WARRANT To Purchase Shares of Class A Common Stock of ACCESS INTEGRATED TECHNOLOGIES, INC.

EXHIBIT 4.2

 

WARRANT

To Purchase Shares of Class A Common Stock of

ACCESS INTEGRATED TECHNOLOGIES, INC.

THIS IS TO CERTIFY THAT, for value received, Sageview Capital Master, L.P., or its registered assigns, is entitled at the times specified herein, to purchase from Access Integrated Technologies, Inc. d/b/a Cinedigm Digital Cinema Corp., a Delaware corporation (the “Company”), up to an aggregate of sixteen million (16,000,000) Warrant Shares (as hereinafter defined and subject to adjustment as provided herein), in whole or in part, including fractional parts, at a purchase price per Warrant Share equal to the Exercise Price (as hereinafter defined), all on the terms and conditions and pursuant to the provisions hereinafter set forth.

ARTICLE 1

DEFINED TERMS

Section 1.1     Definitions .  Capitalized terms used and not defined herein shall have the meanings assigned to them in the Securities Purchase Agreement.   As used herein, the following terms shall have the following meanings:

“ Additional Shares of Class A Common Stock ” means any shares of Class A Common Stock issued (whether from the Company’s treasury or authorized and unissued shares of capital stock) or, as provided in Section 3.6(a) , deemed to be issued by the Company after the Closing Date; provided that, notwithstanding anything to the contrary contained herein, Additional Shares of Class A Common Stock shall not include (a) issuances of Class A Common Stock (including any deemed issuance pursuant to Section 3.6(a) ) that are pursuant to employee benefit plans and compensation-related arrangements approved by the Board (including any duly authorized committee thereof), (b) shares of Class A Common Stock issuable upon the exercise, exchange or conversion of the Convertible Securities (including, without limitation, the Warrants) listed on Schedule 3.1(g) to the Securities Purchase Agreement or (c) securities issued as consideration pursuant to acquisitions of businesses or entities by the Company or its subsidiaries approved by a majority vote of the non-employee members of the Board of Directors (but excluding any transaction in which the Company is issuing securities primarily for the

 

 

purpose of raising capital or to an entity whose primary business is investing in securities).

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, 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) none of the Holder or 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.

“ Aggregate Amount ” shall have the meaning provided in Section 3.5 .

“ Below Exercise Price Issuance ” shall have the meaning provided in Section 3.6(c) .

“ Beneficially Own ,” “ Beneficially Owned ,” or “ Beneficial Ownership ” shall have the meaning set forth in Rule 13d-3 of the rules and regulations promulgated under the Exchange Act; provided , however , that the Holder shall not be deemed to Beneficially Own any securities owned by its portfolio companies as long as the Holder does not directly or indirectly encourage, assist or provide any information to such portfolio company in respect of the acquisition, disposition or voting of such securities.

“ Board ” means the Board of Directors of the Company.

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of New York.

“ Cashless Exercise ” shall have the meaning provided in Section 2.3(b) .

“ Cashless Exercise Ratio ” means a fraction, (i) the numerator of which is the excess of the Fair Market Value per Warrant Share on the date of exercise over the Exercise Price per Warrant Share as of the date of exercise and (ii) the denominator of which is the Fair Market Value per Warrant Share on the date of exercise.

“ 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 Partners 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 Partners LP and/or any of its Affiliates) shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of 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) of the Notes), (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 is at least one Director or one Observer, respectively, for 10 consecutive Trading Days the Class A 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.

“ Class A Common Stock ” means the Class A common stock, par value $0.001 per share, of the Company and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend, spin-off or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization or business combination.

“ Class B Common Stock ” means the Class B common stock, par value $0.001 per share, of the Company and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend, spin-off or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization or business combination.

“ Common Stock ” means the Class A Common Stock and the Class B Common Stock.

“ Company ” shall have the meaning provided in the preamble hereto.

“ Company Rights Plan ” means that certain Tax Benefit Preservation Plan, dated as of August 10, 2009, between the Company and American Stock Transfer & Trust Company, LLC, as amended from time to time in accordance with its terms and in compliance with the Securities Purchase Agreement.

“ 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 debt or other evidences of indebtedness, capital stock, rights, options, warrants or other securities directly or indirectly convertible into or exercisable or exchangeable for Class A Common Stock.

“ Daily Price ” means (i) if the shares of Class A Common Stock then are listed and traded on Nasdaq, the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of Class A Common Stock on the Nasdaq on such date, (ii) if the shares of Class A Common Stock then are not listed and traded on the Nasdaq, the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of Class A Common Stock on such date by the principal United States national securities exchange on which the

 

 

shares are listed and traded or (iii) if the shares of Class A Common Stock then are not listed and traded on any such securities exchange, the last quoted bid price on such date for the shares of Class A Common Stock in the over-the-counter market as reported by Pink Sheets LLC or a similar organization.  If on any determination date the shares of Class A Common Stock are not quoted by any such organization or such bid price is not available, the Daily Price shall be the fair market value of the shares of Class A Common Stock on such date as determined by a nationally recognized investment bank, appraisal or accounting firm (whose fees and expenses will be paid by the Company) selected by mutual agreement of the Company and the holders of Warrants then exercisable for a majority of the Warrant Shares.

“ Disposition Event ” shall have the meaning provided in Section 3.4 .

“ Distribution Date ” shall have the meaning given thereto in the Company Rights Plan or its comparable term/provision under any successor, substitute or additional shareholder rights plan.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Exercise Price ” means $1.37 per Warrant Share, as adjusted from time to time in accordance herewith.

“ Expiration Date ” means August 11, 2016; provided , however , that if (a) the Fair Market Value of the Class A Common Stock on August 11, 2016 is less than $7.50 per share (as adjusted to reflect any stock split, reverse stock split, recapitalization or similar transaction) and (b) Sageview Capital Master, L.P. and its Affiliates hold Warrants exercisable for at least 1,000,000 Warrant Shares on August 11, 2016, then upon the Company’s receipt of a written notice no later than ten (10) Trading Days after August 11, 2016, the Expiration Date shall thereafter be August 11, 2019.

“ Expiration Time ” shall have the meaning provided in Section 3.5 .

“ Fair Market Value ” of Common Stock or any other security or property means the fair market value thereof as determined in accordance with the following rules: (i) for Class A Common Stock or any other security traded or quoted on the Nasdaq or any other United States national securities exchange, the Fair Market Value will be the average of the closing prices of such security on such securities exchange over a ten (10) consecutive Trading Day period, ending on the Trading Day immediately prior to the date of determination; (ii) for any security that is not so traded or quoted, the Fair Market Value shall be determined: (x) mutually by the Board and the Holder, or (y) by a nationally recognized investment bank, appraisal or accounting firm (whose fees and expenses will be paid by the Company) selected by mutual agreement between the Board and the holders of Warrants then exercisable for a majority of the Warrant Shares; or (iii) for any other property, the Fair Market Value shall be determined by the Board in good faith assuming a willing buyer and a willing seller in an arms’-length transaction; provided that if holders of Warrants then exercisable for a majority of the Warrant Shares object to a determination of the Board made pursuant to this clause (iii), the Fair Market Value of such property shall be as determined by nationally recognized investment bank, appraisal or accounting firm (whose fees and expenses will be paid by the Company unless the subsequent

 

 

determination of Fair Market Value by such bank, appraisal or accounting firm is less than one hundred and five percent (105%) of the Board’s determination in which case, such fees and expenses will be paid by the holders of the Warrants) selected by mutual agreement between the Board and such holders.

“ Group ” shall have the meaning assigned to it in Section 13(d)(3) of the Exchange Act.

“ Holder ” means the duly registered holder of this Warrant under the terms hereof, including assignees thereof.

“ Initial Exercise Date ” means the earliest to occur of the following: (i) the date upon which Shareholder Approval has been obtained, (ii) the date upon which the third Shareholder Meeting has been completed or (iii) February 28, 2011.

“ Maximum Voting Power ” means, at the time of determination of the Maximum Voting Power, the total number of votes which may be cast in respect of all capital stock of the Company on the applicable matter subject to the vote of the Common Stock.

“ Measurement Date ” means, with respect to a transaction, the public announcement of such transaction (or, if no such public announcement is made, the date of consummation of the transaction).

“ Nasdaq ” means the Nasdaq Global Market (or any successor thereto).

“ Person ” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivisions thereof or any Group comprised of two or more of the foregoing.

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

“ Public Sale ” means (i) a sale pursuant to an effective registration statement (other than a registration statement on Form S-4, Form S-8 or any successor or other forms promulgated for similar purposes) filed under the Securities Act or (ii) a “brokers’ transaction” (as defined in Rule 144 of the Securities Act) or a “riskless principal transaction” (as defined in Rule 144 of the Securities Act).

“ Purchased Shares ” shall have the meaning provided in Section 3.5 .

“ Rights ” shall have the meaning given thereto in the Company Rights Plan (or the comparable right under any successor, substitute or additional shareholder rights plan).

“ Rights Plan Exchange ” shall be the exchange of Rights for Class A Common Stock or other securities after the occurrence of a Rights Plan Triggering Event pursuant to the Company Rights Plan or under any successor, substitute or additional shareholder rights plan.

 

 

“ Rights Plan Triggering Event ” shall have the same meaning as “Trigger Event” set forth in the Company Rights Plan or its comparable term/provision under any successor, substitute or additional shareholder rights plan.

“ SEC ” means the U.S. Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Securities Purchase Agreement ” means the Securities Purchase Agreement, dated as of August 11, 2009, between the Company and the Purchasers, as amended from time to time in accordance with its terms.

“ Shareholder Approval ” means all approvals of the stockholders of the Company necessary to approve, for purposes of the listing rules of Nasdaq, each of the following:  (a) the removal of the limitation on exercise of the Warrants set forth in Section 2.9, (b) the removal of the limitation on adjustments set forth in Section 3.6(d) and (c) the Second Director Right.

“ Tender Expiration Date ” shall have the meaning provided in Section 3.5 .

“ Trading Day ” means any day on which the Class A 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.

“ Transfer Restriction Termination Event ” means, following the Issuance Date, the earliest to occur of (i) August 11, 2011, (ii) consummation of a Change of Control or (iii) an Event of Default (as defined in the Notes).

“ Warrant Exercise Notice ” shall have the meaning provided in Section 2.3(a) .

“ Warrant Shares ” means the shares of Class A Common Stock issuable, received, or issued, as the case may be, upon exercise of the Warrants.

“ Warrants ” means this Warrant and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof.  All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of Warrant Shares for which they may be exercised.

ARTICLE 2

EXERCISE TERMS

Section 2.1     Exercise Periods .  Subject to Section 2.9 hereof, at any time from and after the Initial Exercise Date and until 5:00 p.m., New York City time, on the Expiration Date, the Holder may exercise this Warrant, subject to required regulatory approval (other than in connection with any such exercise and contemporaneous sale by the Holder of the applicable Warrant Shares issued upon exercise of the Warrant), if any, for all or any part of the number of Warrant Shares purchasable hereunder.

 

 

Section 2.2     Expiration .  This Warrant shall terminate and become void as of the earlier of (i) 5:00 p.m., New York City time, on the Expiration Date and (ii) the time and date this Warrant is exercised in full.

Section 2.3     Manner of Exercise .  (a) In order to exercise this Warrant, in whole or in part, Holder shall deliver to the Company at its principal office at 55 Madison Avenue, Suite 300, Morristown, New Jersey 07960 or at the office or agency designated by the Company pursuant to Article 6 (i) a written notice of Holder’s election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased and shall be substantially in the form of the subscription form appearing at the end of this Warrant as Exhibit A (a “Warrant Exercise Notice”), (ii) subject to Section 2.3(b) , payment of the Exercise Price for the number of Warrant Shares in respect of which such Warrant is then exercised and (iii) this Warrant.  Payment of the Exercise Price may be made (x) in cash or by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose, (y) by surrender of Warrants as set forth in Section 2.3(b) or (z) by any combination of the methods specified in clauses (x) or (y) of this sentence.  The rights represented by this Warrant shall be exercisable at the election of the Holder hereof either in full at any time or in part from time to time, in each case subject to Section 2.1 , Section 2.2 and Section 2.9 hereof, and, in the event that this Warrant is surrendered for exercise in respect of less than all the Warrant Shares purchasable on such exercise at any time prior to the Expiration Date, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares, promptly deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the remaining unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(b)     In lieu of payment of the Exercise Price in cash, at the option of the Holder, as indicated on the subscription form appearing at the end of this Warrant as Exhibit A , the Holder may demand that the Company reduce the number of Warrant Shares to be delivered to such Holder upon exercise of the Warrants then being exercised so that the Holder receives a number of Warrant Shares equal to the product of (i) the number of Warrant Shares for which such Warrant would otherwise then be nominally exercised if payment of the Exercise Price as of the date of exercise were being made in cash and (ii) the Cashless Exercise Ratio.  An exercise of a Warrant in accordance with this clause (b) is herein called a “Cashless Exercise”.  The Holder may use the Cashless Exercise option whether or not this Warrant is being exercised in full or in part and whether or not the Holder elects to pay any portion of the aggregate Exercise Price in cash.

Section 2.4     Issuance of Warrant Shares .  Subject to Section 2.5 , upon the surrender of this Warrant and payment of the per share Exercise Price in cash and/or in accordance with a Cashless Exercise as set forth in Section 2.3 , the Company shall, as promptly as practicable, and in any event within three (3) Trading Days thereafter, issue (or cause there to be issued) and deliver (or cause to be delivered) to or upon the written order of the Holder and in such name or names as the Holder may designate in the Warrant Exercise Notice provided pursuant to Section 2.3(a) , a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants or other securities or property to which it is entitled, registered or otherwise to the Person or Persons entitled to receive the same, together with cash as provided in Section 2.5 in respect of any fractional Warrant Shares otherwise issuable upon such exercise.

 

 

Such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the delivery of the Warrant Exercise Notice provided pursuant to Section 2.3(a) , the surrender of this Warrant and, subject to Section 2.3(b) , payment of the per share Exercise Price, notwithstanding that the stock transfer books of the Company may then be closed or such certificate or certificates may not be actually delivered on such date.  If, prior to both (x) a Rights Plan Triggering Event and (y) a Distribution Date, this Warrant is exercised for Class A Common Stock, upon the exercise of this Warrant, the shares of Class A Common Stock issued in respect thereof shall be issued with the same Rights, if any, attached thereto as are attached to the then-outstanding shares of Class A Common Stock.  If following the occurrence of a Distribution Date and prior to the expiration or redemption of the Rights (it being understood that a Rights Plan Exchange shall not be deemed to be an expiration or redemption of the Rights), this Warrant is exercised for Class A Common Stock, upon the exercise of this Warrant, the holders of such Class A Common Stock shall receive the number of Rights which would have been attached to such Class A Common Stock assuming the Distribution Date had not occurred prior to such exercise and, if the Company has previously completed a Rights Plan Exchange that would have applied to such Rights had they been outstanding at the time of such Rights Plan Exchange, the Company shall promptly effect the same exchange of the Rights received by such holders as was previously completed pursuant to such Rights Plan Exchange (it being understood that Section 3.5 shall not apply to such Rights Plan Exchange).

Section 2.5     Fractional Warrant Shares .  The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants.  If any fraction of a Warrant Share would, except for the provisions of this Section 2.5 , be issuable on the exercise of this Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the Fair Market Value for one Warrant Share on the Trading Day immediately preceding the date the Warrant is exercised, multiplied by such fraction, rounded to the nearest whole cent.

Section 2.6     Reservation of Warrant Shares .  (a) The Company shall at all times on and following the Closing Date keep reserved out of its authorized but unissued shares of Common Stock a number of shares of Class A Common Stock sufficient to provide for the exercise in full of all outstanding Warrants.  The registrar for the Class A Common Stock shall at all times on and following the Closing Date and until the Expiration Date, or the time at which all Warrants have been exercised or canceled, reserve such number of authorized shares of Class A Common Stock as shall be required for such purpose.  All Warrant Shares which may be issued upon exercise of this Warrant shall be duly and validly authorized, validly issued, fully paid, nonassessable, free of preemptive rights and free from all Liens, other than Liens created pursuant to the Securities Purchase Agreement or created by the Holder.

(b)     Before taking any action which would cause an adjustment pursuant to Article 3 to reduce the Exercise Price below the then par value (if any) of the Class A Common Stock, the Company shall take any and all corporate action which may, based on the advice of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Class A Common Stock at the Exercise Price as so adjusted.

Section 2.7     Listing; Compliance with Law .  On or prior to the Initial Exercise Date, the Company will, if applicable, (A) procure, at its sole expense, the listing of the Warrant

 

 

Shares and other securities issuable upon exercise of this Warrant, subject to issuance or notice of issuance on all stock exchanges on which the Warrant Shares are then listed or traded and (B) use its best efforts to maintain the listing of such Warrant Shares after issuance. The Company will use its reasonable best efforts to ensure that the Warrant Shares may be issued without violation of any applicable law or regulation or of any requirement of any securities exchange on which the Warrant Shares are listed or traded.

Section 2.8     Payment of Taxes .  Issuance of certificates for Warrant Shares (or other securities) to the Holder upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company.

Section 2.9     Limitation on Exercise .  (a) Prior to the receipt of Shareholder Approval with respect to the removal of the limitations set forth in this Section 2.9 , no Holder will be permitted to exercise the right to purchase Warrant Shares, if and to the extent, following such exercise, either (i) the aggregate voting power of such Holder (or of any Group including such Holder) on a matter being voted on by holders of the Common Stock would exceed 19.99% of the Maximum Voting Power or (ii) such Holder (or any Group including such Holder) would Beneficially Own more than 19.99% of the then outstanding Common Stock; provided , however , that such exercise restriction shall not apply in connection with and subject to completion of (A) a Public Sale of the Class A Common Stock to be issued upon such exercise, if following consummation of such Public Sale such Holder or Group will not Beneficially Own in excess of 19.99% of the then outstanding Common Stock or (B) a bona fide third party tender offer for the Common Stock.  For purposes of the foregoing sentence, the number of shares of Common Stock Beneficially Owned by a Holder (or any Group including such Holder) shall include the number of shares of Class A Common Stock to be issued with respect to which a Warrant Exercise Notice has been given, but shall exclude the number of shares of Common Stock which would be issuable upon conversion or exercise any other outstanding Warrants Beneficially Owned by such Holder (or any Group including such Holder). At any time upon the written request of the Holder, the Company shall within two (2) Trading Days confirm in writing to the Holder the number of shares of Common Stock and Maximum Voting Power then outstanding.  Effective immediately upon receipt of Shareholder Approval with respect to the removal of the limitations set forth in this Section 2.9 , this Section 2.9 shall cease to apply.

ARTICLE 3

ADJUSTMENT PROVISIONS

Section 3.1     Changes in Common Stock .  In the event that at any time or from time to time after the date hereof, the Company shall (i) pay a dividend or make a distribution on its Class A Common Stock, in each case in shares of its Class A Common Stock, (ii) subdivide its outstanding shares of Class A Com mon Stock into a larger number of shares of Class A Common Stock, (iii) combine its outstanding shares of Class A Common Stock into a smaller number of shares of Class A Common Stock or (iv) increase or decrease the number of shares of Class A Common Stock outstanding by reclassification of its Class A Common Stock (in each case, other than a transaction to which Section 3.4 is applicable), then the number of shares of Class A Common Stock purchasable upon exercise of this Warrant immediately after the