SENIOR SECURED NOTE

EXHIBIT 4.1

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT UNDER SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.  YOU MAY CONTACT GARY S. LOFFREDO, THE GENERAL COUNSEL OF THE COMPANY, AT 55 MADISON AVENUE, SUITE 300, MORRISTOWN, NJ 07960, (973) 290-0080, WHO WILL PROVIDE YOU WITH ANY REQUIRED INFORMATION REGARDING THE ORIGINAL ISSUE DISCOUNT.

SENIOR SECURED NOTE

FOR VALUE RECEIVED, ACCESS INTEGRATED TECHNOLOGIES, INC. d/b/a Cinedigm Digital Cinema Corp., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of Sageview Capital Master, L.P. or registered assigns (the “ Holder ”) the principal amount of SEVENTY-FIVE MILLION United States Dollars ($75,000,000) (the “ Original Principal Amount ”) on the Maturity Date (as defined in Section 4(a)) or the Extended Maturity Date (as defined in Section 2), if applicable, or upon acceleration, redemption or as otherwise required herein, and to pay interest (“ Interest ”) on the unpaid principal balance hereof on each Interest Payment Date (as defined in Section 3), at the interest rates and in the manner set forth in this Senior Secured Note (this “ Note ”).  Interest shall accrue from the Issuance Date (as defined in Section 3) and shall be computed on the basis of a 360-day year of twelve (12) 30-day months.

1.            Securities Purchase Agreement; Other Notes .  This Note is issued pursuant to the Securities Purchase Agreement, dated as of August 11, 2009 (as the same may be amended, supplemented or otherwise modified from time to time, the “ Securities Purchase Agreement ”) between the Company and the purchasers referred to therein.  This Note and all Other Notes (as defined in Section 3) are collectively referred to in this Note as the “ Notes ”.

2.            Payments .

(a)            Payment Location .  All payments of principal of, and interest and premiums on, this Note, except to the extent any such interest is payable through the increase in Principal pursuant to Section 6(b), shall be made in lawful money of the United States of America by wire transfer of immediately available funds to such account as the Holder may from time to time designate by written notice in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day that is not a Trading Day (as defined in Section 3), the same shall instead be due on the next succeeding day that is a Trading Day.

 

 

(b)            Optional Prepayment .  From the Issuance Date through February 11, 2011, the Company may, in its sole and absolute discretion, any time and from time to time, upon at least three (3) Trading Days prior written notice to the Holder certifying that the Company and the Subsidiary Note Parties shall have unrestricted cash and Permitted Investments of not less than $10,000,000 (or such lesser amount as the Majority Holders shall reasonably agree) in the aggregate after giving effect to the contemplated prepayment, prepay (any date on which a prepayment is made, a “ Prepayment Date ”) up to an aggregate of 20% of the Original Principal Amount under this Note and the Other Notes in cash at a price equal to 100% of such Principal plus an amount equal to the Interest Amount with respect to such prepaid Principal that is due through and including the Prepayment Date.  Subject to Sections 5 and 9, the Company may not otherwise prepay all or any portion of the Principal due under this Note (or principal under any Other Notes) prior to August 11, 2011.  On or after August 11, 2011, the Company may, at any time and from time to time, upon twenty (20) Trading Days prior written notice to Holder, prepay all or any portion of the Principal outstanding under this Note in cash at a price equal to the sum of (i) an amount equal to (x) 107.5% of such Principal if the Prepayment Date occurs on or after August 11, 2011 but prior to August 11, 2012, (y) 103.75% of such Principal if the Prepayment Date occurs on or after August 11, 2012 but prior to August 11, 2013, or (z) 100% of such Principal if the Prepayment Date occurs on or after August 11, 2013 plus (ii) an amount equal to the Interest Amount with respect to such prepaid Principal through and including the Prepayment Date.  Any optional prepayment of this Note shall be accompanied by a optional prepayment of each Other Note then outstanding on a pro rata basis in accordance with the respective unpaid principal amounts thereof at the time of such prepayment.

(c)            Mandatory Prepayments .  The Company shall prepay this Note and the Other Notes on or before the date that is ninety (90) days after any fiscal year of the Company ending after the Maturity Date, in an aggregate amount equal to Excess Cash Flow with respect to such fiscal year without premium or penalty.  In the case of each partial prepayment of the Notes under this Section 2(c), the aggregate principal amount of this Note and the Other Notes to be prepaid shall be allocated by the Company among this Note and the Other Notes then outstanding on a pro rata basis in accordance with the respective unpaid principal amounts thereof at the time of such prepayment.

3.            Certain Defined Terms .

(a)           Each capitalized term used herein, and not otherwise defined herein, shall have the meaning ascribed thereto in the Securities Purchase Agreement.  For purposes of this Note, the following terms shall have the following meanings:

“ Access DM ” means Access Digital Media, Inc.

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such specified Person.  Notwithstanding the foregoing, (i) the Company, its Subsidiaries and its other controlled Affiliates shall not be considered Affiliates of the Holder and (ii) neither the Holder nor its Affiliates shall be considered Affiliates of any portfolio company in which the Holder or any of its Affiliates have made a debt or equity investment.

“ Approved Stock Plan ” means any employee benefit or other plan existing on the Issuance Date and identified in Schedule 3.1(ll) of the Securities Purchase Agreement or that is approved by the board of directors and stockholders of the Company, pursuant to which the Company’s securities may be issued to any employee, officer or director for services provided to the Company.

“ Capital Lease Obligation ” means, as to any Person, any obligation that is required to be classified and accounted for as a capital lease on a balance sheet of such Person prepared in

 

 

accordance with GAAP and the amount of such obligation shall be the capitalized amount thereof, determined in accordance with GAAP.

“ Cash Collateral Control Agreement ” means that certain Account Control Agreement, dated as of August 11, 2009, among the Company, the Collateral Agent and UBS Financial Services Inc., as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ Cash Interest Rate ” means a per annum interest rate equal to 7.0% through the Maturity Date and, if applicable, a per annum interest rate of 9.5% beginning on the day after the Maturity Date and ending on the Extended Maturity Date, payable as set forth in Section 6 of this Note, provided that if the Shareholder Approval has not been obtained prior to December 31, 2009, the Cash Interest Rate shall be a per annum interest rate equal to 12.0% beginning on December 31, 2009 and ending on the earlier of (i) March 31, 2010 and (ii) the date the Shareholder Approval is obtained, provided , further , that if the Shareholder Approval has not been obtained prior to March 31, 2010, the Cash Interest Rate shall be a per annum interest rate equal to 17.0% beginning on March 31, 2010 and ending on the date the Shareholder Approval is obtained. 

“ Change of Control ” means (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company (including, for the avoidance of doubt, the sale of all or substantially all of the assets and/or the capital stock of the Company’s Subsidiaries in the aggregate) to any Person or group (as defined in Section 13(d) of the Exchange Act) (other than Sageview Capital LP and/or any of its Affiliates), (ii) the approval by the holders of the Company’s capital stock of any plan or proposal to effect the liquidation, dissolution or winding up of the Company, (iii) any Person or group (as defined in Section 13(d)(3) of the Exchange Act) (other than Sageview Capital LP and/or any of its Affiliates) shall become the beneficial owner (as defined in Rule 13(d)(3) under the Exchange Act) of the voting securities representing more than 35% of the aggregate voting power of all classes of the voting securities of the Company, (iv) the consolidation, merger or other business combination of the Company with or into another Person (other than as permitted by Section 8(p)(i)), (v) as a direct result of any proxy contest or solicitation opposed by the Company, individuals who, at the commencement of that proxy contest or solicitation (the “ Incumbent Directors ”) cease to constitute at least a majority of the Company's board of directors at the conclusion thereof, provided that any person becoming a director in connection with that proxy contest or solicitation whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors shall be an Incumbent Director or (vi) if the Purchaser Director Entitlement or the Purchaser Observer Entitlement under the Securities Purchase Agreement entitles the Holders of the Notes to at least one Director or one Observer, for 10 consecutive Trading Days the Common Stock is neither listed for trading on a U.S. national securities exchange nor quoted on an established U.S. automated interdealer quotation system and no American Depositary Shares or similar instruments for such common stock are so listed or approved for listing in the United States.

“ Christie/AIX ” means Christie/AIX, Inc., a company organized under the laws of Delaware.

“ Christie Note ” means the note issued by Christie/AIX payable to Christie Digital Systems USA, Inc., dated August 9, 2007, in the principal amount of $9,600,000, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ Class B Common Stock ” means (i) the Company’s Class B Common Stock, $0.001 par value per share, and (ii) any capital stock resulting from a reclassification of such common stock.

 

 

“ Code ” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“ Collateral Agent ” has the meaning assigned thereto in the Guarantee and Collateral Agreement.

“ Common Stock ” means (A) the Company’s Class A Common Stock, $0.001 par value per share, and (B) any capital stock resulting from a reclassification of such common stock.

“ Contingent Obligation ” means, as to any Person, any direct or indirect financial liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other financial obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

“ control ” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

“ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exchangeable or exercisable for Shares.

“ Default ” means any event or circumstance that is, or with the giving of notice or lapse of time or both, would be an Event of Default.

“ Disposition ” means, with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof.  The term “ Dispose ” shall have a correlative meaning.

“ Disqualified Stock ” means, with respect to any Person, any capital stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable, in whole or in part, in each case prior to the date that is ninety-one (91) days after the Extended Maturity Date; provided that any capital stock held by any future, present or former employee, officer or director of the Company or any of its Subsidiaries pursuant to an Approved Stock Plan shall not constitute Disqualified Stock solely because it may be required or permitted to be repurchased by the Company in connection with the termination of employment by, or service with, the Company and its Subsidiaries.

“ Dollars ” or “ $ ” means United States Dollars.

“ Environmental Law ” shall mean any law or any regulatory policy statement or similar guidance of any kind relating to pollution or protection of the indoor or outdoor environment (including protection of human health and safety, other than in respect of occupational health and safety), including (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1984, (ii) the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, (iii) the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, (d) the Toxic Substances Control Act of 1976, (iv) the Emergency

 

 

Planning and Community Right-To-Know Act of 1986, (v) the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, (vi) the National Environmental Policy Act of 1970, (h) the Endangered Species Act of 1973, (vii) the Safe Drinking Water Act of 1974 and (viii) the Atomic Energy Act of 1954.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder.

“ Excess Cash Flow ” has the meaning assigned thereto in the GE Credit Facility as of the Issuance Date.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar successor statute.

“ Excluded Taxes ” means, with respect to the Holder, or any other recipient of payment to be made by or on account of any obligations of the Company or any of its Subsidiaries under the Notes, (A) income or franchise taxes imposed on (or measured by) its net income by the United States of America or any other jurisdiction under the laws of which such recipient is organized, its principal offices are located, it is resident for tax purposes or to which it has a connection giving rise to such taxes other than by reason of the transactions contemplated by the Notes, the Securities Purchase Agreement or any other Transaction Document, including the holding of the Notes, and enforcing its rights thereunder, (B) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which such Holder or recipient is treated as doing business, (C) any Taxes imposed by reason of such Holder or recipient failing to provide forms or certifications it is legally able to provide that would reduce or eliminate such Taxes and that are reasonably requested by the Company and (D) any withholding taxes payable on behalf of a Holder at the time it becomes a Holder, except to the extent that such Holder’s transferor, if any, was entitled, at the time of the transfer to obtain additional amounts from the Company in respect of such Taxes pursuant to Section 21 herein.

“ Foreign Subsidiary ” has the meaning assigned thereto in the Guarantee and Collateral Agreement.

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis.

“ GE Credit Facility ” means that certain Credit Agreement, dated as of August 1, 2006, by and among Christie/AIX, the lenders party thereto and General Electric Capital Corporation, as administrative agent and collateral agent, as the same may be amended as of the Issuance Date or subsequently amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ GE Payoff Amount ” means, at any date of determination, the sum of (i) the aggregate outstanding principal amount of the GE Credit Facility at such time, (ii) all accrued and unpaid interest and fees under the GE Credit Facility at such time and (iii) all other amounts owing by Christie/AIX or any of its Subsidiaries pursuant to the terms of the GE Credit Facility at such time.

“ Governmental Authority ” means the government of any nation, state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.

 

 

“ Guarantee and Collateral Agreement ” means that certain Guarantee and Collateral Agreement, dated as of August 11, 2009, among the Company, the Subsidiary Note Parties and Sageview Capital Master, L.P., as collateral agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

“ Holders ” means, collectively, the Holder and the other holders of the Notes.

“ Immaterial Subsidiary ” means any Subsidiary listed on Schedule 1 as of the Issuance Date, provided that the aggregate assets or revenues of all Immaterial Subsidiaries, determined in accordance with GAAP, may not exceed 1.0% of consolidated total assets or consolidated revenues, respectively, of the Company and its Subsidiaries, collectively, at any time.

“ Indebtedness ” of any Person means, without duplication, (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than unsecured account trade payables that are (i) entered into or incurred in the ordinary course of such Person’s business, (ii) on terms that require full payment within ninety (90) days and (iii) not unpaid in excess of ninety (90) days beyond the date such invoice is due to be paid or are being contested in good faith and as to which such reserve as is required by GAAP has been made), (C) all reimbursement or payment obligations, contingent or otherwise, with respect to commercial letters of credit, banker’s acceptances, surety bonds and other similar instruments (including the face amount of all letters of credit), (D) all obligations evidenced by notes, bonds, debentures, redeemable capital stock or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all Capital Lease Obligations, (G) obligations in respect of Disqualified Stock, (H) all indebtedness referred to in clauses (A) through (G) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person that owns such assets or property has not assumed or become liable for the payment of such indebtedness and (I) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (H) above.  The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.

“ Indemnified Taxes ” means Taxes other than Excluded Taxes.

 

“ Interest Amount ” means, with respect to any Principal, all accrued and unpaid Interest (including any Default Interest as defined in Section 6(c) but not including any interest added to the Principal pursuant to Section 6(b)) on such Principal through and including such date of determination.

 

“ Interest Payment Date ” means (i) September 30, December 31, March 31 and June 30 of each year (or if such date is not a Trading Day, the immediately succeeding Trading Day), beginning with September 30, 2009, (ii) the Maturity Date or Extended Maturity Date, as applicable, and (iii) each other date on which any Principal of this Note is paid in accordance with the terms of this Note.

 

 

“ Interest Reserve Account ” has the meaning assigned thereto in the Guarantee and Collateral Agreement.

“ Issuance Date ” means August 11, 2009.

“ Liens ” means, with respect to any asset, any mortgage, lien, pledge, hypothecation, charge, security interest, encumbrance or adverse claim of any kind and any restrictive covenant, condition, restriction or exception of any kind that has the practical effect of creating a mortgage, lien, pledge, hypothecation, charge, security interest, encumbrance or adverse claim of any kind (including any of the foregoing created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor with respect to a Capital Lease Obligation, or any financing lease having substantially the same economic effect as any of the foregoing).

“ Majority Holders ” means, at any time, Holders of the majority of the principal amount of Notes then outstanding.

“ Managed Services Businesses ” means the information technology consulting services and managed network monitoring services of Core Technology Services, Inc.

“ Material Adverse Effect ” means a material adverse effect on (i) the legality, validity or enforceability of any Transaction Document, (ii) the results of operations, assets, liabilities, business, prospects or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or (iii) the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document.

“ Maturity Date ” means August 11, 2014.

“ NEC Notes ” means, collectively (i) the promissory note, dated as of May 28, 2008, issued by Access DM to NEC Financial Services, LLC, (ii) the promissory note, dated as of October 22, 2008, issued by Access DM to NEC Financial Services, LLC and (iii) the promissory note, dated as of October 29, 2008, issued by Access DM to NEC Financial Services, LLC.

“ Obligations ” has the meaning assigned thereto in the Guarantee and Collateral Agreement.

“ Options ” means any rights, warrants or options to subscribe for or purchase Shares or Convertible Securities.

“ Other Notes ” means (i) all of the notes issued pursuant to the Securities Purchase Agreement, other than this Note, and (ii) all notes issued in exchange therefor or replacement thereof.

“ Permitted Lien ” means (i) Liens existing on the Issuance Date not otherwise described in this definition and set forth on Schedule 3.1(jj) to the Securities Purchase Agreement, (ii) Liens for taxes, assessments or governmental charges not at the time due or delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto, and in each case for which adequate reserves in accordance with GAAP are being maintained, (iii) statutory liens of landlords and Liens arising by operation of law in the ordinary course of business in favor of carriers and materialmen, or other similar Liens imposed by law, which are not more than 30 days overdue and remain payable without penalty or which are being contested in good faith by appropriate proceedings diligently

 

 

prosecuted, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto, and in each case for which adequate reserves in accordance with GAAP are being maintained, (iv) Liens arising in the ordinary course of business in connection with workers’ compensation, unemployment compensation, unemployment insurance and other types of social security (excluding Liens arising under ERISA) which are not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto, and in each case for which adequate reserves in accordance with GAAP are being maintained, (v) attachments, appeal bonds (and cash collateral securing such bonds), judgments and other similar Liens, for sums not exceeding $500,000 in the aggregate for the Company and its Subsidiaries at any one time outstanding, arising in connection with court proceedings, provided that the execution or other enforcement of such Liens is effectively stayed, (vi) easements, rights of way, restrictions and other similar Liens arising in the ordinary course of business and not materially detracting from the value of the property subject thereto and not impairing or interfering in any material respect with the operation of the business of the Company or any Subsidiary, (vii) Liens securing Indebtedness permitted under Section 8(c)(ii), provided that, to the extent such Indebtedness is used (or intended to be used) for the purchase of satellite dishes, equipment or infrastructure, such Liens attach at all times only to such assets financed (or to be financed) by such Indebtedness, (viii) Liens securing Permitted Phase II Indebtedness and (ix) Liens securing a Permitted Refinancing pursuant to clause (iii) of the definition of Permitted Refinancing.

“ Permitted Phase II Indebtedness ” means any Indebtedness of a Subsequent Phase Subsidiary (i) as to which neither the Company nor any of its Subsidiaries (other than (A) the Subsequent Phase Subsidiaries and (B) the immediate parent of any Subsequent Phase Subsidiary, to the extent limited to the pledge of capital stock of such Subsequent Phase Subsidiary) provides any Contingent Obligation or credit support of any kind or is directly or indirectly liable (as a guarantor or otherwise) and (ii) which does not provide any recourse against any of the assets of the Company or any of its Subsidiaries (other than the Subsequent Phase Subsidiaries).

“ Permitted Refinancing ” means any Indebtedness constituting an extension or refinancing of the GE Credit Facility which (i) is not secured by any property, is subordinated to the Notes at least to the extent set forth on Exhibit A and does not mature or require repayment of principal amounts prior to 180 days after the Extended Maturity Date, (ii) has sufficient excess proceeds for the Company to optionally redeem the entire outstanding principal amount of this Note and the Other Notes pursuant to Section 5(a) (together with all accrued and unpaid interest thereon and any applicable premium then payable pursuant to Section 5(a)), or (iii) is on terms at least as favorable to the Phase I Subsidiaries in all material respects as the GE Credit Facility (as in effect on the Issuance Date) and the interest rate on Indebtedness thereunder is lower than the interest rate under the GE Credit Facility as of the Issuance Date.

“ Person ” means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

“ Phase I Consolidated Net Income ” means, for any period, the consolidated net income (or loss) of the Phase I Subsidiaries as determined in accordance with GAAP as in effect on the Issuance Date,  excluding (a) the income (or deficit) of any Person accrued prior to the date it becomes a Phase I Subsidiary or is merged into or consolidated with any Phase I Subsidiary, (b) the income (or deficit) of any Person (other than a Phase I Subsidiary) in which any Phase I Subsidiary has an ownership interest, except to the extent that any such income is actually received by a Phase I Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Phase I Subsidiary to the

 

 

extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted, by law, contract or otherwise.

“ Phase I Digital Deployment Agreement ” means a digital deployment agreement executed by a Phase I Subsidiary with a Person in the business of distributing theatrical feature films or other traditional or non-traditional motion picture content.

“ Phase II Digital Deployment Agreement ” means a digital deployment agreement executed by a Subsequent Phase Subsidiary with a Person in the business of distributing theatrical feature films or other traditional or non-traditional motion picture content.

“ Phase I EBITDA ” means, for any period, Phase I Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of Phase I Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Notes), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and non-recurring organization costs, (e) any extraordinary charges or losses determined in accordance with GAAP as in effect on the Issuance Date, and (f) any other non-cash charges, non-cash expenses or non-cash losses for such period (excluding any such charge, expense or loss incurred in the ordinary course of business that constitutes an accrual of or a reserve for cash charges for any future period), provided , however , that cash payments in respect of such non-cash charges, expenses or losses (excluding any such charge, expense or loss incurred in the ordinary course of business that constitutes an accrual of or a reserve for cash charges for any future period) shall be subtracted from Phase I Consolidated Net Income in calculating Phase I EBITDA in the period when such payments are made, and minus, to the extent included in the statement of such Phase I Consolidated Net Income for such period, the sum of (i) interest income, (ii) any extraordinary income or gains determined in accordance with GAAP as in effect on the Issuance Date and (iii) any other non-cash income (excluding any items that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period that are described in the parenthetical to clause (f) above), all as determined on a consolidated basis.

“ Phase I Master License Agreement ” means a license agreement executed by a Phase I Subsidiary with a Person in the business of owning or operating one or more cineplexes used for the exhibition of traditional or non-traditional motion picture content.

“ Phase II Master License Agreement ” means a license agreement executed by a Subsequent Phase Subsidiary with a Person in the business of owning or operating one or more cineplexes used for the exhibition of traditional or non-traditional motion picture content.

“ Phase I Subsidiaries ” means Christie/AIX and any of its Subsidiaries primarily engaged in the financing or deployment of digital cinema equipment.

“ Preferred Stock ” means (A) the Company’s preferred stock, $0.001 par value, including the Series A 10% Non-Voting Cumulative Preferred Stock, $0.001 par value, and (B) any capital stock resulting from a reclassification of such preferred stock.

“ Principal ” means the outstanding principal amount of this Note as of any date of determination (including any Interest added to the outstanding principal amount of this Note pursuant to Section 6(b)).

 

 

“ Principal Market ” means, with respect to the Common Stock, the Nasdaq Global Market or such other primary exchange on which the Common Stock subsequently becomes traded, and with respect to any other security, the principal securities exchange or trading market for such other security.

“ Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of August 11, 2009, between the Company and the Purchasers, as the same may be amended, supplemented or otherwise modified from time to time.

“ SEC ” means the United States Securities and Exchange Commission, or any successor thereto.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute.

“ Shares ” means the shares of Common Stock.

“ Subsequent Phase Subsidiaries ” means (i) Access Digital Cinema Phase 2, Corp. and any of its Subsidiaries and (ii) any Subsidiary formed after the Issuance Date, in each case provided such Subsidiary is primarily engaged in the financing or deployment of digital cinema equipment as contemplated by the Phase II Digital Deployment Agreements as in effect on the Issuance Date.

“ Subsidiary ” means any entity in which the Company or any one or more of its Subsidiaries owns, directly or indirectly, a majority of the outstanding capital stock, equity or similar interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such entity.

“ Subsidiary Note Parties ” means all Subsidiaries of the Company other than (i) the Phase I Subsidiaries (so long as the GE Credit Facility or the Christie Note is outstanding), (ii) Access DM (so long as any of the NEC Notes are outstanding), (iii) the Subsequent Phase Subsidiaries and (iv) the Immaterial Subsidiaries.

“ Swap Agreement ” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions.

“ Taxes ” means any federal, state, provincial, county, local, foreign and other taxes (including, without limitation, income, profits, windfall profits, alternative, minimum, accumulated earnings, personal holding company, capital stock, premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital levy, production, transfer, withholding, employment, unemployment compensation, payroll and property taxes, import duties and other governmental charges and assessments), whether or not measured in whole or in part by net income, and including deficiencies, interest, additions to tax or interest, and penalties with respect thereto.

“ The Pavilion Theatre ” means the nine-screen digital movie theater and showcase, located in Brooklyn, New York, operated by the Company and equipped to demonstrate the Company’s integrated digital cinema solutions.

 

 

“ Trading Day ” means any day on which the Common Stock is traded on its Principal Market; provided that “Trading Day” shall not include any day on which the Principal Market is open for trading for fewer than 4.5 hours.

“ Transaction Documents ” means this Note, the Other Notes, the Securities Purchase Agreement, the Warrant, the Registration Rights Agreement, the Guarantee and Collateral Agreement, the Cash Collateral Control Agreement and each of the other agreements to which the Company is a party or by which it is bound and which is entered into by the parties to the Securities Purchase Agreement in connection with the transactions contemplated thereby.

“ Transfer Restriction Termination Event ” means, following the Issuance Date, the earliest to occur of (i) the second anniversary of the Issuance Date, (ii) consummation of a Change of Control or (iii) an Event of Default.

“ Warrants ” means those certain Warrants issued on the Issuance Date pursuant to the Securities Purchase Agreement.

(b)            Terms Defined Elsewhere in this Note .  The following terms are defined elsewhere in this Note as follows:

 

 

4.            Extended Maturity Date .

(a)           The Company shall have the right, in its sole discretion, to extend irrevocably the Maturity Date until August 11, 2015 (as applicable, the “ Extended Maturity Date ”), provided , that (i) Phase I EBITDA in respect of the twelve (12) month period ending on June 30, 2014 is not less than $40,000,000, (ii) the aggregate outstanding principal amount of Indebtedness of the Phase I Subsidiaries as of the Maturity Date is less than $10,000,000, (iii) the aggregate principal amount of Indebtedness of the Company, the Subsidiary Note Parties and the Phase I Subsidiaries that is due and payable on or before November 11, 2015 does not exceed $10,000,000, (iv) no Default or Event of Default has occurred and is continuing at such time, (v) neither the Company nor any Subsidiary Note Party has made (or will make) any Investment in any Subsequent Phase Subsidiary during the period from August 11, 2013 to the Extended Maturity Date and (vi) the Company has provided Holder with an irrevocable written notice of such election, via electronic delivery or by overnight courier, at any time at least ten (10) Trading Days prior to the Maturity Date certifying that the foregoing conditions shall be satisfied as of the Maturity Date and including a calculation of the Phase I EBITDA required by the foregoing clause (i).

(b)           Notwithstanding anything contained herein or in any of the other Transaction Documents to the contrary, if the Notes shall remain outstanding after the fifth (5th) anniversary of the initial issuance thereof and the aggregate amount that would be includible in the gross income of the Holders with respect to the Notes (within the meaning of the Code section 163(i)) for all periods ending on or before any Interest Payment Date that occurs after that fifth (5th) anniversary (the “ Aggregate Accrual ”) would otherwise exceed an amount equal to the sum of (i) the aggregate amount of interest to be paid (within the meaning of Code section 163(i)) under the Notes on or before such Interest Payment Date and (ii) the product of (A) the issue price (as defined in Code section 1273(b)) of the Notes and (B) the yield to maturity (interpreted in accordance with Code section 163(i)) of the Notes (such sum, the “ Maximum Accrual ”), then the Company shall prepay to the Holders in cash on each Interest Payment Date occurring after such fifth (5th) anniversary that minimum portion of the Principal and/or Interest Amount necessary to prevent the Notes from constituting “applicable high yield discount obligations” within the meaning of Code section 163(i), up to an amount equal to the excess, if any, of the Aggregate Accrual over the Maximum Accrual, and the amount of such payment shall be treated for U.S. federal income tax purposes as an amount of interest to be paid (within the meaning of Code section 163(i)(2)(B)(1)) under the Notes.  This provision is intended to prevent the Notes from being classified as “applicable high yield discount obligations”, as defined in Code section 163(i), and shall be interpreted consistently therewith.

5.            Redemption at Option of the Holder .

(a)            Redemption Option Upon Triggering Event .  In addition to all other rights of the Holder contained herein, after a Triggering Event (as defined in Section 5(b)), the Holder shall have the right, at the Holder’s option, exercised by written notice to the Company given within thirty (30) days of such Triggering Event, to require the Company to redeem all or a portion of the Principal at a price (the “ Redemption Price ”) equal to (i) in the case of a Triggering Event described in Section 5(b)(i)

 

 

below, the sum of (A) 101% of such Principal plus (B) cash in an amount equal to the Interest Amount with respect to such Principal through and including the date of redemption pursuant to this Section 5, or (ii) in the case of Section 5(b)(ii) below, the sum of (A) an amount equal to (x) 107.5% of such Principal if the Prepayment Date occurs on or after the second anniversary of the Issuance Date but prior to the third anniversary of the Issuance Date, (y) 103.75% of such Principal if the Prepayment Date occurs on or after the third anniversary of the Issuance Date but prior to the fourth anniversary of the Issuance Date, or (z) 100% of such Principal if the Prepayment Date occurs on or after the fourth anniversary of the Issuance Date plus (B) cash in an amount equal to the Interest Amount with respect to such Principal through and including the date of redemption pursuant to this Section 5; provided , however , that in the case of a Triggering Event described in Section 5(b)(ii) below, the Holder shall only have the right, at the Holder’s option, to require the Company to redeem the Principal in an amount (together with amounts used to redeem Other Notes) not exceeding the amount by which the net proceeds of the Permitted Refinancing exceed the sum of (A) the GE Payoff Amount plus (B) the total amounts owing under the Christie Note at such time.

(b)            Triggering Event .  A “ Triggering Event ” shall be deemed to have occurred at such time as any of the following events occur:

(i)             upon the Holder’s receipt of a Notice of Change of Control (as defined below); and

(ii)             upon the consummation of any Permitted Refinancing pursuant to which net proceeds of such Permitted Refinancing exceed the sum of (A) the GE Payoff Amount plus (B) the total amounts owing under the Christie Note at such time.

(c)            Mechanics of Redemption Upon Notice of Change of Control and Payment Upon a Change of Control .

(i)             No sooner than thirty (30) nor later than fifteen (15) Trading Days prior to the consummation of a Change of Control, but in any event not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via electronic delivery and overnight courier (a “ Notice of Change of Control ”) to the Holder and each holder of the Other Notes.  At any time during the period beginning after receipt of a Notice of Change of Control (or, in the event a Notice of Change of Control is not delivered at least twenty (20) days prior to a Change of Control, at any time on or after the date which is twenty (20) days prior to a Change of Control) and ending on the date that is five (5) Trading Days prior to the consummation of such Change of Control, the Holder may require the Company to redeem all or a portion of the Principal pursuant to Section 5(e) by delivering written notice thereof via electronic delivery and overnight courier (a “ Notice of Redemption Upon Change of Control ”) to the Company, which Notice of Redemption Upon Change of Control shall indicate (I) the amount of Principal that the Holder is submitting for redemption and (II) the applicable Redemption Price, as calculated pursuant to Section 5(a).

(ii)             The Company shall pay and/or deliver the Redemption Price simultaneously with the consummation of the Change of Control; provided that, if required by Section 5(g), this Note shall have been so delivered to the Company.  The Company shall not enter into any binding agreement or other arrangement with respect to a Change of Control unless the Company provides that the payments provided for in this Section 5(c) shall have priority to payments to stockholders in connection with such Change of Control and the Company complies with such provision.

(d)            Mechanics of Other Redemptions at Option of Holder .  Within one (1) Trading Day after the occurrence of a Triggering Event (other than upon the Holder’s receipt of a Notice

 

 

of Change of Control), the Company shall deliver written notice thereof via electronic delivery and overnight courier (“ Notice of Triggering Event ”) to the Holder and each holder of the Other Notes stating the aggregate principal amount of this Note and the Other Notes that may be redeemed in connection with such Triggering Event in accordance with the proviso in Section 5(a).  At any time after the earlier of the Holder’s receipt of a Notice of Triggering Event and the Holder’s becoming aware of a Triggering Event (other than a Change of Control), the Holder may require the Company to redeem up to all of the Principal by delivering written notice thereof via electronic delivery and overnight courier (“ Notice of Redemption at Option of Holder ”) to the Company, which Notice of Redemption at Option of Holder shall indicate (i) the amount of Principal that the Holder is submitting for redemption, (ii) the applicable Redemption Price as determined and calculated pursuant to Section 5(a) above and (iii) the nature of the Triggering Event to the extent the Holder did not receive a Notice of Triggering Event; provided that a Notice of Redemption at Option of Holder may only be sent during the period beginning on and including the date of the Triggering Event and ending on and including the date which is twenty (20) Trading Days after the date on which the Holder receives a Notice of Triggering Event from the Company with respect to such Triggering Event.

(e)            Payment of Redemption Price other than in Connection with a Change of Control .  Upon the Company’s receipt of a Notice(s) of Redemption at Option of the Holder from any holder of the Other Notes, the Company shall promptly notify the Holder via electronic delivery of the Company’s receipt of such notice(s).  Each holder that has sent such a notice shall, if required pursuant to Section 5(g), promptly submit to the Company such holder’s Note that such holder has elected to have redeemed.  The Company shall deliver the applicable Redemption Price in cash to the Holder within five (5) Trading Days after the Company’s receipt of a Notice of Redemption at Option of Holder, provided that the Holder’s Note shall have been so delivered to the Company.  If the Company is unable to redeem all of the Notes submitted for redemption, the Company shall (i) redeem a pro rata amount from each holder of the Notes based on the principal amount of the Notes submitted for redemption by such holder relative to the aggregate principal amount of the Notes submitted for redemption by all Holders and (ii) in addition to any remedy the Holder may have under this Note, the Securities Purchase Agreement and any other Transaction Document, pay to the Holder interest at a rate equal to the lesser of 1.0% per month (prorated for partial months) or the highest lawful interest rate in respect of the unpaid Redemption Price until paid in full or until delivery of a Void Optional Redemption Notice (as defined in Section 5(f)).

(f)            Void Redemption .  In the event that the Company does not pay the Redemption Price within the time period set forth in Section 5(e), at any time thereafter and until the Company pays such Redemption Price in full, the Holder shall have the option to, in lieu of redemption, require the Company to promptly credit to the Holder the Principal that was submitted for redemption by the Holder under this Section 5 and for which the Redemption Price (together with any interest thereon) has not been paid (or return any or all of the Note or any portion thereof representing such Principal) by sending written notice thereof to the Company via electronic delivery (the “ Void Optional Redemption Notice ”).  Upon the Company’s receipt of such Void Optional Redemption Notice, (i) the Notice of Redemption at Option of Holder shall be null and void with respect to the Principal subject to the Void Optional Redemption Notice and (ii) the Company shall promptly return or credit to the Holder any Principal or Note, as applicable, subject to the Void Optional Redemption Notice.

(g)            Book-Entry .  Notwithstanding anything to the contrary set forth herein, upon redemption of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless all of the Principal is being redeemed.  The Holder and the Company shall each maintain records showing the Principal redeemed and the dates of such redemptions or shall use such other method, reasonably satisfactory to the other, so as not to require physical surrender of this Note upon each such redemption.  In the event of any dispute or discrepancy, such records of the Company establishing the Principal to which the Holder is entitled shall be controlling

 

 

and determinative in the absence of demonstrable error.  Notwithstanding the foregoing, if this Note is redeemed in part as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder may request, representing in the aggregate the remaining Principal represented by this Note.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following prepayment or redemption of any portion of this Note, the Principal of this Note may be less than the principal amount stated on the face hereof.

(h)            Disputes; Miscellaneous .  In the event of a bona fide dispute as to the determination of the arithmetic calculation of the Redemption Price, the Company shall transmit an explanation of the disputed arithmetic calculations to the Holder via electronic delivery within two (2) Trading Days