United states securities and exchange commission


CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT



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CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT dated as of January 13, 2012 (as may be further amended, supplemented or otherwise modified, renewed, restated or replaced from time to time, this “ Credit Agreement ”) among (i) SUMMIT ENTERTAINMENT, LLC , a Delaware limited liability company, as Borrower, (ii) the GUARANTORS referred to herein, (iii) the LENDERS referred to herein, and (iv) JPMORGAN CHASE BANK, N.A. , as Administrative Agent for the Lenders.

INTRODUCTORY STATEMENT

Terms not otherwise defined above or in this Introductory Statement are as defined in Article 1 or as defined elsewhere herein.

The Borrower was party to that certain Credit, Security, Guaranty and Pledge Agreement, dated as of March 8, 2011 (the “ Original Closing Date ”) among the Borrower, the guarantors party thereto, the lenders party thereto, the Administrative Agent and JPMorgan Chase Bank, N.A., as issuing bank (as amended, supplemented or otherwise modified, renewed, restated or replaced from time to time prior to the date hereof, the “ Existing Credit Agreement ”).

The Borrower requested that the Lenders make available to the Borrower a $500,000,000 senior secured term loan facility maturing on September 7, 2016 (the “ Facility ”) in order to refinance the Existing Credit Agreement on the terms set forth herein. In that regard, the Borrower, certain Guarantors, certain Lenders (the “ Initial 2012 Lenders ”) and the Administrative Agent executed a Credit, Security, Guaranty and Pledge Agreement dated as of January 13, 2012 (the “ Initial 2012 Credit Agreement ”) documenting the terms of the Facility.

The proceeds of loans under the Facility were used on January 13, 2012, the Closing Date, to refinance the loans under the Existing Credit Agreement.

In connection with the syndication of the Facility by the Initial 2012 Lenders, this Amended and Restated Credit, Security, Guaranty and Pledge Agreement was executed and became effective as of February 21, 2012. All references herein to the “Credit Agreement” or this “Agreement” are to this Amended and Restated Credit, Security, Guaranty and Pledge Agreement. The conditions precedent enumerated in Section 4.1 to this Credit Agreement were satisfied on January 13, 2012.

To provide assurance for the repayment of the Loans and the other Obligations of the Credit Parties hereunder, the Borrower has, among other things, provided or caused to be provided to the Administrative Agent, for the benefit of the Secured Parties, the following (each as more fully described herein):








(i)

a security interest in the Collateral from each of the Credit Parties pursuant to Article 8;










(ii)

a guaranty of the Obligations by each of the Guarantors pursuant to Article 9; and










(iii)

a pledge by each of the Pledgors of the Pledged Collateral owned by it pursuant to Article 10.

Subject to the terms and conditions set forth herein, the Administrative Agent is willing to act as administrative agent for the Lenders and each Initial 2012 Lender made a Loan to the Borrower on the Closing Date in an amount equal to its Commitment hereunder.

Accordingly, the parties hereto hereby agree as follows:

1. DEFINITIONS

SECTION 1.1      Terms Generally . For the purposes of this Credit Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, (i) terms used herein include, as appropriate, all genders, (ii) references to any agreement include all schedules and exhibits thereto, (iii) references to words such as “herein,” “hereof,” “hereunder,” and words of a similar import shall refer to this Credit Agreement in its entirety and not to any particular part, Article or Section within this Credit Agreement, (iv) terms may be used in the singular or plural, depending on the reference, (v) references to an Article, Section, Exhibit, Annex or Schedule shall refer to the applicable Article or Section of, or Exhibit, Annex or Schedule to, this Credit Agreement, (vi) the terms “include” and all variations thereof shall be deemed to be followed by the phrase “without limitation,” (vii) all accounting terms not otherwise defined herein shall have the respective meanings accorded to them under GAAP, and (viii) references to laws include their amendments and supplements, the rules and regulations thereunder and any successors thereto.

SECTION 1.2      Definitions .

For the purposes of this Credit Agreement, unless the context otherwise requires, the following terms shall have the respective meanings indicated:

Acceptable L/C ” shall mean either (i) an irrevocable letter of credit which: (a) is in form and on terms reasonably acceptable to the Administrative Agent, (b) is payable in Dollars at an office of the issuing or confirming bank in New York City or Los Angeles, and (c) is issued or confirmed by any Person that on the date of issuance or confirmation of the letter of credit is (x) a New York Clearinghouse bank, (y) a commercial bank or U.S. branch of a foreign commercial bank that has (or which is the principal operating Subsidiary of a holding company which has) long term senior unsecured debt outstanding with a rating of at least “A-” (or the equivalent of “A-”) from a nationally recognized statistical rating organization, and capital and surplus in excess of $500,000,000, or (z) any other bank which the Administrative Agent may in its sole discretion determine to be of acceptable credit quality, or (ii) cash collateral acceptable to the Administrative Agent.

Account Control Agreement ” shall mean an account control agreement among the applicable Credit Party, the Administrative Agent and the applicable depository bank or securities intermediary, as the case may be, which such agreement shall be in form and substance reasonably satisfactory to the Administrative Agent.


Acquisition ” shall mean the acquisition of the Borrower by LGAC and LGAC 3, LLC, each of which is a wholly owned subsidiary of Lions Gate Entertainment Inc. on the Closing Date.

Adjusted Excess Cash Flow ” shall mean, for any fiscal quarter, all Excess Cash Flow, but excluding Breaking Dawn Cash Flow.

Administrative Agentshall mean JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders hereunder, or such successor Administrative Agent as may be appointed pursuant to Section 12.11.

Affiliate ” shall mean, with respect to any specified Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified Person. For purposes of this definition, a Person shall be deemed to be “controlled by” another Person if such latter Person possesses, directly or indirectly, power either to direct or cause the direction of the management and policies of such controlled Person whether by contract or otherwise.

Alternate Base Rate ” shall mean, for any day, a rate per annum equal to the greatest of (i) the Prime Rate in effect on such day, (ii) the Federal Funds Effective Rate in effect on such day plus ½ of 1%, and (iii) LIBOR for a one (1) month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%. For the purposes hereof, “ Prime Rate ” shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City. “ Federal Funds Effective Rate ” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three (3) Federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate or LIBOR for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, then the Alternate Base Rate shall be determined without regard to clauses (ii) or (iii) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or LIBOR for a one (1) month Interest Period shall be effective on the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or LIBOR for a one (1) month Interest Period, respectively.

Alternate Base Rate Loan ” shall mean a Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article 2.

Amendment and Restatement Effective Date ” shall mean the date on which the Administrative Agent has received executed counterparts of this Credit Agreement, which, when taken together, bear the signatures of the Administrative Agent, each Initial 2012 Lender and the


Credit Parties.

Applicable Law ” shall mean all provisions of statutes, rules, regulations and orders of the United States of America, any state thereof or municipality or subdivision therein or of any foreign governmental body or of any regulatory agency applicable to the Person in question, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party.

Applicable Margin ” shall mean (i) in the case of Alternate Base Rate Loans, 4.50% per annum, and (ii) in the case of LIBOR Loans, 5.50% per annum.

Approved Co-Financier ” shall mean (i) PM/IN Finance, LLC, DreamWorks II Financial Services Co., LLC, DreamWorks Animation SKG, Inc., Metro-Goldwyn-Mayer Studios Inc., Regency Entertainment (USA), Inc., Monarchy Enterprises S.a.r.l., Lakeshore Entertainment Group and Alcon Entertainment, LLC, (ii) a Major Studio, (iii) any other Person whose production co-financing obligations are (a) secured by an Acceptable L/C, or (b) fully funded into a Production Account pursuant to an Approved Completion Bond and over which the Approved Completion Guarantor has a Production Account take over letter, before a Credit Party funds its share of the Negative Cost, or (c) fully funded into an escrow account pursuant to escrow arrangements reasonably acceptable to the Administrative Agent before a Credit Party funds its share of the Negative Cost, or (d) paid towards the Negative Cost before a Credit Party funds its share of the Negative Cost, or (iv) any other Person, if, at the time of entering into the Approved Co-Financing Transaction and at all times thereafter, the Borrower has sufficient liquidity (on a basis reasonably acceptable to the Administrative Agent) to fund such Person’s share of its obligations if such Person defaulted, and if doing so would not result in a violation of the exposure tests set forth in Section 4.2(a) or (b) with respect to the applicable Picture, (v) any co-financier listed on Schedule 1.1 attached hereto (in each case, solely with respect to the transactions described therein) or (vi) any other co-financier reasonably acceptable to the Administrative Agent; provided , that with respect to clauses (i), (ii), (v) and (vi), the Administrative Agent may in good faith using its reasonable credit judgment from time to time by written notice to the Borrower remove any such Person as an Approved Co-Financier on a prospective basis with respect to Pictures which have not yet been Greenlit.

Approved Co-Financing Transaction ” shall mean a co-financing transaction with respect to a Picture (i) in which each of the following are satisfied (a) the co-financing party is an Approved Co-Financier, (b) the Approved Co-Financier is either (1) not obtaining any interest in the copyright in and to such Picture or (2) obtaining an interest in the copyright in and to such Picture but has agreed in writing that it will have no right to take any action against a Credit Party with respect to or against such copyright for any reason, including, without limitation, a breach by a Credit Party of its obligations to such Approved Co-Financier pursuant to the applicable Co-Financing Agreement, (c) if the Approved Co-Financier is granted a Lien to secure a Credit Party’s co-financing obligations, it is subject to a Co-Financing Intercreditor Agreement and (d) the Approved Co-Financier is entitled to a percentage of receipts generated from such Picture that is (unless otherwise agreed by the Administrative Agent) equal to or less than the percentage of the aggregate P&A costs and/or Negative Cost that such Approved Co-Financier has funded relative to the total P&A costs and/or Negative Cost calculated on an aggregate basis taking into account


all amounts retained by a Credit Party, (ii) that is set forth on Schedule 6.23 hereto or (iii) as may otherwise be approved by the Administrative Agent.

Approved Co-Financing Venture Counterparty ” shall mean each of: (i) PM/IN Finance, LLC, (ii) any Approved Co-Financier pursuant to clauses (i) or (ii) of the definition thereof herein, (iii) any Approved Passive Counterparty and (iv) any other Person reasonably acceptable to the Administrative Agent, provided in each case that the Administrative Agent may in good faith using its reasonable credit judgment from time to time by written notice to the Borrower remove any Person as an Approved Co-Financing Venture Counterparty on a prospective basis with respect to Pictures which have not yet been Greenlit.

As used herein, “ Approved Passive Counterparty ” shall mean, with respect to a Co-Financing Venture Entity, any Person (a) whose production co-financing obligations with respect to the applicable Co-Financing Venture Picture are either (i) secured by an Acceptable L/C or (ii) fully funded into the applicable production account of such Co-Financing Venture Entity or into an escrow account pursuant to escrow arrangements reasonably acceptable to the Administrative Agent, in either case before a Credit Party funds or reimburses its share of the Negative Cost or (iii) paid towards the Negative Cost of such Co-Financing Venture Picture before a Credit Party funds or reimburses its share of such Negative Cost, (b) that is not the Distributor or sales agent with respect to such Co-Financing Venture Picture and (c) that is not acting as “lead studio” with respect to such Co-Financing Venture Picture, i.e. , as between a Credit Party and such Person, the Credit Party is acting as “lead studio” with all applicable day-to-day controls of such Co-Financing Venture Entity.

Approved Co-Financing Venture Transaction ” shall mean a co-financing venture transaction with respect to a Picture between a Credit Party and an Approved Co-Financing Venture Counterparty that satisfies all of the terms and conditions set forth on Schedule 3 hereto.

Approved Completion Bond ” shall mean with respect to a Picture, a completion bond, in form and substance satisfactory to the Administrative Agent, issued by an Approved Completion Guarantor, which bond (i) names the Administrative Agent (for the benefit of the Secured Parties), and in appropriate circumstances, the applicable Foreign Rights Lender, Approved Co-Financier, Approved Co-Financing Venture Counterparty, Credit Party or other appropriate Persons as beneficiaries and (ii) guarantees, subject to standard terms and conditions, due and timely delivery of such Picture by the delivery date set forth therein, or else payment to the Administrative Agent (on behalf of the Secured Parties) of an amount at least equal to (a) the Negative Cost of such Picture actually spent or provided for (other than the portion thereof provided by the relevant Approved Completion Guarantor or by the applicable Foreign Rights Lender, Approved Co-Financier, or Approved Co-Financing Venture Counterparty, limited with regard to the latter to the portion for which the Approved Completion Guarantor has a direct payment obligation to such Person), as well as interest, fees and costs related thereto, or (b), if such Picture is co-financed, the applicable Credit Party’s share of such Negative Cost, as well as interest, fees and costs related thereto.

Approved Completion Guarantor ” shall mean each of (i) Fireman’s Fund Insurance Company, acting through its agent, International Film Guarantors, LLC, (ii) FFI, subject to the

receipt and approval by the Administrative Agent of (x) FFI’s current insurance support package for each 12-month period commencing in April of each year and/or other credit support and (y) a Lloyd’s of London “cut through” endorsement providing a right to make claims directly against underwriters having credit quality acceptable to the Administrative Agent, it being acknowledged that the Administrative Agent has approved FFI through April 2012 and (iii) any other completion guarantor acceptable to the Administrative Agent; provided that in each case, the Administrative Agent may from time to time, in its good faith credit judgment, upon thirty (30) days’ prior written notice to the Borrower remove any such Person as an Approved Completion Guarantor and/or establish or reduce exposure limits with respect thereto on a prospective basis with respect to any Picture for which an Approved Completion Bond has not been executed.

Approved Domestic Distributor ” shall mean (i) Summit Distribution, LLC or another Credit Party acceptable to the Administrative Agent, (ii) Lions Gate Entertainment Inc. and its wholly-owned Subsidiaries (other than the Borrower, the Borrower’s Subsidiaries and any other “Unrestricted Subsidiaries” (as such term is defined in the LG Credit Agreement as in effect on the date hereof)), (iii) solely with respect to a Co-Financed Picture (but not a Co-Financing Venture Picture), any Major Studio, or (iv) any other motion picture Distributor acceptable to the Administrative Agent; provided that in each case the Administrative Agent may remove any such Person (other than Summit Distribution, LLC and Lions Gate Entertainment Inc. and its wholly-owned Subsidiaries (other than the Borrower, the Borrower’s Subsidiaries and any other “Unrestricted Subsidiaries” (as such term is defined in the LG Credit Agreement as in effect on the date hereof)) that the Administrative Agent, acting in good faith, in its discretion, may deem appropriate, as an Approved Domestic Distributor on a prospective basis by written notice to the Borrower with respect to Pictures that have not yet been Greenlit.

Arrangers ” shall mean J.P. Morgan Securities LLC, Barclays Capital, the investment banking division of Barclays Bank PLC, and Jefferies Finance LLC, in their capacities as co-lead arrangers in connection with the Facility, and any successor thereof.

Asset Coverage Certificate ” shall mean an asset coverage certificate in substantially the form of Exhibit J , executed by an Authorized Officer of the Borrower and delivered to the Administrative Agent as required hereunder.

Asset Coverage Ratio ” shall mean the ratio of (i) the Specified Assets to (ii) total Indebtedness of the Credit Parties (including all extensions of credit under the Facility but excluding the intercompany note referred to in Section 6.1(v)).

Assignment and Assumption ” shall mean an agreement substantially in the form of Exhibit G , executed by the assignor, assignee and such other parties as contemplated thereby.

Authorized Officer ” shall mean, with respect to any Person, its Chief Executive Officer, President or Chief Financial Officer.

Bankruptcy Code ” shall mean the Bankruptcy Reform Act of 1978, as codified at 11 U.S.C. §§ 101 et seq .

Board ” shall mean the Board of Governors of the Federal Reserve System of the United States of America.

Board of Directors ” shall mean the Board of Directors of the Borrower.

Bonded Budget ” shall mean, with respect to any Picture, the final budget for such Picture as approved in writing by the applicable Approved Completion Guarantor on or prior to the date upon which the Approved Completion Bond is required to be delivered to the Administrative Agent hereunder, which final budget includes (i) all Negative Cost in respect of such Picture and (ii) any contingency required by the applicable Approved Completion Guarantor, and which may be increased after the effective date of the Approved Completion Bond to the extent such increases have been approved by the applicable Approved Completion Guarantor and are covered by the Approved Completion Bond; provided that the Borrower has sufficient liquidity (which, if not from available cash, is on a basis reasonably acceptable to the Administrative Agent) to fund its share of the modified Bonded Budget.

Bookrunners ” shall mean J.P. Morgan Securities LLC, Barclays Capital, the investment banking division of Barclays Bank PLC, and Jefferies Finance LLC, in their capacities as joint bookrunners in connection with the Facility, and any successor thereof.

Borrower ” shall mean Summit Entertainment, LLC, a Delaware limited liability company.

Borrower LLC Agreement ” shall mean the Second Amended and Restated Limited Liability Company Agreement of the Borrower, dated as of April 18, 2007, as amended on July 26, 2007, and as may be further amended, restated, supplemented or modified pursuant to the terms of Section 6.20 from time to time.

Borrowing ” shall mean a group of Loans of a single Type made, converted or continued on the same date and, in the case of LIBOR Loans, as to which a single Interest Period is in effect.

Borrowing Notice ” shall mean a borrowing notice, substantially in the form of Exhibit F , executed by an Authorized Officer of the Borrower and delivered to the Administrative Agent in connection with each Borrowing.

Breaking Dawn 1 ” shall mean the feature motion picture titled “The Twilight Saga: Breaking Dawn – Part 1”.

Breaking Dawn 2 ” shall mean the feature motion picture tentatively titled “The Twilight Saga: Breaking Dawn – Part 2”.

Breaking Dawn Cash Flow ” shall mean, for any period, the cash received by the Credit Parties (or credited to any of them to satisfy obligations of a Credit Party to a third party which obligations are unrelated to Breaking Dawn 1 or Breaking Dawn 2 ) that was derived from Breaking Dawn 1 and Breaking Dawn 2 , net of (a) third party cash expenses (including Sales


Expenses payable pursuant to the Services Agreement) for such Pictures (which shall only include distribution expenses, participations, residuals and remaining negative cost), Sales Fees payable to Servicer in respect of such Pictures pursuant to the Services Agreement and amounts contractually required to be paid to Foreign Rights Lenders from the proceeds of such Pictures, in each case actually paid in cash and (b) the Breaking Dawn Expense Reserve Amount which has been reserved pursuant to Section 7 of the Services Agreement; provided , that if any such reserved amounts are released pursuant to the Services Agreement, such reserved amounts shall be counted as cash received during the fiscal quarter in which such amounts were intended to be used. For the avoidance of doubt, (i) this amount is to be determined strictly on a cash basis (but shall include (x) amounts credited to satisfy obligations of a Credit Party to a third party (which obligations are unrelated to Breaking Dawn 1 or Breaking Dawn 2 ) and (y) the reserved amounts set forth above) and (ii) cash paid by a foreign Distributor in respect of Breaking Dawn 1 and Breaking Dawn 2 (whether paid to a Foreign Rights Borrower or to a Credit Party) in excess of amounts owed to the applicable Foreign Rights Agent (if any) shall be included in Breaking Dawn Cash Flow.




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