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Item 1.01. |
Entry into a Material Definitive Agreement |
On August 11, 2009, Access Integrated Technologies, Inc. d/b/a Cinedigm Digital Cinema Corp. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with an affiliate of Sageview Capital LP (the “Purchaser”) pursuant to which the Company agreed to issue a Senior Secured Note
(the “2009 Note”) in the aggregate principal amount of $75,000,000 and warrants (the “Warrants”) to purchase 16,000,000 shares of its Class A Common Stock (the “Class A Common Stock”) (the “Private Placement”). The proceeds of the Private Placement will be used for the repayment of existing indebtedness of the Company and one of its subsidiaries, the funding of a cash reserve to pay the cash interest amount required under the 2009 Note for the first two
years, the payment of fees and expenses incurred in connection with the Private Placement and related transactions, and other general corporate purposes. The Private Placement was consummated on August 11, 2009.
The 2009 Note has a term of five years, which may be extended for up to one 12 month period at the discretion of the Company if certain conditions set forth in the 2009 Note are satisfied. Subject to certain adjustments set forth in the 2009 Note, interest on the 2009 Note is 8% per annum to be accrued as an increase in the aggregate
principal amount of the 2009 Note and 7% per annum paid in cash. The cash interest rate will increase to 12% if the Company does not obtain the approval of its stockholders of certain terms of the Private Placement by December 31, 2009 and further to 17% if such approval is not obtained by March 31, 2010 but any such increase will be eliminated if and when stockholder approval has been obtained with respect to the removal of certain limitations set forth in the Warrants as described below and the appointment
of a second designee of the Purchaser to the Company’s board of directors (collectively, the “Stockholder Approvals”).
The Company may prepay the 2009 Note (i) during the initial 18 months of their term, in an amount up to 20% of the original principal amount of the 2009 Note plus accrued and unpaid interest without penalty and (ii) following the second anniversary of issuance of the 2009 Note, subject to a prepayment penalty equal to 7.5% of the principal
amount prepaid if the 2009 Note is prepaid prior to the three year anniversary of their issuance, a prepayment penalty of 3.75% of the principal amount prepaid if the 2009 Note is prepaid after such third anniversary but prior to the fourth anniversary of their issuance and without penalty if the 2009 Note is prepaid thereafter, plus cash in an amount equal to the accrued and unpaid interest amount with respect to the principal amount through and including the prepayment date. The Company is obligated
to offer to redeem all or a portion of the 2009 Note upon the occurrence of certain triggering events described in the 2009 Note. Subject to limited exceptions, the Purchaser may not assign the 2009 Note until the earliest of (a) August 11, 2011, (b) the consummation of a change in control as defined in the 2009 Note or (c) an event of default as defined under the Notes.
The Purchase Agreement also requires the 2009 Note to be guaranteed by each of the Company’s existing and future subsidiaries, other than Access Digital Media, Inc. (“AccessDM”), Christie/AIX, Inc. (“C/AIX”) and its subsidiaries and Access Digital Cinema Phase 2, Corp. and its subsidiaries and subsidiaries formed
after August 11, 2009 which are primarily engaged in the financing or deployment of digital cinema equipment (the "Guarantors"), and that the Company and each Guarantor pledge substantially all of their assets to secure payment on the 2009 Note, except that AccessDM and C/AIX are not required to become Guarantors until such time as certain indebtedness is paid off. Accordingly, the Company and each of the Guarantors entered into a guarantee and collateral agreement (the “Guarantee and Collateral
Agreement”) pursuant to which each Guarantor guaranteed the obligations of the Company under the 2009 Note and the Company and each Guarantor pledged substantially all of their assets to secure such obligations.
The Warrants contain a customary cashless exercise provision and become exercisable upon the earliest of receipt of the Stockholder Approvals, the date of the third meeting of stockholders at which the Stockholder Approvals are sought or February 11, 2011 and expire on August 11,
2016 (subject to
extension in limited circumstances). The exercise price of the Warrants is $1.37, subject to certain customary anti-dilution adjustments (certain of which will apply only after the applicable Stockholder Approval has been obtained). Subject to certain exceptions, the Warrants also contain a limitation on exercise that
prohibits, prior to obtaining the applicable Stockholder Approval to remove such restriction, the exercise of any warrant to the extent that such exercise would result in a warrant holder (or group including such warrant holder) having aggregate voting power on a matter being voted on by holders of the Company’s common stock that exceeds 19.99% of the total number of votes that may be cast in respect of all capital stock of the Company on such matter or having beneficial ownership of more than 19.99% of
the then outstanding common stock of the Company. Subject to limited exceptions, the Warrants and Warrant Shares may not be assigned by the Purchaser until the earliest of August 11, 2011, the consummation of a change in control as defined in the Warrants or an event of default under the 2009 Note.
The Company also entered into a Registration Rights Agreement with the Purchaser pursuant to which the Company agreed to register the resale of the Warrants and any shares of Class A Common Stock issued upon exercise of the Warrants from time to time in accordance with the terms of the Registration Rights Agreement.
On August 11, 2009, in connection with the Private Placement, the Purchaser agreed with the Company that, subject to limited exceptions, the Purchaser and its affiliates would not, without the Company’s consent, acquire, offer to acquire or join or participate in any group, as defined in Rule 13d-3 of the Securities Exchange Act of 1934,
as amended, that would result in Purchaser and its affiliates beneficially owning more than 42.5% of the Class A Common Stock and the Company’s Class B Common Stock outstanding. This agreement will terminate upon the earliest of August 11, 2011, a change of control, as defined in such standstill agreement, an event of default, as defined in the Notes and the date when the Purchaser and its affiliates own less than 10% of the outstanding Class A Common Stock and the Company’s Class B Common
Stock.
On August 11, 2009, in connection with the consummation of the Private Placement, the Company entered into and consummated purchase agreements (the “Note Purchase Agreements”) with the holders of all of its outstanding 10% Senior Notes (the “2007 Senior Notes”) pursuant to which the Company purchased all of the 2007
Senior Notes, in satisfaction of the principal and any accrued and unpaid interest thereon, for an aggregate purchase price of $42,500,000 in cash. The source of such aggregate cash payment was the proceeds of the Private Placement. Upon such purchase, the 2007 Senior Notes were canceled.
The Purchase Agreement, Note Purchase Agreement, 2009 Note, Warrants, Registration Rights Agreement and Guarantee and Collateral Agreement contain representations, warranties, covenants and events of default as are customary for transactions of this type and nature.
The Company also entered into an agreement (the “Aquifer Agreement”) with Aquifer Capital Group, LLC (“Aquifer Capital”) pursuant to which Aquifer provided financial advisory services to the Company in connection with the purchase of the 2007 Senior Notes in exchange for the issuance of 200,000 shares of Class A Common
Stock to designees of Aquifer Capital. The Aquifer Agreement also contained customary indemnification provisions.
On August 11, 2009, in connection with the Private Placement, C/AIX entered into a fifth amendment (the “Fifth Amendment”) to the credit agreement, dated August 1, 2006, among C/AIX, the lenders party thereto and General Electric Capital Corporation, as administrative agent and collateral agent for such lenders (as amended,
the “Credit Agreement”). Pursuant to the Fifth Amendment, $5,000,000 of the proceeds of the sale of the 2009 Note were used by the Company to purchase capital stock of AccessDM, which in turn used such amount to purchase capital stock of C/AIX, which in turn used such amount to fund a prepayment with respect to the Credit Agreement, with such prepayment being applied ratably to
each of the first 24 successive regularly scheduled monthly amortization payments due under the Credit Agreement after the closing of the Private Placement. Such shares of capital stock of C/AIX that were issued to Access DM were pledged in support of the Credit Agreement pursuant to a Pledge Amendment (the “Pledge Amendment”).
In connection with the Private Placement, the Company engaged Imperial Capital, LLC (“Imperial”) to provide financial advisory services. As partial consideration for such services, the Company issued warrants to Imperial to purchase 750,000 shares of Class A Common Stock (the “Imperial Warrants”). The
Imperial Warrants have a customary cashless exercise feature, a strike price of $1.37 per share, become exercisable on February 11, 2010 and expire on August 11, 2014. In connection with the issuance of the Imperial Warrants, the Company and Imperial entered into a registration rights agreement (the “Imperial Registration Rights Agreement”) pursuant to which the Company agreed to register the shares of Class A Common Stock underlying the Imperial Warrants from time to time in accordance
with the terms of the Imperial Registration Rights Agreement.
On August 11, 2009, the Company issued the press release attached hereto as Exhibit 99.1 and incorporated herein by reference.
The foregoing descriptions of the Purchase Agreement, Note Purchase Agreements, 2009 Note, Warrants, Registration Rights Agreement, Guarantee and Collateral Agreement, Aquifer Agreement, Fifth Amendment, the Pledge Amendment, the Imperial Warrants and the Imperial Registration Rights Agreement are qualified in their entirety by reference to
such agreements, which are filed herewith as Exhibit 2.1, Exhibit 2.2, Exhibit 2.3, Exhibit 2.4, Exhibit 4.1, Exhibit 4.2, Exhibit 4.3, Exhibit 10.1, Exhibit 10.4, Exhibit 10.2, Exhibit 4.6, Exhibit 4.4, Exhibit 4.5, respectively.
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Item 2.03. |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant |
On August 11, 2009, the Company issued the 2009 Note pursuant to which the Company borrowed $75,000,000 (the “Borrowing”). The terms of the Borrowing, including the maturity, interest payment terms and use of proceeds, are described more fully in Item 1.01 above and the 2009 Note, which are incorporated by reference
herein.
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Item 3.02. |
Unregistered Sales of Equity Securities |
On August 11, 2009, the Company issued the following equity securities in connection with the Private Placement and the purchase of the 2007 Senior Notes as described in Item 1.01 above: (i) warrants to purchase 16,000,000 shares of Class A Common Stock to the Purchaser; (ii) warrants to purchase 750,000 shares of Class A Common
Stock to Imperial Capital as payment for financial services; and (iii) 200,000 shares of Class A Common Stock to designees of Aquifer Capital for financial advisory services pursuant to the Aquifer Agreement. The full description of the Private Placement and the repurchase of the 2007 Senior Notes under Item 1.01 above is incorporated by reference herein. All such equity securities were issued in reliance upon applicable exemptions from registration under Section 4(2) and Regulation D of the Securities
Act of 1933, as amended.
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Item 5.02. |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
(c) On August 11, 2009, the Company entered into an employment agreement with Adam M. Mizel, a director of the Company (the “Employment Agreement”), pursuant to which Mr. Mizel, age 39, will serve as the Chief Financial Officer and Chief Strategy Officer of the Company. The
term of the Employment Agreement commenced on August 11, 2009 and will end on August 31, 2012. Pursuant to
the Employment Agreement, Mr. Mizel will receive an annual base salary of $375,000 and will be eligible for a bonus based on overall Company performance with goals to be established by the Compensation Committee. Also pursuant to the Employment Agreement, Mr. Mizel received a grant of options to purchase 450,000 shares of Class A Common Stock. The
options have an exercise price of $1.37 and vest on the third anniversary of the date of grant or earlier if certain Class A Common Stock price targets are achieved, and have a term of six (6) years. The Employment Agreement further provides that Mr. Mizel is entitled to participate in all benefit plans provided to senior executives of the Company. If the Company terminates Mr. Mizel’s employment without cause or he resigns with good reason, the Employment Agreement provides that he
is entitled to continued payment of his base salary (and earned bonus) through August 31, 2012 as well as the accelerated vesting of any unvested options granted to him under the Employment Agreement. However, if the Company terminates Mr. Mizel’s employment without cause or he resigns with good reason following a change in control of the Company, the Employment Agreement provides that he is entitled to a lump sum payment equal to his base salary (and earned bonus) times the greater of (i) two
or (ii) the number of months remaining under his employment term divided by 12, as well as the accelerated vesting of any unvested options granted to him under the Employment Agreement.
The foregoing description of the Employment Agreement is qualified in its entirety by reference to such agreement, which is filed herewith as Exhibit 10.3.
On August 11, 2009, pursuant to the Aquifer Agreement, the Company issued 200,000 shares of Class A Common Stock to designees of Aquifer Capital, of which Mr. Mizel is the principal. This arrangement was reviewed by the Audit Committee of the Board of Directors in accordance with the Audit Committee Charter, and approved by the
Board of Directors.