EXHIBIT 10.3

STOCK OPTION AGREEMENT

as of December 23, 2010

The parties to this Non-Statutory Stock Option Agreement (this “Agreement”) are
Cinedigm Digital Cinema Corp. (the “Company”), a Delaware corporation, and
Christopher J. McGurk (the “Optionee”), an employee of the Company.

The Company desires to have the Optionee serve as an employee of the Company and
to provide the Optionee with an incentive to put forth maximum effort for the
success of the business.

This Agreement sets forth the terms and conditions applicable to options to
purchase shares of the Class A Common Stock of the Company, par value $0.001 per
share (the “Common Stock”), granted to the Optionee as of the date first above
written (the “Grant Date”).

Accordingly, intending to be legally bound hereby, the parties agree as follows:

ARTICLE I
Definitions

The following definitions shall apply for purposes of this Agreement:

1.1           “Board” shall mean the Board of Directors of the Company.

1.2           A “Change in Control” of the Company shall be deemed to occur upon
any of the following events:

(a)           the acquisition in one or more transactions by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), other than any beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of beneficial ownership of in excess of
fifty percent (50%) of the then-outstanding Company Voting Securities (as
defined below) (on a fully diluted basis); provided, however, that the term
“Change in Control” shall not include any such acquisition by any entity with
respect to which, following such acquisition, more than 50% of the
then-outstanding shares of voting stock of such entity is then  beneficially
owned, directly or indirectly, by individuals and entities who were beneficial
owners of the then-outstanding Company Voting Securities (and/or options,
warrants or other rights to acquire Company Voting Securities) immediately prior
to such acquisition in substantially the same proportion as their ownership
immediately prior to such acquisition of the then-outstanding Company Voting
Securities (and/or options, warrants or other rights to acquire Company Voting
Securities); or

 
 

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(b)           the consummation of a Merger unless, following such Merger, stock
possessing at least fifty percent (50%) of the total combined voting power of
the issued and outstanding shares of all classes of Company Voting Securities of
the corporation resulting from such Merger is beneficially owned, directly or
indirectly, by individuals and entities who were beneficial owners of the
then-outstanding Company Voting Securities immediately prior to such Merger in
substantially the same proportion as their ownership immediately prior to such
Merger; or

(c)           individuals who are members of the Board as of the Grant Date (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
the members of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose appointment to the Board
or nomination for election by the Company was approved by a vote of at least a
majority of the Incumbent  Directors then in office (unless such appointment or
election was at the request of an unrelated third party who has taken steps
reasonably calculated to result in a Change in Control as described in
paragraphs (a) or (b) of this Section 1.2 and who has indicated publicly an
intent to seek control of the Company) shall be treated from the date of his
appointment or election as an Incumbent Director; or

(d)           consummation of a complete liquidation or dissolution of the
Company.

For purposes of this Section 1.1, “Company Voting Securities” shall mean the
combined voting power of all outstanding classes of common stock of the Company
and all other outstanding securities of the Company entitled to vote generally
in the election of directors of the Company.

1.3           “Committee” shall mean the Compensation Committee of the Board or
such other Committee appointed by the Board for the purpose of administering
this Option comprised solely of two or more members of the Board who qualify as
“non-employee” directors within the meaning of Rule 16b-3 under the Exchange
Act, as “outside” directors within the meaning of § 162(m) of the Code, and as
“independent” directors within the meaning of NASDAQ Rule 4200(b)(15).

1.4           “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

1.5           “Market Price” shall mean the closing price of Common Stock as
reported on the Nasdaq Global Market or such other primary market or exchange on
which the Common Stock may, from time to time, trade, on the date for which a
Market Price is to be determined under this Agreement.

1.6           “Merger” shall mean any merger, reorganization, consolidation,
share exchange, transfer of assets or other transaction having similar effect
involving the Company.
 
 
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ARTICLE II
Grant of Options

2.1           Subject to the terms and conditions of this Agreement, the Company
hereby grants to the Optionee as of the Grant Date, the right and option to
purchase from the Company up to, but not exceeding in the aggregate, 4,500,000
shares of Common Stock, at the option prices listed in Section 2.2 (the
“Options”), and for the period beginning on the Grant Date and ending on
December 23, 2020 (the “Option Term”).  The Options are non-statutory stock
options.

2.2           The Options shall be granted in three tranches as
follows:  1,500,000 of the Options (“First Tranche”) shall have an exercise
price of $1.50 per share; 2,500,000 of the Options (“Second Tranche”) shall have
an exercise price of $3.00 per share; and the remaining 500,000 Options (“Third
Tranche”) shall have an exercise price of $5.00 per share.

2.3           The Options shall be subject to the terms and conditions of this
Agreement.

ARTICLE III
Vesting, Exercise and Tax Withholding

3.1           (a)           Unless sooner terminated pursuant to this Agreement,
the Options granted to the Optionee hereunder shall vest as described in this
Section 3.1 and Section 3.2.  On and after the date Options have vested, they
may be exercised at any time and from time to time during the Option Term,
subject to earlier termination in accordance with Article IV.  Upon the
termination of any of the Options pursuant to Article IV, the Options so
terminated shall cease to be exercisable and the Optionee shall have no further
rights under this Agreement with respect to the Options so terminated.

(b)           The Options shall vest on the earliest to occur of the Vesting
Date, as defined below, the death of the Optionee, or a Change in Control,
provided the Optionee remains an employee of the Company through the relevant
date.  For purposes of the preceding sentence, the Vesting Date shall be:

(i)           the first anniversary of the Grant Date, with respect to one-third
of the Options in each of the First Tranche, the Second Tranche and the Third
Tranche;

(ii)           the second anniversary of the Grant Date, with respect to one
half of the remaining Options in each of the First Tranche, the Second Tranche
and the Third Tranche;and

(iii)           the third anniversary of the Grant Date, with respect to the
remaining Options in each of the First Tranche, the Second Tranche and the Third
Tranche.

 
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3.2           The Company, in its sole discretion, shall have the right (but
shall not in any case be obligated), exercisable at any time after the Grant
Date, to vest the Options, in whole or in part, prior to the time the Options
would otherwise vest under the terms of this Agreement.

3.3           (a)           Vested Options shall be exercised by the Optionee by
delivering to the Company a Notice in the form set forth as Exhibit A hereto,
along with payment of the exercise price (in one of the forms set forth in
subparagraph (b) hereof) as well as payment of the applicable withholding taxes
(as described in Section 3.4).
 

(b)           The exercise price for the Option shall be paid by the Optionee
within ten (10) business days after the date of exercise, and may be paid:
 
(i)           in cash;

(ii)           in whole shares of Common Stock of the Company owned by the
Optionee prior to exercising the Option;

(iii)           by having the Company withhold shares that otherwise would be
delivered to the Optionee pursuant to the exercise of the Option in an amount
equaling in value the exercise price;

(iv)           in a combination of either cash and delivery of shares, or cash
and withholding of shares; or

(v)           by whatever other means the Committee may deem appropriate, other
than by a loan by the Company to the Optionee.

3.4           The Company shall notify the Optionee of the amount of withholding
tax or other tax, if any, that must be paid under federal and, where applicable,
state and local law in connection with the exercise of the Options or the sale
of  shares of Common Stock subject to the Options.  The Optionee shall meet his
withholding requirement (i) by direct payment to the Company in cash of the
amount of any taxes required to be withheld with respect to such exercise, or
(ii) by delivering to the Company other shares of Common Stock of the Company
owned by the Optionee prior to exercising the Option;  (iii)by making a payment
to the Company consisting of a combination of cash and such shares of Common
Stock; or (iv) if the exerciser is the Optionee, by having the Company withhold
shares that otherwise would be delivered to the Optionee pursuant to the
exercise of the Option for which the tax is being withheld, provided that
withholding by such method shall be limited to the minimum required applicable
tax withholding.  Such an election shall be made in such manner as may be
prescribed by the Committee and the Committee shall have the right, in its
discretion, to disapprove such election.  Any such election must be made prior
to the date to be used to determine the tax to be withheld and shall be
irrevocable.  The value of any share of Common Stock to be withheld by the
Company or delivered to the Company pursuant to this Section 3.4 shall be the
Market Price on the date used to determine the amount of tax to be withheld.

 
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ARTICLE IV
Termination of Employment

4.1           In the event of the termination of employment of the Optionee by
the Optionee or the Company for any reason whatsoever other than death or
permanent disability (as defined in Section 4.2), any Options that were vested
prior to the date of such termination (and which were not previously exercised),
together with any other Options designated in writing by the Committee, shall
terminate on the earliest of (i) ninety (90) days after the date of such
termination, or (ii) the last day of the Option Term.  Any Options that were not
vested prior to the date of such termination and do not become vested pursuant
to the immediately preceding sentence shall terminate as of the date of such
termination and shall not be exercisable at any time thereafter.

4.2           In the event of the termination of the employment of the Optionee
by reason of death or permanent disability, any Options that are vested (and
which were not previously exercised), together with any other Options designated
in writing by the Committee, shall terminate on the earliest of (i) one hundred
eighty (180) days after the date of such termination, or (ii) the last day of
the Option Term.  Any Options that were not vested prior to the date of such
termination and do not become vested pursuant to the immediately preceding
sentence shall terminate as of the date of such termination and shall not be
exercisable at any time thereafter.  As used in this Agreement, the term
“permanent disability” means the Optionee being deemed to have suffered a
disability that makes the Optionee eligible for immediate benefits under any
long-term disability plan of the Company, as in effect from time to time.

4.3           In the event of termination of employment, the Company, in its
sole discretion, shall have the right (but shall not in any case be obligated),
exercisable on or at any time after the Grant Date, to permit an Option to be
exercised, in whole or in part, after the dates described in Sections 4.1 and
4.2, but not after the expiration of the Option Term.

4.4           In the event of a Change in Control, all Options outstanding on
the date of such Change in Control that have not previously vested or terminated
under the terms of this Agreement shall become immediately and fully
exercisable.  Notwithstanding the foregoing, unless otherwise determined by the
Board, no change in control of the Company shall be deemed to have occurred for
purposes of determining a Participant's rights under this Agreement if (i) the
Optionee is a member of a group that first announces a proposal which, if
successful, would result in a Change in Control, which proposal (including any
modifications thereof) is ultimately successful, or (ii) the Optionee acquires a
two percent or more equity interest in the entity that ultimately acquires the
Company pursuant to the transaction described in clause (i) of this Section 4.4.
 In the case of termination by the Optionee or the Company of the Optionee’s
employment within two (2) years after a Change in Control, unless such
termination of employment is for cause, the Options shall remain exercisable
during a three-year period commencing on the effective date of termination.

 
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ARTICLE V
Miscellaneous

5.1           The number and kind of shares subject to outstanding Options and
the option price for such shares shall be appropriately adjusted to reflect any
stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Options.  The Company shall have the power and sole discretion
to determine the amount of the adjustment to be made in each case.

5.2           In the event of a Merger in which the Company is not the surviving
corporation or pursuant to which a majority of the shares which are of the same
class as the shares that are subject to outstanding Options are exchanged for,
or converted into, or otherwise become shares of another corporation or other
consideration, the Committee shall have the sole discretion to determine that
(i) the surviving, continuing, successor or purchasing corporation, as the case
may be (the “Acquiring Corporation”), will either assume the Company's rights
and obligations under this Option Agreement or substitute awards in respect of
the Acquiring Corporation's stock for outstanding Options or (ii) the
outstanding Options shall be cancelled in exchange for such consideration as the
Committee shall approve (based on the value of the consideration received in the
Merger by holders of the same class of shares that are subject to outstanding
Options).

5.3           After any Merger in which the Company shall be a surviving
corporation, the Company may grant substituted options, replacing old options
granted under a plan of another party to the Merger whose shares or stock
subject to the old Options may no longer be issued following the Merger.  The
foregoing adjustments and manner of application of the foregoing provisions
shall be determined by the Company in its sole discretion.  Any such adjustments
may provide for the elimination of any fractional shares which might otherwise
become subject to any Options.

5.4           Nothing contained in this Agreement shall be deemed to confer upon
the Optionee, in his capacity as a holder of Options, any right to prevent or to
approve or vote upon any of the corporate actions described in this Article
V.  The existence of the Options granted hereunder shall not affect in any way
the right or the power of the Company or its shareholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company’s capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

5.5           Whenever the term “the Optionee” is used in any provision of this
Agreement under circumstances where the provision should logically be construed
to apply to the executors, the administrators, or the person or persons to whom
Options may be transferred by will or by the laws of descent and distribution,
the term “the Optionee” shall be deemed to include such person or persons.

 
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5.6           The Options granted hereunder are not transferable by the Optionee
otherwise than by will or the laws of descent and distribution and are
exercisable during the Optionee’s lifetime only by him or her.  No assignment or
transfer of the Options granted hereunder, or of the rights represented thereby,
whether voluntary or involuntary, by the operation of law or otherwise (except
by will or the laws of descent and distribution), shall vest in the assignee or
transferee any interest or right herein whatsoever, but immediately upon any
such assignment or transfer the Options shall terminate and become of no further
effect.

5.7           The Optionee shall not be deemed for any purpose to be a
shareholder of the Company in respect of any shares as to which the Options
shall not have been exercised as herein provided.

5.8           Nothing in this Agreement shall confer upon the Optionee any right
to continue in the employ of the Company or shall affect the right of the
Company to terminate the employment of the Optionee, with or without cause.

5.9           Nothing in this Agreement or otherwise shall obligate the Company
to vest any of the Options, to permit the Options to be exercised other than in
accordance with the terms hereof or to grant any waivers of the terms of this
Agreement, regardless of what actions the Company, the Board or the Committee
may take or waivers the Company, the Board or the Committee may grant under the
terms of or with respect to any options now or hereafter granted to any other
person or any other options granted to the Optionee.

5.10           Notwithstanding any other provision hereof, the Optionee shall
not exercise the Options granted hereunder, and the Company shall not be
obligated to issue any shares to the Optionee hereunder, if the exercise thereof
or the issuance (or such purchase) of such shares would constitute a violation
by the Optionee or the Company of any provision of any law or regulation of any
governmental authority.  Any determination in this connection by the Company
shall be final and binding.  The Company shall in no event be obligated to
register any securities pursuant to the Securities Act of 1933 (as the same
shall be in effect from time to time) or to take any other affirmative action in
order to cause the exercise of the Options or the issuance of shares pursuant
thereto to comply with any law or regulation of any governmental authority.

5.11           No amounts of income or other benefits received by the Optionee
pursuant to this Agreement shall be considered compensation for purposes of any
pension or retirement plan, insurance plan or any other employee benefit plan of
the Company unless otherwise provided in such plan.

5.12            Every notice or other communication relating to this Agreement
shall be in writing and shall be mailed to or delivered to the party for whom it
is intended at such address as may from time to time be designated by it in a
notice mailed or delivered to the other party as herein provided; provided,
however, that unless and until some other address be so designated, all notices
or communications by the Optionee to the Company shall be mailed or delivered to
the Company at its office at 55 Madison Avenue, Morristown, New Jersey  07960
and all notices
 
 
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or communications by the Company to Optionee may be given to the Optionee
personally or may be mailed to him or her.

5.13           This Agreement shall be governed by the laws of the State of
Delaware applicable to agreements made and performed wholly within the State of
Delaware (regardless of the laws that might otherwise govern under applicable
conflicts of laws principles).

5.14           As used in this Agreement, unless the context otherwise requires
(i) references to “Articles” or “Sections” are to articles or sections of this
Agreement, (ii) “hereof”, “herein”, “hereunder” and comparable terms refer to
this Agreement in its entirety and not to any particular part of this Agreement,
(iii) references to any gender include references to all genders, (iv)
“including” means including without limitation, and (v) headings of the various
articles and sections are for convenience of reference only.

5.15           The Optionee agrees and acknowledges that he or she shall be
obligated to cooperate with the Company and the underwriters in connection with
any public offering of the Company’s securities and any transactions relating
thereto and shall execute and deliver such agreements and documents, including
without limitation, a lock-up agreement, as may be requested by the Company or
the underwriters.  The Optionee’s obligations under this Section 5.15 shall
apply to any shares of Common Stock issued to him as well as to any and all
other securities of the Company or its successor for which such Common Stock may
be exchanged or into which such Common Stock may be converted.

5.16           This Agreement sets forth a complete understanding between the
parties with respect to its subject matter and supersedes all prior and
contemporaneous agreements and understandings with respect thereto.  Except as
expressly set forth in this Agreement, the Company makes no representations,
warranties or covenants to the Optionee with respect to this Agreement or its
subject matter, including with respect to (i) the current or future value of the
shares subject to the Options and (ii) whether the option price is equal to,
less than or greater than the fair market value of a share of Common Stock.  Any
modification, amendment or waiver to this Agreement will be effective only if it
is in writing signed by the Company and the Optionee.  The failure of any party
to enforce at any time any provision of this Agreement shall not be construed to
be a waiver of that or any other provision of this Agreement.

5.17           This Option shall be administered and interpreted solely by the
Committee or its delegated agent.  The interpretations and decisions of the
Committee with regard to this Option shall be final and conclusive and binding
upon the Optionee.

5.18           In the event of the Optionee’s death while the Options remain
exercisable, the Options may be exercised by the Optionee’s beneficiary as
designated on file with the Company, or, in the absence of such a beneficiary
designation (or if the beneficiary has pre-deceased the Optionee), by will or
the laws of descent and distribution (in which case the Company without
liability to any other person, may rely on the directions of the executor or
administrator of the Optionee’s estate with respect to the disposition or
exercise of such options).

 
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5.19           The Committee may require, upon exercise, payment or delivery
pursuant to the Option, that the Optionee certify in a manner acceptable to the
Company that he or she is in compliance with the terms and conditions of this
Agreement.

5.20           It is the intent that this Agreement comply in all respects with
Rule 16b-3 under the Exchange Act and any related regulations.  If any provision
of this Agreement is later found not to be in compliance with such Rule and
regulations, the provisions shall be deemed null and void.  This grants and
exercises of the Option under this Agreement shall be executed in accordance
with the requirements of Section 16 of the Exchange Act and regulations
promulgated thereunder.

 
 
[SIGNATURE PAGE TO FOLLOW]

 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 
CINEDIGM DIGITAL CINEMA CORP.
         
By:_/s/ Gary S. Loffredo______________________________
 
Name:  Gary S. Loffredo
 
Title:  SVP - General Counsel
         
OPTIONEE:
     
  /s/ Christopher J. McGurk____________________________
 
            Christopher J. McGurk

 
 
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EXHIBIT A

EXERCISE OF STOCK OPTION

Pursuant to the provisions of the Stock Option Agreement entered into as of
December __, 2010  between Cinedigm Digital Cinema Corp. (the “Company”) and
Christopher J. McGurk, Optionee (the “Agreement”), I hereby exercise the Stock
Option granted under the terms of the Agreement to the extent of _____ shares of
the Common Stock of the Company (the “Shares”).  I deliver to the Company
herewith the following in payment for the Shares:
 
Method of Payment (check one of the following):
o
I have enclosed $_________________  in full payment for the option shares and
any applicable withholding.
OR
 
o
I have enclosed stock certificate no(s) _____________ together with stock powers
endorsed to the Company, representing ____________ shares of the Company’s
Common Stock.
OR
 
o
I have given irrevocable instructions to a broker to deliver prompt payment of
the exercise price for the option shares and any applicable withholding.
OR
 
o
A combination of the above methods or other form of payment approved by the
Committee (describe):
______________________________________________________________________________________________________________________
 
 

 
 
 
Date:
             
Optionee
                                     
Address
                                     
Social Security Number