommends that the Stockholders vote "FOR" the proposal to approve the Merger Agreement.

        The Special Committee also recommends that the Stockholders vote "FOR" the proposal to approve the adjournment of the Special Meeting, if necessary or appropriate (as determined by the Company).

        In addition, the Board recommends that the Stockholders vote "FOR" the proposal to approve, on an advisory (non-binding) basis, the compensation that will or may become payable to the Chief Executive Officer and the Principal Financial and Accounting Officer of the Company in connection with the Merger, as disclosed in the table under "Special Factors—Interests of the Company's Directors and Executive Officers in the Merger," beginning on page 71 of this Proxy Statement.

Record Date and Quorum

        We have fixed the close of business on October 2, 2018, as the Record Date for the Special Meeting, and only holders of record of shares of Common Stock on the Record Date are entitled to vote at the Special Meeting. You are entitled to receive notice of, and to vote at, the Special Meeting if you owned shares of Common Stock at the close of business on the Record Date. You will have one vote for each share of Common Stock that you owned on the Record Date. As of the Record Date, there were 22,723,887 shares of Common Stock issued and outstanding, and entitled to vote at the Special Meeting.

        Holders of a majority of the votes entitled to be cast at the Special Meeting must be present, in person or by proxy, at the Special Meeting to achieve the required quorum for the transaction of business at the Special Meeting. Therefore, the presence in person or by proxy of our Stockholders representing at least 11,361,944 votes will be required to establish a quorum. Common Stock represented at the Special Meeting but not voted, including shares of Common Stock for which a Stockholder directs an "abstention" from voting, as well as broker non-votes, will be counted for

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purposes of establishing a quorum. A quorum is necessary to transact business at the Special Meeting. Once a share is represented at the Special Meeting, it will be counted for the purpose of determining a quorum at the Special Meeting and any adjournment of the Special Meeting. However, if a new record date is set for the adjourned Special Meeting, then a new quorum will have to be established. In the event that a quorum is not present at the Special Meeting, it is expected that the Special Meeting will be adjourned or postponed. If the Special Meeting is adjourned or postponed to a date more than 60 days later than the original meeting date, we must fix a new record date and deliver another notice of meeting.

Attendance

        Only Stockholders of record or their duly authorized proxies have the right to attend the Special Meeting. To gain admittance, you must present proof that you are a Stockholder of the Company as well as valid picture identification, such as a current driver's license or passport, in order to attend the meeting. If your shares of Common Stock are held through a bank, brokerage firm or other nominee, please bring to the Special Meeting a copy of your brokerage statement evidencing your beneficial ownership of our Common Stock and a valid photo identification. If you are the representative of a corporate or institutional Stockholder, you must present valid photo identification along with proof that you are the representative of such Stockholder. Please note that cameras, recording devices and other electronic devices will not be permitted at the Special Meeting.

Vote Required

The Merger

        If a quorum is present, approval of the Merger Agreement requires the affirmative vote of holders (in person or by proxy) of a majority of the outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Under applicable Nevada corporate law and the Company Charter, approval of the Merger Agreement requires the affirmative vote (i.e., "for" the Merger Agreement) by the holders of a majority of the Company's outstanding voting power attributable to all outstanding classes of the Company's voting securities. The Common Stock is the only class of the Company's capital stock that has the right to vote in respect of and to approve (or disapprove) the Merger Agreement. It is, therefore, a condition to the obligations of each of Parent, Merger Sub and the Company under the Merger Agreement to consummate the Merger that such requisite Stockholder vote be obtained (in person or by proxy) at the Special Meeting.

        As of the date of this Proxy Statement, AMC, through DEH, currently owns a majority of the voting power attributable to all of the outstanding Common Stock. AMC has notified the Company that it will vote all shares of Common Stock owned by AMC in favor of approval of the Merger Agreement and the transaction contemplated thereby, including the Merger, at the Special Meeting. Accordingly, AMC has the requisite voting power and ability at the Special Meeting to unilaterally cause the approval of the Merger Agreement by the Stockholders (without any need for any additional votes by any other Stockholder). Pursuant to the Voting Agreement, the Johnson Entities, who beneficially owned approximately 29.9% of the issued and outstanding shares of Common Stock as of the date of this Proxy Statement, have agreed, among other things, to affirmatively vote all of their shares of Common Stock at the Special Meeting "for" the approval of the Merger Agreement and have granted to Parent an irrevocable proxy to secure the performance of their voting obligations under the Voting Agreement. Such voting obligations will automatically terminate upon any termination of the Merger Agreement in accordance with its terms, including if the Special Committee makes any Recommendation Change with respect to the Merger Agreement. See "The Merger Agreement—The Voting Agreement" beginning on page 108 of this Proxy Statement.

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Executive Compensation

        If a quorum is present, approval, by non-binding, advisory vote, of certain compensation that will or may become payable to the Company's Chief Executive Officer and Principal Financial and Accounting Officer in connection with the Merger will be approved if the number of votes cast at the special in favor of such proposal exceeds the number of votes cast opposing such proposal. The outcome of this vote is not binding on the Company.

Adjournment

        If a quorum is present, approval of the proposal to adjourn the Special Meeting, if necessary or appropriate (as determined by the Company), requires that the number of votes cast at the Special Meeting, whether in person or by proxy, in favor of adjournment exceeds the number of votes cast opposing adjournment.

        Abstentions will not be counted as votes cast in favor of the proposal to approve the Merger Agreement, the proposal to approve, by non-binding, advisory vote, of certain compensation that will or may become payable to the Company's Chief Executive Officer and Principal Financial and Accounting Officer in connection with the Merger or the proposal to adjourn the Special Meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies. If you fail to submit a proxy or to vote in person at the Special Meeting, or abstain, it will have the same effect as a vote "AGAINST" the proposal to approve the Merger Agreement, but will not affect the outcome of any other proposal.

        If your shares of Common Stock are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares of Common Stock, the "Stockholder of record." This Proxy Statement and proxy card have been sent directly to you by the Company.

        If your shares of Common Stock are held through a bank, brokerage firm or other nominee, you are considered the "beneficial owner" of shares of Common Stock held in street name. In that case, this Proxy Statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Common Stock, the Stockholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares of Common Stock by following their instructions for voting.

        Under the rules of the Nasdaq Capital Market, banks, brokerage firms or other nominees who hold shares in street name for customers have the authority to vote on "routine" proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposal to approve the Merger Agreement, and, as a result, absent specific instructions from the beneficial owner of such shares of Common Stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Common Stock on non-routine matters, which we refer to generally as broker non-votes. These broker non-votes will be counted for purposes of determining a quorum, but will have the same effect as a vote "AGAINST" the proposal to approve the Merger Agreement.

        If you are a Stockholder of record, you may have your shares of Common Stock voted on matters presented at the Special Meeting in any of the following ways:

        Telephone Voting:    You can vote via telephone by calling the telephone number set forth on your proxy card. You will need your proxy card in hand when you call that number. You may vote via the Internet or telephone up until 11:59 p.m. Eastern Time the day before the Special Meeting.

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        Internet Voting:    If you are a Stockholder of record, in addition to voting in person or by completing and mailing the proxy card, you may vote by using the Internet or by telephone. If you wish to vote via the Internet, access the website set forth on your proxy card and follow the instructions given. You will need your proxy card in hand when you access the website.

        Return Your Proxy Card by Mail:    To vote by mail, you may complete the enclosed proxy card and then sign, date and return it in the postage-paid reply envelope provided. Submitting a proxy now will not limit your right to vote at the Special Meeting if you decide to attend in person.

        Vote at the Meeting:    You may cast your vote in person at the Special Meeting. Written ballots will be passed out to Stockholders or legal proxies who want to vote in person at the meeting.

        Telephone and Internet voting is convenient, provides postage and mailing cost savings and is recorded immediately, minimizing the risk that postal delays may cause votes to arrive late and therefore not be counted.

        Even if you plan to attend the Special Meeting, you are encouraged to vote your shares by proxy. You may still vote your shares in person at the meeting even if you have previously voted by proxy. If you are present at the meeting and desire to vote in person, your previous vote by proxy will not be counted.

        If you are a beneficial owner, you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of Common Stock voted. Those instructions will identify which of the above choices are available to you in order to have your Common Stock voted.

        Please note that if you are a beneficial owner and wish to vote in person at the Special Meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee.

        Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for voting over the Internet or by telephone. If you choose to vote by mailing a proxy card, your proxy card must be filed with our Corporate Secretary by the time the Special Meeting begins. Please do not send in your stock certificates with your proxy card. When the Merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the Merger Consideration in exchange for your stock certificates.

        If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, or your proxies, will vote your Common Stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Common Stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

        If you properly sign your proxy card but do not mark the boxes showing how your shares of Common Stock should be voted on a matter, the shares of Common Stock represented by your properly signed proxy will be voted "FOR" the proposal to approve the Merger Agreement, "FOR" approval, by non-binding advisory vote, of certain compensation that will or may become payable to the Company's Chief Executive Officer and Principal Financial and Accounting Officer in connection with the Merger and "FOR" the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies.

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        If you have questions or need assistance voting your shares, please contact MacKenzie Partners at

LOGO

1407 Broadway, 27th Floor
New York, New York 10018
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
Email: proxy@mackenziepartners.com

        WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

Proxies and Revocation

        Any Stockholder of record entitled to vote at the Special Meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person at the Special Meeting. If your shares of Common Stock are held in "street name" by your bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your Common Stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or vote in person at the Special Meeting, or abstain, or do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, your shares of Common Stock will not be voted on any of the proposals described in this Proxy Statement, which will have the same effect as a vote "AGAINST" the proposal to approve the Merger Agreement, but will not affect the outcome of any other proposal.

        If you are a Stockholder of record, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is voted at the Special Meeting by:

    delivering written notice to our Corporate Secretary at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910;

    executing and delivering to our Corporate Secretary at the address above a proxy bearing a later date;

    attending the Special Meeting in person, at which time the powers of the proxy holders with respect to your shares will be revoked if you so request; or

    submitting a vote by telephone or via the Internet with a later date.

        Please note that attendance at the Special Meeting will not, by itself, constitute revocation of your proxy.

        If you hold your shares in "street name," the broker, nominee, fiduciary or other custodian through which you hold your shares will instruct you as to how you may revoke or change your vote. You may also vote in person at the Special Meeting if you obtain a legal proxy from your bank, brokerage firm or other nominee.

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Adjournments and Postponements

        Although it is not currently expected, the Special Meeting may be adjourned or postponed. Other than an announcement to be made at the Special Meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. However, if the Special Meeting is adjourned or postponed to a date more than 60 days later than the original meeting date, we must fix a new record date and deliver another notice of meeting.

Anticipated Date of Completion of the Merger

        The Company and Parent have agreed in the Merger Agreement to complete the Merger as soon as practicable. If the Merger Agreement is approved at the Special Meeting then, assuming timely satisfaction or, to the extent permitted by the Merger Agreement and applicable law, waiver of the other necessary closing conditions, we anticipate that the Merger will be completed promptly thereafter.

Solicitation of Proxies

        The Company will bear all costs of this proxy solicitation. Proxies may be solicited by mail, in person, by telephone, or by facsimile or by electronic means by officers, directors and regular employees of the Company. In addition, to assist in the proxy solicitation we will pay MacKenzie Partners, Inc. a fee of $10,000 plus reasonable out-of-pocket expenses as compensation for their services. We will indemnify MacKenzie Partners, Inc. against any losses arising out of its proxy soliciting services on our behalf. The Company may also reimburse brokerage firms, custodians, nominees and fiduciaries for their expenses to forward proxy materials to beneficial owners. Parent, directly or through one or more affiliates or representatives, may, at its own cost, also make solicitations of proxies by mail, telephone, facsimile or other contact in connection with the Merger.

Questions and Additional Information

        If you have more questions about the Merger, or require assistance in submitting your proxy or voting your shares or need additional copies of the Proxy Statement or the enclosed proxy card, please contact MacKenzie Partners, which is acting as the Company's proxy solicitation agent and information agent in connection with the Merger:

LOGO

1407 Broadway, 27th Floor
New York, New York 10018
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
Email: proxy@mackenziepartners.com

        If your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.

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THE MERGER AGREEMENT

        This section describes the material terms of the Merger Agreement. The description in this section and elsewhere in this Proxy Statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A-1 to this Proxy Statement, as amended by Amendment No. 1, a copy of which is attached as Annex A-2 to this Proxy Statement. This description does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read the Merger Agreement carefully and in its entirety. This section is not intended to provide you with any factual information about us, Parent or Merger Sub. Capitalized terms used herein but otherwise not defined herein will have the meanings ascribed to such terms in the Merger Agreement. Such information can be found elsewhere in this Proxy Statement and in the public filings we make with the SEC, as described in the section entitled, "Where You Can Find More Information," beginning on page 169 of this Proxy Statement.

Explanatory Note Regarding the Merger Agreement

        The Merger Agreement has been attached to this Proxy Statement as Annex A solely to inform you of its terms. It is not intended to provide any other factual information about the Company, Parent Merger Sub or any of their respective subsidiaries or affiliates. The Merger Agreement contains customary representations, warranties and covenants from the Company, Parent and Merger Sub, which were made only for purposes of that Agreement and as of specific dates; were made solely for the benefit of the parties to the Merger Agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures; may not have been intended to be statements of fact, but rather, as a method of allocating contractual risk and governing the contractual rights and relationships between the parties to the Merger Agreement; and may apply standards of materiality in a way that is different from what may be viewed as material by Stockholders of the Company. Our Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the Company, Parent, Merger Sub or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company's or Parent's public disclosures.

        The Company, Parent, Merger Sub and Ultimate Parent have entered into the Merger Agreement. Accordingly, unless otherwise expressly stated otherwise, all discussions in this Proxy Statement concerning the Merger, the Merger Agreement, and all transaction documentation, including all discussions concerning the events leading thereto, the applicable proceedings of the Special Committee, the fairness opinion, and all other considerations, all relate to the Merger Agreement.

Structure of the Merger; Charter and Bylaws; Directors and Officers

        The Merger Agreement provides that, at the Effective Time, Merger Sub will be merged with and into the Company, and following the Merger, the separate corporate existence of Merger Sub will cease. The Company will continue as the Surviving Corporation and a wholly owned subsidiary of Parent and will continue to exist and conduct business following the Merger.

        If the Merger is completed, our Common Stock will be delisted from the Nasdaq Capital Market and deregistered under the Exchange Act and we will no longer be required to file periodic reports with the SEC.

        The Company Charter will be amended and restated in the Merger to read in their entirety as set forth on Exhibit A to the Merger Agreement, and such amended Company Charter will be the articles of incorporation of the Surviving Corporation until thereafter amended as provided therein or by

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applicable law. The Company Bylaws will be amended and restated to read in their entirety as set forth on Exhibit B to the Merger Agreement, until thereafter amended as provided therein or by applicable law.

        At the Effective Time, the directors of Merger Sub immediately prior to the Effective Time will be the only directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time will be the only officers of the Surviving Corporation.

Terms of the Merger Agreement

        The following is a summary of certain provisions of the Merger Agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached hereto as Annex A and is incorporated herein by reference. For a complete understanding of the Merger Agreement, you are encouraged to carefully read the full text of the Merger Agreement. Copies of the Merger Agreement, and any other filings that we make with the SEC with respect to the Merger, may be obtained in the manner set forth in "Where You Can Find More Information" beginning on page 169 of this Proxy Statement. For the purposes of this section, capitalized terms used but not defined herein will have the meanings set forth in the Merger Agreement.

Effect of the Merger on the Common Stock; Preferred Stock; 2015 Warrants

Common Stock

        The Merger Agreement provides that each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) automatically will be converted into the right to receive the Per Share Merger Consideration. All such shares when so converted will no longer be outstanding and automatically will be cancelled and will cease to exist, and each holder of a certificate (or evidence of shares in book-entry form) that immediately prior to the Effective Time represented any such shares will cease to have any rights with respect thereto, except the right to receive the Per Share Merger Consideration.

Preferred Stock

        The Merger Agreement provides that each Eligible Preferred Share for which a change-of-control cash purchase election has been made by the record holder thereof pursuant to Section 7(b) of the certificate of designation applicable to such Eligible Preferred Share will be entitled to receive the Preferred Stock Consideration. If any holder of Eligible Preferred Shares does not make such election and surrender such shares in exchange for the Preferred Stock Consideration within 180 days following the Closing Date, such holder will be entitled to receive, in respect of each Eligible Preferred Share for which the holder fails to make such election, a security to be issued by Surviving Corporation, as provided in the applicable certificate of designation. Parent is also required to comply with the notice and other obligations set forth in the certificates of designation in respect of the Preferred Stock, to the extent applicable, after the date of the Merger Agreement and prior to the Effective Date.

2015 Warrants

        The Merger Agreement provides that, at the Effective Time, each Eligible 2015 Warrant will be converted into the right to receive, as promptly as practicable after the Effective Time, the 2015 Warrant Consideration. For the avoidance of doubt, any Eligible 2015 Warrant which has an exercise price per share that is greater than or equal to the Per Share Merger Consideration will be cancelled at the Effective Time for no consideration, payment or right to consideration or payment.

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Treatment of Company Options, Company Restricted Shares; Company RSUs; Company PSUs

Company Options

        The Merger Agreement provides that, at the Effective Time, (1) each (A) outstanding award of Company Options (or portion thereof) that is vested and exercisable and (B) outstanding and unvested award of Company Options scheduled to vest before 2020 will be cancelled and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Option Consideration, and (2) each outstanding and unvested award of Company Options scheduled to vest after 2019 will be cancelled and converted into a Converted Option Award.

Company Restricted Shares

        The Merger Agreement provides that, at the Effective Time, each Company Restricted Share that is outstanding immediately prior to the Effective Time will become fully vested will be entitled to receive the Per Share Merger Consideration, less any applicable withholding taxes.

Company RSUs

        The Merger Agreement provides that, at the Effective Time, each unvested Company RSU that is scheduled to vest before 2020 will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and each unvested Company RSU that is scheduled to vest after 2019 will be cancelled and converted into a Converted RSU Award.

Company PSUs

        The Merger Agreements provides that, at the Effective Time, each unvested Company PSU that is earned based on performance as of the Effective Time, as determined in accordance with the Merger Agreement and the applicable award agreement, will become fully vested and converted into the right to receive, as soon as reasonably practicable after the Effective Time, the Stock Unit Consideration, and a prorated portion (as calculated in accordance with the applicable award agreement) of any Company PSUs that are not earned at the Effective Time will be cancelled and converted into in a Converted PSU Award. Any Company PSUs that do not vest or convert into a Converted PSU Award will be forfeited at the Effective Time for no consideration.

Representations and Warranties

        In the Merger Agreement, we have made customary representations and warranties to Parent and Merger Sub, including representations relating to:

    Organization, Good Standing, and Qualification;

    Subsidiaries;

    Capital Structure;

    Corporate Authority; Approval and Fairness Opinion;

    Governmental Filings; No Violations; Certain Contracts;

    Compliance with Laws; Licenses;

    Company Reports;

    Disclosure Controls and Procedures and Internal Control Over Financial Reporting;

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    Financial Statements; No Undisclosed Liabilities; "Off-Balance Sheet Arrangements"; Books and Records;

    Litigation;

    Absence of Certain Changes;

    Company Material Contracts;

    Subscribers;

    Employee Benefits;

    Labor Matters;

    Environmental Matters;

    Tax Matters;

    Real Property;

    Title to Tangible Property;

    Intellectual Property;

    Insurance;

    Takeover Statutes;

    Brokers and Finders; and

    No Other Representations or Warranties; Non-Reliance.

        Some of the representations and warranties in the Merger Agreement made by us are qualified as to "materiality" or "Material Adverse Effect." For purposes of the Merger Agreement, "Material Adverse Effect" means any event, change, development, circumstance, fact or effect that, individually or taken together with any other events, changes, developments, circumstances, facts or effects is, or would reasonably be expected to be, materially adverse to the condition (financial or otherwise), properties, assets, liabilities (contingent or otherwise), business operations or results of operations of the Company and its Subsidiaries (taken as a whole); provided, however, that none of the following, either alone or in combination, will be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur:

    (a)
    events, changes, developments, circumstances or facts in or with respect to the economy, credit, capital, securities or financial markets or political, regulatory, trade or business conditions in the countries in which the Company and its Subsidiaries operate or where their products or services are contracted for, distributed or sold;

    (b)
    events, changes, developments, circumstances, facts or effects that are the result of factors generally affecting the industries in which the Company and its Subsidiaries operate or in the geographic markets in which they operate or where their products or services are contracted for, distributed or sold;

    (c)
    any loss of, or adverse event, change, development, circumstance or fact in or with respect to, the relationship of the Company or any of its Subsidiaries, contractual or otherwise, with customers, employees, licensors, licensees, suppliers, distributors, partners or any similar relationship resulting from the entry into, or public announcement of, the Merger Agreement or any of the transactions contemplated by the Merger Agreement;

    (d)
    events or changes in applicable accounting standards, including GAAP, or in any applicable Law;

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    (e)
    any failure by the Company to meet any internal or public projections or forecasts or estimates of revenues or earnings; provided that any event, change, development, circumstance, fact or effect underlying such failure, to the extent not otherwise expressly excepted from being taken into account by any of clauses (a) through (k) of this definition of "Material Adverse Effect", may be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur;

    (f)
    any event, change, development or effect resulting from acts of war (whether or not declared), sabotage, terrorism, military actions or the escalation of any of the foregoing, whether perpetrated or encouraged by a state or non-state actor or actors (other than cyberattacks), any weather event or natural disaster, or any outbreak of illness or other public health event, epidemic or pandemic, however and by whomever (other than the Company, its Subsidiaries or any of their respective Affiliates or Representatives) caused;

    (g)
    any actions required to be taken by the Company or any of its Subsidiaries pursuant to the Merger Agreement (except for any obligation to operate in the ordinary course of business) or, with Parent's prior written consent pursuant to the Merger Agreement or at Parent's written request, any actions permitted to be taken by the Company or any of its Subsidiaries;

    (h)
    any action not taken by the Company or any of its Subsidiaries pursuant to the Merger Agreement or with Parent's prior written consent or at Parent's written request;

    (i)
    a decline in the market price of the Shares on the NASDAQ; provided that any event, change, development or effect underlying such decline in market price, to the extent not otherwise expressly excepted from being taken into account by any of clauses (a) through (k) of this definition of "Material Adverse Effect", may be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur;

    (j)
    any Proceeding (whether direct or derivative, in the nature of a class action, or otherwise) arising out of or in connection with any actions or omissions, or alleging or asserting any breach of fiduciary duty or violation of any law, by any of Ultimate Parent or its affiliates or the Johnson Entities or their affiliates with respect to the negotiation, decision to enter into, execution, delivery or performance by the parties of the Merger Agreement;

    (k)
    any act or omission to act by Ultimate Parent, Parent, Merger Sub or the Johnson Entities (including any action, omission to act, breach or violation by Ultimate Parent, Parent, Merger Sub or any of the Johnson Entities of or with respect to any of their respective obligations and agreements under the Merger Agreement);

provided, further, that with respect to clauses (a), (b), (d) and (f) of this definition, such events, changes, developments, circumstances, facts or effects (as the case may be) will be taken into account in determining whether a "Material Adverse Effect" has occurred or would reasonably be expected to occur to the extent they adversely and disproportionately affect the Company and its Subsidiaries (taken as a whole) relative to the effect thereof on other companies of similar size operating in the geographic markets in which the Company or any of its Subsidiaries operates or its products or services are sold.

        In the Merger Agreement, Parent and Merger Sub have each made customary representations and warranties to us, including representations relating to:

    Organization, Good Standing and Qualification;

    Corporate Authority;

    Government Filings; No Violations;

    Compliance with Laws;

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    Litigation;

    Absence of Certain Changes;

    Available Funds;

    Brokers and Finders; and

    No Other Representations or Warranties; Non-Reliance.

        Some of the representations and warranties in the Merger Agreement made by Parent and Merger Sub are qualified by "knowledge" or subject to "materiality" or "Parent Material Adverse Effect" qualifiers. For purposes of the Merger Agreement, "Parent Material Adverse Effect" means, any event, change, development, circumstance, fact or effect that, individually or taken together with any other events, changes, developments, circumstances, facts or effects, is or would reasonable be expected to prevent, materially delay or materially impair the consummation by Parent of Merger Sub of the Merger or the transactions contemplated by the Merger Agreement.

Other Covenants and Agreements

Interim Operations

        The Merger Agreement provides that, except as expressly permitted by the Merger Agreement, as required by applicable law or as approved by Parent in writing (such approval not to be unreasonably withheld, conditioned or delayed), during the period from the date of the Merger Agreement until the Effective Time, we will, and will cause each of our subsidiaries to, conduct our and their business in the ordinary course consistent with past practice, and will use reasonable best efforts to preserve our business organizations intact and maintain satisfactory relations and goodwill with governmental entities, customers, suppliers, licensors, licensees, distributors, creditors, lessors, employees and business associates, and to keep available the services of our present employees and agents.

        From the date of the Merger Agreement to the Effective Time, we are subject to customary operating covenants and restrictions, including restrictions relating to (i) adopting or proposing any change to our Organizational Documents; (ii) mergers or consolidations of the Company or our subsidiaries, restructurings, reorganizations, or liquidations; (iii) acquiring assets from any other party, except in the ordinary course of business; (iv) the issuance, sale, pledge, disposal of, grant, transfer, lease, license guarantee, or other encumbrance of our stock, voting securities or equity interests in our subsidiaries; (v) entrance into any contract between us or a subsidiary and any directors or officers of the Company or certain beneficial owners of at least five percent (5%) of our stock; (vi) incurrence of any encumbrance on our assets; (vii) making any loans, advances, guarantees or capital contributions to any third party; (viii) declaring, making or paying a dividend or other distribution with respect to any of our capital stock except for dividends paid by any wholly owned subsidiary to the Company or to any other wholly owned subsidiary of the company and dividends required to be paid in accordance with the terms of existing Preferred Stock; (ix) reclassification, splitting, combination, subdivision, redemption or other purchase of any capital stock or securities exchangeable into capital stock, (x) incurrence of any indebtedness; (xi) entrance into any material contract in excess of $250,000; (xii) termination, amendment, modification of any rights pursuant to any material contract except in the ordinary course of business or such terminations, amendments or modifications as are replaced by a substantially similar property, product or service; (xiii) cancellation, modification, or waiver of any debts or claims held by us; (xiv) amendment, modification, termination or cancellation of any insurance policy; (xv) settlement of any trade accounts payable in excess of $100,000 individually or $250,000 in the aggregate; (xvi) changes in our legal structure or accounting policies or procedures; (xvii) entrance into any line of business in any geographic area other than existing lines of business and lines of products or services reasonable ancillary to an existing line of business; (xviii) making of any material changes to existing lines of business or our strategic plans; (xix) making, changing, or revoking any tax

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elections or tax accounting methods; (xx) transferring, selling, leasing, divesting, cancelling, or allowing to lapse any encumbrance upon any assets, licenses, product lines or business; (xxi) cancelling, abandonment, or lapse of any of our intellectual property rights; (xxii) amendment or failure to comply with any privacy or security policies or alteration of operation and security of any information technology assets used by us; (xxiii) increases in compensation or fees, bonuses, pensions, welfare or other benefits, including amendment or establishment of company benefit plans or grant of awards or acceleration of benefits thereunder or making of other material changes to company benefit plans; (xxiv) hiring any employee or engaging any independent contractor with an annual salary or fees in excess of $100,000; (xxv) joining as a party any collective bargaining agreement or other agreement with a labor organization; (xxvi) failure to maintain policies and procedures to ensure compliance with applicable regulations, including FCPA, Anti-Bribery Laws, and Export and Sanctions regulations; (xxvii) the taking of any action or failure to take any action that is reasonable expected to result in the failure of conditions to the Merger to be satisfied or (xxviii) agreements, authorizations, or commitments to take action regarding any of the foregoing.

No Solicitation and the Company's Fiduciary Exceptions Thereto

        The Merger Agreement provides that until the earlier of the termination of the Merger Agreement or the Effective Time, we will not, and we will cause each of our subsidiaries and our respective directors, officers and employees, not to, and will instruct any representatives not to, (i) initiate, solicit, propose or knowingly encourage or facilitate any inquiry or the making of any proposal or offer that constitutes or, would reasonably be expected to lead to, an Acquisition Proposal; (ii) engage in, continue or otherwise participate in any discussions or negotiations relating to any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal (other than to inform any Person who has made any inquiry with respect to, or who has made, an Acquisition Proposal of the "no-shop" restrictions of the Merger Agreement); (iii) provide any information or data concerning our or our subsidiaries' properties, books and records to any third party in connection with any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal; (iv) enter into any Alternative Acquisition Agreement; (v) take any action to exempt any third party from the restrictions on "business combinations" or acquisitions or voting of Common Stock under any applicable law or otherwise cause such restrictions not to apply; (vi) grant any waiver, amendment or release under any standstill or confidentiality agreement concerning an Acquisition Proposal; or (vii) agree, authorize or commit to do any of the foregoing.

        Notwithstanding the foregoing, at any time prior to obtaining the Requisite Company Vote (but not thereafter), in response to an unsolicited, bona fide written Acquisition Proposal, the Company (through the Special Committee and our Representatives) may (i) provide non-public Company information and data and access to the books and records of the Company and its Subsidiaries to the Person who has made such Acquisition Proposal, provided that such information has been previously made available to Parent or is made available to Parent not later than 24 hours after the time it is made available to such Person, and that, prior to furnishing any such information, the Company receives from the Person making such Acquisition Proposal an executed confidentiality agreement with terms not less restrictive to the other party than the terms in the Confidentiality Agreement are on Parent (except that such confidentiality agreement need not contain any "standstill" provisions) (a "Permitted Confidentiality Agreement"), and (ii) engage or otherwise participate in any discussions or negotiations with the Person making such Acquisition Proposal (including to request clarification of the terms and conditions of such Acquisition Proposal). The prior actions may be taken if, and only if, prior to taking the actions set forth above, the Special Committee determines in good faith, after consultation with outside legal counsel, that (A) based on the information available, that such Acquisition Proposal constitutes or would reasonably be expected to result in a Superior Proposal and

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(B) based on the information then available, the failure to take such action would be inconsistent with the Special Committee directors' fiduciary duties under applicable law.

        The Company is also required to promptly (but, in any event, within 48 hours) give notice to Parent of (i) any inquiries, proposals or offers with respect to an Acquisition Proposal or that would reasonably be expected to lead to an Acquisition Proposal received by the Company or the Special Committee (or its Representatives), (ii) any request for non-public information or data concerning the Company or its Subsidiaries or access to the Company or its Subsidiaries' properties, books or records in connection with any Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal received by the Company, the Special Committee (or its Representatives), or (iii) any new substantive developments or discussions or negotiations relating to an Acquisition Proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal being conducted by or on behalf of the Company or the Special Committee (or their Representatives) with respect to an Acquisition Proposal. Such notice will set forth, to the extent not yet publicly disclosed or previously disclosed to Parent, the name of the applicable Persons who made the Acquisition Proposal and the material terms and conditions of any such Acquisition Proposal or inquiry, proposal or offer and the request for the information or data (including, if applicable, correct and complete copies of any written Acquisition Proposals and other proposed transaction documentation and other materials). Thereafter, the Company will keep Parent reasonably informed, on a prompt basis (but, in any event, within 24 hours of any substantive development or change in status) of the status and terms and conditions of any such Acquisition Proposals, inquiries, proposals or offers, or information requests and the status of any such developments or discussions or negotiations, and provide to Parent as soon as practicable after receipt or delivery thereof copies of all correspondence and other written material sent by or provided to the Company or the Special Committee (or their Representatives) from any Person that describes any of the terms or conditions of any Acquisition Proposal. Parent has agreed to promptly give notice and copies to the Special Committee of all communications and documentation relating to any Acquisition Proposal Parent receives in its capacity as a Stockholder of the Company to the extent any such Acquisition Proposal or communications or documentation in respect thereof has not previously been delivered or made available to the Special Committee or is not publicly available.

        Pursuant to the Merger Agreement, Parent has waived the provisions of the Investment Agreement prohibiting the Company from entertaining or soliciting any acquisition proposals, initiating, encouraging, participating in or otherwise facilitating any discussions or negotiations with any person with respect to any acquisition proposals or engaging in certain other solicitation activities, for the sole purpose of (and solely to the extent necessary for) facilitating and permitting the Company, the Special Committee and their respective representatives to take all actions permitted to be taken by them under the Merger Agreement in respect of unsolicited Acquisition Proposals, and has consented to the Company's and the Special Committee's taking of such actions.

        For purposes of the Merger Agreement:

        "Acquisition Proposal" means any (a) proposal, offer, inquiry or indication of interest (other than one made or submitted to the Company by Ultimate Parent, Parent or Merger Sub) relating to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, spin-off, share exchange, business combination or similar transaction involving the Company or any of its Subsidiaries or (b) acquisition by any Person or "group" (as defined in Section 13 of the Exchange Act), other than Ultimate Parent, Parent or Merger Sub, resulting in, or any proposal, offer, inquiry or indication of interest that if consummated would result in, any Person or group (as defined under Section 13 of the Exchange Act), other than Ultimate Parent, Parent or Merger Sub, becoming the beneficial owner of, directly or indirectly, in one or a series of related transactions, 25% or more of the total voting power of the then-outstanding equity securities of the Company or any of its Subsidiaries, or 25% or more of the consolidated net revenues, net income or

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total assets (it being understood that total assets include equity securities of Subsidiaries) of the Company, in each case other than the transactions contemplated by the Merger Agreement.

        "Alternative Acquisition Agreement" means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement (other than a Permitted Confidentiality Agreement) relating to any Acquisition Proposal.

        "Superior Proposal" means an unsolicited, bona fide written Acquisition Proposal (provided that for purposes of this definition of "Superior Proposal", all references to 25% contained in the definition of "Acquisition Proposal" will be deemed to be references to 75%) which the Special Committee determines in good faith, after consultation with outside legal counsel and its financial advisor, that (a) if consummated, would result in a transaction more favorable to the Unaffiliated RLJE Stockholders (as defined in the Merger Agreement) from a financial point of view than the Merger (after taking into account any revisions to the terms of this Agreement proposed by Parent pursuant to Section 7.2(d)(ii) of the Merger Agreement) and (b) for purposes of any determination to be made or action to be taken by the Special Committee pursuant to Sections 7.2(d)(ii) and 9.3(b) of the Merger Agreement, is capable of being consummated on the terms proposed, taking into account all legal, financial, regulatory and approval requirements (including receipt of the requisite approval of the holders of Common Stock, including, for the avoidance of doubt, any Common Stock issued by the Company pursuant to the exercise of the AMC Warrants or the 2015 Warrants), the sources, availability and terms of any required financing and the existence of a financing contingency, and the identity of the Person or Persons making the proposal. For the avoidance of doubt, if the transactions contemplated by the Merger Agreement (after taking into account any revisions to the terms of this Merger Agreement proposed by Parent pursuant to Section 7.2(d)(ii) of the Merger Agreement) contain substantially identical financial and other terms and conditions to those contained in an Acquisition Proposal, such Acquisition Proposal cannot be deemed by the Special Committee to be a "Superior Proposal" as compared to the proposal then provided by Parent.

Adverse Recommendation Change and Fiduciary Termination of Merger Agreement in the Case of a Superior Proposal or Intervening Event

        The Merger Agreement provides that, except as provided below, neither the Board, the Special Committee, nor any other committee of the Board will (i) (A) withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify) the Company Recommendation in a manner adverse to Parent; (B) fail to include the Company Recommendation in this Proxy Statement; (C) at any time following receipt of an Acquisition Proposal, fail to reaffirm its approval or recommendation of the Merger Agreement and the Merger as promptly as practicable (but in any event within five business days) after receipt of any written request to do so from Parent; (D) fail to recommend rejection (pursuant to Rule 14e-2(a)(1) under the Exchange Act and under cover of Schedule 14D-9 filed by the Company with the SEC) of any tender offer or exchange offer for outstanding Shares that has been commenced by any Person (other than by Parent or an Affiliate of Parent) pursuant to Rule 14d-2 under the Exchange Act on or prior to the 10th business day after such commencement; (E) approve, authorize or recommend (or determine to approve, authorize or recommend) or publicly declare advisable any Acquisition Proposal or other proposal that would be reasonably expected to lead to an Acquisition Proposal or any Alternative Acquisition Agreement; or (F) agree, authorize, or commit to do any of the foregoing. The actions described in clauses (A)-(E) hereto are defined as a "Change of Recommendation".

        Notwithstanding the foregoing, pursuant to the Merger Agreement, the Special Committee may at any time prior to the time the Requisite Company Vote is obtained, but not thereafter, make a Change of Recommendation and terminate the Merger Agreement if (A) an unsolicited, bona fide written Acquisition Proposal that was not obtained in breach of the Merger Agreement is received by the

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Company and has not been withdrawn, and (B) the Special Committee determines in good faith, after consultation with outside legal counsel and its financial advisor, that such Acquisition Proposal constitutes a Superior Proposal; provided, however, that (x) a Change of Recommendation and termination by the Company of the Merger Agreement may not be made unless and until the Company has given Parent written notice that the Special Committee intends to convene a meeting of the Special Committee to consider or take any other action with respect to making such Change of Recommendation, together with a reasonably detailed description of the Superior Proposal, at least four business days in advance of convening such meeting or taking such action; (y) during the pendency of such notice period, if requested by Parent, the Special Committee negotiates, and authorizes and instructs its Representatives to negotiate, in good faith with Parent and its Representatives to revise the Merger Agreement (in the form of a proposed binding amendment to the Merger Agreement) to enable the Special Committee to determine in good faith, after consultation with its outside legal counsel and its financial advisor, that after giving effect to the modifications contemplated by such proposed amendment, such Acquisition Proposal would no longer constitute a Superior Proposal; and (z) at the expiration of the requisite notice period, and at such meeting of the Special Committee, the Special Committee, after having taken into account the modifications to the Merger Agreement proposed by Parent in the manner and form described in clause (y) above, has determined in good faith, after consultation with outside legal counsel and its financial advisor, that a failure to make a Change of Recommendation and to terminate the Merger Agreement and to abandon the Merger would be inconsistent with the fiduciary duties of the Company's directors constituting the Special Committee under applicable law (it being understood that any revisions to the financial terms of, or any material revisions to any of the other substantive terms of, any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of the foregoing provision, including for purposes of commencing a new notice period, except that subsequent to the initial notice period, the subsequent notice period be reduced to two business days).

        Additionally, prior to the time the Requisite Company Vote is obtained, but not after, the Special Committee may make a Change of Recommendation and terminate the Merger Agreement if (A) an Intervening Event has occurred and is continuing and (B) the Special Committee determines in good faith, after consultation with its outside legal counsel and its financial advisor, that the failure to make a Change of Recommendation as a result of such Intervening Event would be inconsistent with the fiduciary duties of the Company's directors constituting the Special Committee under applicable Law, provided, however, that (x) a Change of Recommendation and termination by the Company of the Merger Agreement pursuant to the Intervening Event provision may not be made unless and until the Company has given Parent written notice that the Special Committee intends to convene a meeting of the Special Committee to consider or take any other action with respect to making such Change of Recommendation, together with a reasonably detailed description of the nature of the Intervening Event that has occurred and is continuing, at least four business days in advance of convening such meeting or taking such action; (y) during the pendency of such notice period, if requested by Parent, the Special Committee negotiates, and authorizes and instructs its Representatives to negotiate, in good faith with Parent and its Representatives to revise the Merger Agreement (in the form of a proposed binding amendment to the Merger Agreement) to enable the Special Committee to determine in good faith, after consultation with its outside legal counsel and financial advisor that, after giving effect to the modifications contemplated by such proposed amendment, the failure of the Special Committee to make a Change of Recommendation and to terminate the Merger Agreement, would be inconsistent with the fiduciary duties of the Company's directors constituting the Special Committee under applicable law; and (z) at the expiration of the requisite notice period, and at the meeting of the Special Committee, the Special Committee, after having taken into account the modifications to the Merger Agreement proposed by Parent in the manner and form described in clause (y) above, has determined in good faith, after consultation with outside counsel, that a failure to make a Change of Recommendation and to terminate the Merger Agreement and to abandon the Merger would be

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inconsistent with the fiduciary duties of the Company's directors constituting the Special Committee under applicable law.

        For purposes of the Merger Agreement, "Intervening Event" means any material event, change, effect, condition, development, fact or circumstance with respect to the Company and its Subsidiaries or the business of the Company and its Subsidiaries, in each case taken as a whole, that (i) is unknown and not reasonably foreseeable on the date of the Merger Agreement, (ii) does not relate to any Acquisition Proposal and (iii) does not result from a breach of the Merger by the Company, its Subsidiaries or its or their Affiliates or Representatives.

Certain Permissible Disclosures Not Constituting an Adverse Recommendation Change

        Notwithstanding the Company's non-solicitation obligations, nothing will prevent us from, (i) making any disclosure to the holders of Common Stock if the Special Committee determines in good faith, after consultation with its outside legal counsel, that the failure to make any such disclosure would be inconsistent with the fiduciary duties of the Company's directors constituting the Special Committee under applicable Law, (ii) disclosing a position contemplated by Rule 14d-9, Rule 14e-2(a)(2) or (3) or Item 1012(a) of Regulation M-A under the Exchange Act, or (iii) making any "stop, look and listen" communication of the type contemplated by Rule 14d-9(f) under the Exchange Act. For the avoidance of any doubt, notwithstanding any provision of the Merger Agreement, a factually accurate public or other statement or disclosure made by the Company that describes the existence and operation of the terms and provisions of the non-solicitation obligations or related portions of the Merger Agreement will not, in itself, constitute a Change of Recommendation for any purpose of the Merger Agreement; provided that if any disclosures or communications of the type described in clauses (i) and (ii) of this paragraph fail to expressly reaffirm therein the Company Recommendation, such disclosure or communication will constitute a Change of Recommendation for all purposes of the Merger Agreement.

Special Meeting

        The Merger Agreement provides that, unless a Change in Recommendation is made by the Special Committee, or the Merger Agreement has been validly terminated in accordance with its terms, the Company will, as promptly as practicable after the later of (i) the 10-day waiting period under Rule 14a-6(a) under the Exchange Act and (ii) the date on which the SEC's staff orally confirms that it has no further comments on the Proxy Statement and Schedule 13E-3 (such later date, the "Clearance Date"), duly call, give notice of and convene the Special Meeting for the purpose of seeking to obtain the Requisite Company Vote. The date of the Special Meeting will not be less than 30 days after notice of the Special Meeting is first published, sent or given by the Company to the holders of Common Stock (and, pursuant to NRS 92A.120(4) and 92A.410, the holders of Preferred Stock). In connection with the foregoing, the Company will (i) as promptly as practicable after the Clearance Date, cause this Proxy Statement (and all related materials) to be mailed in definitive form to holders of Common Stock and holders of Preferred Stock and (ii) use its reasonable best efforts (including by means of engagement by the Company of a nationally recognized proxy solicitation firm) to solicit proxies from the holders of Shares to seek to obtain the Company Requisite Vote.

        The Company has agreed (i) to provide Parent reasonably detailed periodic updates concerning proxy solicitation results on a timely basis (including, if requested, promptly providing voting reports compiled by the Company's proxy solicitation firm) and (ii) to give written notice to Parent one day prior to the Company Stockholders Meeting and on the day of, but prior to the Special Meeting, indicating whether as of such date, sufficient proxies representing the Requisite Company Vote have been obtained.

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Reasonable Best Efforts to Consummate the Merger; Regulatory Filings

        The Merger Agreement provides that, except to the extent a different standard of efforts has been expressly agreed to and set forth in any provision of this Agreement, the Company and Parent will cooperate with each other and use their respective reasonable best efforts to take or cause to be taken all actions necessary or advisable on its part under the Merger Agreement and applicable laws to consummate the transactions contemplated by the Merger Agreement as promptly as practicable, including preparing and filing documentation to effect all necessary notices, reports, consents, registrations, approvals, permits, authorizations, expirations of waiting periods and other filings and to obtain all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any Governmental Entity in order to consummate the transactions contemplated by this Agreement.

        Notwithstanding anything to the contrary set forth in the Merger Agreement, in no event will (i) any party to the Merger Agreement or any of their respective affiliates be required to agree to any term, condition, liability, obligation, requirement, or other action imposed, required or requested by a Governmental Entity in connection with its grant of any consent, registration, approval, permit or authorization, necessary or advisable in order to consummate the transactions contemplated by the Merger Agreement to be obtained from any Governmental Entity that is not conditioned upon the consummation of the transactions contemplated by the Merger Agreement or (ii) the Company or any of its affiliates agree to term, condition, liability, obligation, requirement, or other action in connection with the obtaining of any such consent, registration, approval, permit or authorization necessary that is not conditioned upon the consummation of the transactions contemplated by this Agreement without the prior written consent of Parent.

        The Parties have agreed that neither the foregoing nor the "reasonable best efforts" standard will require Parent or any of its Affiliates (i) to resist, vacate, limit, reverse, suspend or prevent, through litigation, any actual, anticipated or threatened order seeking to delay, restrain, prevent, enjoin or otherwise prohibit or make unlawful the consummation of the transactions contemplated by the Merger Agreement or (ii) in order to obtain any consent, registration, approval, permit or authorization, including the Governmental Approvals, necessary or advisable in order to consummate the transactions contemplated by the Merger Agreement to be obtained from any Governmental Entity, to agree to any term, condition, liability, obligation, requirement, limitation, qualification, remedy, commitment, sanction or other action that would be reasonably likely to have a material adverse effect on the anticipated benefits to Parent and its Affiliates of the transactions contemplated by the Merger Agreement; provided that Parent may compel the Company to (and to cause its Subsidiaries to) agree to any such term or condition or take any such actions (or agree to take such actions) so long as the effectiveness of such term or condition or action is conditioned upon the consummation of the Merger.

        Pursuant to the Merger Agreement, Parent has the right to direct all matters with any Governmental Entity consistent with its obligations hereunder; provided that Parent and the Company have the right to review in advance and each will consult with the other on and consider in good faith the views of the other in connection with, all of the information relating to Parent or the Company, as the case may be, any of their respective Affiliates and any of their respective Representatives, that appears in any filing made with, or written materials submitted to any Governmental Entity in connection with the transactions contemplated by the Merger Agreement. Neither the Company nor Parent will permit any of its or its Subsidiaries' Representatives to participate in any discussions or meetings with any Governmental Entity in respect of any documentation to effect all necessary notices, reports, consents, registrations, approvals, permits, authorizations, expirations of waiting periods and other filings or any investigation or other inquiry relating thereto or to the transactions contemplated by the Merger Agreement unless it consults with the other in advance and, to the extent permitted by such Governmental Entity, gives the other the opportunity to attend and participate. Each of the Company and Parent, as applicable, will promptly provide to each Governmental Entity of

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non-privileged or protected information and documents reasonably requested by any Governmental Entity or that are necessary or advisable to permit consummation of the transactions contemplated by the Merger Agreement.

        The Merger Agreement provides that the Company and Parent each will keep the other reasonably apprised of the status of matters relating to completion of the transactions contemplated by the Merger Agreement (including in connection with this Proxy Statement) and will, as promptly as practicable, (a) notify the other of any notices or communication from or with any Governmental Entity concerning the transactions, (b) furnish the other with copies of written notices or other communications received by Parent or the Company from any third party, including any Governmental Entity, with respect to such transactions and (c) furnish the other with all information as may be necessary or advisable to effect such notices and communications. The Company and Parent will give prompt notice to each other of any events, changes, developments, circumstances or facts that individually or in the aggregate, has had or would reasonably be expected to (i) in the case of the Company, have a Material Adverse Effect or prevent, materially delay or materially impair the consummation by the Company of the transactions contemplated by the Merger Agreement, (ii) in the case of Parent, have a Parent Material Adverse Effect, or (iii) in the case of either the Company or Parent, result in any non-compliance or violation of any of the respective representations, warranties or covenants of the Company, Ultimate Parent, Parent or Merger Sub, as applicable, set forth in the Merger Agreement, to the extent that any such non-compliance or violation would reasonably be expected to result in a failure of any of the conditions to the Closing, discussed in further detail below.

Indemnification of Directors and D&O Insurance

        The Merger Agreement provides that, from and after the Effective Time, to the fullest extent permitted under applicable law, the Company's Organizational Documents, the Surviving Corporation will indemnify and hold harmless Indemnified Parties from and against all costs and expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages and liabilities, incurred in connection with any proceeding with respect to matters existing or occurring at or prior to the Effective Time (including any Merger-related litigation) arising out of or otherwise related to the fact that such Indemnified Party was an officer or director of the Company or a Subsidiary of the Company, whether asserted or claimed prior to, at or after the Effective Time. Parent or Surviving Corporation will also advance expenses as incurred to the fullest extent permitted under applicable law; provided that any Person who whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to Indemnification.

        Prior to the Effective Time, the Company will and, if the Company is unable to, Parent will cause the Surviving Corporation to obtain and fully pay the premium for all "run off" or "tail" insurance policies for the extension of (i) the directors' and officers' liability coverage of the Company's existing directors' and officers' insurance policies, and (ii) the Company's existing fiduciary liability insurance policies, for a claims reporting or discovery period of the six-year period following the Effective Time from one or more insurance carriers with the same or better credit rating as the Company's insurance carrier as of the date of this Agreement with respect to directors' and officers' liability insurance and fiduciary liability insurance (collectively, "D&O Insurance") with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as the Company's existing policies with respect to matters existing or occurring at or prior to the Effective Time.

        If the Company and the Surviving Corporation for any reason fail to obtain such "run off" or "tail" insurance policies as of the Effective Time, the Surviving Corporation will, and Parent will cause the Surviving Corporation to, continue to maintain in effect for a six-year period following the effective time, the D&O Insurance in place as of the date of the Merger Agreement with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as provided in the Company's existing policies as of the date of the Merger Agreement, or the Surviving Corporation will,

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and Parent will cause the Surviving Corporation to, purchase comparable D&O Insurance for a six-year period following the Effective Time with terms, conditions, retentions and limits of liability that are at least as favorable as provided in the Company's existing policies as of the date of this Agreement. The Merger Agreement provides that in no event will the annual cost of the D&O Insurance exceed during the six-year period following the effective time 300% of the current aggregate annual premium paid by the Company for such purpose. If the cost of such insurance coverage exceeds such amount, the Surviving Corporation will obtain a policy with the greatest coverage available for a cost not exceeding such amount.

        During the six-year period following the Effective Time, all rights to indemnification and exculpation from liabilities for acts or omissions occurring prior to the Effective Time and rights to advancement of expenses relating thereto now existing in favor of any Indemnified Party as provided in the Organizational Documents of the Company and its Subsidiaries or any indemnification agreement between such Indemnified Party and the Company or any of its Subsidiaries, in each case, as in effect on the date of the Merger Agreement, may not be amended, restated, amended and restated, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any such Indemnified Party.

State and Federal Takeover Laws

        If any Takeover Statute is or may become applicable to the transactions contemplated by the Merger Agreement, the Merger Agreement provides that each of Parent and the Company, the respective members of their boards of directors and the Special Committee will grant such approvals and take such actions as are necessary so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and will use their reasonable best efforts to otherwise act to eliminate or minimize the effects of such statute or regulation on such transactions.

Security Holder Litigation

        The Merger Agreement provides that in the event that any Stockholder litigation arising out of or in connection with to the transactions contemplated by the Merger Agreement is brought, or, to the knowledge of the Company, threatened, against the Company, the officers of the Company or any members of the Board from and following the date of the Merger Agreement and prior to the Effective Time, the Company will as promptly as practicable notify Parent of such Stockholder litigation and will keep Parent reasonably informed with respect to the status thereof. The Company will give Parent a reasonable opportunity to participate in the defense and/or settlement of any such litigation and will consider in good faith Parent's and its outside legal counsel's advice with respect to such litigation. The Company may not settle or agree to settle any such litigation without prior written consent of Parent.

Related Party Matters

        The Company and Parent have agreed in the Merger Agreement that, prior to the Effective Time, the parties will cooperate to take all such actions as may be reasonably necessary or appropriate to terminate the Investment Agreement in accordance with its terms as of the Effective Time.

        Prior to the Effective Time, we will cooperate with Parent to take all such administrative and ministerial actions as may be reasonably necessary to consummate the transfer of the Common Stock and 2015 Warrants beneficially owned by the Johnson Entities to Parent, pursuant to the Contribution Agreement.

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Employee Benefits

        The Merger Agreement provides that, for a period of one year after the Effective Time, Parent or one of its Affiliates will provide (i) each employee of the Company and its Subsidiaries who continues to be employed by the Company and its Subsidiaries (a "Continuing Employee") with an annual base salary or base wage rate that is no less favorable than the annual base salary or base wage rate provided by the Company and its Subsidiaries to such Continuing Employee immediately prior to the Effective Time, and (ii) the Continuing Employees with target annual cash bonus opportunities, and pension and welfare benefits (excluding equity and long-term incentive compensation) that are substantially comparable in the aggregate to those provided by the Company and its Subsidiaries to such employees immediately prior to the Effective Time.

Financing Cooperation

        The Merger Agreement provides that the Company, at Parent's sole out-of-pocket expense, will use its commercially reasonable efforts to provide all cooperation as may be reasonably requested by Parent to assist in the arrangement of any bank debt financing necessary to refinance and replace the Credit Agreement and provide for ongoing capital requirements of the Company and its Subsidiaries ("Replacement Financing"); provided, however, that none of the foregoing will require such cooperation to the extent it would (i) require any officer, director or employee to take any action reasonably expected to result in personal liability, (ii) require the Company, its Affiliates or its or their respective Representatives to enter into, supplement or otherwise modify any Contract to the extent such action is not conditioned on or would be effective prior to the occurrence of the Effective Time, or (iii) unreasonably interfere with the ongoing operations of the business of the Company or any of its Subsidiaries. The Merger Agreement provides that under no circumstances will the availability or procurement of, or failure of any of the parties to obtain, any Replacement Financing, constitute a condition to any of the obligations of Parent and Merger Sub to consummate the Merger.

Conditions to the Merger

        The Merger Agreement provides that the obligations of the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction at or prior to the Effective Time of the following: (i) the Requisite Company Vote shall have been duly obtained at the Special Meeting and (ii) no order or law (whether temporary, preliminary or permanent) shall be in effect which enjoins, prevents or otherwise prohibits, restrains or makes unlawful consummation of the Merger and the other transactions contemplated by the Merger Agreement.

        The Merger Agreement provides that the obligations of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions:

    Each of the representations and warranties set forth in: (i) Section 5.1 (Organization, Good Standing and Qualification), Section 5.3 (Capital Structure) (except, in the case of Section 5.3, for such inaccuracies that are not reasonably expected to result, individually or in the aggregate, in additional cost, expense or liability to Ultimate Parent, Parent and Merger Sub, of more than $250,000), Section 5.4 (Corporate Authority; Approval and Fairness) and Section 5.11 (Absence of Certain Changes) are true and correct as of the Effective Time as though made on and at such time; (ii) Section 5.5(a) (Governmental Filings; No Violations; Certain Contracts, Etc.), Section 5.7 (Company Reports), Section 5.8 (Disclosure Controls and Procedures and Internal Control Over Financial Reporting), Section 5.9 (Financial Statements; No Undisclosed Liabilities; "Off-Balance Sheet Arrangements"; Books and Records) Section 5.22 (Takeover Statutes) and Section 5.23 (Brokers and Finders) are true and correct in all material respects as of the Closing Date as though made on and as of such date and time (without giving effect to any qualification by

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      "materiality" or "Material Adverse Effect" and words of similar import set forth therein); and (iii) Article V (other than those sections set forth in the foregoing clauses (i) and (ii) of this section) are true and correct as of the Closing Date as though made on and as of such date and time, except, in the case of this clause (iii), for any failure of any such representation and warranty to be so true and correct (without giving effect to any qualification by "materiality" or "Material Adverse Effect" and words of similar import set forth therein) that would not have a Material Adverse Effect.

    We have performed in all material respects all obligations required to be performed by us under the Merger Agreement;

    Since the date of the Merger Agreement, there has not occurred any event, change development, circumstance, fact or effect that has had a Material Adverse Effect and that remains in effect; and

    We have delivered to Parent a certificate signed on our behalf by the our Chief Executive Officer certifying that conditions set forth in the foregoing three bullet points have been satisfied.

        The Merger Agreement provides that the obligations of the Company to consummate the Merger are subject to the satisfaction at or prior to the Effective Time of the following additional conditions:

    Each of the representations and warranties set forth in (i) Section 6.1 (Organization, Good Standing and Qualification), Section 6.2 (Corporate Authority) and Section 6.6 (Absence of Certain Changes), and Section 6.7 (Available Funds) are true and correct as of the Closing Date as though made on and as of such date and time except to the extent that any such representation and warranty expressly speaks as of a particular date or period of time, in which case such representation and warranty shall be so true and correct as of such particular date or period of time; and (ii) Article VI (other than those sections set forth in the foregoing clause (i)) shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date as though made on and as of such date and time, except, in the case of this clause (ii), for any failure of any such representation and warranty to be so true and correct (without giving effect to any qualification by "materiality" or "Parent Material Adverse Effect" and words of similar import set forth therein) that would have a Parent Material Adverse Effect.

    Each of Parent and Merger Sub has performed in all material respects all obligations required to be performed by them under the Merger Agreement;

    Parent has delivered to us a certificate signed on behalf of Parent and Merger Sub by an executive officer of Merger Sub certifying that conditions set forth in the foregoing two bullet points have been satisfied.

Termination

        The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Requisite Company Vote has been obtained:

    by the mutual written consent of us and Parent;

    by either us or Parent: (i) if the Merger is not consummated on or before the Outside Date, provided, that this right to terminate will not be available to any party whose breach of any provision of the Merger Agreement has proximately contributed to the failure of one or more conditions to the Closing to the consummation of the Merger, or (ii) if any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger has become final and non-appealable, provided that this right to terminate will not be available to any party

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      whose breach of any provision of the Merger Agreement has proximately contributed to the failure of one or more conditions to the Closing to the consummation of the Merger.

    by us (provided that the Company is not then in breach in any material respect any obligation contained in the Merger Agreement that has proximately contributed to the failure of a condition to the consummation of the Merger), if Parent or Merger Sub has breached any representation, warranty, covenant or agreement of Parent or Merger Sub set forth in the Merger Agreement, or if any representation or warranty of Parent or Merger has become untrue, in each case, such that the closing conditions would not be satisfied and such breach is either not curable prior to the Outside Date or has not been cured within the earlier of 30 days of written notice thereof and three business days prior to the Outside Date;

    by us, prior to the time the Requisite Company Vote is obtained, following a Change of Recommendation, but only if we are not then in breach of our Non-Solicitation obligations and such Change of Recommendation is made in accordance with the applicable terms and conditions of the Merger Agreement;

    by Parent (provided that Parent is not then in breach in any material respect any obligation contained in the Merger Agreement that has proximately contributed to the failure of a condition to the consummation of the Merger), if we have breached any representation, warranty, covenant or agreement made by us in the Merger Agreement, or if any representation or warranty made by us has become untrue, in each case, such that the closing conditions would not be satisfied and such breach is either not curable prior to the Outside Date or has not been cured within the earlier of 30 days of written notice thereof and three business days prior to the Outside Date; or

    by Parent, following a Change of Recommendation, if the Requisite Company Vote has not yet been obtained at the Special Meeting.

Termination Fees

        Under the Merger Agreement, the Company is required to pay to Parent a cash termination fee equal to $6.75 million (the "Superior Proposal Termination Fee") if (i) the Merger Agreement is terminated by either the Company or Parent due to the failure of the parties to consummate the Merger by the Outside Date, any Person has made and publicly announced an Acquisition Proposal and, within 12 months of such termination, the Company has entered into or consummated an Alternative Acquisition Agreement with respect to an Acquisition Proposal or (ii) the Merger Agreement is terminated by either Parent or the Company as a result of a Recommendation Change made in connection with a Superior Proposal.

        The Merger Agreement also contemplates that the Company will pay to Parent a cash termination fee equal to the documented, out-of-pocket expenses of Parent incurred in connection with the Merger Agreement and the transactions contemplated thereby, up to a maximum of $3.0 million (the "Intervening Event Termination Fee"), if the Merger Agreement is terminated by Parent or the Company as a result of a Recommendation Change made in connection with an Intervening Event.

        The Superior Proposal Termination Fee and the Intervening Event Termination Fee are payable to Parent by wire transfer of immediately available cash funds. In no event will the Company be required to pay both the Superior Proposal Termination Fee and the Intervening Event Termination Fee, or pay either the Superior Proposal Termination Fee or the Intervening Event Termination Fee on more than one occasion.

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Amendment

        Subject to the provisions of applicable law, at any time prior to the Effective Time, the Merger Agreement may be modified or amended only by an instrument in writing that is executed by each of the Parties.

Specific Performance

        The Merger Agreement provides that the rights of each party to consummate the transactions contemplated by this Agreement are special, unique and of extraordinary character and that if for any reason any of the provisions of the Merger Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or damage may be caused for which money damages would not be an adequate remedy. Accordingly, each party to the Merger Agreement has agreed that, in addition to any other available remedies a Party may have in equity or at law, each Party will be entitled to enforce specifically the terms and provisions of the Merger Agreement and to obtain an injunction restraining any breach or violation or threatened breach or violation of the provisions of this Agreement without necessity of posting a bond or other form of security. In the event that any proceeding should be brought in equity to enforce the provisions of this Agreement, the parties have agreed that no party will allege, and each party will waive the defense, that there is an adequate remedy at law.

Ultimate Parent Guarantee

        Under the Merger Agreement, AMC has irrevocably and unconditionally guaranteed the due and punctual payment by Parent and Merger Sub of the Per Share Merger Consideration, the Preferred Stock Consideration, the 2015 Warrant Consideration, all payments due to the holders of the Company's outstanding equity awards, and all payments in respect of directors' and officers' indemnification and insurance contemplated by the Merger Agreement, as and when such amounts are due and payable pursuant to the Merger Agreement.

Governing Law

        The Merger Agreement is governed by the laws of the State of Nevada. Any disputes in connection with, arising out of or otherwise relating to the Merger Agreement or the transactions contemplated thereby are subject to the jurisdiction of the state and federal courts sitting in Clark County, Nevada.

The Voting Agreement

        In connection with the Merger Agreement, the Johnson Entities entered into the Voting Agreement with Parent and the Company (as a nominal party for certain ministerial acts required to be performed by the Company thereunder), pursuant to which the Johnson Entities have agreed, among other things, to affirmatively vote all of their shares of Common Stock as of the applicable record date at the Special Meeting "for" the approval of the Merger Agreement and have granted to Parent an irrevocable proxy to secure the performance of their voting obligations under the Voting Agreement. Such voting obligations will automatically terminate upon any termination of the Merger Agreement in accordance with its terms, including if the Special Committee makes any Recommendation Change with respect to the Merger Agreement. The foregoing summary of the Voting Agreement is qualified in its entirety by reference to the full text of the Voting Agreement, which is attached as Annex C hereto.

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PROVISIONS FOR NON-AFFILIATE COMMON STOCKHOLDERS

        No provision has been made (i) to grant the Company's Non-Affiliate Common Stockholders access to the corporate files of the Company, any other party to the Merger or any of their respective affiliates, or (ii) to obtain counsel or appraisal services at the expense of the Company, any other such party or affiliate.


IMPORTANT INFORMATION REGARDING THE COMPANY

Company Background

        The Company is a premium digital channel company serving distinct audiences through its proprietary subscription-based digital channels, Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and international mysteries and dramas. UMC showcases compelling urban programming including feature films, documentaries, original series, stand-up comedy and other exclusive content for African-American and urban audiences. The digital channels have consistently experienced substantial year-over-year growth rate since launch in 2011 and 2015, respectively. The table below shows quarterly subscriber growth from December 2015 to December 2017.

GRAPHIC

        We exclusively control, co-produce, and own a large library of content primarily consisting of British mysteries and dramas, independent feature films and urban content. In addition to supporting our digital channels, the value of our content library is monetized through our intellectual property (or IP) licensing and wholesale distribution operations. These activities allow us to control all windows of exploitation of our content. Our IP licensing operations consist of content that we own and includes our 64% investment in Agatha Christie Ltd. (or ACL), while our wholesale distribution operations consist of content we license from others.

        We develop or acquire content that is intended to satisfy the desire of our niche audiences. We also acquire finished programs through long-term exclusive contracts. We invest in content that we believe will increase our digital channel subscribers' interests and subscriptions as well as exceed our internal return-on-investment. We maintain our own sales force and also direct selling relationships

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with the majority of our broadcast and cable/satellite partners and retail customers. Our in-house marketing department manages promotional efforts across a wide range of off-line and online platforms.

        Management views our operations based on three distinct reporting segments: (1) the Digital Channels segment; (2) the IP Licensing segment; and (3) the Wholesale Distribution segment. Operations and net assets that are not associated with any of these operating segments are reported as "Corporate" when disclosing and discussing segment information. The Digital Channels segment distributes film and television content through our proprietary subscription-based digital channels, Acorn TV and UMC. The IP Licensing segment includes intellectual property rights that we own, produce and then license; and includes our 64% ownership of ACL. Our Wholesale Distribution segment consists of the worldwide exploitation of exclusive content in various formats including digital (download-to-rent and electronic sell-through, or EST), television video on demand (VOD) through cable and satellite, broadcast, streaming, and DVD and Blu-ray through third-party media and retail outlets. The Wholesale Distribution and IP Licensing segments exploit content to third parties such as Amazon, Best Buy, iTunes, Netflix, Target and Walmart.

        We focus on compelling British mystery and drama television, action and thriller independent feature films and diverse urban content, and documentaries. We exploit our titles through our various brands as follows:

        Acorn TV—Known for specializing in the best of British television, Acorn Media Group (or Acorn) monetizes high-quality dramas and mysteries via our digital channel Acorn TV in the United States (or U.S.) and Canada and to the broadcast/cable and home video windows within the North American, U.K. and Australian markets. In addition to consistently receiving strong national public relations coverage, our primary marketing to consumers is through Acorn TV offering viewers thousands of hours of compelling content including Acorn TV original productions and exclusive premieres of popular series. We further leverage the Acorn brand through a marketing and wholesale partnership with direct-to-consumer specialist Universal Screen Arts (or USA). USA purchases wholesale inventory from us and pays us a license fee for the exclusive right to publish a branded Acorn direct-to-consumer catalog and website (acornonline.com), which market and sell Acorn content on DVD and Blu-ray alongside complementary merchandise. Our Acorn brand generates revenues that are reported in the Digital Channels, IP Licensing (Agatha Christie revenues) and Wholesale Distribution segments (digital download and home video sales).

        Our subsidiaries with a permanent presence in the U.K. television programming community, provide us access to new content and manage and develop our intellectual property rights. Our owned content includes 28 Foyle's War made-for-TV films and, through our 64% ownership interest in ACL, the Agatha Christie branded library. The bestselling novelist of all time, Agatha Christie has sold more than 2 billion books, and her work contains a variety of short story collections, more than 80 novels, 19 plays and a film library of over 100 TV productions. Acorn is known for mystery and drama franchises and has been releasing TV movie adaptations featuring Agatha Christie's two most famous characters, Hercule Poirot and Miss Marple, for over a decade with both series ranking among our all-time bestselling lines. Through ACL, we manage the vast majority of Agatha Christie publishing and television/film assets worldwide and across all mediums and actively develop new content and productions. In addition to film and television projects, in 2014, ACL published its first book since the death of Agatha Christie, The Monogram Murders, and has subsequently published its second book, Closed Casket, in 2016. The Agatha Christie family retains a 36% holding, and James Prichard, Agatha Christie's great-grandson, is the Chairman of ACL.

        UMC—UMC is a premium subscription-based service which features quality urban content showcasing feature films, documentaries, original series, stand-up comedy and other exclusive content

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for African American and urban audiences. Select UMC content is also monetized in the home video window in partnership with the Wholesale Distribution segment.

        RLJE Films—RLJE Films is a leading film and television licensee focusing on action, thriller, and horror independent feature films and urban content in partnership with our digital channel UMC. RLJE Films acquires exclusive long-term film rights across all distribution channels, with terms ranging generally from 5 to 25 years. RLJE Films content is currently distributed primarily in the U.S. and Canada through theatrical, broadcast/cable, physical and digital platforms. All of the revenues generated by the RLJE Films are included in our Wholesale Distribution segment.

        Trademarks—We currently use several registered trademarks including: RLJ Entertainment, Acorn, Acorn Media, Acorn TV and UMC—Urban Movie Channel. We also currently use registered trademarks through our 64%-owned subsidiary ACL including: Agatha Christie, Miss Marple and Poirot. The above-referenced trademarks, among others, are registered with the U.S. Patent and Trademark Office and various international trademark authorities. In general, trademarks remain valid and enforceable as long as the marks are used in connection with the related products and services and the required registration renewals are filed. We believe our trademarks have value in the marketing of our products. It is our policy to protect and defend our trademark rights.

        Competition—The market for entertainment video is intensely competitive and subject to rapid change. We face competition from other digital channels with similar genre and target audiences, independent distribution companies, major motion picture studios and broadcast and internet outlets in securing exclusive content distribution rights. We also face competition from online and direct-to-consumer retailers, as well as alternative forms of leisure entertainment, including video games, the internet and other computer-related activities. Consumers can choose from a large supply of competing entertainment content from other suppliers. The success of any of our titles depends upon audience acceptance of a given program in relation to consumer tastes and cultural trends as well as the other titles released into the marketplace at or around the same time. Many of these competitors are larger than us. Sales of digital downloading, streaming, VOD and other broadcast formats are largely driven by what is visually available to the consumer, which can be supported by additional placement fees or previous sales success. Programming is available online, delivered to smartphones, tablets, laptops, personal computers, or direct to the consumers' TV set through multiple internet-ready devices, cable or satellite VOD and other subscription-based digital channels. For our physical wholesale distribution, our DVD and Blu-ray products compete for a finite amount of brick-and-mortar retail and rental shelf space. Our ability to continue to successfully compete in our markets is largely dependent upon our ability to develop and secure unique and appealing content, and to anticipate and respond to various competitive factors affecting the industry, including new or changing program formats, changes in consumer preferences, regional and local economic conditions, discount pricing strategies and competitors' promotional activities.

        Employees—As of March 1, 2018, the Company had 98 total employees. Of these employees, 76 are based in the US and 22 are based internationally in the U.K. and Australia.

        Properties—Our principal executive office is located in Silver Spring, Maryland. We also maintain offices in Woodland Hills, California; London, England and Sydney, Australia with varying terms and expiration dates. All locations are leased. A summary of our locations is set forth in the following table.

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We believe that our current offices are adequate to meet our business needs, and our properties and equipment have been well maintained.

Location
  Primary Purpose   Lease Expiration   Reporting Segment(1)
Silver Spring, MD   Executive Office, Administrative/Sales, Content Acquisition   November 15, 2020   Corporate, Digital Channels
Woodland Hills, CA   Administrative/Sales, Content Acquisition   June 30, 2021   Digital Channels, Wholesale Distribution
London, England   Content Development and Production/Sales, Administration for the U.K.   July 1, 2018   Digital Channels/IP Licensing, Wholesale Distribution
Sydney, Australia   Sales, Administration   Month-to-month   Wholesale Distribution

(1)
The segment descriptions above reflect the location's primary activity.

        Legal Proceedings—In the normal course of business, we are subject to proceedings, lawsuits and other claims, including proceedings under government laws and regulations relating to content ownership and copyright matters. While it is not possible to predict the outcome of these matters, it is the opinion of management, based on consultations with legal counsel, that the ultimate disposition of known proceedings will not have a material adverse effect on our financial condition, results of operations or liquidity.

        Reports to Security Holders—We file annual, quarterly and current reports, proxy statements and other information with the SEC. We also make available free of charge through our website at www.rljentertainment.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they are filed electronically with the SEC. You may read and copy any reports, statements or other information that we have filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may request copies of these documents, upon payment of a copying fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room. Our SEC filings are also available to the public on the SEC internet site at http://www.sec.gov.

        Other Information—RLJE was incorporated in Nevada in April 2012. On October 3, 2012, the Company completed the business combination of RLJE, Image Entertainment, Inc. (or Image) and Acorn Media Group, Inc. (or Acorn Media or Acorn). The Company has a direct presence in North America, the U.K. and Australia with strategic sublicense and distribution relationships covering Europe, Asia and Latin America.

        Following the Merger, the Company will continue as a private company and a wholly owned subsidiary of Parent.

        During the past five years, neither the Company nor any of the Company directors or executive officers listed below has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). In addition, during the past five years, except as set forth below, neither the Company nor any of the Company directors or executive officers listed below has been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Each of the individuals listed below is a citizen of the United States.

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Directors and Executive Officers

        Our executive officers and directors are as follows:

Name
  Age   Position

Robert L. Johnson. 

    72   Chairman

Miguel Penella

    49   Director; Chief Executive Officer

Andor (Andy) M. Laszlo

    51   Director

Scott R. Royster

    54   Director

H. Van Sinclair

    65   Director

Dayton Judd

    46   Director

John Ziegelman

    54   Director

John Hsu

    46   Director

Arlene Manos

    76   Director

Mark Nunis

    51   Principal financial and accounting officer

        Robert L. Johnson was appointed as the Company's chairman in October 2012. From November 2010 to October 2012, Mr. Johnson served as the chairman of the board of RLJ Acquisition, Inc., a special purpose acquisition company that created the Company. Mr. Johnson founded The RLJ Companies, an innovative business network that owns or holds interests in a diverse portfolio of companies in businesses operating in hotel real estate investment; private equity; financial services; asset management; automobile dealerships; sports and entertainment; and video lottery terminal (or VLT) gaming and has served as its chairman since February 2003. Prior to forming The RLJ Companies, Mr. Johnson was founder and chief executive officer of Black Entertainment Television (or BET), which was acquired by Viacom Inc. in 2001. He continued to serve as chief executive officer of BET until February 2006. In July 2007, Mr. Johnson was named by USA Today as one of the "25 most influential business leaders of the past 25 years." In addition to the Board, Mr. Johnson currently serves on the boards of directors of RLJ Lodging Trust (NYSE: RLJ), KB Home (NYSE: KBH), Lowe's Companies, Inc. (NYSE: LOW), Elevate Credit, Inc. (NYSE: ELVT), and Retirement Clearinghouse, LLC. He previously served as a director of Hilton Hotels Corporation, US Airways Group, Inc., General Mills, Inc., Strayer Education, Inc. and IMG Worldwide, Inc., and a member of the board of trustees at The Johns Hopkins University.

        Miguel Penella was appointed as the Company's Chief Executive Officer on January 18, 2013. From October 2012 until January 18, 2013, Mr. Penella served as Chief Operating Officer. Mr. Penella has served as a director of the Company since October 2012. From April 2007 to October 2012, Mr. Penella served as chief executive officer of Acorn Media Group, Inc., which was acquired by the Company in October 2012, where he oversaw operations and was the driving force behind the worldwide expansion of the Acorn brand, including the acquisition of 64% of Agatha Christie Limited and the launch of Acorn TV, the Company's first proprietary subscription VOD channel (or SVOD). From 2004 to April of 2007, Mr. Penella was president of Acorn's direct-to-consumer operations offering DVDs and other high-quality products through catalogs and online marketing vehicles. Under his leadership, Acorn Media was transformed from a DVD distributor into a media company with a significant library of television dramas and mysteries, including intellectual property rights, and a nascent proprietary SVOD business. Mr. Penella came to Acorn from Time-Life where he rose in the ranks from circulation director of the catalog department to director of catalogs for the music division and then to vice president of customer marketing in 2001. Previously, he worked in ecommerce catalog management for the National Direct Marketing Corporation and the National Wildlife Federation.

        Andor ("Andy") M. Laszlo has served as a member of the Board since October 2012. Mr. Laszlo joined Sun Trust Robinson Humphrey in January 2014 where he serves as Managing Director and Head of Technology, Media & Communications Equity Origination. Mr. Laszlo served as a Managing Director at Lazard Capital Markets LLC (or LCM) from June 2010 to December 2013, where he

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served as Head of Corporate Underwriting and Head of Business Development. Prior to joining LCM, Mr. Laszlo served as a Senior Advisor to Sports Properties Acquisition Corp., a special purpose acquisition company focused on the sports, leisure and entertainment sectors, from November 2007 to April 2010. Between 1997 and 2007, Mr. Laszlo held various senior equity capital markets positions at both Lehman Brothers and Bank of America Securities. Mr. Laszlo was the Head of Media & Telecom equity capital markets for Bank of America Securities based in New York, NY. Prior to that, Mr. Laszlo was Head of Equity Syndicate and Head of Media & Telecom Equity Capital Markets at Lehman Brothers International (Europe), during which time he was based in London, England. In between his tenure at Lehman Brothers and Bank of America, Mr. Laszlo spent approximately one year as the Chief Operating Officer and Head of Business Development at Eagle Rock Capital Management, LLC, a New York-based multi-strategy hedge fund. Mr. Laszlo has been involved in transactions totaling more than $50 billion of equity issuance over the course of his career. Mr. Laszlo serves on the Advisory Board of Falconhead Capital Management, a private equity firm based in New York City. Previously, he served on the board of directors of Rita's Franchise Company, a leading franchise company focused on frozen treats. Mr. Laszlo also previously served on the board of directors of Radar Detection Holdings Corp. (or Escort Radar), a leading designer, manufacturer and distributor of highway radar and laser detectors. Mr. Laszlo began his career as an attorney with Philadelphia, Pennsylvania-based Rawle & Henderson.

        Scott R. Royster has served as a member of the Board of directors since January 2014. In October 2017, Mr. Royster joined United Negro College Fund as Chief Financial Officer. Prior to October 2017, Mr. Royster co-founded and served as an officer of two companies in the education sector—Latimer Education, Inc. (or Latimer) and Maarifa Edu Holdings Limited (or Maarifa). Since September 2009 he served as Chairman of Latimer and, since August 2014, as Chief Executive Officer and later Chairman of Maarifa. Latimer, based in Washington, DC, is an education company serving the higher education needs of African-Americans in the USA, and Maarifa is an education company that acquires and operates private universities in Africa and is based in Mauritius. From November 2008 until the formation of Latimer, Mr. Royster was engaged in planning for the formation of Latimer and acted as a consultant to several companies. Mr. Royster served as Executive Vice President of Business Development and Chief Financial Officer of DigitalBridge Communications, an early-stage wireless technology company, from January 2008 to November 2008. From 2006 to 2008, Mr. Royster was a member of the board of directors for HRH, Inc. (NYSE: HRH), an insurance brokerage firm. Between June 1996 to December 2007, Mr. Royster served as Executive Vice President and Chief Financial Officer of Radio One, Inc., now known as Urban One, Inc. (NASDAQ: UONE and UONEK), an owner/operator of major market radio stations and other media assets.

        H. Van Sinclair has served as a member of the Board since April 2017 and was a prior member of the Board from October 2012 to June 2015. Since February 2003, Mr. Sinclair has served as president, chief executive officer and general counsel of The RLJ Companies. From January 2006 to May 2011, Mr. Sinclair also served as Vice President of Legal and Business Affairs for RLJ Urban Lodging Funds, a private equity fund concentrating on limited and focused service hotels in the United States and for RLJ Development, The RLJ Companies' hotel and hospitality company. Prior to joining The RLJ Companies, Mr. Sinclair spent 28 years, from October 1978 to February 2003, with the law firm of Arent Fox, LLP. Mr. Sinclair remains of counsel to Arent Fox. Mr. Sinclair previously served as a member of the board of directors of Vringo, Inc. (NASDAQ: VRNG) from July 2012 through March 2016 and RLJ Acquisition, Inc., the predecessor company of RLJE, from November 2010 to October 2012.

        Dayton Judd has served as a member of the Board since May 2015. Mr. Judd is the Founder and Managing Partner of Sudbury Capital Management (or Sudbury). Prior to founding Sudbury, Mr. Judd worked from 2007 through 2011 as a Portfolio Manager at Q Investments, a multi-billion dollar hedge fund in Fort Worth, Texas. Prior to Q Investments, he worked with McKinsey & Company from 1996

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through 1998, and again from 2000 through 2007. Mr. Judd graduated from Brigham Young University in 1995 with a bachelor's degree, summa cum laude, and a master's degree, both in accounting. He also earned an MBA with high distinction from Harvard Business School in 2000, where he was a Baker Scholar. Mr. Judd is a Certified Public Accountant.

        John Ziegelman has served as a member of the Board since May 2015. Mr. Ziegelman is a portfolio manager for Wolverine Asset Management, LLC (or Wolverine). Prior to joining Wolverine in 2013, Mr. Ziegelman was the founder of Carpe Diem Capital Management (2001) and co-founder of Castle Creek Partners (1997); both firms were engaged in private placements and corporate restructurings. Prior to Castle Creek Partners, Mr. Ziegelman worked at Citadel Investment Group and spent most of his early career as an investment banker, working for both Shearson Lehman Brothers and Kidder, Peabody & Co. in their real estate and corporate finance/M&A departments. Mr. Ziegelman graduated from the University of Michigan in 1986 with a BA in Philosophy and Classical Archaeology and earned an MBA from the University of Chicago in 1993 concentrating his studies on finance and accounting.

        John Hsu has served as a member of the Board since October 2016. Mr. Hsu manages the treasury and corporate development operations of AMC Networks Inc., as its Executive Vice President—Treasurer & Financial Strategy, and oversees investment strategies, capital structure planning and debt portfolio management. Additionally, he is responsible for evaluating strategic business opportunities including mergers and acquisition, corporate development, and digital investment activities. Mr. Hsu joined AMC Networks in June 2011 from Cablevision where he served as Vice President of Financial Planning during his seven-year tenure with Cablevision. Prior to Cablevision, Mr. Hsu was an investment banker and served as a Vice President in Bear, Stearns & Co.'s Media & Entertainment Corporate Finance Group, and as an Associate in SG Cowen's Gaming, Lodging and Leisure Group. He began his career as a Senior Auditor at Arthur Andersen LLP. Mr. Hsu is a CPA and holds a B.S. in Accounting and Finance from New York University's Stern School of Business.

        Arlene Manos has served as a member of the Board since October 2016. Ms. Manos joined AMC Networks Inc. in 2002 as President of National Advertising Sales and was responsible for overseeing the advertising sales efforts for its national cable television networks AMC, IFC, SundanceTV, WE tv, and BBC AMERICA (operated through a joint venture with BBC Worldwide). In January 2017, Ms. Manos position transitioned to President Emeritus, National Ad Sales. Responsibilities also include revenue oversite for BBC World News in the U.S. Ms. Manos joined AMC Networks from A&E Television Networks where she held a number of sales management positions, most recently as senior vice president of national advertising sales. Prior to A&E, she served as an associate publisher of Manhattan, Inc. magazine, a retail sales manager at WABC-TV in New York, and as an account executive at CBS Cable. Manos earned her Bachelor of Arts degree in English from Trinity College in Washington, DC. She served on the National Sales Advisory Committee of the Video Advertising Bureau and is a past president and board member of what was then called the Advertising Women of New York (AWNY) now called She Runs It. She has been named to the CableFAX 100 and CableFAX's Most Powerful Women in Cable several times. In 2011, Manos was honored as a "Trailblazer Mom" in the AWNY Working Mothers of the Year Awards.

        Mark Nunis has 26 years of accounting, audit, and financial reporting experience in a variety of industries. Mr. Nunis joined the Company as Chief Accounting Officer in January 2013. He served as Principal Financial and Accounting Officer from November 2015 until May 2016, following the resignation of the previous CFO. Prior to joining the Company, Mr. Nunis was an audit partner with J.H. Cohn LLP from January 2006 to January 2013. From May 2002 to January 2006, Mr. Nunis was a founder and partner of accounting firm, Croutch Nunis Matthews, LLP (or CNM). Prior to CNM, Mr. Nunis worked in the audit practice of Arthur Anderson for 10 years.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion and analysis of our financial condition and results of operations contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As described under the heading "Forward-Looking Statements" of this Proxy Statement, our actual results could differ materially from those anticipated in our forward-looking statements. Factors that could contribute to such differences include those discussed elsewhere in this Proxy Statement, including under the heading "Special Factors." You should not place undue reliance on our forward-looking statements, which apply only as of the date of this Proxy Statement. Except as may be required under federal law, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur. You should read the following discussion and analysis in conjunction with our consolidated financial statements and related footnotes included as an Exhibit to this Proxy Statement.

OVERVIEW

General

        RLJ Entertainment, Inc. (RLJE or the Company) was incorporated in Nevada in April 2012. On October 3, 2012, we completed the business combination of RLJE, Image Entertainment, Inc. (or Image) and Acorn Media Group, Inc. (or Acorn Media), which is referred to herein as the "Business Combination." Acorn Media includes its United Kingdom (or U.K.) subsidiaries RLJ Entertainment Ltd (or RLJE Ltd.), Acorn Media Enterprises Limited (or AME), and RLJE International Ltd (collectively, RLJE UK), as well as RLJ Entertainment Australia Pty Ltd (or RLJE Australia). In February 2012, Acorn Media acquired a 64% ownership of Agatha Christie Limited (or ACL). References to Image include its wholly-owned subsidiary Image/Madacy Home Entertainment, LLC. "We," "our" or "us" refers to RLJE and its subsidiaries unless otherwise noted. Our principal executive offices are located in Silver Spring, Maryland, with an additional location in Woodland Hills, California. We also have international offices in London, England and Sydney, Australia.

        We are a premium digital channel company serving distinct audiences through our proprietary subscription-based digital channels (or Digital Channels segment), Acorn TV and UMC or Urban Movie Channel. Acorn TV features high-quality British and International mysteries and dramas. UMC showcases quality urban programming including feature films, documentaries, original series, stand-up comedy and other exclusive content for African-American and urban audiences.

        We also exclusively control, co-produce, and own a large library of content primarily consisting of British mysteries and dramas, independent feature films and Urban content. In addition to supporting our Digital Channels, we monetize our library through intellectual property (or IP) rights that we own, produce, and then exploit worldwide (our IP Licensing segment) and distribution operations across all available wholesale windows of exploitation (our Wholesale Distribution segment). Our IP Licensing segment consists of content that we own and includes our investment in Agatha Christie Ltd. (or ACL), while our Wholesale Distribution segment consists of worldwide exploitation of exclusive content in various formats through our wholesale partners, including broadcasters, digital outlets and major retailers in the United States of America (or U.S.), Canada, U.K. and Australia. We work closely with our wholesale partners to outline and implement release and promotional campaigns customized to the different audiences we serve and the program genres we exploit.

        On June 24, 2016, we entered into a licensing agreement with Universal Screen Arts (or USA) whereby USA took over our Acorn U.S. catalog/ecommerce business becoming the official, exclusive, direct-to-consumer seller of Acorn product in the U.S. During the quarter ended June 30, 2016, we also electronically distributed our last Acacia catalogs. As a result of these actions, we classified the U.S. catalog/ecommerce business as discontinued operations.

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YEARS ENDED DECEMBER 31, 2017 AND 2016

Revenue Sources

        Revenues by reporting segment as a percentage of total revenues for the periods presented are as follows:

 
  Years Ended
December 31,
 
 
  2017   2016  

Digital Channels

    31.5 %   20.3 %

IP Licensing(1)

    0.1 %   0.2 %

Wholesale Distribution

    68.4 %   79.5 %

Total revenues

    100.0 %   100.0 %

(1)
Reported net revenues exclude revenues generated by our 64% owned subsidiary, ACL, which is accounted for under the equity method of accounting.

        Revenues by geographical area as a percent of the total revenues are as follows:

 
  Years Ended
December 31,
 
 
  2017   2016  

United States

    85.1 %   84.9 %

United Kingdom

    13.6 %   13.9 %

Other

    1.3 %   1.2 %

Total revenues

    100.0 %   100.0 %

    Digital Channels Segment

        Our Digital Channels segment predominately operates in the U.S. and comprises 31.5% of our overall revenue base. The Digital Channels segment revenues are derived from our online, proprietary, SVOD channels, Acorn TV and UMC. During 2017, revenues from our Digital Channels totaled $27.2 million, which represents an increase of $10.9 million when compared to 2016.

    IP Licensing Segment

        Our television drama productions are generally financed by the pre-sale of the initial broadcast license rights. Revenues reported in this segment include the initial broadcast license revenues, generally from the U.K. territory, and sublicense revenues for other territories outside the U.S., U.K. and Australia.

    Wholesale Distribution Segment

    DVD and Blu-ray

        Our primary source of revenues within the Wholesale Distribution segment continues to be from the exploitation of exclusive content on DVD and Blu-ray through third-party retailers such as Amazon and Walmart.

    Digital, VOD and Broadcast

        Revenues derived from digital and broadcast exploitation of our content continue to grow as a percentage of revenues. Net revenues derived from digital, VOD, third-party SVOD and broadcast

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exploitation account for approximately 41.5% of the segment's revenues in 2017 versus 34.9% in 2016. This is consistent with consumer adoption trends. As retailers continue to offer consumer-friendly devices that make access to these on-demand services easier, including allowing consumption on portable devices such as smartphones and tablets, we believe we are well-positioned to capture business in this growing distribution channel. Some of our digital retailers include Amazon, Hulu, iTunes, Netflix and a variety of cable television providers.

    Other Licensing

        We continue our efforts to acquire more programming with international rights. Our key sublicensing partners, that cover territories outside the U.S., the U.K. and Australia, are Universal Music Group International, Universal Pictures Australia and Warner Music Australia. To date, most of the feature films we have acquired do not include rights outside of North America. However, given our presence in the United Kingdom and Australia, we are focusing our efforts to acquire more programming in all English-language markets. When appropriate, we now seek the greatest variety of distribution rights regarding acquired content in the greatest variety of formats. We believe that this will allow us to further diversify revenue streams.

Cost Structure

        Our most significant costs and cash expenditures relate to acquiring or producing content for exclusive exploitation. We generally acquire programming through exclusive license or distribution agreements, under which we either (1) pay royalties or (2) receive distribution fees and pay net profits after recoupment of our upfront costs. Upon entering into a typical license (royalty) agreement, we pay an advance based on the estimated expected future net profits. Once the advance payment has been recouped, we pay royalties to the content suppliers quarterly based on the net revenues collected from the previous quarter. Under a typical exclusive distribution agreement, we may pay upfront fees, which are expressed as advances against future net profits. Once the advance and any other costs incurred are recouped, we pay the content supplier their share of net cash-profits, which is after our distribution fee, from the prior quarter's exploitation.

        In addition to advances, upfront fees and production costs, the other significant expenditures we incur are DVD/Blu-ray replication and digitalization of program masters, shipping costs from self-distribution of exclusive content, content hosting and delivery costs associate with our Digital Channels segment, advertising, personnel compensation costs and interest.

        We strive to achieve long-term, sustainable growth and profitability exceeding our internal return on investment target on new content acquisitions. This financial target is based on all up-front expenses associated with the acquisition and release of a title, including advances and development costs, and is calculated after allocating overhead costs.

        We also seek to maximize our operational cash flow and profitability by closely managing our marketing and discretionary expenses, and by actively negotiating and managing collection and payment terms.

HIGHLIGHTS

        Highlights for the year ended December 31, 2017 and other significant events are as follows:

    Digital Channels segment revenues increased 67.2% to $27.2 million, driven by subscriber growth of 50.6% and was 31.5% of 2017 total revenues compared to 20.3% of 2016 total revenues.

    Total revenues increased 7.6% to $86.3 million, primarily driven by the increase in Digital Channels segment revenues.

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    Gross profit increased 40.7% to $37.1 million and gross margin increased over ten percentage points to 43.0% in 2017 from last year. Continued growth in Digital Channels segment, which represents a larger portion of total revenues, drove the improvements in gross profit and gross margin.

    Net loss (as revised—see footnote on our summary of results of operations on this page) improved by $15.8 million and was $5.7 million for the year compared to a net loss of $21.5 million last year.

    Adjusted EBITDA improved 26.5% to $16.6 million from $13.1 million last year.

        The highlights above and the discussion below are intended to identify some of our more significant results and transactions during 2017 and should be read in conjunction with our consolidated audited financial statements and related discussions within our Form 10-K filed on March 16, 2018.

RESULTS OF OPERATIONS

        A summary of our consolidated results of operations is presented below for the years ended December 31, 2017 and 2016, which have been prepared in accordance US GAAP and should be read in conjunction with our consolidated audited financial statements included in our Form 10-K filed on March 16, 2018.

 
  Years Ended
December 31,
 
(In thousands)
  2017   2016  
 
  (Revised)(1)
 

Revenues

  $ 86,304   $ 80,238  

Costs of sales

    49,174     53,847  

Gross profit

    37,130     26,391  

Operating expenses

    36,305     30,096  

Income (Loss) from operations

    825     (3,705 )

Equity earnings of affiliate

    5,955     3,078  

Interest expense, net

    (8,622 )   (8,400 )

Change in fair value of stock warrants and other derivatives

    (3,922 )   (4,573 )

Gain (Loss) on extinguishment of debt

    351     (3,549 )

Other income (expense)

    521     (1,293 )

Benefit (provision) for income taxes

    (803 )   (211 )

Loss from continuing operations, net of income taxes

    (5,695 )   (18,231 )

Loss from discontinued operations, net of income taxes

        (3,277 )

Net loss

  $ (5,695 ) $ (21,508 )

(1)
As disclosed in our Form 10-Q for the quarterly period ended June 30, 2018 filed on August 9, 2018, we identified an error that caused an overstatement of our previously reported deferred tax liability and an overstatement of our provision for income taxes. Through 2017, we were tax affecting our ACL equity earnings and accumulating a deferred tax liability, which in theory would become payable when we disposed of our equity investment. In addition to recognizing equity earnings, we also receive distributions from ACL, periodically, and when received, those distributions are not taxable nor does our foreign tax basis in ACL change. Therefore, we should have been tax affecting our ACL equity earnings after deducting distributions received. Because of this error, we overstated our benefit (provision) for income taxes for the 2017 and 2016 by $0.4 million for each year.

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    In accordance with Staff Accounting Bulletin (SAB) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the error and determined that the impact was not material to the results of operations or financial position for the years ended December 31, 2017 and 2016. Because the December 31, 2017 balance sheet was included in our June 30, 2018 quarterly Form 10-Q, we corrected that balance sheet in that filing. We will correct the statement of operations for 2017 the next time we file a Form 10-K.

    We have corrected the benefit (provision) for income taxes in the above table as follows:

 
  Year Ended December 31, 2017  
(In thousands)
  As previously
reported
  Adjustment   As revised  

Benefit (provision) for income taxes

  $ (1,234 ) $ 431   $ (803 )

Loss from continuing operations, net of income taxes

  $ (6,126 ) $ 431   $ (5,695 )

Loss from discontinued operations, net of income taxes

  $   $   $  

Net loss

  $ (6,126 ) $ 431   $ (5,695 )

 

 
  Year Ended December 31, 2016  
(In thousands)
  As previously
reported
  Adjustment   As revised  

Benefit (provision) for income taxes

  $ (155 ) $ 366   $ 211  

Loss from continuing operations, net of income taxes

  $ (18,597 ) $ 366   $ (18,231 )

Loss from discontinued operations, net of income taxes

  $ (3,277 ) $   $ (3,277 )

Net loss

  $ (21,874 ) $ 366   $ (21,508 )

Revenues

        A summary of revenues by segment for the years ended December 31, 2017 and 2016 is as follows:

 
  Years Ended
December 31,
 
(In thousands)
  2017   2016  

Digital Channels

  $ 27,194   $ 16,262  

Intellectual Property

    47     168  

Wholesale Distribution Revenue:

             

U.S. 

    46,224     51,834  

International

    12,839     11,974  

Total Wholesale Distribution

    59,063     63,808  

Total Revenues

  $ 86,304   $ 80,238  

        Revenues for the year ended December 31, 2017 increased $6.1 million when compared to the year ended December 31, 2016. The increase in revenues is primarily driven by our Digital Channels segment, which increased by $10.9 million, offset by revenues from our Wholesale Distribution segment, which decreased by $4.8 million. The increase in revenues from our Digital Channels segment was driven by 50.6% growth in paying subscribers. We increased our marketing efforts during the year to support subscriber growth. In addition, we are continually featuring new content on our digital channels, which we believe is a key factor in attracting new subscribers for all of our channels.

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Revenues from our Digital Channels segment continues to represent a growing and more meaningful portion of our consolidated revenues. Revenues from these channels for the year ended December 31, 2017, account for 31.5% of our total revenues as compared to 20.3% for the same period in 2016.

        Our Wholesale Distribution segment's revenue decline is attributable to decreases in the U.S. revenues of $5.6 million and an increase in international revenues of $0.9 million. The Wholesale Distribution segment's U.S. revenue decrease is primarily attributable to less content being released in the first half of 2017 compared to the same period last year as well as a decline in demand for DVDs and Blu-ray product as more digital programming becomes available. In 2017, one of our major wholesale partners substantially discontinued the sale of DVDs which contributed to the decrease in U.S. revenues. International Wholesale Distribution revenues increased due to the strong performance of two new releases during the year.

Cost of Sales ("COS") and Gross Margins

        A summary of COS by segment and overall gross margins for the years ended December 31, 2017 and 2016 is as follows:

 
  Years Ended
December 31,
 
(In thousands)
  2017   2016  

Digital Channels

  $ 7,664   $ 4,929  

IP Licensing

        158  

Wholesale Distribution

    41,510     48,760  

Total COS

  $ 49,174   $ 53,847  

Gross Margin

  $ 37,130   $ 26,391  

Gross Margin %

    43.0 %   32.9 %

        COS decreased by $4.7 million to $49.2 million for 2017 compared to the same period in 2016. The decrease in COS is attributed to lower sales of physical content, lower impairment charges and lower step-up amortization in our Wholesale Distribution segment. Impairment charges recorded for content investments and inventories total $3.0 million and $4.6 million for the years ended December 31, 2017 and 2016, respectively. Impairment charges decreased due to improved performance of our released content relative to our estimation of future revenues. Our step-up amortization was $2.6 million and $3.6 million for the years ended December 31, 2017 and 2016, respectively. The decrease in step-up amortization is attributable to lower revenues from titles that were acquired prior to our Business Combination. As time passes, we expect that step-up amortization will decrease.

        As a percentage of revenues, our gross margin improved to 43.0% for 2017 compared to 32.9% for 2016. The improvement is primarily attributable to lower impairments and step-up amortization, as well as, revenue growth of our proprietary digital channels. Revenues from this segment account for 31.5% of our total revenues during 2017 as compared to 20.3% of total revenues during 2016. This business segment generates a higher gross margin than our other business segments. The Wholesale Distribution segment margins also increased due to the positive impact of a few one-time sales and licensing renewal transactions representing revenues of $1.1 million during 2017, which had very little associated costs.

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Operating Expenses ("SG&A")

        The following table includes a summary of the components of SG&A:

 
  Years Ended
December 31,
 
(In thousands)
  2017   2016  

Selling expenses

  $ 12,896   $ 9,298  

General and administrative expenses

    19,704     17,841  

Depreciation and amortization

    3,705     2,957  

Total operating expenses

  $ 36,305   $ 30,096  

        SG&A increased by $6.2 million for the year ended December 31, 2017, compared to the same period in 2016. The increase is primarily attributable to targeted marketing expenses that increased $3.6 million for year ended December 31, 2017, primarily due to increased marketing related to our Digital Channels segment. General and administrative expenses increased $1.9 million primarily due to increased incentive compensation costs including increased expenses associated with stock-based compensation for executives and employees. Depreciation and amortization expense increased $0.8 million primarily due to investments in our websites to support the growth of the Digital Channels segment.

Equity Earnings of Affiliate

        Equity earnings of affiliate (which is ACL) increased $2.9 million for the year ended December 31, 2017 to $6.0 million when compared to 2016. During 2017, ACL's gross profit margin and its income from operations are higher when compared to 2016 due to higher publishing and licensing revenues, as a percent of its total revenues, which generate higher margins when compared to its other operations. In addition, ACL's results were impacted by the strong performance of film and television programming released in 2017, as well as the receipt of additional licensing revenues from one title.

Interest Expense

        Interest expense increased $0.2 million for the year ended December 31, 2017, as compared to 2016. The increase is primarily a result of higher average outstanding debt balances partially offset by reduced interest rates on our senior debt.

Change in Fair Value of Stock Warrants and Other Derivatives

        The change in the fair value of our warrant and other derivative liabilities impacts the statement of operations. A decrease in the fair value of the liabilities results in the recognition of income, while an increase in the fair value of the liabilities results in the recognition of expense. Changes in fair value are primarily driven by changes in our common stock price and its volatility. During 2017, we recognized expense of $3.9 million due to changes in the fair value of our stock warrants and other derivative liabilities. During 2016, we recognized expense of $4.6 million due to changes in the fair value of our stock warrants and other derivative liabilities.

Gain (Loss) on Extinguishment of Debt

        In 2016, upon repaying our previous credit facility and entering into the senior secured credit agreement with AMC, we recognized a $3.6 million loss from the early extinguishment of debt, which is reported separately within our statement of operations. This loss primarily represents the unamortized debt discount and deferred financing costs at the time of repayment and a prepayment penalty of $0.8 million. In 2017, we amended our credit agreement with AMC (see Liquidity and Capital Resources below) and recorded a gain of $0.3 million. The gain was a result of us recording the new amended debt at an amount that was slightly less than its current carrying amount.

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Other Income (Expense)

        Other expense mostly consists of foreign currency gains and losses resulting primarily from advances and loans by our U.S. subsidiaries to our foreign subsidiaries that have not yet been repaid. Our foreign currency gains and losses are primarily impacted by changes in the exchange rate of the British Pound Sterling (or the Pound) relative to the U.S. dollar (or the Dollar). As the Pound strengthens relative to the Dollar, we recognized other income; and as the Pound weakens relative to the Dollar, we recognize other expense. During 2017, the Pound strengthened relative to the dollar, and we recognized a foreign currency gain of $0.6 million. During 2016, the Pound weakened relative to the dollar, and we recognized foreign currency loss of $1.5 million.

Income Taxes

        We have fully reserved our net U.S. deferred tax assets, and such tax assets may be available to reduce future income taxes payable should we have U.S. taxable income in the future. To the extent such deferred tax assets relate to net operating losses (or NOL) carryforwards, the ability to use our NOL carryforwards against future earnings will be subject to applicable carryforward periods and limitations subsequent to a change in ownership. As of December 31, 2017, we had NOL carryforwards for federal and state income tax purposes of approximately $113.6 million and $61.0 million, respectively.

        We recorded income tax benefit (benefit) of $(0.8) million and $0.2 million for the years ended December 31, 2017 and 2016, respectively. As revised, our tax provision (benefit) consists primarily of a deferred tax provision (benefit) for certain deferred tax liabilities and a current tax provision for our U.K. operations. We are recording a deferred tax provision (benefit) and liability on our equity earnings of affiliate (ACL) less distributions received. These undistributed earnings will be taxable in the U.K., when and if we dispose of our investment. We are providing current income tax expense on pre-tax income from our consolidated U.K. subsidiaries at an effective tax rate of approximately 19%. We are not providing a current tax provision (benefit) on our U.S. operations, other than for certain state minimum taxes, which are not material.

Loss from Discontinued Operations, Net of Income Taxes

        Our loss from discontinued operations is attributable to us transitioning our U.S. catalog/ecommerce business to USA, which was completed during 2016. For the year ended December 31, 2016, our loss from discontinued operations was $3.3 million. Revenues from discontinued operations were $7.8 million for the year ended December 31, 2016.

Adjusted EBITDA

        Management defines Adjusted EBITDA as earnings before income tax, depreciation and amortization, non-cash royalty expense, interest expense, non-cash exchange gains and losses on intercompany accounts, goodwill impairments, restructuring costs, change in fair value of stock warrants and other derivatives, stock-based compensation, basis-difference amortization in equity earnings of affiliate and dividends received from affiliate in excess of equity earnings of affiliate.

        Management believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material non-cash items that allows investors to analyze the operating performance of the business using the same metric management uses. The exclusion of non-cash items better reflects our ability to make investments in the business and meet obligations. Presentation of Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. Management uses this measure to assess operating results and performance of our business, perform analytical

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comparisons, identify strategies to improve performance and allocate resources to our business segments. While management considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with US GAAP. Not all companies calculate Adjusted EBITDA in the same manner and the measure, as presented, may not be comparable to similarly-titled measures presented by other companies.

        The following table includes the reconciliation of our consolidated US GAAP net loss to our consolidated Adjusted EBITDA:

 
  Years Ended
December 31,
 
(In thousands)
  2017   2016  

Net loss

  $ (5,695 ) $ (21,508 )

Interest expense

    8,622     8,400  

Provision (benefit) for income tax

    803     (211 )

Depreciation and amortization

    3,705     2,957  

Basis-difference amortization in equity earnings of affiliate

    460     484  

Change in fair value of stock warrants and other derivatives

    3,922     4,573  

Stock-based compensation

    1,841     1,010  

Restructuring

    249     5,938  

Loss from discontinued operations

        3,277  

Foreign currency exchange loss on intercompany accounts

    (591 )   1,487  

Non-cash royalty expense

    3,234     6,681  

Adjusted EBITDA

  $ 16,550   $ 13,088  

        Adjusted EBITDA increased by $3.5 million for the year ended December 31, 2017 compared to the same period in the prior year. The increase reflects our improved operating results from continuing operations after adjusting for the above non-cash expenses. The improved performance primarily results from the growth of our Digital Channels segment, which is becoming a larger portion of our business and is contributing a higher profit margin. Adjusted EBITDA also improved due to the improved performance of our investment in ACL during the fiscal year ended December 31, 2017 as compared to the same period in December 31, 2016. The 2017 restructuring adjustment primarily includes our net gain on extinguishment of debt, certain non-recurring transaction costs totaling $0.3 million, a legal settlement of $0.2 million and severance payments totaling $0.2 million. The 2016 restructuring adjustment includes our loss on extinguishment of debt and related transaction costs. The adjustment also includes severance payments and related expenses totaling $2.1 million, which consist entirely of personnel costs that have been eliminated as a result of our restructuring activities.

BALANCE SHEET ANALYSIS

Assets

        Total assets at December 31, 2017 and 2016, were $151.8 million and $140.8 million, respectively. The increase of $11.0 million in assets is primarily attributed to increases in investments in content of $9.8 million, equity investment in ACL of $5.1 million and increase in accounts receivable of $0.6 million offset by decreases in other intangible assets of $1.6 million, cash of $1.6 million and inventories of $1.3 million. The decrease in cash is primarily due to increased investments in content and increased royalty payments offset by the expansion of our debt, which generated about $9.3 million of cash, and cash dividends received from ACL of $2.5 million. Our equity investment in ACL primarily increased due to improved operating performance. Our accounts receivable increased largely due to the growth of revenues from our Digital Channels segment.

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        A summary of assets by segment is as follows:

 
  December 31,  
(In thousands)
  2017   2016  
 
  (Revised)(1)
 

Digital Channels

  $ 11,148   $ 5,941  

IP Licensing

    23,981     18,648  

Wholesale Distribution

    109,178     107,565  

Corporate

    7,473     8,643  

Total Assets

  $ 151,780   $ 140,797