United states securities and exchange commission



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(d)      so long as no Default or Event of Default shall have occurred and be continuing, dividends or distributions payable to a third party on account of its Equity Interest in a non-wholly owned Subsidiary of a Credit Party or its interest in a Co-Financing Joint Venture Entity, provided the applicable Credit Party receives its corresponding pro rata share of such dividend or distribution;

(e)      payments not to exceed $3,600,000 in respect of “Unit Appreciation Rights” made pursuant to Section 2.6 of the Purchase Agreement;

(f)      so long as no Default or Event of Default shall have occurred and be continuing, to the Sellers on the Closing Date, up to $5,000,000 for the payment of Sellers’ tax obligations in respect of their ownership of the Borrower;

(g)      so long as no default or Event of Default shall have occurred and be continuing, distributions in the amount of the Bonus Amount (as defined in the Purchase Agreement), not to exceed $7,500,000 in the aggregate, if and when the Bonus Amount is payable pursuant to Section 2.2(e) of the Purchase Agreement;

(h)      distributions in an amount not to exceed $5,000,000 to be used to pay, on or after the Closing Date, LGEC’s (or any Subsidiary of LGEC that is not a Credit Party) invoiced, out-of-pocket expenses in connection with the Acquisition; provided , that the Administrative Agent shall have received a copy of each such invoice prior to any such distribution.

SECTION 6.6      Consolidation, Merger or Sale of Assets, etc. Whether in one transaction or a series of transactions, wind up, liquidate or dissolve its affairs, or enter into any transaction of merger or consolidation, or sell or otherwise dispose of all or substantially all of its property, stock, Equity Interests or assets or agree to do or suffer any of the foregoing, except that (i) any Credit Party or Subsidiary may merge with and into, or transfer assets to, another Credit Party; provided , however , that if any such transaction involves the Borrower, then the Borrower must be the surviving entity in each such transaction, and (ii) any Credit Party or Subsidiary that is a production services company or an Immaterial Subsidiary may dissolve so long as all of the assets owned by such production services company or Immaterial Subsidiary, if any, are transferred to another Credit Party.


SECTION 6.7      Receivables . Sell, discount or otherwise dispose of notes, accounts receivable or other obligations owing to any Credit Party, except for the purpose of collection of accounts receivable in the ordinary course of business.



SECTION 6.8      Sale and Leaseback; Other Tax Motivated Transactions . From and after the date hereof, enter into any (i) tax benefit, tax subsidy or other “soft money” transaction, or (ii) “sale-leaseback” or "lease-leaseback" with any Person or Persons, whereby in contemporaneous transactions any Credit Party sells, leases or licenses essentially all or part of its right, title and interest in a Picture and a Credit Party acquires, leases or licenses the right to distribute or exploit such Picture in media and markets accounting for substantially all the value of such Picture or the value of the rights sold or leased with respect to such Picture, for equivalent periods, as were held by a Credit Party immediately prior to such transaction, unless: (I) (A) in the case of any transaction described in clause (ii) above, all rights in and to such Picture sold, leased or licensed (other than the naked copyright or non-exclusive access to film materials, if and as applicable) are reacquired by or leased or licensed to a Credit Party simultaneously with the sale, lease or license of the copyright in and/or rights to such Picture and a Credit Party receives a first priority Lien securing the reacquisition, assignment, lease or license of such rights and the products and proceeds thereof; (B) in the case of any transaction described in clauses (i) or (ii) above, (x) either the Lien of the Administrative Agent (on behalf of the Secured Parties) in the relevant Picture is not required to be released or, if it is required to be released, it (1) reattaches, or (2) with respect to a transaction described in clause (i) above, is only released with respect to the applicable Credit Party’s rights in and to the tax benefit, tax subsidy, or other “soft money” transaction pledged as collateral to a third party tax credit financier, with the understanding that the proceeds of the loan provided to such Credit Party by such third party tax credit financier shall be applied to reduce the Negative Cost for such Picture or deposited into a Collection Account, and (y) such transaction (1) could not reasonably be expected to have a material adverse effect (taking into account the relative actual benefits of such transaction) on the amount of revenue to be received by the Credit Parties (or the anticipated time of receipt of such revenue) to be used to satisfy the Obligations and (2) would not result in the Administrative Agent not having a first priority perfected Lien in the gross receipts to be applied in satisfaction of the Obligations or in the other Collateral (prior to all Liens other than Specified Permitted Encumbrances); (C) in the case of any transaction described in clauses (i) or (ii) above, the Administrative Agent shall be given access to the proposed transaction documents at least five (5) Business Days prior to execution in order to review to confirm compliance with this Credit Agreement; and (D) in the case of any transaction described in clauses (i) or (ii) above, each of the parties to such transactions shall agree not to interfere with the release of the applicable Picture (or the control of all aspects thereof) by, or any other exploitation rights with respect to such Picture of, the Credit Parties or the exploitation of such Picture by any licensee, or (II) such transaction is otherwise approved by the Administrative Agent in its reasonable discretion.

SECTION 6.9      Places of Business; Change of Name, Jurisdiction . Change (i) the location of its chief executive office or principal place of business, (ii) any of the locations where it keeps any material portion of the Collateral or its books and records with respect to such Collateral, or (iii) its name or jurisdiction of formation or organization without, in each case, (a) giving the Administrative Agent ten (10) Business Days’ prior written notice of such change, and (b) filing (or authorizing the Administrative Agent to file) any additional Uniform Commercial Code financing statements, and such other documents reasonably requested by the Administrative Agent to maintain


perfection of the security interest of the Administrative Agent (for the benefit of the Secured Parties), in the Collateral.

SECTION 6.10      Limitations on Capital Expenditures . Make, incur or suffer to exist any obligation to make, Capital Expenditures following the Closing Date which are not properly includable in the film costs of any Picture permitted to be financed hereunder in excess of $1,000,000 in the aggregate.

SECTION 6.11      Transactions with Affiliates . Enter into any transaction with any of its Affiliates except for (i) transactions approved by the Administrative Agent, (ii) entry into and performance of the Services Agreement, (iii) transactions in respect of the sale and/or development of intellectual property pursuant to and of a type expressly contemplated by the Services Agreement, (iv) transactions listed on Schedule 6.11 , (v) transactions that are solely between or among Credit Parties, (vi) payment of Permitted Distributions and Permitted Tax Distributions, (vii) the Purchase Agreement, (viii) LG Sublicenses, (ix) LG Rights Sales Transactions, (x) the intercompany note referred to in Section 6.1(v) and (xi) transactions that are on terms no less favorable to the Credit Parties than could be obtained in an arm’s length third-party transaction and are disclosed to and approved by the Administrative Agent, such approval not to be unreasonably withheld.

SECTION 6.12      Business Activities . Engage in any business activities of any kind other than (i) the exploitation of the Credit Parties’ existing Pictures and other assets (including intellectual property rights with respect to Pictures not yet completed) by the Borrower or by the Servicer (on behalf of the Borrower), in each case as contemplated by the Services Agreement, (ii) the development, production, marketing and exploitation of intellectual property (including sequels, prequels and remakes of existing Pictures) of the Credit Parties by the Servicer as contemplated by the Services Agreement or by any other party pursuant to arrangements entered into prior to the Closing Date, (iii) funding distribution expenses and remaining negative cost for Breaking Dawn 2 and for any Picture that has been Released prior to the Closing Date, (iv) acquisition of Pictures pursuant to agreements entered into prior to the Closing Date as contemplated by the Services Agreement (i.e., funded by the Servicer) and (v) acquisition of Pictures as permitted under Section 6.22 hereof.

SECTION 6.13      Fiscal Year End . Change its fiscal year end to any date other than March 31 in each year, other than on at least 30 days prior written notice to the Administrative Agent, when such date may be changed to June 30, September 30 or December 31, as the Borrower may decide ( provided , that the Borrower shall not delay delivery of the financial statements and reports required to be delivered under Section 5.1 hereof by changing its fiscal year).

SECTION 6.14      Bank Accounts . Open or maintain any bank account other than (i) accounts maintained at the Administrative Agent or at a Lender, (ii) Production Accounts, (iii) accounts opened by a Co-Financing Venture Entity in connection with an Approved Co-Financing Venture Transaction and (iv) the accounts set forth on Schedule 6.14 , in each case for which Account Control Agreements have been executed and delivered to the Administrative Agent (except (a) to the extent waived by the Administrative Agent in its sole discretion pursuant to Section 12.1(b)(xi), (b) for Production Accounts in existence as of the Original Closing Date, (c) for Comerica Bank cash collateral account securing its Irrevocable Standby Letter of Credit No. 635594-42 (or any

replacement thereof) in an amount not to exceed $800,000, so long as substantially all funds in such account secure the reimbursement of such letter of credit, and (d) the LGAC 1 Account, subject to Section 5.26(b)).

SECTION 6.15      ERISA Compliance . Engage in a “prohibited transaction”, as defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any Plan or Multiemployer Plan or knowingly consent to any other “party in interest” or any “disqualified person”, as such terms are defined in Section 3(14) of ERISA and Section 4975(e)(2) of the Code, respectively, engaging in any “prohibited transaction”, with respect to any Plan or Multiemployer Plan; or permit any Plan to fail to satisfy the minimum funding standard (within the meaning of Section 302 of ERISA or Section 412 of the Code), unless such failure shall have been waived in advance by the Internal Revenue Service; or terminate any Plan in a manner which could result in the imposition of a Lien on any property of any Credit Party pursuant to Section 4068 of ERISA; or breach or knowingly permit any employee or officer or any trustee or administrator of any Plan to breach any fiduciary responsibility imposed under Title I of ERISA with respect to any Plan; engage in any transaction which would result in the incurrence of a liability under Section 4069 of ERISA; or fail to make contributions to a Plan or Multiemployer Plan which could result in the imposition of a Lien on any property of any Credit Party pursuant to Section 303(k) of ERISA or Section 430(k) of the Code, if the occurrence of any of the foregoing events (alone or in the aggregate) would result in a liability which would be reasonably likely to result in a Material Adverse Effect.

SECTION 6.16      Hazardous Materials . Cause or permit any of its properties or assets to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce or process Hazardous Materials, except in compliance in all material respects with all applicable Environmental Laws, nor Release or permit or suffer any Release as a result of any intentional act or omission on its part of Hazardous Materials onto any such property or asset in material violation of any Environmental Law.

SECTION 6.17      Use of Proceeds . Use, or permit the use of, the proceeds of Loans other than for the purposes set forth in Section 5.17.

SECTION 6.18      Swap Agreements . Enter into any Swap Agreement, except Swap Agreements entered into in order to (i) effectively cap, collar or exchange interest rates (from floating to fixed rates) with respect to any interest bearing liability or investment of a Credit Party or (ii) hedge foreign currency exposure in the ordinary course of business for anticipated receipts from Distributors.

SECTION 6.19      Subsidiaries . Acquire or create any new direct or indirect Subsidiary except to the extent that the requirements of Section 5.20 have been met with respect to such Subsidiary.

SECTION 6.20      Amendment, Modification or Termination of Material Agreements .

(a)      Amend, alter, modify, terminate or waive, or permit any amendment, alteration, modification, termination or waiver of, (i) the certificate of formation, limited liability

company agreement (excluding the Borrower LLC Agreement), certificate of incorporation, by-laws or other analogous organizational or governance document of any Credit Party in any manner that is material and adverse to any Secured Party or its respective rights under the Fundamental Documents, without the prior written consent of the Administrative Agent, (ii) the Borrower LLC Agreement in any manner that is material and adverse to any Secured Party or its respective rights under the Fundamental Documents, without the prior written consent of the Administrative Agent; provided , that any amendments that would have the effect of changing any restrictive provisions in the Borrower LLC Agreement to render them consistent with the terms hereof shall not require the consent of the Administrative Agent or (iii) any material multi-picture Distribution Agreement or any other material agreement to which any Credit Party is a party, in each case, in any manner that would be material and adverse to the business of the Borrower, taken as a whole, or that would be material and adverse to any Secured Party or its respective rights under the Fundamental Documents, without the prior written consent of the Administrative Agent. The Borrower shall provide the Administrative Agent with a substantially final form of any such amendment, alteration, modification, or waiver at least five (5) Business Days prior to the proposed execution thereof, and promptly following the execution of any such document, the Borrower shall provide the Administrative Agent and the Lenders with an executed copy thereof; provided , that with respect to Distribution Agreements and amendments thereto, the Borrower may instead require that any Lender inspect such documents at the Borrower’s office.

(b)      Amend, alter, modify, terminate or waive, or permit any amendment, alteration, modification, termination or waiver of, (i) the certificate of organization, operating agreement, certificate of incorporation, by-laws or other analogous organizational or governance document of any Co-Financing Venture Entity in any manner that is material and adverse to the interest of any Secured Party, or (ii) any material multi-picture Distribution Agreement, or any other material agreement to which any Co-Financing Venture Entity is a party, provided the Credit Party that is a party to such Co-Financing Venture Entity Agreement retains the power to approve any such amendment, in each case, in any manner that would be material and adverse to the business of the Borrower, taken as a whole or the Secured Parties, without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrower shall provide the Administrative Agent with a substantially final form of any such amendment, alteration, modification, or waiver at least five (5) Business Days prior to the proposed execution thereof, and promptly following the execution of any such document, the Borrower shall provide the Administrative Agent with an executed copy thereof.

(c)      To the extent a Credit Party controls a Co-Financing Venture Entity, permit such Co-Financing Venture Entity to engage in any activity not permitted by its operating agreement or other analogous governance document, or which is otherwise inconsistent with the terms and conditions for Approved Co-Financing Venture Transactions set forth on Schedule 3 hereto.

(d)      Amend, alter, modify, terminate or waive, or permit any amendment, alteration, modification, termination or waiver of, (i) the Existing Comerica Loan Facility or any security documents entered into in connection therewith without the consent of the Administrative Agent, or (ii) any interparty agreements, intercreditor agreements or related documents (other than those described in clause (i) above) entered into in connection with the Existing Comerica Loan Facility, or release any security interest or any borrower or guarantor under the Existing Comerica

Loan Facility, if such amendment, alteration, modification, termination or waiver of such document or release of such security (or analogous document or security under this Credit Agreement) would require the consent of the Administrative Agent or any Lender or group of Lenders, without the consent of the Administrative Agent.

(e)      Amend, alter, modify, terminate or waive, or permit any amendment, alteration, modification, termination or waiver of the Purchase Agreement or the Services Agreement, in each case in any manner that affects the rights or obligations of the Borrower or its Subsidiaries, without the prior written consent of the Administrative Agent.

SECTION 6.21      No Negative Pledge . Enter into any agreement (i) prohibiting the creation or assumption of any Lien in favor of the Administrative Agent (for the benefit of the Secured Parties) or any Person(s) refinancing the Facility upon the properties or assets of any Credit Party, whether now owned or hereafter acquired, or (ii) requiring an obligation to be secured as a result of any Lien being granted to the Administrative Agent (for the benefit of the Secured Parties) or any Person(s) refinancing the Facility, except the Fundamental Documents.

SECTION 6.22      Negative Pick-Up Obligation . Incur after the Closing Date a Negative Pick-Up Obligation unless the Servicer (and/or any of its wholly-owned Subsidiaries or parent companies) is undertaking such negative pick-up arrangement on behalf of the relevant Credit Party pursuant to the Services Agreement; provided , that, for the avoidance of doubt, in such an arrangement the Servicer (or such Subsidiary or parent company) shall fund all of the relevant Credit Party’s share of the negative pick-up arrangement and the Credit Party shall have no liability thereunder.

SECTION 6.23      Co-Financed Pictures . Engage in any co-financing arrangement with respect to a Picture, unless (i) such co-financing arrangement existed on the Closing Date, each of which arrangements are set forth on Schedule 6.23 hereto or (ii) the Servicer is undertaking such co-financing arrangement on behalf of the relevant Credit Party pursuant to the Services Agreement; provided , that, for the avoidance of doubt, in such an arrangement the Servicer shall fund all of the relevant Credit Party’s share of the co-financing arrangement and the Credit Party shall have no liability thereunder.

SECTION 6.24      Picture Requirements . Commence principal photography on any Picture or acquire any Picture, unless:

(a)      each of the conditions precedent set forth in Section 4.2 applicable as of such date shall be satisfied at such time;

(b)      if such Picture is Uncompleted and a Credit Party is obligated to fund a portion of the Negative Cost prior to Completion or if they are otherwise exposed to any Completion risk, the Administrative Agent shall have received an Approved Completion Bond (together with the Bonded Budget);

(c)      the Administrative Agent shall have received a Liquidity Certificate which demonstrates sufficient liquidity of the Borrower to satisfy the applicable Credit Party’s share of


the Negative Cost of such Picture; and

(d)      if any guild has been granted a Lien which is pari passu or senior to the Lien granted to the Administrative Agent with respect to such Picture, such guild shall have entered into an intercreditor agreement with the Administrative Agent on terms satisfactory to the Administrative Agent; provided , that (i) for any acquired Picture, such an intercreditor agreement shall only be required prior to the acquisition of such Picture if the acquisition price is greater than $15,000,000, and (b) for each other acquired Picture, the Credit Parties shall use commercially reasonable efforts to provide such an intercreditor agreement following the acquisition.

SECTION 6.25      Liquidity Ratio . Permit the ratio of (i) all projected known cash sources of the Credit Parties as a group, to (ii) all projected known cash uses of the Credit Parties (other than the mandatory prepayments set forth in Sections 2.7(e), (f) and (g)), all as determined as of each quarter end and as projected in good faith for the ensuing 12 months, to be less than 1.1 to 1.0.

SECTION 6.26      Breaking Dawn 2 Liquidity; Co-Financing Liquidity . Fail to maintain sufficient liquidity (either from unrestricted cash or Cash Equivalents and/or known cash flow due and payable within thirty (30) days and which can be applied for this purpose) to fund (a) the Credit Parties’ share of the completion and release costs for the Picture Breaking Dawn 2 or (b) with respect to an Approved Co-Financing Transaction entered into with an Approved Co-Financier of the type specified in clause (iii)(e) of the definition thereof, both the Credit Parties’ and such Approved Co-Financier’s share of the obligations set forth in the applicable Co-Financing Agreement.

SECTION 6.27      Fixed Charge Coverage Ratio . Permit the Fixed Charge Coverage Ratio (tested on a trailing twelve month basis) at the end of any calendar quarter to be less than 1.25 to 1.0.

SECTION 6.28      No Adverse Selection . Fail to cause all theatrical Pictures to be produced and/or distributed directly or indirectly by the Credit Parties during the term of the Facility to be financed hereunder, other than Co-Financed Pictures, co-productions, Foreign Rights Loans, loans against tax credits and other subsidies, production loans to Special Purpose Producers (but the Credit Parties will own, at a minimum, a residual equity interest in any such Picture or Special Purpose Producer) or as set forth in the Services Agreement. Notwithstanding the foregoing, Breaking Dawn 2 will be produced at least in part with funds of the Borrower.

SECTION 6.29      No Election to be Treated as a Corporation . Make an election under Treasury Regulation Section 301.7701-3 (or any corresponding provision under state or local law, or any successor provision thereto) to be treated as a corporation for U.S. federal, state or local income or franchise tax purposes or take any action inconsistent with being characterized as other than a partnership or disregarded entity for U.S. federal, state and local and franchise tax purposes (other than, in each case, with respect to Summit Distribution, LLC, Summit International Distribution, Inc. and Summit Entertainment Development Services, and subject to the consent of the Administrative Agent in its sole discretion, LGAC).




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