United states securities and exchange commission



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required under Section 5.1(a) and (b)(ii), providing management’s commentary on financial results of the Borrower for the period covered by such financial statements, including a discussion of significant operational and financial developments during such period and setting forth such other information as may be reasonably requested by the Administrative Agent.

(g)      (i) Within ten (10) Business Days after a Picture for which a Credit Party is the U.S. Distributor becomes a Seasoned Picture, an Ultimates Report for such Picture, and (ii) thereafter, together with each certificate delivered pursuant to Section 5.1(f) (which shall be, for the avoidance of doubt, not less often than once in each calendar quarter), an Ultimates Report for each Seasoned Picture, together with the customary calculations thereof. If such Picture is distributed domestically by a non-Credit Party, the relevant Credit Party shall also deliver to the Administrative Agent information supporting the calculation of the Ultimates (such information to be provided by such U.S. distributor and to include any third-party Ultimates calculation received by such Credit Party).

(h)      Simultaneously with the delivery of each Ultimates Report pursuant to clause (g)(ii) above after the date which is six (6) months following the release of the fourth Seasoned Film after the Closing Date, a reasonably detailed calculation of the Ultimates Ratio and the Ultimates Advance Rate.

(i)      Within ten (10) Business Days after receipt thereof by a Credit Party, copies of all management letters issued to such Person by its auditors.

(j)      Promptly upon their becoming available, copies of all registration statements, proxy statements, notices and reports any Credit Party shall file with any securities exchange or with the Securities and Exchange Commission or any successor agency, if any.

(k)      Together with the delivery of each certificate required under Section 5.1(f), a Liquidity Certificate indicating that, for the applicable four-fiscal-quarter period described therein, the ratio of the Credit Parties’ projected cash flow sources to the Credit Parties’ projected cash uses (other than the mandatory prepayments set forth in Sections 2.7(e), (f) and (g)) will exceed 1.1:1.0 in each quarter.

(l)      Upon the reasonable request of the Administrative Agent, accounting statements with respect to receipts and distribution expenses relating to the applicable Pictures with respect to which a Credit Party has in its possession.

(m)      Such information as may be required to keep current each of the Schedules attached to this Credit Agreement, it being agreed that the relevant Schedules shall be deemed to be updated automatically to reflect any pertinent information or documentation provided, in the form of updated schedules, by a Credit Party to the Administrative Agent from time to time without any further action by the Credit Parties; provided , that Schedules 3 , 3.12 , 3.2(b) , 3.16 , 6.1 , 6.2(j) , 6.3 , 6.4 and 6.11 may not be amended without the prior written consent of the Required Lenders.

(n)      Promptly upon written request therefor, any information required by the Administrative Agent or any Lender under or in connection with the USA Patriot Act.


(o)      Any reports, analyses or other information required to be delivered to the Administrative Agent by the Borrower under any of the other Fundamental Documents to which it is a party, at such time or times as are required therein.

(p)      From time to time such additional information regarding the financial condition or business of any Credit Party or Excluded Subsidiary, or otherwise regarding the Collateral and the Pledged Collateral, as the Administrative Agent or any Lender (through the Administrative Agent) may reasonably request in writing.

SECTION 5.2      Corporate Existence; Compliance with Laws .

(a)      Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its organizational existence, except as otherwise permitted under Sections 6.6 and 6.20; provided , that Summit International Distribution, Inc. may be dissolved within one year of the Closing Date after transferring all of its assets to a Credit Party.

(b)      Maintain all rights, licenses, permits and franchises necessary or desirable in the normal conduct of its business, except to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

(c)      Comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, any Governmental Authority, except to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.3      Maintenance of Properties . Keep its tangible properties which are material to its business in good repair, working order and condition (ordinary wear and tear excepted) and (i) from time to time make (or cause to be made) all necessary and proper repairs, renewals, replacements, additions and improvements thereto, and (ii) comply at all times with the provisions of all material leases and other material agreements to which it is a party so as to prevent any loss or forfeiture thereof or thereunder unless compliance therewith is being currently contested in good faith by appropriate proceedings and appropriate reserves have been established in accordance with GAAP; provided , however , that nothing in this Section 5.3 shall prevent any Credit Party from discontinuing the use, operation or maintenance of such properties or disposing of them if (x) such discontinuance or disposal is, in the reasonable judgment of the governing body of such Credit Party, desirable in the conduct of the business, and (y) such discontinuance or disposal could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.4      Notice of Material Events .

(a)      Promptly upon any Authorized Officer of any Credit Party obtaining knowledge of (i) any Default or Event of Default, or a failure of the Performance Test, (ii) any action or event which could reasonably be expected to materially and adversely affect the performance of the Credit Parties’ obligations under the Fundamental Documents, the repayment of the Loans, or the security interests granted to the Administrative Agent (for the benefit of the Secured Parties) under the Fundamental Documents, (iii) any other action or event which could reasonably be expected to result in a Material Adverse Effect, (iv) any event which could reasonably


be expected to materially and adversely impact upon the amount or collectibility of accounts receivable of the Credit Parties or otherwise materially decrease the value of any Collateral or Pledged Collateral, (v) any proposed material amendment to any material agreements that are part of the Collateral or the Pledged Collateral and which amendment could reasonably be expected to be materially adverse to the business of the Credit Parties as a whole, or (vi) any Person giving any notice to any Credit Party, or taking any other action to enforce remedies with respect to a claimed default or event or condition of the type referred to in Section 7.1(g) or (h), such Credit Party shall promptly give written notice thereof to the Administrative Agent specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by such Person and the nature of such claimed default or event or condition and what action any Credit Party has taken, is taking and proposes to take with respect thereto.

(b)      Promptly upon any Authorized Officer of any Credit Party obtaining knowledge of (i) either (1) the institution of any action, suit, proceeding, investigation or arbitration by any Governmental Authority or other Person against or affecting any Credit Party or any material portion of any Credit Party’s assets (including any Picture) which, if adversely decided would be reasonably likely to result in a Material Adverse Effect (each, a “ Proceeding ”) or (2) the threat of any Proceeding, or (ii) any material adverse development in any Proceeding described in clauses (1) or (2) above (whether or not previously disclosed to the Administrative Agent or the Lenders), such Credit Party shall (x) give written notice thereof to the Administrative Agent and provide such other information as has been made available to such Credit Party to enable the Administrative Agent to evaluate such matters; and (y) upon written request, promptly give notice of the status of any Proceeding covered by a notice delivered to the Administrative Agent pursuant to clause (x) and provide such other information as may be reasonably requested and available to such Credit Party to enable the Administrative Agent and the Lenders to evaluate such matters.

SECTION 5.5      Insurance .

(a)      Keep its assets which are of an insurable character insured (to the extent and for the time periods consistent with, or greater than, customary industry standards) by financially sound and reputable insurers against all risks of loss or damage by fire, explosion, theft or other hazards which are included under extended coverage in amounts not less than the insurable value (as reasonably determined by the Borrower) of the property insured or such lesser amounts, and with such self insured retention or deductible levels, as are generally consistent with normal industry standards.

(b)      Maintain with financially sound and reputable insurers, insurance against other hazards and risks and liability to Persons and property to the extent and in the manner consistent with, or greater than, customary standards.

(c)      Maintain, or cause to be maintained, in effect during the period from the commencement of principal photography of each Picture produced by any Credit Party or from the date of acquisition of each Picture acquired by any Credit Party, through the third anniversary of the date on which such Picture is delivered, a so called “Errors and Omissions” policy or policies covering such Pictures, and cause such Errors and Omissions policy or policies to provide coverage to the extent and in such manner as is customary for Pictures of a like type but at a minimum to the

extent and in such manner as is required under all applicable Distribution Agreements and other contracts relating thereto.

(d)      Maintain, or cause to be maintained, in effect during the period from the commencement of principal photography of each Picture produced by a Credit Party, or from the date of delivery of each such Picture acquired by a Credit Party (i) until such time as the Administrative Agent shall have been advised of the existence of one negative or master tape in one location and an interpositive, internegative or duplicate master tape in another location of the final version of the Completed Picture (satisfactory evidence thereof to be delivered to the Administrative Agent upon request), insurance on the negatives and sound tracks or master tapes of such Picture in an amount not less than the cost of re-shooting the principal photography of such Picture and otherwise re-creating such Picture and (ii) until principal photography of such Picture has been concluded, a cast insurance policy with respect to such Picture, which provides coverage to the extent and in such manner as is customary for Pictures of a like type, but at minimum to the extent and in such manner as is required under all applicable Distribution Agreements and other contracts relating thereto.

(e)      Cause all such above described insurance (excluding worker’s compensation insurance) to: (i) provide for the benefit of the Lenders that thirty (30) days’ prior written notice of cancellation, termination, non renewal or lapse or material change of coverage shall be given to the Administrative Agent; (ii) name the Administrative Agent for the benefit of the Secured Parties as a loss payee (except for “Errors and Omissions” insurance and other third party liability insurance); provided , however , that so long as no Default or Event of Default shall have occurred and be continuing, production insurance recoveries received by a Credit Party prior to Completion or abandonment of a Picture may be utilized to finance the production of such Picture; and provided , further , that so long as no Event of Default shall have occurred and be continuing, property insurance proceeds may be used to repair damage in respect of which such proceeds were received; and (iii) to the extent that none of the Secured Parties shall be liable for premiums or calls, name the Administrative Agent (for the benefit of the Secured Parties) as an additional insured, including, without limitation, under any “Errors and Omissions” policy.

(f)      No less than one time per calendar year, render to the Administrative Agent a broker’s report in form and substance reasonably satisfactory to the Administrative Agent as to all such insurance coverage, including such detail as the Administrative Agent may reasonably request.

SECTION 5.6      [Intentionally omitted] .

SECTION 5.7      Copyrights and Trademarks .

(a)      Within thirty (30) days after (i) the initial U.S. commercial release of each Picture, to the extent any Credit Party is or becomes the owner, in whole or in part, of the copyright to such Picture, (ii) any Credit Party becomes the owner (or otherwise acquires a copyrightable interest), in whole or in part, of the copyright to any items of Music Product and elects to file an application to register its interest therein or (iii) any Credit Party elects to file an application to register any trademark or service mark with the U.S. Patent and Trademark Office, (1) take any and


all actions necessary to register the copyright for such Picture or such item of Music Product or such trademark or service mark in the name of such Credit Party (subject, in the case of the Credit Parties, to a Lien in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to the Copyright Security Agreement and the Trademark Security Agreement) in conformity with the laws of the United States of America, and (2) promptly deliver to the Administrative Agent (x) written evidence of the submission for registration (and subsequently of registration) of any and all such copyrights and trademarks and service marks for inclusion in the Collateral under this Credit Agreement, and (y) a Copyright Security Agreement Supplement or a Trademark Security Agreement, as applicable, relating to such copyright or such trademark or service mark, executed by such Credit Party.

(b)      Within thirty (30) days after (i) the initial U.S. commercial release of each Acquired Picture, to the extent any Credit Party has an interest under copyright therein, but does not own, in whole or in part, the copyright to such Picture, or (ii) any Credit Party is assigned the ownership rights to any registered trademark or service mark (or a trademark or service mark that is the subject of an application for federal registration based on actual use of the mark or if based on intent to use, a Statement of Use or Amendment to Allege Use has been filed and accepted by the U.S. Patent & Trademark Office), record, or cause to be recorded, if such interest or rights may be recorded with the U.S. Copyright Office or the U.S. Patent and Trademark Office, (x) an instrument of transfer in respect to such interests or rights with the U.S. Copyright Office or the U.S. Patent and Trademark Office, as applicable, and (y) a Copyright Security Agreement Supplement or a Trademark Security Agreement, as applicable, relating to such interests or rights, executed by such Credit Party, in the case of clauses (x) and (y), other than with respect to non-theatrical direct to video Pictures for which a Credit Party obtained less than all of the United States distribution rights and did not obtain the copyright in and to such Picture.

(c)      To the extent that the Credit Parties at any time have rights in registered copyrights, trademarks or service marks outside of the U.S. which have material value in the reasonable determination of the Administrative Agent, and the Administrative Agent has also determined that the cost to a Credit Party is not disproportionate to the benefit to be realized by the Secured Parties by perfecting a Lien in such copyrights, trademarks or service marks, the Credit Parties shall execute and deliver appropriate local law security documents and filings (in form and substance reasonably acceptable to the Administrative Agent) following a request by the Administrative Agent; provided , that in no event shall any Credit Party be required to take any action that could reasonably be expected to affect the validity of any such registrations under the law of the applicable jurisdiction in effect at such time or be required to execute any documents that would effect a transfer or assignment of any copyrights, trademarks or service marks should the local law of the applicable jurisdiction not recognize or provide for security interests in copyrights, trademarks or service marks.

SECTION 5.8      Books and Records; Examination .

(a)      Maintain or cause to be maintained at all times true and complete books and records of its financial operations and provide the Administrative Agent and its representatives access to such books and records and to any of its properties or assets upon reasonable advance notice to the applicable Credit Party no more than one (1) time per year (unless an Event of Default


shall have occurred and be continuing, in which case no such notice shall be required and no such limit shall apply) and during regular business hours and in a manner so as not to disrupt the business operations of the Borrower or any Credit Party in order that the Administrative Agent and its representatives may make such audits and examinations of, and make abstracts from such books, accounts, records and other papers pertaining to, the Collateral, and upon reasonable advance notification to the Credit Parties and subject to any party not then bound by a confidentiality agreement to entering into a confidentiality agreement in a form reasonably acceptable to the Borrower, permit the Administrative Agent or its representatives to discuss the affairs, finances and accounts with, and be advised as to the same by, Authorized Officers and independent accountants, all as the Administrative Agent may reasonably deem appropriate for the purpose of verifying the accuracy of each report delivered by any Credit Party to the Administrative Agent and/or the Lenders pursuant to this Credit Agreement or for otherwise ascertaining compliance with the Fundamental Documents.

(b)      If, at any time when no Event of Default has occurred and is continuing, the Administrative Agent wishes to confirm with account debtors and other payors the amounts and terms of a reasonable number of receivables of any Credit Party, the Administrative Agent will so notify the Credit Parties. The Administrative Agent agrees to have such confirmation made through the Credit Parties’ auditors. If for any reason such auditors fail to proceed with the confirmations in a timely manner, after a cure period of ten (10) Business Days from receipt of notice from the Administrative Agent, the Administrative Agent may proceed to make such confirmations directly with account debtors and other payors after prior written notice to the Borrower. The Administrative Agent agrees that it shall not exercise the foregoing rights more than once per year unless (i) an Event of Default shall have occurred and be continuing or (ii) the Administrative Agent shall have a valid credit concern with respect to the Facility or the applicable account debtor. Each of the Credit Parties hereby agrees that, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall be entitled to confirm directly with account debtors and other payors, the amounts and terms of all accounts receivable of the Credit Parties.

SECTION 5.9      Audit Rights .

(a)      Promptly notify the Administrative Agent of, and at all times allow the Administrative Agent or its designee access to the results of all material audits conducted by (i) any Credit Party of any third party licensee, partnership, or joint venturer, or (ii) any contract counterparty of the Credit Party, in each case to the extent the final results thereof are material. The Credit Parties will exercise their audit rights with respect to any such third party licensees, partnerships and joint ventures in a manner consistent with past practice; provided , that if an Event of Default shall have occurred and be continuing, the Administrative Agent shall have the right, subject to providing prior written notice to the Credit Parties, to exercise directly such Credit Party’s audit rights under any agreement with respect to any Picture included in the Collateral.

(a)      From and after the Closing Date, use good faith efforts to not enter into any Distribution Agreement which prohibits the Credit Parties from (i) sharing the results of audits conducted by the Credit Parties and the contract counterparties with the Administrative Agent and the Lenders, or (ii) allowing the Administrative Agent to exercise the Credit Parties’ audit rights as provided in clause (a) above.


SECTION 5.10      Observance of Agreements . Duly observe and perform all material terms and conditions of each Production Services Agreement, all material Distribution Agreements and all other material agreements to which it is a party relating to the production, acquisition, development and exploitation of each Picture and diligently protect and enforce (or cause to be protected and enforced) the material rights of the Credit Parties under all such agreements in a manner consistent with prudent business judgment and subject to the terms and conditions of such agreements as from time to time in effect.

SECTION 5.11      Laboratories; No Removal .

(a)      To the extent any Credit Party has control over, has received delivery of, or has current access rights to, any of the Physical Materials referenced below relating to any Picture, deliver or cause to be delivered to a Laboratory or Laboratories all the original negative (or digital original negative, if applicable, or if no original negative or digital original negative exists, digital files) (the “ Original Negative ”) and preprint materials (until Completion of the Picture), and subsequent to Completion, the Original Negative, master sound elements and digital interpostive with respect to each such Picture sufficient to exploit its rights in all known media (the “ Key Materials ”) and deliver to the Administrative Agent a fully executed Pledgeholder Agreement with respect to such materials. To the extent that any Credit Party has only rights of access to such Key Materials and has not created duplicate materials sufficient to exploit its rights and has not stored such duplicate materials at a Laboratory that has delivered a Pledgeholder Agreement to the Administrative Agent, the applicable Credit Party shall deliver to the Administrative Agent a fully executed Laboratory Access Letter covering such materials. Prior to requesting any such Laboratory to deliver any Key Materials to another Laboratory, such Credit Party shall provide the Administrative Agent with a Pledgeholder Agreement or Laboratory Access Letter, as appropriate, executed by such other Laboratory and all other parties to such Pledgeholder Agreement or Laboratory Access Letter, as the case may be (including, with respect to any such Pledgeholder Agreement, the Administrative Agent). Each Credit Party hereby agrees not to deliver or remove or cause the delivery or removal of the Key Materials with respect to any Picture owned by any Credit Party, or any Picture in which any Credit Party has an interest and the right to control the delivery or removal of Key Materials, to a location outside the United States of America, Canada or the United Kingdom (unless the Key Materials sufficient to exploit its rights in all known media with respect to the applicable Picture are held at a Laboratory in the United States, United Kingdom or Canada) without the prior written consent of the Administrative Agent, except for a limited duration as may be reasonably required for a Picture produced in another territory; provided , that before any such materials may be located in Canada or the United Kingdom, at the request of the Administrative Agent, appropriate local law security documents in form and substance satisfactory to the Administrative Agent shall be delivered to the Administrative Agent.




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