Kartoon Studios Inc

This proposal asks shareholders to approve an amendment to the Company’s 2020 Incentive Plan to add 4,000,000 shares to the plan reserve, increasing the total available shares for award issuance. Management and the Compensation Committee are seeking shareholder approval both to comply with NYSE American listing rules and to preserve tax-favored treatment for incentive stock options under Section 422 of the Internal Revenue Code. The filing explains that the Company’s equity overhang and available shares have been monitored and that, as of the record date, only a limited number of shares remained available for future grants; management argues that additional shares are necessary to attract, retain and motivate employees, consultants and directors through long-term, equity-based incentives. The amendment is presented in the form of a charter amendment (Appendix A) that explicitly increases Section 4.1(a) to reflect the higher share ceiling. Board support is unanimous and framed as essential to maintain competitive compensation practices and align management and stockholder interests. The proposal is material to dilution, and the proxy discloses burn rate and overhang metrics to contextualize potential future dilution and grant activity. Approval requires a majority of votes cast, and management also notes that the Compensation Committee will continue to manage grant pacing and monitor dilution metrics. Given the plan’s broad grant authority (options, RSUs, SARs, performance awards), shareholders should evaluate the request relative to the Company’s hiring needs, historic grant activity, outstanding unvested awards, and potential dilution versus competitive imperatives. If approved, the amended Plan will permit continued equity-based incentives but also increases the pool from which senior executives and directors may receive awards, highlighting the governance trade-off between retention incentives and shareholder dilution.

This advisory proposal asks shareholders to indicate whether they support the Company’s disclosed compensation for its named executive officers. Management is seeking a non-binding endorsement of pay practices that include base salaries, discretionary and performance bonuses, and substantial RSU grants disclosed in the Summary Compensation Table and narrative, including recently negotiated multi-year employment agreements for the CEO and certain other executives. The advisory vote is not binding, but the Board and Compensation Committee state that they value shareholder feedback and will consider the results when designing future compensation policies. Important context includes large equity awards (e.g., RSU grants discussed for the CEO and COO), pay-versus-performance disclosures, and a Board policy to hold say-on-pay votes every three years (the next advisory vote on frequency is scheduled for 2029). Shareholders should consider whether the structure of pay—mix of salary, cash bonuses tied to market cap and net income targets, and equity awards with multi-year vesting and performance conditions—appropriately aligns executives’ incentives with long-term shareholder value. The Company highlights that the say-on-pay vote is intended to address overall compensation philosophy rather than discrete components, and that an unfavorable vote would prompt the Compensation Committee to evaluate potential changes. Given the advisory nature and the Board’s commitment to review results, the primary practical effect of a negative vote would be reputational pressure and follow-up engagement rather than automatic contractual changes.

This procedural proposal requests authority to adjourn the Annual Meeting one or more times to continue soliciting proxies if there are not enough votes to approve the Incentive Plan Increase Proposal at the time of the meeting. Management seeks this flexibility to avoid a failed vote on the 2020 Plan amendment and to allow time for additional outreach to institutional or retail holders, recognizing that broker non-votes and the classification of the Incentive Plan Increase Proposal as non-routine may limit votes cast. The adjournment mechanism is common in situations where management believes additional solicitation may change the outcome and would permit revocation and resubmission of proxies prior to re-voting. From a governance perspective, shareholders should weigh the reasonableness of management’s desire to continue solicitation against any perception that management is seeking multiple opportunities to obtain approval of a dilutive measure. The Board recommends the adjournment only as a contingency and states it will not seek adjournment if Proposal 3 is approved at the meeting. Approval requires a majority of votes cast and, if granted, could lead to one or more future meetings or continuation dates. Opponents may view the adjournment as a tactic to circumvent an unfavorable immediate outcome, while proponents will view it as prudent to ensure adequate consideration and quorum to decide a material compensation and dilution matter. Voting for this proposal preserves management’s optionality to continue outreach and obtain an outcome favorable to the Company without reopening other agenda items unnecessarily.