UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________

FORM 6-K

________________________________________

Report of Foreign Private Issuer

Pursuant to Section 13(a) -16 or 15(d) – 16

Of the Securities Exchange Act of 1934

 

For the month of July 2020

 

000-23697

(Commission file number)

________________________________________

 

EROS INTERNATIONAL PLC

(Exact name of registrant as specified in its charter)

________________________________________

 

3900 West Alameda Avenue, 32nd Floor

Burbank, California 91505

Tel: (818) 524-7000

(Address of principal executive office)

_______________________________________________

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☑ Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

Incorporation by Reference

 

This Report on Form 6-K shall be incorporated by reference into the Registrant’s Form F-3 Registration Statement (File No. 333-219708), as filed with the U.S. Securities and Exchange Commission (the “SEC”), to the extent not superseded by documents or reports subsequently filed or furnished by the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

 

 

Consummation of Merger and Equity Financing Transactions

 

Consummation of the Merger

 

As previously disclosed in its Report of Foreign Private Issuer on Form 6-K, furnished by Eros with the SEC on April 20, 2020, Eros International Plc, an Isle of Man company limited by shares (“Eros”), entered into an Agreement and Plan of Merger (as amended, restated or otherwise modified from time to time, the “Merger Agreement”) with STX Filmworks, Inc., a Delaware corporation (“STX”), England Holdings 2, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Eros (“England Holdings 2”), and England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly owned subsidiary of England Holdings 2 (“Merger Sub”). On July 30, 2020, Merger Sub merged with and into STX, with STX surviving as the surviving corporation and a direct wholly owned subsidiary of England Holdings 2 (the “Merger”). Eros, as the combined company following the Merger, is referred to herein as the “combined company.”

On the terms and subject to the conditions set forth in the Merger Agreement, each share of STX preferred stock issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) was converted at the Effective Time into the right to receive a number of contractual contingent value rights (“CVRs”), without interest, based on the liquidation value and, as applicable, the exit payment, of the respective share of STX preferred stock (the “Merger Consideration”), and such CVRs in turn entitle the holder thereof to receive, on the Settlement Date (as defined below), a number of A ordinary shares of the combined company (the “Eros A Ordinary Shares”) to be calculated in accordance with certain agreements governing the CVRs entered into concurrently with the consummation of the Merger (the “CVR Agreements”). Each share of STX common stock, each STX stock option and restricted stock unit award and each STX warrant issued and outstanding as of immediately prior to the Effective Time was cancelled at the Effective Time without consideration. The aggregate number of Eros A Ordinary Shares to be issued to the former STX stockholders upon settlement of the CVRs (the “Aggregate Merger Consideration CVR Shares”) will be equal to, and will in no event exceed, 171,912,291, which was the total number of ordinary shares of Eros outstanding as of immediately prior to the Effective Time on a fully diluted basis. The calculation of the fully diluted number of outstanding ordinary shares for this purpose includes (1) the aggregate number of ordinary shares subject to issuance pursuant to then outstanding in-the-money (based on the volume weighted average trading price of Eros A Ordinary Shares for the 20 days prior to the Effective Time) Eros stock options and (2) the aggregate number of ordinary shares subject to issuance pursuant to then outstanding Eros restricted stock unit awards.

Pursuant to the CVR Agreements, the applicable CVRs issued as Merger Consideration will be settled in Eros A Ordinary Shares on the date (the “Settlement Date”) that is the earlier to occur of (1) the later to occur of (a) the first time that the Eros A Ordinary Shares issuable pursuant to the CVRs have been registered for resale pursuant to an effective registration statement under the Securities Act, and (b) the 75th day after the Effective Time and (2) the date that is six months after the Effective Time. Each CVR will entitle the holder thereof to receive, on the Settlement Date, a number of Eros A Ordinary Shares allocated from the Aggregate Merger Consideration CVR Shares based on the respective classes of STX preferred stock in respect of which the applicable CVRs were issued. However, the total number of A ordinary shares issuable pursuant to all CVRs will not exceed, in the aggregate, the Aggregate Merger Consideration CVR Shares.

 

Each holder of a CVR (other than any such holder that is also an investor under the PIPE Subscription Agreement (as defined below) and delivered a PIPE Lock-Up Agreement (as defined below) in connection with the PIPE Subscription Agreement) will, as a condition to receiving any Eros A Ordinary Shares issuable in respect of such CVRs on the Settlement Date, be required to execute and deliver a lock-up agreement to the combined company (the “CVR Lock-Up Agreements”). Pursuant to the CVR Lock-Up Agreements, each holder of a CVR will agree not to, without the prior written consent of the combined company, directly or indirectly transfer the Eros A Ordinary Shares issued to such holder on the Settlement Date for a period of 18 months from the Settlement Date.

The foregoing descriptions of the Merger Agreement and the CVR Agreements and the transactions contemplated thereby do not purport to be complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which was filed as Exhibit 4.30 to Eros’ Annual Report on Form 20-F for the fiscal year ended March 31, 2020 and is incorporated herein by reference, and the CVR Agreements, copies of which are furnished as Exhibits 4.1 to 4.5, respectively, to this Report of Foreign Private Issuer on Form 6-K and are incorporated herein by reference.

 

 

Consummation of the PIPE Financing

On April 17, 2020, Eros entered into a Subscription Agreement (as amended, restated or otherwise modified from time to time, the “PIPE Subscription Agreement”) with certain investors, pursuant to which such investors agreed to purchase newly issued Eros A Ordinary Shares from Eros for an aggregate purchase price of $75 million in a private placement transaction (the “PIPE Financing”). Concurrently with its execution of the PIPE Subscription Agreement, each investor thereunder also executed a lock-up agreement (the “PIPE Lock-Up Agreements”) pursuant to which such investor agreed not to, without the prior written consent of the combined company, directly or indirectly transfer the Eros A Ordinary Shares issued to such investor in the PIPE Financing and the Merger for a period of 75 days from the Effective Time. On July 30, 2020, substantially concurrently with the Effective Time, Eros consummated the PIPE Financing. Each investor under the PIPE Subscription Agreement was an existing stockholder of STX as of immediately prior to the Effective Time. The purchase price for each Eros A Ordinary Share purchased under the PIPE Subscription Agreement was $3.08, and Eros issued an aggregate of 24,350,641 Eros A Ordinary Shares to the investors in the PIPE Financing. In connection with the consummation of the PIPE Financing and as contemplated by the Merger Agreement and the PIPE Subscription Agreement, substantially concurrently with the Effective Time, Eros, certain shareholders of Eros affiliated with Kishore Lulla and his family (collectively, the “Founder Group”) and the investors under the PIPE Subscription Agreement entered into an Investors’ Rights Agreement and a Registration Rights Agreement, and Eros filed the Amended Articles of Association (as defined below) with the Companies Registry of the Isle of Man. The Investors’ Rights Agreement, Registration Rights Agreement and Amended Articles of Association are described in further detail below under “Investors’ Rights Agreement, Registration Rights Agreement, and Amended Articles of Association.”

In addition, in accordance with the Merger Agreement and the PIPE Subscription Agreement, between the signing of the Merger Agreement and the Effective Time, Eros consummated $35 million of equity financing through periodic drawdowns under subscription agreements entered into with certain investors pursuant to Eros’ existing registered direct offering (the “2020 Registered Equity Offering”) of Eros A Ordinary Shares. The 2020 Registered Equity Offering is being effected pursuant to a prospectus supplement under Eros’ Registration Statement on Form F-3 (Registration No. 333-219708), as amended. Pursuant to the Merger Agreement and the PIPE Subscription Agreement, the combined company will consummate an additional $15 million of equity financing from new investors and/or through additional drawdowns pursuant to the 2020 Registered Equity Offering within 90 days following the Effective Time.

The foregoing descriptions of the PIPE Subscription Agreement and the 2020 Registered Equity Offering and the transactions contemplated thereby do not purport to be complete and are qualified in their entirety by reference to, respectively, the PIPE Subscription Agreement, a copy of which is filed as Exhibit 4.32 to Eros’ Annual Report on Form 20-F for the fiscal year ended March 31, 2020 and is incorporated herein by reference, and the form of subscription agreement related to the 2020 Registered Equity Offering, a copy of which was filed as Exhibit 4.29 to Eros’ Annual Report on Form 20-F for the fiscal year ended March 31, 2020 and is incorporated herein by reference.

Investors’ Rights Agreement, Registration Rights Agreement, and Amended Articles of Association

Pursuant to the Merger Agreement and the PIPE Subscription Agreement, at the Effective Time: (1) Eros, the Founder Group and the investors under the PIPE Subscription Agreement entered into an Investors’ Rights Agreement (the “Investors’ Rights Agreement”); and (2) Eros, the Founder Group and the investors under the PIPE Subscription Agreement entered into a Registration Rights Agreement (the “Registration Rights Agreement”). In addition, following the Effective Time on the closing date of the Merger, the Company’s existing Articles of Association of Eros were amended and restated in the form approved by the shareholders of Eros at an extraordinary general meeting held on June 29, 2020 (the “Amended Articles of Association”).

 

Eros previously disclosed the material terms and provisions of the Investors’ Rights Agreement, the Registration Rights Agreement and the Amended Articles of Association in its Report of Foreign Private Issuer on Form 6-K furnished by Eros with the SEC on April 20, 2020, Report of Foreign Private Issuer on Form 6-K furnished by Eros with the SEC on June 10, 2020 and Annual Report on Form 20-F for the fiscal year ended March 31, 2020 filed with the SEC on July 30, 2020, the descriptions of which are incorporated herein by reference. Such descriptions do not purport to be complete and are qualified in their entirety by reference to the Investors’ Rights Agreement, Registration Rights Agreement and Amended Articles of Association, copies of which are furnished as Exhibits 10.1, 10.3 and 3.1, respectively, to this Report of Foreign Private Issuer on Form 6-K and are incorporated herein by reference.

 

 

 

Amendment No. 1 to the Investors’ Rights Agreement

 

Immediately following the consummation of the PIPE Financing and entry into the Investors’ Rights Agreement, the required parties to the Investors’ Rights Agreement entered into an amendment to the Investors’ Rights Agreement (“Amendment No. 1 to the Investors’ Rights Agreement”).

 

Amendment No. 1 to the Investors’ Rights Agreement amends the Investors’ Rights Agreement as follows:

 

· For so long as the Founder Group has the right to nominate directors pursuant to the Investors’ Rights Agreement (as amended), the Remuneration Committee of the board of directors of the combined company (the “Board”) will consist of not more than four directors, of which two shall be directors nominated by the Founder Group and, for so long as affiliates of Hony Capital (collectively, the “Hony Investor”) have the right to nominate directors pursuant to the Amended and Restated Investors’ Rights Agreement, two out of four members of the Remuneration Committee shall be directors nominated by the Hony Investor.

 

· In lieu of requiring (1) the approval of at least one director nominated by the Founder Group and at least one director nominated by the Hony Investor with respect to any proposed hiring or termination of the chief executive officer, chief financial officer or president (including any co-president) of the combined company and (2) the approval of at least one director nominated by the Founder Group with respect to adoption of the annual business plan (including operating budget) of the combined company and its subsidiaries, Amendment No. 1 to the Investors’ Rights Agreement provides instead that, until the earliest of (x) the third anniversary of the Effective Time, (y) the first such time after the Settlement Date that the Hony Investor ceases to beneficially own 50% of the Eros A Ordinary Shares owned by it as of the Effective Time (giving effect to the CVRs) or (z) the first such time that the Founder Group ceases to beneficially own 50% of the Eros A Ordinary Shares and B ordinary shares (the Eros A Ordinary Shares and B ordinary shares, collectively, “Eros Ordinary Shares”) of the combined company owned by it as of the Effective Time, the approval of a two-thirds majority of the Board will be required to take any of the actions described in the foregoing clauses (1) and (2) or to enter into any agreement increasing the combined company’s available debt for borrowed money to an amount greater than the greater of (a) $552 million and (b) an amount that would cause the net debt to be greater than five times the Adjusted EBITDA (as that term is defined in Eros’ Annual Report on Form 20-F for the fiscal year ended March 31, 2020 filed with the SEC on July 30, 2020) of the combined company for the most recent four consecutive fiscal quarters for which financial statements are available (giving pro forma effect to the borrowing and the use of proceeds of such borrowing).

 

The foregoing description of Amendment No. 1 to the Investors’ Rights does not purport to be complete and is qualified in its entirety by reference to Amendment No. 1 to the Investors’ Rights Agreement, a copy of which is furnished as Exhibit 10.2 to this Report of Foreign Private Issuer on Form 6-K and are incorporated herein by reference.

 

Composition of the Board of the Combined Company

 

As of the Effective Time, Sunil Lulla, Prem Parameswaran and Shailendra Swarup, each a director of Eros immediately prior to the Merger, resigned from the Board. In accordance with the terms and conditions set forth in the Merger Agreement and the Investors’ Rights Agreement (as amended), effective as of immediately following the Effective Time, the Board has eight directors, of whom four directors (the “Founder Group Directors”) were nominated by the Founder Group and four directors (the “STX Directors”) were nominated by STX. There is currently one vacant seat on the Board. Each of the Founder Group Directors and the STX Directors will serve until his or her respective successor has been duly elected and qualified, or until any such director’s earlier death, resignation or removal, in each case subject to and in accordance with the Investors’ Rights Agreement (as amended).

 

 

 

Pursuant to the Investors’ Rights Agreement (as amended), until the third anniversary of the Effective Time, (1) the Founder Group will have the right, for so long as the Founder Group continues to beneficially own at least 50% of the number of Eros Ordinary Shares beneficially owned by Eros Founder Group as of the Effective Time (excluding for this purpose shares issued in respect of new equity awards granted at or immediately after the Effective Time), to nominate for election or appointment to the Board each successor to or replacement for a Founder Group Director and (2) the Hony Investor will have the right, for so long as the Hony Investor beneficially owns at least 50% of the number of Eros A Ordinary Shares beneficially owned by it as of the Effective Time (giving effect, prior to the Settlement Date, to the Eros A Ordinary Shares underlying the CVRs issued to the Hony Investor pursuant to the Merger Agreement), to nominate for election or appointment to the Board each successor to or replacement for an STX Director. In addition, for so long as the Eros Founder Group has the foregoing Board nomination right, with respect to all other directorships to be elected in an election of directors to the Board, the Founder Group shall vote its shares proportionately to the vote of all holders of shares who are not members of the Founder Group; provided that, for purposes of determining any such proportional vote prior to the Settlement Date, CVRs shall be deemed to be outstanding Eros A Ordinary Shares and to have been voted in such election.

 

The initial Founder Group Directors are Kishore Lulla, Rishika Lulla Singh, Dhirendra Swarup and Dilip Thakkar, each of whom was a director of Eros immediately prior to the Effective Time.

 

The initial STX Directors are Robert B. Simonds, Jr., Nicholas Stone, John Zhao and Shailesh Rao.

 

New Director Biographies

 

Mr. Robert Bruce Simonds, Jr., age 57, is the combined company’s Co-Chairman, executive Director and Chief Executive Officer.  Mr. Simonds has over 20 years of experience in the film industry as a film producer and entrepreneur. Prior to establishing STX Filmworks, Inc. in 2011, Mr. Simonds had his own company, the Robert Simonds Company, and served as producer or executive producer of over 30 films released between 1990 and 2010. Mr. Simonds was a director of Nuverra Environmental Solutions, Inc., a Delaware corporation (“Nuverra”), from May 17, 2010 to August 7, 2017. Nuverra provided environmental solutions to companies focused on the development, exploration and ongoing production of oil and natural gas from shale formations in the United States. On May 1, 2017, Nuverra filed a voluntary bankruptcy petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. At the time of filing of the voluntary petition, Nuverra’s outstanding debt obligations amounted to approximately $145 million. On July 25, 2017, the bankruptcy court confirmed Nuverra’s plan of reorganization and such plan became effective August 7, 2017. No claim has been made against Mr. Simonds arising from his position as a director of Nuverra. Mr. Simonds holds a bachelor’s degree in philosophy from Yale University.

 

Mr. Nicholas Stone, age 42, is a Partner at FS Investment Management, a private investment entity with long term capital and a range of investments across asset classes. He serves as a director of Bayside Communities, Kelvin Inc., FS Investment Management, Wilderness Holdings and Austex Oil Ltd. Mr. Stone previously served as a director of STX Filmworks, Inc. from March 2019 to July 2020. Prior to joining FS Investment Management, Mr. Stone served as Vice President for TPG Capital, one of the world’s largest private equity funds, from 2007 to 2011, and was an investment professional at Kohlberg Kravis Roberts & Co. from 2002 to 2005. Mr. Stone graduated cum laude from Harvard with an AB in 2000 and received his Masters of Business Administration from the Stanford Graduate School of Business, where he was an Arjay Miller Scholar.

 

Mr. John Zhao, age 57, is the Chairman and Chief Executive Officer of Hony Capital, a leading investment group in China he founded in 2003. Under his leadership, Hony Capital currently manages over $12 billion of assets and has invested in approximately 100 companies in China and abroad, including Hospital Corporation of China Limited, Best Food Holding Company Limited, Goldstream Investment Limited, Zoomlion Heavy Industry Science and Technology Co., Ltd, Suning, STX Entertainment, Linmon Pictures, and PCCW International OTT. Mr. Zhao holds an MBA degree from the Kellogg School of Management at Northwestern University, dual Master’s degrees in Electronic Engineering and Physics from Northern Illinois University, and a Bachelor’s degree in Physics from Nanjing University.

 

 

 

Mr. Shailesh Rao, age 48, has two decades of experience in the technology sector, including involvement in the launch and early growth of significant consumer technology platforms and as investor and mentor to technology companies including Moglix, BigSpring, and Omaze. He previously served as a Partner at TPG and Head of the Growth Fund and Rise Fund for India and Southeast Asia from 2017 to 2019, Vice President for International Operations at Twitter from 2012 to 2016, and at Google as Vice President in charge of YouTube for Asia Pacific and Managing Director of Google India from 2005 to 2012. He has served on the board of Jones Lang LaSalle Incorporated, a Fortune 500 global real estate services company, as a Senior Advisor to McKinsey & Company, and a member of the CEO Council of Lighthouse Funds, a private equity firm. Mr. Rao holds an MBA from the Kellogg School of Management and dual degrees from the University of Pennsylvania, a B.S. in Economics from the Wharton School of Business and a B.A. in History with Honors.

 

Biographies of each Founder Group Director are included in Eros’ Annual Report on Form 20-F for the fiscal year ended March 31, 2020 filed with the SEC on July 30, 2020 and are incorporated herein by reference.

 

Classification of the Board

Immediately following the Effective Time, the Board was divided into three classes of directors that will serve staggered three-year terms as follows:

· Class I (initial term expires at the combined company’s 2021 annual general meeting and until his or her successor is duly elected and qualified): Dilip Thakkar, John Zhao, vacant seat

 

· Class II (initial term expires at the combined company’s 2022 annual general meeting and until his or her successor is duly elected and qualified): Dhirendra Swarup, Shailesh Rao, Nicholas Stone

 

· Class III (initial term expires at combined company’s 2023 annual general meeting and until his or her successor is duly elected and qualified): Kishore Lulla, Rishika Lulla Singh, Robert Bruce Simonds, Jr.

 

Related Party Transactions

 

There are no transactions between the combined company and any of the STX Directors required to be disclosed pursuant to Item 7.B of Form 20-F.

 

New Director Compensation

 

The non-employee STX Directors will receive annual director fees and will be eligible to receive standard non-employee director share equity awards, in each case in amounts and on terms to be determined by the Remuneration Committee of the Board.

Composition of the Committees of the Board of the Combined Company

Immediately following the execution of Amendment No. 1 to the Investors’ Rights Agreement, the composition of the Audit Committee of the Board (the “Audit Committee”), Nomination and Governance Committee of the Board (the “Nomination Committee”) and Remuneration Committee of the Board (the “Remuneration Committee”) is as follows:

· Audit Committee: Nicholas Stone (Chair), Shailesh Rao, Dhirendra Swarup and Dilip Thakkar
· Nomination Committee: John Zhao (Chair), Nicholas Stone, Dhirendra Swarup and Dilip Thakkar
· Remuneration Committee: Dhirendra Swarup (Chair), Shailesh Rao, Dilip Thakkar and John Zhao

 

The newly created Independent Committee of the Board (the “Independent Committee”) initially consists of Dilip Thakkar (Chair), Shailesh Rao, Nicholas Stone and Dhirendra Swarup. Pursuant to the Investors’ Rights Agreement (as amended) and Amended Articles of Association, until the third anniversary of the Effective Time, certain actions of the combined company require prior approval of the Independent Committee. In addition, until the third anniversary of the Effective Time, the Founder Group may not acquire more than 50% of the voting power of the combined company without the prior approval of the Independent Committee.

 

 

Officer Changes and Appointments

Effective as of the Effective Time, the following changes in executive officer titles occurred:

· Kishore Lulla ceased to be Group Chief Executive Officer of the combined company (but, for purposes of clarity, remains as Executive Co-Chairman and an employee of the combined company); and

 

· Prem Parameswaran ceased to be Group Chief Financial Officer and President of North America of the combined company (but, for purposes of clarity, became Head of Corporate Strategy and remains an employee of the combined company).

 

Effective as of the Effective Time, (1) Kishore Lulla, Executive Chairman and Group Chief Executive Officer of Eros immediately prior to the Effective Time, was appointed as Executive Co-Chairman of the combined company; and (2) Robert B. Simonds, Jr., Chairman and Chief Executive Officer of STX immediately prior to the Effective Time, was appointed as Co-Chairman and Chief Executive Officer of the combined company. The Board also appointed, effective as of the Effective Time, the following additional officers of the combined company, in each case, to serve until his or her successor is duly appointed or until his or her earlier resignation, death or removal from office:

· Noah Fogelson as Co-President;
· Rishika Lulla Singh as Co-President;
· Andrew Warren as Chief Financial Officer;
· Prem Parameswaran as Head of Corporate Strategy;
· Ridhima Lulla as Chief Content Officer – Eros Now;
· Sunil Lulla as Chairman – Eros Studios;
· Adam Fogelson as Chairman – STX Motion Picture Group;
· Pradeep Dwivedi as Chief Executive Officer – Eros India; and
· Ali Hussein as Chief Executive Officer – Eros Now

Eros International Plc 2020 Long-Term Incentive Plan

 

Immediately following the Effective Time, the Board adopted the Eros International Plc 2020 Long-Term Incentive Plan (the “2020 LTIP”) with an aggregate equity pool of 40 million Eros A Ordinary Shares. Awards under the 2020 LTIP will be allocated and granted by the Remuneration Committee in its discretion. No such awards have been allocated or granted to date.

 

The foregoing description of the 2020 LTIP does not purport to be complete and is qualified in its entirety by reference to the 2020 LTIP, copies of which are furnished as Exhibits 10.4, to this Report of Foreign Private Issuer on Form 6-K and are incorporated herein by reference.

 

STX Credit Facilities

 

STX Senior Credit Agreement

 

On October 7, 2016, STX, as the parent entity of STX Financing, LLC (“Borrower”), entered into that certain Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement (the “Original Senior Credit Agreement”; as amended by each of the Senior Amendments (as defined below), the “Senior Credit Agreement”) by and among STX, the Borrower, JPMorgan Chase Bank, N.A, as administrative agent and issuing bank (the “Senior Administrative Agent”), the lenders from time to time party thereto (the “Senior Lenders”) and the guarantors referred to therein (“Senior Guarantors”, together with the Borrower, the “Senior Credit Parties”). The Senior Credit Agreement has been amended by that certain (i) Amendment No. 1 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of June 2, 2017 (the “First Senior Amendment”), (ii) Amendment No. 2 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 4, 2017 (the “Second Senior Amendment”), (iii) Waiver and Amendment No. 3 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of February 22, 2018 (the “Third Senior Amendment”), (iv) Waiver and Amendment No. 4 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of February 11, 2019 (the “Fourth Senior Amendment”), (v) Consent and Amendment No. 5 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of January 30, 2020 (the “Fifth Senior Amendment”) and (vi) Consent and Amendment No. 6 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of April 17, 2020 (the “Sixth Senior Amendment”, together with the First Senior Amendment, Second Senior Amendment, Third Senior Amendment, Fourth Senior Amendment and Fifth Senior Amendment, the “Senior Amendments”).

 

 

 

Pursuant to the Senior Credit Agreement, the Borrower may borrow up to $350.0 million from the Senior Lenders on a revolving basis. All advances are subject to a borrowing base determined by a variety of the Credit Parties’ assets and secured by substantially all of the Senior Credit Parties’ assets. The Borrower may borrow up to an additional $250.0 million, subject to certain conditions, as set forth in the Senior Credit Agreement. The incremental amounts are not committed and would be issued on the same terms as the existing Senior Credit Agreement.

 

The maturity date of the Senior Credit Agreement is October 7, 2021. Borrowings under the Senior Credit Agreement can be made as alternative base rate loans or London Interbank Offered Rate (“LIBOR”) loans. For alternative base rate loans, the interest rate is equal to 2.00% plus the greater of (i) the prime rate, (ii) the federal funds effective rate plus 0.50%, and (iii) LIBOR for a one-month interest period plus 1.00%. For LIBOR loans, the interest is equal to 3.00% plus the LIBOR rate. The Borrower is required to pay a commitment fee at an annual rate of 0.75% if credit exposure is less than 50.00% of total commitments and 0.50% if credit exposure is greater than or equal to 50.00% of the total commitments.

 

The Senior Credit Agreement includes certain covenants, which are comparable to transactions involving companies operating in the Borrower’s industry, including, but not limited to, limitations on the Senior Credit Parties’ ability to: (i) incur additional indebtedness, (ii) incur liens, (iii) provide guaranties, (iv) make certain investments, (v) pay dividends or make other restricted payments, (vi) sell or discount receivables, (vii) enter into sale and leaseback or soft dollar transactions, (viii) make capital expenditures above an annual cap and (ix) enter into certain transactions with affiliates. Although the Company is not a Senior Credit Party, it pledges its membership interests in the Borrower as collateral for the Senior Credit Agreement and is subject to a passive holding company covenant, which restricts it from engaging in certain activities without the consent of the Senior Administrative Agent as set forth in the Senior Credit Agreement. To date, STX and the Senior Credit Parties have been successful in obtaining such consents when needed, including with respect to the Merger. As of the date of this Report of Foreign Private Issuer on Form 6-K, the Senior Credit Parties and STX are in compliance with each covenant under the Senior Credit Agreement.

 

The description above is only a summary of the material provisions of the Senior Credit Agreement and is qualified in its entirety by reference to copies of the Senior Credit Agreement, First Senior Amendment, Second Senior Amendment, Third Senior Amendment, Fourth Senior Amendment, Fifth Senior Amendment, and Sixth Senior Amendment, which are furnished as Exhibits 10.5, 10.6, 10.7, 10.8, 10.9, 10.10 and 10.11 to this Report of Foreign Private Issuer on Form 6-K and incorporated by reference herein.

 

Subordinated Credit Agreement

 

On October 7, 2016, STX, as the parent entity of Borrower, entered into that certain Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement (the “Original Subordinated Credit Agreement”; as amended by each of the Subordinated Amendments (as defined below), the “Subordinated Credit Agreement”) by and among the Company, the Borrower, Red Fish Blue Fish, LLC, as administrative agent (the “Subordinated Administrative Agent”), the lenders from time to time party thereto (the “Subordinated Lenders”) and the guarantors referred to therein (the “Subordinated Guarantors”, together with the Borrower, the “Subordinated Credit Parties”). The Subordinated Credit Agreement has been amended by that certain (i) Amendment No. 1 to Second Amended and Restated Credit Agreement dated as of March 2, 2018 (the “First Subordinated Amendment”), (ii) Consent and Amendment No. 2 to Second Amended and Restated Subordinated Credit Agreement dated as of February 11, 2019 (the “Second Subordinated Amendment”) and (iii) Consent and Amendment No. 3 to Second Amended and Restated Credit Agreement dated as of April 17, 2020 (the “Third Subordinated Amendment”, together with the First Subordinated Amendment and Second Subordinated Amendment, the “Subordinated Amendments”).

 

Pursuant to the Subordinated Credit Agreement, the Borrower borrowed a term loan in the amount of $35,210,000 (the “Subordinated Loans”) from the Subordinated Lenders. Upon the closing of the Merger and pursuant to certain requirements under the Senior Credit Agreement in connection with the Merger, Borrower prepaid the Obligations under and as defined in the Subordinated Credit Agreement in an amount equal to $21.5 million. Pursuant to the terms of the Third Subordinated Amendment, STX has agreed to use its commercially reasonable efforts to cause the remainder of all of the amounts outstanding under the Subordinated Credit Agreement to be fully repaid in cash concurrently with any subsequent renewal, refinancing, repayment, forgiveness, replacement or termination of the Senior Credit Agreement.

 

The obligations under the Subordinated Credit Agreement are secured by substantially all of the Credit Parties’ assets, but subordinated in right of payment and collateral to the obligations under the Senior Credit Agreement. There is no incremental capacity under the Subordinated Credit Agreement.

 

 

 

The maturity date of the Subordinated Credit Agreement is July 7, 2022. Amounts borrowed under the Subordinated Credit Agreement accrue interest at an annual fixed rate of 11.0%. The interest rate applicable to the Subordinated Loans shall be payable on each Interest Payment Date (as defined in the Subordinated Credit Agreement) on the maturity date of the Subordinated Credit Agreement and on the date of any prepayment thereunder: (i) in cash in an amount equal to 9.0% per annum; plus (ii) in kind in an amount equal to 2.0% per annum by adding an amount equal to such unpaid interest to the principal amount of the Subordinated Loans.

 

The Subordinated Credit Agreement includes certain covenants, which are comparable to transactions involving companies operating in the Borrower’s industry, including, but not limited to, limitations on the Subordinated Credit Parties’ ability to: (i) incur additional indebtedness, (ii) incur liens, (iii) provide guaranties, (iv) make certain investments, (v) pay dividends or make other restricted payments, (vi) sell or discount receivables, (vii) enter into sale and leaseback or soft dollar transactions, (viii) make capital expenditures above an annual cap and (ix) enter into certain transactions with affiliates. Although STX is not a Subordinated Credit Party, it pledges its membership interests in the Borrower as collateral for the Subordinated Credit Agreement and is subject to a passive holding company covenant which restricts it from engaging in certain activities without the consent of the Subordinated Administrative Agent, as set forth in the Subordinated Credit Agreement. To date, STX and the Subordinated Credit Parties have been successful in obtaining such consents when needed, including with respect to the Merger. As of the date of this current report on Form 6-K, the Subordinated Credit Parties and STX are in compliance with each covenant under the Subordinated Credit Agreement.

 

The description above is only a summary of the material provisions of the Subordinated Credit Agreement and is qualified in its entirety by reference to copies of the Subordinated Credit Agreement, First Subordinated Amendment, Second Subordinated Amendment and Third Subordinated Amendment, which are filed as Exhibits 10.12, 10.13, 10.14 and 10.15, respectively, to this Report of Foreign Private Issuer on Form 6-K and are incorporated herein by reference.

 

Press Release Announcing the Consummation of the Merger and the PIPE Financing

 

On July 30, 2020, Eros and STX issued a joint press release announcing the completion of the Merger and the PIPE Financing. A copy of the press release is furnished as Exhibit 99.1 to this Report of Foreign Private Issuer on Form 6-K and incorporated herein by reference.

Important Note

 

The representations, warranties and covenants contained in the agreements and documents described above were made only for purposes of those agreements and documents and as of the specified dates set forth therein, were solely for the benefit of the parties to those agreements and documents, may be subject to limitations agreed upon by those parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between those parties instead of establishing particular matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on these representations, warranties or covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the parties or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the agreement containing them, which subsequent information may or may not be fully reflected in Eros’ and the combined company’s public disclosures. Accordingly, the agreements described above are described in this filing only to provide investors with information regarding the terms of such agreements and not to provide investors with any other factual information regarding the parties or their respective businesses.

 

 

 

Cautionary Note Regarding Forward-Looking Statements

 

Information provided in this Report of Foreign Private Issuer on Form 6-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, and such statements are subject to the safe harbors created thereby. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “approximately,” “anticipate,” “believe,” “estimate,” “continue,” “could,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will” and similar expressions. Those statements include, among other things, the discussions of the combined company’s business strategy and expectations concerning its and the combined company’s market position, future operations, margins, profitability, liquidity and capital resources, tax assessment orders and future capital expenditures. All such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that the combined company is expecting, including, without limitation: the combined company’s ability to successfully and cost-effectively source film content; the combined company’s ability to achieve the desired growth rate of Eros Now, its digital over-the-top (“OTT”) entertainment service; the combined company’s ability to maintain or raise sufficient capital; delays, cost overruns, cancellation or abandonment of the completion or release of the combined company’s films; the combined company’s ability to predict the popularity of its films, or changing consumer tastes; the combined company’s ability to maintain existing rights, and to acquire new rights, to film content; the combined company’s ability to successfully defend any future class action lawsuits it is a party to in the U.S.; anonymous letters to regulators or business associates or anonymous allegations on social media regarding the combined company’s business practices, accounting practices and/or officers and directors; the combined company’s dependence on the Indian box office success of its Hindi and high budget Tamil and Telugu films; the combined company’s ability to recoup the full amount of box office revenues to which it is entitled due to underreporting of box office receipts by theater operators; the combined company’s dependence on its relationships with theater operators and other industry participants to exploit the combined company’s film content; the combined company’s ability to mitigate risks relating to distribution and collection in international markets; fluctuation in the value of the Indian rupee against foreign currencies; the combined company’s ability to compete in the Indian film industry; the combined company’s ability to compete with other forms of entertainment; the combined company’s ability to combat piracy and to protect its intellectual property; the combined company’s ability to maintain an effective system of internal control over financial reporting; contingent liabilities that may materialize, the combined company’s exposure to liabilities on account of unfavorable judgments/decisions in relation to legal proceedings involving the combined company or its subsidiaries and certain of its directors and officers; the combined company’s ability to successfully respond to technological changes; regulatory changes in the Indian film industry and the combined company’s ability to respond to them; the combined company’s ability to satisfy debt obligations, fund working capital and pay dividends; the monetary and fiscal policies of India and other countries around the world, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices; the combined company’s ability to address the risks associated with acquisition opportunities; risks that the ongoing novel coronavirus pandemic and its spread, and related public health measures in India and elsewhere, may have material adverse effects on the combined company’s business, financial position, results of operations and/or cash flows; challenges, disruptions and costs of closing the Merger and related transactions, integrating the Eros and STX businesses and achieving anticipated synergies, and the risk that such synergies will take longer to realize than expected or may not be realized in whole or in part; the amount of any costs, fees, expenses, impairments and charges related to the Merger and related transactions; uncertainty as to the effects of the consummation of the Merger and related transactions on the market price of the Eros A Ordinary Shares and/or the combined company’s financial performance; and uncertainty as to the long-term value of the combined company’s ordinary shares.

The forward-looking statements contained in this communication are based on historical performance and management’s current plans, estimates and expectations in light of information currently available and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting the combined company will be those that it has anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond the combined company’s control. Should one or more of these risks or uncertainties materialize or should any of the combined company’s assumptions prove to be incorrect, the combined company’s actual results may vary in material respects from what the combined company may have expressed or implied by these forward-looking statements. The combined company cautions that you should not place undue reliance on any of its forward-looking statements. Any forward-looking statement made by the combined company in this communication speaks only as of the date on which the combined company makes it. Factors or events that could cause the combined company’s actual results to differ may emerge from time to time, and it is not possible for the combined company to predict all of them. The combined company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

 

 

Exhibit No.   Description
3.1   Amended Articles of Association of Eros International Plc, adopted by resolution passed on 29 June 2020 and made effective July 30, 2020
4.1   Class E Contingent Value Rights Agreement, dated as of July 30, 2020, by and among Eros International Plc, STX Filmworks, Inc., Fortis Advisors LLC, solely in its capacity as the Stockholders’ Representative, and Computershare Inc. and Computershare Trust Company, N.A., together as the Rights Agent and as initial CVR Registrar
4.2   Class D Contingent Value Rights Agreement, dated as of July 30, 2020, by and among Eros International Plc, STX Filmworks, Inc., Fortis Advisors LLC, solely in its capacity as the Stockholders’ Representative, and Computershare Inc. and Computershare Trust Company, N.A., together as the Rights Agent and as initial CVR Registrar
4.3   Class C Contingent Value Rights Agreement, dated as of July 30, 2020, by and among Eros International Plc, STX Filmworks, Inc., Fortis Advisors LLC, solely in its capacity as the Stockholders’ Representative, and Computershare Inc. and Computershare Trust Company, N.A., together as the Rights Agent and as initial CVR Registrar
4.4   Class B Contingent Value Rights Agreement, dated as of July 30, 2020, by and among Eros International Plc, STX Filmworks, Inc., Fortis Advisors LLC, solely in its capacity as the Stockholders’ Representative, and Computershare Inc. and Computershare Trust Company, N.A., together as the Rights Agent and as initial CVR Registrar
4.5   Class A Contingent Value Rights Agreement, dated as of July 30, 2020, by and among Eros International Plc, STX Filmworks, Inc., Fortis Advisors LLC, solely in its capacity as the Stockholders’ Representative, and Computershare Inc. and Computershare Trust Company, N.A., together as the Rights Agent and as initial CVR Registrar
10.1   Investors’ Rights Agreement by and among Eros International Plc and the Investors party thereto, dated as of July 30, 2020
10.2   Amendment No. 1 to the Investors’ Rights Agreement, dated as of July 30, 2020
10.3   Registration Rights Agreement, dated as of July 30, 2020, by and among Eros International Plc and the Holders party thereto
10.4   Eros International Plc 2020 Long-Term Incentive Plan
10.5   Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement (Corporate and Production Facility) dated as of October 7, 2016 by and among STX Financing, LLC, as Borrower, STX, as Parent, the Guarantors referred to therein, the Lenders referred to therein and JPMorgan Chase Bank, N.A., as Administrative Agent and Issuing Bank
10.6   Amendment No. 1 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of June 2, 2017
10.7   Amendment No. 2 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of October 4, 2017
10.8   Waiver and Amendment No. 3 to Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of February 22, 2018
10.9   Amendment No. 4 to Second Amended and Restated Credit, Security, Guaranty, and Pledge Agreement, dated as of February 11, 2019
10.10   Amendment No. 5 to Second Amended and Restated Credit, Security, Guaranty, and Pledge Agreement, dated as of January 30, 2020
10.11   Consent and Amendment No. 6 to Second Amended and Restated Credit, Security, Guaranty, and Pledge Agreement, dated as of April 17, 2020
10.12   Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016, among STX Financing, LLC, as Borrower, STX Filmworks, Inc., as Parent, the Guarantors referred to therein, the Lenders referred to therein, and Red Fish Blue Fish, LLC, as Administrative Agent for the Lenders
10.13   Amendment No. 1 to Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement, dated as of March 2, 2018
10.14   Consent and Amendment No. 2 to Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement, dated as of February 11, 2019
10.15   Consent and Amendment No. 3 to Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement, dated as of April 17, 2020
99.1   Press Release, dated July 30, 2020

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: August 3, 2020   Eros International Plc
       
       
    By: /s/ Andrew Warren  
      Name: Andrew Warren
      Title:   Chief Financial Officer
       

 

 

Exhibit 3.1

THE COMPANIES ACT 2006

ISLE OF MAN

A COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION

OF

EROS INTERNATIONAL PLC

(adopted by resolution passed on 29 June 2020,

and in accordance therewith,

made effective on 30 July 2020)

 
A.   Preliminary 5
1.   Model articles not to apply 5
2.   Interpretation 5
3.   Registered office 10
B.   Share capital 10
4.   Share capital amount 10
5.   Allotment 10
6.   Power to attach rights and issue redeemable shares 10
7.   Share warrants and other rights 10
8.   Commission and brokerage 11
9.   Trusts not to be recognised 11
10.   Renunciation of shares 11
11.   Increase, consolidation and sub division 11
12.   Fractions 12
13.   Reduction of capital 12
14.   Purchase of own shares 12
C.   Variation of class rights 13
15.   Sanction to variation 13
16.   Class meetings 13
17.   Deemed variation 13
D.   B Ordinary Shares & Share certificates 14
18.   B Ordinary Shares 14
19.   Right to certificates 14
20.   Replacement certificates 15
21.   Uncertificated shares 15
E.   B Ordinary Shares 17
22.   B Ordinary Shares 17
F.   Transfer of shares 18
23.   Form of transfer 18
24.   Right to refuse registration 19
25.   Notice of refusal 20
26.   Closing of register 20
27.   No fees on registration 20
28.   Recognition of renunciation of allotment of shares 20
G.   Transmission of shares 20
29.   On death 20
30.   Election of person entitled by transmission 20
31.   Rights on transmission 21
H.   General meetings 21
32.   Annual general meetings 21
33.   Extraordinary general meetings 21
34.   Convening of extraordinary general meeting 21
35.   Notice of general meetings 22
36.   Omission to send notice 22
I.   Proceedings at general meetings 22
37.   Quorum 22
38.   If quorum not present 23
39.   Security and meeting place arrangements 23
40.   Chairman 23
41.   Director may attend and speak 24
42.   Power to adjourn 24

1 

 
43.   Notice of adjourned meeting 24
44.   Business of adjourned meeting 24
J.   Voting 24
45.   Method of voting 24
46.   Chairman’s declaration conclusive on show of hands 25
47.   Objection to error in voting 25
48.   Amendment to resolutions 25
49.   Procedure on a poll 25
50.   Votes of shareholders 26
51.   Casting vote 27
52.   Voting by proxy 27
53.   Form of proxy 27
54.   Deposit of proxy 28
55.   More than one proxy may be appointed 29
56.   Board may supply proxy cards 30
57.   Revocation of proxy 30
58.   Written resolutions 30
59.   Approval Rights 31
K.   Untraced shareholders 32
60.   Power of sale 32
L.   Appointment, term and removal of directors 33
61.   Number of Directors 33
62.   Power of Company to appoint Directors 33
63.   Power of Board to appoint Directors 33
64.   Eligibility of new Directors 34
65.   Share qualification 34
66.   Resolution for appointment 34
67.   No retirement on account of age 34
68.   Staggered Board terms 34
69.   Removal by resolution 35
70.   Vacation of office by Director 35
71.   Resolution as to vacancy conclusive 36
M.   Directors’ remuneration, expenses and pensions 36
72.   Directors’ fees 36
73.   Expenses 36
74.   Remuneration 36
75.   Remuneration of executive Directors 36
76.   Pensions and other benefits 37
N.   Powers and duties of the Board 37
77.   Powers of the Board 37
78.   Powers of Directors being less than minimum number 37
79.   Powers of executive Directors 38
80.   Delegation to committees 38
81.   Local management 38
82.   Power of attorney 39
83.   Associate Directors 39
84.   Exercise of voting power 39
85.   [Intentionally Omitted] 40
86.   Borrowing powers 40
O.   Proceedings of Directors and Committees 40
87.   Board meetings 40

2 

 
88.   Notice of Board meetings 40
89.   Quorum 40
90.   Chairman of Board and other offices 40
91.   Voting 41
92.   Participation by telephone and electronic communication 43
93.   Resolution in writing 43
94.   Minutes of proceedings 44
95.   Validity of proceedings 44
P.   Directors’ interests 44
96.   Related Person Transaction Policies 44
97.   Director may have interests 45
98.   Disclosure of interests to Board 45
99.   Director’s interest in own appointment 46
100.   Chairman’s ruling conclusive on Director’s interest 46
101.   Directors’ resolution conclusive on Chairman’s interest 46
102.   [Intentionally Omitted] 47
Q.   The Seal 47
103.   Application of Seal 47
104.   Deed without sealing 47
105.   Official seal for sealing share certificates 48
R.   Dividends and other payments 48
106.   Declaration of dividends 48
107.   Interim dividends 48
108.   Entitlement to dividends 48
109.   Distribution in specie 48
110.   Dividends not to bear interest 49
111.   Method of payment 49
112.   Uncashed dividends 50
113.   Unclaimed dividends 50
114.   Waiver of dividends 50
115.   Payment of scrip dividends 51
116.   Reserves 51
117.   Capitalisation of reserves 52
118.   Record dates 52
S.   Accounts 53
119.   Accounting records 53
120.   Inspection of records 53
121.   Accounts to be sent to shareholders 53
T.   Destruction and authentication of documents 53
122.   Destruction of documents 53
123.   Authentication of documents 54
U.   Notices 55
124.   Notice to be in writing 55
125.   Service of notice on shareholders 55
126.   Notice in case of death, bankruptcy or mental disorder 56
127.   Evidence of service 56
128.   Notice binding on transferees 56
129.   Notice by advertisement 56
130.   Suspension of postal services 57
V.   Winding up 57
131.   Division of assets 57

3 

 
132.   Transfer or sale under section 222 of the Companies Act 1931 57
W.   Indemnity 58
133.   Right to indemnity 58
134.   Power to insure 58

4 

 
A. Preliminary
1. Model articles not to apply

No regulations for management of a company set out in any statute concerning companies or contained in any regulations or instrument made pursuant to a statute shall apply to the Company. The following shall be the Articles of the Company.

2.            Interpretation

2.1 Definitions

In these Articles, unless the context otherwise requires, the following expressions shall have the following meanings:

“A Ordinary Shares” the A ordinary shares, each of £0.30 par value, in the capital of the Company;
“Act” subject to Article 2.3 (Statutory provisions), the Companies Act 2006 and, where the context requires, every other statute of the Isle of Man from time to time in force concerning companies and affecting the Company;
“Affiliate” with respect to any person, another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person, where “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise;
“Articles” these Articles of Association as altered or varied from time to time (and “Article” means any provision of these Articles);
“Auditors” the auditors for the time being of the Company or, in the case of joint auditors, any of them;
“B Ordinary Shares” the B ordinary shares, each of £0.30 par value, in the capital of the Company and which rank pari passu in all respects with the A Ordinary Shares save in respect of:  (i) the voting rights as set out in Article 50.2; and (ii) the conversion rights set out in Article 22;
“Board” the board of Directors for the time being of the Company or the Directors present at a duly convened meeting of Directors at which a quorum is present;
“British Isles” the United Kingdom, the Isle of Man, the Republic of Ireland and the Channel Islands;

5 

 

 

“certificated” in relation to a share, a share which is recorded in the Register as being held in certificated form;
“Chairman” the co-chairmen (if any) of the Board or of a general meeting of the Company or, where the context requires, the chairman of any such meeting;
“clear days” (in relation to the period of a notice) that period, excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect;
“communication” includes a communication comprising sounds or images or both and a communication effecting a payment (and “communications” shall be construed accordingly);
“Company” Eros International PLC;
“Director” a director for the time being of the Company (and “Directors” shall be construed accordingly);
“dividend” a distribution or a bonus payable on the issued shares of the Company;
“Electronic Communication” has the meaning ascribed to the term “electronic communication” in the Electronic Transactions Act 2000 and includes, for the avoidance of doubt, e-mail (being a system for sending and receiving messages electronically over a computer network);
“employees’ share scheme” a scheme for encouraging or facilitating the holding of shares or debentures in the Company by or for the benefit of:
  (a) the bona fide employees or former employees (including any such employees or former employees who are or were also directors) of the Company, the Company’s subsidiaries or holding company or a subsidiary of the Company’s holding company; or
  (b) the wives, husbands, widows, widowers or children or step-children under the age of 18 of such employees or former employees.
“execution” any mode of execution (and “executions” and “executed” shall be construed accordingly);

6 

 

 

“Family Controlled Entity” (i) any company in which Permitted Holders or any Permitted Holder hold (collectively or individually) the power to elect all of the members of the board of directors of such entity and hold, collectively, at least a majority of the value of its issued shares; (ii) any partnership in which Permitted Holders or any Permitted Holder hold (collectively or individually) the sole right to direct the voting of the B Ordinary Shares held by such partnership and hold, collectively, at least a majority of the economic interest in the partnership interests in such partnership; and (iii) any limited liability or similar company if Permitted Holders or any Permitted Holder hold (collectively or individually) the sole right to direct the voting of the B Ordinary Shares held by such limited liability or similar company and hold, collectively, at least a majority of the economic interest of such limited liability or similar company;
“Family Trust” trusts the sole beneficiaries of which are: (i) Kishore Lulla, his spouse, any of their descendants, spouses of any descendants and their respective estates, guardians, or conservators; or (ii) any other descendants of Arjan Lulla and their respective estates, guardians or conservators;
“holder” (in relation to any share) the shareholder whose name is entered in the Register as the holder or, where the context permits, the shareholders whose names are entered in the Register as the joint holders of that share;
“Hony Investor” collectively, Great Mission International Limited, Marco Alliance Limited, and their respective Affiliates;
“Independent Committee” as defined in Article 22.5 (Voluntary Conversion to B Ordinary Shares);
“Investors’ Rights Agreement” the Investors’ Rights Agreement entered into in connection with transactions contemplated under the Merger Agreement Related Transaction Documents as the same may from time to time be amended, supplemented or novated;
“Merger Agreement Related Transaction Documents” each of (i) the Agreement and Plan of Merger dated as of April 17, 2020, by and among the Company, England Holdings 2, Inc., a Delaware corporation and indirect wholly-owned subsidiary of the Company (“England Holdings 2”), England Merger Corp., a Delaware corporation and direct wholly-owned subsidiary of England Holdings 2, and STX Filmworks, Inc., a Delaware corporation, (ii) the CVR Agreements as defined thereunder and (iii) the PIPE Subscription Agreement as defined thereunder;
“Office” the registered office for the time being of the Company;

7 

 

 

“Operator” the operator (as defined in the Uncertificated Regulations) of the relevant Uncertificated System;
“Ordinary Shares” the A Ordinary Shares and the B Ordinary Shares;
“paid up” paid up or credited as paid up;
“Participating Security” subject to Article 18 (B Ordinary Shares), a share or class of shares or a renounceable right of allotment of a share, title to which is permitted to be transferred by means of an Uncertificated System in accordance with the Uncertificated Regulations;
“Permitted Holder” as defined in Article 22.1 (Holding, transfer and conversion of B Ordinary Shares);
“person entitled by transmission” a person whose entitlement to a share in consequence of the death or bankruptcy of a shareholder or of any other event giving rise to its transmission by operation of law has been noted in the Register;
“recognised investment exchange” as defined in section 285 of the UK Financial Services and Markets Act 2000 (an Act of Parliament);
“record date” as defined in Article 118 (Record dates);
“Register” the register of shareholders of the Company to be kept pursuant to section 62 of the Act;
“Seal” the common seal of the Company;
“share” a share in the capital of the Company being either an A Ordinary Share or a B Ordinary Share (and “shares” shall be construed accordingly);
“shareholder” a holder of any shares;
“solvency test” has that meaning set out in section 49 of the Act;
“special resolution” shall mean a resolution passed or requiring to be passed by a majority of not less than three-fourths of such members as, being entitled so to do, vote in person or by proxy or (being a corporation) by a duly authorised representative at a general or class meeting (as the case may be);
“subsidiary” has that meaning set out in section 220 of the Act;

8 

 

 

“uncertificated” subject to Article 18 (B Ordinary Shares), in relation to a share, a share title to which is recorded on the Register as being held in uncertificated form and to which title may be transferred by means of an Uncertificated System in accordance with the Uncertificated Regulations;
“Uncertificated Regulations” the Uncertificated Securities Regulations 2006 (as amended or replaced from time to time);
“Uncertificated System” a relevant system as defined in the Uncertificated Regulations;
“United Kingdom” or “UK” Great Britain and Northern Ireland;
“US” the United States of America;
“writing” or “written” printing, typewriting, lithography, photography and any other mode or modes of representing or reproducing words in a legible and non-transitory form.
2.2 General interpretation

Unless the context otherwise requires:

(a) words in the singular include the plural and vice versa;
(b) words importing the masculine gender include the feminine gender;
(c) a reference to a person includes a body corporate and an unincorporated body of persons; and
(d) a reference to an Uncertificated System is a reference to the Uncertificated System in respect of which the particular share or class of shares or renounceable right of allotment of a share is a Participating Security.
2.3 Statutory provisions

A reference to any statute or provision of a statute shall include any orders, regulations or other subordinate legislation made under it and shall, unless the context otherwise requires, include any statutory modification or re-enactment of it for the time being in force.

2.4 The Act

Save as aforesaid, and unless the context otherwise requires, words or expressions contained in these Articles shall bear the same meaning as in the Act.

2.5 Headings

The headings are inserted for convenience only and shall not affect the construction of these Articles.

2.6 Company acts

Any reference in these Articles to action by the Company means an act which is approved by a resolution passed by the requisite majority of the shareholders.

9 

 
3. Registered office

The Office shall be at such place in the Isle of Man as the Board shall from time to time appoint.

B. Share capital
4. Share capital amount

Unless the Board shall otherwise direct, the amount of share capital of the Company available for issue is £150,000,000 divided into 500,000,000 shares designated as either A Ordinary Shares or B Ordinary Shares.

5. Allotment

Unissued shares in the capital of the Company shall be allotted by the Directors generally on such terms as they think fit but all shares shall be paid in full prior to or at the time of issue.

6. Power to attach rights and issue redeemable shares
6.1 Rights attaching to shares

Subject to the provisions of the Act and to any special rights for the time being attached to any existing shares, any shares may be allotted or issued with or have attached to them such preferred, deferred or other special rights or restrictions whether in regard to dividends, voting, transfer, return of capital or otherwise as the Board may from time to time determine.

6.2 Redemption of Shares

Shares may be redeemed for any consideration provided that such redemption does not contravene section 60 of the Act or the solvency test; the process for redemption of shares shall be determined by the Directors in their absolute discretion and the Directors may, for the avoidance of doubt, permit an offer to one or more holders of shares in accordance with section 53(1)(b)(ii) of the Act, subject to section 54 of the Act. For the avoidance of doubt, the A Ordinary Shares are non-redeemable.

6.3 Redemption dates

The date on which or by which, or dates between which, any redeemable shares are to be or may be redeemed may be fixed by the Directors and in such a case must be fixed by the Directors before the shares are issued. Unless otherwise specified in these Articles, the amount payable on redemption of any redeemable shares shall be the par value of such shares.

7. Share warrants and other rights

The Company shall have no power to issue any warrants stating that the bearer thereof is entitled to the shares specified therein. Subject to this, however, the Company shall have the power to issue warrants, options or other rights (including the CVRs (as defined in the Merger Agreement Related Transaction Documents)) permitting the registered holder thereof to subscribe for shares; provided that, following the date of the

10 

 

consummation of the transactions contemplated under the Merger Agreement Related Transaction Documents until the date that is the third (3rd) anniversary of the Effective Time (as defined in the Merger Agreement Related Transaction Documents), without the prior approval of the Independent Committee, the Company shall have no power to issue to any Permitted Holders any shares or warrants, options or other rights permitting the registered holder thereof to subscribe for shares if after giving effect to such issuance on a fully diluted basis (but, for clarity, not assuming any voluntary conversion of A Ordinary Shares to B Ordinary Shares by the Permitted Holders except to the extent notice of such conversion has been delivered by a Permitted Holder pursuant to Article 22.5), the Permitted Holders have or will have greater than 50% of the voting power of the Company.

8. Commission and brokerage

The Company may exercise the powers conferred by the Act to pay commissions or brokerage to any person in consideration of his subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company to the full extent permitted by the Act. Any such commission or brokerage may be satisfied by the payment of cash, the allotment of fully paid shares, the grant of an option to call for an allotment of shares or any combination of such methods.

9. Trusts not to be recognised

Except as otherwise expressly provided by these Articles, as required by law or as ordered by a court of competent jurisdiction, the Company shall not recognise any person as holding any share on any trust and (except as aforesaid) the Company shall not be bound by or recognise (even if having notice of it) any equitable, contingent, future, partial or other claim to or interest in any share or any interest in any fractional part of a share except an absolute right of the holder to the whole of the share.

10. Renunciation of shares

Subject to the provisions of the Act and of these Articles, the Directors may at any time after the allotment of any share but before any person has been entered in the Register as the holder recognise a renunciation of it by the allottee in favour of some other person and may accord to any allottee of a share the right to effect such renunciation upon and subject to such terms and conditions as the Directors may think fit to impose.

11. Increase, consolidation and sub division

To the extent that the shares in the capital of the Company comprise shares with a par value, the Board may from time to time:

(a) increase the Company’s share capital by such sum to be divided into shares of such amount as the Board prescribes;
(b) consolidate and/or divide, re-designate or redenominate or convert all or any of the Company’s share capital into shares of larger or smaller par value, into shares having a purchase price of another currency; and
(c) sub-divide shares or any of them into shares of smaller par value.

11 

 
12. Fractions
12.1 Power to deal with fractional entitlements

Whenever as the result of any consolidation, division or sub-division of shares any shareholder would become entitled to fractions of a share, the Board may deal with the fractions as it thinks fit and in particular (but without prejudice to the generality of the foregoing):

(a) the Board may determine which of the shares of such holder are to be treated as giving rise to such fractional entitlement and may decide that any of those shares shall be consolidated with any of the shares of any other holder or holders which are similarly determined by it to be treated as giving rise to a fractional entitlement for such other holder or holders into a single consolidated share and the Board may on behalf of all such holders, sell such consolidated share for the best price reasonably obtained to any person (including the Company) and distribute the net proceeds of sale after deduction of the expenses of sale in due proportion among those holders (except that any amount otherwise due to a holder, being less than £3 (or US Dollar equivalent) or such other sum as the Board may from time to time determine may be retained for the benefit of the Company); or
(b) provided that the necessary unissued shares are available, the Board may issue to such holder, credited as fully paid, by way of capitalisation the minimum number of shares required to round up his holding to an exact multiple of the number of shares to be consolidated into a single share (such issue being deemed to have been effected prior to consolidation), and the amount required to pay up such shares shall be appropriated at the Board’s discretion from any of the sums standing to the credit of any of the Company’s reserve accounts (including share premium account and capital redemption reserve) or to the credit of profit and loss account and capitalised by applying the same in paying up the share.
12.2 Sale of fractions

For the purposes of any sale of consolidated shares pursuant to Article 12.1 (Power to deal with fractional entitlements), the Board may in the case of certificated shares authorise some person to execute an instrument of transfer of the shares to or in accordance with the directions of the purchaser, and the transferee shall not be bound to see to the application of the purchase money in respect of any such sale, nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings in reference to the sale or transfer and any instrument or exercise shall be effective as if it had been executed or exercised by the holder of the shares to which it relates.

13. Reduction of capital

Subject to compliance with the solvency test and to any rights for the time being attached to any shares, the Company may by resolution of the Board reduce its paid up share capital in any manner.

12 

 
14. Purchase of own shares

Shares may be purchased or otherwise acquired by the Company for any consideration provided that such purchase does not contravene section 60 of the Act or the solvency test; the terms and process for purchase or acquisition of shares shall be determined by the Directors in their absolute discretion and the Directors may, for the avoidance of doubt, permit an offer to one or more holders of shares in accordance with section 53(1)(b)(ii) of the Act, subject only to section 54 of the Act.

C. Variation of class rights
15. Sanction to variation

Subject to the provisions of the Act, if at any time the share capital of the Company is divided into shares of different classes, any of the rights for the time being attached to any share or class of shares in the Company in issue (and notwithstanding that the Company may be or be about to be in liquidation) may (unless otherwise provided by the terms of issue of the shares of that class) be varied or abrogated in such manner (if any) as may be provided by such rights or, in the absence of any such provision, either with the consent in writing of the holders of not less than three quarters in par value of the issued shares of the class or with the sanction of a resolution passed at a separate general meeting of the holders of shares of the class duly convened and held as provided in these Articles (but not otherwise). The foregoing provisions of this Article shall apply also to the variation or abrogation of the special rights attached to only some of the shares of any class in issue as if each group of shares of the class differently treated formed a separate class the separate rights of which are to be varied. Subject to the terms of issue or the rights attached to any shares the rights or privileges attached to any class of shares shall be deemed not to be varied or abrogated by the Board resolving that a class of shares is to become or to cease to be a Participating Security; provided that the prior approval of the holders of a majority of the A Ordinary Shares in issue shall be required prior to any such resolution of the Board.

16. Class meetings

All the provisions in these Articles as to general meetings shall mutatis mutandis apply to every meeting of the holders of any class of shares save that:

(a) the quorum at every such meeting shall be one or more persons holding or representing by proxy at least one-third of the par value paid up on the issued shares of the class;
(b) every holder of shares of the class present in person or by proxy or (being a corporation) by a duly authorised representative may demand a poll;
(c) each such holder shall on a poll be entitled to one vote for every share of the class held by him; and
(d) if at any adjourned meeting of such holders, such quorum as aforesaid is not present, not less than one person holding shares of the class who is present in person or by proxy or (being a corporation) by a duly authorised representative shall be a quorum.

13 

 
17. Deemed variation

Subject to the terms on which any shares may be issued, the rights or privileges attached to any class of shares shall be deemed to be varied or abrogated by the reduction of the capital paid up on such shares or by the allotment of further shares ranking in priority for the payment of a dividend or in respect of capital or howsoever or which confer on the holders voting rights more favourable than those conferred by such first mentioned shares but shall not be deemed to be varied or abrogated by the creation or issue of any new shares ranking pari passu in all respects (save as to the date from which such new shares shall rank for dividend) with or subsequent to those already issued or by the purchase or redemption by the Company of its own shares in accordance with the provisions of the Act and these Articles.

D. B Ordinary Shares & Share certificates
18. B Ordinary Shares

Any B Ordinary Share shall be capable of being a Participating Security.

19.          Right to certificates

19.1 Issue of certificates

On becoming the holder of any certificated share every person shall be entitled without charge to have issued within two months after allotment or fourteen days after lodgement of a transfer (unless the terms of issue of the shares provide otherwise or the transfer is one which the Company is for any reason entitled to refuse to register and does not register) one certificate for all the certificated shares of any one class registered in his name and to a separate certificate for each class of certificated shares so registered. Such certificate shall specify the number, class and distinguishing numbers (if any) of the shares in respect of which it is issued and the amount or respective amounts paid up on them and shall be issued either under the Seal (which may be affixed to it or printed on it) or in such other manner having the same effect as if issued under a seal and, having regard to the rules and regulations applicable to the recognised investment exchange(s) to which any shares are admitted, as the Board may approve.

19.2 Distinguishing numbers

If and so long as all the issued shares of the Company or all the issued shares of a particular class are fully paid up and rank pari passu for all purposes then none of those shares shall bear a distinguishing number. In all other cases each share shall bear a distinguishing number.

19.3 Joint holders

The Company shall not be bound to issue more than one certificate in respect of certificated shares held jointly by two or more persons. Delivery of a certificate to the person first named on the register shall be sufficient delivery to all joint holders.

19.4 Balancing certificates

Where a shareholder has transferred part only of the shares comprised in a certificate he shall be entitled without charge to a certificate for the balance of such certificated shares.

14 

 
19.5 Restrictions on certificates

No certificate shall be issued representing certificated shares of more than one class.

20. Replacement certificates
20.1 Consolidation of certificates

Any two or more certificates representing shares of any one class held by any shareholder may at his request be cancelled and a single new certificate for such shares issued in lieu, subject to the payment of such reasonable fee (if any) as the Board may determine, on surrender of the original certificates for cancellation.

20.2 Splitting share certificates

If any shareholder shall surrender for cancellation a share certificate representing certificated shares held by him and request the Company to issue in lieu two or more share certificates representing such certificated shares in such proportions as he may specify, the Board may, if it thinks fit, comply with such request subject to the payment of such reasonable fee (if any) as it may determine.

20.3 Renewal or replacement

Share certificates may be renewed or replaced on such terms as to provision of evidence and indemnity (with or without security) and to payment of any exceptional out of pocket expenses (including those incurred by the Company in investigating such evidence and preparing such indemnity and security) as the Board may decide, and on surrender of the original certificate (where it is defaced or worn out) but without any further charge.

20.4 Joint holders

In the case of shares held jointly by several persons, any such request as is mentioned in this Article 20 (Replacement certificates) may be made by any one of the joint holders.

21. Uncertificated shares
21.1 Participating security

The Board may resolve that a class of shares is to become, or is to cease to be, a Participating Security and may implement such arrangements as it thinks fit in order for any class of shares to be admitted to settlement by means of an Uncertificated System. Shares of a class shall not be treated as forming a separate class from other shares of the same class as a consequence only of such shares being held in uncertificated form. Any share of a class which is a Participating Security may be changed from an uncertificated share to a certificated share and from a certificated share to an uncertificated share in accordance with the Uncertificated Regulations. For any purpose under these Articles, the Company may treat a shareholder’s holding of uncertificated shares and of certificated shares of the same class as if they were separate holdings, unless the Board otherwise decides.

15 

 
21.2 Application of Articles

These Articles apply to uncertificated shares of a class which is a Participating Security only to the extent that these Articles are consistent with the holding of such shares in uncertificated form, with the transfer of title to such shares by means of the Uncertificated System and with the Uncertificated Regulations.

21.3 Board regulations

The Board may lay down regulations not included in these Articles which:

(a) apply to the issue, holding or transfer of uncertificated shares (in addition to or in substitution for any provisions in these Articles);
(b) set out (where appropriate) the procedures for conversion, redemption and/or purchase of uncertificated shares; and/or
(c) the Board considers necessary or appropriate to ensure that these Articles are consistent with the Uncertificated Regulations and/or the Operator’s rules and practices.

Such regulations will apply instead of any relevant provisions in these Articles which relate to certificates and the transfer, conversion, redemption and purchase of shares or which are not consistent with the Uncertificated Regulations, in all cases to the extent (if any) stated in such regulations. If the Board makes any such regulations, Article 20.2 (Splitting share certificates) will (for the avoidance of doubt) continue to apply to these Articles, when read in conjunction with those regulations.

21.4 Instructions via an uncertificated system

Any instruction given by means of an Uncertificated System as referred to in these Articles shall be a dematerialised instruction given in accordance with the Uncertificated Regulations, the facilities and requirements of the Uncertificated System and the Operator’s rules and practices.

21.5 Forfeiture and sale

Where the Company is entitled under the Operator’s rules and practices, these Articles or otherwise to dispose of, forfeit, enforce a lien over or sell or otherwise procure the sale of any shares of a class which is a Participating Security which are held in uncertificated form, the Board may take such steps (subject to the Uncertificated Regulations and to such rules and practices) as may be required or appropriate, by instruction by means of an Uncertificated System or otherwise, to effect such disposal, forfeiture, enforcement or sale including by (without limitation):

(a) requesting or requiring the deletion of any computer-based entries in the Uncertificated System relating to the holding of such shares in uncertificated form;
(b) altering such computer-based entries so as to divest the holder of such shares of the power to transfer such shares other than to a person selected or approved by the Company for the purpose of such transfer;

16 

 
(c) requiring any holder of such shares, by notice in writing to him, to change his holding of such uncertificated shares into certificated form within any specified period;
(d) requiring any holder of such shares to take such steps as may be necessary to sell or transfer such shares as directed by the Company;
(e) otherwise rectifying or changing the Register in respect of any such shares in such manner as the Board considers appropriate (including, without limitation, by entering the name of a transferee into the Register as the next holder of such shares);
(f) appointing any person to take any steps in the name of any holder of such shares as may be required to change such shares from uncertificated form to certificated form and/or to effect the transfer of such shares (and such steps shall be effective as if they had been taken by such holder); and/or
(g) taking such other action as may be necessary to enable such shares to be registered in the name of the person to whom the shares have been sold or disposed of.
E. B Ordinary Shares
22. B Ordinary Shares
22.1 Holding, transfer and conversion of B Ordinary shares

B Ordinary Shares may only be held by or transferred to the following persons: (i) Eros Ventures Limited; (ii) Beech Investments Limited; (iii) the trustees for the time being of the Ganges Trust; (iv) Kishore Lulla and his estate, guardian, or conservator; (v) Kishore Lulla’s descendants; (vi) any other descendants of Arjan Lulla and their respective estates, guardians or conservators; (vii) any Family Controlled Entity; (viii) the trustees, solely in their respective capacities as such, of any Family Trust; and (ix) any custodian or bare nominee for any person within (i) – (viii) inclusive (each, a “Permitted Holder”), and a transfer to any person other than a Permitted Holder shall, immediately upon the registration of such transfer, result in the relevant B Ordinary Shares being converted automatically into A Ordinary Shares.

22.2 Ceasing to be a Permitted Holder

A person which was a Permitted Holder shall notify the Directors forthwith if it ceases to meet the requirements to be a Permitted Holder and on such notification each B Ordinary Share held by such person shall convert automatically into one fully paid A Ordinary Share.

22.3 Transfer of B Ordinary Shares

A transfer of B Ordinary Shares shall not include: (i) the granting of a proxy to officers or Directors of the Company at the request of its board in connection with actions to be taken at a meeting of shareholders; or (ii) the mortgage or charge of B Ordinary Shares by a Permitted Holder pursuant to a bona fide loan or indebtedness transaction providing that the relevant Permitted Holder continues to be able to exercise all powers of voting in respect of such B Ordinary Shares and providing further that enforcement by the relevant mortgagee or chargee in respect of such B Ordinary Shares shall constitute a transfer.

17 

 
22.4 Voluntary Conversion of B Ordinary Shares

At any time and from time to time a holder of B Ordinary Shares shall have the right to convert any or all of the B Ordinary Shares which it holds into an equivalent number of fully paid A Ordinary Shares. Such right shall be exercised by the holder of the B Ordinary Shares serving a notice in writing on the Company to that effect which notice shall set out the number of B Ordinary Shares which it wishes to convert and which shall be accompanied by such documents as the Company may reasonably require. Upon receipt of such notice, the Directors shall arrange for such conversion to be effected forthwith.

22.5 Voluntary Conversion to B Ordinary Shares

A holder of A Ordinary Shares who is a Permitted Holder shall have the right to convert any or all of the A Ordinary Shares which it holds into an equivalent number of fully paid B Ordinary Shares; provided that, during the period following the consummation of the transactions contemplated under the Merger Agreement Related Transaction Documents and until the third (3rd) anniversary of the Effective Time (as defined in the Merger Agreement Related Transaction Documents), without the prior approval of an independent committee that has been delegated the authority to make such determination by the Board (the “Independent Committee”), no conversion shall be permitted if all Permitted Holders (on a fully diluted (as if all options, warrants and similar rights (including the CVRs (as defined in the Merger Agreement Related Transaction Documents)) have been exercised) as converted basis and after giving effect to such conversion (but, for clarity, not assuming any further voluntary conversion of A Ordinary Shares to B Ordinary Shares by the Permitted Holders except to the extent notice of such conversion has been delivered by a Permitted Holder pursuant to Article 22.5)) have or will have greater than 50% of the voting power of the Company; provided further, for clarity, that after the third (3rd) anniversary of the Effective Time (as defined in the Merger Agreement Related Transaction Documents), conversions pursuant to this Article 22.5 shall be permitted without limitation or the requirement for any approval. Such right shall be exercised by the Permitted Holder serving a notice in writing on the Company to that effect which notice shall set out the number of A Ordinary Shares which it wishes to convert and which shall be accompanied by such documents as the Company may reasonably require. Upon receipt of such notice, the Directors shall arrange for such conversion to be effected as soon as reasonably practicable.

22.6       Automatic Conversion to A Ordinary Shares

If the voting power of the B Ordinary Shares in issue shall at any time be less than 2% of the voting power of all Ordinary Shares in issue, such B Ordinary Shares shall be converted by the Company as soon as reasonably practicable into an equivalent number of fully paid A Ordinary Shares.

F. Transfer of shares

18 

 
23. Form of transfer

Subject to Article 22 (B Ordinary Shares), each shareholder may transfer all or any of his shares in the case of certificated shares by instrument of transfer in writing in any usual form or in any form approved by the Board or in the case of uncertificated shares without a written instrument in accordance with the Uncertificated Regulations. Any written instrument shall contain the business or residential address of the transferee and be executed by or on behalf of the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect of it.

24. Right to refuse registration
24.1 Registration of certificated share transfer

The Board may in its absolute discretion and without giving any reason refuse to register any transfer of a certificated share unless:

(a) it is in respect of only one class of shares;
(b) it is in favour of a single transferee or not more than four joint transferees;
(c) it is duly stamped (if so required);
(d) it is delivered for registration to the registered agent of the Company, or such other person as the Board may from time to time appoint, accompanied (except in the case of a transfer where a certificate has not been required to be issued) by the certificate for the shares to which it relates and such other evidence as the Board may reasonably require to prove the title of the transferor and the due execution by him of the transfer or if the transfer is executed by some other person on his behalf, the authority of that person to do so; and
(e) the holding of such share would not result in a regulatory, pecuniary, legal, taxation or material administrative disadvantage for the Company or its shareholders as a whole including, but not limited to, where such a disadvantage would arise out of the transfer of any share to a person in breach of any law or requirement of any country or by virtue of which such person is not qualified to own those shares and, in the sole and conclusive determination of the Board, such ownership or holding or continued ownership or holding of those shares (whether on its own or in conjunction with any other circumstance appearing to the Board to be relevant) would in the reasonable opinion of the Board, cause a pecuniary or tax disadvantage to the Company or any other holder of shares or other securities of the Company which it or they might not otherwise have suffered or incurred.

provided that where such share is listed on the New York Stock Exchange such discretion may not be exercised in such a way as to prevent dealings in such shares from taking place on an open and proper basis.

24.2 Registration of an uncertificated share transfer

The Board shall register a transfer of title to any uncertificated share or the renunciation or transfer of any renounceable right of allotment of a share which is a Participating Security held in uncertificated form in accordance with the Uncertificated Regulations, except that the Board may refuse (subject to any relevant requirements applicable to the recognised investment exchange(s) to which the shares of the Company are admitted) to register any such transfer or renunciation which is in favour of more than four persons jointly or in any other circumstance permitted by the Uncertificated Regulations.

19 

 
24.3 [Intentionally Omitted]
24.4 Neither the Company nor the Board shall be liable to indemnify, reimburse or compensate any shareholder in respect of any cost, liability or expense (including, without limitation, any taxes or duties imposed, paid or suffered under the laws of the Isle of Man or any other jurisdiction) arising from or by reference to any sale or forfeiture of any shares pursuant to this Article 24.
25. Notice of refusal

If the Board refuses to register a transfer of a share it shall, within two months after the date on which the transfer was lodged with the Company, send notice of the refusal to the transferee. Any instrument of transfer which the Board refuses to register shall (except in the case of suspected fraud) be returned to the person depositing it. All instruments of transfer which are registered may be retained by the Company.

26. Closing of register

The registration of transfers of shares or of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the Board in its absolute discretion may from time to time determine following the giving of notice by advertisement in not less than two newspapers circulating generally in the Isle of Man (subject to the Uncertificated Regulations in the case of any shares of a class which is a Participating Security).

27. No fees on registration

No fee shall be charged for registration of a transfer or on the registration of any probate, letters of administration, certificate of death or marriage, power of attorney, notice or other instrument relating to or affecting the title to any shares or otherwise for making any entry in the Register affecting the title to any shares.

28. Recognition of renunciation of allotment of shares

Nothing in these Articles shall preclude the Board from recognising a renunciation of the allotment of any share by the allottee in favour of some other person.

G. Transmission of shares
29. On death

If a shareholder dies the survivors or survivor where he was a joint holder and his executors or administrators where he was a sole or the only survivor of joint holders, shall be the only persons recognised by the Company as having any title to his shares. Nothing in these Articles shall release the estate of a deceased shareholder from any liability in respect of any share which has been solely or jointly held by him.

20 

 
30. Election of person entitled by transmission

Any person entitled to a share by transmission may, on such evidence as to his title being produced as the Board may reasonably require, elect either to become registered as a shareholder or to have some person nominated by him registered as a shareholder. If he elects to become registered himself he shall give written notice signed by him to the Company to that effect. If he elects to have some other person registered he shall, in the case of a certificated share, execute an instrument of transfer of such shares to that person and, in the case of an uncertificated share, either procure that all appropriate instructions are given by means of the Uncertificated System to effect the transfer of such share to such person or change the uncertificated share to certificated form and then execute an instrument of transfer of such share to such person. All the provisions of these Articles relating to the transfer of shares shall apply to the notice, instrument of transfer or instructions (as the case may be) as if it were an instrument of transfer executed or instructions given by the shareholder and his death, bankruptcy or other event had not occurred and any notice or transfer were executed by such shareholder. Where the entitlement of a person to a share in consequence of the death or bankruptcy of a shareholder or of any other event giving rise to its transmission by operation of law is proved to the satisfaction of the Board, the Board shall, within two months after proof, cause the entitlement of that person to be noted in the Register.

31. Rights on transmission

Where a person is entitled to a share by transmission, the rights of the holder in relation to such share shall cease. However, the person so entitled may give a good discharge for any dividends and other moneys payable in respect of it and shall have the same rights to which he would be entitled if he were the holder of the share except that he shall not before he is registered as the holder of the share be entitled in respect of it to give notice of or to attend or vote at any meeting of the Company or at any separate meeting of the holders of any class of shares of the Company. The Board may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share. If the notice is not complied with within sixty days the Board may thereafter withhold payment of all dividends and other moneys payable in respect of such share until the requirements of the notice have been complied with.

H. General meetings
32. Annual general meetings

The Board shall convene in each year a general meeting of the shareholders of the Company called the annual general meeting; any annual general meeting so convened shall be held at such time and place and consider such business as the Board may determine.

33. Extraordinary general meetings

All general meetings other than annual general meetings shall be called extraordinary general meetings.

34. Convening of extraordinary general meeting

The Board may convene an extraordinary general meeting whenever it thinks fit. At any meeting convened by the Board or any meeting requisitioned pursuant to section 67(2) of the Act, no business shall be transacted except that stated by the requisition or proposed by the Board. If there are not sufficient Directors to convene a general meeting, any Director or any shareholder of the Company may call a general meeting.

21 

 
35. Notice of general meetings
35.1 Length of notice

Any annual general meeting and any extraordinary general meeting convened for the passing of a resolution appointing a person as a Director shall be convened by not less than twenty-one clear days’ notice in writing. Other extraordinary general meetings shall be convened by not less than fourteen clear days’ notice in writing. Notwithstanding that a meeting is convened by shorter notice than that specified in this Article, it shall be deemed to have been properly convened if it is so agreed by all the shareholders entitled to attend and vote at the meeting.

35.2 Form of notice

Every notice convening a general meeting shall specify:

(a) whether the meeting is an annual general meeting or an extraordinary general meeting;
(b) the place, the day and the time of the meeting; and
(c) with reasonable prominence that a shareholder entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him and that a proxy need not also be a shareholder, and the place where instruments of proxy are to be deposited if the Board determines that place to be other than the Office.
35.3 Entitlement to receive notice

The notice shall be given to the shareholders (other than any who under the provisions of these Articles are not entitled to receive notice from the Company), to the Directors and to the Auditors and if more than one for the time being, to each of them.

36. Omission to send notice

The accidental omission to send a notice of meeting or, in cases where it is intended that it be sent out with the notice, an instrument of proxy, to, or the non-receipt of either by, any person entitled to receive the same shall not invalidate the proceedings at that meeting.

I. Proceedings at general meetings
37. Quorum

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business but the absence of a quorum shall not preclude the choice or appointment of the Chairman in accordance with the provisions of Article 40 (Chairman) which shall not be treated as part of the business of the meeting. Subject to the provisions of Article 38 (If quorum not present), a shareholder or shareholders entitled to attend and to vote on the business to be transacted holding not less than thirty per cent of the issued share capital of the Company and being present in person, by telephone, other electronic means of communication or by proxy or (being a corporation) by a duly authorised representative shall be a quorum.

22 

 
38. If quorum not present

If within fifteen minutes (or such longer interval not exceeding one hour as the Chairman in his absolute discretion thinks fit) from the time appointed for the holding of a general meeting a quorum is not present, or if during a meeting such a quorum ceases to be present, the meeting, if convened on the requisition of shareholders, shall be dissolved. In any other case, the meeting shall stand adjourned to later on the same day, to the same day in the next week at the same time and place, or to such other day and at such time and place as the Chairman (or, in default, the Board) may determine, being not less than fourteen nor more than twenty-eight days thereafter. If at such adjourned meeting a quorum is not present within fifteen minutes from the time appointed for holding the meeting one shareholder present, in person, by telephone, other electronic means of communication or by proxy or (being a corporation) by a duly authorised representative shall be a quorum. If no such quorum is present, or if during the adjourned meeting a quorum ceases to be present, the adjourned meeting shall be dissolved. The Company shall give at least seven clear days’ notice of any meeting adjourned through lack of quorum (where such meeting is adjourned to a day being not less than fourteen nor more than twenty-eight days thereafter).

39.          Security and meeting place arrangements

39.1 Searches

The Board may direct that shareholders or proxies or representatives of shareholders being corporations wishing to attend any general meeting should submit to such searches or other security arrangements or restrictions as the Board shall consider appropriate in the circumstances, and the Board shall be entitled in its absolute discretion to refuse entry to such general meeting to any shareholder, proxy or representative who fails to submit to such searches or otherwise to comply with such security arrangements or restrictions.

39.2 Inadequate meeting place

If it appears to the Chairman that the meeting place specified in the notice convening the meeting is inadequate to accommodate all shareholders entitled and wishing to attend, the meeting shall nevertheless be duly constituted and its proceedings valid provided that the Chairman is satisfied that adequate facilities are available to ensure that any shareholder who is unable to be accommodated is nonetheless able to participate in the business for which the meeting has been convened and to hear and see all persons present who speak (whether by the use of microphones, loudspeakers, audio-visual communications equipment or otherwise), whether in the meeting place or elsewhere, and to be heard and seen by all other persons so present in the same manner.

40. Chairman

The Chairman of the Board shall preside as Chairman at every general meeting of the Company. For so long as there are co-chairmen of the Board, if at any meeting any one of such co-chairmen shall not be present within fifteen minutes after the time appointed for holding the meeting or shall be unwilling to act as Chairman, the sole remaining co-chairman (if any) of the Board shall if present and willing to act preside as Chairman at such meeting. If no Chairman shall be so present and willing to act, the Directors present shall choose one of their number to act or, if there be only one Director present, he shall be Chairman if willing to act. If no Director is willing to act as Chairman of the meeting or, if no Director is present within fifteen minutes of the time appointed for holding the meeting, the shareholders present and entitled to vote shall choose one of their number to be Chairman of the meeting.

23 

 
41. Director may attend and speak

A Director shall notwithstanding that he is not a shareholder be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares of the Company. The Chairman may invite any person to attend and speak at any general meeting of the Company whom the Chairman considers to be equipped by knowledge or experience of the Company’s business to assist in the deliberations of the meeting.

42. Power to adjourn

The Chairman of the general meeting may, with the consent of a meeting at which a quorum is present, and shall if so directed by the meeting, adjourn any meeting from time to time (or indefinitely) and from place to place as he shall determine. However, without prejudice to any other power which he may have under these Articles or at common law the Chairman may, without the need for the consent of the meeting, interrupt or adjourn any meeting from time to time and from place to place or for an indefinite period if he is of the opinion that it has become necessary to do so in order to secure the proper and orderly conduct of the meeting or to give all persons entitled to do so a reasonable opportunity of attending, speaking and voting at the meeting or to ensure that the business of the meeting is otherwise properly disposed of.

43. Notice of adjourned meeting

Where a meeting is adjourned indefinitely the Board shall fix the time and place for the adjourned meeting. Whenever a meeting is adjourned for fourteen days or more or indefinitely, seven clear days’ notice at the least, specifying the place, the day and time of the adjourned meeting and the general nature of the business to be transacted, shall be given in the same manner as in the case of an original meeting. Save as aforesaid, no shareholder shall be entitled to any notice of an adjournment or of the business to be transacted at any adjourned meeting.

44. Business of adjourned meeting

No business shall be transacted at any adjourned meeting other than the business which might properly have been transacted at the meeting from which the adjournment took place.

J. Voting
45. Method of voting

At any general meeting a resolution put to a vote of the meeting shall be decided on a show of hands unless (before or immediately after the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. Subject to the provisions of the Act, a poll may be demanded by:

24 

 
(a) the Chairman of the meeting; or
(b) at least two shareholders present in person or by proxy or (being a corporation) by a duly authorised representative having the right to vote at the meeting; or
(c) a person present in person or by proxy or (being a corporation) by a duly authorised representative who is the holder of B Ordinary Shares; or
(d) a shareholder or shareholders present in person or by proxy or (being a corporation) by a duly authorised representative representing not less than one tenth of the voting rights of all the shareholders having the right to vote at the meeting,

and a demand for a poll by a person as proxy for a shareholder shall be as valid as if the demand were made by the shareholder himself.

46. Chairman’s declaration conclusive on show of hands

Unless a poll is duly demanded and the demand is not withdrawn, a declaration by the Chairman of the meeting that a resolution has on a show of hands been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive, and an entry to that effect in the book containing the minutes of proceedings of the Company shall be conclusive evidence thereof, without proof of the number or proportion of the votes recorded in favour of or against such resolution.

47. Objection to error in voting

No objection shall be raised to the qualification of any voter or to the counting of or failure to count any vote except at the meeting or adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the Chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the Chairman decides that it is of sufficient magnitude to vitiate the resolution or may otherwise have affected the decision of the meeting. The decision of the Chairman on such matters shall be final and conclusive.

48. Amendment to resolutions

If an amendment shall be proposed to any resolution under consideration but shall in good faith be ruled out of order by the Chairman of the meeting, any error in such ruling shall not invalidate the proceedings on the substantive resolution. No amendment to a resolution (other than a mere clerical amendment to correct a manifest error) may be considered or voted upon unless notice of such proposed amendment is delivered to the Office at least forty-eight hours prior to the time appointed for holding the relevant meeting or adjourned meeting and the Chairman of the meeting in his absolute discretion rules that the amendment is fit for consideration at the meeting.

49.          Procedure on a poll

25 

 
49.1 Timing of poll

Any poll duly demanded on the election of a Chairman of a meeting or on any question of adjournment shall be taken forthwith. A poll duly demanded on any other matter shall be taken in such manner (including the use of ballot or voting papers or tickets) and at such time and place, not being more than thirty days from the date of the meeting or adjourned meeting at which the poll was demanded, as the Chairman shall direct. The Chairman may, and if so directed by the meeting shall, appoint scrutineers who need not be shareholders and may adjourn the meeting to some place and time fixed by him for the purpose of declaring the result of the poll. No notice need be given of a poll not taken immediately if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case at least seven clear days’ notice shall be given specifying the time and place at which the poll is to be taken. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.

49.2 Continuance of the meeting

The demand for a poll shall not prevent the continuance of the meeting for the transaction of any business other than the question on which a poll has been demanded. If a poll is demanded before the declaration of the result on a show of hands and the demand is duly withdrawn the meeting shall continue as if the demand had not been made.

49.3 Withdrawal of demand for a poll

The demand for a poll may be withdrawn before the poll is taken, but only with the consent of the Chairman. A demand so withdrawn shall validate the result of a show of hands declared before the demand was made. If a demand is withdrawn, the persons entitled in accordance with Article 45 (Method of voting) may demand a poll.

49.4 Voting on a poll

On a poll votes may be given in person or by proxy or (in the case of a corporate shareholder) by a duly authorised representative. A shareholder entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way.

50. Votes of shareholders
50.1 Voting systems including proxies

Notwithstanding any other provisions of these Articles, the Board may utilise, or approve the utilisation of, any telephone or internet based systems or any other electronic systems as they in their absolute discretion may think fit with respect to the appointment of proxies and/or the receipt of proxy forms and/or receipt of, or processing of, voting instructions for use at any general meeting.

50.2 Number of votes

Subject to any suspension or abrogation of voting rights pursuant to these Articles, at any general meeting (whether an annual general meeting or an extraordinary general meeting):

26 

 
(a) every shareholder present in person or by proxy or (in the case of a corporate shareholder) by duly authorised representative shall on a poll have one vote for each A Ordinary Share of which he is the holder; and
(b) every shareholder present in person or by proxy or (in the case of a corporate shareholder) by duly authorised representative shall on a poll have ten votes for each B Ordinary Share of which he is the holder.
50.3 Joint holders

If two or more persons are joint holders of a share, then in voting on any question the vote of the senior who tenders a vote, whether in person or by proxy or (being a corporation) by a duly authorised representative, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose seniority shall be determined by the order in which the names of the holders stand in the Register.

50.4 Receivers and other persons

Where in the Isle of Man or elsewhere a receiver or other person (by whatever name called) has been appointed by any court claiming jurisdiction in that behalf to exercise powers with respect to the property or affairs of any shareholder on the ground (however formulated) of mental disorder, the Board may in its absolute discretion on or subject to production of such evidence of the appointment as the Board may require, permit such receiver or other person authorised by a court or official, to vote in person or, on a poll, by proxy on behalf of such shareholder at any general meeting. Evidence to the satisfaction of the Board of the authority of the person claiming to exercise the right to vote shall be deposited at the Office or at such other place as is specified in accordance with these Articles for the deposit of instruments of proxy not less than forty-eight hours before the time appointed for holding the meeting or adjourned meeting at which the right to vote is to be exercised and in default the right to vote shall not be exercisable.

51. Casting vote

In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place or at which the poll was demanded shall be entitled to a second or casting vote in addition to any other vote that they may have; provided that in the event that there remains an equality of votes following the vote of the Chairman, the majority of the votes of the independent directors of the Board shall prevail.

52. Voting by proxy

Any person (whether a shareholder of the Company or not) may be appointed to act as a proxy. Deposit of an instrument of proxy shall not preclude a shareholder from attending and voting in person at the meeting in respect of which the proxy is appointed or at any adjournment of it.

53. Form of proxy

The appointment of a proxy shall:

(a) be in any common form or in such other form as the Board may approve under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation under its common seal or under the hand of some officer or attorney duly authorised in that behalf or shall be contained in an Electronic Communication sent to such address (if any) as may for the time being be notified by or on behalf of the Company for that purpose, provided that the Electronic Communication is received in accordance with Article 54.1(b);

27 

 
(b) be deemed (subject to any contrary direction contained in the same) to confer authority to demand or join in demanding a poll and to vote on any resolution or amendment of a resolution put to the meeting for which it is given, as the proxy thinks fit, but shall not confer any further right to speak at the meeting except with the permission of the Chairman;
(c) unless the contrary is stated in it be valid as well for any adjournment of the meeting as for the meeting to which it relates; and
(d) where it is stated to apply to more than one meeting, be valid for all such meetings as well as for any adjournment of any such meetings.
54. Deposit of proxy
54.1 The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a copy of such authority certified notarially or in some other way approved by the Board shall:
(a) in the case of an instrument in writing, be deposited by personal delivery or post at the Office or at such other place within the Isle of Man or elsewhere as is specified in the notice convening the meeting or in any instrument of proxy sent out by the Company in relation to the meeting not less than forty-eight hours before the time of the holding of the meeting or adjourned meeting at which the person named in the instrument proposes to vote; or
(b) in the case of an appointment contained in an Electronic Communication, where an address has been specified for the purpose of receiving Electronic Communications:
(i) in the notice convening the meeting; or
(ii) in any instrument of proxy sent out by the Company in relation to the meeting; or
(iii) in any invitation contained in an Electronic Communication to appoint a proxy issued by the Company in relation to the meeting

be received at such address not less than forty-eight hours before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote; or

(c) in the case of a poll taken more than forty-eight hours after it is demanded be deposited as aforesaid after the poll has been demanded and not less than twenty-four hours before the time appointed for the taking of the poll; or

28 

 
(d) where the poll is not taken forthwith but is taken not more than forty-eight hours after it was demanded, be delivered at the meeting at which the poll was demanded to the Chairman of the meeting;

and an appointment of a proxy not deposited, delivered or received in a manner so permitted shall be invalid. The Board may at its discretion treat a machine made copy of a written instrument appointing a proxy as such an appointment for the purpose of this Article.

54.2 Without limiting the foregoing, in relation to any shares which are held in uncertificated form, the Board may from time to time permit appointments of a proxy to be made by means of an Electronic Communication in the form of an uncertificated proxy instruction (that is, a properly authenticated dematerialised instruction, and/or other instruction or notification, which is sent by means of an Uncertificated System and received by such participant in the Uncertificated System acting on behalf of the Company as the Directors may prescribe, in such form and subject to such terms and conditions as may from time to time be prescribed by the Directors (subject always to the facilities and requirements of the Uncertificated System)); and may in a similar manner permit supplements to, or amendments or revocations of, any such uncertificated proxy instruction to be made by like means. The Board may in addition prescribe the method of determining the time at which any such properly authenticated dematerialised instruction (and/or other instruction or notification) is to be treated as received by the Company or such participant. The Board may treat any such uncertificated proxy instruction which purports to be or is expressed to be sent on behalf of a holder of a share as sufficient evidence of the authority of the person sending that instruction to send it on behalf of that holder.
54.3 For the purposes of Articles 53(a), 54.1(b) and 57 the term “address” in relation to Electronic Communications includes any number or address (including, in the case of any uncertificated proxy instruction permitted pursuant to Article 54.2, an identification number of a participant in the relevant Uncertificated System concerned) used for the purposes of such communications.
54.4 No appointment of a proxy shall be valid after the expiry of twelve months from the date named in it as the date of its execution except at an adjourned meeting or on a poll demanded at a meeting or an adjourned meeting in cases where the meeting was originally held within twelve months from such date.
54.5 The proceedings at a general meeting shall not be invalidated where an appointment of a proxy in respect of that meeting is delivered in a manner permitted by these Articles by Electronic Communication, but because of a technical problem it cannot be read by the recipient.
55. More than one proxy may be appointed

A shareholder may appoint more than one proxy to attend on the same occasion. When two or more valid but differing appointments of proxy are delivered in respect of the same share for use at the same meeting and in respect of the same matter, the one which is last validly delivered (regardless of its date or of the date of its execution) shall be treated as replacing and revoking the other or others as regards that share. If the Company is unable to determine which appointment was last validly delivered, none of them shall be treated as valid in respect of that share.

29 

 
56. Board may supply proxy cards

The Board shall at the expense of the Company send by post or otherwise forms of appointment of proxy (reply-paid or otherwise) with the notice convening any general meeting to shareholders entitled to vote at the meeting. Such forms of appointment of proxy shall provide for at least three-way voting on all resolutions to be proposed at the meeting other than the resolutions relating to the procedure of the meeting. The accidental omission to send an appointment of proxy or the non receipt of it by any shareholder entitled to attend and vote at a meeting shall not invalidate the proceedings at that meeting.

57. Revocation of proxy

A vote given or poll demanded in accordance with the terms of an appointment of a proxy shall be valid notwithstanding the death or mental disorder of the principal or the revocation of the appointment of the proxy, or of the authority under which the appointment of the proxy was executed or the transfer of the share in respect of which the appointment of the proxy is given unless notice of such death, mental disorder, revocation or transfer shall have been delivered to or received by the Company not later than the latest time at which the proxy should have been delivered to or received by the Company in order to be valid for use at the meeting or adjourned meeting at which the proxy is used, or (in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) not later than twenty-four hours before the time of the taking of the poll at which the vote is cast. Such notice of determination shall be either by means of an instrument delivered to the Office or to such other place within the Isle of Man or elsewhere as may be specified by or on behalf of the Company in accordance with Article 54.1(a) or contained in an Electronic Communication received at the address (if any) specified by or on behalf of the Company in accordance with Article 54.1(b), regardless of whether any relevant proxy appointment was effected by means of an instrument or contained in an Electronic Communication. For the purpose of this Article, an Electronic Communication which contained such notice of determination need not be in writing if the Board has determined that the Electronic Communication which contains the relevant proxy appointment need not be in writing.

58. Written resolutions

Any action that may be taken by the shareholders at a general meeting may also be taken by a resolution consented to in writing by shareholders holding: (i) in excess of fifty per cent of the rights to vote on such resolution or seventy-five per cent in the case of a special resolution conferred on such shareholders according to the rights attached to the shares held; and (ii) the requisite percentage of shares held by any particular class or classes of shareholders having the right to consent to such resolution pursuant to Article 59. The consent may be in the form of counterparts, each counterpart being signed by one or more shareholders. If the consent is in one or more counterparts, and the counterparts bear different dates, then the resolution or special resolution (as applicable) shall take effect on the earliest date upon which shareholders holding a sufficient number of votes to constitute a resolution or special resolution (as applicable) of shareholders have consented to the resolution by signed counterparts. If any written resolution of the shareholders is adopted otherwise than by the unanimous written consent of all shareholders, a copy of such resolution shall be sent to all shareholders not consenting to such resolution forthwith upon it taking effect.

30 

 
59. Approval Rights

In addition to any items which require the approval of shareholders under applicable law, until the date that is the third (3rd) anniversary of the Effective Time (as defined in the Merger Agreement Related Transaction Documents), the Company shall not, and shall cause its subsidiaries not to, directly or indirectly, take any of the following actions without the prior approval of the holders of a majority of the A Ordinary Shares in issue (for the avoidance of doubt, excluding any vote of the holders of B Ordinary Shares with respect to such B Ordinary Shares):

(a) amending, supplementing or otherwise modifying the provisions of this Article 59;
(b) amending, supplementing or otherwise modifying (whether by merger or otherwise) the memorandum of association of the Company or these Articles in a manner that would affect the relative rights of holders of B Ordinary Shares vis-à-vis holders of A Ordinary Shares;
(c) entering into any agreement or effecting any transaction or series of related transactions providing for consideration to the holders of B Ordinary Shares that is in a different amount or form per share than the consideration provided to the holders of A Ordinary Shares in such transaction;
(d) any action that would have the effect of increasing the relative voting power of the B Ordinary Shares in issue vis-à-vis the A Ordinary Shares in issue; provided that, for avoidance of doubt, this Article 59(d) expressly does not include the acquisition by the Permitted Holders of additional A Ordinary Shares from time to time (but, if such Shares are acquired directly from the Company or any of its subsidiaries, such acquisition shall be subject to Article 59(e)) and/or the conversion from time to time of any A Ordinary Shares then held by the Permitted Holders into B Ordinary Shares (but any such conversion remaining subject to Article 22.5);
(e) issuing additional B Ordinary Shares (other than upon conversion of A Ordinary Shares, but any such conversion remaining subject to Article 22.5) to any Permitted Holder;
(f) entering into any agreement or amending any existing agreement or effecting any transaction or series of related transactions between the Company or any of its subsidiaries, on the one hand, and any Permitted Holder from time to time, on the other hand, except for (i) awards of equity-based compensation approved by the Remuneration Committee and granted in the ordinary course of business to members of the Permitted Holders who are also members of the Company’s senior management, (ii) arms’ length transactions the material terms of which are approved in advance by the Independent Committee and (iii) any agreements, transactions or arrangements existing on the date hereof the material terms of which are publicly disclosed prior to the date hereof in the documents publicly filed by the Company with the U.S. Securities and Exchange Commission; or
(g) agreeing or otherwise committing (whether or not in writing) to take any of the foregoing actions.

31 

 
K. Untraced shareholders
60. Power of sale
60.1 Untraceable shareholders

The Company shall be entitled to sell at the market price reasonably obtainable any share of a shareholder or any share to which a person is entitled by transmission if and provided that:

(a) during the period of twelve years prior to the date of the publication of the advertisements referred to in paragraph (b) (or if published on different dates, the earlier or earliest of them) no cheque, order or warrant in respect of such share sent by the Company through the post in a pre-paid envelope addressed to the shareholder or to the person entitled by transmission to the share at his address on the Register or other last known address given by the shareholder or person to which cheques, orders or warrants in respect of such share are to be sent has been cashed and the Company has received no communications in respect of such share from such shareholder or person provided that during such period of twelve years at least three cash dividends (whether interim or final) in respect of the shares in question have become payable and no such dividend during that period has been claimed by the person entitled to it;
(b) on or after expiry of the said period of twelve years the Company has given notice of its intention to sell such share by advertisements in a national daily newspaper published in the United Kingdom and a national daily newspaper published in the US and (if the last known address of such shareholder or person is not in the United Kingdom or the US) in a newspaper circulating in the area of the last known address of such shareholder or person;
(c) the said advertisements, if not published on the same day, shall have been published within thirty days of each other;
(d) during the further period of three months following the date of publication of the said advertisements (or, if published on different dates, the later or latest of them) and prior to the exercise of the power of sale the Company has not received any communication in respect of such share from the shareholder or person entitled by transmission; and
(e) the Company has given notice, if required, in accordance with the regulations of the relevant regulatory authority of its intention to make such sale and shall, if appropriate, have obtained the approval of the relevant regulatory authority to the proposed form of the said advertisement, if shares of the class concerned are admitted to a securities list and/or a recognised investment exchange.
60.2 Perfection of transfer

To give effect to any sale of shares pursuant to this Article 59 (Power of sale) the Board may in the case of certificated shares authorise some person to transfer the shares in question and may enter the name of the transferee in respect of the transferred shares in the Register notwithstanding the absence of any share certificate being lodged in respect of it and may issue a new certificate to the transferee and in the case of uncertificated shares exercise any power conferred on it by Article 21.5 (Forfeiture and sale) to effect a transfer of the shares. The purchaser shall not be bound to see to the application of the purchase moneys in respect of any such sale nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale or transfer. Any instrument or exercise shall be effective as if it had been executed or exercised by the holder of or the person entitled by transmission to the shares to which it relates.

32 

 
60.3 Additional shares

If during the period of twelve years referred to in Article 59.1 (Untraceable shareholders) or during any period ending on the date when all the requirements of paragraphs (a) to (d) of Article 59.1 have been satisfied, any additional shares have been issued in respect of those held at the beginning of such period or of any previously so issued during such period and all the requirements of paragraphs (b) to (d) of Article 59.1 have been satisfied in regard to such additional shares the Company shall also be entitled to sell the additional shares.

60.4 Application of proceeds of sale

Subject to compliance with the solvency test, the Company shall account to the shareholder or other person entitled to such share or shares for the net proceeds of such sale by carrying all moneys in respect of it to a separate account. The Company shall be deemed to be a debtor to and not a trustee for such shareholder or other person in respect of such moneys. Moneys carried to such separate account may either be employed in the business of the Company or invested in such investments as the Board may from time to time think fit. No interest shall be payable to such shareholder or other person in respect of such moneys and the Company shall not be required to account for any money earned on them.

L. Appointment, term and removal of directors
61. Number of Directors

Subject to the Investors’ Rights Agreement, the number of Directors shall be not less than three or more than twelve with the number to be set from time to time by the Board in a manner consistent with the Investors’ Rights Agreement.

62. Power of Company to appoint Directors

Subject to the Investors’ Rights Agreement and the provisions of these Articles, the Company may by resolution appoint a person who is willing to act to be a Director, either to fill a vacancy, or as an addition to the existing Board, but the total number of Directors shall not exceed any maximum number fixed in accordance with these Articles. Any Director so appointed shall hold office in accordance with Article 68.2 (Re-election of Directors).

63. Power of Board to appoint Directors

Without prejudice to the power of the Company to appoint any person to be a Director pursuant to these Articles, the Board shall, in accordance with the Investors’ Rights Agreement, have power at any time to appoint any person who is willing to act as a Director, either to fill a vacancy or as an addition to the existing Board, but the total number of Directors shall not exceed any maximum number fixed in accordance with these Articles. Any Director so appointed shall hold office in accordance with Article 68.2 (Re-election of directors).

33 

 
64. Eligibility of new Directors

No person other than a Director whose term expires at the meeting (pursuant to Article 68.1 (Number of Directors)) shall be appointed or re-appointed a Director at any general meeting unless (if applicable) such appointment or re-appointment is in accordance with the Investors’ Rights Agreement (if relevant) or such person is nominated in accordance with the Investors’ Rights Agreement (if relevant).

65. Share qualification

A Director shall not be required to hold any shares.

66. Resolution for appointment

A resolution for the appointment of two or more persons as Directors by a single resolution shall not be moved unless a resolution that it shall be so proposed has first been agreed to by the meeting without any vote being given against it and any resolution moved in contravention of this provision shall be void. For the purpose of this Article, a resolution for approving a person’s appointment or for nominating a person for appointment as a Director shall be treated as a resolution for his appointment.

67. No retirement on account of age

No person shall be or become incapable of being appointed or re-appointed a Director by reason of his having attained the age of eighty or any other age, nor shall any special notice be required in connection with the appointment, re-appointment or the approval of the appointment of such person. No Director shall vacate his office at any time by reason of the fact that he has attained the age of eighty or any other age.

68.          Staggered Board terms

68.1 Number of Directors

The Board shall be divided into three classes, each as nearly equal in number as possible, designated Class I Directors, Class II Directors and Class III Directors. Class I Directors shall initially hold office until the 2021 annual general meeting; Class II Directors shall initially hold office until the 2022 annual general meeting; and Class III Directors shall initially hold office until the 2023 annual general meeting. At each annual general meeting, each of the Directors of the relevant class the term of which shall then expire shall be eligible for re-election to the Board for a period of three years. In the case of any increase or decrease in the number of Directors, the Board shall apportion the number of Directors in each class equally or, if this is not possible, as nearly as equal as possible. The Board shall assign the Directors as at the date of adoption of these Articles to Class I, Class II or Class III.

68.2 Re-election of Directors

A Director whose term is to expire shall be eligible for re-election and may, if willing to act, be re-appointed. A Director who is re-elected will continue in office without a break.

34 

 

A Director appointed to fill a vacancy (other than at an annual general meeting) shall initially serve the remainder of the term of the Director he replaces. No decrease in the number of Directors will shorten the term of any Director.

69. Removal by resolution

Subject to the Investors’ Rights Agreement, the Company may by resolution remove any Director before the expiration of his period of office notwithstanding anything in these Articles or in any agreement between the Company and such Director and, without prejudice to any claim for damages which he may have for breach of any contract of service between him and the Company, may (subject to these Articles) by resolution appoint another person who is willing to act to be a Director in his place.

70. Vacation of office by Director

Without prejudice to any provisions for the term of office contained in these Articles the office of a Director shall be vacated if:

(a) he resigns by notice in writing delivered to the Company’s registered agent or the Office or tendered at a Board meeting in which event he shall vacate that office on the service of that notice on the Company or at such later time as is specified in the notice or he offers in writing to resign from his office and the Directors resolve to accept such offer; or
(b) he ceases to be a Director by virtue of any provision of the Act, is removed from office pursuant to these Articles or becomes prohibited by law from being a Director (including, without limitation, by virtue of section 93 of the Act); or
(c) he has an interim receiving order made against him, makes any arrangement or compounds with his creditors generally; or
(d) an order is made by any court of competent jurisdiction (whether in the Isle of Man, the United Kingdom or elsewhere) on the ground (howsoever formulated) of mental disorder for his detention or for the appointment of a guardian or receiver or other person to exercise powers with respect to his property or affairs or he is admitted to hospital in pursuance of an application for admission for treatment under any statute for the time being in force in the Isle of Man or the United Kingdom relating to mental disorder or, in any other territory, in pursuance of an application for admission under analogous legislation or regulations and the Board resolves that his office be vacated; or
(e) he shall be absent, without the permission of the Board, from Board meetings for six consecutive months and the Board resolves that his office be vacated; or
(f) he is requested to resign by notice in writing addressed to him at his address as shown in the register of Directors and signed by all the other Directors (without prejudice to any claim for damages which he may have for breach of any contract between him and the Company); or
(g) he is convicted of an indictable offence and the Directors shall resolve that it is undesirable in the interests of the Company that he remains a Director of the Company; or

35 

 
(h) the conduct of that Director (whether or not concerning the affairs of the Company) is the subject of (i) an application to the High Court pursuant to section 3 of the Company Officers (Disqualification) Act 2009 to the Isle of Man High Court or (ii) a formal criminal investigation by the police of any jurisdiction and the Board shall resolve that it is undesirable that he remains a Director; or
(i) notice is given to terminate his contract of employment or engagement with the Company where he is in breach of such contract; or
(j) he has been disqualified from acting as a director.
71. Resolution as to vacancy conclusive

A resolution of the Board declaring a Director to have vacated office under the terms of Article 70 (Vacation of office by Director) shall be conclusive as to the fact and grounds of vacation stated in the resolution.

M. Directors’ remuneration, expenses and pensions
72. Directors’ fees

The Directors shall be entitled to receive by way of fees for their services as Directors such sum as the Board may from time to time determine. Such sum shall be divided among the Directors in such proportions and in such manner as the Board may determine or in default of such determination, equally (except that in such event any Director holding office for less than the whole of the relevant period in respect of which the fees are paid shall only rank in such division in proportion to the time during such period for which he holds office). Any fees payable pursuant to this Article shall be distinct from any salary, remuneration or other amounts payable to a Director pursuant to any other provisions of these Articles and shall accrue from day to day but any Director who is also an officer of the Company or any of its subsidiaries shall not be entitled to any fees hereunder although such Director may be paid a salary and/or remuneration in accordance with Article 75 (Remuneration of executive Directors).

73. Expenses

Each Director shall be entitled to be repaid all reasonable travelling, hotel and other expenses properly incurred by him in or about the performance of his duties as Director, including any expenses incurred in attending meetings of the Board or any committee of the Board or general meetings or separate meetings of the holders of any class of shares or of debentures of the Company.

74. Remuneration

If by arrangement with the Board any Director shall perform or render any special duties or services outside his ordinary duties as a Director and not in his capacity as a holder of employment or executive office, he may be paid such reasonable additional remuneration (whether by way of a lump sum or by way of salary, commission, participation in profits or otherwise) as the Board may from time to time determine.

36 

 
75. Remuneration of executive Directors

The salary or remuneration of any Director appointed to hold any employment or executive office in accordance with the provisions of these Articles may be either a fixed sum of money or may altogether or in part be governed by business done or profits made or otherwise determined by the Board.

76. Pensions and other benefits

The Board may exercise all the powers of the Company to provide pensions or other retirement or superannuation benefits and to provide death or disability benefits or other allowances or gratuities (whether by insurance or otherwise) for or to institute and maintain any institution, association, society, club, trust, other establishment or profit sharing, share incentive, share purchase or employees’ share scheme calculated to advance the interests of the Company or to benefit any person who is or has at any time been a Director of the Company or any company which is a subsidiary company of or allied to or associated with the Company or any such subsidiary or any predecessor in business of the Company or of any such subsidiary and for any member of his family (including a spouse or former spouse) and any person who is or was dependent on him. For such purpose the Board may establish, maintain, subscribe and contribute to any scheme, institution, association, club, trust or fund and pay premiums and, subject to the provisions of the Act, lend money or make payments to, guarantee or give an indemnity in respect of, or give any financial or other assistance in connection with, any of the aforesaid matters or bodies. The Board may procure any of such matters to be done by the Company either alone or in conjunction with any other person. Any Director or former Director shall be entitled to receive and retain for his own benefit any pension or other benefit provided under this Article and shall not be obliged to account for it to the Company.

N. Powers and duties of the Board
77. Powers of the Board

The management and control of the business of the Company shall be in and from such place as the Board may determine from time to time. Subject to the provisions of the Investors’ Rights Agreement, the Act, the memorandum of association of the Company and these Articles and to any directions given by special resolution of the Company, the business of the Company shall be managed by the Board, which may exercise all the powers of the Company whether relating to the management of the business or not. No alteration of the memorandum of association or of these Articles and no such direction given by the Company shall invalidate any prior act of the Board which would have been valid if such alteration had not been made or such direction had not been given. Provisions contained elsewhere in these Articles as to any specific power of the Board shall not be deemed to limit the general powers given by this Article.

78. Powers of Directors being less than minimum number

If the number of Directors is less than the minimum for the time being prescribed by these Articles, the remaining Director or Directors shall act only for the purposes of appointing an additional Director or Directors to make up such minimum or of convening a general meeting of the Company for the purpose of making such appointment. If there are no Director or Directors able or willing to act, any two shareholders may summon a general meeting for the purpose of appointing Directors. Subject to the provisions of these Articles, any additional Director so appointed shall hold office only until the dissolution of the annual general meeting of the Company next following such appointment unless he is re-elected during such meeting.

37 

 
79. Powers of executive Directors

Subject to the Investors’ Rights Agreement, the Board may from time to time:

(a) delegate or entrust to and confer on any Director holding executive office (including a Managing Director) such of its powers, authorities and discretions (with power to sub-delegate) for such time on such terms and subject to such conditions as it thinks fit; and
(b) revoke, withdraw, alter or vary all or any of such powers.

80.          Delegation to committees

80.1 Constituting committees

Subject to the Investors’ Rights Agreement, the Board may delegate any of its powers, authorities and discretions (with power to sub-delegate) for such time on such terms and subject to such conditions as it thinks fit to any committee consisting of one or more Directors and (if thought fit) one or more other persons provided that:

(a) a majority of the members of a committee shall be Directors;
(b) no resolution of a committee shall be effective unless a majority of those present when it is passed are Directors; and
(c) the committee may meet in such places as the members thereof may from time to time determine provided, however, that the Board shall ensure that the Company does not become, and is not deemed to be, resident for taxation purposes in any jurisdiction other than the Isle of Man.

Any committee so formed may exercise its power to sub-delegate by sub-delegating to any person or persons (whether or not a Director or a member of such committee).

80.2 Powers of committee

Subject to the Investors’ Rights Agreement, the Board may confer such powers either collaterally with or to the exclusion of and in substitution for all or any of the powers of the Board in that respect and may from time to time revoke, withdraw, alter or vary any of such powers and discharge any such committee in whole or in part. Insofar as any power, authority or discretion is so delegated any reference in these Articles to the exercise by the Board of such power, authority or discretion shall be construed as if it were a reference to the exercise of such power, authority or discretion by such committee. Subject to any terms and conditions expressly imposed by the Board, the proceedings of a committee with two or more members shall be governed by such of these Articles as regulate the proceedings of the Board so far as they are capable of applying.

38 

 
81. Local management

Subject to the Investors’ Rights Agreement, the Board may establish any local group or divisional boards or agencies for managing any of the affairs of the Company in any specified locality and may appoint any persons to be members of such local or divisional board or any managers or agents, may fix their remuneration and remove any person so appointed. The Board may delegate to any local group or divisional board manager or agent so appointed any of its powers, authorities and discretions other than the power to borrow (with power to sub-delegate) and may authorise the members for the time being of any such local or divisional board or any of them to fill any vacancies and to act notwithstanding vacancies, and any such appointment or delegation may be made for such time on such terms and subject to such conditions as the Board may think fit. The Board may confer such powers either collectively with or to the exclusion of and in substitution for all or any of the powers of the Board in that respect and may from time to time revoke, withdraw, alter or vary all or any of such powers. Subject to any terms and conditions expressly imposed by the Board, the proceedings of any local group or divisional board or agency with two or more members shall be governed by such of these Articles as regulate the proceedings of the Board so far as they are capable of applying.

82. Power of attorney

Subject to the Investors’ Rights Agreement, the Board may by power of attorney or otherwise appoint any company, firm, person or persons (including registrars) to be the agent or attorney of the Company and may delegate to any such agent or attorney or any fluctuating body of persons, whether nominated directly or indirectly by the Directors, any of its powers, authorities and discretions (with power to sub-delegate), in each case for such purposes and for such time, on such terms (including as to remuneration) and subject to such conditions as it thinks fit. The Board may confer such powers either collaterally with, or to the exclusion of and in substitution for, all or any of the powers of the Board in that respect and may from time to time revoke, withdraw, alter or vary any of such powers. Any such appointment or power of attorney may contain such provisions for the protection and convenience of persons dealing with any such agent or attorney as the Board may think fit and may also authorise any such agent or attorney to sub-delegate all or any of the powers, authorities and discretions vested in him.

83. Associate Directors

The Board may appoint any person (not being a Director) to any office or employment having a designation or title including the word “director” or attach to any existing office or employment with the Company such designation or title and may define, limit, vary or restrict the powers, authorities and discretions of persons so appointed and may terminate any such appointment subject to any contract between him and the Company or the use of such designation or title. The inclusion of the word “director” in the designation or title of any such office or employment shall not imply that such person is or is deemed to be or is empowered in any respect to act as a Director or a member of any committee of the Board for any of the purposes of the Act or these Articles.

84. Exercise of voting power

Subject to the Investors’ Rights Agreement, the Board may exercise or cause to be exercised the voting power conferred by the shares in any other company held or owned by the Company or any power of appointment to be exercised by the Company in such manner in all respects as it thinks fit (including the exercise of the voting power or power of appointment in favour of the appointment of any Director as a director or other officer or employee of such company or in favour of the payment of remuneration to the directors, officers or employees of such company).

39 

 
85. [Intentionally Omitted]
86. Borrowing powers

Subject to the Investors’ Rights Agreement and as herein provided and to the provisions of the Act, the Directors may exercise all the powers of the Company to borrow money, to guarantee, to indemnify and to mortgage or charge its undertaking, property, assets (present and future) and uncalled capital or any part or parts thereof and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

O. Proceedings of Directors and Committees
87. Board meetings

Subject to the provisions of the Investors’ Rights Agreement and these Articles, the Board may meet for the despatch of business, adjourn and otherwise regulate its proceedings as it thinks fit. Board meetings shall be held in such places as the Board may from time to time determine.

88. Notice of Board meetings

Subject to the Investors’ Rights Agreement, one Director may summon a Board meeting at any time on reasonable notice. Notice of a Board meeting shall be deemed to be properly given to a Director if it is given to him in writing to him at his last known address or any other address given by him to the Company for that purpose or by Electronic Communication. A Director may waive the requirement that notice be given to him of any Board meeting either prospectively or retrospectively.

89. Quorum

The quorum necessary for the transaction of business may be determined by the Board and until otherwise determined shall be a majority in number of the Directors. A duly convened meeting of the Board at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the Board. Any Director who ceases to be a Director at a meeting of the Directors may continue to be present and to act as a Director and be counted in the quorum until the termination of the meeting of the Directors if no Director objects and if otherwise a quorum of Directors would not be present.

90.          Chairman of Board and other offices

90.1 Appointment of Chairman

The Board shall appoint one or more of its body as Chairman or Co-Chairmen of the Board and shall determine the period for which they are to hold office and may at any time remove one or both of them from office. If no such Chairman is elected or if at any meeting no Chairman or Co-Chairmen is present within fifteen minutes of the time appointed for holding it, the Directors present shall choose one of their number to be Chairman of such meeting. Any Chairman may also hold executive office under the Company.

40 

 
90.2 Chief Executive

The Directors may appoint one or more of their number to any office or employment under the Company (including, but without limitation, that of Chief Executive, Managing Director or Joint Managing Director but not including that of auditor), and may enter into an agreement or arrangement with any Director for his employment by the Company or for the provision by him of any services outside the scope of the ordinary duties of a Director and may also permit any person appointed to be a Director to continue in any office or employment held by him before he was so appointed. Any such appointment, agreement or arrangement may be made for such period and upon such terms as the Directors determine.

90.3 Delegation of powers

Subject to the Investors’ Rights Agreement, without prejudice to the generality of the foregoing, the Directors may entrust to and confer upon any Director holding any such office or employment any of the powers exercisable by them as Directors with power to sub-delegate upon such terms and conditions and with such restrictions as they think fit and either collaterally with or to the exclusion of their own powers, authorities and discretions, and may from time to time revoke, withdraw, alter or vary all or any of such powers but no person dealing in good faith and without notice of the revocation or variation shall be affected by it. The power to delegate contained in this Article shall be effective in relation to the powers, authorities and discretions of the Board generally and shall not be limited by the fact that in certain Articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the Board or by a committee authorised by the Board.

90.4 Removal from position

Subject to the Investors’ Rights Agreement, the Directors may also (without prejudice to any claim for damages for breach of any agreement between the Director and the Company) remove a Director from any such office and appoint another in his place.

90.5 Cessation of position on ceasing to be a director

A Director appointed to the office of Co-Chairman, Managing Director, Chief Executive or any other executive office shall automatically and immediately cease to hold that office if he ceases to hold the office of Director from any cause, but he shall not (unless any agreement between him and the Company shall otherwise provide) cease to hold his office as a Director by reason only of his ceasing to be Chairman, Deputy Chairman, Managing Director, Chief Executive of the Company or to hold any other such executive office, as the case may be.

91. Voting
91.1 Subject to Articles 91.2, 91.3 and 91.4, questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes the Chairman of that meeting shall have a second or casting vote; provided that in the event that there remains an equality of votes following such vote by the Chairman, the vote of a majority of the independent directors of the Board shall prevail.

41 

 
91.2 Until the date that is the third (3rd) anniversary of the Effective Time (as defined in the Merger Agreement Related Transaction Documents), the Company shall not, and shall cause its subsidiaries not to, directly or indirectly, take any of the following actions without the prior approval of the majority of the members of the Independent Committee:
(a) amending, supplementing or otherwise modifying (whether by merger or otherwise) the memorandum of association of the Company or these Articles in a manner that would affect the relative rights of holders of B Ordinary Shares vis-à-vis holders of A Ordinary Shares;
(b) entering into any agreement or effecting any transaction or series of related transactions providing for consideration to the holders of B Ordinary Shares that is in a different amount or form per share than the consideration provided to the holders of A Ordinary Shares in such transaction;
(c) entering into any agreement or amending any existing agreement or effecting any transaction or series of related transactions between the Company or any of its subsidiaries, on the one hand, and any Permitted Holder from time to time, on the other hand, except for (i) awards of equity-based compensation approved by the Remuneration Committee and granted in the ordinary course of business to members of the Permitted Holders who are also members of the Company’s senior management and (ii) any agreements, transactions or arrangements existing on the date hereof the material terms of which are publicly disclosed prior to the date hereof in the documents publicly filed by the Company with the U.S. Securities and Exchange Commission; or
(d) agreeing or otherwise committing (whether or not in writing) to take any of the foregoing actions.
91.3 Until the date that is the third (3rd) anniversary of the Effective Time (as defined in the Merger Agreement Related Transaction Documents) or such earlier date on which the Permitted Holders first collectively cease to directly or beneficially own at least 50% of the shares held by them at the Effective Time (as defined in the Merger Agreement Related Transaction Documents) (excluding for such purpose shares underlying or issuable in respect of equity awards granted at or as of immediately following the Effective Time), the Company shall not, and shall cause its subsidiaries not to, directly or indirectly, take any of the following actions without the prior approval of the majority of the Directors, including at least one Director nominated by the Permitted Holders in accordance with the Investors’ Rights Agreement who is not an independent Director:
(a) entering into or effecting a transaction or series of related transactions (whether by merger, consolidation, recapitalization, liquidation or sale or transfer of shares or assets or otherwise) as a result of which any person or group of persons acting together for the purpose of acquiring, holding, voting or disposing of shares (other than the Permitted Holders and their respective Affiliates) obtains or would obtain ownership, directly or indirectly, of (i) shares that represent more than 50% of the total voting power of the shares of the Company or applicable successor entity or (ii) all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis;

42 

 
(b) initiating a voluntary liquidation, dissolution, receivership, bankruptcy or other insolvency proceeding involving the Company or any subsidiary of the Company that is a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X under the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time;
(c) making any material change in the nature of the business conducted by the Company and its subsidiaries;
(d) hiring or terminating the chief executive officer, chief financial officer or president (including any co-president) of the Company;
(e) adopting the annual business plan (including operating budget) of the Company and its subsidiaries; or
(f) agreeing or otherwise committing (whether or not in writing) to take any of the foregoing actions.
91.4 Until the date that is the third (3rd) anniversary of the Effective Time (as defined in the Merger Agreement Related Transaction Documents) or such earlier date after the settlement of the CVRs (as defined in the Merger Agreement Related Transaction Documents) on which the Hony Investor first ceases to directly or beneficially own at least 50% of the shares held by the Hony Investor at the Effective Time (as defined in the Merger Agreement Related Transaction Documents), the Company shall not, and shall cause its subsidiaries not to, directly or indirectly, take any of the following actions without the prior approval of the majority of the Directors, including at least one Director nominated by the Hony Investor in accordance with the Investors’ Rights Agreement:
(a) hiring or terminating the chief executive officer, chief financial officer or president (including any co-president) of the Company.
92. Participation by telephone and electronic communication

Any Director may validly participate in a meeting of the Board or a committee of the Board through the medium of conference telephone or other electronic means of communication provided that all persons participating in the meeting are able to hear and speak to each other throughout such meeting. A person so participating shall be deemed to be present in person at the meeting and shall accordingly be counted in a quorum and be entitled to vote. Such a meeting shall be deemed to take place where the Chairman of the meeting is located. Subject to these Articles, all business transacted in such manner by the Board or a committee of the Board shall for the purpose of these Articles be deemed to be validly and effectively transacted at a meeting of the Board or a committee of the Board notwithstanding that two or fewer than two Directors are physically present at the same place.

43 

 
93. Resolution in writing

Subject, in the case of any matters requiring the approval of specific Directors or committees of the Board pursuant to Articles 91.2, 91.3 and 91.4 or the Investors’ Rights Agreement, to receipt of any such specific approval, a resolution in writing executed by all the Directors for the time being entitled to receive notice of a Board meeting and not being less than a quorum or by all the members of a committee of the Board for the time entitled to receive notice of such committee meeting and not being less than a quorum of that committee shall be as valid and effective for all purposes as a resolution duly passed at a meeting of the Board (or committee as the case may be). Such a resolution may consist of several documents in the same form each executed by one or more of the Directors or members of the relevant committee, including executions evidenced by means of facsimile transmission.

94. Minutes of proceedings
94.1 Contents of minutes

The Board shall cause minutes to be made in books kept for the purpose of recording all orders, resolutions and proceedings of every meeting of the Board, of a committee of the Board, of the Company or of the holders of any class of shares or debentures of the Company including:

(a) all appointments of officers and committees made by the Board and of any such officer’s salary or remuneration; and
(b) the names of Directors present at every such meeting.
94.2 Evidence of proceedings

Any such minutes if purporting to be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting, shall be prima facie evidence of the matters stated in such minutes without any further proof.

95. Validity of proceedings

All acts done by a meeting of the Board or of any committee of the local board or agency or by any person acting as a Director or member of a committee, local board or agency shall, as regards all persons dealing in good faith with the Company notwithstanding that it is afterwards discovered that there was some defect in the appointment of any person or persons acting as aforesaid or that they or any of them were or was disqualified from holding office or not entitled to vote or had in any way vacated their or his office or that the delegation to such committee, local board or agency had been annulled, varied or revoked, be as valid as if every such person had been duly appointed, and was duly qualified and had continued to be a Director or member of the relevant committee, local board or agency and had been entitled to vote or as if the delegation had continued in full force and effect.

P. Directors’ interests
96. Related Person Transaction Policies

The provisions in these Articles relating to Directors’ interests are subject to the Company’s Related Person Transaction Policies as approved by the Board from time to time.

44 

 
97. Director may have interests

Subject to the provisions of section 104 of the Act and provided that Article 98 (Disclosure of interests to Board) is complied with, a Director, notwithstanding his office:

(a) may be a party to or otherwise be interested in any contract, arrangement, transaction or proposal with the Company or in which the Company is otherwise interested, either in regard to his tenure of any office or place of profit or as vendor, purchaser or otherwise;
(b) may hold any other office or place of profit under the Company (except that of Auditor or of auditor of a subsidiary of the Company) in conjunction with the office of Director and may act by itself or through his firm in a professional capacity for the Company and in any such case on such terms as to remuneration and otherwise as the remuneration committee may arrange either in addition to or in lieu of any remuneration provided for by any other Article;
(c) may be a shareholder of or a director or other officer, or employed by, or a party to any transaction or arrangement with or otherwise interested in, any body corporate promoted by or promoting the Company or in which the Company is otherwise interested or as regards which the Company has any powers of appointment; and
(d) shall not, by reason of his office, be liable to account to the Company for any dividend, profit, remuneration, superannuation payment or other benefit which he derives from any such office, employment, contract, arrangement, transaction or proposal or from any interest in any such body corporate,

and no such contract, arrangement, transaction or proposal shall be avoided on the grounds of any such interest or benefit.

98. Disclosure of interests to Board
98.1 Notification of interest

A Director who to his knowledge is in any way (directly or indirectly) interested in any contract, arrangement, transaction or proposal with the Company shall declare the nature of his interest at the meeting of the Board at which the question of entering into the contract, arrangement, transaction or proposal is first considered if he knows his interest then exists or, in any other case, at the first meeting of the Board after he knows that he is or has become so interested.

98.2 Adequacy of notice

For the purposes of this Article:

(a) a general notice given to the Board by a Director that he is to be regarded as having an interest (of the nature and extent specified in the notice) in any contract, transaction, arrangement or proposal in which a specified firm, company, person or class of persons is interested shall be deemed to be a sufficient disclosure under this Article in relation to such contract, transaction, arrangement or proposal of the nature and extent thereof as so specified provided that no such notice shall be effective unless either it is given at a meeting of the Directors or the Director takes reasonable steps to secure that it is brought up and read at the next meeting of the Directors after it is given; and

45 

 
(b) an interest of which a Director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his until such time as such Director has, or reasonably could be expected to have, such knowledge.
98.3 Interested Director not to vote or count for quorum

A Director shall not vote on or be counted in the quorum in relation to any resolution of the Board or of a committee of the Board concerning any contract, arrangement, transaction or proposal whatsoever to which the Company is to be a party and in which he has an interest.

99. Director’s interest in own appointment

A Director shall not vote or be counted in the quorum on any resolution of the Board or committee of the Board concerning his own appointment (including fixing or varying the terms of his appointment or its termination) as the holder of any office or place of profit with the Company or any company in which the Company is interested. Where proposals are under consideration concerning the appointment (including fixing or varying the terms of appointment or termination) of two or more Directors to offices or places of profit with the Company or any company in which the Company is interested, such proposals may be divided and a separate resolution considered in relation to each Director. In such case each of the Directors concerned (if not otherwise debarred from voting under these Articles) shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment.

100. Chairman’s ruling conclusive on Director’s interest

If any question arises at any meeting of the Board or any committee of the Board as to the materiality of a Director’s interest (other than the Chairman’s interest) or as to the entitlement of any Director (other than the Chairman) to vote or be counted in a quorum and such question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum such question (unless the Director concerned is the Chairman in which case Article 101 (Directors’ resolution conclusive on Chairman’s interest) shall apply) shall before the conclusion of the meeting be referred to the Chairman of the meeting. The Chairman’s ruling in relation to the Director concerned shall be final and conclusive except in a case where the nature or extent of the interest of the Director has not been fairly disclosed and provided that any such question shall, for the purposes of disclosure of such interests in the accounts of the company, be finally and conclusively decided by a majority of the Directors (other than the Director concerned).

101. Directors’ resolution conclusive on Chairman’s interest

If any question arises at any meeting of the Board or any committee of the Board as to the materiality of the Chairman’s interest or as to the entitlement of the Chairman to vote or be counted in a quorum and such question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum, such question shall before the conclusion of the meeting be decided by resolution of the Directors or committee members present at the meeting (excluding the Chairman) whose majority vote shall be final and conclusive except in a case where the nature or extent of the interest of the Chairman has not been fairly disclosed and provided that any such question shall, for the purposes of disclosure of such interests in the accounts of the company, be finally and conclusively decided by a majority of the Directors (other than the Chairman).

46 

 
102. [Intentionally Omitted]
Q. The Seal

103.       Application of Seal

103.1 Use of seal

The Seal shall be used only by the authority of a resolution of the Board or of a committee of the Board so authorised. The Board may determine whether any instrument to which the Seal is affixed shall be signed and if it is to be signed who shall sign it. Unless otherwise so determined:

(a) share certificates and, subject to the provisions of any instrument constituting them, certificates issued under the Seal in respect of any debentures or other securities but excluding letters of allotment or scrip certificates shall be executed by a Director or by two Directors but the Board may by resolution determine that any signatures may be affixed to or printed (including by means of a facsimile of the signature of any person to be applied by any mechanical or electronic means in place of that person’s actual signature) on any such certificate by any means approved by the Board or that such certificates need not bear any signature; and
(b) every other instrument to which the Seal is affixed shall be signed by a Director or by two Directors or by any other person appointed by the Board for the purpose.
103.2 Certificates

Every certificate shall be issued under the Seal or in such other manner as the Board having regard to the terms of issue and the regulations applicable to the securities list(s) and recognised investment exchange(s) to which the shares of the Company are admitted. All references in these Articles to the Seal shall be construed accordingly.

104. Deed without sealing

A document signed by one or more Directors and expressed (in whatever form of words) to be executed by the Company as a deed shall have the same effect as if it were executed under the Seal, provided that no instrument shall be so signed which makes it clear on its face that it is intended by the person or persons making it not to have effect as a deed without the authority of a resolution of the Board or of a committee of the Board authorised in that behalf. An instrument or document which is executed by the Company as a deed shall not be deemed to be delivered by the Company solely as a result of it having been executed by the Company.

47 

 
105. Official seal for sealing share certificates

The Company may have, for use for sealing securities issued by the Company and for sealing documents creating or evidencing securities so issued, an official seal which is a facsimile of the Seal with the addition on its face of the word “Securities”. The official seal when duly affixed to a document by or on behalf of the Company has the same effect as the Seal.

R. Dividends and other payments
106. Declaration of dividends

Subject to the provisions of these Articles, the Board may, subject to the satisfaction of the solvency test, declare and pay dividends out of the Company’s profits to shareholders according to their respective rights and interests in the profits of the Company. Each Ordinary Share confers upon the holder thereof the right to an equal share in any dividend paid by the Company.

107. Interim dividends

The Board may, subject to the satisfaction of the solvency test, declare and pay such interim dividends (including any dividend payable at a fixed rate) as appear to the Board to be justified by the profits of the Company and the position of the Company.

108. Entitlement to dividends
108.1 Payment of dividends

All dividends and interest shall be paid (subject to any lien of the Company) to those shareholders whose names shall be on the Register at the date at which such dividend shall be declared or at the date at which such interest shall be payable respectively, or at such other date as the Company by resolution or the Board may determine, notwithstanding any subsequent transfer or transmission of shares.

108.2 Shares passing by transmission

The Board may pay the dividends or interest payable on shares in respect of which any person is by transmission entitled to be registered as holder to such person upon production of such certificate and evidence as would be required if such person desired to be registered as a shareholder in respect of such shares.

109. Distribution in specie

The Company in general meeting may, on the recommendation of the Board, by resolution direct that payment of any dividend declared may be satisfied wholly or partly by the distribution of assets, and in particular, of fully paid up shares or debentures of any other company or in any one or more of such ways. Where any difficulty arises in regard to such distribution the Board may settle it as it thinks fit. In particular, the Board may:

(a) issue fractional certificates or, subject to the law and, in the case of shares held in uncertificated form, the rules of the Uncertificated System, authorise and instruct any person to sell and transfer any fractions or disregard fractions altogether;

48 

 
(b) fix the value for distribution of such assets or any part of them and determine that cash payments may be made to any shareholders on the footing of the value so fixed, in order to adjust the rights of shareholders; and
(c) vest any such assets in trustees on trust for the persons entitled to the dividend.
110. Dividends not to bear interest

Unless otherwise provided by the rights attached to the share no dividend or other moneys payable by the Company or in respect of a share shall bear interest as against the Company.

111.       Method of payment

111.1 General provisions

The Company may pay any dividend, interest or other sum payable in respect of a share in cash or by direct debit, bank transfer, cheque, dividend warrant or money order (or in respect of any uncertificated share through the Uncertificated System) and may send it by post or other delivery service to the registered address of the shareholder or person entitled to it (or if two or more persons are holders of the share or are jointly entitled to it by reason of the death or bankruptcy of the shareholder or otherwise by operation of law to the registered address of such of those persons as is first named in the Register) or to such person and such address as such shareholder or person or persons may direct in writing. Every cheque, warrant or order is sent at the risk of the person entitled to the money represented by it and shall be made payable to the order of the person or persons entitled or, where an authority in that behalf shall have been received by the Company in such form as the Company shall consider sufficient, to such other person as the person or persons entitled may direct in writing. Payment of the cheque, warrant or order to the person entitled or the person specified in such authority shall be a good discharge to the Company. If any such cheque, warrant or order has or shall be alleged to have been lost, stolen or destroyed the Board may at the request of the person entitled to it issue a replacement cheque, warrant or order, subject to compliance with such conditions as to evidence and indemnity and the payment of out of pocket expenses of the Company in connection with the request as the Board may think fit. Any joint holder or other person jointly entitled to a share may give an effective receipt for any dividend or other moneys payable in respect of such share. Any such dividend, interest or other sum may also be paid by any other method as the Board considers appropriate. If the payment is made on behalf of the Company through the Uncertificated System the Company shall not be responsible for any default in accounting for such payment to the shareholder or other person entitled to such payment by a bank or other financial intermediary of which the shareholder or other person is a customer for settlement purposes in connection with the Uncertificated System.

49 

 
111.2 Payment in currencies other than sterling

The Board may, at its discretion, make provisions to enable such shareholder as the Board shall from time to time determine to receive dividends duly declared in a currency or currencies other than sterling. For the purposes of the calculation of the amount receivable in respect of any dividend, the rate of exchange to be used to determine the foreign currency equivalent of any sum payable as a dividend shall be such market rate selected by the Board as it shall consider appropriate at the close of business in London on the date which is the business day last preceding the date on which the Board publicly announces its intention to pay that specific dividend, provided that where the Board considers the circumstances to be appropriate it shall determine such foreign currency equivalent by reference to such market rate or rates or the mean of such market rates prevailing at such time or times or on such other date or dates, in each case falling before the time of the relevant announcement, as the Board may select.

111.3 Payments through the uncertificated system

The Board may:

(a) lay down procedures for making any payments in respect of uncertificated shares through the Uncertificated System;
(b) allow any holder of uncertificated shares to elect to receive or not to receive any such payment through the Uncertificated System; and
(c) lay down procedures to enable any such holder to make, vary or revoke any such election.

The Company may make, or procure the making of, any payment in respect of a shareholder’s uncertificated shares through the Uncertificated System in accordance with any authority given to the Company to do so (whether in writing, through the Uncertificated System or otherwise) by or on behalf of the shareholder in a form satisfactory to the Board. The making of such payment in accordance with such authority shall be a good discharge to the Company.

112. Uncashed dividends

If cheques, warrants or orders for dividends or other sums payable in respect of a share sent by the Company to the person entitled thereto by post are returned to the Company undelivered or left uncashed on two consecutive occasions or, following one occasion, reasonable enquiries have failed to establish any new address to be used for the purpose, the Company shall not be obliged to send any further dividends or other moneys payable in respect of that share due to that person until he notifies the Company of an address to be used for the purpose.

113. Unclaimed dividends

All dividends, interest or other sum payable and unclaimed for twelve months after having become payable may be invested or otherwise made use of by the Board for the benefit of the Company until, subject to compliance with the solvency test, claimed and the Company shall not be constituted a trustee in respect thereof. Any dividends claimed by a member shall require the Company to satisfy the solvency test at the point of claim. All dividends unclaimed for a period of twelve years after having become due for payment shall (if the Board so resolves) be forfeited and shall revert to the Company.

50 

 
114. Waiver of dividends

The waiver in whole or in part of any dividend on any share by any document (whether or not under seal) shall be effective only if such document is signed by the shareholder (or the person entitled to the share in consequence of the death, bankruptcy or mental disorder of the holder or otherwise by operation of law) and delivered to the Company and only if or to the extent that the same is accepted as such or acted upon by the Company.

115. Payment of scrip dividends
115.1 Authority to pay scrip dividends

The Board may with the prior authority of a resolution of the Company and subject to such conditions as the Board may determine, provided that the Company has sufficient unissued shares and undistributed profits or reserves to give effect to it, offer to any holders of Ordinary Shares (whether the holder of A Ordinary Shares or of B Ordinary Shares) the right to elect to receive A Ordinary Shares credited as fully paid instead of cash in respect of the whole or some part (to be determined by the Board) of any dividend specified by the resolution.

115.2 Election mandates

The Board may also from time to time establish or vary a procedure for election mandates, under which a holder of Ordinary Shares may elect to receive Ordinary Shares of the same class held by him credited as fully paid instead of cash in respect of all or certain future rights offered to that holder under this Article until the election mandate is revoked in accordance with any such procedure.

115.3 Admission of shares

If the A Ordinary Shares are admitted to listing or trading on any recognised investment exchange, the Company shall apply to the relevant regulatory authority for additional A Ordinary Shares so allotted to be admitted to the recognised investment exchange(s) and securities list(s) to which the Company’s existing issued A Ordinary Shares are admitted.

115.4 Directors’ powers

The Directors shall have power to do all acts and things as they consider necessary or expedient to give effect to this Article 115.

116. Reserves

The Board may, before recommending any dividend (whether preferential or otherwise) carry to reserves out of the profits of the Company such sums as it thinks fit. All sums standing to reserves may be applied from time to time, at the discretion of the Board, for any other purpose to which the profits of the Company may properly be applied and pending such application may either be employed in the business of the Company or be invested in such investments as the Board thinks fit and so that it shall not be necessary to keep any investment constituting the reserve separate or distinct from any other investment of the Company. The Board may divide the reserve into such special funds as it thinks fit and may consolidate into one fund any special fund or any part of any special fund into which the reserve may have been divided as it thinks fit. Any sum which the Board may carry to reserve out of the unrealised profit of the Company shall not be mixed with any reserve to which profits available for distribution have been carried. The Board may also, without placing the same to reserve, carry forward any profit which it may think prudent not to distribute.

51 

 
117. Capitalisation of reserves

The Board may:

(a) subject as provided in this Article, resolve to capitalise any profits of the Company not required for paying any preferential dividend (whether or not they are available for distribution) or any sum standing to the credit of any reserve or fund of the Company which is available for distribution;
(b) appropriate the sum resolved to be capitalised on the date specified in the resolution to the holders of Ordinary Shares in proportion to the par value of the shares held by them respectively which would entitle them to participate in a distribution of that sum if the sum were then distributable and were distributed by way of dividend and apply such sum on their behalf in paying up in full unissued shares of the Company at a price equal to that sum and allot A Ordinary Shares or B Ordinary Shares (as appropriate to existing holders of such shares) credited as fully paid to such holders or as they may direct in those proportions or partly in one way and partly in the other;
(c) make such provision by the issue of fractional certificates (or by ignoring fractions or by accruing the benefit of it to the Company rather than to the holders of Ordinary Shares concerned) or by payment in cash or otherwise as it thinks fit in the case of shares or debentures becoming distributable in fractions; authorise any person to enter on behalf of all the holders of Ordinary Shares concerned into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any shares or debentures to which they may be entitled on such capitalisation (any agreement made under such authority being effective and binding on all such holders); and
(d) generally do all acts and things required to give effect to such resolution.
118. Record dates

Notwithstanding any other provision of these Articles but without prejudice to the rights attached to any shares, the Board may fix any date (the “record date”) as the date at the close of business (or such other time as the Board may determine) on which persons registered as the holders of shares or other securities shall be entitled to receipt of any dividend, distribution, interest, allotment, issue, notice, information, document or circular. Such record date may be on or at any time within sixty (60) days before any date on which such dividend, distribution, interest, allotment, issue, notice, information, document or circular is declared, paid or made but without prejudice to the rights inter se in respect of the same of transfers and transferees of any such shares or other securities. In the absence of a record date being fixed, entitlement to any dividend, distribution, allotment or issue shall be determined by reference to the date on which the dividend is declared or the distribution, allotment or issue is made.

52 

 
S. Accounts
119. Accounting records

The Board shall cause accounting records to be kept in accordance with the Act and shall keep such other books and registers as are necessary to comply with the Act.

120. Inspection of records

The accounting records shall be kept at the Office or (subject to the Act) at such other place as the Board thinks fit. No shareholder (other than a Director) shall have any right to inspect any accounting record or other document of the Company unless he is authorised to do so by statute, by order of the Court, by the Board or by resolution of the Company. Such records shall always be open for inspection by officers of the Company.

121. Accounts to be sent to shareholders

A copy of the Directors’ and Auditors’ reports accompanied by printed copies of the annual accounts (including every document required by law to be comprised in them or annexed or attached to them) shall, not less than twenty-one clear days before the meeting before which they are to be laid, be sent to every shareholder and every holder of debentures of the Company and to the Auditors and to every other person who is entitled to receive notice of general meetings. However, this Article shall not require a copy of those documents to be sent to any person who under the provisions of these Articles is not entitled to receive notices from the Company or of whose address the Company is unaware or to any holder of debentures of whose address the Company is unaware or to more than one of the joint holders of any shares or debentures. If all or any of the shares in or debentures of the Company are listed or dealt in on any stock exchange, there shall at the same time be forwarded to the secretary of that stock exchange such number of copies of each of those documents as the regulations of that stock exchange may require.

T. Destruction and authentication of documents
122. Destruction of documents
122.1 Documents which may be destroyed

Subject to the Act, the Company may destroy:

(a) any instrument of transfer after six years from the date on which it is registered;
(b) any dividend mandate or any variation or cancellation thereof or any notification of change of name or address after two years from the date on which it is recorded;
(c) any registered certificate for debentures or representing any other form of securities after one year from the date on which it is cancelled;
(d) any other document on the basis of which any entry in the Register is made after six years from the date on which an entry was first made in the Register in respect of it;

53 

 
(e) all paid dividend warrants and cheques at any time after the expiration of one year from the date of actual payment thereof; and
(f) all instruments of proxy which have been used for the purpose of a poll at any time after the expiration of one year from the date of such use and all instruments of proxy which have not been used for the purpose of a poll at any time after one month from the end of the meeting to which the instrument of proxy relates and at which no poll was demanded.

Provided that the Company may destroy any such type of document after such shorter period as the Board may determine if a copy of such document is retained on microfilm or other similar means which shall not be destroyed before the expiration of the relevant period and provided that adequate precautions against falsification and to share reproduction are taken.

122.2 Presumption in respect of destroyed documents

It shall be conclusively presumed in favour of the Company that every entry in the Register purporting to have been made on the basis of a document so destroyed was duly and properly made, that every instrument of transfer so destroyed was duly registered, that every share certificate so destroyed was a valid and effective certificate duly cancelled, that every other document so destroyed had been properly dealt with in accordance with its terms and was valid and effective in accordance with the particulars in the records of the Company, provided that:

(a) this Article 122 shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties to it) to which the document might be relevant;
(b) nothing in this Article 122 shall be construed as imposing on the Company any liability in respect of the destruction of any such document or otherwise than as provided for in this Article 122 which would not attach to the Company in the absence of this Article 122; and
(c) references in this Article 122 to the destruction of any document include references to the disposal of it in any manner.
123. Authentication of documents

Any Director or any person appointed by the Directors for the purpose shall have power to authenticate any documents affecting the constitution of the Company and any resolutions passed by the Company or the Directors or any committee and any books, records, documents and accounts relating to the business of the Company and to certify copies of them or extracts from them as true copies or extracts and where any books, records, documents or accounts are elsewhere than at the Office, the local manager or other officer of the Company having the custody of them shall be deemed to be a person appointed by the Directors as aforesaid. A document purporting to be a copy of a resolution, or an extract from the minutes of a meeting, of the Company or of the Directors or any committee which is certified as aforesaid shall be conclusive evidence in favour of all persons dealing with the Company in reliance on them that such resolution has been duly passed or, as the case may be, that any minute so extracted is a true and accurate record of proceedings at a duly constituted meeting.

54 

 
U. Notices
124. Notice to be in writing

Any notice to be given to or by any person pursuant to these Articles shall be in writing or shall be given using Electronic Communication to an address for the time being notified for that purpose to the person giving the notice. Nothing in Part U of these Articles shall affect any requirements of the Act that any particular offer, notice or other document be served in any particular manner.

In this Part U of these Articles, “address” in relation to Electronic Communications includes any number, electronic mail address or other address used for the purposes of such communications

125.       Service of notice on shareholders

125.1 Method of service

The Company may give or send any notice or document to a shareholder by any of the following means:

(a) by post, other delivery service or hand; or
(b) by Electronic Communication to an address for the time being notified to the Company by or on behalf of the shareholder for that purpose; or
(c) by publishing it on a website designated by the Company.
125.2 Joint holders

In the case of joint holders of a share all notices or documents shall be given to the joint holder whose name stands first in the Register in respect of the joint holding. Notice so given shall be sufficient notice to all the joint holders.

125.3 Shareholders outside the British Isles

Where a shareholder (or in the case of joint holders the person first named in the Register) has a registered address outside the British Isles but has notified the Company of an address within the British Isles at which notices or other documents may be given to him or an address to which notices may be sent using Electronic Communication, he shall be entitled to have notices given to him at that address, but otherwise no such shareholder shall be entitled to receive any notice or document from the Company.

125.4 Record date

Any notice to be given to a shareholder may be given by reference to the register as it stands at any time within the period of fifteen days before the notice is given (subject to the Uncertificated Regulations if the Company is then a participating issuer for the purposes of the Uncertificated Regulations) and no change in the Register after that time shall invalidate the giving of the notice.

55 

 
126. Notice in case of death, bankruptcy or mental disorder

The Company may, on receipt of such evidence as the Board may reasonably require to show title to that share, give notice to the person entitled to a share in consequence of the death, bankruptcy or mental disorder of a shareholder or otherwise by operation of law, by sending or delivering it in any manner authorised by these Articles for the giving of notice to a shareholder, addressed to that person by name, or by the title of representative of the deceased or trustee of the bankrupt or representative by operation of law or by any like description at the address (if any) within the British Isles supplied for the purpose by the person claiming to be so entitled. Until such an address has been so supplied a notice may be given in any manner in which it might have been given if the death, bankruptcy, operation of law or other event had not occurred. Such service of notice shall for all purposes be deemed a sufficient service of such notice on all persons interested in the share.

127.       Evidence of service

127.1 Present at meeting

Any shareholder present in person or by proxy or (being a corporation) by a duly authorised representative at any meeting of the Company or of the holders of any class of shares of the Company shall be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such meeting was called.

127.2 Deemed service

Any notice, certificate or other document, addressed to a shareholder at his registered address or address for service in the British Isles shall, if sent by post, be deemed to have been given at the expiration of twenty-four hours after the envelope was posted and, if sent by Electronic Communication, be deemed to have been given at the expiration of twenty-four hours after the Electronic Communication was sent. In proving such service or delivery it shall be sufficient to prove that the envelope containing the notice or document was properly addressed and put into the post as a prepaid letter or, in the case of a notice sent by Electronic Communication, to prove that it was sent in accordance with guidance issued by the Institute of Chartered Secretaries or Administrators. Any notice, certificate or other document not sent by post but delivered or left at a registered address or address for service in the British Isles shall be deemed to have been served or delivered on the day on which it was so delivered or left.

128. Notice binding on transferees

Every person who, by operation of law, transfers or by any other means becomes entitled to a share shall be bound by any notice in respect of that share which, before his name is entered in the Register, has been duly given to a person from whom he derives his title.

129. Notice by advertisement

Any notice to be given by the Company to the shareholders or any of them and not otherwise provided for by these Articles shall be sufficiently given if given by advertisement in at least one daily national newspaper published in the United Kingdom and at least one daily national newspaper published in the US and, where the Company keeps an overseas branch register, in at least one leading daily newspaper published in the territory in which such register is maintained. Any notice given by advertisement shall be deemed to have been served at noon on the day on which the advertisement first appears.

56 

 
130. Suspension of postal services

If at any time by reason of the threat of or of the suspension, interruption or curtailment of postal services within the British Isles, the Company is or would be unable effectively to convene a general meeting by notices sent through the post, a general meeting may be convened by a notice advertised in at least two leading daily national newspapers (at least one of which shall be published in London) and, where the Company keeps an overseas branch register, in at least one leading daily newspaper published in the territory in which such register is maintained. Such notice shall be deemed to have been duly served on all shareholders entitled thereto at noon on the day on which the first of such advertisements appears. In any such case the Company shall send confirmatory copies of the notice by post if at least seven days prior to the meeting the posting of notices to addresses throughout the British Isles again becomes practicable.

V. Winding up
131. Division of assets
131.1 Power to present a petition

The Board shall have power in the name and on behalf of the Company to present a petition to the court for the Company to be wound up.

131.2 Distribution of assets

If the Company is wound up, the surplus assets remaining after payment of all creditors are to be divided among the shareholders in proportion to their economic ownership of the Company. This Article 131.2 is subject to the rights attached to any shares which may be issued on special terms or conditions.

131.3 Distribution in specie

If the Company is wound up the liquidator may, with the sanction of a resolution of the Company and any other sanction required by law, divide among the shareholders in specie the whole or any part of the assets of the Company and may for that purpose value any assets and determine how the division shall be carried out as between the shareholders or different classes of shareholders; provided that the A Ordinary Shares and the B Ordinary Shares shall be pari passu with respect to any such division. Any such division may be otherwise than in accordance with the existing rights of the shareholders but if any division is resolved otherwise than in accordance with such rights the shareholders shall have the same right of dissent and consequential rights as if such resolution were a special resolution passed pursuant to section 222 of the Companies Act 1931 (which provision applies to the Company (with statutory modification) pursuant to the Act). The liquidator may with the like sanction vest the whole or any part of the whole of the assets in trustees on such trusts for the benefit of the shareholders as he with the like sanction shall determine but no shareholder shall be compelled to accept any assets on which there is a liability.

57 

 
132. Transfer or sale under section 222 of the Companies Act 1931

A special resolution sanctioning a transfer or sale to another company duly passed pursuant to section 222 of the Companies Act 1931 (which provision applies to the Company (with statutory modification) pursuant to the Act) may in the like manner authorise the distribution of any shares or other consideration receivable by the liquidator among the shareholders otherwise than in accordance with their existing rights and any such determination shall be binding on all the shareholders, subject to the right of dissent and consequential rights conferred by the said section; provided that the A Ordinary Shares and the B Ordinary Shares shall be pari passu with respect to any such distribution.

W. Indemnity
133. Right to indemnity

Subject to the provisions of the Act and the Investors’ Rights Agreement, the Company may indemnify every Director or other officer of the Company (other than an Auditor) to the fullest extent permitted by law.

134. Power to insure

Subject to the provisions of the Act, the Board may purchase and maintain insurance at the expense of the Company for the benefit of any person who is or was at any time a Director or other officer or employee of the Company or of any other company which is a subsidiary, subsidiary undertaking or holding company of the Company or in which the Company has an interest whether direct or indirect or which otherwise is in any way allied to or associated with the Company or of any subsidiary undertaking or holding company of the Company or of any such company or who is or was at any time a trustee of any pension fund or employee benefits trust in which any employee of the Company or of any such other company or subsidiary undertaking is or has been interested indemnifying such person against any liability which may attach to him or loss or expenditure which he may incur in relation to anything done or alleged to have been done or omitted to be done as a Director, officer, employee or trustee.

58 

 

Exhibit 4.1

CLASS E CONTINGENT VALUE RIGHTS AGREEMENT

This CLASS E CONTINGENT VALUE RIGHTS AGREEMENT, dated as of July 30, 2020 (this “Agreement”), is entered into by and among Eros International Plc, an Isle of Man company limited by shares (“Parent”), STX Filmworks, Inc., a Delaware corporation (the “Company”), Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the former holders of the Shares (in such capacity, the “Stockholders’ Representative”), and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally chartered trust company, collectively as rights agent (the “Rights Agent”) and as initial CVR Registrar (as defined herein).

WITNESSETH:

WHEREAS, the Company, Parent, England Holdings 2, Inc., a Delaware corporation and indirect wholly-owned Subsidiary of Parent (“England Holdings 2”), England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly-owned Subsidiary of England Holdings 2 (“Merger Sub”), have entered into an Agreement and Plan of Merger (as the same may be amended, modified or supplemented from time to time, the “Merger Agreement”), dated as of April 17, 2020, pursuant to which Merger Sub merged with and into the Company (the “Merger”), with the Company surviving the Merger, as an indirect wholly-owned Subsidiary of Parent;

WHEREAS, pursuant to the Merger Agreement, Parent agreed to issue to holders of record of shares of Class E Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Shares”) outstanding immediately prior to the effective time of the Merger (the “Effective Time”), a number of contingent value rights (the “CVRs”) as hereinafter described; and

WHEREAS, each holder of Shares as of immediately prior to the Effective Time, will receive, among other things, as merger consideration, the right to receive upon the Effective Time a number of CVRs in such amount as set forth in Article II of the Merger Agreement.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

Article I
DEFINITIONS

Section 1.1      Definitions.

(a)                For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i)                 the terms defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular;

1 

 

(ii)               the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iii)             unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa;

(iv)             the term “Affiliate” when used with respect to the Company shall, after the Effective Time, include Parent and its Subsidiaries and Affiliates; and

(v)               all references to “including” shall be deemed to mean including without limitation.

(b)               Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Affiliate” means, with respect to any specified Person, (i) any other Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (ii) with respect to any natural person, any Member of the Immediate Family of such natural person. Notwithstanding the foregoing, for purposes hereof, (i) none of the Holders, the Company, or any of their respective Subsidiaries shall be considered Affiliates of any portfolio company (or Subsidiary thereof) in which any Holder or any of its affiliated investment funds have made a debt or equity investment, and (ii) no Holder or any of its Affiliates shall be considered an Affiliate of (a) Parent or any of its Subsidiaries or (b) any other Holders or their respective Affiliates (except to the extent such Holders are otherwise Affiliates under this definition without regard to their status as Holders).

“Agreement” has the meaning set forth in the Preamble.

“Aggregate CVR Shares” means the aggregate number of underlying Parent A Shares issuable in respect of all CVRs.

“Appraisal Shares” has the meaning set forth in Section 4.2(h).

“Available Class E Merger Consideration CVR Shares” means the Merger Consideration CVR Share Cap.

“Base Price” means $2.60.

2 

 

“Change of Control Transaction” means the occurrence of (i) an acquisition by any Person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares or comparable equity interests of Parent entitling that Person to fifty percent (50%) or more of the total voting power of all such shares or comparable equity interests of Parent; or (ii) the consolidation or merger of Parent with or into any other Person, any merger of another Person into Parent, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of Parent’s properties, business or assets, other than (in the case of this clause (ii) only) (1) any transaction (x) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares or comparable equity interests of Parent, and (y) pursuant to which holders of Parent’s shares or comparable equity interest immediately prior to such transaction have the right to exercise, directly or indirectly, fifty percent (50%) or more of the total voting power of all shares or comparable equity interest of the continuing or surviving Person immediately after such transaction, or (2) any merger solely for the purpose of changing Parent’s jurisdiction of formation and resulting in a reclassification, conversion or exchange of outstanding shares or comparable equity interests into shares or comparable equity interest of the surviving entity with substantially identical rights.

“Class A CVR” means the contingent value rights issued by Parent with respect to the Class A Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class A CVR Agreement.

“Class A CVR Agreement” means the Class A CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class A CVR Shares” means the underlying Parent A Shares issuable in respect of the Class A CVRs.

“Class B CVR” means the contingent value rights issued by Parent with respect to the Class B Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class B CVR Agreement.

“Class B CVR Agreement” means the Class B CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class B CVR Shares” means the underlying Parent A Shares issuable in respect of the Class B CVRs.

“Class C CVR” means the contingent value rights issued by Parent with respect to the Class C Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class C CVR Agreement.

“Class C CVR Agreement” means the Class C CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

3 

 

“Class C CVR Shares” means the underlying Parent A Shares issuable in respect of the Class C CVRs.

“Class D CVR” means the contingent value rights issued by Parent with respect to the Class D Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class D CVR Agreement.

“Class D CVR Agreement” means the Class D CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class D CVR Shares” means the underlying Parent A Shares issuable in respect of the Class D CVRs.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Company” has the meaning set forth in the Preamble.

“CVR” means a contingent value right issued by Parent with respect to the Shares, pursuant to the Merger Agreement and this Agreement.

“CVR Shares” has the meaning set forth in Section 3.4(b).

“CVR Register” has the meaning set forth in Section 3.3(b).

“CVR Registrar” has the meaning set forth in Section 3.3(b).

“Effective Time” has the meaning set forth in the Recitals.

“Eros Pre-Closing Equity Financing” has the meaning ascribed in the PIPE Agreement.

“Final Settlement Time” has the meaning set forth in Section 3.2(b).

“Funds” has the meaning set forth in Section 7.12.

“Fully Diluted Parent Shares” means, as of immediately prior to the Effective Time, the sum of (without duplication) (i) the aggregate number of Parent Ordinary Shares then outstanding, plus (ii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding In-the-Money Parent Options (whether or not vested), plus (iii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding Parent RSU Awards (whether or not vested), plus (iv) the aggregate number of Parent Ordinary Shares then subject to issuance pursuant to the Parent Convertible Notes assuming full conversion thereof at a conversion price of $2.60; provided, however, that, notwithstanding the foregoing, Fully Diluted Parent Shares shall not include any Parent Ordinary Shares issuable pursuant to the Eros Pre-Closing Equity Financing. For the avoidance of doubt, Fully Diluted Parent Shares shall be calculated prior to, and without giving effect to, the PIPE Investment.

“Holder” means a Person in whose name a CVR is registered in the CVR Register.

4 

 

“In-the-Money Parent Options” means an Eros Option (as defined in the Merger Agreement) having a per Parent Ordinary Share exercise price less than the Parent Trading Price.

“Investors’ Rights Agreement” means the Investors’ Rights Agreement, entered into on or around the date hereof, by and among Parent, certain shareholders of Parent and the investors party thereto.

“Law” with respect to any Person, means (a) all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

“Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Members of the Immediate Family” means, with respect to any individual, each spouse or child or other descendants of such individual, each trust created solely for the benefit of one or more of the aforementioned Persons and their spouses and each custodian or guardian of any property of one or more of the aforementioned Persons in his capacity as such custodian or guardian.

“Merger” has the meaning set forth in the Recitals.

“Merger Agreement” has the meaning set forth in the Recitals.

“Merger Consideration CVRs” means the CVRs, the Class D CVRs, the Class C CVRs, the Class B CVRs and the Class A CVRs.

“Merger Consideration CVR Share Cap” means a number of Parent A Shares equal to the Fully Diluted Parent Shares.

“Merger Consideration CVR Shares” means the Aggregate CVR Shares, the Class D CVR Shares, the Class C CVR Shares, the Class B CVR Shares and the Class A CVR Shares.

“Merger Sub” has the meaning set forth in the Recitals.

“Organizational Documents” has the meaning set forth in Section 2.1(a).

“Parent” has the meaning set forth in the Preamble.

“Parent A Shares” means the A Ordinary Shares, par value £0.30 per share, of Parent.

“Parent B Shares” means the B Ordinary Shares, par value £0.30 per share, of Parent.

“Parent Convertible Notes” means Parent’s Senior Convertible Notes due September 27, 2020 in the original aggregate principal amount of $27,500,000.

“Parent Option” means a compensatory option to purchase Parent Ordinary Shares.

5 

 

“Parent Ordinary Shares” means, collectively, the Parent A Shares and the Parent B Shares.

“Parent Proceedings” has the meaning set forth in Section 7.5(a).

“Parent RSU Award” means an award of restricted stock units relating to Parent Ordinary Shares.

“Parent Trading Price” means the VWAP for one Parent A Share for the twenty (20) consecutive full Trading Days ending on the full Trading Day immediately preceding the Effective Time (as adjusted as appropriate to reflect any stock splits, stock dividends, combinations, reorganizations, classifications or similar events).

“Permitted Transfer” means: (i) the transfer (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; or (vi) a transfer by any Holder to one or more of its Affiliates or affiliated investment funds of any of its Affiliates.

“Permitted Transferee” means a Person who receives a CVR pursuant to a Permitted Transfer and otherwise in accordance with this Agreement.

“Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Authority or other entity of any kind or nature.

“PIPE Agreement” means that certain Subscription Agreement, made as of April 17, 2020, by and among Parent and each Person defined therein as a “Purchaser.”

“PIPE Investment” means the purchase of Parent A Shares pursuant to the PIPE Agreement.

“PIPE Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Pre-Closing VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Closing.

“Pre-Settlement VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Settlement Date; provided, that for purposes of determining the CVR Shares issuable as of any time prior to the Settlement Date, the reference to “the Trading Day immediately preceding the Settlement Date” in this definition shall be deemed a reference to “the Trading Day immediately preceding the applicable time of determination”.

6 

 

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Settlement Date” shall mean the date that is the earlier to occur of (a) the later to occur of (i) the first time that the Merger Consideration CVR Shares have been registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and (ii) the 75th calendar day after the Closing and (b) the occurrence of the Settlement Outside Date.

“Settlement Outside Date” means the date that is six (6) months after the Closing; provided that the Settlement Outside Date may be extended (but only once) by holders of a majority of the CVRs; provided, further, that such majority must include each such holder that, together with its Affiliates, purchased $15 million or more of Parent A Shares in the PIPE Investment.

“Shares” has the meaning set forth in the Recitals.

“Stockholders’ Representative” has the meaning set forth in the Preamble.

“STX Purchase Price” means the lowest of (i) the Base Price, (ii) the volume weighted average of the purchase price of all purchases comprising the Eros Pre-Closing Equity Financing and (iii) the Pre-Closing VWAP; provided, however, that if the Pre-Closing VWAP is greater than $3.25, then the STX Purchase Price shall be the average of the Base Price and the Pre-Closing VWAP.

“Subsidiary” of any Person shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or comparable governing body are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person.

“Taxes” or “Tax” means all taxes, charges, fees, levies or other assessments in the nature of a tax imposed by any governmental authority, including any income, gross receipts, license, severance, occupation, premium, environmental (including taxes under former Code Section 59A), customs, duties, profits, disability, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, occupancy, franchise, real property, personal property, business and occupation, mercantile, windfall profits, capital stock, stamp, transfer, workmen’s compensation, amounts due under any applicable laws governing escheat or unclaimed property or other taxes, charges, fees, levies or other assessments in the nature of a tax, together with any interest, penalties, additions to tax or additional amounts imposed by any Governmental Authority with respect thereto, whether disputed or not.

“Trading Day” means, with respect to any referenced security, any day on which such security is actually traded on the principal securities exchange or securities market on which such security is then listed.

7 

 

“VWAP” means, for any security as of any date(s), the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then listed during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (sets to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date(s) on any of the foregoing bases, the VWAP of such security on such date(s) shall be the fair market value thereof on such date(s) as reasonably determined by a nationally recognized independent investment banking firm mutually agreed between Parent and the Stockholders’ Representative.

Article II
OPERATION OF PARENT

Section 2.1      Operation of Parent.

From the Effective Time until the Settlement Date, Parent shall not, and shall cause its Subsidiaries and Affiliates not to:

(a)                after the effectiveness of the Amended Articles (as defined in the Investors’ Rights Agreement), effect any action that requires approval by the shareholders of Parent under Parent’s Memorandum of Association or Articles of Association (the “Organizational Documents”) or applicable Law; or

(b)               prior to the effectiveness of Amended Articles, take any action set forth in Section 4.3(c) of the Investors’ Rights Agreement as in effect on the date hereof,

without, in each such case, obtaining the consent thereto of holders of such class and number of Merger Consideration CVRs (including the CVRs hereunder) that, together with the shares of Parent actually voted (at a meeting or by resolution) with respect to such action and assuming all Merger Consideration CVR Shares were outstanding Parent A Shares and voted, would be required to approve such action under the Organizational Documents, applicable Law or Section 4.3(c) of the Investors’ Rights Agreement, as applicable. For purposes of the foregoing consent rights, the number of Merger Consideration CVR Shares underlying the Merger Consideration CVRs as of any time prior to the Settlement Date shall be calculated as set forth below in Article III and in Article III of the Class D CVR Agreement with respect to the Class D CVRs, Article III of the Class C CVR Agreement with respect to the Class C CVRs, Article III of the Class B CVR Agreement with respect to the Class B CVRs and Article III of the Class A CVR Agreement with respect to the Class A CVRs.

8 

 

Article III
CVRS

Section 3.1      Issuance of CVRs; Appointment of Rights Agent; Reservation of Shares.

(a)                The CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement. The registration on the books and records of Parent and administration of the CVRs shall be handled pursuant to this Agreement in the manner set forth in this Agreement.

(b)               Parent hereby appoints the Rights Agent to act as rights agent for the CVRs in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

(c)                From the date hereof until the issuance of the Aggregate CVR Shares in accordance with the terms hereof, Parent shall reserve and keep available out of its authorized but unissued share capital, for the purpose of effecting the issuance of the CVR Shares hereunder, a number of Parent A Shares equal to the Merger Consideration CVR Share Cap, minus the number of CVR Shares, if any, previously issued in accordance with the terms of this Agreement; and if at any time during such period the number of authorized but unissued Parent A Shares shall not be sufficient to effect the issuance of the Aggregate CVR Shares in full, Parent shall take all such action as may be necessary to increase its authorized but unissued share capital as shall be sufficient for such purposes.

Section 3.2      Nontransferable; Expiration.

(a)                The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than to a Permitted Transferee. Any purported transfer of a CVR to anyone other than a Permitted Transferee shall be null and void ab initio.

(b)               Subject to Section 3.4(c), the CVRs shall expire on the Settlement Date upon the registration of the CVR Shares in the respective names of the Holders entitled thereto and shall thereafter be of no force or effect following such registration; provided that, if any CVR Shares are not so registered on the Settlement Date, then the CVRs in respect thereof shall not expire until the registration of such CVR Shares in the respective names of the Holders entitled thereto (the time of registration thereof, the “Final Settlement Time”).

Section 3.3      No Certificate; Registration; Registration of Transfer; Change of Address.

(a)                The CVRs shall not be evidenced by a certificate or other instrument.

(b)               Upon receipt from Parent of the names and addresses of each Holder and the number of CVRs held by such Holder, the Rights Agent shall keep a register (the “CVR Register”) for the registration of CVRs in a book-entry position for each Holder of a CVR. The CVR Register shall set forth the name and address of each Holder, and the number of CVRs held by such Holder and Tax Identification Number of each Holder. Each of Parent and the Stockholders’ Representative may receive and inspect a copy of the CVR Register, from time to time, upon written request made to the CVR Registrar. Within five (5) Business Days after receipt of such request, the CVR Registrar shall deliver a copy of the CVR Register, as then in effect, to Parent and the Stockholders’ Representative at the address set forth in Section 7.1. The Rights Agent is hereby initially appointed “CVR Registrar” for the purpose of registering CVRs and transfers of CVRs as herein provided.

9 

 

(c)                Subject to the restrictions set forth in Section 3.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other reasonably requested documentation in form reasonably satisfactory to Parent and the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. A request for a transfer of a CVR shall be accompanied by documentation establishing that the transfer is to a Permitted Transferee and shall thereafter be supplemented with and any other information as may be reasonably requested by Parent or the CVR Registrar (including opinions of counsel, if appropriate). Upon receipt of such written notice, the CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein on its face, without investigation or inquiry by the Rights Agent, register the transfer of the CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same rights and entitling the transferee to the same benefits and rights under this Agreement as those held by the transferor immediately prior to such transfer. No transfer of a CVR shall be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void ab initio (unless the transfer was permissible hereunder and such failure to be duly registered is attributable to the fault of the CVR Registrar). Any transfer or assignment of the CVRs shall be without charge by Parent or the CVR Registrar (other than the cost of any Tax which shall be the responsibility of the transferor) to the Holder.

(d)               A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder and accompanied by such other evidence of the Holder’s identity or interest in the CVR as reasonably requested by the Rights Agent. Upon receipt of such written notice, the CVR Registrar is hereby authorized to, and shall promptly, record the change of address in the CVR Register.

(e)                The Stockholders’ Representative may make a written request to the Rights Agent for a list containing the names, addresses and number of CVRs of the Holders that are registered in the CVR Register. Within five (5) Business Days following the date of receipt by the Rights Agent of such request, the CVR Registrar shall deliver a copy of such list to the Stockholders’ Representative.

Section 3.4      Issuance Procedures.

(a)                On the Settlement Date, Parent shall issue, and cause to be deposited with the Rights Agent, a number of Parent A Shares equal to the Aggregate CVR Shares. On the Settlement Date or as promptly as practicable thereafter, subject to Section 3.4(c) below, the Rights Agent shall cause the applicable number of CVR Shares to be registered in the name of each of the Holders as reflected in the CVR Register as of the close of business on the last Business Day prior to such issuance date.

10 

 

(b)               The number of Parent A Shares issued in respect of each CVR from the Available Class E Merger Consideration CVR Shares (the “CVR Shares”) shall be equal to (i) the quotient obtained by dividing $2,750 by the lesser of (A) the STX Purchase Price and (B) the Pre-Settlement VWAP minus (ii) the quotient obtained by dividing $1,000 by the STX Purchase Price; provided, that the number of Parent A Shares allocated to the CVRs shall be pro-rated in the event there are insufficient Available Class E Merger Consideration CVR Shares remaining for allocation to the CVRs. For all purposes above, fractional CVRs shall represent a proportionate number of CVR Shares; provided, however, that no fractional Parent A Shares (or certificate or scrip representing the same) shall be issued upon the settlement of any CVRs hereunder. Notwithstanding any other provision of this Agreement, each Holder of CVRs who would otherwise have been entitled to receive a fraction of a Parent A Share upon settlement of such Holder’s CVRs hereunder (after aggregating all CVRs of such Holder that are subject to this Agreement) shall receive, in lieu thereof, an amount of cash (rounded to the nearest whole cent), without interest, equal to such fractional amount multiplied by the lesser of the STX Purchase Price and the Pre-Settlement VWAP. Whenever a payment for fractional Parent A Shares or fractional shares is to be made by the Rights Agent under any section of this Agreement, Parent shall (i) promptly deliver to the Rights Agent a certificate setting forth the amount of any such payment and calculation related thereto and (ii) cash in the amount of such payment to the Rights Agent by wire transfer of immediately available funds to make such payment to the applicable Holder by check mailed to such Holder as reflected in the CVR Register or by wire transfer of immediately available funds. The Rights Agent shall not be liable to any Holder or Parent for the amount of any cash payment made to such Holder on behalf of Parent in accordance with the amount set forth in such certificate.

(c)                Parent’s obligation to issue and cause to be deposited with the Rights Agent the applicable number of CVR Shares, and the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares shall be conditioned on the execution and delivery by such Holder of a lockup agreement with Parent, substantially in the form attached hereto as Exhibit A (a “Lock-Up Agreement”); provided, however, that the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares to a Holder shall not be conditioned on the execution and delivery by such Holder of a Lock-Up Agreement if (i) such Holder or any of its Affiliates shall have entered into a lockup agreement with Parent in connection with the PIPE Investment (such lockup agreement, a “PIPE Lock-Up Agreement”) or (ii) the Settlement Date is the Settlement Outside Date and the Merger consideration CVR Shares have not been, as of such date, registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; provided, further, that Rights Agent shall have no duty to act without the written instruction of Parent with respect to the foregoing.

11 

 

(d)               Without limiting the other provisions of this Agreement, if at any time during the period between the execution of this Agreement and the Settlement Date (or if applicable, theFinal Settlement Time), any change in the number or type of outstanding Parent A Shares shall occur as a result of a reclassification, recapitalization, exchange, stock split (including a reverse stock split), combination or readjustment of capital stock, shares or any stock dividend or stock distribution with a record date during such period (including any such reclassification, recapitalization, exchange, stock split, combination or readjustment of capital stock, shares or any stock dividend or stock distribution in connection with a consolidation, merger or combination in which Parent is the continuing or surviving corporation), the CVR Shares and any other similarly dependent items, as the case may be, shall be appropriately equitably adjusted to provide the same economic effect as contemplated by this Agreement prior to such event; provided that nothing in this Section 3.4(d) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

(e)                If, at any time prior to the Settlement Date (or, if applicable, the Final Settlement Time) Parent effects any Change of Control Transaction, then, upon any Settlement Date, each Holder shall have the right to receive, on the Settlement Date, for each CVR Share that would have been issuable upon the Settlement Date the same consideration (in the same amount and form) per Parent A Share payable to the holders thereof in such Change of Control Transaction. For purposes hereof, the determination of Pre-Settlement VWAP shall be appropriately adjusted to refer to such consideration instead of Parent A Shares. If holders of Parent A Shares are given any right of election as to the securities, cash or property to be received in such Change of Control Transaction, then each Holder shall be given the same right of election. To the extent necessary to effectuate the foregoing provisions, Parent shall ensure that any successor to Parent or the surviving entity in such Change of Control Transaction shall agree to be bound by the terms of this Agreement. In the event that the Final Settlement Time occurs after the Settlement Date, references herein to Settlement Date shall mean as promptly as practicable following the Change of Control Transaction.

Section 3.5      CVR Rights

(a)                Subject to Section 2.1, except as provided in Section 3.5(b), the CVRs shall not have any voting rights and shall not represent any equity or ownership interest in Parent, in any constituent company to the Merger, any Affiliate of Parent or any other Person.

(b)               The CVRs shall entitle each Holder, at the Settlement Date and subject to any applicable withholding Taxes, to a payment per Parent A Share issued thereunder, without interest, equal (as to both amount and form of consideration) to all dividends or other distributions of any kind declared per Parent A Share of the CVR Shares with a record date after the Closing and prior to the Settlement Date. Any dividends or other distributions of any kind made in respect of the CVR Shares will be delivered promptly to the Rights Agent to be held in escrow with respect to the CVRs (the “CVR Income”) treating the CVR Shares for this purpose as if the Aggregate CVR Shares were then outstanding. On the Settlement Date, the Rights Agent shall deliver to each Holder, concurrent with the issuance to such Holder of the applicable CVR Shares, the CVR Income earned in respect of each such CVR Share, less any applicable withholding Taxes.

12 

 

Article IV
THE RIGHTS AGENT

Section 4.1      Certain Duties and Responsibilities.

The Rights Agent shall not have any liability for any actions taken or not taken by the Rights Agent in connection with the execution, acceptance, administration, exercise and performance of its duties under this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction). No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

Section 4.2      Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a)                the Rights Agent may rely and shall be protected and held harmless by Parent in and shall not incur any liability in acting or refraining from acting in connection with its performance under this Agreement upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction);

(b)               the Rights Agent may consult with legal counsel selected by it, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct and in accordance with such advice or opinion. The reasonable costs of such counsel’s services shall be paid to the Rights Agent in accordance with Section 4.2(g) below. The Rights Agent may perform any and all of its duties through its agents, representatives, custodians and/or nominees and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such agents, representatives, custodians and/or nominees or for any loss to Parent or the Company, to the Holders or any other Person resulting from any such act, omission, default, neglect or misconduct, absent gross negligence, willful misconduct or bad faith on the part of the Rights Agent, such agents, representatives, custodians and/or nominees (which gross negligence, willful misconduct or bad faith must be determined by a final, non-appealable judgment of a court of competent jurisdiction);

(c)                if the Rights Agent becomes involved in litigation on account of this Agreement, it shall have the right to retain counsel and shall be entitled to reimbursement for all reasonable and documented out-of-pocket costs and expenses related thereto as provided in this Section 4.2(c) and Section 4.2(g) hereof; provided, however, that the Rights Agent shall not be entitled to any such reimbursement to the extent such litigation ultimately determines that the Rights Agent acted with willful misconduct, bad faith or gross negligence. In the event that conflicting demands are made upon the Rights Agent for any situation addressed or not addressed in this Agreement, the Rights Agent may withhold performance of the terms of this Agreement until such time as said conflicting demands shall have been withdrawn or the rights of the respective parties shall have been settled by court adjudication, arbitration, joint order or otherwise;

13 

 

(d)               the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(e)                the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(f)                Parent agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence (in each case as determined by a court of competent jurisdiction); provided, however, that the Rights Agent’s aggregate liability with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by Parent to the Rights Agent as fees and charges (but not including reimbursable expenses) in the 12 months preceding the event for which recovery is sought. The provisions under this Section 4.2 and Section 4.1 above shall survive the settlement of the CVRs and the termination of this Agreement and the resignation, replacement or removal of the Rights Agent. To the extent the Rights Agent is entitled to indemnification hereunder, the reasonable and documented out-of-pocket costs and expenses of the Rights Agent incurred in enforcing this right of indemnification shall be paid by Parent;

(g)               Parent agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder in accordance with a fee schedule to be mutually agreed upon in writing between Parent and the Rights Agent and, from time to time, to reimburse the Rights Agent for all of its reasonable, customary and documented out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel) and other disbursements incurred in the preparation, delivery, negotiation, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. Without limiting any of its rights to compensation or reimbursement under this Agreement, the Rights Agent shall deliver to Parent the final invoice for the Rights Agent fees and costs (which shall include a reasonable estimate of all remaining fees and expenses) at a reasonable time prior to the date of delivery of the CVR Shares. An invoice for any reasonable and documented out-of-pocket expenses and per item fees realized will be rendered and payable as mutually agreed upon in writing between Parent and the Rights Agent. For the avoidance of doubt, and notwithstanding anything to the contrary herein, in no event shall Parent be required to indemnify or otherwise reimburse the Rights Agent for any income or similar taxes of the Rights Agent (or an of its Affiliates) in connection with the performance of its duties hereunder;

14 

 

(h)               For avoidance of doubt, no CVRs shall be issued in respect of any shares of capital stock of the Company as to which the holder thereof as of immediately prior to the Effective Time properly demands appraisal in accordance with, and who complies in all respects with, Section 262 of the Delaware General Corporation Law (such shares, “Appraisal Shares” and such statutory section, “Section 262”); provided, however, that notwithstanding the foregoing, (i) the CVRs that would have been issuable in respect of Appraisal Shares but for their status as such shall be deemed to be outstanding for purposes of determining the number of CVR Shares to be issued per CVR and (ii) if any holder of Appraisal Shares shall fail to perfect or otherwise waive, withdraw or lose the right to appraisal under Section 262 with respect to any Appraisal Shares (whether before or after the Settlement Date), then the CVRs issuable in respect of such Appraisal Shares shall be deemed to have been issued to such holder as of the Effective Time and to entitle such holder to all rights of a Holder hereunder with respect thereto, including the right to receive the CVR Shares and CVR Income in respect thereof upon the Settlement Date in accordance with the other provisions of this Agreement;

(i)                 whenever the Rights Agent shall reasonably require that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may rely upon a signed certificate from an authorized officer of Parent, and the Rights Agent shall incur no liability and be held harmless by Parent for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon and in accordance with such certificate;

(j)                 the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(k)               the Rights Agent shall not be required to give any note or surety in respect of the execution of its powers hereunder or otherwise in respect of the premises;

(l)                 the Rights Agent shall not be liable for or by reason of, and shall be held harmless by Parent with respect to any of the statements of fact or recitals contained in this Agreement or any certificate delivered by Parent under this Agreement and shall not be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by Parent only;

(m)             the Rights Agent shall have no liability and shall be held harmless by Parent in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent and the enforceability of this Agreement against the Rights Agent assuming the due execution and delivery hereof by the other parties hereto), nor shall it be responsible for any breach by Parent of any covenant or condition contained in this Agreement;

(n)               anything to the contrary notwithstanding, the Rights Agent shall not be liable for any special, punitive, consequential, indirect or incidental loss or damage of any kind whatsoever (including lost profits) arising out of any act or failure to act hereunder, even if the Rights Agent has been advised of the likelihood of such loss or damage or has foreseen the possibility or likelihood of such damages;

15 

 

(o)               the Rights Agent shall not be deemed to have knowledge of any event of which it was required to receive notice from Parent or the Stockholders’ Representative hereunder and did not receive such notice, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such required notice in writing;

(p)               the Rights Agent and any affiliate of the Rights Agent may buy, sell or deal in any of securities of Parent or the Company or become pecuniarily interested in any transaction in which Parent or the Company may be interested, or contract with or lend money to Parent or the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement, subject to applicable Law (including applicable securities Laws). Nothing herein shall preclude the Rights Agent from acting in any other capacity for Parent or the Company or for any other legal entity;

(q)               the Rights Agent shall act hereunder solely as agent for Parent and it shall not assume any obligations or relationship of agency or trust with any of the Holders or any other Person;

(r)                 the Rights Agent shall not be deemed to have knowledge of a change in authorized officers or duly authorized representatives of any Person without notice of such change, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such notice in writing;

(s)                the Rights Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any Holder with respect to any action or default by Parent, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or to make any demand upon Parent; and

(t)                 the Rights Agent shall have no duty or obligation under any Section of this Agreement that requires the payment of taxes or charges by the Parent or Holder in connection with the Rights Agent’s performance of such duty or obligation, unless and until the Rights Agent is reasonably satisfied that all such taxes and/or charges have been paid.

Section 4.3      Resignation and Removal; Appointment of Successor.

(a)                The Rights Agent may resign at any time by giving written notice thereof to Parent and the Stockholders’ Representative specifying a date when such resignation shall take effect, which notice shall be sent at least thirty (30) days’ prior to the date so specified. In the event any transfer agency relationship in effect between the Parent and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination. Parent may terminate the Rights Agent at any time by giving written notice thereof to the Rights Agent and the Stockholders’ Representative specifying a date when such termination shall take effect, which notice shall be sent at least thirty (30) days prior to the date so specified.

(b)               If the Rights Agent shall resign, be removed or become incapable of acting, Parent and the Stockholders’ Representative shall promptly appoint a qualified successor Rights Agent. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 4.3(b), become the successor Rights Agent.

16 

 

(c)                Parent shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event through electronic mail, to the Stockholders’ Representative. The Stockholders’ Representative shall forward such notice to the Holders. If Parent fails to send such notice within ten (10) days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed and electronically transmitted at the expense of Parent.

(d)               If a successor Rights Agent has not been appointed and has not accepted such appointment by the end of the thirty (30) day period, the Stockholders’ Representative or the Rights Agent may (but shall not be obligated to) apply to a court of competent jurisdiction for the appointment of a successor Rights Agent, and the reasonable documented out-of-pocket costs, expenses (including reasonable attorneys’ fees which are incurred in connection with such a proceeding) shall be paid in accordance with Section 4.2(g) hereof. Any such successor to the Rights Agent shall agree to be bound by the terms of this Agreement and shall, upon receipt of the all relevant books and records relating thereto, become the Rights Agent hereunder. Upon delivery of all of the relevant books and records, pursuant to the terms of this Section 4.3(d) to a successor Rights Agent, the Rights Agent shall thereafter be discharged from any further obligations hereunder. Without limiting any of the rights or immunities of the Rights Agent under this Agreement, the Rights Agent is hereby authorized, in any and all events, to comply with and obey any and all final judgments, orders and decrees of any court of competent jurisdiction which may be filed, entered or issued, and all final arbitration awards and, if it shall so comply or obey, it shall not be liable to any other person by reason of such compliance or obedience.

Section 4.4      Acceptance of Appointment by Successor.

(a)                Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Parent, the Stockholders’ Representative and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; but, on request of Parent, the Stockholders’ Representative or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent but such retiring Rights Agent shall not be required to make any additional expenditure or assume any additional liability in connection with the foregoing.

Article V
COVENANTS AND REPRESENTATIONS

Section 5.1      List of Holders.

Parent shall furnish or cause to be furnished to the Rights Agent in such form as Parent receives from the Company prior to the Effective Time (or other agent performing similar services for Parent or its Affiliates), the names, addresses, shareholdings and tax certification (T.I.N.) of the record holders of Shares eligible to receive CVRs pursuant to the Merger Agreement reasonably promptly following the Effective Time.

17 

 

Section 5.2      Delivery of CVR Shares.

The Rights Agent shall cause the applicable number of CVR Shares to be registered in the names of the Holders upon receipt thereof in the manner provided for in Section 3.4 and in accordance with the terms of this Agreement, and each of the Stockholders’ Representative and Parent shall use reasonable efforts to cause the Rights Agent to do so.

Section 5.3      Assignment.

(a)                Except for assignments occurring through operation of law, Parent and the Company shall not, in whole or in part, assign any of their rights or obligations under this Agreement.

Section 5.4      Tax Treatment.

Unless (x) Parent has determined, based on advice from a “Big 4” accounting firm or nationally recognized tax counsel and after consulting with the Stockholders’ Representative in connection with obtaining such advice and making such determination, that the Intended Tax Treatment (as defined below) is not supported by a “more likely than not” or higher standard or (y) reporting in a manner consistent with the Intended Tax Treatment would require that Parent establish a reserve on its financial statements, each of Parent and each Holder shall and shall cause its Affiliates to (i) treat the CVRs as equity for applicable U.S. federal income tax purposes and to treat the settlement of the CVRs for CVR Shares as a recapitalization under Section 368(a)(1)(E) of the Code for U.S. federal income tax purposes (the “Intended Tax Treatment”) and (ii) file U.S federal income tax returns (if any such tax returns are required to be filed) in a manner consistent with the Intended Tax Treatment.

Article VI
AMENDMENTS

Section 6.1      Amendments Without Consent of Holders or Stockholders’ Representative.

(a)                Without the consent of any Holders, Parent, the Stockholders’ Representative (upon written instruction from the Holders holding a majority of the CVRs) and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes only:

(i)                 to evidence the succession of another Person selected in accordance with Section 4.3(b) as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

18 

 

(ii)               to evidence the termination of the CVR Registrar and the succession of another Person as a successor CVR Registrar and the assumption by any successor of the obligations of the CVR Registrar herein; or

(iii)             to add, eliminate or change any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders; provided, that if such addition, elimination or change is materially adverse to the rights of holders of any other Merger Consideration CVRs, then instruction from the holders of such other Merger Consideration CVRs representing a majority of the Merger Consideration CVR Shares in respect thereof shall also be necessary; provided, further, if such addition, elimination or change adversely affects the rights and obligations of any Holder in a disproportionate manner to the other Holders hereunder, then instruction from each such affected Holder shall also be necessary; or

(iv)             as necessary to ensure that the CVRs are not subject to registration under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

(b)               Any other amendment to this Agreement shall be made by Parent, the Stockholders’ Representative (upon written instruction of each of the Holders of CVRs) and the Rights Agent.

(c)                Promptly after the execution by Parent, Stockholders Representative and the Rights Agent of any amendment pursuant to the provisions of this Section 6.1, Parent shall mail or cause to be mailed a written notice thereof by electronic mail to the Stockholders’ Representative and by first-class mail and electronic mail to the Holders at their addresses as they shall appear on the CVR Register, setting forth in general terms the substance of such amendment.

Section 6.2      Execution of Amendments; Effect of Amendments.

Prior to executing any amendment permitted by this Article VI, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, a certificate from an appropriate officer of Parent or, if requested by the Rights Agent, an opinion of counsel selected by Parent and reasonably acceptable to Rights Agent stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement. Upon the execution of any amendment under this Article VI, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby. No supplement or amendment to this Agreement shall be effective unless duly executed by the Rights Agent, Parent and the Stockholders’ Representative.

19 

 

Article VII
OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1      Notices to the Rights Agent, Parent and the Stockholders’ Representative.

Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by electronic mail (except with respect to the Rights Agent), by facsimile transmission only with respect to the Rights Agent or overnight courier, provided that with respect to notices deliverable to the Stockholders’ Representative, such notices shall be delivered solely via electronic mail or facsimile:

If to Parent or the Company:

Eros International Plc

First Names House

Victoria Road

Douglas

Isle of Man IM2 4DF

British Isles

Attention: Mark Carbeck, Chief Corporate and Strategy Officer
Email: mark.carbeck@erosintl.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197

Attention: Kevin Masuda
Peter Wardle

Email: kmasuda@gibsondunn.com
pwardle@gibsondunn.com

 

If to the Rights Agent:

Computershare Trust Company, N.A.,

Computershare Inc.

150 Royall Street

Canton, MA 02021

Attention: Client Services

Facsimile: (781) 575-3146

 

If to the Stockholders’ Representative:

Fortis Advisors LLC

Attention: Notices Department (Project World Cup)

Email: notices@fortisrep.com

20 

 

Facsimile: (858) 408-1843

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP
555 South Flower Street, Suite 3700
Los Angeles, California 90071
Attention: Rick C. Madden, P.C.
Email: rick.madden@kirkland.com

 

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by electronic mail; or on the next business day after deposit with an overnight courier, if sent by an overnight courier.

Section 7.2      Effect of Headings; Construction.

The headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions of this Agreement. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated.

Section 7.3      Successors and Assigns.

All covenants and agreements in this Agreement by any party hereto shall bind its successors and permitted assigns, whether so expressed or not.

Section 7.4      Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the Holders, the parties hereto and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Holders, the parties hereto and their permitted successors and assigns. For the avoidance of doubt, the Holders shall be considered express third party beneficiaries of this Agreement.

Section 7.5      Governing Law and Venue; Waiver of Jury Trial.

(a)                THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF THAT WOULD RESULT IN THE APPLICATION OF ANY OTHER JURISDICTION’S LAWS. The parties hereby irrevocably submit to the personal jurisdiction of the courts of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents

21 

 

referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement of this Agreement or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims relating to such action, proceeding or transactions shall be heard and determined in such a Delaware state or federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 7.1 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. If and to the extent that any action, suit or proceeding relates to the rectification of Parent’s register of members or the enforcement of Section 2.1 (“Parent Proceedings”) (but otherwise without prejudice to the provisions of this Section 7.5(a)), each party irrevocably agrees that the courts of the Isle of Man shall have jurisdiction to hear and decide such Parent Proceedings and, for this purpose only, each party irrevocably submits to the jurisdiction of the such courts.

(b)               EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.5.

Section 7.6      Severability Clause.

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction; provided, however, that if an excluded provision shall affect the rights, immunities, liabilities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately written notice to the Parent in accordance with Section 4.2.

22 

 

Section 7.7      Counterparts.

This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

Section 7.8      Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon consummation of the issuance and delivery to the Holders of all of the Parent A Shares to which they are entitled pursuant to and in accordance with Section 3.4; provided, Article I, Article IV and this Article VII shall survive.

Section 7.9      Withholding.

Notwithstanding anything to the contrary in this Agreement, Parent, the Rights Agent and their respective agents, shall be entitled to deduct and withhold from any amounts otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of applicable Tax law; provided, however, that other than in respect of compensatory withholding or backup withholding, withholding as a result of the failure to provide the certificate set forth in Section 6.2(g) of the Merger Agreement or withholding in respect of CVR Income, Parent or the Rights Agent, as applicable, shall use commercially reasonable efforts to provide written notice to the Stockholders’ Representative no later than two (2) Business Days prior to any such withholding or deduction in respect of a Holder and to allow the Holder the opportunity to provide any Tax forms, reports or certificates as may be permitted by Applicable Laws to reduce or eliminate such withholding or deduction. Any amounts so withheld and properly remitted to the applicable Governmental Authority shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. In the case of any withholding from any payments not payable in cash, Parent or its agent shall withhold or shall cause to be withheld an amount of such payment having a fair market value equal to the withholding obligation to be satisfied in respect of such payment at the time such amount is withheld (provided that if any cash is otherwise payable to the relevant payee, such withholding shall be made first from such cash), and shall be treated as having paid such amount to the Person in respect of which such amount is withheld.

Section 7.10  Entire Agreement.

This Agreement, the letter agreement between Parent and the Rights Agent of even date herewith regarding fees payable to the Rights Agent (the “Fee Schedule”), and the Merger Agreement represent the entire understanding of Parent, the Company and the Stockholders’ Representative with reference to the CVRs, and, as between such Persons, this Agreement supersedes any and all other oral or written agreements hereto made with respect to the CVRs, except for the Merger Agreement. Notwithstanding the reference to any other document in this Agreement, the Rights Agent shall not be deemed to have knowledge of, or have any duty to

23 

 

ascertain or inquire into, the existence, the content, or the terms and conditions of any other agreement, instrument or document, in each case, to which the Rights Agent is not a party, whether or not such agreement, instrument or document, as the case may be, is referenced in this Agreement. This Agreement and the Fee Schedule represent the entire understanding of the Rights Agent with reference to the CVRs and the performance of the Rights Agent’s duties, its immunities and rights with respect thereto, and with respect to the Rights Agent, this Agreement and the Fee Schedule supersede any and all other oral or written agreements heretofore made with respect to the CVRs. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling, and this Agreement may be amended, modified, supplemented or altered only in accordance with the terms of Article VII. No party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not contained herein.

Section 7.11  Force Majeure.

Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance to the extent resulting from acts beyond its reasonable control including, without limitation, acts of God, epidemics, pandemics, terrorist acts, breakdowns, interruptions or malfunctions of any communications or computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest; provided, that the Rights Agent shall use reasonable commercial efforts to resume performance as soon as practicable. If any such act or event occurs, the Rights Agent shall give prompt written notice to Parent and the Stockholders’ Representative, stating the nature of the act or event and action being taken to avoid or minimize its effect.

Section 7.12  Funds.

All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more bank accounts to be maintained by the Rights Agent in its name as agent for Parent. Until paid pursuant to the terms of this Agreement, the Rights Agent will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by the Rights Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. The Rights Agent may from time to time receive interest, dividends or other earnings in connection with such deposits. The Rights Agent shall not be obligated to pay such interest, dividends or earnings to the Parent, any Holder or any other Person.

 

[Remainder of Page Intentionally Left Blank.]

24 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

EROS INTERNATIONAL PLC


By: /s/ Kishore Lulla
Name: Kishore Lulla
Title: Executive Chairman and Group Chief

Executive Officer and Managing Director

 

[Signature Page to Class E CVR Agreement]

  

 

STX FILMWORKS, INC.

 

By: /s/ Noah Fogelson
Name: Noah Fogelson
Title: Executive Vice President,

Corporate Strategy and General

Counsel

 

[Signature Page to Class E CVR Agreement]

  

 

FORTIS ADVISORS LLC

 

By: /s/ Ryan Simkin
Name: Ryan Simkin
Title: Managing Director

 

[Signature Page to Class E CVR Agreement]

  

 

COMPUTERSHARE TRUST

COMPANY, N.A. AND COMPUTERSHARE INC.

On behalf of both entities

By: /s/ Collin Ekeogu

Name: Collin Ekeogu
Title: Manager, Corporate Actions

 

[Signature Page to Class E CVR Agreement]

Exhibit 4.2

CLASS D CONTINGENT VALUE RIGHTS AGREEMENT

This CLASS D CONTINGENT VALUE RIGHTS AGREEMENT, dated as of July 30, 2020 (this “Agreement”), is entered into by and among Eros International Plc, an Isle of Man company limited by shares (“Parent”), STX Filmworks, Inc., a Delaware corporation (the “Company”), Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the former holders of the Shares (in such capacity, the “Stockholders’ Representative”), and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally chartered trust company, collectively as rights agent (the “Rights Agent”) and as initial CVR Registrar (as defined herein).

WITNESSETH:

WHEREAS, the Company, Parent, England Holdings 2, Inc., a Delaware corporation and indirect wholly-owned Subsidiary of Parent (“England Holdings 2”), England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly-owned Subsidiary of England Holdings 2 (“Merger Sub”), have entered into an Agreement and Plan of Merger (as the same may be amended, modified or supplemented from time to time, the “Merger Agreement”), dated as of April 17, 2020, pursuant to which Merger Sub merged with and into the Company (the “Merger”), with the Company surviving the Merger, as an indirect wholly-owned Subsidiary of Parent;

WHEREAS, pursuant to the Merger Agreement, Parent agreed to issue to holders of record of shares of Class D Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Shares”) outstanding immediately prior to the effective time of the Merger (the “Effective Time”), a number of contingent value rights (the “CVRs”) as hereinafter described; and

WHEREAS, each holder of Shares as of immediately prior to the Effective Time, will receive, among other things, as merger consideration, the right to receive upon the Effective Time a number of CVRs in such amount as set forth in Article II of the Merger Agreement.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

Article I
DEFINITIONS

Section 1.1      Definitions.

(a)                For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i)                 the terms defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular;

1 

 

(ii)               the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iii)             unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa;

(iv)             the term “Affiliate” when used with respect to the Company shall, after the Effective Time, include Parent and its Subsidiaries and Affiliates; and

(v)               all references to “including” shall be deemed to mean including without limitation.

(b)               Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Affiliate” means, with respect to any specified Person, (i) any other Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (ii) with respect to any natural person, any Member of the Immediate Family of such natural person. Notwithstanding the foregoing, for purposes hereof, (i) none of the Holders, the Company, or any of their respective Subsidiaries shall be considered Affiliates of any portfolio company (or Subsidiary thereof) in which any Holder or any of its affiliated investment funds have made a debt or equity investment, and (ii) no Holder or any of its Affiliates shall be considered an Affiliate of (a) Parent or any of its Subsidiaries or (b) any other Holders or their respective Affiliates (except to the extent such Holders are otherwise Affiliates under this definition without regard to their status as Holders).

“Agreement” has the meaning set forth in the Preamble.

“Aggregate CVR Shares” means the aggregate number of underlying Parent A Shares issuable in respect of all CVRs.

“Appraisal Shares” has the meaning set forth in Section 4.2(h).

“Available Class D Merger Consideration CVR Shares” means the Merger Consideration CVR Share Cap minus the Parent A Shares issued to the Class E CVRs.

“Base Price” means $2.60.

2 

 

“Change of Control Transaction” means the occurrence of (i) an acquisition by any Person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares or comparable equity interests of Parent entitling that Person to fifty percent (50%) or more of the total voting power of all such shares or comparable equity interests of Parent; or (ii) the consolidation or merger of Parent with or into any other Person, any merger of another Person into Parent, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of Parent’s properties, business or assets, other than (in the case of this clause (ii) only) (1) any transaction (x) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares or comparable equity interests of Parent, and (y) pursuant to which holders of Parent’s shares or comparable equity interest immediately prior to such transaction have the right to exercise, directly or indirectly, fifty percent (50%) or more of the total voting power of all shares or comparable equity interest of the continuing or surviving Person immediately after such transaction, or (2) any merger solely for the purpose of changing Parent’s jurisdiction of formation and resulting in a reclassification, conversion or exchange of outstanding shares or comparable equity interests into shares or comparable equity interest of the surviving entity with substantially identical rights.

“Class A CVR” means the contingent value rights issued by Parent with respect to the Class A Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class A CVR Agreement.

“Class A CVR Agreement” means the Class A CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class A CVR Shares” means the underlying Parent A Shares issuable in respect of the Class A CVRs.

“Class B CVR” means the contingent value rights issued by Parent with respect to the Class B Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class B CVR Agreement.

“Class B CVR Agreement” means the Class B CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class B CVR Shares” means the underlying Parent A Shares issuable in respect of the Class B CVRs.

“Class C CVR” means the contingent value rights issued by Parent with respect to the Class C Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class C CVR Agreement.

“Class C CVR Agreement” means the Class C CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

3 

 

“Class C CVR Shares” means the underlying Parent A Shares issuable in respect of the Class C CVRs.

“Class E CVR” means the contingent value rights issued by Parent with respect to the Class E Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class E CVR Agreement.

“Class E CVR Agreement” means the Class E CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class E CVR Shares” means the underlying Parent A Shares issuable in respect of the Class E CVRs.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Company” has the meaning set forth in the Preamble.

“CVR” means a contingent value right issued by Parent with respect to the Shares, pursuant to the Merger Agreement and this Agreement.

“CVR Shares” has the meaning set forth in Section 3.4(b).

“CVR Register” has the meaning set forth in Section 3.3(b).

“CVR Registrar” has the meaning set forth in Section 3.3(b).

“Effective Time” has the meaning set forth in the Recitals.

“Eros Pre-Closing Equity Financing” has the meaning ascribed in the PIPE Agreement.

“Final Settlement Time” has the meaning set forth in Section 3.2(b).

“Funds” has the meaning set forth in ‎Section 7.12.

“Fully Diluted Parent Shares” means, as of immediately prior to the Effective Time, the sum of (without duplication) (i) the aggregate number of Parent Ordinary Shares then outstanding, plus (ii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding In-the-Money Parent Options (whether or not vested), plus (iii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding Parent RSU Awards (whether or not vested), plus (iv) the aggregate number of Parent Ordinary Shares then subject to issuance pursuant to the Parent Convertible Notes assuming full conversion thereof at a conversion price of $2.60; provided, however, that, notwithstanding the foregoing, Fully Diluted Parent Shares shall not include any Parent Ordinary Shares issuable pursuant to the Eros Pre-Closing Equity Financing. For the avoidance of doubt, Fully Diluted Parent Shares shall be calculated prior to, and without giving effect to, the PIPE Investment.

“Holder” means a Person in whose name a CVR is registered in the CVR Register.

4 

 

“In-the-Money Parent Options” means an Eros Option (as defined in the Merger Agreement) having a per Parent Ordinary Share exercise price less than the Parent Trading Price.

“Investors’ Rights Agreement” means the Investors’ Rights Agreement, entered into on or around the date hereof, by and among Parent, certain shareholders of Parent and the investors party thereto.

“Law” with respect to any Person, means (a) all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

“Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Members of the Immediate Family” means, with respect to any individual, each spouse or child or other descendants of such individual, each trust created solely for the benefit of one or more of the aforementioned Persons and their spouses and each custodian or guardian of any property of one or more of the aforementioned Persons in his capacity as such custodian or guardian.

“Merger” has the meaning set forth in the Recitals.

“Merger Agreement” has the meaning set forth in the Recitals.

“Merger Consideration CVRs” means the CVRs, the Class E CVRs, the Class C CVRs, the Class B CVRs and the Class A CVRs.

“Merger Consideration CVR Share Cap” means a number of Parent A Shares equal to the Fully Diluted Parent Shares.

“Merger Consideration CVR Shares” means the Aggregate CVR Shares, the Class E CVR Shares, the Class C CVR Shares, the Class B CVR Shares and the Class A CVR Shares.

“Merger Sub” has the meaning set forth in the Recitals.

“Organizational Documents” has the meaning set forth in Section 2.1(a).

“Parent” has the meaning set forth in the Preamble.

“Parent A Shares” means the A Ordinary Shares, par value £0.30 per share, of Parent.

“Parent B Shares” means the B Ordinary Shares, par value £0.30 per share, of Parent.

“Parent Convertible Notes” means Parent’s Senior Convertible Notes due September 27, 2020 in the original aggregate principal amount of $27,500,000.

“Parent Option” means a compensatory option to purchase Parent Ordinary Shares.

5 

 

“Parent Ordinary Shares” means, collectively, the Parent A Shares and the Parent B Shares.

“Parent Proceedings” has the meaning set forth in Section 7.5(a).

“Parent RSU Award” means an award of restricted stock units relating to Parent Ordinary Shares.

“Parent Trading Price” means the VWAP for one Parent A Share for the twenty (20) consecutive full Trading Days ending on the full Trading Day immediately preceding the Effective Time (as adjusted as appropriate to reflect any stock splits, stock dividends, combinations, reorganizations, classifications or similar events).

“Permitted Transfer” means: (i) the transfer (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; or (vi) a transfer by any Holder to one or more of its Affiliates or affiliated investment funds of any of its Affiliates.

“Permitted Transferee” means a Person who receives a CVR pursuant to a Permitted Transfer and otherwise in accordance with this Agreement.

“Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Authority or other entity of any kind or nature.

“PIPE Agreement” means that certain Subscription Agreement, made as of April 17, 2020, by and among Parent and each Person defined therein as a “Purchaser.”

“PIPE Investment” means the purchase of Parent A Shares pursuant to the PIPE Agreement.

“PIPE Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Pre-Closing VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Closing.

“Pre-Settlement VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Settlement Date; provided, that for purposes of determining the CVR Shares issuable as of any time prior to the Settlement Date, the reference to “the Trading Day immediately preceding the Settlement Date” in this definition shall be deemed a reference to “the Trading Day immediately preceding the applicable time of determination”.

6 

 

“Reference Price” means a price per share equal to the lesser of (x) the Pre-Settlement VWAP and (y) the Upper Collar Price; provided, that if the Pre-Settlement VWAP is equal to or greater than $4, then the Reference Price will equal the average of the Pre-Settlement VWAP and the Upper Collar Price.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Settlement Date” shall mean the date that is the earlier to occur of (a) the later to occur of (i) the first time that the Merger Consideration CVR Shares have been registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and (ii) the 75th calendar day after the Closing and (b) the occurrence of the Settlement Outside Date.

“Settlement Outside Date” means the date that is six (6) months after the Closing; provided that the Settlement Outside Date may be extended (but only once) by holders of a majority of the Class E CVRs; provided, further, that such majority must include each such holder that, together with its Affiliates, purchased $15 million or more of Parent A Shares in the PIPE Investment.

“Shares” has the meaning set forth in the Recitals.

“Stockholders’ Representative” has the meaning set forth in the Preamble.

“STX Purchase Price” means the lowest of (i) the Base Price, (ii) the volume weighted average of the purchase price of all purchases comprising the Eros Pre-Closing Equity Financing and (iii) the Pre-Closing VWAP; provided, however, that if the Pre-Closing VWAP is greater than $3.25, then the STX Purchase Price shall be the average of the Base Price and the Pre-Closing VWAP.

“Subsidiary” of any Person shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or comparable governing body are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person.

“Taxes” or “Tax” means all taxes, charges, fees, levies or other assessments in the nature of a tax imposed by any governmental authority, including any income, gross receipts, license, severance, occupation, premium, environmental (including taxes under former Code Section 59A), customs, duties, profits, disability, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, occupancy, franchise, real property, personal property, business and occupation, mercantile, windfall profits, capital stock, stamp, transfer, workmen’s compensation, amounts due under any applicable laws governing escheat or unclaimed property or other taxes, charges, fees, levies or other assessments in the nature of a tax, together with any interest, penalties, additions to tax or additional amounts imposed by any Governmental Authority with respect thereto, whether disputed or not.

7 

 

“Trading Day” means, with respect to any referenced security, any day on which such security is actually traded on the principal securities exchange or securities market on which such security is then listed.

“Upper Collar Price” means the quotient of the STX Purchase Price, divided by one and one-half (1.5).

“VWAP” means, for any security as of any date(s), the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then listed during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (sets to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date(s) on any of the foregoing bases, the VWAP of such security on such date(s) shall be the fair market value thereof on such date(s) as reasonably determined by a nationally recognized independent investment banking firm mutually agreed between Parent and the Stockholders’ Representative.

Article II
OPERATION OF PARENT

Section 2.1      Operation of Parent.

From the Effective Time until the Settlement Date, Parent shall not, and shall cause its Subsidiaries and Affiliates not to:

(a)                after the effectiveness of the Amended Articles (as defined in the Investors’ Rights Agreement), effect any action that requires approval by the shareholders of Parent under Parent’s Memorandum of Association or Articles of Association (the “Organizational Documents”) or applicable Law; or

(b)               prior to the effectiveness of Amended Articles, take any action set forth in Section 4.3(c) of the Investors’ Rights Agreement as in effect on the date hereof,

without, in each such case, obtaining the consent thereto of holders of such class and number of Merger Consideration CVRs (including the CVRs hereunder) that, together with the shares of Parent actually voted (at a meeting or by resolution) with respect to such action and assuming all Merger Consideration CVR Shares were outstanding Parent A Shares and voted, would be required to approve such action under the Organizational Documents, applicable Law or Section 4.3(c) of the Investors’ Rights Agreement, as applicable. For purposes of the foregoing consent rights, the number of Merger Consideration CVR Shares underlying the Merger Consideration CVRs as of any time prior to the Settlement Date shall be calculated as set forth below in Article III and in Article III of the Class E CVR Agreement with respect to the Class E CVRs, Article III of the Class C CVR Agreement with respect to the Class C CVRs, Article III of the Class B CVR Agreement with respect to the Class B CVRs and Article III of the Class A CVR Agreement with respect to the Class A CVRs.

8 

 

Article III
CVRS

Section 3.1      Issuance of CVRs; Appointment of Rights Agent; Reservation of Shares.

(a)                The CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement. The registration on the books and records of Parent and administration of the CVRs shall be handled pursuant to this Agreement in the manner set forth in this Agreement.

(b)               Parent hereby appoints the Rights Agent to act as rights agent for the CVRs in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

(c)                From the date hereof until the issuance of the Aggregate CVR Shares in accordance with the terms hereof, Parent shall reserve and keep available out of its authorized but unissued share capital, for the purpose of effecting the issuance of the CVR Shares hereunder, a number of Parent A Shares equal to the Merger Consideration CVR Share Cap, minus the number of CVR Shares, if any, previously issued in accordance with the terms of this Agreement; and if at any time during such period the number of authorized but unissued Parent A Shares shall not be sufficient to effect the issuance of the Aggregate CVR Shares in full, Parent shall take all such action as may be necessary to increase its authorized but unissued share capital as shall be sufficient for such purposes.

Section 3.2      Nontransferable; Expiration.

(a)                The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than to a Permitted Transferee. Any purported transfer of a CVR to anyone other than a Permitted Transferee shall be null and void ab initio.

(b)               Subject to Section 3.4(c), the CVRs shall expire on the Settlement Date upon the registration of the CVR Shares in the respective names of the Holders entitled thereto and shall thereafter be of no force or effect following such registration; provided that, if any CVR Shares are not so registered on the Settlement Date, then the CVRs in respect thereof shall not expire until the registration of such CVR Shares in the respective names of the Holders entitled thereto (the time of registration thereof, the “Final Settlement Time”).

Section 3.3      No Certificate; Registration; Registration of Transfer; Change of Address.

(a)                The CVRs shall not be evidenced by a certificate or other instrument.

9 

 

(b)               Upon receipt from Parent of the names and addresses of each Holder and the number of CVRs held by such Holder, the Rights Agent shall keep a register (the “CVR Register”) for the registration of CVRs in a book-entry position for each Holder of a CVR. The CVR Register shall set forth the name and address of each Holder, and the number of CVRs held by such Holder and Tax Identification Number of each Holder. Each of Parent and the Stockholders’ Representative may receive and inspect a copy of the CVR Register, from time to time, upon written request made to the CVR Registrar. Within five (5) Business Days after receipt of such request, the CVR Registrar shall deliver a copy of the CVR Register, as then in effect, to Parent and the Stockholders’ Representative at the address set forth in Section 7.1. The Rights Agent is hereby initially appointed “CVR Registrar” for the purpose of registering CVRs and transfers of CVRs as herein provided.

(c)                Subject to the restrictions set forth in Section 3.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other reasonably requested documentation in form reasonably satisfactory to Parent and the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. A request for a transfer of a CVR shall be accompanied by documentation establishing that the transfer is to a Permitted Transferee and shall thereafter be supplemented with and any other information as may be reasonably requested by Parent or the CVR Registrar (including opinions of counsel, if appropriate). Upon receipt of such written notice, the CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein on its face, without investigation or inquiry by the Rights Agent, register the transfer of the CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same rights and entitling the transferee to the same benefits and rights under this Agreement as those held by the transferor immediately prior to such transfer. No transfer of a CVR shall be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void ab initio (unless the transfer was permissible hereunder and such failure to be duly registered is attributable to the fault of the CVR Registrar). Any transfer or assignment of the CVRs shall be without charge by Parent or the CVR Registrar (other than the cost of any Tax which shall be the responsibility of the transferor) to the Holder.

(d)               A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder and accompanied by such other evidence of the Holder’s identity or interest in the CVR as reasonably requested by the Rights Agent. Upon receipt of such written notice, the CVR Registrar is hereby authorized to, and shall promptly, record the change of address in the CVR Register.

(e)                The Stockholders’ Representative may make a written request to the Rights Agent for a list containing the names, addresses and number of CVRs of the Holders that are registered in the CVR Register. Within five (5) Business Days following the date of receipt by the Rights Agent of such request, the CVR Registrar shall deliver a copy of such list to the Stockholders’ Representative.

10 

 

Section 3.4      Issuance Procedures.

(a)                On the Settlement Date, Parent shall issue, and cause to be deposited with the Rights Agent, a number of Parent A Shares equal to the Aggregate CVR Shares. On the Settlement Date or as promptly as practicable thereafter, subject to Section 3.4(c) below, the Rights Agent shall cause the applicable number of CVR Shares to be registered in the name of each of the Holders as reflected in the CVR Register as of the close of business on the last Business Day prior to such issuance date.

(b)               The number of Parent A Shares issued in respect of each CVR from the Available Class D Merger Consideration CVR Shares (the “CVR Shares”) shall be equal to the quotient obtained by dividing $1,000 by the Reference Price; provided, that the number of Parent A Shares allocated to the CVRs shall be pro-rated in the event there are insufficient Available Class D Merger Consideration CVR Shares remaining for allocation to the CVRs. For all purposes above, fractional CVRs shall represent a proportionate number of CVR Shares; provided, however, that no fractional Parent A Shares (or certificate or scrip representing the same) shall be issued upon the settlement of any CVRs hereunder. Notwithstanding any other provision of this Agreement, each Holder of CVRs who would otherwise have been entitled to receive a fraction of a Parent A Share upon settlement of such Holder’s CVRs hereunder (after aggregating all CVRs of such Holder that are subject to this Agreement) shall receive, in lieu thereof, an amount of cash (rounded to the nearest whole cent), without interest, equal to such fractional amount multiplied by the Reference Price. Whenever a payment for fractional Parent A Shares or fractional shares is to be made by the Rights Agent under any section of this Agreement, Parent shall (i) promptly deliver to the Rights Agent a certificate setting forth the amount of any such payment and calculation related thereto and (ii) cash in the amount of such payment to the Rights Agent by wire transfer of immediately available funds to make such payment to the applicable Holder by check mailed to such Holder as reflected in the CVR Register or by wire transfer of immediately available funds. The Rights Agent shall not be liable to any Holder or Parent for the amount of any cash payment made to such Holder on behalf of Parent in accordance with the amount set forth in such certificate.

(c)                Parent’s obligation to issue and cause to be deposited with the Rights Agent the applicable number of CVR Shares, and the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares shall be conditioned on the execution and delivery by such Holder of a lockup agreement with Parent, substantially in the form attached hereto as Exhibit A (a “Lock-Up Agreement”); provided, however, that the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares to a Holder shall not be conditioned on the execution and delivery by such Holder of a Lock-Up Agreement if (i) such Holder or any of its Affiliates shall have entered into a lockup agreement with Parent in connection with the PIPE Investment (such lockup agreement, a “PIPE Lock-Up Agreement”) or (ii) the Settlement Date is the Settlement Outside Date and the Merger consideration CVR Shares have not been, as of such date, registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; provided, further, that Rights Agent shall have no duty to act without the written instruction of Parent with respect to the foregoing.

11 

 

(d)               Without limiting the other provisions of this Agreement, if at any time during the period between the execution of this Agreement and the Settlement Date (or if applicable, the Final Settlement Time), any change in the number or type of outstanding Parent A Shares shall occur as a result of a reclassification, recapitalization, exchange, stock split (including a reverse stock split), combination or readjustment of capital stock, shares or any stock dividend or stock distribution with a record date during such period (including any such reclassification, recapitalization, exchange, stock split, combination or readjustment of capital stock, shares or any stock dividend or stock distribution in connection with a consolidation, merger or combination in which Parent is the continuing or surviving corporation), the CVR Shares and any other similarly dependent items, as the case may be, shall be appropriately equitably adjusted to provide the same economic effect as contemplated by this Agreement prior to such event; provided that nothing in this Section 3.4(d) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

(e)                If, at any time prior to the Settlement Date (or, if applicable, the Final Settlement Time) Parent effects any Change of Control Transaction, then, upon any Settlement Date, each Holder shall have the right to receive, on the Settlement Date, for each CVR Share that would have been issuable upon the Settlement Date the same consideration (in the same amount and form) per Parent A Share payable to the holders thereof in such Change of Control Transaction. For purposes hereof, the determination of Pre-Settlement VWAP shall be appropriately adjusted to refer to such consideration instead of Parent A Shares. If holders of Parent A Shares are given any right of election as to the securities, cash or property to be received in such Change of Control Transaction, then each Holder shall be given the same right of election. To the extent necessary to effectuate the foregoing provisions, Parent shall ensure that any successor to Parent or the surviving entity in such Change of Control Transaction shall agree to be bound by the terms of this Agreement. In the event that the Final Settlement Time occurs after the Settlement Date, references herein to Settlement Date shall mean as promptly as practicable following the Change of Control Transaction.

Section 3.5      CVR Rights

(a)                Subject to Section 2.1, except as provided in Section 3.5(b), the CVRs shall not have any voting rights and shall not represent any equity or ownership interest in Parent, in any constituent company to the Merger, any Affiliate of Parent or any other Person.

(b)               The CVRs shall entitle each Holder, at the Settlement Date and subject to any applicable withholding Taxes, to a payment per Parent A Share issued thereunder, without interest, equal (as to both amount and form of consideration) to all dividends or other distributions of any kind declared per Parent A Share of the CVR Shares with a record date after the Closing and prior to the Settlement Date. Any dividends or other distributions of any kind made in respect of the CVR Shares will be delivered promptly to the Rights Agent to be held in escrow with respect to the CVRs (the “CVR Income”) treating the CVR Shares for this purpose as if the Aggregate CVR Shares were then outstanding. On the Settlement Date, the Rights Agent shall deliver to each Holder, concurrent with the issuance to such Holder of the applicable CVR Shares, the CVR Income earned in respect of each such CVR Share, less any applicable withholding Taxes.

12 

 

Article IV
THE RIGHTS AGENT

Section 4.1      Certain Duties and Responsibilities.

The Rights Agent shall not have any liability for any actions taken or not taken by the Rights Agent in connection with the execution, acceptance, administration, exercise and performance of its duties under this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction). No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

Section 4.2      Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a)                the Rights Agent may rely and shall be protected and held harmless by Parent in and shall not incur any liability in acting or refraining from acting in connection with its performance under this Agreement upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction);

(b)               the Rights Agent may consult with legal counsel selected by it, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct and in accordance with such advice or opinion. The reasonable costs of such counsel’s services shall be paid to the Rights Agent in accordance with Section 4.2(g) below. The Rights Agent may perform any and all of its duties through its agents, representatives, custodians and/or nominees and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such agents, representatives, custodians and/or nominees or for any loss to Parent or the Company, to the Holders or any other Person resulting from any such act, omission, default, neglect or misconduct, absent gross negligence, willful misconduct or bad faith on the part of the Rights Agent, such agents, representatives, custodians and/or nominees (which gross negligence, willful misconduct or bad faith must be determined by a final, non-appealable judgment of a court of competent jurisdiction);

(c)                if the Rights Agent becomes involved in litigation on account of this Agreement, it shall have the right to retain counsel and shall be entitled to reimbursement for all reasonable and documented out-of-pocket costs and expenses related thereto as provided in this Section 4.2(c) and Section 4.2(g) hereof; provided, however, that the Rights Agent shall not be entitled to any such reimbursement to the extent such litigation ultimately determines that the Rights Agent acted with willful misconduct, bad faith or gross negligence. In the event that conflicting demands are made upon the Rights Agent for any situation addressed or not addressed in this Agreement, the Rights Agent may withhold performance of the terms of this Agreement until such time as said conflicting demands shall have been withdrawn or the rights of the respective parties shall have been settled by court adjudication, arbitration, joint order or otherwise;

13 

 

(d)               the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(e)                the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(f)                Parent agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence (in each case as determined by a court of competent jurisdiction); provided, however, that the Rights Agent’s aggregate liability with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by Parent to the Rights Agent as fees and charges (but not including reimbursable expenses) in the 12 months preceding the event for which recovery is sought. The provisions under this Section 4.2 and ‎Section 4.1 above shall survive the settlement of the CVRs and the termination of this Agreement and the resignation, replacement or removal of the Rights Agent. To the extent the Rights Agent is entitled to indemnification hereunder, the reasonable and documented out-of-pocket costs and expenses of the Rights Agent incurred in enforcing this right of indemnification shall be paid by Parent;

(g)               Parent agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder in accordance with a fee schedule to be mutually agreed upon in writing between Parent and the Rights Agent and, from time to time, to reimburse the Rights Agent for all of its reasonable, customary and documented out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel) and other disbursements incurred in the preparation, delivery, negotiation, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. Without limiting any of its rights to compensation or reimbursement under this Agreement, the Rights Agent shall deliver to Parent the final invoice for the Rights Agent fees and costs (which shall include a reasonable estimate of all remaining fees and expenses) at a reasonable time prior to the date of delivery of the CVR Shares. An invoice for any reasonable and documented out-of-pocket expenses and per item fees realized will be rendered and payable as mutually agreed upon in writing between Parent and the Rights Agent. For the avoidance of doubt, and notwithstanding anything to the contrary herein, in no event shall Parent be required to indemnify or otherwise reimburse the Rights Agent for any income or similar taxes of the Rights Agent (or an of its Affiliates) in connection with the performance of its duties hereunder;

14 

 

(h)               For avoidance of doubt, no CVRs shall be issued in respect of any shares of capital stock of the Company as to which the holder thereof as of immediately prior to the Effective Time properly demands appraisal in accordance with, and who complies in all respects with, Section 262 of the Delaware General Corporation Law (such shares, “Appraisal Shares” and such statutory section, “Section 262”); provided, however, that notwithstanding the foregoing, (i) the CVRs that would have been issuable in respect of Appraisal Shares but for their status as such shall be deemed to be outstanding for purposes of determining the number of CVR Shares to be issued per CVR and (ii) if any holder of Appraisal Shares shall fail to perfect or otherwise waive, withdraw or lose the right to appraisal under Section 262 with respect to any Appraisal Shares (whether before or after the Settlement Date), then the CVRs issuable in respect of such Appraisal Shares shall be deemed to have been issued to such holder as of the Effective Time and to entitle such holder to all rights of a Holder hereunder with respect thereto, including the right to receive the CVR Shares and CVR Income in respect thereof upon the Settlement Date in accordance with the other provisions of this Agreement;

(i)                 whenever the Rights Agent shall reasonably require that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may rely upon a signed certificate from an authorized officer of Parent, and the Rights Agent shall incur no liability and be held harmless by Parent for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon and in accordance with such certificate;

(j)                 the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(k)               the Rights Agent shall not be required to give any note or surety in respect of the execution of its powers hereunder or otherwise in respect of the premises;

(l)                 the Rights Agent shall not be liable for or by reason of, and shall be held harmless by Parent with respect to any of the statements of fact or recitals contained in this Agreement or any certificate delivered by Parent under this Agreement and shall not be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by Parent only;

(m)             the Rights Agent shall have no liability and shall be held harmless by Parent in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent and the enforceability of this Agreement against the Rights Agent assuming the due execution and delivery hereof by the other parties hereto), nor shall it be responsible for any breach by Parent of any covenant or condition contained in this Agreement;

(n)               anything to the contrary notwithstanding, the Rights Agent shall not be liable for any special, punitive, consequential, indirect or incidental loss or damage of any kind whatsoever (including lost profits) arising out of any act or failure to act hereunder, even if the Rights Agent has been advised of the likelihood of such loss or damage or has foreseen the possibility or likelihood of such damages;

15 

 

(o)               the Rights Agent shall not be deemed to have knowledge of any event of which it was required to receive notice from Parent or the Stockholders’ Representative hereunder and did not receive such notice, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such required notice in writing;

(p)               the Rights Agent and any affiliate of the Rights Agent may buy, sell or deal in any of securities of Parent or the Company or become pecuniarily interested in any transaction in which Parent or the Company may be interested, or contract with or lend money to Parent or the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement, subject to applicable Law (including applicable securities Laws). Nothing herein shall preclude the Rights Agent from acting in any other capacity for Parent or the Company or for any other legal entity;

(q)               the Rights Agent shall act hereunder solely as agent for Parent and it shall not assume any obligations or relationship of agency or trust with any of the Holders or any other Person;

(r)                 the Rights Agent shall not be deemed to have knowledge of a change in authorized officers or duly authorized representatives of any Person without notice of such change, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such notice in writing;

(s)                the Rights Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any Holder with respect to any action or default by Parent, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or to make any demand upon Parent; and

(t)                 the Rights Agent shall have no duty or obligation under any Section of this Agreement that requires the payment of taxes or charges by the Parent or Holder in connection with the Rights Agent’s performance of such duty or obligation, unless and until the Rights Agent is reasonably satisfied that all such taxes and/or charges have been paid.

Section 4.3      Resignation and Removal; Appointment of Successor.

(a)                The Rights Agent may resign at any time by giving written notice thereof to Parent and the Stockholders’ Representative specifying a date when such resignation shall take effect, which notice shall be sent at least thirty (30) days’ prior to the date so specified. In the event any transfer agency relationship in effect between the Parent and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination. Parent may terminate the Rights Agent at any time by giving written notice thereof to the Rights Agent and the Stockholders’ Representative specifying a date when such termination shall take effect, which notice shall be sent at least thirty (30) days prior to the date so specified.

(b)               If the Rights Agent shall resign, be removed or become incapable of acting, Parent and the Stockholders’ Representative shall promptly appoint a qualified successor Rights Agent. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 4.3(b), become the successor Rights Agent.

16 

 

(c)                Parent shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event through electronic mail, to the Stockholders’ Representative. The Stockholders’ Representative shall forward such notice to the Holders. If Parent fails to send such notice within ten (10) days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed and electronically transmitted at the expense of Parent.

(d)               If a successor Rights Agent has not been appointed and has not accepted such appointment by the end of the thirty (30) day period, the Stockholders’ Representative or the Rights Agent may (but shall not be obligated to) apply to a court of competent jurisdiction for the appointment of a successor Rights Agent, and the reasonable documented out-of-pocket costs, expenses (including reasonable attorneys’ fees which are incurred in connection with such a proceeding) shall be paid in accordance with Section 4.2(g) hereof. Any such successor to the Rights Agent shall agree to be bound by the terms of this Agreement and shall, upon receipt of the all relevant books and records relating thereto, become the Rights Agent hereunder. Upon delivery of all of the relevant books and records, pursuant to the terms of this Section 4.3(d) to a successor Rights Agent, the Rights Agent shall thereafter be discharged from any further obligations hereunder. Without limiting any of the rights or immunities of the Rights Agent under this Agreement, the Rights Agent is hereby authorized, in any and all events, to comply with and obey any and all final judgments, orders and decrees of any court of competent jurisdiction which may be filed, entered or issued, and all final arbitration awards and, if it shall so comply or obey, it shall not be liable to any other person by reason of such compliance or obedience.

Section 4.4      Acceptance of Appointment by Successor.

(a)                Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Parent, the Stockholders’ Representative and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; but, on request of Parent, the Stockholders’ Representative or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent but such retiring Rights Agent shall not be required to make any additional expenditure or assume any additional liability in connection with the foregoing.

Article V
COVENANTS AND REPRESENTATIONS

Section 5.1      List of Holders.

Parent shall furnish or cause to be furnished to the Rights Agent in such form as Parent receives from the Company prior to the Effective Time (or other agent performing similar services for Parent or its Affiliates), the names, addresses, shareholdings and tax certification (T.I.N.) of the record holders of Shares eligible to receive CVRs pursuant to the Merger Agreement reasonably promptly following the Effective Time.

17 

 

Section 5.2      Delivery of CVR Shares.

The Rights Agent shall cause the applicable number of CVR Shares to be registered in the names of the Holders upon receipt thereof in the manner provided for in Section 3.4 and in accordance with the terms of this Agreement, and each of the Stockholders’ Representative and Parent shall use reasonable efforts to cause the Rights Agent to do so.

Section 5.3      Assignment.

(a)                Except for assignments occurring through operation of law, Parent and the Company shall not, in whole or in part, assign any of their rights or obligations under this Agreement.

Section 5.4      Tax Treatment.

Unless (x) Parent has determined, based on advice from a “Big 4” accounting firm or nationally recognized tax counsel and after consulting with the Stockholders’ Representative in connection with obtaining such advice and making such determination, that the Intended Tax Treatment (as defined below) is not supported by a “more likely than not” or higher standard or (y) reporting in a manner consistent with the Intended Tax Treatment would require that Parent establish a reserve on its financial statements, each of Parent and each Holder shall and shall cause its Affiliates to (i) treat the CVRs as equity for applicable U.S. federal income tax purposes and to treat the settlement of the CVRs for CVR Shares as a recapitalization under Section 368(a)(1)(E) of the Code for U.S. federal income tax purposes (the “Intended Tax Treatment”) and (ii) file U.S federal income tax returns (if any such tax returns are required to be filed) in a manner consistent with the Intended Tax Treatment.

Article VI
AMENDMENTS

Section 6.1      Amendments Without Consent of Holders or Stockholders’ Representative.

(a)                Without the consent of any Holders, Parent, the Stockholders’ Representative (upon written instruction from the Holders holding a majority of the CVRs) and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes only:

(i)                 to evidence the succession of another Person selected in accordance with Section 4.3(b) as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

18 

 

(ii)               to evidence the termination of the CVR Registrar and the succession of another Person as a successor CVR Registrar and the assumption by any successor of the obligations of the CVR Registrar herein; or

(iii)             to add, eliminate or change any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders; provided, that if such addition, elimination or change is materially adverse to the rights of holders of any other Merger Consideration CVRs, then instruction from the holders of such other Merger Consideration CVRs representing a majority of the Merger Consideration CVR Shares in respect thereof shall also be necessary; provided, further, if such addition, elimination or change adversely affects the rights and obligations of any Holder in a disproportionate manner to the other Holders hereunder, then instruction from each such affected Holder shall also be necessary; or

(iv)             as necessary to ensure that the CVRs are not subject to registration under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

(b)               Any other amendment to this Agreement shall be made by Parent, the Stockholders’ Representative (upon written instruction of each of the Holders of CVRs) and the Rights Agent.

(c)                Promptly after the execution by Parent, Stockholders Representative and the Rights Agent of any amendment pursuant to the provisions of this Section 6.1, Parent shall mail or cause to be mailed a written notice thereof by electronic mail to the Stockholders’ Representative and by first-class mail and electronic mail to the Holders at their addresses as they shall appear on the CVR Register, setting forth in general terms the substance of such amendment.

Section 6.2      Execution of Amendments; Effect of Amendments.

Prior to executing any amendment permitted by this ‎‎‎Article VI, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, a certificate from an appropriate officer of Parent or, if requested by the Rights Agent, an opinion of counsel selected by Parent and reasonably acceptable to Rights Agent stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement. Upon the execution of any amendment under this Article VI, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby. No supplement or amendment to this Agreement shall be effective unless duly executed by the Rights Agent, Parent and the Stockholders’ Representative.

19 

 

Article VII
OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1      Notices to the Rights Agent, Parent and the Stockholders’ Representative.

Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by electronic mail (except with respect to the Rights Agent), by facsimile transmission only with respect to the Rights Agent or overnight courier, provided that with respect to notices deliverable to the Stockholders’ Representative, such notices shall be delivered solely via electronic mail or facsimile:

If to Parent or the Company:

Eros International Plc

First Names House

Victoria Road

Douglas

Isle of Man IM2 4DF

British Isles

Attention: Mark Carbeck, Chief Corporate and Strategy Officer
Email: mark.carbeck@erosintl.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197

Attention: Kevin Masuda
Peter Wardle

Email: kmasuda@gibsondunn.com
pwardle@gibsondunn.com

 

If to the Rights Agent:

Computershare Trust Company, N.A.,

Computershare Inc.

150 Royall Street

Canton, MA 02021

Attention: Client Services

Facsimile: (781) 575-3146

 

If to the Stockholders’ Representative:

Fortis Advisors LLC

Attention: Notices Department (Project World Cup)

Email: notices@fortisrep.com

20 

 

Facsimile: (858) 408-1843

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP
555 South Flower Street, Suite 3700
Los Angeles, California 90071
Attention: Rick C. Madden, P.C.
Email: rick.madden@kirkland.com

 

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by electronic mail; or on the next business day after deposit with an overnight courier, if sent by an overnight courier.

Section 7.2      Effect of Headings; Construction.

The headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions of this Agreement. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated.

Section 7.3      Successors and Assigns.

All covenants and agreements in this Agreement by any party hereto shall bind its successors and permitted assigns, whether so expressed or not.

Section 7.4      Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the Holders, the parties hereto and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Holders, the parties hereto and their permitted successors and assigns. For the avoidance of doubt, the Holders shall be considered express third party beneficiaries of this Agreement.

Section 7.5      Governing Law and Venue; Waiver of Jury Trial.

(a)                THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF THAT WOULD RESULT IN THE APPLICATION OF ANY OTHER JURISDICTION’S LAWS. The parties hereby irrevocably submit to the personal jurisdiction of the courts of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents

21 

 

referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement of this Agreement or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims relating to such action, proceeding or transactions shall be heard and determined in such a Delaware state or federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 7.1 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. If and to the extent that any action, suit or proceeding relates to the rectification of Parent’s register of members or the enforcement of Section 2.1 (“Parent Proceedings”) (but otherwise without prejudice to the provisions of this Section 7.5(a)), each party irrevocably agrees that the courts of the Isle of Man shall have jurisdiction to hear and decide such Parent Proceedings and, for this purpose only, each party irrevocably submits to the jurisdiction of the such courts.

(b)               EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.5.

Section 7.6      Severability Clause.

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction; provided, however, that if an excluded provision shall affect the rights, immunities, liabilities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately written notice to the Parent in accordance with Section 4.2.

22 

 

Section 7.7      Counterparts.

This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

Section 7.8      Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon consummation of the issuance and delivery to the Holders of all of the Parent A Shares to which they are entitled pursuant to and in accordance with Section 3.4; provided, Article I, Article IV and this Article VII shall survive.

Section 7.9      Withholding.

Notwithstanding anything to the contrary in this Agreement, Parent, the Rights Agent and their respective agents, shall be entitled to deduct and withhold from any amounts otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of applicable Tax law; provided, however, that other than in respect of compensatory withholding or backup withholding, withholding as a result of the failure to provide the certificate set forth in Section 6.2(g) of the Merger Agreement or withholding in respect of CVR Income, Parent or the Rights Agent, as applicable, shall use commercially reasonable efforts to provide written notice to the Stockholders’ Representative no later than two (2) Business Days prior to any such withholding or deduction in respect of a Holder and to allow the Holder the opportunity to provide any Tax forms, reports or certificates as may be permitted by Applicable Laws to reduce or eliminate such withholding or deduction. Any amounts so withheld and properly remitted to the applicable Governmental Authority shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. In the case of any withholding from any payments not payable in cash, Parent or its agent shall withhold or shall cause to be withheld an amount of such payment having a fair market value equal to the withholding obligation to be satisfied in respect of such payment at the time such amount is withheld (provided that if any cash is otherwise payable to the relevant payee, such withholding shall be made first from such cash), and shall be treated as having paid such amount to the Person in respect of which such amount is withheld.

Section 7.10  Entire Agreement.

This Agreement, the letter agreement between Parent and the Rights Agent of even date herewith regarding fees payable to the Rights Agent (the “Fee Schedule”), and the Merger Agreement represent the entire understanding of Parent, the Company and the Stockholders’ Representative with reference to the CVRs, and, as between such Persons, this Agreement supersedes any and all other oral or written agreements hereto made with respect to the CVRs, except for the Merger Agreement. Notwithstanding the reference to any other document in this Agreement, the Rights Agent shall not be deemed to have knowledge of, or have any duty to

23 

 

ascertain or inquire into, the existence, the content, or the terms and conditions of any other agreement, instrument or document, in each case, to which the Rights Agent is not a party, whether or not such agreement, instrument or document, as the case may be, is referenced in this Agreement. This Agreement and the Fee Schedule represent the entire understanding of the Rights Agent with reference to the CVRs and the performance of the Rights Agent’s duties, its immunities and rights with respect thereto, and with respect to the Rights Agent, this Agreement and the Fee Schedule supersede any and all other oral or written agreements heretofore made with respect to the CVRs. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling, and this Agreement may be amended, modified, supplemented or altered only in accordance with the terms of Article VII. No party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not contained herein.

Section 7.11  Force Majeure.

Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance to the extent resulting from acts beyond its reasonable control including, without limitation, acts of God, epidemics, pandemics, terrorist acts, breakdowns, interruptions or malfunctions of any communications or computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest; provided, that the Rights Agent shall use reasonable commercial efforts to resume performance as soon as practicable. If any such act or event occurs, the Rights Agent shall give prompt written notice to Parent and the Stockholders’ Representative, stating the nature of the act or event and action being taken to avoid or minimize its effect.

Section 7.12  Funds.

All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more bank accounts to be maintained by the Rights Agent in its name as agent for Parent. Until paid pursuant to the terms of this Agreement, the Rights Agent will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by the Rights Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. The Rights Agent may from time to time receive interest, dividends or other earnings in connection with such deposits. The Rights Agent shall not be obligated to pay such interest, dividends or earnings to the Parent, any Holder or any other Person.

 

[Remainder of Page Intentionally Left Blank.]

24 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

EROS INTERNATIONAL PLC


By: /s/ Kishore Lulla
Name: Kishore Lulla
Title: Executive Chairman and Group Chief

Executive Officer and Managing Director

 

[Signature Page to Class D CVR Agreement]

  

 

STX FILMWORKS, INC.

 

By: /s/ Noah Fogelson
Name: Noah Fogelson
Title: Executive Vice President,

Corporate Strategy and General

Counsel

 

[Signature Page to Class D CVR Agreement]

  

 

FORTIS ADVISORS LLC

 

By: /s/ Ryan Simkin
Name: Ryan Simkin
Title: Managing Director

 

[Signature Page to Class D CVR Agreement]

  

 

COMPUTERSHARE TRUST

COMPANY, N.A. AND COMPUTERSHARE INC.

On behalf of both entities

By: /s/ Collin Ekeogu

Name: Collin Ekeogu
Title: Manager, Corporate Actions

 

[Signature Page to Class D CVR Agreement]

Exhibit 4.3

CLASS C CONTINGENT VALUE RIGHTS AGREEMENT

This CLASS C CONTINGENT VALUE RIGHTS AGREEMENT, dated as of July 30, 2020 (this “Agreement”), is entered into by and among Eros International Plc, an Isle of Man company limited by shares (“Parent”), STX Filmworks, Inc., a Delaware corporation (the “Company”), Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the former holders of the Shares (in such capacity, the “Stockholders’ Representative”), and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally chartered trust company, collectively as rights agent (the “Rights Agent”) and as initial CVR Registrar (as defined herein).

WITNESSETH:

WHEREAS, the Company, Parent, England Holdings 2, Inc., a Delaware corporation and indirect wholly-owned Subsidiary of Parent (“England Holdings 2”), England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly-owned Subsidiary of England Holdings 2 (“Merger Sub”), have entered into an Agreement and Plan of Merger (as the same may be amended, modified or supplemented from time to time, the “Merger Agreement”), dated as of April 17, 2020, pursuant to which Merger Sub merged with and into the Company (the “Merger”), with the Company surviving the Merger, as an indirect wholly-owned Subsidiary of Parent;

WHEREAS, pursuant to the Merger Agreement, Parent agreed to issue to holders of record of shares of Class C Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Shares”) outstanding immediately prior to the effective time of the Merger (the “Effective Time”), a number of contingent value rights (the “CVRs”) as hereinafter described; and

WHEREAS, each holder of Shares as of immediately prior to the Effective Time, will receive, among other things, as merger consideration, the right to receive upon the Effective Time a number of CVRs in such amount as set forth in Article II of the Merger Agreement.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

Article I
DEFINITIONS

Section 1.1      Definitions.

(a)                For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i)                 the terms defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular;

1 

 

(ii)               the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iii)             unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa;

(iv)             the term “Affiliate” when used with respect to the Company shall, after the Effective Time, include Parent and its Subsidiaries and Affiliates; and

(v)               all references to “including” shall be deemed to mean including without limitation.

(b)               Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Affiliate” means, with respect to any specified Person, (i) any other Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (ii) with respect to any natural person, any Member of the Immediate Family of such natural person. Notwithstanding the foregoing, for purposes hereof, (i) none of the Holders, the Company, or any of their respective Subsidiaries shall be considered Affiliates of any portfolio company (or Subsidiary thereof) in which any Holder or any of its affiliated investment funds have made a debt or equity investment, and (ii) no Holder or any of its Affiliates shall be considered an Affiliate of (a) Parent or any of its Subsidiaries or (b) any other Holders or their respective Affiliates (except to the extent such Holders are otherwise Affiliates under this definition without regard to their status as Holders).

“Agreement” has the meaning set forth in the Preamble.

“Aggregate CVR Shares” means the aggregate number of underlying Parent A Shares issuable in respect of all CVRs.

“Appraisal Shares” has the meaning set forth in Section 4.2(h).

“Available Class C Merger Consideration CVR Shares” means the Merger Consideration CVR Share Cap minus the Parent A Shares issued to the Class E CVRs and the Class D CVRs.

“Base Price” means $2.60.

2 

 

“Change of Control Transaction” means the occurrence of (i) an acquisition by any Person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares or comparable equity interests of Parent entitling that Person to fifty percent (50%) or more of the total voting power of all such shares or comparable equity interests of Parent; or (ii) the consolidation or merger of Parent with or into any other Person, any merger of another Person into Parent, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of Parent’s properties, business or assets, other than (in the case of this clause (ii) only) (1) any transaction (x) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares or comparable equity interests of Parent, and (y) pursuant to which holders of Parent’s shares or comparable equity interest immediately prior to such transaction have the right to exercise, directly or indirectly, fifty percent (50%) or more of the total voting power of all shares or comparable equity interest of the continuing or surviving Person immediately after such transaction, or (2) any merger solely for the purpose of changing Parent’s jurisdiction of formation and resulting in a reclassification, conversion or exchange of outstanding shares or comparable equity interests into shares or comparable equity interest of the surviving entity with substantially identical rights.

“Class A CVR” means the contingent value rights issued by Parent with respect to the Class A Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class A CVR Agreement.

“Class A CVR Agreement” means the Class A CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class A CVR Shares” means the underlying Parent A Shares issuable in respect of the Class A CVRs.

“Class B CVR” means the contingent value rights issued by Parent with respect to the Class B Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class B CVR Agreement.

“Class B CVR Agreement” means the Class B CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class B CVR Shares” means the underlying Parent A Shares issuable in respect of the Class B CVRs.

“Class D CVR” means the contingent value rights issued by Parent with respect to the Class D Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class D CVR Agreement.

“Class D CVR Agreement” means the Class D CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

3 

 

“Class D CVR Shares” means the underlying Parent A Shares issuable in respect of the Class D CVRs.

“Class E CVR” means the contingent value rights issued by Parent with respect to the Class E Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class E CVR Agreement.

“Class E CVR Agreement” means the Class E CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class E CVR Shares” means the underlying Parent A Shares issuable in respect of the Class E CVRs.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Company” has the meaning set forth in the Preamble.

“CVR” means a contingent value right issued by Parent with respect to the Shares, pursuant to the Merger Agreement and this Agreement.

“CVR Shares” has the meaning set forth in Section 3.4(b).

“CVR Register” has the meaning set forth in Section 3.3(b).

“CVR Registrar” has the meaning set forth in Section 3.3(b).

“Effective Time” has the meaning set forth in the Recitals.

“Eros Pre-Closing Equity Financing” has the meaning ascribed in the PIPE Agreement.

“Final Settlement Time” has the meaning set forth in Section 3.2(b).

“Funds” has the meaning set forth in Section 7.12.

“Fully Diluted Parent Shares” means, as of immediately prior to the Effective Time, the sum of (without duplication) (i) the aggregate number of Parent Ordinary Shares then outstanding, plus (ii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding In-the-Money Parent Options (whether or not vested), plus (iii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding Parent RSU Awards (whether or not vested), plus (iv) the aggregate number of Parent Ordinary Shares then subject to issuance pursuant to the Parent Convertible Notes assuming full conversion thereof at a conversion price of $2.60; provided, however, that, notwithstanding the foregoing, Fully Diluted Parent Shares shall not include any Parent Ordinary Shares issuable pursuant to the Eros Pre-Closing Equity Financing. For the avoidance of doubt, Fully Diluted Parent Shares shall be calculated prior to, and without giving effect to, the PIPE Investment.

“Holder” means a Person in whose name a CVR is registered in the CVR Register.

4 

 

“In-the-Money Parent Options” means an Eros Option (as defined in the Merger Agreement) having a per Parent Ordinary Share exercise price less than the Parent Trading Price.

“Investors’ Rights Agreement” means the Investors’ Rights Agreement, entered into on or around the date hereof, by and among Parent, certain shareholders of Parent and the investors party thereto.

“Law” with respect to any Person, means (a) all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

“Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Members of the Immediate Family” means, with respect to any individual, each spouse or child or other descendants of such individual, each trust created solely for the benefit of one or more of the aforementioned Persons and their spouses and each custodian or guardian of any property of one or more of the aforementioned Persons in his capacity as such custodian or guardian.

“Merger” has the meaning set forth in the Recitals.

“Merger Agreement” has the meaning set forth in the Recitals.

“Merger Consideration CVRs” means the CVRs, the Class E CVRs, the Class D CVRs, the Class B CVRs and the Class A CVRs.

“Merger Consideration CVR Share Cap” means a number of Parent A Shares equal to the Fully Diluted Parent Shares.

“Merger Consideration CVR Shares” means the Aggregate CVR Shares, the Class E CVR Shares, the Class D CVR Shares, the Class B CVR Shares and the Class A CVR Shares.

“Merger Sub” has the meaning set forth in the Recitals.

“Organizational Documents” has the meaning set forth in Section 2.1(a).

“Parent” has the meaning set forth in the Preamble.

“Parent A Shares” means the A Ordinary Shares, par value £0.30 per share, of Parent.

“Parent B Shares” means the B Ordinary Shares, par value £0.30 per share, of Parent.

“Parent Convertible Notes” means Parent’s Senior Convertible Notes due September 27, 2020 in the original aggregate principal amount of $27,500,000.

“Parent Option” means a compensatory option to purchase Parent Ordinary Shares.

5 

 

“Parent Ordinary Shares” means, collectively, the Parent A Shares and the Parent B Shares.

“Parent Proceedings” has the meaning set forth in Section 7.5(a).

“Parent RSU Award” means an award of restricted stock units relating to Parent Ordinary Shares.

“Parent Trading Price” means the VWAP for one Parent A Share for the twenty (20) consecutive full Trading Days ending on the full Trading Day immediately preceding the Effective Time (as adjusted as appropriate to reflect any stock splits, stock dividends, combinations, reorganizations, classifications or similar events).

“Permitted Transfer” means: (i) the transfer (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; or (vi) a transfer by any Holder to one or more of its Affiliates or affiliated investment funds of any of its Affiliates.

“Permitted Transferee” means a Person who receives a CVR pursuant to a Permitted Transfer and otherwise in accordance with this Agreement.

“Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Authority or other entity of any kind or nature.

“PIPE Agreement” means that certain Subscription Agreement, made as of April 17, 2020, by and among Parent and each Person defined therein as a “Purchaser.”

“PIPE Investment” means the purchase of Parent A Shares pursuant to the PIPE Agreement.

“PIPE Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Pre-Closing VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Closing.

“Pre-Settlement VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Settlement Date; provided, that for purposes of determining the CVR Shares issuable as of any time prior to the Settlement Date, the reference to “the Trading Day immediately preceding the Settlement Date” in this definition shall be deemed a reference to “the Trading Day immediately preceding the applicable time of determination”.

6 

 

“Reference Price” means a price per share equal to the lesser of (x) the Pre-Settlement VWAP and (y) the Upper Collar Price; provided, that if the Pre-Settlement VWAP is equal to or greater than $4, then the Reference Price will equal the average of the Pre-Settlement VWAP and the Upper Collar Price.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Settlement Date” shall mean the date that is the earlier to occur of (a) the later to occur of (i) the first time that the Merger Consideration CVR Shares have been registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and (ii) the 75th calendar day after the Closing and (b) the occurrence of the Settlement Outside Date.

“Settlement Outside Date” means the date that is six (6) months after the Closing; provided that the Settlement Outside Date may be extended (but only once) by holders of a majority of the Class E CVRs; provided, further, that such majority must include each such holder that, together with its Affiliates, purchased $15 million or more of Parent A Shares in the PIPE Investment.

“Shares” has the meaning set forth in the Recitals.

“Stockholders’ Representative” has the meaning set forth in the Preamble.

“STX Purchase Price” means the lowest of (i) the Base Price, (ii) the volume weighted average of the purchase price of all purchases comprising the Eros Pre-Closing Equity Financing and (iii) the Pre-Closing VWAP; provided, however, that if the Pre-Closing VWAP is greater than $3.25, then the STX Purchase Price shall be the average of the Base Price and the Pre-Closing VWAP.

“Subsidiary” of any Person shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or comparable governing body are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person.

“Taxes” or “Tax” means all taxes, charges, fees, levies or other assessments in the nature of a tax imposed by any governmental authority, including any income, gross receipts, license, severance, occupation, premium, environmental (including taxes under former Code Section 59A), customs, duties, profits, disability, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, occupancy, franchise, real property, personal property, business and occupation, mercantile, windfall profits, capital stock, stamp, transfer, workmen’s compensation, amounts due under any applicable laws governing escheat or unclaimed property or other taxes, charges, fees, levies or other assessments in the nature of a tax, together with any interest, penalties, additions to tax or additional amounts imposed by any Governmental Authority with respect thereto, whether disputed or not.

7 

 

“Trading Day” means, with respect to any referenced security, any day on which such security is actually traded on the principal securities exchange or securities market on which such security is then listed.

“Upper Collar Price” means the quotient of the STX Purchase Price, divided by one and one-half (1.5).

“VWAP” means, for any security as of any date(s), the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then listed during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (sets to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date(s) on any of the foregoing bases, the VWAP of such security on such date(s) shall be the fair market value thereof on such date(s) as reasonably determined by a nationally recognized independent investment banking firm mutually agreed between Parent and the Stockholders’ Representative.

Article II
OPERATION OF PARENT

Section 2.1      Operation of Parent.

From the Effective Time until the Settlement Date, Parent shall not, and shall cause its Subsidiaries and Affiliates not to:

(a)                after the effectiveness of the Amended Articles (as defined in the Investors’ Rights Agreement), effect any action that requires approval by the shareholders of Parent under Parent’s Memorandum of Association or Articles of Association (the “Organizational Documents”) or applicable Law; or

(b)               prior to the effectiveness of Amended Articles, take any action set forth in Section 4.3(c) of the Investors’ Rights Agreement as in effect on the date hereof,

without, in each such case, obtaining the consent thereto of holders of such class and number of Merger Consideration CVRs (including the CVRs hereunder) that, together with the shares of Parent actually voted (at a meeting or by resolution) with respect to such action and assuming all Merger Consideration CVR Shares were outstanding Parent A Shares and voted, would be required to approve such action under the Organizational Documents, applicable Law or Section 4.3(c) of the Investors’ Rights Agreement, as applicable. For purposes of the foregoing consent rights, the number of Merger Consideration CVR Shares underlying the Merger Consideration CVRs as of any time prior to the Settlement Date shall be calculated as set forth below in Article III and in Article III of the Class E CVR Agreement with respect to the Class E CVRs, Article III of the Class D CVR Agreement with respect to the Class D CVRs, Article III of the Class B CVR Agreement with respect to the Class B CVRs and Article III of the Class A CVR Agreement with respect to the Class A CVRs.

8 

 

Article III
CVRS

Section 3.1      Issuance of CVRs; Appointment of Rights Agent; Reservation of Shares.

(a)                The CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement. The registration on the books and records of Parent and administration of the CVRs shall be handled pursuant to this Agreement in the manner set forth in this Agreement.

(b)               Parent hereby appoints the Rights Agent to act as rights agent for the CVRs in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

(c)                From the date hereof until the issuance of the Aggregate CVR Shares in accordance with the terms hereof, Parent shall reserve and keep available out of its authorized but unissued share capital, for the purpose of effecting the issuance of the CVR Shares hereunder, a number of Parent A Shares equal to the Merger Consideration CVR Share Cap, minus the number of CVR Shares, if any, previously issued in accordance with the terms of this Agreement; and if at any time during such period the number of authorized but unissued Parent A Shares shall not be sufficient to effect the issuance of the Aggregate CVR Shares in full, Parent shall take all such action as may be necessary to increase its authorized but unissued share capital as shall be sufficient for such purposes.

Section 3.2      Nontransferable; Expiration.

(a)                The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than to a Permitted Transferee. Any purported transfer of a CVR to anyone other than a Permitted Transferee shall be null and void ab initio.

(b)               Subject to Section 3.4(c), the CVRs shall expire on the Settlement Date upon the registration of the CVR Shares in the respective names of the Holders entitled thereto and shall thereafter be of no force or effect following such registration; provided that, if any CVR Shares are not so registered on the Settlement Date, then the CVRs in respect thereof shall not expire until the registration of such CVR Shares in the respective names of the Holders entitled thereto (the time of registration thereof, the “Final Settlement Time”).

Section 3.3      No Certificate; Registration; Registration of Transfer; Change of Address.

(a)                The CVRs shall not be evidenced by a certificate or other instrument.

9 

 

(b)               Upon receipt from Parent of the names and addresses of each Holder and the number of CVRs held by such Holder, the Rights Agent shall keep a register (the “CVR Register”) for the registration of CVRs in a book-entry position for each Holder of a CVR. The CVR Register shall set forth the name and address of each Holder, and the number of CVRs held by such Holder and Tax Identification Number of each Holder. Each of Parent and the Stockholders’ Representative may receive and inspect a copy of the CVR Register, from time to time, upon written request made to the CVR Registrar. Within five (5) Business Days after receipt of such request, the CVR Registrar shall deliver a copy of the CVR Register, as then in effect, to Parent and the Stockholders’ Representative at the address set forth in Section 7.1. The Rights Agent is hereby initially appointed “CVR Registrar” for the purpose of registering CVRs and transfers of CVRs as herein provided.

(c)                Subject to the restrictions set forth in Section 3.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other reasonably requested documentation in form reasonably satisfactory to Parent and the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. A request for a transfer of a CVR shall be accompanied by documentation establishing that the transfer is to a Permitted Transferee and shall thereafter be supplemented with and any other information as may be reasonably requested by Parent or the CVR Registrar (including opinions of counsel, if appropriate). Upon receipt of such written notice, the CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein on its face, without investigation or inquiry by the Rights Agent, register the transfer of the CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same rights and entitling the transferee to the same benefits and rights under this Agreement as those held by the transferor immediately prior to such transfer. No transfer of a CVR shall be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void ab initio (unless the transfer was permissible hereunder and such failure to be duly registered is attributable to the fault of the CVR Registrar). Any transfer or assignment of the CVRs shall be without charge by Parent or the CVR Registrar (other than the cost of any Tax which shall be the responsibility of the transferor) to the Holder.

(d)               A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder and accompanied by such other evidence of the Holder’s identity or interest in the CVR as reasonably requested by the Rights Agent. Upon receipt of such written notice, the CVR Registrar is hereby authorized to, and shall promptly, record the change of address in the CVR Register.

(e)                The Stockholders’ Representative may make a written request to the Rights Agent for a list containing the names, addresses and number of CVRs of the Holders that are registered in the CVR Register. Within five (5) Business Days following the date of receipt by the Rights Agent of such request, the CVR Registrar shall deliver a copy of such list to the Stockholders’ Representative.

10 

 

Section 3.4      Issuance Procedures.

(a)                On the Settlement Date, Parent shall issue, and cause to be deposited with the Rights Agent, a number of Parent A Shares equal to the Aggregate CVR Shares. On the Settlement Date or as promptly as practicable thereafter, subject to Section 3.4(c) below, the Rights Agent shall cause the applicable number of CVR Shares to be registered in the name of each of the Holders as reflected in the CVR Register as of the close of business on the last Business Day prior to such issuance date.

(b)               The number of Parent A Shares issued in respect of each CVR from the Available Class C Merger Consideration CVR Shares (the “CVR Shares”) shall be equal to the quotient obtained by dividing $1,000 by the Reference Price; provided, that the number of Parent A Shares allocated to the CVRs shall be pro-rated in the event there are insufficient Available Class C Merger Consideration CVR Shares remaining for allocation to the CVRs. For all purposes above, fractional CVRs shall represent a proportionate number of CVR Shares; provided, however, that no fractional Parent A Shares (or certificate or scrip representing the same) shall be issued upon the settlement of any CVRs hereunder. Notwithstanding any other provision of this Agreement, each Holder of CVRs who would otherwise have been entitled to receive a fraction of a Parent A Share upon settlement of such Holder’s CVRs hereunder (after aggregating all CVRs of such Holder that are subject to this Agreement) shall receive, in lieu thereof, an amount of cash (rounded to the nearest whole cent), without interest, equal to such fractional amount multiplied by the Reference Price. Whenever a payment for fractional Parent A Shares or fractional shares is to be made by the Rights Agent under any section of this Agreement, Parent shall (i) promptly deliver to the Rights Agent a certificate setting forth the amount of any such payment and calculation related thereto and (ii) cash in the amount of such payment to the Rights Agent by wire transfer of immediately available funds to make such payment to the applicable Holder by check mailed to such Holder as reflected in the CVR Register or by wire transfer of immediately available funds. The Rights Agent shall not be liable to any Holder or Parent for the amount of any cash payment made to such Holder on behalf of Parent in accordance with the amount set forth in such certificate.

(c)                Parent’s obligation to issue and cause to be deposited with the Rights Agent the applicable number of CVR Shares, and the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares shall be conditioned on the execution and delivery by such Holder of a lockup agreement with Parent, substantially in the form attached hereto as Exhibit A (a “Lock-Up Agreement”); provided, however, that the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares to a Holder shall not be conditioned on the execution and delivery by such Holder of a Lock-Up Agreement if (i) such Holder or any of its Affiliates shall have entered into a lockup agreement with Parent in connection with the PIPE Investment (such lockup agreement, a “PIPE Lock-Up Agreement”) or (ii) the Settlement Date is the Settlement Outside Date and the Merger consideration CVR Shares have not been, as of such date, registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; provided, further, that Rights Agent shall have no duty to act without the written instruction of Parent with respect to the foregoing.

11 

 

(d)               Without limiting the other provisions of this Agreement, if at any time during the period between the execution of this Agreement and the Settlement Date (or if applicable, the Final Settlement Time), any change in the number or type of outstanding Parent A Shares shall occur as a result of a reclassification, recapitalization, exchange, stock split (including a reverse stock split), combination or readjustment of capital stock, shares or any stock dividend or stock distribution with a record date during such period (including any such reclassification, recapitalization, exchange, stock split, combination or readjustment of capital stock, shares or any stock dividend or stock distribution in connection with a consolidation, merger or combination in which Parent is the continuing or surviving corporation), the CVR Shares and any other similarly dependent items, as the case may be, shall be appropriately equitably adjusted to provide the same economic effect as contemplated by this Agreement prior to such event; provided that nothing in this Section 3.4(d) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

(e)                If, at any time prior to the Settlement Date (or, if applicable, the Final Settlement Time) Parent effects any Change of Control Transaction, then, upon any Settlement Date, each Holder shall have the right to receive, on the Settlement Date, for each CVR Share that would have been issuable upon the Settlement Date the same consideration (in the same amount and form) per Parent A Share payable to the holders thereof in such Change of Control Transaction. For purposes hereof, the determination of Pre-Settlement VWAP shall be appropriately adjusted to refer to such consideration instead of Parent A Shares. If holders of Parent A Shares are given any right of election as to the securities, cash or property to be received in such Change of Control Transaction, then each Holder shall be given the same right of election. To the extent necessary to effectuate the foregoing provisions, Parent shall ensure that any successor to Parent or the surviving entity in such Change of Control Transaction shall agree to be bound by the terms of this Agreement. In the event that the Final Settlement Time occurs after the Settlement Date, references herein to Settlement Date shall mean as promptly as practicable following the Change of Control Transaction.

Section 3.5      CVR Rights

(a)                Subject to Section 2.1, except as provided in Section 3.5(b), the CVRs shall not have any voting rights and shall not represent any equity or ownership interest in Parent, in any constituent company to the Merger, any Affiliate of Parent or any other Person.

(b)               The CVRs shall entitle each Holder, at the Settlement Date and subject to any applicable withholding Taxes, to a payment per Parent A Share issued thereunder, without interest, equal (as to both amount and form of consideration) to all dividends or other distributions of any kind declared per Parent A Share of the CVR Shares with a record date after the Closing and prior to the Settlement Date. Any dividends or other distributions of any kind made in respect of the CVR Shares will be delivered promptly to the Rights Agent to be held in escrow with respect to the CVRs (the “CVR Income”) treating the CVR Shares for this purpose as if the Aggregate CVR Shares were then outstanding. On the Settlement Date, the Rights Agent shall deliver to each Holder, concurrent with the issuance to such Holder of the applicable CVR Shares, the CVR Income earned in respect of each such CVR Share, less any applicable withholding Taxes.

12 

 

Article IV
THE RIGHTS AGENT

Section 4.1      Certain Duties and Responsibilities.

The Rights Agent shall not have any liability for any actions taken or not taken by the Rights Agent in connection with the execution, acceptance, administration, exercise and performance of its duties under this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction). No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

Section 4.2      Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a)                the Rights Agent may rely and shall be protected and held harmless by Parent in and shall not incur any liability in acting or refraining from acting in connection with its performance under this Agreement upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction);

(b)               the Rights Agent may consult with legal counsel selected by it, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct and in accordance with such advice or opinion. The reasonable costs of such counsel’s services shall be paid to the Rights Agent in accordance with Section 4.2(g) below. The Rights Agent may perform any and all of its duties through its agents, representatives, custodians and/or nominees and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such agents, representatives, custodians and/or nominees or for any loss to Parent or the Company, to the Holders or any other Person resulting from any such act, omission, default, neglect or misconduct, absent gross negligence, willful misconduct or bad faith on the part of the Rights Agent, such agents, representatives, custodians and/or nominees (which gross negligence, willful misconduct or bad faith must be determined by a final, non-appealable judgment of a court of competent jurisdiction);

(c)                if the Rights Agent becomes involved in litigation on account of this Agreement, it shall have the right to retain counsel and shall be entitled to reimbursement for all reasonable and documented out-of-pocket costs and expenses related thereto as provided in this Section 4.2(c) and Section 4.2(g) hereof; provided, however, that the Rights Agent shall not be entitled to any such reimbursement to the extent such litigation ultimately determines that the Rights Agent acted with willful misconduct, bad faith or gross negligence. In the event that conflicting demands are made upon the Rights Agent for any situation addressed or not addressed in this Agreement, the Rights Agent may withhold performance of the terms of this Agreement until such time as said conflicting demands shall have been withdrawn or the rights of the respective parties shall have been settled by court adjudication, arbitration, joint order or otherwise;

13 

 

(d)               the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(e)                the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(f)                Parent agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence (in each case as determined by a court of competent jurisdiction); provided, however, that the Rights Agent’s aggregate liability with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by Parent to the Rights Agent as fees and charges (but not including reimbursable expenses) in the 12 months preceding the event for which recovery is sought. The provisions under this Section 4.2 and Section 4.1 above shall survive the settlement of the CVRs and the termination of this Agreement and the resignation, replacement or removal of the Rights Agent. To the extent the Rights Agent is entitled to indemnification hereunder, the reasonable and documented out-of-pocket costs and expenses of the Rights Agent incurred in enforcing this right of indemnification shall be paid by Parent;

(g)               Parent agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder in accordance with a fee schedule to be mutually agreed upon in writing between Parent and the Rights Agent and, from time to time, to reimburse the Rights Agent for all of its reasonable, customary and documented out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel) and other disbursements incurred in the preparation, delivery, negotiation, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. Without limiting any of its rights to compensation or reimbursement under this Agreement, the Rights Agent shall deliver to Parent the final invoice for the Rights Agent fees and costs (which shall include a reasonable estimate of all remaining fees and expenses) at a reasonable time prior to the date of delivery of the CVR Shares. An invoice for any reasonable and documented out-of-pocket expenses and per item fees realized will be rendered and payable as mutually agreed upon in writing between Parent and the Rights Agent. For the avoidance of doubt, and notwithstanding anything to the contrary herein, in no event shall Parent be required to indemnify or otherwise reimburse the Rights Agent for any income or similar taxes of the Rights Agent (or an of its Affiliates) in connection with the performance of its duties hereunder;

14 

 

(h)               For avoidance of doubt, no CVRs shall be issued in respect of any shares of capital stock of the Company as to which the holder thereof as of immediately prior to the Effective Time properly demands appraisal in accordance with, and who complies in all respects with, Section 262 of the Delaware General Corporation Law (such shares, “Appraisal Shares” and such statutory section, “Section 262”); provided, however, that notwithstanding the foregoing, (i) the CVRs that would have been issuable in respect of Appraisal Shares but for their status as such shall be deemed to be outstanding for purposes of determining the number of CVR Shares to be issued per CVR and (ii) if any holder of Appraisal Shares shall fail to perfect or otherwise waive, withdraw or lose the right to appraisal under Section 262 with respect to any Appraisal Shares (whether before or after the Settlement Date), then the CVRs issuable in respect of such Appraisal Shares shall be deemed to have been issued to such holder as of the Effective Time and to entitle such holder to all rights of a Holder hereunder with respect thereto, including the right to receive the CVR Shares and CVR Income in respect thereof upon the Settlement Date in accordance with the other provisions of this Agreement;

(i)                 whenever the Rights Agent shall reasonably require that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may rely upon a signed certificate from an authorized officer of Parent, and the Rights Agent shall incur no liability and be held harmless by Parent for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon and in accordance with such certificate;

(j)                 the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(k)               the Rights Agent shall not be required to give any note or surety in respect of the execution of its powers hereunder or otherwise in respect of the premises;

(l)                 the Rights Agent shall not be liable for or by reason of, and shall be held harmless by Parent with respect to any of the statements of fact or recitals contained in this Agreement or any certificate delivered by Parent under this Agreement and shall not be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by Parent only;

(m)             the Rights Agent shall have no liability and shall be held harmless by Parent in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent and the enforceability of this Agreement against the Rights Agent assuming the due execution and delivery hereof by the other parties hereto), nor shall it be responsible for any breach by Parent of any covenant or condition contained in this Agreement;

(n)               anything to the contrary notwithstanding, the Rights Agent shall not be liable for any special, punitive, consequential, indirect or incidental loss or damage of any kind whatsoever (including lost profits) arising out of any act or failure to act hereunder, even if the Rights Agent has been advised of the likelihood of such loss or damage or has foreseen the possibility or likelihood of such damages;

15 

 

(o)               the Rights Agent shall not be deemed to have knowledge of any event of which it was required to receive notice from Parent or the Stockholders’ Representative hereunder and did not receive such notice, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such required notice in writing;

(p)               the Rights Agent and any affiliate of the Rights Agent may buy, sell or deal in any of securities of Parent or the Company or become pecuniarily interested in any transaction in which Parent or the Company may be interested, or contract with or lend money to Parent or the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement, subject to applicable Law (including applicable securities Laws). Nothing herein shall preclude the Rights Agent from acting in any other capacity for Parent or the Company or for any other legal entity;

(q)               the Rights Agent shall act hereunder solely as agent for Parent and it shall not assume any obligations or relationship of agency or trust with any of the Holders or any other Person;

(r)                 the Rights Agent shall not be deemed to have knowledge of a change in authorized officers or duly authorized representatives of any Person without notice of such change, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such notice in writing;

(s)                the Rights Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any Holder with respect to any action or default by Parent, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or to make any demand upon Parent; and

(t)                 the Rights Agent shall have no duty or obligation under any Section of this Agreement that requires the payment of taxes or charges by the Parent or Holder in connection with the Rights Agent’s performance of such duty or obligation, unless and until the Rights Agent is reasonably satisfied that all such taxes and/or charges have been paid.

Section 4.3      Resignation and Removal; Appointment of Successor.

(a)                The Rights Agent may resign at any time by giving written notice thereof to Parent and the Stockholders’ Representative specifying a date when such resignation shall take effect, which notice shall be sent at least thirty (30) days’ prior to the date so specified. In the event any transfer agency relationship in effect between the Parent and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination. Parent may terminate the Rights Agent at any time by giving written notice thereof to the Rights Agent and the Stockholders’ Representative specifying a date when such termination shall take effect, which notice shall be sent at least thirty (30) days prior to the date so specified.

(b)               If the Rights Agent shall resign, be removed or become incapable of acting, Parent and the Stockholders’ Representative shall promptly appoint a qualified successor Rights Agent. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 4.3(b), become the successor Rights Agent.

16 

 

(c)                Parent shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event through electronic mail, to the Stockholders’ Representative. The Stockholders’ Representative shall forward such notice to the Holders. If Parent fails to send such notice within ten (10) days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed and electronically transmitted at the expense of Parent.

(d)               If a successor Rights Agent has not been appointed and has not accepted such appointment by the end of the thirty (30) day period, the Stockholders’ Representative or the Rights Agent may (but shall not be obligated to) apply to a court of competent jurisdiction for the appointment of a successor Rights Agent, and the reasonable documented out-of-pocket costs, expenses (including reasonable attorneys’ fees which are incurred in connection with such a proceeding) shall be paid in accordance with Section 4.2(g) hereof. Any such successor to the Rights Agent shall agree to be bound by the terms of this Agreement and shall, upon receipt of the all relevant books and records relating thereto, become the Rights Agent hereunder. Upon delivery of all of the relevant books and records, pursuant to the terms of this Section 4.3(d) to a successor Rights Agent, the Rights Agent shall thereafter be discharged from any further obligations hereunder. Without limiting any of the rights or immunities of the Rights Agent under this Agreement, the Rights Agent is hereby authorized, in any and all events, to comply with and obey any and all final judgments, orders and decrees of any court of competent jurisdiction which may be filed, entered or issued, and all final arbitration awards and, if it shall so comply or obey, it shall not be liable to any other person by reason of such compliance or obedience.

Section 4.4      Acceptance of Appointment by Successor.

(a)                Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Parent, the Stockholders’ Representative and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; but, on request of Parent, the Stockholders’ Representative or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent but such retiring Rights Agent shall not be required to make any additional expenditure or assume any additional liability in connection with the foregoing.

Article V
COVENANTS AND REPRESENTATIONS

Section 5.1      List of Holders.

Parent shall furnish or cause to be furnished to the Rights Agent in such form as Parent receives from the Company prior to the Effective Time (or other agent performing similar services for Parent or its Affiliates), the names, addresses, shareholdings and tax certification (T.I.N.) of the record holders of Shares eligible to receive CVRs pursuant to the Merger Agreement reasonably promptly following the Effective Time.

17 

 

Section 5.2      Delivery of CVR Shares.

The Rights Agent shall cause the applicable number of CVR Shares to be registered in the names of the Holders upon receipt thereof in the manner provided for in Section 3.4 and in accordance with the terms of this Agreement, and each of the Stockholders’ Representative and Parent shall use reasonable efforts to cause the Rights Agent to do so.

Section 5.3      Assignment.

(a)                Except for assignments occurring through operation of law, Parent and the Company shall not, in whole or in part, assign any of their rights or obligations under this Agreement.

Section 5.4      Tax Treatment.

Unless (x) Parent has determined, based on advice from a “Big 4” accounting firm or nationally recognized tax counsel and after consulting with the Stockholders’ Representative in connection with obtaining such advice and making such determination, that the Intended Tax Treatment (as defined below) is not supported by a “more likely than not” or higher standard or (y) reporting in a manner consistent with the Intended Tax Treatment would require that Parent establish a reserve on its financial statements, each of Parent and each Holder shall and shall cause its Affiliates to (i) treat the CVRs as equity for applicable U.S. federal income tax purposes and to treat the settlement of the CVRs for CVR Shares as a recapitalization under Section 368(a)(1)(E) of the Code for U.S. federal income tax purposes (the “Intended Tax Treatment”) and (ii) file U.S federal income tax returns (if any such tax returns are required to be filed) in a manner consistent with the Intended Tax Treatment.

Article VI
AMENDMENTS

Section 6.1      Amendments Without Consent of Holders or Stockholders’ Representative.

(a)                Without the consent of any Holders, Parent, the Stockholders’ Representative (upon written instruction from the Holders holding a majority of the CVRs) and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes only:

(i)                 to evidence the succession of another Person selected in accordance with Section 4.3(b) as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

18 

 

(ii)               to evidence the termination of the CVR Registrar and the succession of another Person as a successor CVR Registrar and the assumption by any successor of the obligations of the CVR Registrar herein; or

(iii)             to add, eliminate or change any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders; provided, that if such addition, elimination or change is materially adverse to the rights of holders of any other Merger Consideration CVRs, then instruction from the holders of such other Merger Consideration CVRs representing a majority of the Merger Consideration CVR Shares in respect thereof shall also be necessary; provided, further, if such addition, elimination or change adversely affects the rights and obligations of any Holder in a disproportionate manner to the other Holders hereunder, then instruction from each such affected Holder shall also be necessary; or

(iv)             as necessary to ensure that the CVRs are not subject to registration under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

(b)               Any other amendment to this Agreement shall be made by Parent, the Stockholders’ Representative (upon written instruction of each of the Holders of CVRs) and the Rights Agent.

(c)                Promptly after the execution by Parent, Stockholders Representative and the Rights Agent of any amendment pursuant to the provisions of this Section 6.1, Parent shall mail or cause to be mailed a written notice thereof by electronic mail to the Stockholders’ Representative and by first-class mail and electronic mail to the Holders at their addresses as they shall appear on the CVR Register, setting forth in general terms the substance of such amendment.

Section 6.2      Execution of Amendments; Effect of Amendments.

Prior to executing any amendment permitted by this Article VI, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, a certificate from an appropriate officer of Parent or, if requested by the Rights Agent, an opinion of counsel selected by Parent and reasonably acceptable to Rights Agent stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement. Upon the execution of any amendment under this Article VI, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby. No supplement or amendment to this Agreement shall be effective unless duly executed by the Rights Agent, Parent and the Stockholders’ Representative.

19 

 

Article VII
OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1      Notices to the Rights Agent, Parent and the Stockholders’ Representative.

Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by electronic mail (except with respect to the Rights Agent), by facsimile transmission only with respect to the Rights Agent or overnight courier, provided that with respect to notices deliverable to the Stockholders’ Representative, such notices shall be delivered solely via electronic mail or facsimile:

If to Parent or the Company:

Eros International Plc

First Names House

Victoria Road

Douglas

Isle of Man IM2 4DF

British Isles

Attention: Mark Carbeck, Chief Corporate and Strategy Officer
Email: mark.carbeck@erosintl.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197

Attention: Kevin Masuda
Peter Wardle

Email: kmasuda@gibsondunn.com
pwardle@gibsondunn.com

 

If to the Rights Agent:

Computershare Trust Company, N.A.,

Computershare Inc.

150 Royall Street

Canton, MA 02021

Attention: Client Services

Facsimile: (781) 575-3146

 

If to the Stockholders’ Representative:

Fortis Advisors LLC

Attention: Notices Department (Project World Cup)

Email: notices@fortisrep.com

20 

 

Facsimile: (858) 408-1843

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP
555 South Flower Street, Suite 3700
Los Angeles, California 90071
Attention: Rick C. Madden, P.C.
Email: rick.madden@kirkland.com

 

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by electronic mail; or on the next business day after deposit with an overnight courier, if sent by an overnight courier.

Section 7.2      Effect of Headings; Construction.

The headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions of this Agreement. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated.

Section 7.3      Successors and Assigns.

All covenants and agreements in this Agreement by any party hereto shall bind its successors and permitted assigns, whether so expressed or not.

Section 7.4      Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the Holders, the parties hereto and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Holders, the parties hereto and their permitted successors and assigns. For the avoidance of doubt, the Holders shall be considered express third party beneficiaries of this Agreement.

Section 7.5      Governing Law and Venue; Waiver of Jury Trial.

(a)                THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF THAT WOULD RESULT IN THE APPLICATION OF ANY OTHER JURISDICTION’S LAWS. The parties hereby irrevocably submit to the personal jurisdiction of the courts of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents

21 

 

referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement of this Agreement or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims relating to such action, proceeding or transactions shall be heard and determined in such a Delaware state or federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 7.1 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. If and to the extent that any action, suit or proceeding relates to the rectification of Parent’s register of members or the enforcement of Section 2.1 (“Parent Proceedings”) (but otherwise without prejudice to the provisions of this Section 7.5(a)), each party irrevocably agrees that the courts of the Isle of Man shall have jurisdiction to hear and decide such Parent Proceedings and, for this purpose only, each party irrevocably submits to the jurisdiction of the such courts.

(b)               EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.5.

Section 7.6      Severability Clause.

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction; provided, however, that if an excluded provision shall affect the rights, immunities, liabilities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately written notice to the Parent in accordance with Section 4.2.

22 

 

Section 7.7      Counterparts.

This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

Section 7.8      Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon consummation of the issuance and delivery to the Holders of all of the Parent A Shares to which they are entitled pursuant to and in accordance with Section 3.4; provided, Article I, Article IV and this Article VII shall survive.

Section 7.9      Withholding.

Notwithstanding anything to the contrary in this Agreement, Parent, the Rights Agent and their respective agents, shall be entitled to deduct and withhold from any amounts otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of applicable Tax law; provided, however, that other than in respect of compensatory withholding or backup withholding, withholding as a result of the failure to provide the certificate set forth in Section 6.2(g) of the Merger Agreement or withholding in respect of CVR Income, Parent or the Rights Agent, as applicable, shall use commercially reasonable efforts to provide written notice to the Stockholders’ Representative no later than two (2) Business Days prior to any such withholding or deduction in respect of a Holder and to allow the Holder the opportunity to provide any Tax forms, reports or certificates as may be permitted by Applicable Laws to reduce or eliminate such withholding or deduction. Any amounts so withheld and properly remitted to the applicable Governmental Authority shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. In the case of any withholding from any payments not payable in cash, Parent or its agent shall withhold or shall cause to be withheld an amount of such payment having a fair market value equal to the withholding obligation to be satisfied in respect of such payment at the time such amount is withheld (provided that if any cash is otherwise payable to the relevant payee, such withholding shall be made first from such cash), and shall be treated as having paid such amount to the Person in respect of which such amount is withheld.

Section 7.10  Entire Agreement.

This Agreement, the letter agreement between Parent and the Rights Agent of even date herewith regarding fees payable to the Rights Agent (the “Fee Schedule”), and the Merger Agreement represent the entire understanding of Parent, the Company and the Stockholders’ Representative with reference to the CVRs, and, as between such Persons, this Agreement supersedes any and all other oral or written agreements hereto made with respect to the CVRs, except for the Merger Agreement. Notwithstanding the reference to any other document in this Agreement, the Rights Agent shall not be deemed to have knowledge of, or have any duty to

23 

 

ascertain or inquire into, the existence, the content, or the terms and conditions of any other agreement, instrument or document, in each case, to which the Rights Agent is not a party, whether or not such agreement, instrument or document, as the case may be, is referenced in this Agreement. This Agreement and the Fee Schedule represent the entire understanding of the Rights Agent with reference to the CVRs and the performance of the Rights Agent’s duties, its immunities and rights with respect thereto, and with respect to the Rights Agent, this Agreement and the Fee Schedule supersede any and all other oral or written agreements heretofore made with respect to the CVRs. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling, and this Agreement may be amended, modified, supplemented or altered only in accordance with the terms of Article VII. No party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not contained herein.

Section 7.11  Force Majeure.

Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance to the extent resulting from acts beyond its reasonable control including, without limitation, acts of God, epidemics, pandemics, terrorist acts, breakdowns, interruptions or malfunctions of any communications or computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest; provided, that the Rights Agent shall use reasonable commercial efforts to resume performance as soon as practicable. If any such act or event occurs, the Rights Agent shall give prompt written notice to Parent and the Stockholders’ Representative, stating the nature of the act or event and action being taken to avoid or minimize its effect.

Section 7.12  Funds.

All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more bank accounts to be maintained by the Rights Agent in its name as agent for Parent. Until paid pursuant to the terms of this Agreement, the Rights Agent will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by the Rights Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. The Rights Agent may from time to time receive interest, dividends or other earnings in connection with such deposits. The Rights Agent shall not be obligated to pay such interest, dividends or earnings to the Parent, any Holder or any other Person.

 

[Remainder of Page Intentionally Left Blank.]

24 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

EROS INTERNATIONAL PLC


By: /s/ Kishore Lulla
Name: Kishore Lulla
Title: Executive Chairman and Group Chief

Executive Officer and Managing Director

 

[Signature Page to Class C CVR Agreement]

  

 

STX FILMWORKS, INC.

 

By: /s/ Noah Fogelson
Name: Noah Fogelson
Title: Executive Vice President,

Corporate Strategy and General

Counsel

 

[Signature Page to Class C CVR Agreement]

  

 

FORTIS ADVISORS LLC

 

By: /s/ Ryan Simkin
Name: Ryan Simkin
Title: Managing Director

 

[Signature Page to Class C CVR Agreement]

  

 

COMPUTERSHARE TRUST

COMPANY, N.A. AND COMPUTERSHARE INC.

On behalf of both entities

By: /s/ Collin Ekeogu

Name: Collin Ekeogu
Title: Manager, Corporate Actions

 

[Signature Page to Class C CVR Agreement]

Exhibit 4.4

CLASS B CONTINGENT VALUE RIGHTS AGREEMENT

This CLASS B CONTINGENT VALUE RIGHTS AGREEMENT, dated as of July 30, 2020 (this “Agreement”), is entered into by and among Eros International Plc, an Isle of Man company limited by shares (“Parent”), STX Filmworks, Inc., a Delaware corporation (the “Company”), Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the former holders of the Shares (in such capacity, the “Stockholders’ Representative”), and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally chartered trust company, collectively as rights agent (the “Rights Agent”) and as initial CVR Registrar (as defined herein).

WITNESSETH:

WHEREAS, the Company, Parent, England Holdings 2, Inc., a Delaware corporation and indirect wholly-owned Subsidiary of Parent (“England Holdings 2”), England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly-owned Subsidiary of England Holdings 2 (“Merger Sub”), have entered into an Agreement and Plan of Merger (as the same may be amended, modified or supplemented from time to time, the “Merger Agreement”), dated as of April 17, 2020, pursuant to which Merger Sub merged with and into the Company (the “Merger”), with the Company surviving the Merger, as an indirect wholly-owned Subsidiary of Parent;

WHEREAS, pursuant to the Merger Agreement, Parent agreed to issue to holders of record of shares of Class B Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Shares”) outstanding immediately prior to the effective time of the Merger (the “Effective Time”), a number of contingent value rights (the “CVRs”) as hereinafter described; and

WHEREAS, each holder of Shares as of immediately prior to the Effective Time, will receive, among other things, as merger consideration, the right to receive upon the Effective Time a number of CVRs in such amount as set forth in Article II of the Merger Agreement.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

Article I
DEFINITIONS

Section 1.1      Definitions.

(a)                For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i)                 the terms defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular;

1 

 

(ii)               the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iii)             unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa;

(iv)             the term “Affiliate” when used with respect to the Company shall, after the Effective Time, include Parent and its Subsidiaries and Affiliates; and

(v)               all references to “including” shall be deemed to mean including without limitation.

(b)               Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Affiliate” means, with respect to any specified Person, (i) any other Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (ii) with respect to any natural person, any Member of the Immediate Family of such natural person. Notwithstanding the foregoing, for purposes hereof, (i) none of the Holders, the Company, or any of their respective Subsidiaries shall be considered Affiliates of any portfolio company (or Subsidiary thereof) in which any Holder or any of its affiliated investment funds have made a debt or equity investment, and (ii) no Holder or any of its Affiliates shall be considered an Affiliate of (a) Parent or any of its Subsidiaries or (b) any other Holders or their respective Affiliates (except to the extent such Holders are otherwise Affiliates under this definition without regard to their status as Holders).

“Agreement” has the meaning set forth in the Preamble.

“Aggregate CVR Shares” means the aggregate number of underlying Parent A Shares issuable in respect of all CVRs.

“Appraisal Shares” has the meaning set forth in Section 4.2(h).

“Available Class B Merger Consideration CVR Shares” means the Merger Consideration CVR Share Cap minus the Parent A Shares issued to the Class E CVRs, the Class D CVRs and the Class C CVRs.

“Base Price” means $2.60.

2 

 

“Change of Control Transaction” means the occurrence of (i) an acquisition by any Person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares or comparable equity interests of Parent entitling that Person to fifty percent (50%) or more of the total voting power of all such shares or comparable equity interests of Parent; or (ii) the consolidation or merger of Parent with or into any other Person, any merger of another Person into Parent, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of Parent’s properties, business or assets, other than (in the case of this clause (ii) only) (1) any transaction (x) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares or comparable equity interests of Parent, and (y) pursuant to which holders of Parent’s shares or comparable equity interest immediately prior to such transaction have the right to exercise, directly or indirectly, fifty percent (50%) or more of the total voting power of all shares or comparable equity interest of the continuing or surviving Person immediately after such transaction, or (2) any merger solely for the purpose of changing Parent’s jurisdiction of formation and resulting in a reclassification, conversion or exchange of outstanding shares or comparable equity interests into shares or comparable equity interest of the surviving entity with substantially identical rights.

“Class A CVR” means the contingent value rights issued by Parent with respect to the Class A Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class A CVR Agreement.

“Class A CVR Agreement” means the Class A CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class A CVR Shares” means the underlying Parent A Shares issuable in respect of the Class A CVRs.

“Class C CVR” means the contingent value rights issued by Parent with respect to the Class C Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class C CVR Agreement.

“Class C CVR Agreement” means the Class C CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class C CVR Shares” means the underlying Parent A Shares issuable in respect of the Class C CVRs.

“Class D CVR” means the contingent value rights issued by Parent with respect to the Class D Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class D CVR Agreement.

“Class D CVR Agreement” means the Class D CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

3 

 

“Class D CVR Shares” means the underlying Parent A Shares issuable in respect of the Class D CVRs.

“Class E CVR” means the contingent value rights issued by Parent with respect to the Class E Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class E CVR Agreement.

“Class E CVR Agreement” means the Class E CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class E CVR Shares” means the underlying Parent A Shares issuable in respect of the Class E CVRs.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Company” has the meaning set forth in the Preamble.

“CVR” means a contingent value right issued by Parent with respect to the Shares, pursuant to the Merger Agreement and this Agreement.

“CVR Shares” has the meaning set forth in Section 3.4(b).

“CVR Register” has the meaning set forth in Section 3.3(b).

“CVR Registrar” has the meaning set forth in Section 3.3(b).

“Effective Time” has the meaning set forth in the Recitals.

“Eros Pre-Closing Equity Financing” has the meaning ascribed in the PIPE Agreement.

“Final Settlement Time” has the meaning set forth in Section 3.2(b).

“Funds” has the meaning set forth in Section 7.12.

“Fully Diluted Parent Shares” means, as of immediately prior to the Effective Time, the sum of (without duplication) (i) the aggregate number of Parent Ordinary Shares then outstanding, plus (ii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding In-the-Money Parent Options (whether or not vested), plus (iii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding Parent RSU Awards (whether or not vested), plus (iv) the aggregate number of Parent Ordinary Shares then subject to issuance pursuant to the Parent Convertible Notes assuming full conversion thereof at a conversion price of $2.60; provided, however, that, notwithstanding the foregoing, Fully Diluted Parent Shares shall not include any Parent Ordinary Shares issuable pursuant to the Eros Pre-Closing Equity Financing. For the avoidance of doubt, Fully Diluted Parent Shares shall be calculated prior to, and without giving effect to, the PIPE Investment.

“Holder” means a Person in whose name a CVR is registered in the CVR Register.

4 

 

“In-the-Money Parent Options” means an Eros Option (as defined in the Merger Agreement) having a per Parent Ordinary Share exercise price less than the Parent Trading Price.

“Investors’ Rights Agreement” means the Investors’ Rights Agreement, entered into on or around the date hereof, by and among Parent, certain shareholders of Parent and the investors party thereto.

“Law” with respect to any Person, means (a) all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

“Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Members of the Immediate Family” means, with respect to any individual, each spouse or child or other descendants of such individual, each trust created solely for the benefit of one or more of the aforementioned Persons and their spouses and each custodian or guardian of any property of one or more of the aforementioned Persons in his capacity as such custodian or guardian.

“Merger” has the meaning set forth in the Recitals.

“Merger Agreement” has the meaning set forth in the Recitals.

“Merger Consideration CVRs” means the CVRs, the Class E CVRs, the Class D CVRs, the Class C CVRs and the Class A CVRs.

“Merger Consideration CVR Share Cap” means a number of Parent A Shares equal to the Fully Diluted Parent Shares.

“Merger Consideration CVR Shares” means the Aggregate CVR Shares, the Class E CVR Shares, the Class D CVR Shares, the Class C CVR Shares and the Class A CVR Shares.

“Merger Sub” has the meaning set forth in the Recitals.

“Organizational Documents” has the meaning set forth in Section 2.1(a).

“Parent” has the meaning set forth in the Preamble.

“Parent A Shares” means the A Ordinary Shares, par value £0.30 per share, of Parent.

“Parent B Shares” means the B Ordinary Shares, par value £0.30 per share, of Parent.

“Parent Convertible Notes” means Parent’s Senior Convertible Notes due September 27, 2020 in the original aggregate principal amount of $27,500,000.

“Parent Option” means a compensatory option to purchase Parent Ordinary Shares.

5 

 

“Parent Ordinary Shares” means, collectively, the Parent A Shares and the Parent B Shares.

“Parent Proceedings” has the meaning set forth in Section 7.5(a).

“Parent RSU Award” means an award of restricted stock units relating to Parent Ordinary Shares.

“Parent Trading Price” means the VWAP for one Parent A Share for the twenty (20) consecutive full Trading Days ending on the full Trading Day immediately preceding the Effective Time (as adjusted as appropriate to reflect any stock splits, stock dividends, combinations, reorganizations, classifications or similar events).

“Permitted Transfer” means: (i) the transfer (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; or (vi) a transfer by any Holder to one or more of its Affiliates or affiliated investment funds of any of its Affiliates.

“Permitted Transferee” means a Person who receives a CVR pursuant to a Permitted Transfer and otherwise in accordance with this Agreement.

“Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Authority or other entity of any kind or nature.

“PIPE Agreement” means that certain Subscription Agreement, made as of April 17, 2020, by and among Parent and each Person defined therein as a “Purchaser.”

“PIPE Investment” means the purchase of Parent A Shares pursuant to the PIPE Agreement.

“PIPE Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Pre-Closing VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Closing.

“Pre-Settlement VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Settlement Date; provided, that for purposes of determining the CVR Shares issuable as of any time prior to the Settlement Date, the reference to “the Trading Day immediately preceding the Settlement Date” in this definition shall be deemed a reference to “the Trading Day immediately preceding the applicable time of determination”.

6 

 

“Reference Price” means a price per share equal to the lesser of (x) the Pre-Settlement VWAP and (y) the Upper Collar Price; provided, that if the Pre-Settlement VWAP is equal to or greater than $4, then the Reference Price will equal the average of the Pre-Settlement VWAP and the Upper Collar Price.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Settlement Date” shall mean the date that is the earlier to occur of (a) the later to occur of (i) the first time that the Merger Consideration CVR Shares have been registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and (ii) the 75th calendar day after the Closing and (b) the occurrence of the Settlement Outside Date.

“Settlement Outside Date” means the date that is six (6) months after the Closing; provided that the Settlement Outside Date may be extended (but only once) by holders of a majority of the Class E CVRs; provided, further, that such majority must include each such holder that, together with its Affiliates, purchased $15 million or more of Parent A Shares in the PIPE Investment.

“Shares” has the meaning set forth in the Recitals.

“Stockholders’ Representative” has the meaning set forth in the Preamble.

“STX Purchase Price” means the lowest of (i) the Base Price, (ii) the volume weighted average of the purchase price of all purchases comprising the Eros Pre-Closing Equity Financing and (iii) the Pre-Closing VWAP; provided, however, that if the Pre-Closing VWAP is greater than $3.25, then the STX Purchase Price shall be the average of the Base Price and the Pre-Closing VWAP.

“Subsidiary” of any Person shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or comparable governing body are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person.

“Taxes” or “Tax” means all taxes, charges, fees, levies or other assessments in the nature of a tax imposed by any governmental authority, including any income, gross receipts, license, severance, occupation, premium, environmental (including taxes under former Code Section 59A), customs, duties, profits, disability, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, occupancy, franchise, real property, personal property, business and occupation, mercantile, windfall profits, capital stock, stamp, transfer, workmen’s compensation, amounts due under any applicable laws governing escheat or unclaimed property or other taxes, charges, fees, levies or other assessments in the nature of a tax, together with any interest, penalties, additions to tax or additional amounts imposed by any Governmental Authority with respect thereto, whether disputed or not.

7 

 

“Trading Day” means, with respect to any referenced security, any day on which such security is actually traded on the principal securities exchange or securities market on which such security is then listed.

“Upper Collar Price” means the quotient of the STX Purchase Price, divided by one and one-half (1.5).

“VWAP” means, for any security as of any date(s), the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then listed during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (sets to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date(s) on any of the foregoing bases, the VWAP of such security on such date(s) shall be the fair market value thereof on such date(s) as reasonably determined by a nationally recognized independent investment banking firm mutually agreed between Parent and the Stockholders’ Representative.

Article II
OPERATION OF PARENT

Section 2.1      Operation of Parent.

From the Effective Time until the Settlement Date, Parent shall not, and shall cause its Subsidiaries and Affiliates not to:

(a)                after the effectiveness of the Amended Articles (as defined in the Investors’ Rights Agreement), effect any action that requires approval by the shareholders of Parent under Parent’s Memorandum of Association or Articles of Association (the “Organizational Documents”) or applicable Law; or

(b)               prior to the effectiveness of Amended Articles, take any action set forth in Section 4.3(c) of the Investors’ Rights Agreement as in effect on the date hereof,

without, in each such case, obtaining the consent thereto of holders of such class and number of Merger Consideration CVRs (including the CVRs hereunder) that, together with the shares of Parent actually voted (at a meeting or by resolution) with respect to such action and assuming all Merger Consideration CVR Shares were outstanding Parent A Shares and voted, would be required to approve such action under the Organizational Documents, applicable Law or Section 4.3(c) of the Investors’ Rights Agreement, as applicable. For purposes of the foregoing consent rights, the number of Merger Consideration CVR Shares underlying the Merger Consideration CVRs as of any time prior to the Settlement Date shall be calculated as set forth below in Article III and in Article III of the Class E CVR Agreement with respect to the Class E CVRs, Article III of the Class D CVR Agreement with respect to the Class D CVRs, Article III of the Class C CVR Agreement with respect to the Class C CVRs and Article III of the Class A CVR Agreement with respect to the Class A CVRs.

8 

 

Article III
CVRS

Section 3.1      Issuance of CVRs; Appointment of Rights Agent; Reservation of Shares.

(a)                The CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement. The registration on the books and records of Parent and administration of the CVRs shall be handled pursuant to this Agreement in the manner set forth in this Agreement.

(b)               Parent hereby appoints the Rights Agent to act as rights agent for the CVRs in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

(c)                From the date hereof until the issuance of the Aggregate CVR Shares in accordance with the terms hereof, Parent shall reserve and keep available out of its authorized but unissued share capital, for the purpose of effecting the issuance of the CVR Shares hereunder, a number of Parent A Shares equal to the Merger Consideration CVR Share Cap, minus the number of CVR Shares, if any, previously issued in accordance with the terms of this Agreement; and if at any time during such period the number of authorized but unissued Parent A Shares shall not be sufficient to effect the issuance of the Aggregate CVR Shares in full, Parent shall take all such action as may be necessary to increase its authorized but unissued share capital as shall be sufficient for such purposes.

Section 3.2      Nontransferable; Expiration.

(a)                The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than to a Permitted Transferee. Any purported transfer of a CVR to anyone other than a Permitted Transferee shall be null and void ab initio.

(b)               Subject to Section 3.4(c), the CVRs shall expire on the Settlement Date upon the registration of the CVR Shares in the respective names of the Holders entitled thereto and shall thereafter be of no force or effect following such registration; provided that, if any CVR Shares are not so registered on the Settlement Date, then the CVRs in respect thereof shall not expire until the registration of such CVR Shares in the respective names of the Holders entitled thereto (the time of registration thereof, the “Final Settlement Time”).

Section 3.3      No Certificate; Registration; Registration of Transfer; Change of Address.

(a)                The CVRs shall not be evidenced by a certificate or other instrument.

9 

 

(b)               Upon receipt from Parent of the names and addresses of each Holder and the number of CVRs held by such Holder, the Rights Agent shall keep a register (the “CVR Register”) for the registration of CVRs in a book-entry position for each Holder of a CVR. The CVR Register shall set forth the name and address of each Holder, and the number of CVRs held by such Holder and Tax Identification Number of each Holder. Each of Parent and the Stockholders’ Representative may receive and inspect a copy of the CVR Register, from time to time, upon written request made to the CVR Registrar. Within five (5) Business Days after receipt of such request, the CVR Registrar shall deliver a copy of the CVR Register, as then in effect, to Parent and the Stockholders’ Representative at the address set forth in Section 7.1. The Rights Agent is hereby initially appointed “CVR Registrar” for the purpose of registering CVRs and transfers of CVRs as herein provided.

(c)                Subject to the restrictions set forth in Section 3.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other reasonably requested documentation in form reasonably satisfactory to Parent and the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. A request for a transfer of a CVR shall be accompanied by documentation establishing that the transfer is to a Permitted Transferee and shall thereafter be supplemented with and any other information as may be reasonably requested by Parent or the CVR Registrar (including opinions of counsel, if appropriate). Upon receipt of such written notice, the CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein on its face, without investigation or inquiry by the Rights Agent, register the transfer of the CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same rights and entitling the transferee to the same benefits and rights under this Agreement as those held by the transferor immediately prior to such transfer. No transfer of a CVR shall be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void ab initio (unless the transfer was permissible hereunder and such failure to be duly registered is attributable to the fault of the CVR Registrar). Any transfer or assignment of the CVRs shall be without charge by Parent or the CVR Registrar (other than the cost of any Tax which shall be the responsibility of the transferor) to the Holder.

(d)               A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder and accompanied by such other evidence of the Holder’s identity or interest in the CVR as reasonably requested by the Rights Agent. Upon receipt of such written notice, the CVR Registrar is hereby authorized to, and shall promptly, record the change of address in the CVR Register.

(e)                The Stockholders’ Representative may make a written request to the Rights Agent for a list containing the names, addresses and number of CVRs of the Holders that are registered in the CVR Register. Within five (5) Business Days following the date of receipt by the Rights Agent of such request, the CVR Registrar shall deliver a copy of such list to the Stockholders’ Representative.

10 

 

Section 3.4      Issuance Procedures.

(a)                On the Settlement Date, Parent shall issue, and cause to be deposited with the Rights Agent, a number of Parent A Shares equal to the Aggregate CVR Shares. On the Settlement Date or as promptly as practicable thereafter, subject to Section 3.4(c) below, the Rights Agent shall cause the applicable number of CVR Shares to be registered in the name of each of the Holders as reflected in the CVR Register as of the close of business on the last Business Day prior to such issuance date.

(b)               The number of Parent A Shares issued in respect of each CVR from the Available Class B Merger Consideration CVR Shares (the “CVR Shares”) shall be equal to the quotient obtained by dividing $1,000 by the Reference Price; provided, that the number of Parent A Shares allocated to the CVRs shall be pro-rated in the event there are insufficient Available Class B Merger Consideration CVR Shares remaining for allocation to the CVRs. For all purposes above, fractional CVRs shall represent a proportionate number of CVR Shares; provided, however, that no fractional Parent A Shares (or certificate or scrip representing the same) shall be issued upon the settlement of any CVRs hereunder. Notwithstanding any other provision of this Agreement, each Holder of CVRs who would otherwise have been entitled to receive a fraction of a Parent A Share upon settlement of such Holder’s CVRs hereunder (after aggregating all CVRs of such Holder that are subject to this Agreement) shall receive, in lieu thereof, an amount of cash (rounded to the nearest whole cent), without interest, equal to such fractional amount multiplied by the Reference Price. Whenever a payment for fractional Parent A Shares or fractional shares is to be made by the Rights Agent under any section of this Agreement, Parent shall (i) promptly deliver to the Rights Agent a certificate setting forth the amount of any such payment and calculation related thereto and (ii) cash in the amount of such payment to the Rights Agent by wire transfer of immediately available funds to make such payment to the applicable Holder by check mailed to such Holder as reflected in the CVR Register or by wire transfer of immediately available funds. The Rights Agent shall not be liable to any Holder or Parent for the amount of any cash payment made to such Holder on behalf of Parent in accordance with the amount set forth in such certificate.

(c)                Parent’s obligation to issue and cause to be deposited with the Rights Agent the applicable number of CVR Shares, and the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares shall be conditioned on the execution and delivery by such Holder of a lockup agreement with Parent, substantially in the form attached hereto as Exhibit A (a “Lock-Up Agreement”); provided, however, that the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares to a Holder shall not be conditioned on the execution and delivery by such Holder of a Lock-Up Agreement if (i) such Holder or any of its Affiliates shall have entered into a lockup agreement with Parent in connection with the PIPE Investment (such lockup agreement, a “PIPE Lock-Up Agreement”) or (ii) the Settlement Date is the Settlement Outside Date and the Merger consideration CVR Shares have not been, as of such date, registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; provided, further, that Rights Agent shall have no duty to act without the written instruction of Parent with respect to the foregoing.

11 

 

(d)               Without limiting the other provisions of this Agreement, if at any time during the period between the execution of this Agreement and the Settlement Date (or if applicable, the Final Settlement Time), any change in the number or type of outstanding Parent A Shares shall occur as a result of a reclassification, recapitalization, exchange, stock split (including a reverse stock split), combination or readjustment of capital stock, shares or any stock dividend or stock distribution with a record date during such period (including any such reclassification, recapitalization, exchange, stock split, combination or readjustment of capital stock, shares or any stock dividend or stock distribution in connection with a consolidation, merger or combination in which Parent is the continuing or surviving corporation), the CVR Shares and any other similarly dependent items, as the case may be, shall be appropriately equitably adjusted to provide the same economic effect as contemplated by this Agreement prior to such event; provided that nothing in this Section 3.4(d) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

(e)                If, at any time prior to the Settlement Date (or, if applicable, the Final Settlement Time) Parent effects any Change of Control Transaction, then, upon any Settlement Date, each Holder shall have the right to receive, on the Settlement Date, for each CVR Share that would have been issuable upon the Settlement Date the same consideration (in the same amount and form) per Parent A Share payable to the holders thereof in such Change of Control Transaction. For purposes hereof, the determination of Pre-Settlement VWAP shall be appropriately adjusted to refer to such consideration instead of Parent A Shares. If holders of Parent A Shares are given any right of election as to the securities, cash or property to be received in such Change of Control Transaction, then each Holder shall be given the same right of election. To the extent necessary to effectuate the foregoing provisions, Parent shall ensure that any successor to Parent or the surviving entity in such Change of Control Transaction shall agree to be bound by the terms of this Agreement. In the event that the Final Settlement Time occurs after the Settlement Date, references herein to Settlement Date shall mean as promptly as practicable following the Change of Control Transaction.

Section 3.5      CVR Rights

(a)                Subject to Section 2.1, except as provided in Section 3.5(b), the CVRs shall not have any voting rights and shall not represent any equity or ownership interest in Parent, in any constituent company to the Merger, any Affiliate of Parent or any other Person.

(b)               The CVRs shall entitle each Holder, at the Settlement Date and subject to any applicable withholding Taxes, to a payment per Parent A Share issued thereunder, without interest, equal (as to both amount and form of consideration) to all dividends or other distributions of any kind declared per Parent A Share of the CVR Shares with a record date after the Closing and prior to the Settlement Date. Any dividends or other distributions of any kind made in respect of the CVR Shares will be delivered promptly to the Rights Agent to be held in escrow with respect to the CVRs (the “CVR Income”) treating the CVR Shares for this purpose as if the Aggregate CVR Shares were then outstanding. On the Settlement Date, the Rights Agent shall deliver to each Holder, concurrent with the issuance to such Holder of the applicable CVR Shares, the CVR Income earned in respect of each such CVR Share, less any applicable withholding Taxes.

12 

 

Article IV
THE RIGHTS AGENT

Section 4.1      Certain Duties and Responsibilities.

The Rights Agent shall not have any liability for any actions taken or not taken by the Rights Agent in connection with the execution, acceptance, administration, exercise and performance of its duties under this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction). No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

Section 4.2      Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a)                the Rights Agent may rely and shall be protected and held harmless by Parent in and shall not incur any liability in acting or refraining from acting in connection with its performance under this Agreement upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction);

(b)               the Rights Agent may consult with legal counsel selected by it, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct and in accordance with such advice or opinion. The reasonable costs of such counsel’s services shall be paid to the Rights Agent in accordance with Section 4.2(g) below. The Rights Agent may perform any and all of its duties through its agents, representatives, custodians and/or nominees and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such agents, representatives, custodians and/or nominees or for any loss to Parent or the Company, to the Holders or any other Person resulting from any such act, omission, default, neglect or misconduct, absent gross negligence, willful misconduct or bad faith on the part of the Rights Agent, such agents, representatives, custodians and/or nominees (which gross negligence, willful misconduct or bad faith must be determined by a final, non-appealable judgment of a court of competent jurisdiction);

(c)                if the Rights Agent becomes involved in litigation on account of this Agreement, it shall have the right to retain counsel and shall be entitled to reimbursement for all reasonable and documented out-of-pocket costs and expenses related thereto as provided in this Section 4.2(c) and Section 4.2(g) hereof; provided, however, that the Rights Agent shall not be entitled to any such reimbursement to the extent such litigation ultimately determines that the Rights Agent acted with willful misconduct, bad faith or gross negligence. In the event that conflicting demands are made upon the Rights Agent for any situation addressed or not addressed in this Agreement, the Rights Agent may withhold performance of the terms of this Agreement until such time as said conflicting demands shall have been withdrawn or the rights of the respective parties shall have been settled by court adjudication, arbitration, joint order or otherwise;

13 

 

(d)               the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

 

(e)                the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(f)                Parent agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence (in each case as determined by a court of competent jurisdiction); provided, however, that the Rights Agent’s aggregate liability with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by Parent to the Rights Agent as fees and charges (but not including reimbursable expenses) in the 12 months preceding the event for which recovery is sought. The provisions under this Section 4.2 and Section 4.1 above shall survive the settlement of the CVRs and the termination of this Agreement and the resignation, replacement or removal of the Rights Agent. To the extent the Rights Agent is entitled to indemnification hereunder, the reasonable and documented out-of-pocket costs and expenses of the Rights Agent incurred in enforcing this right of indemnification shall be paid by Parent;

(g)               Parent agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder in accordance with a fee schedule to be mutually agreed upon in writing between Parent and the Rights Agent and, from time to time, to reimburse the Rights Agent for all of its reasonable, customary and documented out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel) and other disbursements incurred in the preparation, delivery, negotiation, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. Without limiting any of its rights to compensation or reimbursement under this Agreement, the Rights Agent shall deliver to Parent the final invoice for the Rights Agent fees and costs (which shall include a reasonable estimate of all remaining fees and expenses) at a reasonable time prior to the date of delivery of the CVR Shares. An invoice for any reasonable and documented out-of-pocket expenses and per item fees realized will be rendered and payable as mutually agreed upon in writing between Parent and the Rights Agent. For the avoidance of doubt, and notwithstanding anything to the contrary herein, in no event shall Parent be required to indemnify or otherwise reimburse the Rights Agent for any income or similar taxes of the Rights Agent (or an of its Affiliates) in connection with the performance of its duties hereunder;

14 

 

(h)               For avoidance of doubt, no CVRs shall be issued in respect of any shares of capital stock of the Company as to which the holder thereof as of immediately prior to the Effective Time properly demands appraisal in accordance with, and who complies in all respects with, Section 262 of the Delaware General Corporation Law (such shares, “Appraisal Shares” and such statutory section, “Section 262”); provided, however, that notwithstanding the foregoing, (i) the CVRs that would have been issuable in respect of Appraisal Shares but for their status as such shall be deemed to be outstanding for purposes of determining the number of CVR Shares to be issued per CVR and (ii) if any holder of Appraisal Shares shall fail to perfect or otherwise waive, withdraw or lose the right to appraisal under Section 262 with respect to any Appraisal Shares (whether before or after the Settlement Date), then the CVRs issuable in respect of such Appraisal Shares shall be deemed to have been issued to such holder as of the Effective Time and to entitle such holder to all rights of a Holder hereunder with respect thereto, including the right to receive the CVR Shares and CVR Income in respect thereof upon the Settlement Date in accordance with the other provisions of this Agreement;

(i)                 whenever the Rights Agent shall reasonably require that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may rely upon a signed certificate from an authorized officer of Parent, and the Rights Agent shall incur no liability and be held harmless by Parent for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon and in accordance with such certificate;

(j)                 the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(k)               the Rights Agent shall not be required to give any note or surety in respect of the execution of its powers hereunder or otherwise in respect of the premises;

(l)                 the Rights Agent shall not be liable for or by reason of, and shall be held harmless by Parent with respect to any of the statements of fact or recitals contained in this Agreement or any certificate delivered by Parent under this Agreement and shall not be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by Parent only;

(m)             the Rights Agent shall have no liability and shall be held harmless by Parent in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent and the enforceability of this Agreement against the Rights Agent assuming the due execution and delivery hereof by the other parties hereto), nor shall it be responsible for any breach by Parent of any covenant or condition contained in this Agreement;

(n)               anything to the contrary notwithstanding, the Rights Agent shall not be liable for any special, punitive, consequential, indirect or incidental loss or damage of any kind whatsoever (including lost profits) arising out of any act or failure to act hereunder, even if the Rights Agent has been advised of the likelihood of such loss or damage or has foreseen the possibility or likelihood of such damages;

15 

 

(o)               the Rights Agent shall not be deemed to have knowledge of any event of which it was required to receive notice from Parent or the Stockholders’ Representative hereunder and did not receive such notice, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such required notice in writing;

(p)               the Rights Agent and any affiliate of the Rights Agent may buy, sell or deal in any of securities of Parent or the Company or become pecuniarily interested in any transaction in which Parent or the Company may be interested, or contract with or lend money to Parent or the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement, subject to applicable Law (including applicable securities Laws). Nothing herein shall preclude the Rights Agent from acting in any other capacity for Parent or the Company or for any other legal entity;

(q)               the Rights Agent shall act hereunder solely as agent for Parent and it shall not assume any obligations or relationship of agency or trust with any of the Holders or any other Person;

(r)                 the Rights Agent shall not be deemed to have knowledge of a change in authorized officers or duly authorized representatives of any Person without notice of such change, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such notice in writing;

(s)                the Rights Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any Holder with respect to any action or default by Parent, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or to make any demand upon Parent; and

(t)                 the Rights Agent shall have no duty or obligation under any Section of this Agreement that requires the payment of taxes or charges by the Parent or Holder in connection with the Rights Agent’s performance of such duty or obligation, unless and until the Rights Agent is reasonably satisfied that all such taxes and/or charges have been paid.

Section 4.3      Resignation and Removal; Appointment of Successor.

(a)                The Rights Agent may resign at any time by giving written notice thereof to Parent and the Stockholders’ Representative specifying a date when such resignation shall take effect, which notice shall be sent at least thirty (30) days’ prior to the date so specified. In the event any transfer agency relationship in effect between the Parent and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination. Parent may terminate the Rights Agent at any time by giving written notice thereof to the Rights Agent and the Stockholders’ Representative specifying a date when such termination shall take effect, which notice shall be sent at least thirty (30) days prior to the date so specified.

(b)               If the Rights Agent shall resign, be removed or become incapable of acting, Parent and the Stockholders’ Representative shall promptly appoint a qualified successor Rights Agent. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 4.3(b), become the successor Rights Agent.

16 

 

(c)                Parent shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event through electronic mail, to the Stockholders’ Representative. The Stockholders’ Representative shall forward such notice to the Holders. If Parent fails to send such notice within ten (10) days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed and electronically transmitted at the expense of Parent.

 

(d)               If a successor Rights Agent has not been appointed and has not accepted such appointment by the end of the thirty (30) day period, the Stockholders’ Representative or the Rights Agent may (but shall not be obligated to) apply to a court of competent jurisdiction for the appointment of a successor Rights Agent, and the reasonable documented out-of-pocket costs, expenses (including reasonable attorneys’ fees which are incurred in connection with such a proceeding) shall be paid in accordance with Section 4.2(g) hereof. Any such successor to the Rights Agent shall agree to be bound by the terms of this Agreement and shall, upon receipt of the all relevant books and records relating thereto, become the Rights Agent hereunder. Upon delivery of all of the relevant books and records, pursuant to the terms of this Section 4.3(d) to a successor Rights Agent, the Rights Agent shall thereafter be discharged from any further obligations hereunder. Without limiting any of the rights or immunities of the Rights Agent under this Agreement, the Rights Agent is hereby authorized, in any and all events, to comply with and obey any and all final judgments, orders and decrees of any court of competent jurisdiction which may be filed, entered or issued, and all final arbitration awards and, if it shall so comply or obey, it shall not be liable to any other person by reason of such compliance or obedience.

Section 4.4      Acceptance of Appointment by Successor.

(a)                Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Parent, the Stockholders’ Representative and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; but, on request of Parent, the Stockholders’ Representative or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent but such retiring Rights Agent shall not be required to make any additional expenditure or assume any additional liability in connection with the foregoing.

Article V
COVENANTS AND REPRESENTATIONS

Section 5.1      List of Holders.

Parent shall furnish or cause to be furnished to the Rights Agent in such form as Parent receives from the Company prior to the Effective Time (or other agent performing similar services for Parent or its Affiliates), the names, addresses, shareholdings and tax certification (T.I.N.) of the record holders of Shares eligible to receive CVRs pursuant to the Merger Agreement reasonably promptly following the Effective Time.

17 

 

Section 5.2      Delivery of CVR Shares.

The Rights Agent shall cause the applicable number of CVR Shares to be registered in the names of the Holders upon receipt thereof in the manner provided for in Section 3.4 and in accordance with the terms of this Agreement, and each of the Stockholders’ Representative and Parent shall use reasonable efforts to cause the Rights Agent to do so.

Section 5.3      Assignment.

(a)                Except for assignments occurring through operation of law, Parent and the Company shall not, in whole or in part, assign any of their rights or obligations under this Agreement.

Section 5.4      Tax Treatment.

Unless (x) Parent has determined, based on advice from a “Big 4” accounting firm or nationally recognized tax counsel and after consulting with the Stockholders’ Representative in connection with obtaining such advice and making such determination, that the Intended Tax Treatment (as defined below) is not supported by a “more likely than not” or higher standard or (y) reporting in a manner consistent with the Intended Tax Treatment would require that Parent establish a reserve on its financial statements, each of Parent and each Holder shall and shall cause its Affiliates to (i) treat the CVRs as equity for applicable U.S. federal income tax purposes and to treat the settlement of the CVRs for CVR Shares as a recapitalization under Section 368(a)(1)(E) of the Code for U.S. federal income tax purposes (the “Intended Tax Treatment”) and (ii) file U.S federal income tax returns (if any such tax returns are required to be filed) in a manner consistent with the Intended Tax Treatment.

Article VI
AMENDMENTS

Section 6.1      Amendments Without Consent of Holders or Stockholders’ Representative.

(a)                Without the consent of any Holders, Parent, the Stockholders’ Representative (upon written instruction from the Holders holding a majority of the CVRs) and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes only:

(i)                 to evidence the succession of another Person selected in accordance with Section 4.3(b) as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

18 

 

(ii)               to evidence the termination of the CVR Registrar and the succession of another Person as a successor CVR Registrar and the assumption by any successor of the obligations of the CVR Registrar herein; or

(iii)             to add, eliminate or change any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders; provided, that if such addition, elimination or change is materially adverse to the rights of holders of any other Merger Consideration CVRs, then instruction from the holders of such other Merger Consideration CVRs representing a majority of the Merger Consideration CVR Shares in respect thereof shall also be necessary; provided, further, if such addition, elimination or change adversely affects the rights and obligations of any Holder in a disproportionate manner to the other Holders hereunder, then instruction from each such affected Holder shall also be necessary; or

(iv)             as necessary to ensure that the CVRs are not subject to registration under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

(b)               Any other amendment to this Agreement shall be made by Parent, the Stockholders’ Representative (upon written instruction of each of the Holders of CVRs) and the Rights Agent.

(c)                Promptly after the execution by Parent, Stockholders Representative and the Rights Agent of any amendment pursuant to the provisions of this Section 6.1, Parent shall mail or cause to be mailed a written notice thereof by electronic mail to the Stockholders’ Representative and by first-class mail and electronic mail to the Holders at their addresses as they shall appear on the CVR Register, setting forth in general terms the substance of such amendment.

Section 6.2      Execution of Amendments; Effect of Amendments.

Prior to executing any amendment permitted by this Article VI, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, a certificate from an appropriate officer of Parent or, if requested by the Rights Agent, an opinion of counsel selected by Parent and reasonably acceptable to Rights Agent stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement. Upon the execution of any amendment under this Article VI, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby. No supplement or amendment to this Agreement shall be effective unless duly executed by the Rights Agent, Parent and the Stockholders’ Representative.

19 

 

Article VII
OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1      Notices to the Rights Agent, Parent and the Stockholders’ Representative.

Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by electronic mail (except with respect to the Rights Agent), by facsimile transmission only with respect to the Rights Agent or overnight courier, provided that with respect to notices deliverable to the Stockholders’ Representative, such notices shall be delivered solely via electronic mail or facsimile:

If to Parent or the Company:

Eros International Plc

First Names House

Victoria Road

Douglas

Isle of Man IM2 4DF

British Isles

Attention: Mark Carbeck, Chief Corporate and Strategy Officer
Email: mark.carbeck@erosintl.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197

Attention: Kevin Masuda
Peter Wardle

Email: kmasuda@gibsondunn.com
pwardle@gibsondunn.com

 

If to the Rights Agent:

Computershare Trust Company, N.A.,

Computershare Inc.

150 Royall Street

Canton, MA 02021

Attention: Client Services

Facsimile: (781) 575-3146

 

If to the Stockholders’ Representative:

Fortis Advisors LLC

Attention: Notices Department (Project World Cup)

Email: notices@fortisrep.com

20 

 

Facsimile: (858) 408-1843

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP
555 South Flower Street, Suite 3700
Los Angeles, California 90071
Attention: Rick C. Madden, P.C.
Email: rick.madden@kirkland.com

 

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by electronic mail; or on the next business day after deposit with an overnight courier, if sent by an overnight courier.

Section 7.2      Effect of Headings; Construction.

The headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions of this Agreement. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated.

Section 7.3      Successors and Assigns.

All covenants and agreements in this Agreement by any party hereto shall bind its successors and permitted assigns, whether so expressed or not.

Section 7.4      Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the Holders, the parties hereto and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Holders, the parties hereto and their permitted successors and assigns. For the avoidance of doubt, the Holders shall be considered express third party beneficiaries of this Agreement.

Section 7.5      Governing Law and Venue; Waiver of Jury Trial.

(a)                THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF THAT WOULD RESULT IN THE APPLICATION OF ANY OTHER JURISDICTION’S LAWS. The parties hereby irrevocably submit to the personal jurisdiction of the courts of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents

21 

 

referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement of this Agreement or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims relating to such action, proceeding or transactions shall be heard and determined in such a Delaware state or federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 7.1 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. If and to the extent that any action, suit or proceeding relates to the rectification of Parent’s register of members or the enforcement of Section 2.1 (“Parent Proceedings”) (but otherwise without prejudice to the provisions of this Section 7.5(a)), each party irrevocably agrees that the courts of the Isle of Man shall have jurisdiction to hear and decide such Parent Proceedings and, for this purpose only, each party irrevocably submits to the jurisdiction of the such courts.

(b)               EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.5.

Section 7.6      Severability Clause.

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction; provided, however, that if an excluded provision shall affect the rights, immunities, liabilities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately written notice to the Parent in accordance with Section 4.2.

22 

 

Section 7.7      Counterparts.

This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

Section 7.8      Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon consummation of the issuance and delivery to the Holders of all of the Parent A Shares to which they are entitled pursuant to and in accordance with Section 3.4; provided, Article I, Article IV and this Article VII shall survive.

Section 7.9      Withholding.

Notwithstanding anything to the contrary in this Agreement, Parent, the Rights Agent and their respective agents, shall be entitled to deduct and withhold from any amounts otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of applicable Tax law; provided, however, that other than in respect of compensatory withholding or backup withholding, withholding as a result of the failure to provide the certificate set forth in Section 6.2(g) of the Merger Agreement or withholding in respect of CVR Income, Parent or the Rights Agent, as applicable, shall use commercially reasonable efforts to provide written notice to the Stockholders’ Representative no later than two (2) Business Days prior to any such withholding or deduction in respect of a Holder and to allow the Holder the opportunity to provide any Tax forms, reports or certificates as may be permitted by Applicable Laws to reduce or eliminate such withholding or deduction. Any amounts so withheld and properly remitted to the applicable Governmental Authority shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. In the case of any withholding from any payments not payable in cash, Parent or its agent shall withhold or shall cause to be withheld an amount of such payment having a fair market value equal to the withholding obligation to be satisfied in respect of such payment at the time such amount is withheld (provided that if any cash is otherwise payable to the relevant payee, such withholding shall be made first from such cash), and shall be treated as having paid such amount to the Person in respect of which such amount is withheld.

Section 7.10  Entire Agreement.

This Agreement, the letter agreement between Parent and the Rights Agent of even date herewith regarding fees payable to the Rights Agent (the “Fee Schedule”), and the Merger Agreement represent the entire understanding of Parent, the Company and the Stockholders’ Representative with reference to the CVRs, and, as between such Persons, this Agreement supersedes any and all other oral or written agreements hereto made with respect to the CVRs, except for the Merger Agreement. Notwithstanding the reference to any other document in this Agreement, the Rights Agent shall not be deemed to have knowledge of, or have any duty to

23 

 

ascertain or inquire into, the existence, the content, or the terms and conditions of any other agreement, instrument or document, in each case, to which the Rights Agent is not a party, whether or not such agreement, instrument or document, as the case may be, is referenced in this Agreement. This Agreement and the Fee Schedule represent the entire understanding of the Rights Agent with reference to the CVRs and the performance of the Rights Agent’s duties, its immunities and rights with respect thereto, and with respect to the Rights Agent, this Agreement and the Fee Schedule supersede any and all other oral or written agreements heretofore made with respect to the CVRs. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling, and this Agreement may be amended, modified, supplemented or altered only in accordance with the terms of Article VII. No party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not contained herein.

Section 7.11  Force Majeure.

Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance to the extent resulting from acts beyond its reasonable control including, without limitation, acts of God, epidemics, pandemics, terrorist acts, breakdowns, interruptions or malfunctions of any communications or computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest; provided, that the Rights Agent shall use reasonable commercial efforts to resume performance as soon as practicable. If any such act or event occurs, the Rights Agent shall give prompt written notice to Parent and the Stockholders’ Representative, stating the nature of the act or event and action being taken to avoid or minimize its effect.

Section 7.12  Funds.

All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more bank accounts to be maintained by the Rights Agent in its name as agent for Parent. Until paid pursuant to the terms of this Agreement, the Rights Agent will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by the Rights Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. The Rights Agent may from time to time receive interest, dividends or other earnings in connection with such deposits. The Rights Agent shall not be obligated to pay such interest, dividends or earnings to the Parent, any Holder or any other Person.

 

[Remainder of Page Intentionally Left Blank.]

24 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

EROS INTERNATIONAL PLC


By: /s/ Kishore Lulla
Name: Kishore Lulla
Title: Executive Chairman and Group Chief
Executive Officer and Managing Director

 

[Signature Page to Class B CVR Agreement]

  

 

STX FILMWORKS, INC.

 

By: /s/ Noah Fogelson
Name: Noah Fogelson
Title: Executive Vice President,

Corporate Strategy and General

Counsel

 

[Signature Page to Class B CVR Agreement]

  

 

FORTIS ADVISORS LLC

 

By: /s/ Ryan Simkin
Name: Ryan Simkin
Title: Managing Director

 

[Signature Page to Class B CVR Agreement]

  

 

COMPUTERSHARE TRUST

COMPANY, N.A. AND COMPUTERSHARE INC.

On behalf of both entities

By: /s/ Collin Ekeogu

Name: Collin Ekeogu
Title: Manager, Corporate Actions

 

[Signature Page to Class B CVR Agreement]

Exhibit 4.5

CLASS A CONTINGENT VALUE RIGHTS AGREEMENT

This CLASS A CONTINGENT VALUE RIGHTS AGREEMENT, dated as of July 30, 2020 (this “Agreement”), is entered into by and among Eros International Plc, an Isle of Man company limited by shares (“Parent”), STX Filmworks, Inc., a Delaware corporation (the “Company”), Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the former holders of the Shares (in such capacity, the “Stockholders’ Representative”), and Computershare Inc., a Delaware corporation, and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally chartered trust company, collectively as rights agent (the “Rights Agent”) and as initial CVR Registrar (as defined herein).

WITNESSETH:

WHEREAS, the Company, Parent, England Holdings 2, Inc., a Delaware corporation and indirect wholly-owned Subsidiary of Parent (“England Holdings 2”), England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly-owned Subsidiary of England Holdings 2 (“Merger Sub”), have entered into an Agreement and Plan of Merger (as the same may be amended, modified or supplemented from time to time, the “Merger Agreement”), dated as of April 17, 2020, pursuant to which Merger Sub merged with and into the Company (the “Merger”), with the Company surviving the Merger, as an indirect wholly-owned Subsidiary of Parent;

WHEREAS, pursuant to the Merger Agreement, Parent agreed to issue to holders of record of shares of Class A Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Shares”) outstanding immediately prior to the effective time of the Merger (the “Effective Time”), a number of contingent value rights (the “CVRs”) as hereinafter described; and

WHEREAS, each holder of Shares as of immediately prior to the Effective Time, will receive, among other things, as merger consideration, the right to receive upon the Effective Time a number of CVRs in such amount as set forth in Article II of the Merger Agreement.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined), as follows:

Article I
DEFINITIONS

Section 1.1      Definitions.

(a)                For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i)                 the terms defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular;

1 

 

(ii)               the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iii)             unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa;

(iv)             the term “Affiliate” when used with respect to the Company shall, after the Effective Time, include Parent and its Subsidiaries and Affiliates; and

(v)               all references to “including” shall be deemed to mean including without limitation.

(b)               Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“Affiliate” means, with respect to any specified Person, (i) any other Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (ii) with respect to any natural person, any Member of the Immediate Family of such natural person. Notwithstanding the foregoing, for purposes hereof, (i) none of the Holders, the Company, or any of their respective Subsidiaries shall be considered Affiliates of any portfolio company (or Subsidiary thereof) in which any Holder or any of its affiliated investment funds have made a debt or equity investment, and (ii) no Holder or any of its Affiliates shall be considered an Affiliate of (a) Parent or any of its Subsidiaries or (b) any other Holders or their respective Affiliates (except to the extent such Holders are otherwise Affiliates under this definition without regard to their status as Holders).

“Agreement” has the meaning set forth in the Preamble.

“Aggregate CVR Shares” means the aggregate number of underlying Parent A Shares issuable in respect of all CVRs.

“Appraisal Shares” has the meaning set forth in Section 4.2(h).

“Available Class A Merger Consideration CVR Shares” means the Merger Consideration CVR Share Cap minus the Parent A Shares issued to the Class E CVRs, the Class D CVRs, the Class C CVRs and the Class B CVRs.

“Base Price” means $2.60.

2 

 

“Change of Control Transaction” means the occurrence of (i) an acquisition by any Person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, of beneficial ownership, directly or indirectly, through purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares or comparable equity interests of Parent entitling that Person to fifty percent (50%) or more of the total voting power of all such shares or comparable equity interests of Parent; or (ii) the consolidation or merger of Parent with or into any other Person, any merger of another Person into Parent, or any conveyance, transfer, sale, lease or other disposition of all or substantially all of Parent’s properties, business or assets, other than (in the case of this clause (ii) only) (1) any transaction (x) that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares or comparable equity interests of Parent, and (y) pursuant to which holders of Parent’s shares or comparable equity interest immediately prior to such transaction have the right to exercise, directly or indirectly, fifty percent (50%) or more of the total voting power of all shares or comparable equity interest of the continuing or surviving Person immediately after such transaction, or (2) any merger solely for the purpose of changing Parent’s jurisdiction of formation and resulting in a reclassification, conversion or exchange of outstanding shares or comparable equity interests into shares or comparable equity interest of the surviving entity with substantially identical rights.

“Class B CVR” means the contingent value rights issued by Parent with respect to the Class B Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class B CVR Agreement.

“Class B CVR Agreement” means the Class B CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class B CVR Shares” means the underlying Parent A Shares issuable in respect of the Class B CVRs.

“Class C CVR” means the contingent value rights issued by Parent with respect to the Class C Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class C CVR Agreement.

“Class C CVR Agreement” means the Class C CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class C CVR Shares” means the underlying Parent A Shares issuable in respect of the Class C CVRs.

“Class D CVR” means the contingent value rights issued by Parent with respect to the Class D Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class D CVR Agreement.

“Class D CVR Agreement” means the Class D CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

3 

 

“Class D CVR Shares” means the underlying Parent A Shares issuable in respect of the Class D CVRs.

“Class E CVR” means the contingent value rights issued by Parent with respect to the Class E Convertible Preferred Stock, par value $0.01 of the Company, pursuant to the Merger Agreement and the Class E CVR Agreement.

“Class E CVR Agreement” means the Class E CVR Agreement, dated as of the date hereof, by and among Parent, the Company, the stockholders’ representative thereunder and the rights agent thereunder.

“Class E CVR Shares” means the underlying Parent A Shares issuable in respect of the Class E CVRs.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Company” has the meaning set forth in the Preamble.

“CVR” means a contingent value right issued by Parent with respect to the Shares, pursuant to the Merger Agreement and this Agreement.

“CVR Shares” has the meaning set forth in Section 3.4(b).

“CVR Register” has the meaning set forth in Section 3.3(b).

“CVR Registrar” has the meaning set forth in Section 3.3(b).

“Effective Time” has the meaning set forth in the Recitals.

“Eros Pre-Closing Equity Financing” has the meaning ascribed in the PIPE Agreement.

“Final Settlement Time” has the meaning set forth in Section 3.2(b).

“Funds” has the meaning set forth in Section 7.12.

“Fully Diluted Parent Shares” means, as of immediately prior to the Effective Time, the sum of (without duplication) (i) the aggregate number of Parent Ordinary Shares then outstanding, plus (ii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding In-the-Money Parent Options (whether or not vested), plus (iii) the aggregate number of Parent Ordinary Shares subject to issuance pursuant to then outstanding Parent RSU Awards (whether or not vested), plus (iv) the aggregate number of Parent Ordinary Shares then subject to issuance pursuant to the Parent Convertible Notes assuming full conversion thereof at a conversion price of $2.60; provided, however, that, notwithstanding the foregoing, Fully Diluted Parent Shares shall not include any Parent Ordinary Shares issuable pursuant to the Eros Pre-Closing Equity Financing. For the avoidance of doubt, Fully Diluted Parent Shares shall be calculated prior to, and without giving effect to, the PIPE Investment.

“Holder” means a Person in whose name a CVR is registered in the CVR Register.

4 

 

“In-the-Money Parent Options” means an Eros Option (as defined in the Merger Agreement) having a per Parent Ordinary Share exercise price less than the Parent Trading Price.

“Investors’ Rights Agreement” means the Investors’ Rights Agreement, entered into on or around the date hereof, by and among Parent, certain shareholders of Parent and the investors party thereto.

“Law” with respect to any Person, means (a) all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

“Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Members of the Immediate Family” means, with respect to any individual, each spouse or child or other descendants of such individual, each trust created solely for the benefit of one or more of the aforementioned Persons and their spouses and each custodian or guardian of any property of one or more of the aforementioned Persons in his capacity as such custodian or guardian.

“Merger” has the meaning set forth in the Recitals.

“Merger Agreement” has the meaning set forth in the Recitals.

“Merger Consideration CVRs” means the CVRs, the Class E CVRs, the Class D CVRs, the Class C CVRs and the Class B CVRs.

“Merger Consideration CVR Share Cap” means a number of Parent A Shares equal to the Fully Diluted Parent Shares.

“Merger Consideration CVR Shares” means the Aggregate CVR Shares, the Class E CVR Shares, the Class D CVR Shares, the Class C CVR Shares and the Class B CVR Shares.

“Merger Sub” has the meaning set forth in the Recitals.

“Organizational Documents” has the meaning set forth in Section 2.1(a).

“Parent” has the meaning set forth in the Preamble.

“Parent A Shares” means the A Ordinary Shares, par value £0.30 per share, of Parent.

“Parent B Shares” means the B Ordinary Shares, par value £0.30 per share, of Parent.

“Parent Convertible Notes” means Parent’s Senior Convertible Notes due September 27, 2020 in the original aggregate principal amount of $27,500,000.

“Parent Option” means a compensatory option to purchase Parent Ordinary Shares.

5 

 

“Parent Ordinary Shares” means, collectively, the Parent A Shares and the Parent B Shares.

“Parent Proceedings” has the meaning set forth in Section 7.5(a).

“Parent RSU Award” means an award of restricted stock units relating to Parent Ordinary Shares.

“Parent Trading Price” means the VWAP for one Parent A Share for the twenty (20) consecutive full Trading Days ending on the full Trading Day immediately preceding the Effective Time (as adjusted as appropriate to reflect any stock splits, stock dividends, combinations, reorganizations, classifications or similar events).

“Permitted Transfer” means: (i) the transfer (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; or (vi) a transfer by any Holder to one or more of its Affiliates or affiliated investment funds of any of its Affiliates.

“Permitted Transferee” means a Person who receives a CVR pursuant to a Permitted Transfer and otherwise in accordance with this Agreement.

“Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Authority or other entity of any kind or nature.

“PIPE Agreement” means that certain Subscription Agreement, made as of April 17, 2020, by and among Parent and each Person defined therein as a “Purchaser.”

“PIPE Investment” means the purchase of Parent A Shares pursuant to the PIPE Agreement.

“PIPE Lock-Up Agreement” has the meaning set forth in Section 3.4(c).

“Pre-Closing VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Closing.

“Pre-Settlement VWAP” means the VWAP of the Parent A Shares for the 10 Trading Days ending on the end of the Trading Day immediately preceding the Settlement Date; provided, that for purposes of determining the CVR Shares issuable as of any time prior to the Settlement Date, the reference to “the Trading Day immediately preceding the Settlement Date” in this definition shall be deemed a reference to “the Trading Day immediately preceding the applicable time of determination”.

6 

 

“Reference Price” means a price per share equal to the lesser of (x) the Pre-Settlement VWAP and (y) the Upper Collar Price; provided, that if the Pre-Settlement VWAP is equal to or greater than $4, then the Reference Price will equal the average of the Pre-Settlement VWAP and the Upper Collar Price.

“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent shall have become such pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” shall mean such successor Rights Agent.

“Settlement Date” shall mean the date that is the earlier to occur of (a) the later to occur of (i) the first time that the Merger Consideration CVR Shares have been registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and (ii) the 75th calendar day after the Closing and (b) the occurrence of the Settlement Outside Date.

“Settlement Outside Date” means the date that is six (6) months after the Closing; provided that the Settlement Outside Date may be extended (but only once) by holders of a majority of the Class E CVRs; provided, further, that such majority must include each such holder that, together with its Affiliates, purchased $15 million or more of Parent A Shares in the PIPE Investment.

“Shares” has the meaning set forth in the Recitals.

“Stockholders’ Representative” has the meaning set forth in the Preamble.

“STX Purchase Price” means the lowest of (i) the Base Price, (ii) the volume weighted average of the purchase price of all purchases comprising the Eros Pre-Closing Equity Financing and (iii) the Pre-Closing VWAP; provided, however, that if the Pre-Closing VWAP is greater than $3.25, then the STX Purchase Price shall be the average of the Base Price and the Pre-Closing VWAP.

“Subsidiary” of any Person shall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or comparable governing body are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person.

“Taxes” or “Tax” means all taxes, charges, fees, levies or other assessments in the nature of a tax imposed by any governmental authority, including any income, gross receipts, license, severance, occupation, premium, environmental (including taxes under former Code Section 59A), customs, duties, profits, disability, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, occupancy, franchise, real property, personal property, business and occupation, mercantile, windfall profits, capital stock, stamp, transfer, workmen’s compensation, amounts due under any applicable laws governing escheat or unclaimed property or other taxes, charges, fees, levies or other assessments in the nature of a tax, together with any interest, penalties, additions to tax or additional amounts imposed by any Governmental Authority with respect thereto, whether disputed or not.

7 

 

“Trading Day” means, with respect to any referenced security, any day on which such security is actually traded on the principal securities exchange or securities market on which such security is then listed.

“Upper Collar Price” means the quotient of the STX Purchase Price, divided by one and one-half (1.5).

“VWAP” means, for any security as of any date(s), the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then listed during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (sets to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date(s) on any of the foregoing bases, the VWAP of such security on such date(s) shall be the fair market value thereof on such date(s) as reasonably determined by a nationally recognized independent investment banking firm mutually agreed between Parent and the Stockholders’ Representative.

Article II
OPERATION OF PARENT

Section 2.1      Operation of Parent.

From the Effective Time until the Settlement Date, Parent shall not, and shall cause its Subsidiaries and Affiliates not to:

(a)                after the effectiveness of the Amended Articles (as defined in the Investors’ Rights Agreement), effect any action that requires approval by the shareholders of Parent under Parent’s Memorandum of Association or Articles of Association (the “Organizational Documents”) or applicable Law; or

(b)               prior to the effectiveness of Amended Articles, take any action set forth in Section 4.3(c) of the Investors’ Rights Agreement as in effect on the date hereof,

without, in each such case, obtaining the consent thereto of holders of such class and number of Merger Consideration CVRs (including the CVRs hereunder) that, together with the shares of Parent actually voted (at a meeting or by resolution) with respect to such action and assuming all Merger Consideration CVR Shares were outstanding Parent A Shares and voted, would be required to approve such action under the Organizational Documents, applicable Law or Section 4.3(c) of the Investors’ Rights Agreement, as applicable. For purposes of the foregoing consent rights, the number of Merger Consideration CVR Shares underlying the Merger Consideration CVRs as of any time prior to the Settlement Date shall be calculated as set forth below in Article III and in Article III of the Class E CVR Agreement with respect to the Class E CVRs, Article III of the Class D CVR Agreement with respect to the Class D CVRs, Article III of the Class C CVR Agreement with respect to the Class C CVRs and Article III of the Class B CVR Agreement with respect to the Class B CVRs.

8 

 

Article III
CVRS

Section 3.1      Issuance of CVRs; Appointment of Rights Agent; Reservation of Shares.

(a)                The CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement. The registration on the books and records of Parent and administration of the CVRs shall be handled pursuant to this Agreement in the manner set forth in this Agreement.

(b)               Parent hereby appoints the Rights Agent to act as rights agent for the CVRs in accordance with the instructions hereinafter set forth in this Agreement, and the Rights Agent hereby accepts such appointment.

(c)                From the date hereof until the issuance of the Aggregate CVR Shares in accordance with the terms hereof, Parent shall reserve and keep available out of its authorized but unissued share capital, for the purpose of effecting the issuance of the CVR Shares hereunder, a number of Parent A Shares equal to the Merger Consideration CVR Share Cap, minus the number of CVR Shares, if any, previously issued in accordance with the terms of this Agreement; and if at any time during such period the number of authorized but unissued Parent A Shares shall not be sufficient to effect the issuance of the Aggregate CVR Shares in full, Parent shall take all such action as may be necessary to increase its authorized but unissued share capital as shall be sufficient for such purposes.

Section 3.2      Nontransferable; Expiration.

(a)                The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than to a Permitted Transferee. Any purported transfer of a CVR to anyone other than a Permitted Transferee shall be null and void ab initio.

(b)               Subject to Section 3.4(c), the CVRs shall expire on the Settlement Date upon the registration of the CVR Shares in the respective names of the Holders entitled thereto and shall thereafter be of no force or effect following such registration; provided that, if any CVR Shares are not so registered on the Settlement Date, then the CVRs in respect thereof shall not expire until the registration of such CVR Shares in the respective names of the Holders entitled thereto (the time of registration thereof, the “Final Settlement Time”).

Section 3.3      No Certificate; Registration; Registration of Transfer; Change of Address.

(a)                The CVRs shall not be evidenced by a certificate or other instrument.

9 

 

(b)               Upon receipt from Parent of the names and addresses of each Holder and the number of CVRs held by such Holder, the Rights Agent shall keep a register (the “CVR Register”) for the registration of CVRs in a book-entry position for each Holder of a CVR. The CVR Register shall set forth the name and address of each Holder, and the number of CVRs held by such Holder and Tax Identification Number of each Holder. Each of Parent and the Stockholders’ Representative may receive and inspect a copy of the CVR Register, from time to time, upon written request made to the CVR Registrar. Within five (5) Business Days after receipt of such request, the CVR Registrar shall deliver a copy of the CVR Register, as then in effect, to Parent and the Stockholders’ Representative at the address set forth in Section 7.1. The Rights Agent is hereby initially appointed “CVR Registrar” for the purpose of registering CVRs and transfers of CVRs as herein provided.

(c)                Subject to the restrictions set forth in Section 3.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other reasonably requested documentation in form reasonably satisfactory to Parent and the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. A request for a transfer of a CVR shall be accompanied by documentation establishing that the transfer is to a Permitted Transferee and shall thereafter be supplemented with and any other information as may be reasonably requested by Parent or the CVR Registrar (including opinions of counsel, if appropriate). Upon receipt of such written notice, the CVR Registrar shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions herein on its face, without investigation or inquiry by the Rights Agent, register the transfer of the CVRs in the CVR Register. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same rights and entitling the transferee to the same benefits and rights under this Agreement as those held by the transferor immediately prior to such transfer. No transfer of a CVR shall be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void ab initio (unless the transfer was permissible hereunder and such failure to be duly registered is attributable to the fault of the CVR Registrar). Any transfer or assignment of the CVRs shall be without charge by Parent or the CVR Registrar (other than the cost of any Tax which shall be the responsibility of the transferor) to the Holder.

(d)               A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder and accompanied by such other evidence of the Holder’s identity or interest in the CVR as reasonably requested by the Rights Agent. Upon receipt of such written notice, the CVR Registrar is hereby authorized to, and shall promptly, record the change of address in the CVR Register.

(e)                The Stockholders’ Representative may make a written request to the Rights Agent for a list containing the names, addresses and number of CVRs of the Holders that are registered in the CVR Register. Within five (5) Business Days following the date of receipt by the Rights Agent of such request, the CVR Registrar shall deliver a copy of such list to the Stockholders’ Representative.

10 

 

Section 3.4      Issuance Procedures.

(a)                On the Settlement Date, Parent shall issue, and cause to be deposited with the Rights Agent, a number of Parent A Shares equal to the Aggregate CVR Shares. On the Settlement Date or as promptly as practicable thereafter, subject to Section 3.4(c) below, the Rights Agent shall cause the applicable number of CVR Shares to be registered in the name of each of the Holders as reflected in the CVR Register as of the close of business on the last Business Day prior to such issuance date.

(b)               The number of Parent A Shares issued in respect of each CVR from the Available Class A Merger Consideration CVR Shares (the “CVR Shares”) shall be equal to the quotient obtained by dividing $1,000 by the Reference Price; provided, that the number of Parent A Shares allocated to the CVRs shall be pro-rated in the event there are insufficient Available Class A Merger Consideration CVR Shares remaining for allocation to the CVRs. For all purposes above, fractional CVRs shall represent a proportionate number of CVR Shares; provided, however, that no fractional Parent A Shares (or certificate or scrip representing the same) shall be issued upon the settlement of any CVRs hereunder. Notwithstanding any other provision of this Agreement, each Holder of CVRs who would otherwise have been entitled to receive a fraction of a Parent A Share upon settlement of such Holder’s CVRs hereunder (after aggregating all CVRs of such Holder that are subject to this Agreement) shall receive, in lieu thereof, an amount of cash (rounded to the nearest whole cent), without interest, equal to such fractional amount multiplied by the Reference Price. Whenever a payment for fractional Parent A Shares or fractional shares is to be made by the Rights Agent under any section of this Agreement, Parent shall (i) promptly deliver to the Rights Agent a certificate setting forth the amount of any such payment and calculation related thereto and (ii) cash in the amount of such payment to the Rights Agent by wire transfer of immediately available funds to make such payment to the applicable Holder by check mailed to such Holder as reflected in the CVR Register or by wire transfer of immediately available funds. The Rights Agent shall not be liable to any Holder or Parent for the amount of any cash payment made to such Holder on behalf of Parent in accordance with the amount set forth in such certificate.

(c)                Parent’s obligation to issue and cause to be deposited with the Rights Agent the applicable number of CVR Shares, and the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares shall be conditioned on the execution and delivery by such Holder of a lockup agreement with Parent, substantially in the form attached hereto as Exhibit A (a “Lock-Up Agreement”); provided, however, that the Rights Agent’s obligation to cause the applicable number of CVR Shares to be registered in the name of a Holder upon receipt of the applicable number of CVR Shares to a Holder shall not be conditioned on the execution and delivery by such Holder of a Lock-Up Agreement if (i) such Holder or any of its Affiliates shall have entered into a lockup agreement with Parent in connection with the PIPE Investment (such lockup agreement, a “PIPE Lock-Up Agreement”) or (ii) the Settlement Date is the Settlement Outside Date and the Merger consideration CVR Shares have not been, as of such date, registered for resale pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; provided, further, that Rights Agent shall have no duty to act without the written instruction of Parent with respect to the foregoing.

11 

 

(d)               Without limiting the other provisions of this Agreement, if at any time during the period between the execution of this Agreement and the Settlement Date (or if applicable, the Final Settlement Time), any change in the number or type of outstanding Parent A Shares shall occur as a result of a reclassification, recapitalization, exchange, stock split (including a reverse stock split), combination or readjustment of capital stock, shares or any stock dividend or stock distribution with a record date during such period (including any such reclassification, recapitalization, exchange, stock split, combination or readjustment of capital stock, shares or any stock dividend or stock distribution in connection with a consolidation, merger or combination in which Parent is the continuing or surviving corporation), the CVR Shares and any other similarly dependent items, as the case may be, shall be appropriately equitably adjusted to provide the same economic effect as contemplated by this Agreement prior to such event; provided that nothing in this Section 3.4(d) shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

(e)                If, at any time prior to the Settlement Date (or, if applicable, the Final Settlement Time) Parent effects any Change of Control Transaction, then, upon any Settlement Date, each Holder shall have the right to receive, on the Settlement Date, for each CVR Share that would have been issuable upon the Settlement Date the same consideration (in the same amount and form) per Parent A Share payable to the holders thereof in such Change of Control Transaction. For purposes hereof, the determination of Pre-Settlement VWAP shall be appropriately adjusted to refer to such consideration instead of Parent A Shares. If holders of Parent A Shares are given any right of election as to the securities, cash or property to be received in such Change of Control Transaction, then each Holder shall be given the same right of election. To the extent necessary to effectuate the foregoing provisions, Parent shall ensure that any successor to Parent or the surviving entity in such Change of Control Transaction shall agree to be bound by the terms of this Agreement. In the event that the Final Settlement Time occurs after the Settlement Date, references herein to Settlement Date shall mean as promptly as practicable following the Change of Control Transaction.

Section 3.5      CVR Rights

(a)                Subject to Section 2.1, except as provided in Section 3.5(b), the CVRs shall not have any voting rights and shall not represent any equity or ownership interest in Parent, in any constituent company to the Merger, any Affiliate of Parent or any other Person.

(b)               The CVRs shall entitle each Holder, at the Settlement Date and subject to any applicable withholding Taxes, to a payment per Parent A Share issued thereunder, without interest, equal (as to both amount and form of consideration) to all dividends or other distributions of any kind declared per Parent A Share of the CVR Shares with a record date after the Closing and prior to the Settlement Date. Any dividends or other distributions of any kind made in respect of the CVR Shares will be delivered promptly to the Rights Agent to be held in escrow with respect to the CVRs (the “CVR Income”) treating the CVR Shares for this purpose as if the Aggregate CVR Shares were then outstanding. On the Settlement Date, the Rights Agent shall deliver to each Holder, concurrent with the issuance to such Holder of the applicable CVR Shares, the CVR Income earned in respect of each such CVR Share, less any applicable withholding Taxes.

12 

 

Article IV
THE RIGHTS AGENT

Section 4.1      Certain Duties and Responsibilities.

The Rights Agent shall not have any liability for any actions taken or not taken by the Rights Agent in connection with the execution, acceptance, administration, exercise and performance of its duties under this Agreement, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction). No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

Section 4.2      Certain Rights of Rights Agent.

The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Rights Agent. In addition:

(a)                the Rights Agent may rely and shall be protected and held harmless by Parent in and shall not incur any liability in acting or refraining from acting in connection with its performance under this Agreement upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties, except to the extent of its willful misconduct, bad faith or gross negligence (in each case as determined by a final, non-appealable judgment of a court of competent jurisdiction);

(b)               the Rights Agent may consult with legal counsel selected by it, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in the absence of bad faith, gross negligence or willful misconduct and in accordance with such advice or opinion. The reasonable costs of such counsel’s services shall be paid to the Rights Agent in accordance with Section 4.2(g) below. The Rights Agent may perform any and all of its duties through its agents, representatives, custodians and/or nominees and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such agents, representatives, custodians and/or nominees or for any loss to Parent or the Company, to the Holders or any other Person resulting from any such act, omission, default, neglect or misconduct, absent gross negligence, willful misconduct or bad faith on the part of the Rights Agent, such agents, representatives, custodians and/or nominees (which gross negligence, willful misconduct or bad faith must be determined by a final, non-appealable judgment of a court of competent jurisdiction);

(c)                if the Rights Agent becomes involved in litigation on account of this Agreement, it shall have the right to retain counsel and shall be entitled to reimbursement for all reasonable and documented out-of-pocket costs and expenses related thereto as provided in this Section 4.2(c) and Section 4.2(g) hereof; provided, however, that the Rights Agent shall not be entitled to any such reimbursement to the extent such litigation ultimately determines that the Rights Agent acted with willful misconduct, bad faith or gross negligence. In the event that conflicting demands are made upon the Rights Agent for any situation addressed or not addressed in this Agreement, the Rights Agent may withhold performance of the terms of this Agreement until such time as said conflicting demands shall have been withdrawn or the rights of the respective parties shall have been settled by court adjudication, arbitration, joint order or otherwise;

13 

 

(d)               the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(e)                the Rights Agent shall not be required to give any note or surety in respect of the execution of such powers or otherwise in respect of the premises;

(f)                Parent agrees to indemnify the Rights Agent for, and hold the Rights Agent harmless against, any loss, liability, claim, demands, suits or expense arising out of or in connection with the Rights Agent’s duties under this Agreement, including the costs and expenses of defending the Rights Agent against any claims, charges, demands, suits or loss, unless such loss shall have been determined by a court of competent jurisdiction to be a result of the Rights Agent’s willful misconduct, bad faith or gross negligence (in each case as determined by a court of competent jurisdiction); provided, however, that the Rights Agent’s aggregate liability with respect to, arising from, or arising in connection with this Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by Parent to the Rights Agent as fees and charges (but not including reimbursable expenses) in the 12 months preceding the event for which recovery is sought. The provisions under this Section 4.2 and Section 4.1 above shall survive the settlement of the CVRs and the termination of this Agreement and the resignation, replacement or removal of the Rights Agent. To the extent the Rights Agent is entitled to indemnification hereunder, the reasonable and documented out-of-pocket costs and expenses of the Rights Agent incurred in enforcing this right of indemnification shall be paid by Parent;

(g)               Parent agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder in accordance with a fee schedule to be mutually agreed upon in writing between Parent and the Rights Agent and, from time to time, to reimburse the Rights Agent for all of its reasonable, customary and documented out-of-pocket expenses (including reasonable fees and expenses of the Rights Agent’s counsel) and other disbursements incurred in the preparation, delivery, negotiation, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder. Without limiting any of its rights to compensation or reimbursement under this Agreement, the Rights Agent shall deliver to Parent the final invoice for the Rights Agent fees and costs (which shall include a reasonable estimate of all remaining fees and expenses) at a reasonable time prior to the date of delivery of the CVR Shares. An invoice for any reasonable and documented out-of-pocket expenses and per item fees realized will be rendered and payable as mutually agreed upon in writing between Parent and the Rights Agent. For the avoidance of doubt, and notwithstanding anything to the contrary herein, in no event shall Parent be required to indemnify or otherwise reimburse the Rights Agent for any income or similar taxes of the Rights Agent (or an of its Affiliates) in connection with the performance of its duties hereunder;

14 

 

(h)               For avoidance of doubt, no CVRs shall be issued in respect of any shares of capital stock of the Company as to which the holder thereof as of immediately prior to the Effective Time properly demands appraisal in accordance with, and who complies in all respects with, Section 262 of the Delaware General Corporation Law (such shares, “Appraisal Shares” and such statutory section, “Section 262”); provided, however, that notwithstanding the foregoing, (i) the CVRs that would have been issuable in respect of Appraisal Shares but for their status as such shall be deemed to be outstanding for purposes of determining the number of CVR Shares to be issued per CVR and (ii) if any holder of Appraisal Shares shall fail to perfect or otherwise waive, withdraw or lose the right to appraisal under Section 262 with respect to any Appraisal Shares (whether before or after the Settlement Date), then the CVRs issuable in respect of such Appraisal Shares shall be deemed to have been issued to such holder as of the Effective Time and to entitle such holder to all rights of a Holder hereunder with respect thereto, including the right to receive the CVR Shares and CVR Income in respect thereof upon the Settlement Date in accordance with the other provisions of this Agreement;

(i)                 whenever the Rights Agent shall reasonably require that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Rights Agent may rely upon a signed certificate from an authorized officer of Parent, and the Rights Agent shall incur no liability and be held harmless by Parent for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon and in accordance with such certificate;

(j)                 the permissive rights of the Rights Agent to do things enumerated in this Agreement shall not be construed as a duty;

(k)               the Rights Agent shall not be required to give any note or surety in respect of the execution of its powers hereunder or otherwise in respect of the premises;

(l)                 the Rights Agent shall not be liable for or by reason of, and shall be held harmless by Parent with respect to any of the statements of fact or recitals contained in this Agreement or any certificate delivered by Parent under this Agreement and shall not be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by Parent only;

(m)             the Rights Agent shall have no liability and shall be held harmless by Parent in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent and the enforceability of this Agreement against the Rights Agent assuming the due execution and delivery hereof by the other parties hereto), nor shall it be responsible for any breach by Parent of any covenant or condition contained in this Agreement;

(n)               anything to the contrary notwithstanding, the Rights Agent shall not be liable for any special, punitive, consequential, indirect or incidental loss or damage of any kind whatsoever (including lost profits) arising out of any act or failure to act hereunder, even if the Rights Agent has been advised of the likelihood of such loss or damage or has foreseen the possibility or likelihood of such damages;

15 

 

(o)               the Rights Agent shall not be deemed to have knowledge of any event of which it was required to receive notice from Parent or the Stockholders’ Representative hereunder and did not receive such notice, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such required notice in writing;

(p)               the Rights Agent and any affiliate of the Rights Agent may buy, sell or deal in any of securities of Parent or the Company or become pecuniarily interested in any transaction in which Parent or the Company may be interested, or contract with or lend money to Parent or the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement, subject to applicable Law (including applicable securities Laws). Nothing herein shall preclude the Rights Agent from acting in any other capacity for Parent or the Company or for any other legal entity;

(q)               the Rights Agent shall act hereunder solely as agent for Parent and it shall not assume any obligations or relationship of agency or trust with any of the Holders or any other Person;

(r)                 the Rights Agent shall not be deemed to have knowledge of a change in authorized officers or duly authorized representatives of any Person without notice of such change, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection therewith, unless and until it has received such notice in writing;

(s)                the Rights Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any Holder with respect to any action or default by Parent, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or to make any demand upon Parent; and

(t)                 the Rights Agent shall have no duty or obligation under any Section of this Agreement that requires the payment of taxes or charges by the Parent or Holder in connection with the Rights Agent’s performance of such duty or obligation, unless and until the Rights Agent is reasonably satisfied that all such taxes and/or charges have been paid.

Section 4.3      Resignation and Removal; Appointment of Successor.

(a)                The Rights Agent may resign at any time by giving written notice thereof to Parent and the Stockholders’ Representative specifying a date when such resignation shall take effect, which notice shall be sent at least thirty (30) days’ prior to the date so specified. In the event any transfer agency relationship in effect between the Parent and the Rights Agent terminates, the Rights Agent will be deemed to have resigned automatically and be discharged from its duties under this Agreement as of the effective date of such termination. Parent may terminate the Rights Agent at any time by giving written notice thereof to the Rights Agent and the Stockholders’ Representative specifying a date when such termination shall take effect, which notice shall be sent at least thirty (30) days prior to the date so specified.

(b)               If the Rights Agent shall resign, be removed or become incapable of acting, Parent and the Stockholders’ Representative shall promptly appoint a qualified successor Rights Agent. The successor Rights Agent so appointed shall, forthwith upon its acceptance of such appointment in accordance with this Section 4.3(b), become the successor Rights Agent.

16 

 

(c)                Parent shall give notice of each resignation and each removal of a Rights Agent and each appointment of a successor Rights Agent by mailing written notice of such event through electronic mail, to the Stockholders’ Representative. The Stockholders’ Representative shall forward such notice to the Holders. If Parent fails to send such notice within ten (10) days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent shall cause such notice to be mailed and electronically transmitted at the expense of Parent.

(d)               If a successor Rights Agent has not been appointed and has not accepted such appointment by the end of the thirty (30) day period, the Stockholders’ Representative or the Rights Agent may (but shall not be obligated to) apply to a court of competent jurisdiction for the appointment of a successor Rights Agent, and the reasonable documented out-of-pocket costs, expenses (including reasonable attorneys’ fees which are incurred in connection with such a proceeding) shall be paid in accordance with Section 4.2(g) hereof. Any such successor to the Rights Agent shall agree to be bound by the terms of this Agreement and shall, upon receipt of the all relevant books and records relating thereto, become the Rights Agent hereunder. Upon delivery of all of the relevant books and records, pursuant to the terms of this Section 4.3(d) to a successor Rights Agent, the Rights Agent shall thereafter be discharged from any further obligations hereunder. Without limiting any of the rights or immunities of the Rights Agent under this Agreement, the Rights Agent is hereby authorized, in any and all events, to comply with and obey any and all final judgments, orders and decrees of any court of competent jurisdiction which may be filed, entered or issued, and all final arbitration awards and, if it shall so comply or obey, it shall not be liable to any other person by reason of such compliance or obedience.

Section 4.4      Acceptance of Appointment by Successor.

(a)                Every successor Rights Agent appointed hereunder shall execute, acknowledge and deliver to Parent, the Stockholders’ Representative and to the retiring Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and thereupon such successor Rights Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Rights Agent; but, on request of Parent, the Stockholders’ Representative or the successor Rights Agent, such retiring Rights Agent shall execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of the retiring Rights Agent but such retiring Rights Agent shall not be required to make any additional expenditure or assume any additional liability in connection with the foregoing.

Article V
COVENANTS AND REPRESENTATIONS

Section 5.1      List of Holders.

Parent shall furnish or cause to be furnished to the Rights Agent in such form as Parent receives from the Company prior to the Effective Time (or other agent performing similar services for Parent or its Affiliates), the names, addresses, shareholdings and tax certification (T.I.N.) of the record holders of Shares eligible to receive CVRs pursuant to the Merger Agreement reasonably promptly following the Effective Time.

17 

 

Section 5.2      Delivery of CVR Shares.

The Rights Agent shall cause the applicable number of CVR Shares to be registered in the names of the Holders upon receipt thereof in the manner provided for in Section 3.4 and in accordance with the terms of this Agreement, and each of the Stockholders’ Representative and Parent shall use reasonable efforts to cause the Rights Agent to do so.

Section 5.3      Assignment.

(a)                Except for assignments occurring through operation of law, Parent and the Company shall not, in whole or in part, assign any of their rights or obligations under this Agreement.

Section 5.4      Tax Treatment.

Unless (x) Parent has determined, based on advice from a “Big 4” accounting firm or nationally recognized tax counsel and after consulting with the Stockholders’ Representative in connection with obtaining such advice and making such determination, that the Intended Tax Treatment (as defined below) is not supported by a “more likely than not” or higher standard or (y) reporting in a manner consistent with the Intended Tax Treatment would require that Parent establish a reserve on its financial statements, each of Parent and each Holder shall and shall cause its Affiliates to (i) treat the CVRs as equity for applicable U.S. federal income tax purposes and to treat the settlement of the CVRs for CVR Shares as a recapitalization under Section 368(a)(1)(E) of the Code for U.S. federal income tax purposes (the “Intended Tax Treatment”) and (ii) file U.S federal income tax returns (if any such tax returns are required to be filed) in a manner consistent with the Intended Tax Treatment.

Article VI
AMENDMENTS

Section 6.1      Amendments Without Consent of Holders or Stockholders’ Representative.

(a)                Without the consent of any Holders, Parent, the Stockholders’ Representative (upon written instruction from the Holders holding a majority of the CVRs) and the Rights Agent, at any time and from time to time, may enter into one or more amendments hereto, for any of the following purposes only:

(i)                 to evidence the succession of another Person selected in accordance with Section 4.3(b) as a successor Rights Agent and the assumption by any successor of the covenants and obligations of the Rights Agent herein;

18 

 

(ii)               to evidence the termination of the CVR Registrar and the succession of another Person as a successor CVR Registrar and the assumption by any successor of the obligations of the CVR Registrar herein; or

(iii)             to add, eliminate or change any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders; provided, that if such addition, elimination or change is materially adverse to the rights of holders of any other Merger Consideration CVRs, then instruction from the holders of such other Merger Consideration CVRs representing a majority of the Merger Consideration CVR Shares in respect thereof shall also be necessary; provided, further, if such addition, elimination or change adversely affects the rights and obligations of any Holder in a disproportionate manner to the other Holders hereunder, then instruction from each such affected Holder shall also be necessary; or

(iv)             as necessary to ensure that the CVRs are not subject to registration under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

(b)               Any other amendment to this Agreement shall be made by Parent, the Stockholders’ Representative (upon written instruction of each of the Holders of CVRs) and the Rights Agent.

(c)                Promptly after the execution by Parent, Stockholders Representative and the Rights Agent of any amendment pursuant to the provisions of this Section 6.1, Parent shall mail or cause to be mailed a written notice thereof by electronic mail to the Stockholders’ Representative and by first-class mail and electronic mail to the Holders at their addresses as they shall appear on the CVR Register, setting forth in general terms the substance of such amendment.

Section 6.2      Execution of Amendments; Effect of Amendments.

Prior to executing any amendment permitted by this Article VI, the Rights Agent shall be entitled to receive, and shall be fully protected in relying upon, a certificate from an appropriate officer of Parent or, if requested by the Rights Agent, an opinion of counsel selected by Parent and reasonably acceptable to Rights Agent stating that the execution of such amendment is authorized or permitted by this Agreement. The Rights Agent may, but is not obligated to, enter into any such amendment that affects the Rights Agent’s own rights, privileges, covenants or duties under this Agreement. Upon the execution of any amendment under this Article VI, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby. No supplement or amendment to this Agreement shall be effective unless duly executed by the Rights Agent, Parent and the Stockholders’ Representative.

19 

 

Article VII
OTHER PROVISIONS OF GENERAL APPLICATION

Section 7.1      Notices to the Rights Agent, Parent and the Stockholders’ Representative.

Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by electronic mail (except with respect to the Rights Agent), by facsimile transmission only with respect to the Rights Agent or overnight courier, provided that with respect to notices deliverable to the Stockholders’ Representative, such notices shall be delivered solely via electronic mail or facsimile:

If to Parent or the Company:

Eros International Plc

First Names House

Victoria Road

Douglas

Isle of Man IM2 4DF

British Isles

Attention: Mark Carbeck, Chief Corporate and Strategy Officer
Email: mark.carbeck@erosintl.com

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197

Attention: Kevin Masuda
Peter Wardle

Email: kmasuda@gibsondunn.com
pwardle@gibsondunn.com

 

If to the Rights Agent:

Computershare Trust Company, N.A.,

Computershare Inc.

150 Royall Street

Canton, MA 02021

Attention: Client Services

Facsimile: (781) 575-3146

 

If to the Stockholders’ Representative:

Fortis Advisors LLC

Attention: Notices Department (Project World Cup)

Email: notices@fortisrep.com

20 

 

Facsimile: (858) 408-1843

with a copy (which shall not constitute notice) to:

Kirkland & Ellis LLP
555 South Flower Street, Suite 3700
Los Angeles, California 90071
Attention: Rick C. Madden, P.C.
Email: rick.madden@kirkland.com

 

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by electronic mail; or on the next business day after deposit with an overnight courier, if sent by an overnight courier.

Section 7.2      Effect of Headings; Construction.

The headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions of this Agreement. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated.

Section 7.3      Successors and Assigns.

All covenants and agreements in this Agreement by any party hereto shall bind its successors and permitted assigns, whether so expressed or not.

Section 7.4      Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the Holders, the parties hereto and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Holders, the parties hereto and their permitted successors and assigns. For the avoidance of doubt, the Holders shall be considered express third party beneficiaries of this Agreement.

Section 7.5      Governing Law and Venue; Waiver of Jury Trial.

(a)                THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF THAT WOULD RESULT IN THE APPLICATION OF ANY OTHER JURISDICTION’S LAWS. The parties hereby irrevocably submit to the personal jurisdiction of the courts of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents

21 

 

referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement of this Agreement or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims relating to such action, proceeding or transactions shall be heard and determined in such a Delaware state or federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 7.1 or in such other manner as may be permitted by Law shall be valid and sufficient service thereof. If and to the extent that any action, suit or proceeding relates to the rectification of Parent’s register of members or the enforcement of Section 2.1 (“Parent Proceedings”) (but otherwise without prejudice to the provisions of this Section 7.5(a)), each party irrevocably agrees that the courts of the Isle of Man shall have jurisdiction to hear and decide such Parent Proceedings and, for this purpose only, each party irrevocably submits to the jurisdiction of the such courts.

(b)               EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.5.

Section 7.6      Severability Clause.

The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction; provided, however, that if an excluded provision shall affect the rights, immunities, liabilities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately written notice to the Parent in accordance with Section 4.2.

22 

 

Section 7.7      Counterparts.

This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

Section 7.8      Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, upon consummation of the issuance and delivery to the Holders of all of the Parent A Shares to which they are entitled pursuant to and in accordance with Section 3.4; provided, Article I, Article IV and this Article VII shall survive.

Section 7.9      Withholding.

Notwithstanding anything to the contrary in this Agreement, Parent, the Rights Agent and their respective agents, shall be entitled to deduct and withhold from any amounts otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of applicable Tax law; provided, however, that other than in respect of compensatory withholding or backup withholding, withholding as a result of the failure to provide the certificate set forth in Section 6.2(g) of the Merger Agreement or withholding in respect of CVR Income, Parent or the Rights Agent, as applicable, shall use commercially reasonable efforts to provide written notice to the Stockholders’ Representative no later than two (2) Business Days prior to any such withholding or deduction in respect of a Holder and to allow the Holder the opportunity to provide any Tax forms, reports or certificates as may be permitted by Applicable Laws to reduce or eliminate such withholding or deduction. Any amounts so withheld and properly remitted to the applicable Governmental Authority shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. In the case of any withholding from any payments not payable in cash, Parent or its agent shall withhold or shall cause to be withheld an amount of such payment having a fair market value equal to the withholding obligation to be satisfied in respect of such payment at the time such amount is withheld (provided that if any cash is otherwise payable to the relevant payee, such withholding shall be made first from such cash), and shall be treated as having paid such amount to the Person in respect of which such amount is withheld.

Section 7.10  Entire Agreement.

This Agreement, the letter agreement between Parent and the Rights Agent of even date herewith regarding fees payable to the Rights Agent (the “Fee Schedule”), and the Merger Agreement represent the entire understanding of Parent, the Company and the Stockholders’ Representative with reference to the CVRs, and, as between such Persons, this Agreement supersedes any and all other oral or written agreements hereto made with respect to the CVRs, except for the Merger Agreement. Notwithstanding the reference to any other document in this Agreement, the Rights Agent shall not be deemed to have knowledge of, or have any duty to

23 

 

ascertain or inquire into, the existence, the content, or the terms and conditions of any other agreement, instrument or document, in each case, to which the Rights Agent is not a party, whether or not such agreement, instrument or document, as the case may be, is referenced in this Agreement. This Agreement and the Fee Schedule represent the entire understanding of the Rights Agent with reference to the CVRs and the performance of the Rights Agent’s duties, its immunities and rights with respect thereto, and with respect to the Rights Agent, this Agreement and the Fee Schedule supersede any and all other oral or written agreements heretofore made with respect to the CVRs. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement shall govern and be controlling, and this Agreement may be amended, modified, supplemented or altered only in accordance with the terms of Article VII. No party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not contained herein.

Section 7.11  Force Majeure.

Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be liable for any delays or failures in performance to the extent resulting from acts beyond its reasonable control including, without limitation, acts of God, epidemics, pandemics, terrorist acts, breakdowns, interruptions or malfunctions of any communications or computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war or civil unrest; provided, that the Rights Agent shall use reasonable commercial efforts to resume performance as soon as practicable. If any such act or event occurs, the Rights Agent shall give prompt written notice to Parent and the Stockholders’ Representative, stating the nature of the act or event and action being taken to avoid or minimize its effect.

Section 7.12  Funds.

All funds received by the Rights Agent under this Agreement that are to be distributed or applied by the Rights Agent in the performance of services hereunder (the “Funds”) shall be held by the Rights Agent as agent for Parent and deposited in one or more bank accounts to be maintained by the Rights Agent in its name as agent for Parent. Until paid pursuant to the terms of this Agreement, the Rights Agent will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by the Rights Agent in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. The Rights Agent may from time to time receive interest, dividends or other earnings in connection with such deposits. The Rights Agent shall not be obligated to pay such interest, dividends or earnings to the Parent, any Holder or any other Person.

 

[Remainder of Page Intentionally Left Blank.]

24 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

EROS INTERNATIONAL PLC


By: /s/ Kishore Lulla
Name: Kishore Lulla
Title: Executive Chairman and Group Chief

Executive Officer and Managing Director

 

[Signature Page to Class A CVR Agreement]

  

 

STX FILMWORKS, INC.

 

By: /s/ Noah Fogelson
Name: Noah Fogelson
Title: Executive Vice President,

Corporate Strategy and General

Counsel

\

[Signature Page to Class A CVR Agreement]

  

 

FORTIS ADVISORS LLC

 

By: /s/ Ryan Simkin
Name: Ryan Simkin
Title: Managing Director

 

[Signature Page to Class A CVR Agreement]

  

 

COMPUTERSHARE TRUST

COMPANY, N.A. AND COMPUTERSHARE INC.

On behalf of both entities

By: /s/ Collin Ekeogu

Name: Collin Ekeogu
Title: Manager, Corporate Actions

 

[Signature Page to Class A CVR Agreement]

 

Exhibit 10.1

 

INVESTORS’ RIGHTS AGREEMENT

by and among

 

EROS INTERNATIONAL PLC,

 

EROS FOUNDER GROUP,

 

AND

 

THE OTHER PARTIES NAMED HEREIN

 

 

Dated as of July 30, 2020

 

 

 

 

 

table of contents

Page

Article I DEFINITIONS 1
Section 1.1   Definitions 1
Section 1.2   General Interpretive Principles 7
Article II REPRESENTATIONS AND WARRANTIES 7
Section 2.1   Representations and Warranties of the Investors 7
Section 2.2   Entitlement of the Company and the Investors to Rely on Representations and Warranties 8
Section 2.3   Representations and Warranties of the Company 8
Article III MANAGEMENT 9
Section 3.1   Board Representation Rights of the Hony Investor 9
Section 3.2   Board Representation Rights of the Eros Founder Group 10
Section 3.3   Committees of the Board 12
Section 3.4   Board Observer Rights of the Liberty Investor 14
Article IV MINORITY PROTECTIONS 15
Section 4.1   Restrictions on Certain Actions of the Eros Founder Group 15
Section 4.2   Amended Articles 16
Section 4.3   Consent Rights Pending Effectiveness of the Amended Articles 16
Article V REGISTRATION RIGHTS 18
Section 5.1   Investors Registration Rights Agreement 18
Article VI ADDITIONAL AGREEMENTS OF THE PARTIES 18
Section 6.1   Indemnity and Liability. 18
Section 6.2   Access to Information and Personnel; Regulatory Examinations 20
Section 6.3   Confidentiality 21
Section 6.4   U.S. Tax Matters. 22

i 

 
Section 6.5   Certain Other Matters. 23
Article VII MISCELLANEOUS 24
Section 7.1   Freedom to Pursue Opportunities. 24
Section 7.2   Entire Agreement 25
Section 7.3   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. 25
Section 7.4   Obligations; Remedies 26
Section 7.5   Amendment and Waiver. 26
Section 7.6   Binding Effect; Assignment 26
Section 7.7   Termination 26
Section 7.8   Non-Recourse 27
Section 7.9   Notices 27
Section 7.10   Severability 29
Section 7.11   Headings 29
Section 7.12   Contracts (Rights of Third Parties) Act 2001 29
Section 7.13   Recapitalizations; Exchanges, Etc 29
Section 7.14   Counterparts 29

 

ii 

 

investors’ rights AGREEMENT

This INVESTORS’ RIGHTS AGREEMENT (as the same may be amended from time to time in accordance with its terms, the “Agreement”) is made as of July 30, 2020, by and among (i) Eros International Plc, an Isle of Man public company limited by shares (the “Company”); (ii) the Eros Founder Group; and (iii) each of the Persons set forth on Schedule 1 attached hereto (collectively, the “New Investors” and together with each member of the Eros Founder Group, the “Investors” and each, an “Investor”); provided that each Minority New Investor (as defined below) has executed this Agreement only in respect of, and shall only be bound by the obligations, and entitled to the benefit of the rights, arising under Article I, Article II, Section 3.4 (to the extent applicable by its terms to such Minority New Investor), Article V, Article VI and Article VII hereof.

WHEREAS, in connection with the transactions contemplated by the Agreement and Plan of Merger, dated as of April 17, 2020, by and among the Company, England Holdings 2, Inc., a Delaware corporation (“England Holdings 2”), an indirect wholly owned Subsidiary of the Company, England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly owned subsidiary of England Holdings 2 and indirect wholly owned Subsidiary of the Company, and STX Filmworks, Inc., a Delaware corporation (as may be amended, restated, supplemented and/or otherwise modified from time to time, the “Merger Agreement”), the parties hereto have agreed to enter into this Agreement.

THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties mutually agree as follows:

Article I

DEFINITIONS

Section 1.1            Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

“A Ordinary Shares” means the A ordinary shares of the Company, par value £0.30 per share.

“Affiliate” means (i) with respect to any Person, any other Person that controls, is controlled by, or is under common control with such Person, (ii) with respect to any Person that is a natural person, any Member of the Immediate Family of such natural person and (iii) with respect to any New Investor, any affiliated investment fund of such New Investor or of any of its Affiliates. The term “control,” as used with respect to any Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. “Controlled” and “controlling” have meanings correlative to the foregoing. Notwithstanding the foregoing, for purposes hereof, none of the Investors, the Company, or any of their respective Subsidiaries shall be considered Affiliates of any portfolio company (or Subsidiary thereof) in which the Investors or any of their or their Affiliates’ respective affiliated investment funds have made a debt or equity investment, and no Investor or any of its Affiliates shall be considered an Affiliate of (a) the Company or any of its Subsidiaries or (b) any other Investor or their respective Affiliates.

1 

 

“Aggregate Investor Voting Percentage” means, as of any determination date with respect to any one or more Investors, a fraction (expressed as a percentage), with the numerator being the aggregate number of votes with respect to the Shares beneficially owned by such Investor(s) and its (or their) Affiliates, and the denominator of which is the aggregate number of votes with respect to all Shares then outstanding; provided that, whenever a reference to the Aggregate Investor Voting Percentage of any Person or Persons is accompanied by the phrase “(giving effect to the CVRs),” then the number of Shares beneficially owned by such Person or Persons shall be deemed to include the A Ordinary Shares issuable pursuant to CVRs held by such Person or Person as of the applicable time of determination and the number of Shares outstanding shall be deemed to include all Merger Consideration CVR Shares to the extent not already issued and allotted to the holders of CVRs.

“Agreement” has the meaning set forth in the Preamble.

“Audit Committee” has the meaning set forth in Section 3.3(a).

“B Ordinary Share” means B ordinary shares of the Company, par value £0.30 per share.

“beneficial ownership” and “beneficially own” and similar terms have the meaning set forth in Rule 13d-3 under the Exchange Act; provided, however, that no Investor shall be deemed to beneficially own any securities of the Company held by any other Investor solely by virtue of the provisions of this Agreement (other than this definition which shall be deemed to be read for this purpose without the proviso hereto); provided, further, that whenever a reference to any Person’s or Persons’ beneficial ownership of Shares is accompanied by the phrase “(giving effect to the CVRs),” then the number of Shares beneficially owned by such Person or Persons shall be deemed to include the A Ordinary Shares that would be issuable pursuant to CVRs held by such Person or Persons as of the applicable time of determination under the terms of the applicable CVR Agreement.

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

“CFC” has the meaning set forth in set forth in Section 6.4(a).

“Change in Control” means any transaction or series of related transactions (whether by merger, consolidation, recapitalization, liquidation or sale or transfer of Shares or assets (including equity securities of the Subsidiaries) or otherwise) as a result of which any Person or group, within the meaning of Section 13(d)(3) of the Exchange Act (other than members of the Eros Founder Group and their respective Affiliates), obtains or would obtain ownership, directly or indirectly, of (i) Shares that represent more than 50% of the total voting power of the outstanding capital stock of the Company or applicable successor entity or (ii) all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.

“Class E CVR Agreement” has the meaning set forth in the Merger Agreement.

“Code” has the meaning set forth in Section 6.4(a).

2 

 

“Company” has the meaning set forth in the Preamble, except that, as used in Section 6.4, “Company” shall have the meaning set forth in Section 6.4(a).

“Company Articles” means the Amended and Restated Articles of Association of the Company, as may be amended, supplemented or otherwise modified from time to time.

“CVRs” has the meaning ascribed to such term in the Merger Agreement.

“CVR Agreement” has the meaning ascribed to such term in the Merger Agreement.

“Director” means any of the individuals elected or appointed to serve on the Board as a director of the Company.

“Effective Time” has the meaning ascribed to such term in the Merger Agreement.

“Effective Time Equity” means, with respect to any one or more Investors, the number of Shares beneficially owned by such Investor(s) as of immediately following the Effective Time (subject to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like); provided that, with respect to any New Investor, solely for purposes of this definition, the Shares beneficially owned by such New Investor shall be deemed to include all Merger Consideration CVR Shares underlying CVRs held by such New Investor, calculated as of the Settlement Date; provided further, that with respect to the Eros Founder Group, solely for purposes of this definition, the Shares beneficially owned by the Eros Founder Group shall not include any Shares underlying, or issuable pursuant to, any equity awards granted to members of the Eros Founder Group as compensation at or as of immediately following the Effective Time.

“EIML” means Eros International Media Ltd.

“EIML Committee” has the meaning set forth in Section 3.3(c).

“Equity Securities” means, with respect to the Company, (i) Shares, (ii) obligations, evidences of indebtedness or other securities or interests, in each case that are convertible or exchangeable into Shares, (iii) warrants, options or other rights to purchase or otherwise acquire Shares, (iv) any capital stock of the Company issued or issuable upon the exercise, conversion, or exchange of any of the securities referred to in clauses (i) through (iii) above, or (v) any securities issued or issuable directly or indirectly with respect to the securities referred to in clauses (i) through (iv) above by way of share dividend or shares split or in connection with a combination of shares, recapitalization, reclassification, merger, consolidation or other reorganization. As to any particular securities constituting Shares, such securities will cease to be Shares when they have been (1) effectively registered under the 1933 Securities Act and disposed of in accordance with the registration statement or prospectus covering them, (2) distributed to the public through a broker, dealer or market maker pursuant to Rule 144 under the 1933 Securities Act (or any similar or equivalent provision then in force), or (3) repurchased or otherwise acquired by the Company.

“Eros Designated Directors” has the meaning ascribed in the Merger Agreement.

3 

 

“Eros Founder Group” means, collectively, (i) Eros Ventures Limited; (ii) Beech Investments Limited; (iii) the trustees for the time being of the Ganges Trust; (iv) Kishore Lulla and his estate, guardian, or conservator; (v) the other descendants of Arjan Lulla and their respective estates, guardians or conservators; (vi) the trustees, solely in their respective capacities as such, of any Family Trust; and (vii) any custodian or bare nominee for any person within (i) – (vi) inclusive and any of their respective Affiliates who beneficially own Shares from time to time. Any determination, appointment, designation, consent or approval to be made, given or withheld by the Eros Founder Group in its capacity as such under this Agreement shall be made, given or withheld by Kishore Lulla or such other Person(s) as may be designated by Kishore Lulla in writing from time to time.

“Eros Nominee” has the meaning set forth in Section 3.2(a).

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.

“Family Trust” means any trust the sole beneficiaries of which are (i) Kishore Lulla, his spouse, any of their descendants, spouses of any descendants and their respective estates, guardians, or conservators or (ii) the other descendants of Arjan Lulla and their respective estates, guardians or conservators.

“FCPA” has the meaning set forth in Section 6.5(c).

“Hony Investor” means, collectively, Great Mission International Limited, Marco Alliance Limited, and their respective Affiliates.  Any determination, appointment, designation, consent or approval to be made, given or withheld by the Hony Investor in its capacity as such under this Agreement shall be made, given or withheld by Marco Alliance Limited or such other Person(s) as may be designated by Marco Alliance Limited in writing from time to time.

“Hony Nominee” has the meaning set forth in Section 3.1(a).

“IFRS” means International Financial Reporting Standards promulgated by the International Accounting Standards Board (which includes standards and interpretations approved by the International Accounting Standards Board and International Accounting Standards issued under previous constitutions), together with its pronouncements thereon from time to time.

“Indemnified Liabilities” has the meaning set forth in Section 6.1.

“Indemnified Party” has the meaning set forth in Section 6.1.

“Indemnitees” has the meaning set forth in Section 6.1.

“Independent Committee” has the meaning set forth in Section 3.3(b).

“Independent Director” means a Director who qualifies, as of the date of such Director’s election or appointment to the Board and as of any other date on which the determination is being made, as an “Independent Director” under Rule 10A-3 under the Exchange Act, as well as any other requirement of the U.S. securities laws or the listing standards of a U.S. national securities exchange that is then applicable to the Company, as determined by the Board.

4 

 

“Investors” has the meaning set forth in the Preamble.

“Investors Registration Rights Agreement” has the meaning set forth in Section 5.1.

“Law,” with respect to any Person, means (a) all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and (b) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject.

“Liberty Investor” means, collectively, Liberty Global Ventures Limited and its Affiliates. Any determination, appointment, designation, consent or approval to be made, given or withheld by the Liberty Investor in its capacity as such under this Agreement shall be made, given or withheld by Liberty Global Ventures Limited or such other Person(s) as may be designated by Liberty Global Ventures Limited in writing from time to time.

“Members of the Immediate Family” means, with respect to any natural person, (i) each spouse or child or other descendants of such person, (ii) each trust created solely for the benefit of one or more persons referred to in clause (i) and any of their respective spouses, and (iii) each custodian or guardian of any property of any person referred to in clauses (i) or (ii) in such custodian’s or guardian’s capacity as such.

“Merger Consideration CVR Shares” has the meaning ascribed to such term in the Class E CVR Agreement.

“Minority New Investors” means Anna Standish, Boston Fern Investment Limited, Cheng Kar Shing, Codelouf Ltd., Ever Star Trading Limited, Lakeside Investment Management Limited, Liberty Global Ventures Limited, Palace Global Investments Ltd., PE Fund LP and Per Utnegaard & Partners GmbH.

“Necessary Action” means, with respect to any party and a specified result, all actions (to the extent such actions are permitted by Law and within such party’s control) necessary to cause such result, including (i) voting or providing a written resolution or proxy with respect to the Shares, (ii) causing the adoption of shareholders’ resolutions and amendments to the organizational documents of the Company, (iii) executing agreements and instruments and (iv) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

“Nominating Committee” has the meaning set forth in Section 3.3(a).

“Observer” has the meaning set forth in Section 3.4.

“Organizational Documents” has the meaning set forth in Section 4.3(a).

5 

 

“Person” means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, limited liability company or any other entity of whatever nature, and shall include any successor (by merger or otherwise) of such entity.

“PFIC” has the meaning set forth in Section 6.4(b).

“Proprietary Information” has the meaning set forth in Section 6.3.

“Public Offering” means any public offering and sale of equity securities of the Company or any successor to the Company for cash pursuant to an effective registration statement (other than on Form F-4, F-8 or a comparable form) under the Securities Act.

“Remuneration Committee” has the meaning set forth in Section 3.3(a).

“Representatives” has the meaning set forth in Section 6.3(i).

“Rule 144” means Rule 144 under the Securities Act (or any successor rule or regulation).

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.

“Settlement Date” has the meaning ascribed to such term in the Class E CVR Agreement.

“Shareholder” means each member of the Eros Founder Group and each of the New Investors and their respective Affiliates, in each case so long as such Person owns Shares.

“Shares” means, collectively, A Ordinary Shares and B Ordinary Shares, of the Company, and any securities into which such shares shall have been changed or any securities resulting from any reclassification or recapitalization of such shares.

“Stock Exchange” means the New York Stock Exchange or other national securities exchange or interdealer quotation system on which the Shares are at any time listed or quoted.

“STX Designated Directors” has the meaning ascribed in the Merger Agreement.

“Subsidiary” means, with respect to any Person, any corporation, partnership, trust, limited liability company or other non-corporate business enterprise in which such Person (or another Subsidiary of such Person) holds stock or other ownership interests representing (a) more than fifty percent (50%) of the voting power of all outstanding stock or ownership interests of such entity, (b) the right to receive more than fifty percent (50%) of the net assets of such entity available for distribution to the holders of outstanding stock or ownership interests upon a liquidation or dissolution of such entity or (c) a general or managing partnership interest in such entity.

6 

 

“Transfer” means, with respect to any Shares, a direct or indirect transfer (including through one or more transfers), sale, exchange, assignment, pledge, hypothecation or other encumbrance or other disposition of such Shares, including the grant of an option or other right, whether directly or indirectly, whether voluntarily, involuntarily or by operation of Law. “Transferred”, “Transferring” and “Transferee” shall each have a correlative meaning to the term “Transfer.”

Section 1.2            General Interpretive Principles. The name assigned to this Agreement and the section captions used herein are for convenience of reference only and shall not be construed to affect the meaning, construction or effect hereof. Unless otherwise specified, the terms “hereof,” “herein” and similar terms refer to this Agreement as a whole, and references herein to Articles or Sections refer to Articles or Sections of this Agreement. For purposes of this Agreement, the words, “include,” “includes” and “including,” when used herein, shall be deemed in each case to be followed by the words “without limitation.” The terms “dollars” and “$” shall mean United States dollars. Except as otherwise set forth herein, Shares underlying unexercised options that have been issued by the Company shall not be deemed “outstanding” for any purposes in this Agreement. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Agreement.

Article II

REPRESENTATIONS AND WARRANTIES

Section 2.1            Representations and Warranties of the Investors. Each Investor, severally and not jointly, hereby represents and warrants to the Company, and each other Investor that on the date hereof:

(a)                This Agreement has been duly authorized, executed and delivered by such Investor and, assuming the due execution and delivery of this Agreement by the other parties hereto, this Agreement constitutes the valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at Law).

(b)               The execution, delivery and performance by such Investor of this Agreement and the agreements contemplated hereby and the consummation by such Investor of the transactions contemplated hereby do not and will not, with or without the giving of notice or the passage of time or both: (i) violate the provisions of any Law, rule or regulation applicable to such Investor or his, her or its properties or assets; (ii) violate any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to such Investor or his, her or its properties or assets; or (iii) result in any breach of any terms or conditions of, or constitute a default under, any contract, agreement or instrument to which such Investor is a party or by which such Investor or his, her or its properties or assets are bound.

7 

 

(c)                Such Investor understands that the Shares may not be sold, Transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Shares or an available exemption from registration under the Securities Act, Shares must be held indefinitely.

Section 2.2            Entitlement of the Company and the Investors to Rely on Representations and Warranties. The representations and warranties contained in Section 2.1 may be relied upon by the Company, and by the other Investors, in connection with the entering into of this Agreement. Without limiting the foregoing, each Investor agrees to give the Company prompt written notice in the event that any representation of such Investor contained in Section 2.1 ceases to be true at any time following the date hereof.

Section 2.3            Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors that as of the date of this Agreement:

(a)                It is a company limited by shares duly organized, validly existing and in good standing under the laws of the Isle of Man, it has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by it of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action.

(b)               This Agreement has been duly and validly executed and delivered by the Company and constitutes a legal and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at Law).

(c)                The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not, with or without the giving of notice or the passage of time or both, (i) violate any provision of Law, rule or regulation applicable to the Company or its properties or assets, (ii) violate any judgment, decree, order or award of any court, governmental or quasi-governmental agency or arbitrator applicable to the Company or its properties or assets or (iii) result in any breach of any terms or conditions of, or constitute a default under, any contract, agreement or instrument to which the Company is a party or by which it or its properties or assets are bound.

(d)               The Company does not engage in the design, fabrication, development, testing, production or manufacture of critical technologies within the meaning of the Defense Production Act of 1950, as amended, including all implementing regulations thereof.

8 

 

Article III

MANAGEMENT

Section 3.1            Board Representation Rights of the Hony Investor. Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 3.1 constitute an agreement between the Company, on the one hand, and the Hony Investor, on the other hand, and shall not constitute an agreement to which any other Investor is bound; provided that this Section 3.1 shall not be amended in any manner that has a material and disproportionate effect on the Eros Founder Group vis-à-vis the New Investors without the written consent of the Eros Founder Group.

(a)                Nomination Right. From the Effective Time until the earlier of (i) the third (3rd) anniversary of the Effective Time or (ii) the first such time after the Settlement Date that the Hony Investor ceases to beneficially own (giving effect to the CVRs) 50% of its Effective Time Equity, the Hony Investor shall have the right to nominate up to four (4) Directors (each a “Hony Nominee”), and the number of directorships constituting the full Board shall not exceed nine (9) without the approval of the Hony Investor; provided that at all times at least one (1) of the Hony Nominees shall be (or, if not yet serving on the Board as a Director, shall if elected qualify as) an Independent Director. The Hony Investor may elect to terminate or suspend such nomination right by written notice to the Company at any time. As of the Effective Time, the four Hony Nominees shall initially be the four STX Designated Directors. Whenever the Board is divided into classes of Directors serving staggered terms, unless the Hony Investor otherwise consents in writing, the Hony Nominees shall be allocated among such classes as nearly equal as possible; provided that the allocation of the STX Designated Directors to their respective classes as of the Effective Time in the manner set forth in the Merger Agreement shall be deemed to satisfy this sentence with respect to such Hony Nominees.

(b)               Company Assurances. The Company shall (and shall cause its Subsidiaries to) cooperate in facilitating the nomination rights described in Section 3.1(a), including (i) taking all Necessary Action to nominate each Hony Nominee as part of the slate that is included in any proxy statement (or similar document) of the Company in respect of any meeting of shareholders at which Directors are to be elected (other than, if applicable, when no Hony Nominee is allocated to the class of Directors to be elected at such meeting), (ii) providing the highest level of support for the election of each such Hony Nominee as the Company provides to any other individual standing for election as a Director as part of the Company’s slate of nominees, (iii) not nominating for any election a number of Directors (inclusive of Hony Nominees standing for election) that exceeds the number of directorships to be elected in such election and (iv) not (x) soliciting proxies or participating in a solicitation or (y) knowingly assisting, cooperating with, or encouraging any Person in any effort or attempt, in either case, reasonably likely to interfere with the election of a Hony Nominee as a Director.

9 

 

(c)                Vacancies. If a vacancy on the Board is caused by the death, retirement, resignation or removal of any Director who was a Hony Nominee and the Hony Investor would be entitled to nominate a Hony Nominee in respect of such vacancy as of such time, then the Hony Investor shall, to the fullest extent permitted by applicable Law, have the exclusive right to nominate a replacement to fill such vacancy for the remainder of the deceased, retired, resigned or removed, as applicable, Director’s term, and the Company shall take all Necessary Action to cause such replacement to be appointed to the Board as a Director (at which point such replacement shall attain the status of a Hony Nominee for all other purposes of this Section 3.1).

(d)               Committees. For so long as the Hony Investor has the right to nominate Hony Nominees pursuant to Section 3.1(a), the Company shall take all Necessary Action to appoint (i) two (2) Hony Nominees (at least one of whom must be an Independent Director) to each of the Audit Committee and Nominating Committee, and the number of Directors serving on either such committee shall be four (4) without the prior approval of the Hony Investor and (ii) one (1) Hony Nominee to the Remuneration Committee, and the number of Directors serving on such committee shall not exceed three (3) without the prior approval of the Hony Investor.

(e)                Actions Requiring Board Approval. From the Effective Time until the earlier of (x) the third (3rd) anniversary of the Effective Time or (y) the first such time after the Settlement Date that the Hony Investor ceases to beneficially own (giving effect to the CVRs) 50% of its Effective Time Equity, the following actions by the Company or any of its Subsidiaries shall require the approval of the majority of the Board, including at least one (1) Hony Nominee:

(i)                 Hiring or terminating the chief executive officer, chief financial officer or president (including any co-president) of the Company.

(f)                Indemnification Agreement. The Company and its Subsidiaries shall enter into customary director and officer indemnification agreements with each Hony Nominee elected or appointed to serve on the Board as a Director. Such customary indemnification agreements shall be in a form to be mutually agreed by the Company and the Hony Investor prior to the Effective Time, and each of the Company and the Hony Investor shall negotiate in good faith with respect to such form prior to the Effective Time.

Section 3.2            Board Representation Rights of the Eros Founder Group. Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 3.2 constitute an agreement between the Company, on the one hand, and the Eros Founder Group, on the other hand, and shall not constitute an agreement to which any other Investor is bound; provided that this Section 3.2 shall not be amended in any manner that has a material and disproportionate effect on the New Investors vis-à-vis the Eros Founder Group without the written consent of New Investors that beneficially own (giving effect to the CVRs) a majority of the voting power of the Shares beneficially owned (giving effect to the CVRs) by all New Investors in the aggregate.

10 

 

(a)                Nomination Right. From the Effective Time until the earlier of (i) the third (3rd) anniversary of the Effective Time or (ii) the first such time that the Eros Founder Group ceases to beneficially own 50% of its Effective Time Equity, the Eros Founder Group shall have the right to nominate four (4) Directors (each, an “Eros Nominee”), and the number of directorships constituting the full Board shall not exceed nine (9) without the approval of the Eros Founder Group; provided that at all times at least one (1) of the Eros Nominees shall be (or, if not yet serving on the Board as a Director, shall if elected qualify as) an Independent Director. As of the Effective Time, the four Eros Nominees shall initially be the four Eros Designated Directors. Whenever the Board is divided into classes of Directors serving staggered terms, unless the Eros Founder Group otherwise consents in writing, the Eros Nominees shall be allocated among such classes as nearly equal as possible; provided that the allocation of the Eros Designated Directors to their respective classes as of the Effective Time in the manner set forth in the Merger Agreement shall be deemed to satisfy this sentence with respect to such Eros Nominees.

(b)               Company Assurances. The Company shall (and shall cause its Subsidiaries to) cooperate in facilitating the nomination rights described in Section 3.2(a), including (i) taking all Necessary Action to nominate each Eros Nominee as part of the slate that is included in any proxy statement (or similar document) of the Company in respect of any meeting of shareholders at which Directors are to be elected (other than, if applicable, when no Eros Nominee is allocated to the class of Directors to be elected at such meeting), (ii) providing the highest level of support for the election of each such Eros Nominee as the Company provides to any other individual standing for election as a Director as part of the Company’s slate of nominees, (iii) not nominating for any election a number of Directors (inclusive of Eros Nominees standing for election) that exceeds the number of directorships to be elected in such election and (iv) not (x) soliciting proxies or participating in a solicitation or (y) knowingly assisting, cooperating with, or encouraging any Person in any effort or attempt, in either case, reasonably likely to interfere with the election of an Eros Nominee as a Director.

(c)                Vacancies. If a vacancy on the Board is caused by the death, retirement, resignation or removal of any Director who was an Eros Nominee and the Eros Founder Group would be entitled to nominate an Eros Nominee in respect of such vacancy as of such time, then the Eros Founder Group shall, to the fullest extent permitted by applicable Law, have the exclusive right to nominate a replacement to fill such vacancy for the remainder of the deceased, retired, resigned or removed, as applicable, Director’s term, and the Company shall take all Necessary Action to cause such replacement to be appointed to the Board as a Director (at which point such replacement shall attain the status of an Eros Nominee for all other purposes of this Section 3.2).

(d)               Committees. For so long as the Eros Founder Group has the right to nominate Eros Nominees pursuant to Section 3.2(a), the Company shall take all Necessary Action to appoint (i) two (2) Eros Nominees (at least one of whom must be an Independent Director) to each of the Audit Committee and Nominating Committee, and the number of Directors serving on either such committee shall not exceed four (4) without the prior approval of the Eros Founder Group and (ii) one (1) Eros Nominee to the Remuneration Committee, and the number of Directors serving on such committee shall not exceed three (3) without the prior approval of the Eros Founder Group.

11 

 

(e)                Actions Requiring Board Approval. From the Effective Time until the earlier of (x) the third (3rd) anniversary of the Effective Time or (y) the first such time that the Eros Founder Group ceases to beneficially own 50% of its Effective Time Equity, the following actions by the Company or any of its Subsidiaries shall require the approval of the majority of the Board, including at least one (1) Eros Nominee that is not an Independent Director:

(i)                 Entering into or effecting a Change in Control.

(ii)               Initiating a voluntary liquidation, dissolution, receivership, bankruptcy or other insolvency proceeding involving the Company or any Subsidiary of that Company that is a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X under the Exchange Act.

(iii)             Making any material change in the nature of the business conducted by the Company and its Subsidiaries.

(iv)             Hiring or terminating the chief executive officer, chief financial officer or president (including any co-president) of the Company.

(v)               Adopting the annual business plan (including operating budget) of the Company and its Subsidiaries.

(f)                Chairman Emeritus. If Kishore Lulla ceases to serve as a Director, he shall thereafter hold the title of Chairman Emeritus of the Board until his death, retirement or resignation. The Chairman Emeritus shall be entitled to attend meetings of the Board but shall not have any authority to vote at such meetings or otherwise to take any action binding on the Board or the Company in his capacity as Chairman Emeritus, except to the extent such authority is specifically delegated to him by the then-serving Board in compliance with the Company Articles and applicable Law.

Section 3.3            Committees of the Board.

(a)                The Company shall establish and maintain an audit committee of the Board (the “Audit Committee”), a nominating and governance committee of the Board (the “Nominating Committee”), a remuneration committee of the Board (the “Remuneration Committee”) and such other Board committees as the Board deems appropriate from time to time or as may be required by applicable law or the Stock Exchange rules. The committees shall have such duties and responsibilities as are customary for such committees, subject to the provisions of this Agreement. In the event of a tie vote on any matter before the Audit Committee or Nominating Committee the Company shall take all Necessary Action so that the Independent Director(s) then serving on such committee shall be entitled to cast a tie-breaking vote. The initial composition of the Audit Committee, Nominating Committee and Remuneration Committee at the Effective Time shall be as set forth in the following clauses (i)-(iii) until thereafter modified by action of the Board (upon the recommendation of the Nominating Committee):

12 

 

(i)                 The Audit Committee shall initially consist of Shailesh Rao, Nicholas Stone, Dhirendra Swarup and Dilip Thakkar.

(ii)               The Nominating Committee shall initially consist of Nicholas Stone, Dhirendra Swarup, Dilip Thakkar and John Zhao.

(iii)             The Remuneration Committee shall initially consist of Dilip Thakkar and John Zhao, with the third seat being vacant.

(b)               The Company shall establish and maintain an independent committee of the Board (the “Independent Committee”) to review and approve certain actions by the Company and its Subsidiaries. The Independent Committee shall consist entirely of each of the Independent Directors that are disinterested and independent with respect to the matter in question (it being acknowledged that a Director may qualify as an Independent Director hereunder for general purposes but lack independence with respect to a particular transaction or the parties interested therein); provided that, if an Independent Director previously appointed to the Independent Committee is interested or lacks independence with respect to a particular matter, it shall not be necessary to remove such Independent Director from the Independent Committee so long as such Independent Director recuses himself or herself from all discussions, deliberations and approvals with respect to such matter, and in such case all references herein to approval by a majority of the members of the Independent Committee or similar phrasing shall be deemed to refer to approval by a majority of the members of the Independent Committee other than such recused Independent Directors. The Independent Committee shall meet as needed, may confer and consult with the Board as the Independent Committee deems necessary or appropriate to fulfill its duties and obligations, and shall report its findings and decisions to the Board reasonably promptly as determined by the Independent Committee to be appropriate to fulfill its duties and obligations and, if applicable, taking into account the confidentiality of its deliberations pending final determination on any matter under consideration.

(c)                The Company shall establish and maintain a committee of the Board (the “EIML Committee”) to review and approve all actions by the Company and its Subsidiaries with respect to EIML. The EIML Committee shall consist only of Directors who are Eros Nominees and who are not Independent Directors and shall include Kishore Lulla for so long as he serves as a Director. The EIML Committee shall have full and exclusive power and authority to take or cause to be taken, on behalf of the Company and in its name, any and all actions and decisions required or permitted to be taken by the Company in respect of EIML, and any and all actions taken by the Company and its Subsidiaries with respect to EIML shall require the prior written consent of a majority of the members of the EIML Committee (including Kishore Lulla for so long as he serves as a Director). Such actions include, without limitation, the voting or disposition of any shares of capital stock or other ownership interests of EIML held by the Company or any of its Subsidiaries from time to time; the nomination, appointment and/or election of the

13 

 

directors and officers of EIML; and any decisions regarding changes in the management personnel of EIML. Notwithstanding the foregoing, (x) any provision of the Company Articles or this Agreement that requires the additional approval of the Independent Committee or any or certain holders of Shares with respect to agreements or transactions between the Company or any of its Subsidiaries, on the one hand, and any member of the Eros Founder Group from time to time, on the other hand, shall continue to apply to the extent of such provisions’ respective terms with respect to agreements or transactions between EIML, on the one hand, and any member of the Eros Founder Group from time to time, on the other hand and (y) the EIML Committee shall not take or cause or permit to be taken, or agree or commit to take, any of the following actions without, in each case, the prior approval of Directors comprising a majority of the full Board:

(i)                 Liquidating, dissolving or winding up the affairs of EIML, or effecting any merger or consolidation of EIML.

(ii)               Amending, altering or repealing any provision of the organizational documents of EIML if such amendment, alteration or repeal would adversely affect the rights of the Shareholders other than the Eros Founder Group, unless such amendment, alteration or repeal would adversely affect the rights of the Eros Founder Group in the same manner.

(iii)             Creating or issuing any equity security of, or security convertible into or exchangeable or exercisable for, equity securities of EIML.

(iv)             Redeeming any equity security of, or security convertible into or exchangeable or exercisable for, equity securities of EIML.

(v)               Incurring any indebtedness for borrowed money of EIML in excess of $100 million.

(vi)             Selling, leasing or otherwise disposing of all or substantially all of the assets of EIML in one or a series of transactions.

Section 3.4            Board Observer Rights of the Liberty Investor. Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 3.4 constitute an agreement between the Company, on the one hand, and the Liberty Investor, on the other hand, and shall not constitute an agreement to which any other Investor is bound. From the Effective Time until the earlier of (x) the third (3rd) anniversary of the Effective Time or (y) the first such time after the Settlement Date that the Liberty Investor ceases to beneficially own (giving effect to the CVRs) at least 50% of its Effective Time Equity, the Company agrees that the Liberty Investor shall have the right, but not the obligation, from time to time in the Liberty Investor’s sole discretion, to appoint one (1) person (an “Observer”) to serve as a non-voting observer of the Board. Subject to the immediately following sentence, whenever the Liberty Investor has the right, and exercises its right, to appoint an Observer pursuant to the preceding sentence, the Company shall (a) invite such Observer to attend all meetings of the Board in a nonvoting observer capacity and (b) provide such Observer, as, if and when distributed generally to the Independent Directors, copies of all meeting notices, meeting minutes, written resolutions

14 

 

executed by the Board, and other materials prepared for consideration at any meeting of the Board; provided that, as a condition to the Company’s obligations under this sentence, such Observer shall agree (in writing, if so requested by the Company) to hold in confidence and trust and to act in a fiduciary manner with respect to all Proprietary Information. Notwithstanding the immediately prior sentence, the Company shall have the right to exclude an Observer from access to any material or meeting, or portion of either thereof, if the Company reasonably determines in good faith (i) that there exists actual adversity between the interests of the Liberty Investor, on the one hand, and the Company, on the other hand, with respect to the matters from which the Observer is to be excluded or (ii) with the advice of counsel that such exclusion is necessary to preserve attorney-client, work product or similar privilege or to comply with the terms and conditions of confidentiality agreements with third parties or applicable Law; provided that any such exclusion shall be limited to only the portion of the materials or meetings, as applicable, which gives rise to such reason for exclusion. The Company agrees and acknowledges that any Observer may share with the Liberty Investor any Proprietary Information such Observer obtains in its capacity as such; provided that the Liberty Investor shall be bound by Section 6.3 with respect thereto. The Company also agrees and acknowledges that the Liberty Investor shall not have any rights under this Section 3.4 (or access to any material nonpublic information of the Company pursuant to this Section 3.4) unless and until the Liberty Investor affirmatively appoints an Observer in writing.

Article IV

MINORITY PROTECTIONS

Section 4.1            Restrictions on Certain Actions of the Eros Founder Group.

(a)                In each election of Directors at a time when the Eros Founder Group has the right to nominate Eros Nominees pursuant to Section 3.2(a), each member of the Eros Founder Group shall (i) have the right to vote its Shares in its sole discretion with respect to the election of such Eros Nominees and (ii) with respect to all other directorships to be elected in such election, vote its Shares proportionately to the vote of all holders of Shares who are not members of the Eros Founder Group; provided that, for purposes of determining any such proportional vote prior to the Settlement Date, the Merger Consideration CVR Shares shall be deemed to be outstanding A Ordinary Shares and to have been voted in accordance with the consents of holders of CVRs required by Section 4.3(c).

(b)               During the period from the date of this Agreement until the third (3rd) anniversary of the Effective Time, no member of the Eros Founder Group shall, without the prior approval of the Independent Committee, acquire beneficial ownership of any Equity Security of the Company or convert any of its A Ordinary Shares into B Ordinary Shares pursuant to the Company Articles if, as a result thereof, the members of the Eros Founder Group would, in the aggregate, beneficially own a majority of the voting power of the then outstanding Shares (treating all Equity Securities beneficially owned by any member of the Eros Founder Group and that are not Shares as if converted, exchanged or exercised for the Shares underlying such Equity Securities (but, for clarity, not assuming any voluntary conversion of any such underlying A Ordinary Shares to B Ordinary Shares except to the extent notice of such conversion has been delivered by a member of the Eros Founder Group in accordance with the Company Articles)).

15 

 

Section 4.2            Amended Articles. Unless effected prior to the Effective Time, (a) the Company shall take all Necessary Action to cause the Company Articles to be amended in the form attached to the Merger Agreement as Exhibit J thereto (the “Amended Articles”) and (b) each Investor that is not a Minority New Investor hereby agrees that it shall take all Necessary Action to vote or cause to be voted all Shares it has the power to vote or cause the voting of in favor of the approval of the Amended Articles, whether at any meeting at which a resolution to approve the Amended Articles is submitted to the shareholders of the Company or by consenting in writing to any such resolution in lieu of a meeting, as applicable. For avoidance of doubt, the foregoing covenants shall remain in full force and effect notwithstanding any failure of the Company to obtain the requisite approval of the holders of Shares at any meeting of shareholders or pursuant to any publicly or privately made consent solicitation.

Section 4.3            Consent Rights Pending Effectiveness of the Amended Articles. The provisions of this Section 4.3 shall apply prior to the effectiveness of the Amended Articles, but at no time thereafter.

(a)                The Company shall not, and shall cause its Subsidiaries not to, directly or indirectly, take any of the following actions without the prior approval of the holders of a majority of the outstanding A Ordinary Shares:

(i)                 amending, supplementing or otherwise modifying the provisions of this Article IV;

(ii)               amending, supplementing or otherwise modifying (whether by merger or otherwise) the Company’s Memorandum of Association or the Company Articles (collectively, the “Organizational Documents”) in a manner that would affect the relative rights of holders of B Ordinary Shares vis-à-vis holders of A Ordinary Shares, except to adopt the Amended Articles;

(iii)             entering into any agreement or effecting any transaction or series of related transactions providing for consideration to the holders of B Ordinary Shares that is in a different amount or form per share than the consideration provided to the holders of A Ordinary Shares in such transaction;

(iv)             any action that would have the effect of increasing the relative voting power of the then outstanding B Ordinary Shares vis-à-vis the then outstanding A Ordinary Shares; provided that, for avoidance of doubt, this Section 4.3 (a) (iv) expressly does not include the acquisition by the Eros Founder Group of additional A Ordinary Shares from time to time (but, if such Shares are acquired directly from the Company or any of its Subsidiaries, such acquisition shall be subject to Section 4.3 (a)(vi)) and/or the conversion from time to time of any A Ordinary Shares then held by the Eros Founder Group into B Ordinary Shares (but any such conversion remaining subject to Section 4.1(b));

16 

 

(v)               issuing additional B Ordinary Shares (other than upon conversion of A Ordinary Shares, but any such conversion remaining subject to Section 4.1(b)) to any member of the Eros Founder Group;

(vi)             entering into any agreement or amending any existing agreement or effecting any transaction or series of related transactions between the Company or any of its Subsidiaries, on the one hand, and any member of the Eros Founder Group from time to time, on the other hand, except for (A) awards of equity-based compensation approved by the Remuneration Committee and granted in the ordinary course of business to members of the Eros Founder Group who are also members of the Company’s senior management, (B) arms’ length transactions the material terms of which are approved in advance by the Independent Committee and (C) any agreements or arrangements existing on the date hereof, the material terms of which are publicly disclosed in the Eros Filed SEC Documents (as defined in the Merger Agreement) prior to the date hereof; or

(vii)           agreeing or otherwise committing (whether or not in writing) to take any of the foregoing.

(b)               The Company shall not, and shall cause its Subsidiaries not to, directly or indirectly, take any of the following actions without the prior approval of the majority of the members of the Independent Committee:

(i)                 amending, supplementing or otherwise modifying (whether by merger or otherwise) any Organizational Document in a manner that would affect the relative rights of holders of B Ordinary Shares vis-à-vis holders of A Ordinary Shares, except to adopt the Amended Articles;

(ii)               entering into any agreement or effecting any transaction or series of related transactions providing for consideration to the holders of B Ordinary Shares that is in a different amount or form per share than the consideration provided to the holders of A Ordinary Shares in such transaction;

(iii)             entering into any agreement or amending any existing agreement or effecting any transaction or series of related transactions between the Company or any of its Subsidiaries, on the one hand, and any member of the Eros Founder Group from time to time, on the other hand, except for (A) awards of equity-based compensation approved by the Remuneration Committee and granted in the ordinary course of business to members of the Eros Founder Group who are also members of the Company’s senior management and (B) any agreements or arrangements existing on the date hereof, the material terms of which are publicly disclosed in the Eros Filed SEC Documents prior to the date hereof; or

(iv)             agreeing or otherwise committing (whether or not in writing) to take any of the foregoing.

17 

 

(c)                From the date hereof until the Settlement Date, the Company shall not, and shall cause its Subsidiaries not to, directly or indirectly, take any of the following actions:

(i)                 each of the actions set forth in Section 4.3(a) (but, for avoidance of doubt, subject to the exceptions set forth therein);

(ii)               effect any election or removal of Directors by the holders of Shares; or

(iii)             effect any other action upon the approval of holders of Shares;

without, in each case, obtaining the consent thereto of holders of such number and class of CVRs that, together with the Shares actually voted (at a meeting or by resolution) with respect to such action and assuming all Merger Consideration CVR Shares were outstanding A Ordinary Shares and voted, would be required to approve such action pursuant to the Organizational Documents, Section 4.3(a) (if applicable) or other applicable Law.

(d)               Notwithstanding anything to the contrary in this Agreement, (i) at any time that this Section 4.3 remains in effect, any New Investor may relinquish the benefits of and right to enforce this Section 4.3 (in whole, but not in part) as to itself upon written notice to the Company and (ii) from and after any such relinquishment, this Section 4.3 shall constitute an agreement between the Company, the Eros Founder Group and the remaining New Investors that have not exercised their right to so relinquish this Section 4.3, and this Section 4.3 shall not constitute an agreement for the benefit of or enforceable by such relinquishing New Investor.

Article V

REGISTRATION RIGHTS

Section 5.1            Investors Registration Rights Agreement. The Company shall grant to each Investor the registration rights set forth in the Registration Rights Agreement attached as Exhibit A hereto (the “Investors Registration Rights Agreement”).

Article VI

ADDITIONAL AGREEMENTS OF THE PARTIES

Section 6.1            Indemnity and Liability.

(a)                The Company hereby indemnifies and agrees to exonerate and hold each of the Investors and each of their respective shareholders, members, affiliates, directors, officers, fiduciaries, managers, controlling persons, employees, representatives, and agents and each of the partners, shareholders, members, affiliates, directors, officers, fiduciaries, managers, controlling persons, employees, representatives, and agents of each of the foregoing (collectively, the “Indemnitees”), each of whom is an intended third

18 

 

party beneficiary of this Agreement and may specifically enforce the Company’s obligations hereunder, free and harmless from and against any and all actions, causes of action, suits, claims, liabilities, losses, damages and out-of-pocket costs and expenses or any other amounts in connection therewith, including without limitation all actual out-of-pocket attorneys’ fees and expenses (collectively, the “Indemnified Liabilities”), incurred by the Indemnitees or any of them as a result of, arising out of, or in any way relating to this Agreement or any claim, cause of action or suit against the Investor or any Indemnitee solely by reason of the Investor’s status as such under this Agreement, except for any breach of this Agreement by such Investor or such Investor’s respective Indemnitee or any Indemnified Liabilities arising from or primarily related to such Indemnitee’s willful misconduct, fraud or gross negligence, or filings with the SEC describing its ownership in the Company, or in connection with any Public Offering where information provided by an Investor is the cause of any claim relating to that Public Offering. If and to the extent that the foregoing undertaking may be unavailable or unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable Law. For purposes of this Section 6.1, none of the circumstances described in the limitations contained in the immediately preceding sentence shall be deemed to apply absent a final non-appealable judgment of a court of competent jurisdiction to such effect, in which case to the extent any such limitation is so determined to apply to any Indemnitee as to any previously advanced indemnity payments made by the Company, then such payments shall be repaid by such Indemnitee to the Company.

(b)               Any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense, and in any action, claim, suit, investigation or proceeding in which the Company, on the one hand, and an Indemnified Party, on the other hand, is, or is reasonably likely to become, a party. An Indemnified Party shall have the right to employ one (1) separate counsel in each applicable jurisdiction at the expense of the Company and to control its own defense of such action, claim, suit, investigation or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the Company, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable. The Company agrees that it will not, without the prior written consent of the applicable Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, suit, investigation, action or proceeding relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of the applicable Indemnified Party and each other Indemnified Party from all liability arising or that may arise out of such claim, suit, investigation, action or proceeding.

19 

 

(c)                The rights of any Indemnitee to indemnification hereunder will be in addition to any other rights any such Person may have under any other agreement or instrument referenced above or any other agreement or instrument to which such Indemnitee is or becomes a party or is or otherwise becomes a beneficiary or under Law or regulation. The Company hereby agrees that it is the indemnitor of first resort (i.e., its obligations to any Indemnitee under this Agreement are primary and any obligation of any Investor (or any Affiliate thereof (other than the Company)) to provide advancement or indemnification for the same Indemnified Liabilities (including all interest, assessment and other charges paid or payable in connection with or in respect of such Indemnified Liabilities) incurred by Indemnitee are secondary), and if any Investor (or any Affiliate thereof other than the Company) pays or causes to be paid, for any reason, any amounts otherwise indemnifiable hereunder or under any other indemnification agreement (whether pursuant to contract, bylaws or charter or the equivalent governing document) with any Indemnitee, then (i) such Investor shall be fully subrogated to all rights of the Indemnitee with respect to such payment, and (ii) the Company shall reimburse such Investor (or such other Affiliate) for the payments actually made. The Company hereby unconditionally and irrevocably waives, relinquishes and releases (and covenants and agrees not to exercise, and to cause each of its Affiliates not to exercise), any claims or rights that the Company may now have or hereafter acquire against any Indemnitee (in any capacity) that arise from or relate to the existence, payment, performance or enforcement of the Company’s obligations under this Agreement or under any indemnification obligation (whether pursuant to any other contract, any organizational document or otherwise), including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Indemnitee against any Indemnitee, whether such claim, remedy or right arises in equity or under contract, statute, common law or otherwise, including any right to claim, take or receive from any Indemnitee, directly or indirectly, in cash or other property or by set-off or in any other manner, any payment or security or other credit support on account of such claim, remedy or right. Except as specifically provided otherwise in this Agreement, none of the Indemnitees will be liable to the Company or any of its Affiliates for any act or omission suffered or taken by such Indemnitee that does not constitute willful misconduct, fraud or gross negligence.

Section 6.2            Access to Information and Personnel; Regulatory Examinations. Notwithstanding anything to the contrary in this Agreement, the provisions of this Section 6.2 constitute an agreement between the Company, on the one hand, and the Hony Investor and the Eros Founder Group, on the other hand, and shall not constitute an agreement to which any other Investor is bound.

(a)                For so long as the Hony Investor has the right to nominate Hony Nominees pursuant to Section 3.1(a), the Company will deliver, or will cause to be delivered, the following to the Hony Investor, and for so long as the Eros Founder Group is entitled to nominate at least one Director pursuant to Section 3.2(a), the Company will deliver, or will cause to be delivered, the following to the Eros Founder Group:

(i)                 unaudited consolidated quarterly financial reports of the Company and its consolidated subsidiaries prepared in accordance with IFRS for the first three fiscal quarters of each year, which shall be provided no later than 45 days following the end of such fiscal quarter;

(ii)               audited consolidated annual financial reports of the Company and its consolidated subsidiaries prepared in accordance with IFRS, which shall be provided no later than the date upon which the Form 20-F for the Company is due for such fiscal year;

20 

 

(iii)             the annual business plan (including operating budget and capital expenditure presented on a monthly basis); and

(iv)             such other information and data as the Hony Investor or the Eros Founder Group may reasonably request in connection with its ownership of Shares, including, but not limited to any information necessary to assist the Hony Investor or any member of the Eros Founder Group, as the case may be, in preparing its tax, regulatory or other similar filings or as otherwise required for administrative purposes.

(b)               The Company shall, and shall cause its Subsidiaries to, provide (in each case upon reasonable advance notice during normal business hours and under the supervision of appropriate Company personnel) the Hony Investor or the Eros Founder Group, as applicable, or any governmental authority having jurisdiction over the Hony Investor and its Affiliates, the Eros Founder Group and its Affiliates or the Company reasonable access to all books, records, policies and procedures, internal audit and compliance reports, and to officers, personnel, accountants and other representatives of the Company and its Subsidiaries and their respective businesses, whether located in the United States or outside the United States, including without limitation the right to audit any of such books, records, policies and procedures, and reports and to make copies therefrom. The Company shall provide, upon reasonable advance notice during normal business hours and under the supervision of appropriate Company personnel, the Hony Investor and Eros Founder Group with access to any materials viewed by any governmental authority if requested by the Hony Investor or the Eros Founder Group and if permitted by applicable Law.

Section 6.3            Confidentiality. Each Investor shall maintain the confidentiality of any confidential and proprietary information of the Company and its Subsidiaries (“Proprietary Information”) using the same standard of care, but in no event less than reasonable care, as it applies to its own confidential information, except (i) for any Proprietary Information which is publicly available (other than as a result of dissemination by such Investor, its Representatives or, in the case of the Liberty Investor, its Observer(s)) or a matter of public knowledge generally, (ii) if the release of such Proprietary Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, following delivery of prior written notice to the Company (to the extent permitted under applicable Law), or (iii) for Proprietary Information that was known to such Investor prior to its disclosure by the Company, or becomes known by such Investor, in each case on a non-confidential basis, without, to such Investor’s knowledge, breach of any third party’s confidentiality obligations. Each Investor further acknowledges and agrees that it shall not disclose any Proprietary Information to any Person, except that Proprietary Information may be disclosed:

21 

 

(i)                 to its and its Affiliates’ directors, officers, employees, stockholders, members, partners, agents, counsel, investment advisers or other representatives (all such persons being collectively referred to as “Representatives”) in the normal course of the performance of their duties to the Investor or its Affiliates; provided that such recipient agrees to be bound by a confidentiality agreement consistent with the provisions hereunder or is otherwise bound under Law or contract to a duty of confidentiality to the Investor or its Affiliate;

(ii)               to any regulatory authority to which such Investor or any of its Affiliates is subject or with which it has regular dealings in connection with a general regulatory inquiry not specifically targeted at the Company; provided that to the extent legally permissible and practicable, such Investor gives prior notice of such disclosure to the Company, and provided, further, that such authority is advised of the confidential nature of such information;

(iii)             to the extent related to the tax treatment and tax structure of the transactions contemplated by this Agreement (including all materials of any kind, such as opinions or other tax analyses that the Company, its Affiliates or any of its Representatives have provided to such Investor relating to such tax treatment and tax structure); provided that the foregoing does not constitute an authorization to disclose the identity of any existing or future party to the transactions contemplated by this Agreement or their Affiliates or Representatives, or, except to the extent relating to such tax structure or tax treatment, any specific pricing terms or commercial or financial information; or

(iv)             if the prior written consent of the Board shall have been obtained.

Nothing contained herein shall prevent the use (subject, to the extent possible, to a protective order) of Proprietary Information in connection with the assertion or defense of any claim by or against the Company or any Investor.

Section 6.4            U.S. Tax Matters.

(a)                Controlled Foreign Corporation. The Company shall, at the request of any Investor that is (or a direct or indirect owner of which is) a “United States shareholder” (as defined in Section 951(b) of the U.S. Internal Revenue Code of 1986, as amended (or any successor thereto) (the “Code”)) with respect to the Company and that is not classified as a partnership for United States federal income tax purposes, and at such Investor’s sole cost and expense, use commercially reasonable efforts to provide any information reasonably requested by such Investor that the Company has in its possession (or that is reasonably available from the Company’s tax advisors) that is reasonably necessary to enable such Investor to determine the Company’s status as a controlled foreign corporation within the meaning of Section 957 of the Code (a “CFC”) and, if such Investor reasonably determines that the Company is a CFC (and informs the Company of such determination and, upon request of the Company, provides such information to the Company that forms the basis of such determination), to enable such Investor to determine whether any portion of the Company’s income is “subpart F income” (as defined in Section 952 of the Code) or income described in Section 951A of the Code.

22 

 

For purposes of this paragraph (a), the term “Company” shall mean the Company and any of its Subsidiaries.

(b)               Passive Foreign Investment Company. The Company shall, at the request of any Investor that is (or a direct or indirect owner of which is) a United States person within the meaning of Section 7701(a)(30) of the Code and that has an Aggregate Investor Voting Percentage (giving effect to the CVRs) equal to at least 2%, use commercially reasonable efforts to provide any information reasonably requested by such Investor that the Company has in its possession (or that is reasonably available from the Company’s tax advisors) to enable such Investor or such Investor’s direct or indirect owners to determine the Company’s status as a “passive foreign investment company” within the meaning of Section 1297 of the Code (a “PFIC”) and, if the Company is a PFIC during any taxable year and the Board so determines, to enable such Investor (or such Investor’s direct or indirect owners) to make a “Qualified Electing Fund” election pursuant to Section 1295 of the Code or file a “Protective Statement” pursuant to Treasury Regulation Section 1.1295-3. If the Company provides such information to any such Investor, the Company shall provide such information to any other Investor that is (or a direct or indirect owner of which is) a United States person within the meaning of Section 7701(a)(30) of the Code and that requests such information (notwithstanding its Aggregate Investor Voting Percentage). Notwithstanding the foregoing, Investors shall cease to have any rights, and the Company shall cease to have any obligations, under this paragraph (b) on the third (3rd) anniversary of the Effective Time.

Section 6.5            Certain Other Matters.

(a)                Neither the Company nor any of its Subsidiaries shall enter into any contract, agreement, arrangement or understanding containing any provision or covenant that purports to, or could reasonably be expected to, limit in any respect the ability of any Investor or any of their respective Affiliates or portfolio companies to (i) sell any products or services of or to any other Person or in any geographic region, (ii) engage in any line of business, (iii) compete with or obtain products or services from any Person or (iv) provide products or services to the Company or any of its Subsidiaries.

(b)               Notwithstanding anything in this Agreement (but subject to applicable Laws, including applicable securities Laws), none of the provisions of this Agreement, other than the confidentiality provisions contained herein, shall in any way limit any Affiliate or portfolio company of any Investor from engaging in any brokerage, investment advisory, financial advisory, anti-raid advisory, principaling, merger advisory, financing, asset management, trading, market making, arbitrage, investment activity and other similar activities conducted in the ordinary course of their business.

(c)                The Company covenants and agrees that it shall not (and shall not permit any of its Subsidiaries or Affiliates or any of its or their respective directors, officers, managers, employees, independent contractors, representatives or agents to) promise, authorize or make any payment to, or otherwise contribute any item of value to, directly or indirectly, to any third party, including any Non-U.S. Official (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”)), in each

23 

 

case, in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption Law. The Company further represents that it shall (and shall cause each of its Subsidiaries and Affiliates to) cease all of its or their respective activities, as well as remediate any actions taken by the Company, its Subsidiaries or Affiliates, or any of their respective directors, officers, managers, employees, independent contractors, representatives or agents in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption Law. The Company further represents that it shall (and shall cause each of its Subsidiaries and Affiliates to) maintain systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption Law. Upon request, the Company agrees to provide to any Investor an annual certification concerning the Company’s compliance with applicable anti-corruption Laws. The Company shall, and shall cause any direct or indirect Subsidiary or entity controlled by it, whether now in existence or formed in the future, to comply with the FCPA. The Company shall use its best efforts to cause any direct or indirect Subsidiary, whether now in existence or formed in the future, to comply in all material respects with all applicable Laws.

Article VII

MISCELLANEOUS

Section 7.1            Freedom to Pursue Opportunities.

(a)                Without in any way limiting their obligations under Section 7.5, the parties expressly acknowledge and agree that: (i) each Investor, its Affiliates and its and their affiliated investment funds, and each Director, has the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly engage in the same or similar business activities or lines of business as the Company or any of its Subsidiaries, on its own account, or in partnership with, or as an employee, officer, director or stockholder of any other Person, including those lines of business deemed to be competing with the Company or any of its Subsidiaries; (ii) none of the Company, any of its Subsidiaries or any of the Company’s shareholders shall have any rights in and to the business ventures of any Investor, its Affiliates and its and their affiliated investment funds, or any Director, or the income or profits derived therefrom; (iii) each Investor, its Affiliates and its and their affiliated investment funds, and each Director, may do business with any potential or actual customer or supplier of the Company or any of its Subsidiaries or may employ or otherwise engage any officer or employee of the Company or any of its Subsidiaries; and (iv) in the event that an Investor, it Affiliates and its and their affiliated investment funds, or any Director, acquires knowledge of a potential transaction or matter that may be an opportunity for the Company, any of its Subsidiaries, or any other shareholder of the Company, such Investor, Affiliate, affiliated investment fund or Director shall, to the fullest extent permitted by applicable Law, have no duty (fiduciary, contractual or otherwise) to communicate or present such opportunity to the Company, any of its Subsidiaries, or any such shareholder, as the case may be, and, notwithstanding any provision of this Agreement to the contrary, shall not be liable to the Company, any of its Subsidiaries, or any other shareholder of the Company (or their respective

24 

 

Affiliates) for breach of any duty (fiduciary, contractual or otherwise) by reason of the fact that such Investor, Affiliate, affiliated investment fund or Director directly or indirectly, pursues or acquires such opportunity for itself, directs such opportunity to another Person, or does not present such opportunity to the Company, any of its Subsidiaries, or any other shareholder of the Company; provided that the foregoing shall not apply to any Director with respect to any business opportunity first presented to such Director expressly in his or her capacity as such. For the avoidance of doubt, any actions taken, directly or indirectly, by any publicly traded Affiliate (or any of its officers, directors or employees) of an Investor shall not be deemed to be an action taken by such Investor.

(b)               Each Investor hereby, to the fullest extent permitted by applicable Law, acknowledges and agrees that, (i) in the event of any conflict of interest between the Company or any of its Subsidiaries, on the one hand, and such Investor or any of its Affiliates, on the other hand, such Investor or Affiliate may act in such Investor’s or Affiliate’s best interest and (ii) no Investor shall be obligated (A) to reveal to the Company or any of its Subsidiaries confidential information belonging to or relating to the business of such Investor, its Affiliates or its or their respective portfolio companies (or any Subsidiary thereof) or (B) to recommend or take any action in its capacity as an Investor that prefers the interest of the Company or any of its Subsidiaries over the interest of such Investor, its Affiliates or its or their respective portfolio companies (or any Subsidiary thereof).

Section 7.2            Entire Agreement. This Agreement, together with the Investors Registration Rights Agreement and all of the other exhibits, annexes and schedules hereto and thereto, constitute the entire understanding and agreement between or among the parties as to the matters covered herein and therein and supersede and replace any prior understanding, agreement or statement of intent between or among the parties as to the matters covered herein and therein. In the event of any inconsistency between this Agreement and any document executed or delivered to effect the purposes of this Agreement, including, without limitation, the Organizational Documents or comparable governing documents of any other company, this Agreement shall govern as between or among the parties hereto.

Section 7.3            Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

(a)                This Agreement shall be governed by and construed in accordance with the laws of the Isle of Man applicable to contracts entered into and performed entirely within the Isle of Man.

(b)               Any claim, action, suit or proceeding (whether in contract or tort) seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be heard and determined in the courts of the Isle of Man, and each of the parties hereto hereby consents to the exclusive jurisdiction of such courts and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of venue of any such claim, action, suit or proceeding in any such court or that any such claim, action, suit or proceeding that is brought in any such court has been brought in an inconvenient forum.

25 

 

(c)                Subject to applicable Law, process in any such claim, action, suit or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing and subject to applicable Law, each party agrees that service of process on such party as provided in Section 7.9 shall be deemed effective service of process on such party. Nothing herein shall affect the right of any party to serve legal process in any other manner permitted by Law or at equity.

Section 7.4            Obligations; Remedies. The Company and the Investors shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement (including, without limitation, costs of enforcement) and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement, and that the Company or any Investor may in its sole discretion apply to any court of Law or equity of competent jurisdiction for specific performance or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. All remedies, either under this Agreement or by Law or otherwise afforded to any party, shall be cumulative and not alternative. All obligations hereunder shall be satisfied in full without set-off, defense or counterclaim.

Section 7.5            Amendment and Waiver.

(a)                The terms and provisions of this Agreement may be modified or amended at any time and from time to time only by the written agreement of the Company and each Investor (or, with respect to any such terms and provisions to which only some Investors are parties, such Investors). No purported waiver of any term or provision of this Agreement shall be valid or effective unless set forth in an instrument in writing signed on behalf of the party against which such waiver is sought to be enforced. Any amendment, modification or waiver effected in accordance with the foregoing shall be effective and binding on the Company and the Investors (or, with respect to any such terms and provisions to which only some Investors are parties, such Investors).

(b)               Any failure by any party at any time to enforce any of the provisions of this Agreement, or single or partial enforcement of any rights, powers or remedies conferred by this Agreement, shall not be construed a waiver of such provision or any other provisions hereof, or preclude any other or further exercise thereof.

Section 7.6            Binding Effect; Assignment. The rights and obligations under this Agreement shall not be assignable without the prior written consent of the Investors, and any attempted assignment of rights or obligations in violation of this Section 7.6 shall be null and void.

26 

 

Section 7.7            Termination. This Agreement shall terminate automatically (without any action by any party hereto) as to each Investor when such Investor ceases to hold any Shares or CVRs; provided, however, for the avoidance of doubt, that any rights particular to any one or more Investors, but not all Investors, contingent upon having at least a specified Aggregate Investor Voting Percentage or percentage of Effective Time Equity shall terminate as to such particular Investor or Investors when it or they, as applicable, cease to have such Aggregate Investor Voting Percentage or percentage of Effective Time Equity, respectively. In the event of any termination of this Agreement as provided in this Section 7.7, this Agreement (and all rights and obligations hereunder) shall forthwith become wholly void and of no further force or effect as to such Investor (except for Section 6.1, Section 6.3 and this Article VII) and there shall be no liability on the part of any parties hereto or their respective officers or directors with respect to such Investor. Notwithstanding the foregoing, no party hereto shall be relieved from liability for any willful breach of this Agreement.

 

Section 7.8            Non-Recourse. Notwithstanding anything to the contrary that may be expressed or implied in this Agreement or any document or instrument delivered in connection herewith, and notwithstanding the fact that certain of the Investors may be partnerships or limited liability companies, by its acceptance of the benefits of this Agreement, the Company and each Investor covenants, agrees and acknowledges that no Person (other than the parties hereto) has any obligations hereunder, and that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any current or future director, officer, employee, general or limited partner or member of any Investor or of any Affiliate, portfolio company (or Subsidiary thereof) of any Investor or of any of its Affiliates, or any assignee of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable Law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current and future equity holders, controlling persons, directors, officers, employees, agents, Affiliates, members, managers, general or limited partners, portfolio companies (or Subsidiaries thereof) or assignees of the Investor or any former, current or future shareholder, controlling person, director, officer, employee, general or limited partner, member, manager, Affiliate, portfolio company (or Subsidiary thereof), agent or assignee of any of the foregoing, as such for any obligation of any Investor under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.

Section 7.9            Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given (i) if delivered personally, upon such delivery, (ii) if delivered by electronic mail, when confirmation of successful transmission is received or (iii) if sent by Federal Express or other nationally-recognized overnight courier, upon delivery or refusal of delivery, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

if to the Company, to:

Eros International Plc
First Names House

Victoria Road

Douglas

27 

 

Isle of Man IM2 4DF

British Isles

Attention: Mark Carbeck, Chief Corporate and Strategy Officer

Email:  mark.carbeck@erosintl.com

 

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California 90071-3197

U.S.A.

Attention: Kevin Masuda

Peter Wardle

Email:      kmasuda@gibsondunn.com

pwardle@gibsondunn.com

if to the Eros Founder Group, to:

3902 & 3903 Tower A

Business Central Tower

Dubai Internet City

Sheikh Zayed Road

Dubai, U.A.E.

Attention:  Kishore Lulla

Rishika Lulla Singh           

Email:  klulla@erosintl.com; rishika.lulla@erosnow.com

 

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP

333 South Grand Avenue

Los Angeles, California 90071-3197

U.S.A.

Attention: Kevin Masuda

Peter Wardle

Email:      kmasuda@gibsondunn.com

pwardle@gibsondunn.com

if to the Hony Investor, to:

Marco Alliance Limited and Great Mission International Limited

Suite 2701, One Exchange Square Central

Hong Kong

Attention: Ms. ZhiFang Cui

Email:      cuizf@honycapital.com

with a copy (which shall not constitute written notice) to:

28 

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

Beijing Representative Office

Unit 5201, Fortune Financial Center, 5 Dongsanhuan Zhonglu

Chaoyang District, Beijing 100020

China

Attention: Greg Liu

Email:      gliu@paulweiss.com

if to the Liberty Investor, to:

161 Hammersmith Road

Hammersmith

London W6 8BS United Kingdom

Attention: Simon Freer

Email:      sfreer@libertyglobal.com

               LegalUS@libertyglobal.com

if to any other party, to the contact information set forth below such party’s signature on its signature page hereto.

Section 7.10        Severability. If any portion of this Agreement shall be declared void or unenforceable by any court or administrative body of competent jurisdiction, then, so long as no party is deprived of the benefits of this Agreement in any material respect, such portion shall be deemed severable from the remainder of this Agreement, which shall continue in all respects valid and enforceable.

Section 7.11        Headings. The headings and subheadings in this Agreement are included for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereto.

Section 7.12        Contracts (Rights of Third Parties) Act 2001. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective permitted assigns and successors, and, except as provided in Section 6.1 and Section 7.8, nothing herein, express or implied, is intended to or shall create any right enforceable by any person who is not a party to it under the Contracts (Rights of the Third Parties) Act 2001, but this Section 7.12 does not affect any right or remedy of a third party that exists or is available apart from that Act.

Section 7.13        Recapitalizations; Exchanges, Etc. The provisions of this Agreement shall apply to the full extent set forth herein with respect to the Shares, to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of the Shares, by reason of a stock dividend, stock split, stock issuance, reverse stock split, combination, recapitalization, reclassification, merger, consolidation or otherwise.

Section 7.14        Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute a single instrument. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 7.14.

[The remainder of this page intentionally left blank]

29 

 

IN WITNESS WHEREOF, each of the undersigned has executed and delivered this Agreement as a deed or caused this Agreement to be executed and delivered as a deed on its behalf as of the date first written above.

EXECUTED and DELIVERED as a
deed by EROS INTERNATIONAL
PLC acting by:

 

 

 

 

)

)

)

 

 

/s/ Kishore Lulla

 

 

Name: Kishore Lulla

Title: Executive Chairman and Group Chief

Executive Officer and Managing

Director

 

 

 

 

 

By: CDS International Limited, its sole director

EXECUTED and DELIVERED as a
deed by EROS VENTURES
LIMITED acting by:

)

)

)

 

 

/s/ Joel Smith ____________

 

Name: Joel Smith

Title: Authorized Signatory

)

)

)

/s/ Simon Kleis        ____________
 

Name: Simon Kleis

Title: Authorized Signatory

 

 

 

 

EXECUTED and DELIVERED as a
deed by BEECH INVESTMENTS
LIMITED acting by:

)

)

)

 

 

/s/ Joel Smith

 

Name: Joel Smith

Title: Director

)

)

)

/s/ Simon Kleis  
 

Name: Simon Kleis

Title: Director

 

 

 

SIGNED and DELIVERED as a
DEED by KISHORE LULLA in the presence
of:

 

 

/s/ Swaneet Singh

)

)

)

 

 

/s/ Kishore Lulla

Kishore Lulla
Witness signature

Name: Swaneet Singh

Address: [Address]

Occupation: Executive

 

 

 

 

 

 

SIGNED and DELIVERED as a DEED
by RISHIKA LULLA SINGH in the
presence of:

 

 

/s/ Swaneet Singh

)

)

)

 

 

/s/ Rishika Lulla Singh

Rishika Lulla Singh
Witness signature

Name: Swaneet Singh

Address: [Address]

Occupation: Executive

 

 

SIGNED and DELIVERED as a DEED
by SUNIL LULLA in the presence of:

 

 

/s/ Pradeep Dwivedi

)

)

)

 

 

/s/ Sunil Lulla

Sunil Lulla
Witness signature

Name: Pradeep Dwivedi

Address: [Address]

Occupation: Private Service

 

 

SIGNED and DELIVERED as a DEED
by RIDHIMA LULLA in the presence
of:

 

 

/s/ Rayaan shah

)

)

)

 

 

/s/ Ridhima Lulla

Ridhima Lulla
Witness signature

Name: Rayaan shah

Address: [Address]

Occupation: Consultant

 

 

 

 

 

EXECUTED and DELIVERED as a
deed by TPG GROWTH IV OSCARS,
L.P. acting by its general partner TPG
Growth GenPar IV, L.P. itself acting
by its general partner TPG Growth GenPar
IV Advisors, LLC acting by:

)

)

)

 

 

/s/ David Mossé

 
  Vice President  
   
   

TEXT BOX: A NOTARY PUBLIC OR OTHER OFFICER COMPLETING THIS CERTIFICATE VERIFIES ONLY THE IDENTITY OF THE INDIVIDUAL WHO SIGNED THE DOCUMENT, TO WHICH THIS CERTIFICATE IS ATTACHED, AND NOT THE TRUTHFULNESS, ACCURACY, OR VALIDITY OF THAT DOCUMENT.

 

 

 

 

 

 

 

State of Texas §
   
County of Tarrant §

 

Before me, Diana Cullum, Notary Public, on this day personally appeared David Mossé, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same in his authorized capacity for the purposes and consideration therein expressed.

 

 

Given under my hand and seal of office this 9th day of July 2020.

 

TEXT BOX: DIANA ARIEL CULLUM NOTARY PUBLIC, STATE OF TEXAS COMM. EXPIRES 11-04-2023 NOTARY ID 132237104

 

/s/ Diana Cullum

Notary Public in and for the State of Texas

 

 

 

 

EXECUTED and DELIVERED as a
deed by MARCO ALLIANCE
LIMITED acting by:

 

 

 

)

)

)

 

 

)

)

)

 

 

/s/ Yuan Bing

Director

 

 

 

/s/ Rong Zhang

Witness Name: Rong Zhang

Address: [Address]

 

 

 

EXECUTED and DELIVERED as a
deed by PCCW MEDIA LIMITED
acting by:

 

 

 

)

)

)

 

 

 

 

 

 

 

/s/ LEE Hoi Yee, Janice

Director

 

 

 

 

 

EXECUTED and DELIVERED as a
deed by BLACK FISH BLUE FISH,
LLC acting by:

 

 

 

)

)

)

 

 

)

)

)

 

 

/s/ Derek Arend

President

 

 

 

/s/ Nicole Truebenbach

Vice President

 

 

 

EXECUTED and DELIVERED as a
deed by PTOLEMY CAPITAL, LLC
acting by:

 

 

 

)

)

)

 

 

 

 

 

 

 

 

 

 

/s/ Mitchell Otolski

Agent

 

 

 

 

SIGNED and DELIVERED as a DEED by Andrew Warren in the presence of:

 

 

/s/ Tracy Warren

)

)

)

 

 

/s/ Andrew Warren

 
Witness signature

Name: Tracy Warren

Address: [Address]

Occupation: Homemaker 

 

 

 

EXECUTED and DELIVERED as a
deed by PE Fund LP acting by:

 

 

 

)

)

)

 

 

 

 

 

 

 

/s/ Beau Wrigley

William Wrigley, Jr., as Chairman & CEO of WWJr. Enterprises., as its GP

 

 

 

SIGNED and DELIVERED as a DEED
by Cheng Kar Shing in the presence of:

 

 

/s/ Chester Yuen

)

)

)

 

 

/s/ Cheng Kar Shing

 
Witness signature

Name: Chester Yuen

Address: [Address]

Occupation: Associate Director

 

 

EXECUTED and DELIVERED as a
deed by Ever Star Trading Limited
acting by: Chak Mei Hing

)

)

)

 

 

/s/ Chak Mei Hing

 

Title: Director

)

)

)

/s/                       
 

Director Secretary

  

 

  

EXECUTED and DELIVERED as a
deed by Codelouf Ltd. acting by:

)

)

)

 

 

/s/ Andrew Ogier

 

Title: Director

)

)

)

                            
 

Director Secretary

 

 

EXECUTED and DELIVERED as a
deed by Lakeside Investment
Management Ltd. acting by:

)

)

)

 

 

/s/ Raffael Stockli

 

Title: Director

)

)

)

/s/                       
 

Director Secretary

 
EXECUTED and DELIVERED as a
deed by Boston Fern Investment
Limited acting by:

)

)

)

 

 

/s/ MaHuateng

 

Director

)

)

)

                               
 

Director Secretary

 
EXECUTED and DELIVERED as a
deed by Per Utnegaard & Partners
GmbH. acting by:

)

)

)

 

 

/s/ Per Utnegaard

 

Title: Director

)

)

)

                         
 

Director Secretary

 

 

 

 

SIGNED and DELIVERED as a DEED by
Anna Standish in the presence of:

 

 

/s/ Lachlan Sf Dix

)

)

)

 

 

/s/ Anna Standish

Witness signature

Name: Lachlan Sf Dix

Address: [Address]

Occupation: Student

 

 

 

 

EXECUTED and DELIVERED as a
deed by Palace Global Investments
Ltd. acting by:

)

)

)

 

 

/s/ Sanjay N. Kirpalani

 

Director

)

)

)

/s/ Thomas Koechli
 

Director Secretary


 

MINORITY NEW INVESTOR:

 

 

SIGNED and DELIVERED as a DEED
by LIBERTY GLOBAL VENTURES
LIMITED solely in respect of Article I,
Article II, Section 3.4 (to the extent applicable
by its terms to such Minority New Investor),
Article V, Article VI and Article VII,
in the presence of:

 

 

/s/ Donna Ashong

 

 

 

)

)

)

 

 

 

 

 

/s/ Jeremy Evans

Director    Jeremy Evans

Witness signature

 

Name: Donna Ashong

Address: [Address]

Occupation: EA

 

 

SCHEDULE 1

 

· Andrew Warren
· Anna Standish
· Black Fish Blue Fish, LLC
· Boston Fern Investment Limited
· Cheng Kar Shing
· Codelouf Ltd.
· Ever Star Trading Limited
· Lakeside Investment Management Ltd.
· Liberty Global Ventures Limited
· Marco Alliance Limited
· Palace Global Investments Ltd.
· PCCW Media Limited
· PE Fund LP
· Per Utnegaard & Partners GmbH
· Ptolemy Capital, LLC
· TPG Growth IV Oscars, L.P.

Exhibit 10.2 

AMENDMENT NO. 1 TO THE
INVESTORS’ RIGHTS AGREEMENT

 

This Amendment No. 1 (this “Amendment”) to the Investors’ Rights Agreement, dated as of July 30, 2020, by and among Eros International Plc, an Isle of Man public company limited by shares (the “Company”), and the Investors party thereto (the “Original Agreement”) is made as of July 30, 2020 by and among the Company and the undersigned Investors (the “Required Investors”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Original Agreement.

BACKGROUND

WHEREAS, the Company and the Investors desire to amend certain terms and conditions of the Original Agreement in accordance with Section 7.5(a) of the Original Agreement as set forth herein.

NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Required Investors hereby amend the Original Agreement as follows:

AGREEMENT

1.                  Amendment to Section 1.1 of the Original Agreement.

(a)                Section 1.1 of the Original Agreement is hereby amended by inserting the following new definition thereto in the appropriate alphabetical order:

““Adjusted EBITDA” means net income before interest expense, income tax expense and depreciation and amortization (excluding amortization of capitalized film content and debt issuance costs), adjusted for (i) gain/impairment of available-for-sale financial assets, (ii) profit/loss on held for trading liabilities (including profit/loss on derivative financial instruments), (iii) transactions costs relating to equity transactions, (iv) share based payments, (v) loss/gain on sale of property and equipment, (vi) loss on de-recognition of financial assets measured at amortized cost (on a net basis), (vii) credit impairment loss (on a net basis), (viii) loss on financial liability (convertible notes) measured at fair value through profit and loss, (ix) loss on deconsolidation of a subsidiary and (x) exceptional items such as impairment of goodwill, trademark, film and content rights and content advances.”

2.                  Amendments to Section 3.1 of the Original Agreement.

(a)                Section 3.1(d) of the Original Agreement is hereby amended and restated in its entirety as follows:

 

“(d) Committees. For so long as the Hony Investor has the right to nominate Hony Nominees pursuant to Section 3.1(a), the Company shall take all Necessary Action to appoint (i) two (2) Hony Nominees (at least one of whom must be an Independent Director) to each of the Audit Committee and Nominating Committee, and the number of Directors serving on either such committee shall be four (4) without the prior approval of the Hony Investor and (ii) two (2) Hony Nominees to the Remuneration Committee, and the number of Directors serving on such committee shall not exceed four (4) without the prior approval of the Hony Investor.”

(b)               Section 3.1(e) of the Original Agreement is hereby amended and restated in its entirety as follows:

“[Reserved.]”

3.                  Amendments to Section 3.2 of the Original Agreement.

(a)                Section 3.2(d) of the Original Agreement is hereby amended and restated in its entirety as follows:

“(d) Committees. For so long as the Eros Founder Group has the right to nominate Eros Nominees pursuant to Section 3.2(a), the Company shall take all Necessary Action to appoint (i) two (2) Eros Nominees (at least one of whom must be an Independent Director) to each of the Audit Committee and Nominating Committee, and the number of Directors serving on either such committee shall not exceed four (4) without the prior approval of the Eros Founder Group and (ii) two (2) Eros Nominees to the Remuneration Committee, and the number of Directors serving on such committee shall not exceed four (4) without the prior approval of the Eros Founder Group.”

(b)               Section 3.2(e) of the Original Agreement is hereby amended by deleting clauses (iv) and (v) in their entirety.

4.                  Amendment to Section 3.3 of the Original Agreement.

(a)                Section 3.3(a) of the Original Agreement is hereby amended by replacing the third sentence thereof with the following:

“In the event of a tie vote on any matter before the Audit Committee or Nominating Committee the Company shall take all Necessary Action so that the Independent Director(s) then serving on such committee, if any, shall be entitled to cast a tie-breaking vote.”

(b)               Section 3.3(a) of the Original Agreement is hereby amended by deleting clause (iii) in its entirety and replacing such clause (iii) with the following:

“(iii) The Remuneration Committee shall initially consist of Shailesh Rao, Dhirendra Swarup, Dilip Thakkar and John Zhao.”

2 

 

5.                  Amendment to Article III of the Original Agreement.

(a)                Article III of the Original Agreement is hereby amended by inserting the following new Section 3.5 thereto as follows:

“Section 3.5 Actions Requiring Board Approval. From the Effective Time until the earliest of (x) the third (3rd) anniversary of the Effective Time, (y) the first such time after the Settlement Date that the Hony Investor ceases to beneficially own (giving effect to the CVRs) 50% of its Effective Time Equity or (z) the first such time that the Eros Founder Group ceases to beneficially own 50% of its Effective Time Equity, the following actions by the Company or any of its Subsidiaries shall require the approval of at least two-thirds (2/3) of the Directors of the Board:

(i)       Hiring or terminating the chief executive officer, chief financial officer or president (including any co-president) of the Company.

(ii)       Adopting the annual business plan (including operating budget) of the Company and its Subsidiaries.

(iii)       entering into any agreement increasing the Company’s available debt for borrowed money to an amount greater than the greater of (i) $552 million and (ii) an amount that would cause the net debt to be greater than five (5) times Adjusted EBITDA of the Company for the most recent four (4) consecutive fiscal quarters for which financial statements are available (giving pro forma effect to the borrowing and the use of proceeds of such borrowing).”

6.                  Affirmation. This Amendment is to be read and construed with the Original Agreement as constituting one and the same agreement. Except as specifically modified by this Amendment, all remaining provisions, terms and conditions of the Original Agreement shall remain in full force and effect in accordance with their terms.

7.                  Defined Terms. All terms not herein defined shall have the meanings ascribed to them in the Original Agreement.

8.                  Severability. If any portion of this Amendment shall be declared void or unenforceable by any court or administrative body of competent jurisdiction, then, so long as no party is deprived of the benefits of this Amendment in any material respect, such portion shall be deemed severable from the remainder of this Amendment, which shall continue in all respects valid and enforceable.

9.                  Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute a single instrument. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 5.

3 

 

10.              Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the Isle of Man applicable to contracts entered into and performed entirely within the Isle of Man.

11.              Effectiveness. This Amendment shall become effective as of the date hereof.

[SIGNATURE PAGE FOLLOWS]

4 

 

IN WITNESS WHEREOF, each of the undersigned has executed and delivered this Amendment as a deed or caused this Amendment to be executed and delivered as a deed on its behalf as of the date first written above.

EXECUTED and DELIVERED as a deed by EROS INTERNATIONAL PLC acting by:

 

 

 

 

)

)

)

 

 

/s/ Noah Fogelson                    

 

 

Director/Authorised Signatory

 

 

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

By: CDS International Limited, its sole director

EXECUTED and DELIVERED as a deed by EROS VENTURES LIMITED acting by:

)

)

)

 

 

/s/ Joel Smith ____________

 

Name: Joel Smith

Title: Authorized Signatory

)

)

)

/s/ Simon Kleis        ____________
 

Name: Simon Kleis

Title: Authorized Signatory

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

 

EXECUTED and DELIVERED as a deed by BEECH INVESTMENTS LIMITED acting by:

)

)

)

 

 

/s/ Joel Smith ____________

 

Name: Joel Smith

Title: Director

)

)

)

/s/ Simon Kleis  ____________
 

Name: Simon Kleis

Title: Director

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

 

SIGNED and DELIVERED as a DEED by KISHORE LULLA in the presence of:

 

 

/s/ Swaneet Singh

)

)

)

 

 

/s/ Kishore Lulla

Kishore Lulla
Witness signature

Name: SWANEET SINGH

Address: [Address]

Occupation: Executive

 

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

SIGNED and DELIVERED as a DEED by RISHIKA LULLA SINGH in the presence of:

 

 

/s/ Swaneet Singh

)

)

)

 

 

/s/ Rishika Lulla Singh

Rishika Lulla Singh
Witness signature

Name: Swaneet Singh

Address: [Address]

Occupation: Executive

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

SIGNED and DELIVERED as a DEED by SUNIL LULLA in the presence of:

 

 

/s/ K. Arand Sharkar

)

)

)

 

 

/s/ Sunil Lulla

Sunil Lulla
Witness signature

Name: K. Arand Sharkar

Address: [Address]

Occupation: Service

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]


 

 

SIGNED and DELIVERED as a DEED by RIDHIMA LULLA in the presence of:

 

 

/s/ Swaneet Singh

)

)

)

 

 

/s/ Ridhima Lulla

Ridhima Lulla
Witness signature

Name: SWANEET SINGH

Address: [Address]

 

Occupation: Executive

 

  

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

EXECUTED and DELIVERED as a deed by TPG GROWTH IV OSCARS, L.P. acting by its general partner TPG Growth GenPar IV, L.P. itself acting by its general partner TPG Growth GenPar IV Advisors, LLC acting by:

)

)

)

 

 

/s/ David Mossé

  Vice President
 

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

EXECUTED and DELIVERED as a deed by MARCO ALLIANCE LIMITED acting by:

 

 

 

)

)

)

 

 

)

)

)

 

 

/s/ Yuan Bing

Director

 

 

 

/s/ Rong Zhang

Witness Name: Rong Zhang

Address: [Address]

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

EXECUTED and DELIVERED as a deed by BLACK FISH BLUE FISH, LLC acting by:

 

 

 

)

)

)

 

 

)

)

)

 

 

/s/ Derek Arend

President

 

 

 

/s/ Nicole Truebenbach

Vice President

 

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

EXECUTED and DELIVERED as a deed by PCCW MEDIA LIMITED acting by:

)

)

)

 

 

/s/ LEE Hoi Yee, Janice________

  Director

)

)

)

____________________________
  Director/Secretary

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

EXECUTED and DELIVERED as a deed by PTOLEMY CAPITAL, LLC acting by:

)

)

)

 

 

/s/ Mitchell Otolski_______________

  Agent
   
   

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

 

 

SIGNED and DELIVERED as a DEED by Andrew Warren in the presence of:

 

 

/s/ Noah Fogelson

)

)

)

 

 

/s/ Andrew Warren

 
Witness signature

Name: Noah Fogelson

 

Address: [Address]

Occupation: EVP / GC

 

[Signature Page to Amendment No. 1 to the Investors’ Rights Agreement]

Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT 

This REGISTRATION RIGHTS AGREEMENT (as the same may be amended from time to time in accordance with its terms, the “Agreement”) is made as of July 30, 2020, by and among (i) Eros International Plc, an Isle of Man company limited by shares (the “Company”), (ii) each of the Persons set forth on Schedule 1 attached hereto with respect to the A Shares (as defined below) held by such Person, including A Shares to be purchased pursuant to that certain subscription agreement, dated as of April 17, 2020, by and between the Company and each of the purchaser parties thereto, or issuable to such Person upon settlement of the contingent value rights (the “CVRs”) received by such Person pursuant to the Merger Agreement (as defined below), in each case as set forth opposite each such Person’s name on Schedule 1 attached hereto (collectively, together with their Permitted Assignees (as defined herein), the “STX Holders” and each, a “STX Holder”) and (iii) each of the Persons set forth on Schedule 2 attached hereto with respect to the A Shares set forth opposite each such Person’s name on Schedule 2 attached hereto (collectively, the “Original Holders” and each, an “Original Holder”). The STX Holders and the Original Holders, together with their Permitted Assignees, are collectively referred to herein as “Holders” and each, a “Holder”.

WHEREAS, in connection with the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 17, 2020, by and among the Company, England Holdings 2, Inc., a Delaware corporation (“England Holdings 2”), an indirect wholly owned subsidiary of the Company, England Merger 1 Corp. (f/k/a England Merger Corp.), a Delaware corporation and a direct wholly owned subsidiary of England Holdings 2 and indirect wholly owned subsidiary of the Company, and STX Filmworks, Inc., a Delaware corporation, the parties hereto have agreed to enter into this Agreement pursuant to which the Company has agreed to grant the STX Holders and the Original Holders certain registration rights with respect to the Company’s A Shares held by the STX Holders and the Original Holders as more fully set forth herein.

THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties mutually agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Definitions. As used in this Agreement, capitalized terms not otherwise defined herein shall have the meanings ascribed to them below:

“A Shares” means the A Ordinary Shares, par value £0.30 per share, of the Company, and any equity securities issued or issuable in exchange for or with respect to the A Shares by way of a stock dividend, stock split or combination of shares or in connection with a reclassification, recapitalization, merger, consolidation or other reorganization or otherwise.

“Affiliate” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person.

 

“Automatic Shelf Registration Statement” means an “automatic shelf registration statement” as defined in Rule 405 promulgated under the Securities Act.

“Block Trade” means an offering and/or sale of Registrable Securities by any Holder to one or more financial institutions in an underwritten registered shelf take-down transaction in the form of a bought deal, a block trade or a direct sale that does not include any substantial marketing efforts by the Company or its management prior to pricing.

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“FINRA” means the Financial Industry Regulatory Authority, Inc.

“Initiating Shelf Take-Down Holder” has the meaning set forth in Section 2.1(d)(i).

“Issuer Free Writing Prospectus” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Securities.

“Majority Participating Holders” means Participating Holders holding more than 50% of the Registrable Securities proposed to be included in any offering of Registrable Securities by such Participating Holders pursuant to Section 2.2 or Section 2.3.

“Majority STX Holders” means STX Holders holding more than 50% of the STX Securities proposed to be included in the Shelf Registration Statement (as defined below) pursuant to Section 2.1 hereof.

“Participating Holder” means a Holder who shall have properly submitted a written request for inclusion of such Holder’s Registrable Securities in a registration pursuant to Section 2.2 or 2.3 hereof.

“Permitted Assignee” has the meaning set forth in Section 4.8.

“Person” means any individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity or any governmental or regulatory body or other agency or authority or political subdivision thereof, including any successor, by merger or otherwise, of any of the foregoing.

“Registrable Securities” means (a) A Shares held by the Original Holders as of the date hereof and set forth on Schedule 2 attached hereto, (b) A Shares issued or issuable, directly or indirectly, in exchange for or with respect to the A Shares referenced in clause (a) above, (c) any other A Shares owned or hereafter acquired by the Original Holders and (d) the STX Securities. Any particular Registrable Securities shall cease to be Registrable Securities when such Registrable Securities have been transferred by a Holder to any transferee that is not a Permitted Assignee.

2 

 

“Registration Expenses” means all fees and expenses incurred in connection with the Company’s performance of or compliance with the provisions of Article II, including, without limitation: (a) all registration, listing, qualification and filing fees (including FINRA filing fees), (b) fees and expenses of compliance with state securities or “blue sky” laws (including reasonable counsel fees in connection with the preparation of a blue sky and legal investment survey and FINRA filings), (c) printing and copying expenses, (d) messenger and delivery expenses, (e) expenses incurred in connection with any road show, (f) fees and disbursements of counsel for the Company, (g) with respect to each registration, the reasonable fees and disbursements of one counsel for the Participating Holder(s) selected by the Majority Participating Holders or one counsel for the STX Holders selected by the Majority STX Holders, as applicable, (h) fees and disbursements of independent public accountants, including the expenses of any audit or “comfort” letter, and fees and expenses of other persons, including special experts, retained by the Company, (i) underwriter fees, excluding discounts and commissions, and any other expenses which are customarily borne by the issuer or seller of securities in a public equity offering and (j) all internal expenses of the Company (including all salaries and expenses of officers and employees performing legal or accounting duties).

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Shelf Registration” has the meaning set forth in Section 2.1(a).

“Shelf Registration Statement” has the meaning set forth in Section 2.1(a).

“STX Securities” means all A Shares (i) owned by the STX Holders as of the date hereof or (ii) to be received by the STX Holders upon settlement of the CVRs, in each case as set forth on Schedule 1 attached hereto,

“Underwritten Shelf Take-Down” has the meaning set forth in Section 2.1(d)(i).

“Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2.1(d)(ii).

“Underwritten Shelf Take-Down Request” has the meaning set forth in Section 2.1(d)(i).

ARTICLE II

REGISTRATION RIGHTS

Section 2.1 Shelf Registration.

 

3 

 

(a)       Shelf Registration. As soon as reasonably practicable after the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), but in any event no later than the 60th day following such Closing, the Company shall prepare and file with the SEC a registration statement on Form F-1 or Form F-3 or an equivalent general registration form then in effect (the “Shelf Registration Statement”) providing for the resale from time to time on a delayed or continuous basis pursuant to Rule 415 under the Securities Act by the STX Holders of all STX Securities. If at the time of filing of the Shelf Registration Statement the Company is eligible for use of an Automatic Shelf Registration Statement, then such shelf registration statement shall be filed as an Automatic Shelf Registration Statement. The Shelf Registration Statement described in this Section 2.1(a) shall relate to the offer and sale of the STX Securities by the STX Holders thereof from time to time in accordance with the methods of distribution set forth in the applicable Shelf Registration Statement (hereinafter the “Shelf Registration”). The Company shall use its commercially reasonable efforts to address any comments from the SEC regarding such Shelf Registration Statement. The Shelf Registration Statement shall cover to the extent allowable under the Securities Act and the rules promulgated thereunder, such indeterminate number of additional A Shares resulting from stock splits, stock dividends or similar transactions with respect to the STX Securities. The Company shall use its commercially reasonable efforts to cause the Shelf Registration Statement to become effective under the Securities Act as promptly as practicable following the initial filing thereof.

(b)       Continued Effectiveness. Except as provided herein, the Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective pursuant to the rules, regulations or instructions under the Securities Act until the earliest of (i) the date as of which all of the STX Securities specified in such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement or another Registration Statement filed under the Securities Act, (ii) such shorter period as all of the STX Holders with respect to such Shelf Registration shall agree in writing and (iii) the four-year anniversary of the date of effectiveness of the Shelf Registration Statement.

 

(c)       Certain Undertakings. Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause (i) the Shelf Registration Statement (as of the effective date of such Shelf Registration Statement), any amendment thereof (as of the effective date thereof) or supplement thereto (as of its date) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and (ii) any related prospectus (including any preliminary prospectus) or Issuer Free Writing Prospectus and any amendment thereof or supplement thereto, as of its date, not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading; provided, however, the Company shall have no such obligations or liabilities with respect to any written information pertaining to any STX Holder and furnished in writing to the Company by or on behalf of such STX Holder specifically for inclusion therein. The Company agrees, to the extent necessary, to supplement or make amendments to each Shelf Registration Statement if required by applicable law, or as may reasonably be requested by any STX Holder.

(d)       Underwritten Shelf Take-Downs.

 

(i) An underwritten offering or sale of STX Securities pursuant this Section 2.1 (each, an “Underwritten Shelf Take-Down”) may be initiated by any STX Holder (or STX Holders, as the case may be) (an

4 

 

“Initiating Shelf Take-Down Holder”) that has STX Securities registered for sale on the Shelf Registration Statement with an aggregate value of $20 million or greater (based on the market price of the A Shares as of the date of such request (an “Underwritten Shelf Take-Down Request”)). The Company shall effect such Underwritten Shelf Take-Down as promptly as practicable in accordance with this Agreement and shall amend or supplement the Shelf Registration Statement for such purpose as soon as practicable. No such Initiating Shelf Take-Down Holder shall be required to permit the offer and sale of Registrable Securities by Original Holders in connection with any such Underwritten Shelf Take-Down initiated by such Initiating Shelf Take-Down Holder(s).

 

(ii) Promptly upon delivery of such Underwritten Shelf Take-Down Request (but in no event more than two Business Days thereafter), the Company shall promptly deliver a written notice (an “Underwritten Shelf Take-Down Notice”) of such Underwritten Shelf Take-Down to all STX Holders (other than the Initiating Shelf Take-Down Holder(s)), which notice shall state that the material terms of such proposed Underwritten Shelf Take-Down, to the extent known, as well as the identity of the Initiating Shelf Take-Down Holder(s), are available upon request, and the Company shall include in such Underwritten Shelf Take-Down all such STX Securities of such STX Holders for which the Company has received written requests for inclusion therein within three Business Days after the date that such Underwritten Shelf Take-Down Notice has been delivered; provided, that if the managing underwriter or underwriters of any proposed Underwritten Shelf Take-Down informs the Company and the STX Holders that have requested to participate in such Underwritten Shelf Take-Down that, in its or their good faith opinion, the number of securities requested to be included in such registration by the STX Holders exceeds the largest number that can be sold in an orderly manner in such offering within a price range acceptable to the Initiating Shelf Take-Down Holder(s), then the aggregate number of securities to be included in such Underwritten Shelf Take-Down shall be the number of STX Securities that, in the opinion of such managing underwriter or underwriters, can be sold without having such adverse effect on such Underwritten Shelf Take-Down, which number shall be allocated on a pro rata basis based on the relative number of STX Securities so requested to be included by each such STX Holder. The Initiating Shelf Take-Down Holder shall have the right to select the managing underwriter or underwriters to administer such offering; provided, that, in each case, each such underwriter is reasonably satisfactory to the Company; provided further, that, in the case of a Block Trade, any nationally recognized investment banking firm shall be considered satisfactory unless the Company notifies the Initiating

5 

 

Shelf Take-Down Holder of any investment bank that would not be considered reasonably satisfactory prior to the issuance of the Underwritten Shelf Take-Down Notice. No Holder of securities of the Company shall be permitted to include such Holder’s securities in any Underwritten Shelf Take-Down except for STX Holders who timely request, in accordance with this clause (ii), to include STX Securities in such Underwritten Shelf Take-Down. The price, underwriting discount and other financial terms for the STX Securities shall be determined by the Initiating Shelf Take-Down Holder participating in such Underwritten Shelf Take-Down.

 

(iii) The Company shall pay all Registration Expenses in connection with the Shelf Registration or any Underwritten Shelf Take-Down, whether or not such Shelf Registration becomes effective or such Underwritten Shelf Take-Down is completed and whether or not all or any portion of the STX Securities originally requested to be included in such Underwritten Shelf Take-Down are ultimately included. Each STX Holder shall be permitted to withdraw all or part of its STX Securities from an Underwritten Shelf Take-Down at any time prior to the execution of the underwriting agreement in connection with such Underwritten Shelf Take-Down. Notwithstanding the foregoing, in connection with any Underwritten Shelf Take-Down, each STX Holder shall pay all underwriting discounts and commissions pro rata in accordance with the number of STX Securities sold in the offering by such STX Holder and transfer taxes, if any, attributable to the sale of such STX Holder’s STX Securities.

 

(iv) The Company shall not be obligated to effect more than one Underwritten Shelf Takedown that is not a Block Trade or more than four Block Trades under Section 2.1(d) in any calendar year.

 

(v) In the case of any Underwritten Shelf Take-Down, all securities to be included in such Underwritten Shelf Take-Down shall be subject to an underwriting agreement and no STX Holder may participate in such Underwritten Shelf Take-Down unless such STX Holder agrees to sell such STX Holder’s securities on the basis provided therein and completes and executes all reasonable questionnaires, and other documents, including custody agreements and powers of attorney, that must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be necessary to register such STX Holder’s securities.

 

(e)       Notwithstanding anything else to the contrary herein, to the extent the Company is unable to comply with its obligations under this Section 2.1, Section 2.3 below or Section 2.5 below, in each case in connection with the exercise by a STX Holder of its rights under Section 2.3 below, and such inability is primarily related to any duplicative registration of Registrable Securities on the Shelf Registration Statement and any additional registration statement filed by the Company, such inability to comply will not be deemed to be a breach of or other violation by the Company of any of its obligations under this Agreement.

6 

 

Section 2.2 Demand Registrations.

(a) (i) Subject to Section 2.2(c), at any time or from time to time after the three-month anniversary of the date hereof, one or more Original Holders shall have the right to require the Company to file a registration statement under the Securities Act covering Registrable Securities with an aggregate value of $20 million or greater (based on the market price of the A Shares as of the date of the Demand Registration Request (as defined below)), by delivering a written request therefor to the Company specifying the number of Registrable Securities to be included in such registration by such Original Holders and the intended method of distribution thereof. All such requests by any Original Holder pursuant to this Section 2.2(a)(i) are referred to as “Demand Registration Requests,” the registrations so requested are referred to as “Demand Registrations” and the Original Holders making such demand for registration are referred to as the “Initiating Holders.” As promptly as practicable, but no later than ten days after receipt of a Demand Registration Request, the Company shall give written notice (a “Demand Exercise Notice”) of such Demand Registration Request to all Holders of record of Registrable Securities other than the Initiating Holders.

(ii)       The Company shall, subject to Sections 2.4 and 2.8, include in a Demand Registration (A) the Registrable Securities of the Initiating Holders and (B) the Registrable Securities of any other Holder that shall have made a written request to the Company within the time limits specified below for inclusion in such registration. Any such request from the other Holders must be delivered to the Company within 15 days after the receipt of the Demand Exercise Notice and must specify the maximum number of Registrable Securities intended to be disposed of by such other Holder.

(iii)       The Company, as expeditiously as possible but subject to Section 2.2(c), shall use its commercially reasonable efforts to effect such Demand Registration.

(b)       Registrations under this Section 2.2 shall be on such appropriate registration form of the SEC for the disposition of such Registrable Securities in accordance with the intended method of disposition thereof, which form shall be selected by the Company.

 

(c)       The Demand Registration rights granted in Section 2.2(a) to the Original Holders are subject to the following limitations:

(i)       the Company shall not be required to cause a registration pursuant to Section 2.2(a) to be filed within 90 days, or to be declared effective within a period of 180 days, after the effective date of any other registration statement of the Company filed pursuant to the Securities Act;

7 

 

(ii)       if any registration of Registrable Securities of an Original Holder would require disclosure of information not otherwise then required by law to be publicly disclosed and, in the good faith judgment of the board of directors of the Company, such disclosure is reasonably likely to adversely affect any material financing, acquisition, corporate reorganization or merger or other material transaction or event involving the Company or otherwise have a material adverse effect on the Company (a “Valid Business Reason”), the Company may postpone the filing of or withdraw a registration statement relating to a Demand Registration Request until such Valid Business Reason no longer exists, but in no event shall the Company avail itself of such right for more than 120 days, in the aggregate, in any period of 365 consecutive days (such period of postponement or withdrawal under this clause (ii), the “Postponement Period”); and the Company shall give notice to the Participating Holder(s) of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof; and

(iii)       the Company shall not be obligated to effect more than five Demand Registrations under Section 2.2(a).

If the Company shall give any notice of postponement or withdrawal of any registration statement pursuant to clause (ii) above, the Company shall not register any equity security of the Company during the period of postponement or withdrawal. Each Original Holder agrees that, upon receipt of any notice from the Company that the Company has determined to withdraw any registration statement pursuant to clause (ii) above, such Original Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement. If the Company shall have withdrawn or prematurely terminated a registration statement filed under Section 2.2(a)(i), the Company shall not be considered to have effected an effective registration for the purposes of this Agreement until the Company shall have filed a new registration statement covering the Registrable Securities covered by the withdrawn registration statement and such registration statement shall have been declared effective and shall not have been withdrawn. If the Company shall give any notice of withdrawal or postponement of a registration statement pursuant to clause (ii) above, at such time as the Valid Business Reason that caused such withdrawal or postponement no longer exists (but in no event more than 180 days after the date of the postponement or withdrawal), the Company shall use its commercially reasonable efforts to effect the registration under the Securities Act of the Registrable Securities covered by the withdrawn or postponed registration statement in accordance with this Section 2.2.

(d)       The Company may, subject to Sections 2.4 and 2.8, elect to include in any registration statement and offering made pursuant to Section 2.2(a), (i) authorized but unissued A Shares or A Shares held by the Company as treasury shares and/or (ii) any other A Shares that are requested to be included in such registration pursuant to the exercise of piggyback rights granted by the Company that are not inconsistent with the rights granted in, or that do not otherwise conflict with the terms of, this Agreement (“Additional Piggyback Rights”); provided, however, that such inclusion shall be permitted only to the extent that it is pursuant to and subject to the terms of the underwriting agreement or arrangements, if any, entered into by the Participating Holders.

8 

 

(e)       Any Holder may withdraw its Registrable Securities from a Demand Registration at any time. If all such Holders do so, the Company shall cease all efforts to secure registration and such registration nonetheless shall be deemed a Demand Registration for purposes of this Section 2.2 unless (i) the withdrawal is made following withdrawal or postponement of such registration by the Company pursuant to a Valid Business Reason as contemplated by Section 2.2(c)(ii), (ii) the withdrawal is based on the reasonable determination of the Initiating Holders that there has been, since the date of the Demand Registration Request, a material adverse change in the business or prospects of the Company or (iii) the Initiating Holders have paid or reimbursed the Company for all of the reasonable out-of-pocket fees and expenses incurred by the Company in connection with the withdrawn registration.

(f)       A Demand Registration shall not be deemed to have been effected and shall not count as such (i) unless a registration statement with respect thereto has become effective and has remained effective for a period of at least 180 days or such shorter period during which all Registrable Securities covered by such registration statement have been sold or withdrawn, or, if such registration statement relates to an underwritten offering, such longer period as, in the reasonable opinion of counsel for the underwriter(s), is required by law for delivery of a prospectus in connection with the sale of Registrable Securities by an underwriter or dealer, (ii) if, after the registration statement with respect thereto has become effective, it becomes subject to any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason, (iii) if it is withdrawn by the Company pursuant to a Valid Business Reason as contemplated by Section 2.2(c) or (iv) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such Demand Registration are not satisfied, other than solely by reason of some act or omission of the Participating Holders.

(g)       In connection with any Demand Registration, the Initiating Holders may designate the lead managing underwriter in connection with such registration and each other managing underwriter for such registration, provided, that, in each case, each such underwriter is reasonably satisfactory to the Company.

Section 2.3 Piggyback Registrations.

(a)       If, at any time, the Company proposes or is required to register any of its equity securities under the Securities Act (other than pursuant to (i) a registration on Form F-4 or Form F-8 or any successor or similar form which is then in effect or (ii) the Shelf Registration Statement under Section 2.1) on a registration statement on Form F-1 or Form F-3 or an equivalent general registration form then in effect, whether or not for its own account, the Company shall give prompt written notice of its intention to do so to each Holder of record of Registrable Securities. Upon the written request of any such Holder, made within 15 days following the receipt of any such written notice (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof), the Company shall, subject to Sections 2.3(b), 2.4 and 2.8, use commercially reasonable efforts to cause all such Registrable Securities to be included in the registration statement with the securities that the Company at the time proposes to register to permit the sale or other disposition by such Holders in accordance with the intended method of distribution thereof of the Registrable Securities to be so registered. No registration of Registrable Securities effected under this Section 2.3(a) shall relieve the Company of its obligations to effect Demand Registrations under Section 2.2, subject to the conditions for a Demand Registration set forth in Section 2.2(c).

9 

 

(b)       If, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such equity securities, the Company will give written notice of such determination to each Holder of record of Registrable Securities and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 2.2 and (ii) in the case of a determination to delay such registration of its equity securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other equity securities.

(c)       Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.3 by giving written notice to the Company of its request to withdraw. Such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration. Such withdrawal shall be irrevocable and, after making such withdrawal, a Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made.

Section 2.4 Priority in Registrations.

(a)       If any requested registration made pursuant to Section 2.2 involves an underwritten offering and the lead managing underwriter of such offering (the “Manager”) shall advise the Company that, in its view, the number of securities requested to be included in such registration by the Participating Holders or any other persons, including those A Shares to be included in such registration by the Company, exceeds the largest number (the “Section 2.4(a) Sale Number”) that can be sold in an orderly manner in such offering within a price range acceptable to the Majority Participating Holders, the Company shall use commercially reasonable efforts to include in such registration:

(i)       first, all Registrable Securities requested to be included in such registration by the Participating Holders; provided, however, that, if the number of such Registrable Securities exceeds the Section 2.4(a) Sale Number, the number of such Registrable Securities (not to exceed the Section 2.4(a) Sale Number) to be included in such registration shall be allocated on a pro rata basis among all Participating Holders based on the number of Registrable Securities requested to be included by each such Participating Holder in relation to the number of Registrable Securities requested to be included by all Participating Holders;

(ii)       second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.4(a) is less than the Section 2.4(a) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all holders requesting that securities be included in such registration pursuant to the exercise of Additional Piggyback Rights (“Piggyback Shares”), based on the aggregate number of Piggyback Shares requested to be included by each holder requesting inclusion in relation to the aggregate number of Piggyback Shares requested to be included by all holders requesting inclusion, up to the Section 2.4(a) Sale Number; and

10 

 

(iii)       third, to the extent that the number of securities to be included pursuant to clauses (i) and (ii) of this Section 2.4(a) is less than the Section 2.4(a) Sale Number, any securities that the Company proposes to register, up to the Section 2.4(a) Sale Number.

If, as a result of the proration provisions of this Section 2.4(a), any Participating Holder shall not be entitled to include all Registrable Securities in a registration that such Participating Holder has requested be included, such Participating Holder may elect to withdraw its request to include Registrable Securities in such registration or may reduce the number requested to be included; provided, however, that (A) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (B) such withdrawal shall be irrevocable and, after making such withdrawal, such Participating Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made.

(b)       If any registration pursuant to Section 2.3 involves an underwritten offering that was proposed by the Company and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the number (the “Section 2.4(b) Sale Number”) that can be sold in an orderly manner in such registration within a price range acceptable to the Company, the Company shall include in such registration:

(i)       first, all A Shares that the Company proposes to register for its own account; and

(ii)       second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.4(b) is less than the Section 2.4(b) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all holders requesting that Registrable Securities or Piggyback Shares be included in such registration pursuant to the exercise of piggyback rights pursuant to Section 2.3 of this Agreement or Additional Piggyback Rights, based on the aggregate number of Registrable Securities and Piggyback Shares requested to be included by each holder requesting inclusion in relation to the aggregate number of Registrable Securities and Piggyback Shares requested to be included by all holders requesting inclusion, up to the Section 2.4(b) Sale Number.

(c)       If any registration pursuant to Section 2.3 involves an underwritten offering that was proposed by holders of securities of the Company that have the right to require such registration pursuant to an agreement entered into by the Company in accordance with Section 3.3 (“Additional Demand Rights”) and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the number (the “Section 2.4(c) Sale Number”) that can be sold in an orderly manner in such registration within a price range acceptable to the Company, the Company shall include in such registration:

11 

 

(i)       first, all securities requested to be included in such registration by the holders of Additional Demand Rights (“Additional Registrable Securities”); provided, however, that, if the number of such Additional Registrable Securities exceeds the Section 2.4(c) Sale Number, the number of such Additional Registrable Securities (not to exceed the Section 2.4(c) Sale Number) to be included in such registration shall be allocated on a pro rata basis among all holders of Additional Registrable Securities requesting that Additional Registrable Securities be included in such registration, based on the number of Additional Registrable Securities requested to be included by each such holder requesting inclusion in relation to the number of Additional Registrable Securities requested to be included by all of such holders requesting inclusion;

(ii)       second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.4(c) is less than the Section 2.4(c) Sale Number, on a pro rata basis among all holders requesting that Registrable Securities or Piggyback Shares be included in such registration pursuant to the exercise of piggyback rights pursuant to Section 2.3 or Additional Piggyback Rights, based on the aggregate number of Registrable Securities and Piggyback Shares requested to be included by each holder requesting inclusion in relation to the aggregate number of Registrable Securities and Piggyback Shares requested to be included by all holders requesting inclusion, up to the Section 2.4(c) Sale Number; and

(iii)       third, to the extent that the number of securities to be included pursuant to clauses (i) and (ii) of this Section 2.4(c) is less than the Section 2.4(c) Sale Number, any A Shares that the Company proposes to register for its own account, up to the Section 2.4(c) Sale Number.

Section 2.5 Registration Procedures. Whenever the Company is required by the provisions of this Agreement to use commercially reasonable efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company, as expeditiously as possible, and in each case subject to Section 2.1(e) hereof:

(a)       shall prepare and file with the SEC the requisite registration statement, which shall comply as to form in all material respects with the requirements of the applicable form and shall include all financial statements required by the SEC to be filed therewith, and use commercially reasonable efforts to cause such registration statement to become and remain effective (provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of any jurisdiction, or any Issuer Free Writing Prospectus related thereto, the Company will furnish to (i) with respect to a registration pursuant to Section 2.2 or 2.3, one counsel for the Participating Holders (selected by the Majority Participating Holders) and to the lead managing underwriter, if any, or (ii) with respect to the Shelf Registration Statement, one counsel for the STX Holders (selected by the Majority STX Holders), copies of all such documents proposed to be filed (including all exhibits thereto), which documents will be subject to the reasonable review and comment of such counsel, and the Company shall not file any registration statement or amendment thereto, any prospectus or supplement thereto or any Issuer Free Writing Prospectus related thereto to which such parties shall reasonably object);

12 

 

(b)       shall prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for such period as any Participating Holder or STX Holder, as applicable, shall reasonably request and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement in accordance with the intended methods of disposition set forth in such registration statement;

(c)       shall furnish, without charge, to each Participating Holder and each underwriter, if any, of the securities covered by such registration statement and to each STX Holder, as applicable, such number of copies of such registration statement, each amendment thereto, the prospectus included in such registration statement, each preliminary prospectus and each Issuer Free Writing Prospectus utilized in connection therewith, all in conformity with the requirements of the Securities Act, and such other documents as such Participating Holder or STX Holder, as applicable, and underwriter reasonably may request in order to facilitate the public sale or other disposition of the Registrable Securities or STX Securities owned by such Participating Holder or STX Holder, and shall consent to the use in accordance with all applicable law of each such registration statement, each amendment thereto, each such prospectus, preliminary prospectus or Issuer Free Writing Prospectus by each such Participating Holder and the underwriters, if any, or each STX Holder, as applicable, in connection with the offering and sale of the securities covered by such registration statement or prospectus;

(d)       shall use commercially reasonable efforts to register or qualify the Registrable Securities or STX Securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions as any Participating Holder, any managing underwriter, if any, or any STX Holder reasonably shall request, and do any and all other acts and things that may be reasonably necessary or advisable to enable such Participating Holder or underwriter, if any, or such STX Holder to consummate the disposition of the securities in such jurisdictions; provided, however, that in no event shall the Company be required to (i) qualify to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 2.5(d), it would not be required to be so qualified, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction;

(e)       shall promptly notify each Participating Holder and each managing underwriter, if any, or each STX Holder, as applicable:

(i)       when the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto, any post-effective amendment to the registration statement or any Issuer Free Writing Prospectus has been filed and, with respect to the registration statement or any post-effective amendment, when the same has become effective;

(ii)       of any request by the SEC or state securities authority for amendments or supplements to the registration statement or the prospectus related thereto or for additional information;

13 

 

(iii)       of the issuance or threatened issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation or threatening of any proceedings for that purpose;

(iv)       of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities or STX Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose; and

(v)       of the existence of any fact of which the Company becomes aware which results in the registration statement, the prospectus related thereto, any document incorporated therein by reference, any Issuer Free Writing Prospectus or the information conveyed to any purchaser at the time of sale to such purchaser containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statement therein not misleading;

provided, however, that if the notification relates to an event described in clause (v), the Company, subject to the provisions of Section 2.2(c), promptly shall prepare and file with the SEC, and furnish to each seller and each underwriter, if any, a reasonable number of copies of, a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(f)       shall comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, as soon as reasonably practicable after the effective date of the registration statement (and in any event within 90 days after the end of the 12-month period described hereafter), an earnings statement, which need not be audited, covering a period of at least 12 consecutive months beginning with the first day of the Company’s first calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(g)       shall use commercially reasonable efforts to cause all securities covered by such registration statement to be authorized to be listed on a national securities exchange if shares of the particular class of securities are at that time, or will be immediately following the offering, listed on such exchange;

(h)       shall provide and cause to be maintained a transfer agent and registrar for all such securities covered by such registration statement not later than the effective date of such registration statement;

(i)       shall enter into such customary agreements (including, if applicable, an underwriting agreement) and take such other actions as the Majority Participating Holders or the Majority STX Holders, as applicable, shall reasonably request in order to expedite or facilitate the disposition of such securities (it being understood that the applicable holders of the securities that are to be distributed by any underwriters shall be parties to any such underwriting agreement);

14 

 

(j)       shall use commercially reasonable efforts to obtain an opinion from the Company’s counsel and a “comfort” letter from the Company’s independent public accountants in customary form and covering such matters as are customarily covered by such opinions and “comfort” letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the underwriter, if any;

(k)       shall use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement;

(l)       shall provide a CUSIP number for all Registrable Securities and STX Securities, not later than the effective date of the applicable registration statement;

(m)       shall make reasonably available its employees and personnel for participation in “road shows” and other marketing efforts and otherwise provide reasonable assistance to the underwriters, taking into account the needs of the Company’s businesses and the requirements of the marketing process, in the marketing of Registrable Securities in any underwritten offering;

(n)       shall promptly prior to the filing of any Issuer Free Writing Prospectus, provide copies of such document to counsel for the Participating Holders or the STX Holders, as applicable, and to each managing underwriter, if any, and make the Company’s representatives reasonably available for discussion of such document and make such changes in such document concerning the Participating Holders or the STX Holders, as applicable, prior to the filing thereof as counsel for such Participating Holders, STX Holders or underwriters may reasonably request;

(o)       shall cooperate with the Participating Holders or the STX Holders, as applicable, and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the Participating Holders or STX Holders at least three Business Days prior to any sale of Registrable Securities and instruct any transfer agent and registrar of Registrable Securities to release any stop transfer orders in respect thereof;

(p)       shall cooperate with each Participating Holder or STX Holder, as applicable, and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA; and

(q)       shall take all other reasonable steps necessary to effect the registration and disposition of the Registrable Securities as required hereby.

The Company may require as a condition precedent to the Company’s obligations under this Section 2.5 that each Participating Holder or STX Holder as to which any registration is being effected furnish the Company such information in writing regarding such Participating Holder or STX Holder and the distribution of its Registrable Securities or STX Securities, as applicable, as the Company from time to time reasonably may request. Each Participating Holder or STX Holder agrees that upon receipt of any notice from the Company under Section 2.5(e)(v), such Participating Holder or STX Holder will discontinue its disposition of securities pursuant to the registration statement covering such securities until such Participating Holder’s or STX Holder’s receipt of the copies of the supplemented or amended prospectus. In the event the Company shall give any such notice, the applicable period set forth in Section 2.5(b) shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each Participating Holder or STX Holder shall have received the copies of the supplemented or amended prospectus.

15 

 

Section 2.6 Automatic Shelf Registration Statements. To the extent the Company is a well-known seasoned issuer as defined in Rule 405 under the Securities Act (a “WKSI”) at the time any Demand Registration Request is submitted to the Company, and such Demand Registration Request requests that the Company file an automatic shelf registration statement as defined in Rule 405 under the Securities Act (an “automatic shelf registration statement”) on Form F-3, the Company shall file an automatic shelf registration statement that covers those Registrable Securities that are requested to be registered. The Company shall use commercially reasonable efforts to remain a WKSI and not become an ineligible issuer (as defined in Rule 405 under the Securities Act) during the period during which such automatic shelf registration statement is required to remain effective. If the Company does not pay the filing fee covering the Registrable Securities at the time the automatic shelf registration statement is filed, the Company shall pay such fee at such time or times as the Registrable Securities are to be sold. If the automatic shelf registration statement has been outstanding for at least three years, at the end of the third year the Company shall refile a new automatic shelf registration statement covering the Registrable Securities. If at any time when the Company is required to re-evaluate its WKSI status, the Company determines that it is not a WKSI, the Company shall use commercially reasonable efforts to refile the shelf registration statement on Form F-3 and, if such form is not available, Form F-1, and keep such registration statement effective during the period during which such registration statement is required to be kept effective hereunder.

Section 2.7 Registration Expenses.

(a)       The Company shall pay all Registration Expenses (i) with respect to any Demand Registration, whether or not it becomes effective or remains effective for the period contemplated by Section 2.5(b), (ii) with respect to any registration effected under Section 2.1 and (iii) with respect to any registration effected under Section 2.3.

(b)       Notwithstanding the foregoing, (i) the provisions of this Section 2.7 shall be deemed amended to the extent necessary to cause these expense provisions to comply with “blue sky” laws of each state in which the offering is made and (ii) in connection with any registration hereunder, each Participating Holder shall pay all underwriting discounts and commissions pro rata in accordance with the number of Registrable Securities sold in the offering by such Participating Holder and transfer taxes, if any, attributable to the sale of such Participating Holder’s Registrable Securities.

Section 2.8 Underwritten Demand Offerings.

16 

 

(a)       If requested by the underwriters for any underwritten offering by the Original Holders pursuant to a Demand Registration, the Company shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall be satisfactory in form and substance to the Company and the Majority Participating Holders and shall contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally prevailing in agreements of that type. Any Participating Holder shall be a party to such underwriting agreement and, at its option, may require that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Participating Holder; provided, however, that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a Participating Holder for inclusion in the registration statement.

(b)       In the case of a registration pursuant to Section 2.3, if the Company shall have determined to enter into an underwriting agreement in connection therewith, any Registrable Securities to be included in such registration shall be subject to such underwriting agreement. Any Participating Holder may, at its option, require that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Participating Holder.

(c)       In the case of any Demand Registration pursuant to an underwritten offering, or, in the case of a registration under Section 2.3, if the Company has determined to enter into an underwriting agreement in connection therewith, all securities to be included in such registration shall be subject to an underwriting agreement and no Person may participate in such registration unless such Person agrees to sell such Person’s securities on the basis provided therein and, subject to the provisions of this Section 2.8, completes and executes all reasonable questionnaires, and other documents, including custody agreements and powers of attorney, that must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be necessary to register such Person’s securities.

Section 2.9 Holdback Agreements. Each Participating Holder, each STX Holder participating in an Underwritten Shelf Take-Down and each other holder of 1% or more of the outstanding A Shares at the time of an offering hereunder that is party hereto agrees, to the extent requested in writing by a managing underwriter, if any, of any registration hereunder, not to sell, transfer or otherwise dispose of, including any sale pursuant to Rule 144 under the Securities Act, any A Shares, or any other equity security of the Company or any security convertible into or exchangeable or exercisable for any equity security of the Company other than as part of such underwritten public offering during the time period reasonably requested by the managing underwriter, not to exceed (a) 90 days, in the case of an Underwritten Shelf Take-Down that is not a Block Trade or underwritten offering pursuant to Section 2.2 or Section 2.3 or (b) 60 days, in the case of a Block Trade.

Section 2.10 No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Holder to sell any Registrable Securities pursuant to any effective registration statement.

Section 2.11 Indemnification.

17 

 

(a)       In the event of any registration of any securities of the Company under the Securities Act pursuant to Article II, the Company will, and hereby agrees to, indemnify and hold harmless, to the fullest extent permitted by law, each Participating Holder or STX Holder, as applicable, its directors, officers, Affiliates, (and the directors and officers thereof), and each other Person, if any, who controls such holder within the meaning of the Securities Act, from and against any and all losses, claims, damages, expenses or liabilities, joint or several, actions or proceedings (whether commenced or threatened) and expenses (including reasonable fees of counsel and any amounts paid in any settlement effected with the Company’s consent) to which each such indemnified party may become subject under the Securities Act or otherwise in respect thereof (collectively, “Losses”), insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact necessary to be stated or necessary in order to make the statements, in light of the circumstances under which they were made, not misleading, in any registration statement under which such securities were registered under the Securities Act, or amendment thereof or supplement thereto, or in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or any Issuer Free Writing Prospectus utilized in connection therewith, and the Company will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Loss as such expenses are incurred; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Loss arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus or Issuer Free Writing Prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use therein.

(b)       Each Holder whose Registrable Securities are included in the securities as to which any registration under Article II is being effected shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.11), to the fullest extent permitted by law, the Company, its officers and directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers and their respective directors, officers, Affiliates and respective controlling Persons with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus utilized in connection therewith, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or its representatives by or on behalf of such holder specifically for use therein and reimburse such indemnified party for any legal or other expenses reasonably incurred in connection with investigating or defending any such Loss as such expenses are incurred; provided, however, that the aggregate amount that any such holder shall be required to pay pursuant to this Section 2.11 shall in no case be greater than the amount of the net proceeds received by such holder upon the sale of the securities pursuant to the registration statement giving rise to such claim. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such holder.

18 

 

(c)       Any Person entitled to indemnification under this Agreement promptly shall notify the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 2.11, but the failure of any such Person to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.11, except to the extent the indemnifying party is materially prejudiced thereby, and shall not relieve the indemnifying party from any liability that it may have to any such Person otherwise than under this Article II. In case any action or proceeding is brought against an indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party that it so chooses, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within 20 days after receiving notice from such indemnified party, (ii) if such indemnified party who is a defendant in any action or proceeding that is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party that are not available to the indemnifying party or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties) and the indemnifying party shall be liable for any expenses therefor. Without the written consent of the indemnified party, which consent shall not be unreasonably withheld, no indemnifying party shall effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder, whether or not the indemnified party is an actual or potential party to such action or claim, unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

(d)       If for any reason the foregoing indemnity is unavailable or is insufficient to hold harmless an indemnified party under Section 2.11(a), (b) or (c), then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, with respect to such offering of securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct

19 

 

or prevent such untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 2.11(d) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 2.11(d). The amount paid or payable in respect of any Loss shall be deemed to include any legal or other third party expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Loss. No Person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 2.11(d) to the contrary, no indemnifying party other than the Company shall be required pursuant to this Section 2.11(d) to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of securities in the offering to which the losses, claims, damages, expenses or liabilities of the indemnified parties relate, less the amount of any indemnification payment made by such indemnifying party pursuant to Sections 2.11(b) and (c).

(e)       The indemnity and contribution agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.

ARTICLE III

GENERAL

Section 3.1 Company Filings. The Company covenants that, so long as it remains subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act or, if it is not required to file such reports, upon the request of any Holder it shall make publicly available other information so long as necessary to permit sales of such Registrable Securities in compliance with Rule 144 under the Securities Act, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

Section 3.2 Nominees for Beneficial Owners. If securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its option, be treated as the holder of such securities for purposes of any request or other action by any holder or holders pursuant to this Agreement or any determination of any number or percentage of shares constituting securities held by any holder or holders contemplated by this Agreement; provided, that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership.

20 

 

Section 3.3 No Inconsistent Agreements. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with any other agreements to which the Company is a party or by which it is bound.

ARTICLE IV

MISCELLANEOUS

Section 4.1 Amendment and Waiver.

(a)       Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by (i) the Company, (ii) the Original Holders who hold a majority of the Registrable Securities then outstanding and held by the Original Holders and (iii) the STX Holders who hold a majority of the Registrable Securities then outstanding and held by the STX Holders or, in the case of a waiver, by the party or parties against whom the waiver is to be effective, in an instrument specifically designated as an amendment or waiver hereto; provided, however, that a waiver by (i) the Original Holders shall require the consent of Original Holders who hold a majority of the Registrable Securities then outstanding and held by the Original Holders and (ii) the STX Holders shall require the consent of STX Holders who hold a majority of the Registrable Securities then outstanding and held by the STX Holders; provided further, that any amendment that affects any Holder in a manner that is materially and adversely disproportionate to the impact of such amendment on other Holders (but taking into account any specific differences between the rights of the Original Holders and the rights of the STX Holders provided under this Agreement as in effect on the date hereof) may only be made with the prior written consent of such affected Holder.

(b)       No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder.

Section 4.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, (b) upon receipt of confirmation of successful transmission if delivered by electronic mail, (c) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (d) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

21 

 

(i)       if to any Original Holder or STX Holder, to its last known address appearing on the books of the Company maintained for such purpose;

 

(ii)       if to the Company, to:

 

Eros International Plc

First Names House

Victoria Road

Douglas

Isle of Man IM2 4DF

British Isles

Attention: Mark Carbeck, Chief Corporate and Strategy Officer

Email: mark.carbeck@erosintl.com

or such other address as the Company or the applicable holder shall have specified to the other party in writing in accordance with this Section 4.2.

Section 4.3 Interpretation. When a reference is made in this Agreement to a Section or Article, such reference shall be to a Section or Article of this Agreement unless otherwise indicated. The headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. Each of the parties hereto acknowledges that it has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

Section 4.4 Entire Agreement. This Agreement constitutes the entire agreement, and supersedes all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings between the parties with respect to the subject matter hereof and thereof.

Section 4.5 No Third-Party Beneficiaries. Except as provided in Section 2.11, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement.

Section 4.6 Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York.

22 

 

Section 4.7 Submission to Jurisdiction. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any other party or its successors or assigns shall be brought and determined in any New York State or federal court, and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in New York, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in New York as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in New York as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

Section 4.8 Successors, Assigns and Transferees. The rights and obligations of each party hereto may not be assigned, in whole or in part, without the written consent of the Company; provided, however, that notwithstanding the foregoing, the rights and obligations set forth herein may be assigned, in whole or in part, by any Original Holder or STX Holder to any of its Affiliates, and such transferee shall, with the consent of the transferring holder, be treated as an “Original Holder” or “STX Holder,” as applicable, for all purposes of this Agreement (each Person to whom the rights and obligations are assigned in compliance with this Section 4.8 is a “Permitted Assignee” and all such Persons, collectively, are “Permitted Assignees”); provided, further, that such transferee shall only be admitted as a party hereunder upon its, his or her execution and delivery of a joinder agreement in substantially the form attached as Exhibit A hereto, agreeing to be bound by the terms and conditions of this Agreement as if such Person were a party hereto.

Section 4.9 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any New York State or federal court, this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.

23 

 

Section 4.10 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

Section 4.11 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 4.12 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

Section 4.13 Facsimile or .pdf Signature. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.

Section 4.14 Time of Essence. Time is of the essence with regard to all dates and time periods set forth or referred to in this Agreement.

Signature pages follow.

24 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

EROS INTERNATIONAL PLC

By:_/s/ Kishore Lulla____________

Name: Kishore Lulla

Title: Executive Chairman and Group Chief

Executive Officer and Managing Director

 

Signature Page to Registration Rights Agreement

 

 

TPG GROWTH IV OSCARS, L.P.

 

By: TPG Growth GenPar IV, L.P.

Its: General Partner

 

By: TPG Growth GenPar IV Advisors, LLC

Its: General Partner

By:/s/ David Mossé                              

Name: David Mossé

Title: Vice President

 

MARCO ALLIANCE LIMITED

 

 

By:/s/ Yuan Bing                                   

Name: Yuan Bing

Title: Director

Signature Page to Registration Rights Agreement

 

PCCW MEDIA LIMITED

By: /s/ LEE Hoi Yee, Janice____________

Name: LEE Hoi Yee, Janice

Title: Director

Signature Page to Registration Rights Agreement

 

BLACK FISH BLUE FISH, LLC

By: /s/ Derek Arend_______________________

Name: Derek Arend

Title: President

Signature Page to Registration Rights Agreement

 

 

/s/ Andrew Warren______________

Name: Andrew Warren

 

Signature Page to Registration Rights Agreement

 

PTOLEMY CAPITAL, LLC

By: /s/ Mitchell Otolski_______________________

Name: Mitchell Otolski

Title: Agent

Signature Page to Registration Rights Agreement

 

LIBERTY GLOBAL VENTURES LIMITED

By: /s/ Jeremy Evans__________________

Name: Jeremy Evans

Title:

Signature Page to Registration Rights Agreement

 

/s/ Cheng Kar Shing________________

Name: Cheng Kar Shing

 

Signature Page to Registration Rights Agreement

 

PE Fund LP

By: /s/ Beau Wrigley _____________

Name: William Wrigley, Jr.

Title: Chairman & CEO of WWJr. Enterprises

Inc., as its GP

 

 

Signature Page to Registration Rights Agreement

 

Ever Star Trading Limited

By: /s/ Chak Mei Hing____________

Name: Chak Mei Hing

Title: Director

Signature Page to Registration Rights Agreement

 

Codelouf Ltd.

By: /s/ Andrew Ogier______________________

Name: Andrew Ogier

Title: Director

Signature Page to Registration Rights Agreement

 

Lakeside Investment Management Ltd.

By: /s/ Raffael Stockli and Andrea Crespi____

Name: Raffael Stockli and Andrea Crespi

Title: Both as company’s Directors

 

Signature Page to Registration Rights Agreement

 

Boston Fern Investment Limited

By: /s/ Ma Huateng_________________

Name: Ma Huateng

Title: Director

Signature Page to Registration Rights Agreement

 

Per Utnegaard & Partners GmbH

By: /s/ Per Utnegaard____________

Name:

Title:

Signature Page to Registration Rights Agreement

 

Palace Global Investments Ltd.

By: /s/ Sanjay N. Kirpalani Thomas Koechli____

Name: Sanjay N. Kirpalani Thomas Koechli

Title: Directors

 

Signature Page to Registration Rights Agreement

 

       

-/s/ Anna Standish____________

Name: Anna Standish

 

Signature Page to Registration Rights Agreement

 

ORIGINAL HOLDERS:

 

KISHORE LULLA

 

 

/s/ Kishore Lulla________________

 

Signature Page to Registration Rights Agreement

 

EROS VENTURES LIMITED

By: CDS International Limited, its sole director

 

By:/s/ Joel Smith____________

Name: Joel Smith

Title: Authorized Signatory

 

By:_/s/ Simon Kleis ________

Name: Simon Kleis

Title: Authorized Signatory

 

Signature Page to Registration Rights Agreement

 

BEECH INVESTMENTS LIMITED

 

By:_/s/ Joel Smith __________

Name: Joel Smith

Title: Director

 

By:_/s/ Simon Kleis _________

Name: Simon Kleis

Title: Director

 

 

 

Signature Page to Registration Rights Agreement

 

 

RISHIKA LULLA SINGH

 

 

/s/ Rishika Lulla Singh____________

 

Signature Page to Registration Rights Agreement

 

RIDHIMA LULLA

 

 

/s/ Ridhima Lulla ____________

 

Signature Page to Registration Rights Agreement

 

 

SUNIL LULLA

 

 

/s/ Sunil Lulla ______________

 

 

Signature Page to Registration Rights Agreement

 

Schedule 1

 

STX Holders

 

Name Issued and Outstanding STX Securities Number and Class of Contingent Value Rights (CVRs)
Marco Alliance Limited  7,965,334

66,256.41466 Class B CVRs

 

58,154.57456 Class C CVRs

 

58,808.58903 Class D CVRs

 

24,533.00000 Class E CVRs

TPG Growth IV Oscars, L.P.  7,965,334

44,515.10688 Class D CVRs

 

24,533.00000 Class E CVRs

PCCW Media Limited  2,705,207

49,953.32303 Class C CVRs

 

14,819.57714 Class D CVRs

 

8,333.00000 Class E CVRs

Black Fish Blue Fish, LLC  1,803,471

4,209.58978 Class D CVRs

 

5,555.00000 Class E CVRs

Liberty Global Ventures Limited  901,735

20,374.89271 Class C CVRs

 

2,963.91542 Class D CVRs

 

2,777.00000 Class E CVRs

PE Fund LP  642,587

14,439.63993 Class C CVRs

 

1,074.41935 Class D CVRs

 

1,979.00000 Class E CVRs

Ptolemy Capital, LLC  601,157

2,667.52389 Class D CVRs

 

1,852.00000 Class E CVRs

 

 

Andrew Warren  601,157

1,481.95772 Class D CVRs

 

1,852.00000 Class E CVRs

Boston Fern Investment Limited  454,518

11,809.15502 Class C CVRs

 

1,400.00000 Class E CVRs

Lakeside Investment Management Ltd.  265,379

6,950.40701 Class C CVRs

 

817.00000 Class E CVRs

Anna Standish  127,198

2,759.54253 Class C CVRs

 

257.24672 Class D CVRs

 

392.00000 Class E CVRs

Ever Star Trading Limited  105,764

2,770.26507 Class C CVRs

 

326.00000 Class E CVRs

Codelouf Ltd.  53,075

1,379.77127 Class C CVRs

 

163.00000 Class E CVRs

Per Utnegaard & Partners GmbH  53,075

1,390.08140 Class C CVRs

 

163.00000 Class E CVRs

Cheng Kar Shing  53,011

1,388.43178 Class C CVRs

 

163.00000 Class E CVRs

Palace Global Investments Ltd.  52,639

1,378.94645 Class C CVRs

 

162.00000 Class E CVRs

 

 

 

Schedule 2

 

Original Holders

 

Beneficial Owner Issued and Outstanding Registrable Securities A Shares Issuable Upon Settlement of Vested Restricted Stock Units
Beech Investments Limited 318,818 -
Kishore Lulla 317,303 183,333
Rishika Lulla Singh 248,083 395,368
Ridhima Lulla - 333,333
Sunil Lulla 3,061,999 -
Eros Ventures Limited - -

 

 

 

 

 

 

Exhibit 10.4 

EROS INTERNATIONAL PLC

2020 LONG-TERM INCENTIVE PLAN

Adopted by the Board: July 30, 2020
Effective date: July 30, 2020

1. GENERAL.

(a)                Eligible Award Recipients. Employees, Directors, and Consultants are eligible to receive Awards.

(b)               Available Awards. The Plan provides for the grant of the following Awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted Stock Awards; (v) Restricted Stock Unit Awards; and (vi) Performance Stock Awards.

(c)                Purpose. This Plan, through the granting of Awards, is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and provide a means by which the eligible recipients may benefit from increases in the value of the Ordinary Shares.

2. ADMINISTRATION.

(a)                Administration by Board. The Board will administer the Plan. The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c).

(b)               Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i)                 To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Ordinary Shares under the Award; (E) the number of Ordinary Shares subject to, or the cash value of, an Award; and (F) the Fair Market Value applicable to a Stock Award.

(ii)               To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Document, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective.

(iii)             To settle all controversies regarding the Plan and Awards granted under it.

 

(iv)             To accelerate, in whole or in part, or to extend, in whole or in part, the time during which an Award may be exercised or vest, or at which cash or Ordinary Shares may be issued.

(v)               To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an Award Document, suspension or termination of the Plan will not materially impair a Participant’s rights under his or her then-outstanding Award without his or her written consent except as provided in subsection (viii) below.

(vi)       To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, adopting amendments relating to Incentive Stock Options and nonqualified deferred compensation under Section 409A of the Code and/or making the Plan or Awards granted under the Plan exempt from or compliant with the requirements for Incentive Stock Options or exempt from or compliant with the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. Except as otherwise provided in the Plan (including subsection (viii) below) or an Award Document, no amendment of the Plan will materially impair a Participant’s rights under an outstanding Award without the Participant’s written consent.

(vii)       To submit for shareholder approval amendments to the Plan intended to satisfy the requirements of Section 422 of the Code regarding “incentive stock options”.

(viii)       To approve forms of Award Documents for use under the Plan and to amend the terms of any one or more outstanding Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Documents for such Awards, subject to any specified limits in the Plan that are not subject to Board discretion. A Participant’s rights under any Award will not be impaired by any such amendment unless the Company requests the consent of the affected Participant, and the Participant consents in writing. In addition, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent (A) to maintain the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code, (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code, (C) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code, or (D) to comply with other applicable laws or listing requirements.

(ix)       Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan and/or Award Documents.

(x)       To adopt such procedures and sub-plans as are necessary or appropriate (A) to permit or facilitate participation in the Plan by persons eligible to receive Awards under the Plan who are not citizens of, subject to taxation by, or employed outside, the United States or (B) allow Awards to qualify for special tax treatment in a jurisdiction other than the United States. Board approval will not be necessary for immaterial modifications to the Plan or any Award Document that are required for compliance with the laws of the relevant jurisdiction.

2 

 

(c)                Delegation to Committee.

(i)                 General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Committee may, at any time, abolish the subcommittee and/or revest in the Committee any powers delegated to any subcommittee. Unless otherwise provided by the Board, delegation of authority by the Board to a Committee, or to an Officer or employee pursuant to Section 2(d), does not limit the authority of the Board, which may continue to exercise any authority so delegated and may concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated. The Board has delegated administration of the Plan to the Remuneration Committee, who will serve for such period of time as the Board may specify and whom the Board may remove at any time.

(ii)               Rule 16b-3 Compliance. The Committee may consist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3 of the Exchange Act.

(d)               Delegation to an Officer. The Board may delegate to one (1) or more Officers the authority to do one or both of the following, to the maximum extent permitted by applicable law: (i) designate Employees who are not Officers to be recipients of Stock Awards and the terms of such Stock Awards; and (ii) determine the number of Ordinary Shares to be subject to such Stock Awards granted to such Employees; provided, however, that the Board resolutions regarding such delegation will specify the total number of Ordinary Shares that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Any such Stock Awards will be granted on a form that is substantially the same as the form of Stock Award Document approved by the Committee or the Board for use in connection with such Stock Awards, unless otherwise provided for in the resolutions approving the delegation authority.

(e)                Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board (or a duly authorized Committee, subcommittee or Officer exercising powers delegated by the Board under this Section 2) in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.

3. SHARES SUBJECT TO THE PLAN.

(a)                Share Reserve.

(i)                 Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of Ordinary Shares that may be issued pursuant to Stock Awards from and after the Effective Date will not exceed 40,000,000 Ordinary Shares (the “Share Reserve”).

3 

 

(ii)               For clarity, the Share Reserve is a limitation on the number of Ordinary Shares that may be issued under the Plan. As a single share may be subject to grant more than once (e.g., if a share subject to a Stock Award is forfeited, it may be made subject to grant again as provided in Section 3(b) below), the Share Reserve is not a limit on the number of Stock Awards that can be granted.

(iii)             Shares may be issued under the terms of this Plan in connection with a merger or acquisition as permitted by Nasdaq Listing Rule 5635(c), NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.

(b)               Reversion of Shares to the Share Reserve. If a Stock Award or any portion of a Stock Award (i) expires, is cancelled or forfeited or otherwise terminates without all of the shares covered by the Stock Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), such expiration, cancellation, forfeiture, termination or settlement will not reduce (or otherwise offset) the number of Ordinary Shares that are available for issuance under the Plan. If any Ordinary Shares issued under a Stock Award are forfeited back to, reacquired at no cost by, or repurchased at cost by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited, reacquired or repurchased will revert to and again become available for issuance under the Plan. Any shares retained and not issued by the Company in satisfaction of tax withholding obligations on a Stock Award or as consideration for the exercise or purchase price of a Stock Award will not reduce (or otherwise offset) the number of Ordinary Shares that are available for issuance under the Plan. Any shares reacquired by the Company (as distinguished from being retained without issuance by the Company) in satisfaction of tax withholding obligations on a Stock Award, as consideration for the exercise or purchase price of a Stock Award, or with the proceeds paid by the Participant under the terms of a Stock Award, will again become available for issuance under the Plan.

(c)                Incentive Stock Option Limit. Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of Ordinary Shares that may be issued on the exercise of Incentive Stock Options will be 40,000,000 Ordinary Shares.

(d)               Source of Shares. The shares issuable under the Plan will be shares of authorized but unissued or reacquired Ordinary Shares, including shares repurchased by the Company on the open market or otherwise or shares classified as treasury shares.

4. ELIGIBILITY.

(a)                Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.

4 

 

(b)               Ten Percent Stockholders. A Ten Percent Stockholder will not be granted an Incentive Stock Option unless the exercise price of such Option is at least 110% of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

5. PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS.

Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for Ordinary Shares purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; provided, however, that each Award Document will conform to (through incorporation of provisions hereof by reference in the applicable Award Document or otherwise) the substance of each of the following provisions:

(a)                Term. Subject to Section 4(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of 10 years from the date of its grant or such shorter period specified in the Award Document.

(b)               Exercise Price. Subject to Section 4(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Ordinary Shares subject to the Option or SAR on the date the Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Ordinary Shares subject to the Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a corporate transaction and in a manner consistent with the provisions of Section 409A of the Code and, if applicable, Section 424(a) of the Code. Each SAR will be denominated in Ordinary Share equivalents.

(c)                Purchase Price for Options. The purchase price of Ordinary Shares acquired pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment. The purchase price shall be denominated in U.S. dollars. The permitted methods of payment are as follows:

(i)                 by cash, check, bank draft or money order payable to the Company;

5 

 

(ii)               pursuant to a program developed under Regulation T as promulgated by the United States Federal Reserve Board or a successor regulation, or a similar rule in a foreign jurisdiction of domicile of a Participant, that, prior to or contemporaneously with the issuance of the shares subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the proceeds of sale of such shares;

(iii)             by delivery to the Company (either by actual delivery or attestation) of Ordinary Shares;

(iv)             by a “net exercise” arrangement pursuant to which the Company will reduce the number of Ordinary Shares issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company will accept cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; or

(v)               in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Award Document.

Ordinary Shares will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations.

(d)               Exercise and Payment of a SAR. To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Award Document evidencing such SAR. The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of Ordinary Shares equal to the number of Ordinary Share equivalents in which the Participant is vested under such SAR (with respect to which the Participant is exercising the SAR on such date), over (B) the aggregate strike price of the number of Ordinary Share equivalents with respect to which the Participant is exercising the SAR on such date. The appreciation distribution may be paid in Ordinary Shares, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Award Document evidencing such SAR.

(e)                Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board determines. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:

(i)                 Restrictions on Transfer. Unless otherwise determined by the Board, an Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii), (iii) and (iv) below), and will be exercisable during the lifetime of the Participant only by the Participant. Except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration.

6 

 

(ii)               Beneficiary Designation. Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Ordinary Shares or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate will be entitled to exercise the Option or SAR and receive the Ordinary Shares or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.

(f)                Vesting Generally. The total number of Ordinary Shares subject to an Option or SAR may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of Ordinary Shares as to which an Option or SAR may be exercised.

(g)               Termination of Continuous Service. Except as otherwise provided in the applicable Award Document, or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three (3) months following the termination of the Participant’s Continuous Service and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Document. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR will terminate.

(h)               Extension of Termination Date. Except as otherwise provided in the applicable Award Document, or other agreement between the Participant and the Company, if the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of Ordinary Shares would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of three (3) months (that need not be consecutive) after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Document. In addition, unless otherwise provided in a Participant’s applicable Award Document, or other agreement between the Participant and the Company, if the sale of any Ordinary Shares received upon exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, and the Company does not allow the Participant to surrender Ordinary Shares to the Company in satisfaction of any exercise price and/or any withholding obligations under Section 8(h), then the Option or SAR will terminate on the earlier of (i) the expiration of a period of months (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the Ordinary Shares received upon exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Document.

7 

 

(i)                 Disability of Participant. Except as otherwise provided in the applicable Award Document, or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Document. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.

(j)                 Death of Participant. Except as otherwise provided in the applicable Award Document, or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in this Plan or the applicable Award Document, or other agreement between the Participant and the Company, for exercisability after the termination of the Participant’s Continuous Service (for a reason other than death), then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date 12 months following the date of death, and (ii) the expiration of the term of such Option or SAR as set forth in the applicable Award Document. If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR will terminate.

(k)               Termination for Cause. Except as explicitly provided otherwise in a Participant’s Award Document or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will terminate upon the date on which the event giving rise to the termination for Cause first occurred, and the Participant will be prohibited from exercising his or her Option or SAR from and after the date on which the event giving rise to the termination for Cause first occurred (or, if required by law, the date of termination of Continuous Service). If a Participant’s Continuous Service is suspended pending an investigation of the existence of Cause, all of the Participant’s rights under the Option or SAR will also be suspended during the investigation period.

8 

 

(l)                 Non-Exempt Employees. If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the U.S. Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any Ordinary Shares until at least 6 months following the date of grant of the Option or SAR (although the Award may vest prior to such date). Consistent with the provisions of the U.S. Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Change in Control in which such Option or SAR is not assumed, continued, or substituted, or (iii) upon the non-exempt Employee’s retirement (as such term may be defined in the non-exempt Employee’s applicable Award Document, in another agreement between the non-exempt Employee and the Company, or, if no such definition, in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than 6 months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt Employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the U.S. Worker Economic Opportunity Act to ensure that any income derived by a non-exempt Employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from such employee’s regular rate of pay, the provisions of this paragraph will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Documents.

6. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.

(a)                Restricted Stock Awards. Each Restricted Stock Award Document will be in such form and will contain such terms and conditions as the Board deems appropriate. To the extent consistent with the Company’s bylaws, at the Board’s election, Ordinary Shares may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse, or (y) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board. The terms and conditions of Restricted Stock Award Documents may change from time to time, and the terms and conditions of separate Restricted Stock Award Documents need not be identical. Each Restricted Stock Award Document will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i)                 Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.

(ii)               Vesting. Ordinary Shares awarded under the Restricted Stock Award Document may be subject to forfeiture to the Company in accordance with a vesting schedule and subject to such conditions as may be determined by the Board.

(iii)             Termination of Participant’s Continuous Service. If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right, any or all of the Ordinary Shares held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Document.

9 

 

(iv)             Transferability. Ordinary Shares issued pursuant to an Award, and rights to acquire Ordinary Shares under the Restricted Stock Award Document, will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Document, as the Board determines in its sole discretion, so long as such Ordinary Shares remain subject to the terms of the Restricted Stock Award Document.

(v)               Dividends. Any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.

(b)               Restricted Stock Unit Awards. Each Restricted Stock Unit Award Document will be in such form and will contain such terms and conditions as the Board deems appropriate. The terms and conditions of Restricted Stock Unit Award Documents may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Documents need not be identical. Each Restricted Stock Unit Award Document will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

(i)                 Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each Ordinary Share subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each Ordinary Share subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.

(ii)               Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

(iii)             Payment. A Restricted Stock Unit Award may be settled by the delivery of Ordinary Shares, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Document.

(iv)             Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the Ordinary Shares (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

(v)               Dividend Equivalents. Dividend equivalents may be credited in respect of Ordinary Shares covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Document. At the sole discretion of the Board, such dividend equivalents may be converted into additional Ordinary Shares covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any dividend equivalents and/or additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Document to which they relate.

(vi)             Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Document, or other agreement between the Participant and the Company, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

10 

 

(c)                Performance Awards.

(i)                 Performance Stock Awards. A Performance Stock Award is a Stock Award that is payable (including that may be granted, vest or exercised) contingent upon the attainment during a Performance Period of the achievement of certain performance goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the performance goals to be achieved during the Performance Period, and the measure of whether and to what degree such performance goals have been attained will be conclusively determined by the Committee, the Board, or an authorized Officer, in its sole discretion. In addition, to the extent permitted by applicable law and the applicable Award Document, the Board may determine that cash may be used in payment of Performance Stock Awards.

(ii)               Board Discretion. The Committee, the Board, or an authorized Officer, as the case may be, retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of performance goals and to define the manner of calculating the performance criteria it selects to use for a Performance Period.

7. COVENANTS OF THE COMPANY.

(a)                Availability of Shares. The Company will keep available at all times the number of Ordinary Shares reasonably required to satisfy then-outstanding Stock Awards.

(b)               Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell Ordinary Shares upon exercise of the Stock Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Ordinary Shares issued or issuable pursuant to any such Stock Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Ordinary Shares under the Plan, the Company will be relieved from any liability for failure to issue and sell Ordinary Shares upon exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent issuance of cash or Ordinary Shares pursuant to the Award if such grant or issuance would be in violation of any applicable securities law.

(c)                No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to, and does not undertake to, provide tax advice or to minimize the tax consequences of an Award to the holder of such Award.

11 

 
8. MISCELLANEOUS.

(a)                Use of Proceeds from Sales of Ordinary Shares. Proceeds from the sale of Ordinary Shares pursuant to Stock Awards will constitute general funds of the Company.

(b)               Corporate Action Constituting Grant of Awards. Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the latest date that all necessary corporate action has occurred and all material terms of the Award (including, in the case of stock options, the exercise price thereof) are fixed, unless otherwise determined by the Board, regardless of when the documentation evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Document as a result of a clerical error in the papering of the Award Document, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Document.

(c)                Shareholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Ordinary Shares subject to a Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of Ordinary Shares under, the Stock Award pursuant to its terms, and (ii) the issuance of the Ordinary Shares subject to such Stock Award has been entered into the books and records of the Company.

(d)               No Employment or Other Service Rights. Nothing in the Plan, any Award Document or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or any other capacity or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, including, but not limited to, Cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the organizational documents of the Company or an Affiliate (including articles of incorporation and bylaws), and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

(e)                Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Ordinary Shares with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds USD$100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

12 

 

(f)                Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Ordinary Shares under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award, and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Ordinary Shares subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Ordinary Shares. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (i) the issuance of the shares upon the exercise of a Stock Award or acquisition of Ordinary Shares under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Ordinary Shares.

(g)               Withholding Obligations. Unless prohibited by the terms of an Award Document, any national, state, local or other tax withholding obligation relating to an Award may be satisfied by any of the following means or by a combination of such means: (i) requiring the Participant to tender a cash payment; (ii) at the Participant’s direction, withholding Ordinary Shares from the Ordinary Shares issued or otherwise issuable to the Participant in connection with the Award (only up to the amount permitted that will not cause an adverse accounting consequence); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant, including proceeds from the sale of Ordinary Shares issued pursuant to a Stock Award; or (v) by such other method as may be set forth in the Award Document.

(h)               Electronic Delivery. Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto), or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).

(i)                 Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Ordinary Shares or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award (other than Options or SARs) may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code (to the extent applicable to a Participant). Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

13 

 

(j)                 Compliance with Section 409A. Unless otherwise expressly provided for in an Award Document, or other agreement between the Participant and the Company, the Plan and Award Documents will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A of the Code, to the extent that Section 409A of the Code is applicable to an Award, and, to the extent not so exempt, in compliance with Section 409A of the Code. If the Board determines that any Award granted hereunder is subject to Section 409A of the Code, the Award Document evidencing such Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Document is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Document. Notwithstanding anything to the contrary in this Plan (and unless the Award Document specifically provides otherwise), if the Ordinary Shares are publicly traded, and if a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code and the Participant is otherwise subject to Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six (6) months following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period elapses, with the balance paid thereafter on the original schedule.

(i)                 Clawback/Recovery. All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company adopts or is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Award Document as the Board determines necessary or appropriate, including, but not limited to, a reacquisition right in respect of previously acquired Ordinary Shares or other cash or property upon the occurrence of Cause. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company or an Affiliate.

9. ADJUSTMENTS UPON CHANGES IN ORDINARY SHARES; OTHER CORPORATE EVENTS.

(a)                Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c); and (iii) the class(es) and number of securities or other property and value (including price per share) subject to outstanding Stock Awards. The Board will make such adjustments, and its determination will be final, binding and conclusive.

14 

 

(b)               Dissolution or Liquidation. Except as otherwise provided in the Stock Award Document, or other agreement between the Participant and the Company, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding Ordinary Shares not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the Ordinary Shares subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service; provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

(c)                Change in Control. The following provisions will apply to Awards in the event of a Change in Control unless otherwise provided in the instrument evidencing the Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of an Award. In the event of a Change in Control, then, notwithstanding any other provision of the Plan, the Board will take one or more of the following actions with respect to each outstanding Award, contingent upon the closing or completion of the Change in Control:

(i)                 arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Award or to substitute a similar award for the Award (including, but not limited to, an award to acquire the same consideration per share paid to the shareholders of the Company pursuant to the Change in Control);

(ii)               arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Ordinary Shares issued pursuant to the Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

(iii)             accelerate the vesting, in whole or in part, of the Award (and, if applicable, the time at which the Award may be exercised) to a date prior to the effective time of such Change in Control as the Board will determine (or, if the Board will not determine such a date, to the date that is 5 days prior to the effective date of the Change in Control), with such Award terminating if not exercised (if applicable) at or prior to the effective time of the Change in Control, and with such exercise reversed if the Change in Control does not become effective;

(iv)             arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Award;

15 

 

(v)               cancel or arrange for the cancellation of the Award, to the extent not vested or not exercised prior to the effective time of the Change in Control, in exchange for such cash consideration, if any, as the Board, in its reasonable determination, may consider appropriate as an approximation of the value of the canceled Award, taking into account the value of the Ordinary Shares subject to the canceled Award, the possibility that the Award might not otherwise vest in full, and such other factors as the Board deems relevant; and

(vi)             cancel or arrange for the cancellation of the Award, to the extent not vested or not exercised prior to the effective time of the Change in Control, in exchange for a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value in the Change in Control of the property the Participant would have received upon the exercise of the Award immediately prior to the effective time of the Change in Control, over (B) any exercise price payable by such holder in connection with such exercise.

The Board need not take the same action or actions with respect to all Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of an Award.

In the absence of any affirmative determination by the Board at the time of a Change in Control, each outstanding Award will be assumed or an equivalent Award will be substituted by such successor corporation or a parent or subsidiary of such successor corporation (the “Successor Corporation”), unless the Successor Corporation does not agree to assume the Award or to substitute an equivalent Award, in which case the vesting of such Award will accelerate in its entirety (along with, if applicable, the time at which the Award may be exercised) to a date prior to the effective time of such Change in Control as the Board will determine (or, if the Board will not determine such a date, to the date that is 5 days prior to the effective date of the Change in Control), with such Award terminating if not exercised (if applicable) at or prior to the effective time of the Change in Control, and with such exercise reversed if the Change in Control does not become effective.

(d)               Acceleration of Awards upon a Change in Control. An Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Award Document for such Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.

10. TERMINATION OR SUSPENSION OF THE PLAN.

The Board or the Remuneration Committee may suspend or terminate the Plan at any time. The Plan will have no fixed expiration date; provided, however, that no Incentive Stock Option may be granted more than 10 years after the later of (i) the Adoption Date and (ii) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

11. EFFECTIVE DATE OF PLAN; TIMING OF FIRST GRANT OR EXERCISE.

The Plan shall come into existence on the Effective Date and no Award may be granted under the Plan prior to the Effective Date.

16 

 
12. CHOICE OF LAW.

The laws of the Isle of Man will govern all questions concerning the construction, validity and interpretation of this Plan.

13. DEFINITIONS.

As used in the Plan, the following definitions will apply to the capitalized terms indicated below:

(a)                “Adoption Date” means the date the Plan is adopted by the Board.

(b)               “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act. The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

(c)                “Award” means a Stock Award.

(d)               “Award Document” means a written agreement between the Company and a Participant, or a written notice issued by the Company to a Participant, evidencing the terms and conditions of an Award.

(e)                “Board” means the Board of Directors of the Company.

(f)                “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Ordinary Shares subject to the Plan or subject to any Stock Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.

(g)               “Cause” will have the meaning ascribed to such term in any written agreement between the Participant and the Company or any Affiliate defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) Participant’s failure substantially to perform his or her duties and responsibilities to the Company or any Affiliate or violation of a policy of the Company or any Affiliate; (ii) Participant’s commission of any act of fraud, embezzlement, dishonesty or any other misconduct that has caused or is reasonably expected to result in injury to the Company or any Affiliate; (iii) unauthorized use or disclosure by Participant of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company or any Affiliate; or (iv) Participant’s breach of any of his or her obligations under any written agreement or covenant with the Company or any Affiliate. The determination as to whether a Participant is being terminated for Cause will be made in good faith by the Company and will be final and binding on the Participant. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company, any Affiliate or such Participant for any other purpose.

17 

 

(h)               “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i)                 any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;

(ii)               there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the shareholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing 50% or more of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) 50% or more of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

(iii)             there is consummated a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by shareholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

18 

 

(iv)             individuals who, on the Adoption Date, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.

Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.

If required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under U.S. Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent, amend the definition of “Change in Control” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder.

(i)                 “Code” means the U.S. Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.

(j)                 “Committee” means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

(k)               “Company” means Eros International Plc, an Isle of Man company limited by shares.

(l)                 “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form Registration Statement on Form S-8 or a successor form under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person.

19 

 

(m)             “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute an interruption of Continuous Service. If the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. In addition, if required for exemption from or compliance with Section 409A of the Code, the determination of whether there has been a termination of Continuous Service will be made, and such term will be construed, in a manner that is consistent with the definition of “separation from service” as defined under U.S. Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder). A leave of absence will be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the applicable Award Document, the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

(n)               “Director” means a member of the Board.

(o)               “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months as provided in Sections 22(e)(3) and 409A(a)(2)(C)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

(p)               “Effective Date” means July 30, 2020.

(q)               “Employee” means any person providing services as an employee of the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.

(r)                 “Entity” means a corporation, partnership, limited liability company or other entity.

(s)                “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

20 

 

(t)                 “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their Ownership of stock of the Company, or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities.

(u)               “Fair Market Value” means, as of any date, the value of the Ordinary Shares determined as follows:

(i)                 If the Ordinary Shares are listed on any established stock exchange or traded on any established market, the Fair Market Value of an Ordinary Share as of any date of determination will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Ordinary Shares) on the date of determination, as reported in a source the Board deems reliable.

(ii)               Unless otherwise provided by the Board, if there is no closing sales price for the Ordinary Shares on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.

(iii)             In the absence of such markets for the Ordinary Shares, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.

(v)               “Incentive Stock Option” means an option granted pursuant to Section 5 of the Plan that is intended to be, and that qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.

(w)             “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3 of the Exchange Act.

(x)               “Nonstatutory Stock Option” means any option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock Option.

(y)               “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.

21 

 

(z)                “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase Ordinary Shares granted pursuant to the Plan.

(aa)            “Option Agreement” means an Award Document evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan.

(bb)           “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

(cc)            “Ordinary Shares” means the ordinary shares in issue in the capital of the Company.

(dd)          “Own,” “Owned,” “Owner,” “Ownership” means a person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(ee)            “Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

(ff)             “Performance Period” means the period of time selected by the Board over which the attainment of one or more performance goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.

(gg)           “Performance Stock Award” means a Stock Award granted under the terms and conditions of Section 6(c)(i).

(hh)           “Plan” means this 2020 Long-Term Incentive Plan of Eros International Plc.

(ii)               “Remuneration Committee” means the Remuneration Committee of the Board.

(jj)               “Restricted Stock Award” means an award of Ordinary Shares which is granted pursuant to the terms and conditions of Section 6(a).

(kk)           “Restricted Stock Award Document” means an Award Document evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Document will be subject to the terms and conditions of the Plan.

(ll)               “Restricted Stock Unit Award” means a right to receive Ordinary Shares which is granted pursuant to the terms and conditions of Section 6(b).

(mm)       “Restricted Stock Unit Award Document” means an Award Document evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Document will be subject to the terms and conditions of the Plan.

22 

 

(nn)           “Securities Act” means the U.S. Securities Act of 1933, as amended.

(oo)           “Stock Appreciation Right” or “SAR” means a right to receive the appreciation on Ordinary Shares that is granted pursuant to the terms and conditions of Section 5.

(pp)           “Stock Appreciation Right Award Document” means an Award Document evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Award Document will be subject to the terms and conditions of the Plan.

(qq)           “Stock Award” means any right to receive Ordinary Shares granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, or a Performance Stock Award.

(rr)              “Stock Award Document” means an Award Document evidencing the terms and conditions of a Stock Award grant. Each Stock Award Document will be subject to the terms and conditions of the Plan.

(ss)             “Subsidiary” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.

(tt)              “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate.

 

END OF DOCUMENT

23 

 

Exhibit 10.5

 

EXECUTION

 

 

 

 

SECOND AMENDED AND RESTATED CREDIT, SECURITY, GUARANTY
AND PLEDGE AGREEMENT

Dated as of October 7, 2016

among

stx fiNAnCING, LLC

as Borrower,

STX FILMWORKS, INC.

as Parent,

THE GUARANTORS REFERRED TO HEREIN,

THE LENDERS REFERRED TO HEREIN,

and

JPMORGAN CHASE BANK, N.A.

as Administrative Agent and Issuing Bank,

________________

JPMORGAN CHASE BANK, N.A.

as Co-Lead Arranger, Sole Bookrunner and Co-Syndication Agent,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, CIT BANK, N.A., EAST WEST BANK and MUFG UNION BANK, N.A.,

as Co-Lead Arrangers

and

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, CIT BANK, N.A., EAST WEST BANK and MUFG UNION BANK, N.A.,

as Co-Syndication Agents

 

 

 

TABLE OF CONTENTS

 

    Page
1. DEFINITIONS 2
  SECTION 1.1 Terms Generally 2
  SECTION 1.2 Definitions 2
2. THE LOANS   60
  SECTION 2.1 Loans 60
  SECTION 2.2 Making of Loans 61
  SECTION 2.3 Notes; Repayment 63
  SECTION 2.4 Interest on Loans 63
  SECTION 2.5 Commitment Fees and Other Fees 64
  SECTION 2.6 Optional Termination or Reduction of Commitments 64
  SECTION 2.7 Default Interest; Alternate Rate of Interest 65
  SECTION 2.8 Continuation and Conversion of Loans 65
  SECTION 2.9 Voluntary and Mandatory Prepayment of Loans; Reimbursement of Lenders 66
  SECTION 2.10 Increased Costs 69
  SECTION 2.11 Change in Legality 71
  SECTION 2.12 Manner of Payments 72
  SECTION 2.13 Taxes 72
  SECTION 2.14 Interest Adjustments 76
  SECTION 2.15 Defaulting Lenders 77
  SECTION 2.16 Provisions Relating to the Borrowing Base 80
  SECTION 2.17 Letters of Credit 82
  SECTION 2.18 Increase of Commitments 87
3. REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES 88
  SECTION 3.1 Existence and Power 89
  SECTION 3.2 Authority and No Violation 89
  SECTION 3.3 Governmental Approvals 90
  SECTION 3.4 Binding Agreements 90
  SECTION 3.5 Financial Statements 90
  SECTION 3.6 No Material Adverse Change 90
  SECTION 3.7 Ownership of Pledged Securities, Subsidiaries, etc 91
  SECTION 3.8 Copyrights, Trademarks and Other Rights 91
  SECTION 3.9 Fictitious Names 92
  SECTION 3.10 Title to Properties 92
  SECTION 3.11 Chief Executive Office; Location of Collateral and Records; Tax Identification Number 93
  SECTION 3.12 Litigation 93
  SECTION 3.13 Federal Reserve Regulations 93
  SECTION 3.14 Investment Company Act 93
  SECTION 3.15 Taxes 93
  SECTION 3.16 Compliance with ERISA 93

i 

 

TABLE OF CONTENTS
(continued)

Page

  SECTION 3.17 Agreements 95
  SECTION 3.18 Security Interest 95
  SECTION 3.19 Rights 95
  SECTION 3.20 Environmental Liabilities 95
  SECTION 3.21 Pledged Securities 96
  SECTION 3.22 Compliance with Laws 96
  SECTION 3.23 Solvency 96
  SECTION 3.24 True and Complete Disclosure 97
  SECTION 3.25 Subsidiaries 97
  SECTION 3.26 Status as a Pass-Through Entity 98
  SECTION 3.27 Anti-Corruption Laws and Sanctions 98
  SECTION 3.28 No Registered or Publicly-Traded Securities 98
  SECTION 3.29 EEA Financial Institution 98
4. CONDITIONS OF LENDING 99
  SECTION 4.1 Conditions Precedent to the Closing Date 99
  SECTION 4.2 Conditions Precedent to Initial Extension of Credit for each Item of Product (Other than a Revenue Participation) and for Initial Inclusion of Credit in the Borrowing Base 104
  SECTION 4.3 Conditions Precedent to the Initial Extension of Credit for Revenue Participations and for Inclusion of Credit in the Borrowing Base 108
  SECTION 4.4 Conditions Precedent to the Initial Loan or Letter of Credit and Each Subsequent Extension of Credit 109
5. AFFIRMATIVE COVENANTS 110
  SECTION 5.1 Financial Statements and Reports 110
  SECTION 5.2 Corporate Existence; Compliance with Laws 115
  SECTION 5.3 Maintenance of Properties 115
  SECTION 5.4 Notice of Material Events 115
  SECTION 5.5 Insurance 116
  SECTION 5.6 Music 117
  SECTION 5.7 Copyrights and Trademarks 117
  SECTION 5.8 Books and Records; Examination 118
  SECTION 5.9 Third Party Audit Rights 119
  SECTION 5.10 Observance of Agreements 119
  SECTION 5.11 Laboratories; No Removal 119
  SECTION 5.12 Taxes and Charges; Indebtedness in Ordinary Course of Business 120
  SECTION 5.13 Liens 120
  SECTION 5.14 Further Assurances; Security Interests 120

ii 

 

TABLE OF CONTENTS
(continued)

Page

  SECTION 5.15 Environmental Laws 121
  SECTION 5.16 Use of Proceeds 122
  SECTION 5.17 Distribution Agreements; Letters of Credit 123
  SECTION 5.18 Subsidiaries 123
  SECTION 5.19 ERISA Compliance and Reports 124
  SECTION 5.20 Location of Bank Accounts 125
  SECTION 5.21 Licensing Intermediaries 125
  SECTION 5.22 Post-Closing Conditions 125
6. NEGATIVE COVENANTS 125
  SECTION 6.1 Limitations on Indebtedness 125
  SECTION 6.2 Limitations on Liens 127
  SECTION 6.3 Limitation on Guarantees 130
  SECTION 6.4 Limitations on Investments 130
  SECTION 6.5 Restricted Payments 131
  SECTION 6.6 Consolidation, Merger or Sale of Assets, etc 133
  SECTION 6.7 Receivables 133
  SECTION 6.8 Sale and Leaseback; Soft Dollar Transactions 134
  SECTION 6.9 Places of Business; Change of Name, Jurisdiction 134
  SECTION 6.10 Limitations on Capital Expenditures 134
  SECTION 6.11 Transactions with Affiliates 135
  SECTION 6.12 Business Activities 135
  SECTION 6.13 Fiscal Year End 135
  SECTION 6.14 Bank Accounts 135
  SECTION 6.15 ERISA 135
  SECTION 6.16 Hazardous Materials 135
  SECTION 6.17 Use of Proceeds 136
  SECTION 6.18 Swap Agreements 136
  SECTION 6.19 Amendments, Modifications and Terminations of Material Agreements 136
  SECTION 6.20 No Negative Pledge 137
  SECTION 6.21 Subsidiaries 137
  SECTION 6.22 Production Exposures (Programs) 138
  SECTION 6.23 Overhead 138
  SECTION 6.24 Pay or Play; Development 138
  SECTION 6.25 Co-Financed Items of Product 139
  SECTION 6.26 [Intentionally Omitted] 140
  SECTION 6.27 No Adverse Selection 140
  SECTION 6.28 No Election to be Treated as a Corporation 141
  SECTION 6.29 Holding Company 141

iii 

 

TABLE OF CONTENTS
(continued)

Page

7. EVENTS OF DEFAULT 142
  SECTION 7.1 Events of Default 142
8. GRANT OF SECURITY INTEREST; REMEDIES 146
  SECTION 8.1 Security Interests 146
  SECTION 8.2 Use of Collateral 146
  SECTION 8.3 Collection Accounts 147
  SECTION 8.4 Credit Parties to Hold in Trust 148
  SECTION 8.5 Collections, etc 148
  SECTION 8.6 Possession, Sale of Collateral, etc 148
  SECTION 8.7 Application of Proceeds after Event of Default 150
  SECTION 8.8 Power of Attorney 150
  SECTION 8.9 Financing Statements; Direct Payments 151
  SECTION 8.10 Termination and Release 151
  SECTION 8.11 Remedies Not Exclusive 152
  SECTION 8.12 Quiet Enjoyment 152
  SECTION 8.13 Continuation and Reinstatement 152
9. GUARANTY OF GUARANTORS 153
  SECTION 9.1 Guaranty 153
  SECTION 9.2 No Impairment of Guaranty, etc 154
  SECTION 9.3 Continuation and Reinstatement, etc 154
  SECTION 9.4 Limitation on Guaranteed Amount, etc 155
  SECTION 9.5 Keepwell 155
10. PLEDGE 156
  SECTION 10.1 Pledge 156
  SECTION 10.2 Covenant 156
  SECTION 10.3 Registration in Nominee Name; Denominations 156
  SECTION 10.4 Voting Rights; Dividends; etc 156
  SECTION 10.5 Remedies Upon Default 157
  SECTION 10.6 Application of Proceeds of Sale and Cash 159
  SECTION 10.7 Securities Act, etc 159
  SECTION 10.8 Continuation and Reinstatement 160
  SECTION 10.9 Termination 160
11. CASH COLLATERAL 160
  SECTION 11.1 Cash Collateral Accounts 160
  SECTION 11.2 Investment of Funds 161
  SECTION 11.3 Grant of Security Interest 161
  SECTION 11.4 Remedies 162

iv 

 

TABLE OF CONTENTS
(continued)

Page

12. THE ADMINISTRATIVE AGENT AND THE ISSUING BANK 162
  SECTION 12.1 Administration by the Administrative Agent 162
  SECTION 12.2 Payments 165
  SECTION 12.3 Sharing of Setoffs and Cash Collateral 165
  SECTION 12.4 Notice to the Lenders 166
  SECTION 12.5 Liability of the Administrative Agent and the Issuing Bank 166
  SECTION 12.6 Reimbursement and Indemnification 167
  SECTION 12.7 Rights of Administrative Agent 168
  SECTION 12.8 Independent Investigation by Lenders 168
  SECTION 12.9 Agreement of Required Lenders 168
  SECTION 12.10 Notice of Transfer 168
  SECTION 12.11 Successor Administrative Agent 168
  SECTION 12.12 Successor Issuing Bank 169
  SECTION 12.13 Other Agent Titles 170
  SECTION 12.14 Lender Acknowledgment 170
  SECTION 12.15 Credit Bidding 170
13. MISCELLANEOUS 172
  SECTION 13.1 Notices 172
  SECTION 13.2 Survival of Agreement, Representations and Warranties, etc 174
  SECTION 13.3 Successors and Assigns; Syndications; Loan Sales; Participations 174
  SECTION 13.4 Expenses; Documentary Taxes 179
  SECTION 13.5 Indemnity 179
  SECTION 13.6 CHOICE OF LAW 180
  SECTION 13.7 WAIVER OF JURY TRIAL 181
  SECTION 13.8 WAIVER WITH RESPECT TO DAMAGES 181
  SECTION 13.9 No Waiver 182
  SECTION 13.10 Amendments, etc 182
  SECTION 13.11 Severability 184
  SECTION 13.12 SERVICE OF PROCESS; SUBMISSION TO JURISDICTION 184
  SECTION 13.13 Headings 185
  SECTION 13.14 Execution in Counterparts 185
  SECTION 13.15 Subordination of Inter-company Indebtedness, Receivables and Advances 185
  SECTION 13.16 USA Patriot Act 186
  SECTION 13.17 Entire Agreement 186
  SECTION 13.18 Confidentiality 186
  SECTION 13.19 Platform; Materials 187
  SECTION 13.20 Intercreditor Agreement 187

v 

 

TABLE OF CONTENTS
(continued)

Page

 

  SECTION 13.21 Acknowledgment and Consent to Bail-In of EEA Financial Institutions 188
  SECTION 13.22 Effect of Amendment and Restatement of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement 188

vi 

 

SCHEDULES:

1.1 Schedule of Commitments
1.2 Immaterial Subsidiaries
1.3 Co-Financing Venture Terms and Conditions
2.16 Acceptable Obligors and Allowable Amounts
3.1 List of Jurisdictions
3.7(a) Ownership of Equity Interests of the Credit Parties
3.7(b) Ownership of Pledged Securities other than Credit Parties
3.7(c) Organizational Chart
3.8(a) Items of Product
3.8(b) Trademarks
3.8(c) Applications and Registrations Not in Full Force and Effect
3.8(d) Pictures in which any Credit Party Holds a Revenue Participation
3.9 Fictitious Names
3.11 Chief Executive Office; Location of Collateral and Records; Tax Identification Numbers
3.12 Litigation
3.16 ERISA Matters
3.17 Material Agreements
3.18 Filing Offices for Financing Statements
3.25 Subsidiaries
6.1(l) Existing Indebtedness
6.2 Existing Liens
6.11 Transactions with Affiliates
10.1 Initial Pledged Securities

vii 

 

 

EXHIBITS:

A Form of Note
B Form of Opinion of Latham & Watkins LLP, counsel to the Credit Parties
C Form of Borrowing Notice
D Form of Borrowing Base Certificate
E-1 Form of Copyright Security Agreement
E-2 Form of Copyright Security Agreement Supplement
F Form of Trademark Security Agreement
G-1 Form of Pledgeholder Agreement (Uncompleted Pictures)
G-2 Form of Pledgeholder Agreement (Completed Pictures)
H Form of Laboratory Access Letter
I-1 Form of Picture Declaration
I-2 Form of Program Declaration
I-3 Form of Digital Product Declaration
J Form of Instrument of Assumption and Joinder
K Form of Assignment and Assumption
L-1 Form of Notice of Assignment and Irrevocable Instructions
M Form of Contribution Agreement
N-1 U.S. Tax Compliance Certificate (For Foreign Lenders that are not Partnerships for U.S. Federal Income Tax Purposes)
N-2 U.S. Tax Compliance Certificate (For Foreign Participants that are Partnerships for U.S. Federal Income Tax Purposes)
N-3 U.S. Tax Compliance Certificate (For Foreign Lenders that are Partnerships for U.S. Federal Income Tax Purposes)
N-4 U.S. Tax Compliance Certificate (For Foreign Participants that are not Partnerships for U.S. Federal Income Tax Purposes)
O Form of Liquidity Certificate
P Form of Release Pattern Certificate

 

viii 

 

SECOND AMENDED AND RESTATED CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT dated as of October 7, 2016 (as amended, supplemented or otherwise modified, renewed, restated or replaced from time to time, this “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as the Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as the Parent, (iii) the GUARANTORS referred to herein, (iv) the LENDERS referred to herein and (v) JPMORGAN CHASE BANK, N.A., as Administrative Agent and as Issuing Bank.

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 requested that the Lenders make available to the Borrower a $400,000,000 five-year senior secured revolving credit facility, which shall constitute a second amendment and restatement of both the Existing Corporate Facility Agreement and the Existing Production Facility Agreement referred to herein, which revolving credit facility may be increased by up to $200,000,000 under certain circumstances in accordance with Section 2.18 (the “Facility”). The proceeds of the Facility will be used for general working capital purposes, including (i) overhead, development and payment of interest, fees, costs and expenses under the Facility, (ii) to fund the Credit Parties’ development, pre-production, production, acquisition, distribution, and prints and advertising expenses of Items of Product, (iii) to refinance (but not to novate or terminate) loans under the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, to repay outstanding loans under the Seer P&A Facility Credit Agreement in order to rebalance outstanding P&A Credits and P&A Credits as defined in the Seer P&A Credit Agreement to be in pro forma compliance with the new advance rates in effect on the Closing Date and to pay transaction costs and (iv) to make Permitted Seer P&A Payments but only to the extent of Corporate Priority Collateral Availability.

To provide assurance for the repayment of the Loans and the other Obligations, the Credit Parties have, 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, the Issuing Bank is willing to issue Letters of Credit and each Lender is willing to make Loans to the Borrower and participate in the Letters of Credit in an aggregate principal amount at any one time outstanding not in excess of its Commitment hereunder.

 1

 

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 and the plural as well as the singular, (ii) references to any agreement, instrument or other documents (including any organizational document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified, renewed or replaced (subject to any restrictions on such amendments, restatements, supplements, modifications, renewals or replacements set forth herein or in any other Fundamental Documents) and shall 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) references to an Article, Section, Exhibit or Schedule shall refer to the applicable Article or Section of, or Exhibit or Schedule to, this Credit Agreement, (v) the terms “include” and all variations thereof shall be deemed to be followed by the phrase “without limitation,” (vi) all terms defined in the UCC and not otherwise defined herein shall have the respective meanings accorded to them therein, (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. Notwithstanding anything to the contrary hereunder, the Credit Parties shall not be required to deliver financial statements in conformity with GAAP prior to the first delivery of the financial statements pursuant to Section 5.1.

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 an irrevocable standby letter of credit which: (i) is in form and on terms reasonably acceptable to the Administrative Agent, (ii) is payable in Dollars at an office of the issuing or confirming bank in New York City or Los Angeles or another city in the United States of America which is acceptable to the Administrative Agent in its sole discretion, and which, unless otherwise agreed to by the Administrative Agent, names the Administrative Agent as beneficiary and the original of which has been delivered to the Administrative Agent, and (iii) is issued or confirmed by any Person that on the date of issuance or confirmation of the letter of credit is (a) a Lender that is not a Defaulting Lender, (b) a commercial bank or domestic branch of a foreign commercial bank that is not a Lender and 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 by S&P or at least A-2 by Moody’s, or capital and surplus in excess of $2,000,000,000, or (c) any other bank which the Administrative Agent may in its sole discretion determine to be of acceptable credit quality.

 2

 

“Acceptable Obligor” shall mean any Approved Tier 1 Account Debtor, Approved Tier 2 Account Debtor, Approved Tier 3 Account Debtor and Approved Tier 4 Account Debtor.

“Account Control Agreement” shall mean an account control agreement among the applicable Credit Party, the Administrative Agent and the applicable depository bank, which agreement shall be in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time.

“Administrative Agent” shall 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.

“Affiliated Group” shall mean a group of Persons, each of which is an Affiliate (other than by reason of having common directors or officers) of some other Person in the group.

“Agent Party” shall have the meaning assigned to such term in Section 13.1(d)(ii).

“Allocated Overhead Costs” shall mean the fully-absorbed costs for overhead and certain services (such as sales, human resources, accounting, legal and treasury functions) furnished to or on behalf of the Borrower and the other Credit Parties by Parent to the extent directly attributable to costs or services for the Borrower or the other Credit Parties; provided that Allocated Overhead Costs (x) may not be billed more frequently than monthly, and (y) may not include any mark-up.

 

“Allowable Amount” shall mean, with respect to any Acceptable Obligor, such amount as may be specified on Schedule 2.16 as the maximum aggregate exposure with respect to Eligible Receivables for such Acceptable Obligor (as modified from time to time in accordance with Section 2.16).

“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 NYFRB 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%; provided that, LIBOR for any day shall be based on the LIBO Screen Rate at approximately 11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or LIBOR shall be effective from and including the effective date of such change in the Prime Rate, NYFRB Rate or LIBOR, respectively.

 3

 

“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.

“Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to the Person in question from time to time concerning or relating to bribery or corruption.

“Applicable Law” shall mean all provisions of statutes, rules, regulations and orders of any Governmental Authority applicable to the Person in question, and all orders and decrees of all courts, tribunals 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, 2.00% per annum, and (ii) in the case of LIBOR Loans, 3.00% per annum.

“Approval Certificate” shall have the meaning given to such term in the definition of “Tax Incentive Receivable”.

“Approved Co-Financier” shall mean (i) a Major Studio, (ii) Shanghai Media Group (including Great Mission International Limited and Marco Alliance Limited (each, a “Hony Investor”)) and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Administrative Agent, (iii) Odd Lot Entertainment, LLC and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Administrative Agent, (iv) Metro-Goldwyn-Mayer Inc. and its Affiliates, and (v) any other Person acceptable (with respect to such Person’s identity and creditworthiness, with consideration to be given to any credit enhancement being offered by or on behalf of such Person) to the Administrative Agent.

“Approved Co-Financing Venture Counterparty” shall mean any Approved Co-Financier.

“Approved Co-Financing Venture Transaction” shall mean a co-financing venture transaction with respect to an Item of Product between a Credit Party and an Approved Co-Financing Venture Counterparty that (i) satisfies all of the terms and conditions set forth on Schedule 1.3 hereto or (ii) is otherwise approved by the Administrative Agent, provided that each transaction approved under this clause (ii) must satisfy the terms and conditions set forth in paragraphs 1, 2, 3, 4 and 9 set forth on Schedule 1.3 as well as the first sentence of paragraph 10 of such Schedule 1.3.

“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) as beneficiary thereof to the extent of the applicable Credit Party’s financial interest in such Picture, and (ii) guarantees, subject to standard terms and conditions, due and timely delivery of such Picture by a date no later than one year after the Maturity Date, or else payment to the Administrative Agent (on behalf of the Secured Parties) of an amount at least

 4

 

equal to the aggregate amount expended on the production of such Picture by, or for the account of such Credit Parties, plus interest on, and other bank charges with respect to, such amounts (other than amounts expended by the Approved Completion Guarantor and any Approved Co-Financiers who are also beneficiaries of the Approved Completion Bond).

“Approved Completion Guarantor” shall mean with respect to a Picture, (i) any Major Studio with regard to any Co-Financed Picture for which such Major Studio has agreed to cash flow its share of production costs, and (ii) a financially sound and reputable completion guarantor approved by the Administrative Agent (it being understood that the Administrative Agent hereby pre-approves Film Finances, Inc. (“FFI”); provided however, that such pre-approval is conditioned upon the receipt and approval by the Administrative Agent of (a) FFI’s current insurance support package for each 12-month period commencing in April of each year and (b) 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. Such pre-approval under clause (ii) may be revoked by the Administrative Agent by written notice to the Borrower on a prospective basis with respect to Pictures for which an Approved Completion Bond (or written commitment therefor) has not yet been fully executed.

“Approved Domestic Distributor” shall mean (A) with respect to Pictures, (i) the Borrower, (ii) a Major Studio, and (iii) any other Person acceptable (with respect to such Person’s identity and creditworthiness) to the Administrative Agent (on a Picture by Picture basis) so long as the Administrative Agent has not received an objection from the Required Lenders upon five (5) days’ written notice of such potential approval, (B) with respect to Programs, a U.S. broadcast network (i.e., ABC, CBS, NBC, CW or Fox), major cable television network (e.g., TBS, Lifetime, A&E, FX, Comedy Central, HBO, Starz, VH1, CMT, TNT, TBS or MTV), Netflix, Hulu, Amazon, or such other network or internet distributor as may be acceptable (on a Program by Program basis) to the Administrative Agent with respect to such Program so long as the Administrative Agent has not received an objection from the Required Lenders upon five (5) days’ written notice of such potential approval , and (C) with respect to Digital Product, YouTube, Netflix, Hulu, Amazon, or such other internet distributor as may be acceptable to the Administrative Agent (on a Digital Product by Digital Product basis and so long as the Administrative Agent has not received an objection from the Required Lenders upon five (5) days’ written notice of such potential approval).

“Approved Foreign Sales Agent” shall mean (A) in the case of Pictures (i) Good Universe, Summit Entertainment/Lions Gate Entertainment, FilmNation, Mister Smith, Sierra/Affinity LLC, eOne, any Major Studio, (ii) the Borrower, and (iii) any other foreign sales agent approved by the Required Lenders and (B) in the case of Programs, (i) the Borrower and (ii) any other foreign sales agent approved by the Administrative Agent so long as the Administrative Agent has not received an objection from the Required Lenders upon five (5) Business Days’ written notice of such potential approval. Any foreign sales agent pre-approved under clauses (A)(i), (A)(ii) or (B)(i) above or approved pursuant to clauses (A)(iii) or (B)(ii) above may be removed by the Administrative Agent or the Required Lenders by written notice to the Borrower on a prospective basis with respect to territories for Items of Product for which such foreign sales agent has not yet been engaged.

 5

 

“Approved P&A Budget” shall mean, for each Qualifying Picture, the budget to be contributed by all Persons towards P&A Expenses for the theatrical distribution of such Picture in the Domestic Territory, which shall be in an amount of not less than the greater of (i) the contractually required minimum P&A budget for such Picture in the Domestic Territory as set forth in any applicable pre-sale agreement(s) and (ii) the minimum P&A budget necessary to satisfy the applicable theatrical release requirement in the Domestic Territory set forth in any such pre-sale agreements, as determined by the Borrower using its reasonable business judgment.

“Approved Tier 1 Account Debtor” shall mean any Person or Affiliated Group identified as such on Schedule 2.16 (as modified from time to time in accordance with Section 2.16).

“Approved Tier 2 Account Debtor” shall mean any Person or Affiliated Group identified as such on Schedule 2.16 (as modified from time to time in accordance with Section 2.16).

“Approved Tier 3 Account Debtor” shall mean any Person or Affiliated Group identified as such on Schedule 2.16 (as modified from time to time in accordance with Section 2.16).

“Approved Tier 4 Account Debtor” shall mean any Person or Affiliated Group identified as such on Schedule 2.16 (as modified from time to time in accordance with Section 2.16).

“Arrangers” shall mean JPMorgan Chase Bank, N.A., Merril Lynch, Pierce, Fenner & Smith Incorporated, CIT Bank, N.A., East West Bank and MUFG Union Bank, N.A., in their capacity as co-lead arrangers in connection with the Facility], or any successor thereof.

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

“Authorized Officer” shall mean, with respect to any Person, its Chairman, Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer or General Counsel, in each case which have signing authority on behalf of such Person.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

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

 6

 

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

“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 funding for such Picture under the Facility commences, which final budget includes (i) all Direct Negative Costs in respect of such Picture, (ii) any contingency required by the applicable Approved Completion Guarantor, (iii) a completion bond fee payable to an Approved Completion Guarantor in respect of an Approved Completion Bond and (iv) interest anticipated to accrue on amounts borrowed under the Facility to cash flow items (i), (ii) and (iii) above through the outside delivery date for such Picture (giving effect to all applicable arbitration and cure periods) at a rate per annum equal to LIBOR plus the Applicable Margin for LIBOR Loans.

“Bookrunner” shall mean JPMorgan Chase Bank, N.A., in its capacity as sole bookrunner in connection with the Facility, or any successor thereof.

“Borrower” shall mean STX Financing, LLC, a Delaware limited liability company.

“Borrower LLC Agreement” shall mean the Limited Liability Company Agreement of STX Financing, LLC, dated as of February 12, 2014.

“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 Base” shall mean, at any date for which the amount thereof is to be determined, an amount equal to the aggregate (without double counting) of the following:

(i)              the P&A Advance Rate multiplied by the Credit Parties’ share of each Qualifying Picture’s Approved P&A Budget (to be reduced to zero on the Seasoning Date of such Picture) (the “P&A Credit”); provided that (A) the Borrowing Base credit under this clause (i) shall be capped at $30,000,000 for each Qualifying Picture and (B) the aggregate amount of P&A Credits in the Borrowing Base may not exceed $95,000,000 at any point in time, plus

(ii)            the Ultimates Advance Rate multiplied by Remaining Ultimates, plus

(iii)          the Unlicensed Free TV Ultimates Advance Rate multiplied by Unlicensed Free TV Ultimates; provided that aggregate the Borrowing Base credit under this clause (iii) shall be capped at $20,000,000, plus

(iv)          (a) 100% of Eligible Receivables that are secured by an Acceptable L/C and (b) 100% (or such lower advance rate as shall be determined by the Administrative Agent in its reasonable discretion) of Eligible Receivables that are

 7

 

secured to the satisfaction of the Administrative Agent, and amounts owing to the Credit Parties in the Tang Escrow Account or the Huayi Escrow Account for which the Administrative Agent may make a draw request if the Borrower fails to do so, plus

(v)            100% of Eligible Receivables from Approved Tier 1 Account Debtors, plus

(vi)          90% of Eligible Receivables from Approved Tier 2 Account Debtors, plus

(vii)        80% of Eligible Receivables from Approved Tier 3 Account Debtors, plus

(viii)      50% of Eligible Receivables from Approved Tier 4 Account Debtors, plus

(ix)          50% of Eligible Receivables from other obligors not specified on Schedule 2.16 hereof; provided, that the aggregate amount of Borrowing Base credit under this clause (ix) shall at no time exceed (A) $500,000 for any single obligor or Affiliated Group or (B) $15,000,000 at any point in time, plus

(x)            90% of Tax Incentive Receivables for which all requirements of the definition thereof are satisfied and (B) 50% (or such higher advance rate as may be agreed by the Administrative Agent after consultation with the Lenders on a case-by-case basis) of other Eligible Receivables from sales of tax incentives or tax rebates from account debtors (other than Approved Tier 1 Account Debtors, Approved Tier 2 Account Debtors, Approved Tier 3 Account Debtors or Approved Tier 4 Account Debtors (for whom Eligible Receivables from sales of tax incentives or tax rebates would receive the relevant advance rates set forth in clauses (v)-(vii) above)) acceptable to the Administrative Agent (and subject to any concentration limits imposed by the Administrative Agent) after consultation with the Lenders, plus

(xi)          the Unsold Rights Credit for each applicable Qualifying Picture; provided, that (a) the Borrowing Base credit for any Qualifying Picture under this clause (xi) shall at no time exceed the lesser of (1) 25% of the negative cost of such Qualifying Picture (without reference to any overhead fees) and (2) $8,500,000, (b) the aggregate amount of Borrowing Base credit under this clause (xi) shall at no time exceed 25% of the total Borrowing Base, and (c) the Borrowing Base credit for any Qualifying Picture under this clause (vii) shall be reduced to zero upon the earlier of (x) eighteen (18) months following its initial inclusion in the Borrowing Base and (y) one hundred twenty (120) days following the Completion of such Qualifying Picture, plus

(xii)        the Unsold TV Rights Credit for each applicable Program; provided, that (a) the Borrowing Base credit for any Program under this clause (xii) shall at no time exceed the lesser of (1) 20% of the negative cost of such Program (without reference to any overhead fees) and (2) $10,000,000, (b) the aggregate amount of Borrowing Base credit under this clause (xii) shall at no time exceed 15% of the total

 8

 

Borrowing Base, (c) the aggregate amount of Borrowing Base credit under this clause (xii) and clause (xi) above shall at no time exceed 25% of the total Borrowing Base and (d) the Borrowing Base credit for any Program under this clause (xii) shall be reduced to zero (x) upon the earlier of (i) twelve (12) months after the initially scheduled first airing in the United States of the first episode of the applicable season of such Program and (ii) nine (9) months following Completion of such Program (which for the avoidance of doubt shall treat all the episodes of a series for a relevant season as a single Program), and (y) with regard to any specific territory, the sale of that territory with respect to such Program.

(xiii)      the aggregate amount of cash of the Credit Parties held in (A) blocked deposit accounts maintained at a Lender (pursuant to Account Control Agreements in favor of, and in form and substance satisfactory to, the Administrative Agent) or (B) blocked Cash Collateral Accounts, minus

(xiv)       the sum of the Reserves;

provided, however:

(a)             Borrowing Base credit under the foregoing clauses (i) and (xi) shall only be available for Qualifying Pictures and Borrowing Base credit under the foregoing clause (i) shall not be available for Revenue Participations (although P&A Credits may be taken for P&A Distribution Pictures as defined in clause (m) of this proviso in accordance with such clause (m)).

(b)            Borrowing Base credit under the foregoing clauses (ii) and (iii) shall only be available for Pictures which are released theatrically.

(c)             All of the foregoing amounts are without duplication of any deductions contained within any of the components of the Borrowing Base and the amount of credit provided under any component of the Borrowing Base shall be reduced, prior to (except in the case of Borrowing Base credit under clauses (i), (xi) and (xii)) application of the applicable advance rate, dollar-for-dollar by any payments which a Credit Party is required to pay to any third party in respect of such receivable or credit (e.g., royalties, residuals, fees, commissions) and any other projected expenses of the Credit Parties arising in connection with such amounts (and including any amounts payable to the Seer P&A Facility Agent or any lender under the Seer P&A Facility Credit Agreement directly in connection with such anticipated proceeds (including for the avoidance of doubt, the mandatory principal prepayments and Profit Participation Fees (as defined in the Seer P&A Facility Credit Agreement and any other required application of such proceeds pursuant to the Senior Intercreditor Agreement);

(d)            The portion of the Borrowing Base attributable at any time to each Uncompleted Picture shall not exceed the portion of the negative cost or purchase price of such Picture (other than that provided by the Approved Completion Guarantor) which would be refunded to the Administrative Agent (for itself or on behalf of the Credit Parties) by the Approved Completion Guarantor or the Approved Domestic Distributor (excluding the Borrower for this purpose) and applied in accordance with the terms hereof if the Picture was

 9

 

then abandoned. The Borrowing Base attributable at any time to each Uncompleted Program shall not exceed the Credit Parties’ budgeted cost thereof.

(e)             No Borrowing Base credit may be taken with respect to Remaining Ultimates for any Picture if the Administrative Agent has not received with respect thereto the related ultimates information as and when required under Section 5.1(k), and the Borrower must remove any Remaining Ultimates attributable to a Picture if the most recent underlying written ultimate report of the Ultimates Provider that has been delivered to the Administrative Agent was computed as of a date more than six months prior to the relevant date of determination.

(f)             No P&A Credit for a particular Picture shall be available unless (i) a P&A Reserve has been established with respect thereto, and (ii) the Borrower has provided a certification to the Administrative Agent in substantially the form attached hereto as Exhibit P as to the broad release pattern contemplated for such Picture. The P&A Credit for a Picture will be reduced on a dollar-for-dollar basis as receipts from exploitation in the Domestic Territory are received by the Credit Parties with regard to the relevant Picture.

(g)            The P&A Credit for any Picture shall be reduced to zero upon the earlier of (i) the Seasoning Date of such Picture and (ii) the date that is six months from the date on which the P&A Credit for such Picture was first included in the Borrowing Base if such Picture has not been theatrically released in the Domestic Territory by such date.

(h)            The P&A Credit shall not be available for any new Pictures if the Five Picture Rolling P&A Coverage Ratio has been determined to be less than 100% (other than for new Pictures for which P&A Credits had not previously been taken by the relevant date of determination but that are scheduled to be released theatrically domestically within six months of such determination date, for which the P&A Credit shall be available but at a 50% advance rate) until (if ever) the Five Picture Rolling P&A Coverage Ratio for five new Pictures (i.e. Pictures that were not included in any computation of the Five Picture Rolling P&A Coverage Ratio that yielded a percentage of less than 100%) exceeds 125%.

(i)              To the extent any receivable included in the Borrowing Base is conditioned upon a general theatrical release of a Picture in the Domestic Territory, (i) (x) the Borrower shall self-release such Picture in the Domestic Territory or a Distribution Agreement for the Domestic Territory with another Approved Domestic Distributor shall have been entered into with respect to such Picture and (y) if applicable, such Picture shall meet, or be expected in good faith to meet, the requirements for distribution under the relevant Distribution Agreement for the Domestic Territory, or (ii) another Approved Domestic Distributor has committed to release such Picture in the Domestic Territory. A receivable under a contract requiring that a Picture be released theatrically in the Domestic Territory with minimum P&A Expenses may be included in the Borrowing Base only if: (i) the Borrower has established the P&A Reserve, and the Administrative Agent shall have received satisfactory evidence of establishment of such P&A Reserve; (ii) at all times prior to the general theatrical release date of such Picture in the Domestic Territory, (x) the receivable meets all of the other requirements of an Eligible Receivable and (y) the Borrower (if self-distributing) or other Approved Domestic Distributor (or, if it has the ability to instruct such Approved Domestic Distributor to do so, the Borrower (with respect to such other Approved Domestic Distributor’s distribution)) has committed to a

 10

 

release pattern that meets any such minimum requirements; and (iii) at all times thereafter, the general theatrical release of such Picture in the Domestic Territory actually satisfies such minimum requirements. In addition, any Approved Completion Bond relating to such Picture shall guarantee the delivery of any items which are a condition to such general theatrical release in the Domestic Territory under such Distribution Agreement (if applicable) and under any other Distribution Agreement for which Borrowing Base credit is requested. In addition, no receivable may be included in the Borrowing Base to the extent that it is conditioned upon a release in the Domestic Territory requiring any specific number of screens unless the Picture to which such receivable relates is being distributed in the Domestic Territory either (a) by a Major Studio or other Approved Domestic Distributor who has committed in the applicable Distribution Agreement or otherwise in a binding agreement to achieve a screen release sufficient to satisfy the relevant screen release condition or (b) by the Borrower, provided, that the Borrower shall have delivered to the Administrative Agent an officer’s certificate certifying that it shall achieve a screen release in the Domestic Territory sufficient to satisfy the relevant screen release condition.

(j)              No Unsold Rights Credit or Unsold TV Rights Credit shall be given with respect to any Item of Product unless the Administrative Agent shall have received the Major Territory Value Forecasts prepared by an Approved Foreign Sales Agent within the preceding six (6) months as to each of the unsold Major Territories for the applicable Item of Product (it being understood that a Major Territory Value Forecast may be zero for a particular Major Territory). No Unsold Rights Credit or Unsold TV Rights Credit shall be given with respect to Revenue Participations.

(k)            The Administrative Agent after consultation with the Borrower is authorized to remove all Borrowing Base credit with respect to a Tax Incentive Receivable in the event that, in the good faith determination of the Administrative Agent, the Credit Parties, Co-Financing Venture Entity or Major Studio (in the case of a Revenue Participation) (as applicable) have not caused the production or post-production of the applicable Picture to comply in all respects with the relevant statutory requirements giving rise thereto or have not timely filed any and all forms with any governmental, administrative or regulatory body in order to claim the applicable Tax Incentive Receivable or have otherwise not timely complied with any of the other commitments or agreements contained within the definition of “Tax Incentive Receivable” (without the application of any grace or cure period).

(l)              The Credit Parties shall be in compliance with Section 4.2 or Section 4.3, as applicable, with respect to an Item of Product prior to receiving the initial Borrowing Base credit for such Item of Product.

(m)           The Credit Parties may access P&A Credits for Pictures which constitute rent-a-system Pictures for which the Credit Parties are fronting print and advertising expenses for a third-party producer (such Picture, a “P&A Risk Distribution Picture”), under the following parameters: (i) any such Picture constitutes a Qualifying Picture; (ii) the Credit Parties shall be entitled to a domestic distribution fee of not less than ten percent (10%); and (iii) P&A Credits may only be accessed under this construct for up to two P&A Risk Distribution Pictures to be theatrically released in any calendar year, unless (for any additional P&A Risk Distribution Picture(s) beyond two per calendar year) the Borrower shall have made

 11

 

the request to the Administrative Agent and the Lenders constituting Required Lenders have not objected to the request during a ten (10) Business Day notice period. In the case of rent-a-system Pictures for which the Credit Parties are not advancing print & advertising expenses, no P&A Credits shall be available.

(n)            Credit may not be obtained for any item in the Borrowing Base except to the extent that the Administrative Agent holds a perfected security interest therein, with the priority contemplated by Section 3.18 or such greater standard required under the definitions of “Tax Incentive Receivable”, “Eligible Receivables” and “Remaining Ultimates”.

(o)            In computing the maximum amount of the credits allowable pursuant to any component(s) of the Borrowing Base which contains a limitation that such component(s) individually or collectively may not exceed a stated percentage of the Borrowing Base, a stated percentage of the Total Commitments, or a dollar amount certain, such computation shall be made prior to making any deductions from the Borrowing Base for Production/Acquisition Cost Reserves and/or P&A Reserves.

(p)            Borrowing Base credit attributable to Tax Incentive Receivables and Eligible Receivables which are denominated in a non-U.S. Dollar currency but are not hedged in a manner satisfactory to the Administrative Agent shall not exceed $5,000,000 in the aggregate at any time outstanding.

“Borrowing Base Certificate” shall mean a borrowing base certificate, substantially in the form of Exhibit D, executed by an Authorized Officer of the Borrower and delivered to the Administrative Agent as required hereunder.

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

“Budgeted Negative Cost” shall mean, for any Item of Product, the aggregate amount of the development and pre-production expenses of such Item of Product plus the cost of all production elements usually and customarily included as part of the negative cost of an Item of Product of like cost and quality plus the usual and customary post-production costs of such Item of Product and all other delivery items, and shall specifically include charges for any completion guaranty fee which is to be paid (or, in the case of passive co-financings, including Revenue Participations, and Items of Product that are acquired rather than produced by a Credit Party, the acquisition price or co-financing or equity contribution to be paid by such Credit Party for such Item of Product pursuant to the applicable negative pick-up documentation or co-financing documentation), all as reflected in the budget referenced in the applicable Item of Product Declaration (or, in the case of an Item of Product with an Approved Completion Bond, approved in writing by the relevant Approved Completion Guarantor). In the case of an Item of Product for which an Approved Completion Bond has been delivered, the Budgeted Negative Cost shall mean the Bonded Budget of such Picture.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on which banks are required or permitted to close in the State of New York or the State of

 12

 

California; provided, however, that when used in connection with a LIBOR Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits on the London Interbank Market.

“Business Plan” shall mean each annual business plan of the Borrower and its Subsidiaries, substantially in the form of the business plan delivered to the Administrative Agent on June 8, 2016.

“Capex Cap” shall have the meaning given to such term in Section 6.10.

“Capex Carry-Over Amount” shall have the meaning given to such term in Section 6.10.

“Capital Expenditures” shall mean, with respect to any Person for any period, the sum of (i) the aggregate of all expenditures, whether paid in cash or accrued as a liability, by such Person during that period which, in accordance with GAAP, are or should be included in “additions to property, plant or equipment” or similar items included in the statement of cash flows (including Capital Leases), and (ii) to the extent not covered by clause (i) hereof, the aggregate of all expenditures properly capitalized in accordance with GAAP by such Person to acquire, by purchase or otherwise, the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, in part or in whole, any other Person (other than the portion of such expenditures allocable in accordance with GAAP to net current assets or which is allocable to the production or acquisition of Items of Product). For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds actually received shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time, or the amount of such proceeds, as the case may be.

“Capital Lease” shall mean, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of such Person, and the amount of obligations in respect of a Capital Lease shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Collateral Account” shall have the meaning given to such term in Section 11.1.

“Cash Equivalents” shall mean: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one (1) year from the date of acquisition thereof, (ii) investments in commercial paper maturing within two hundred seventy (270) days from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A-1 from S&P or Prime-1 from Moody’s, (iii) investments in certificates of deposit, banker’s acceptances and time deposits maturing within one hundred eighty (180) days from the date of acquisition thereof issued or guaranteed by or placed with, and money

 13

 

market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $2,000,000,000 or that is a Lender, (iv) fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above, and (v) money market funds that (a) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (b) are rated AAA by S&P or Aaa by Moody’s, and (c) have portfolio assets of at least $5,000,000,000.

“CFC” shall mean a Subsidiary that is a “controlled foreign corporation” as defined in Section 957(a) of the Code or any successor provision thereto; provided, that a Subsidiary shall not constitute a CFC under this Facility unless, at the relevant date of determination, there is a reasonable expectation of substantial earnings and profits in the United States of America, tax on which may be deferred.

“Chain of Title Documents” shall have the meaning given to such term in Section 4.2(d).

“Change in Control” shall mean (i) the Permitted Holders shall cease to directly own the Equity Interests issued by the Parent in an amount sufficient to entitle the Permitted Holders to a majority of the distributions payable to holders of any Equity Interests of the Parent upon the liquidation, dissolution or sale of the Parent, (ii) the Permitted Holders shall cease to have voting control of the Parent, (iii) the Parent shall cease to directly own 100% of the Equity Interests issued by the Borrower or shall cease to have voting control of the Borrower, or (iv) except as otherwise permitted pursuant to the terms hereof, the Borrower (or, if applicable, any Guarantor) shall cease to own 100% of the Equity Interests issued by any Guarantor to the Borrower (or, if applicable, to any Guarantor) or shall cease to have voting control of any Guarantor.

“Change in Law” shall mean the occurrence after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes a party to this Credit Agreement) of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.10(b), by any lending office of such Lender or by such Lender's or the Issuing Bank's holding company, if any) with any request, guideline, requirement or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Closing Date; provided, that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

 14

 

“Change in Management” shall mean (i) either (a) Robert Simonds or (b) two out of three of Noah Fogelson, Thomas McGrath and Adam Fogelson, shall cease for any reason (including, without limitation, termination of employment, death or disability) to perform the functions and services currently being performed by him or them, as applicable and (ii) the Borrower shall have failed to appoint a replacement or replacements (as applicable) reasonably acceptable to the Administrative Agent and the Required Lenders within 90 days of such discontinuance.

“Closing Date” shall mean the date on which all of the conditions precedent set forth in Section 4.1 have been satisfied or waived.

“Code” shall mean the Internal Revenue Code of 1986, as now and hereafter in effect, as codified at 26 U.S.C. § 1 et seq.

“Co-Financed Item of Product” shall mean any Item of Product (a) a portion of the negative cost or acquisition cost of which, shall be co-financed by an Approved Co-Financier (i) by funding such portion of the negative cost as incurred during the production period thereof, (ii) by paying such portion upon Completion of such Item of Product, or (iii) in a manner otherwise acceptable to the Administrative Agent, in each case pursuant to a Co-Financing Agreement, and which co-financing shall, in any case, satisfy the conditions set forth in Section 6.25 or (b) which satisfies the requirements for an Approved Co-Financing Venture Transaction.

“Co-Financing Agreement” shall mean an agreement between a Credit Party and an Approved Co-Financier relating to the co-financing arrangements in respect of a Co-Financed Item of Product permitted hereunder and which is in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time in accordance with the terms hereof and thereof. A co-financing transaction which contains economic terms no less favorable to the Credit Parties than those described in the Strategic Collaboration Agreement dated as of the Closing Date, by and between STX Financing, LLC and Odd Lot Entertainment, LLC or an Affiliate thereof is hereby pre-approved for purposes of this definition. For the avoidance of doubt, Co-Financing Agreement shall not include a Co-Financing Venture Agreement.

“Co-Financing Intercreditor Agreement” shall mean an intercreditor agreement among (i) the Administrative Agent, the Seer P&A Facility Agent and Subordinated Agent, (ii) each applicable Credit Party, (iii) the applicable Approved Co-Financier (and, if applicable, its lender), (iv) if appropriate, the applicable Approved Completion Guarantor, and (v) such other Person(s) as the Administrative Agent may deem appropriate (as amended, supplemented or otherwise modified, renewed, restated or replaced from time to time in accordance with the terms hereof and thereof) governing, among other things, the terms of the co-financing arrangements with respect to the applicable Co-Financed Item of Product, which such agreement shall be in form and substance reasonably satisfactory to the Administrative Agent and in any case shall comply with the provisions set forth in Section 6.25.

“Co-Financing Venture Agreement” shall mean an agreement between a Credit Party and an Approved Co-Financing Venture Counterparty relating to an Approved Co-Financing Venture Transaction, in form and substance reasonably satisfactory to the

 15

 

Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time in accordance with the terms hereof and thereof.

“Co-Financing Venture Entity” shall mean a special purpose, joint venture entity, created to produce, acquire, own or control any right, title or interest in and to an Item of Product pursuant to an Approved Co-Financing Venture Transaction, and 100% of the Equity Interests of which are owned by a Credit Party and by an Approved Co-Financing Venture Counterparty pro rata in proportion to their respective beneficial ownership interests in the relevant Item of Product and the Direct Negative Cost thereof.

“Co-Financing Venture Interparty Agreement” shall mean, in respect of any Co-Financing Venture Item of Product, an interparty agreement among the Administrative Agent, the applicable Credit Party, the applicable Approved Co-Financing Venture Counterparty and, if applicable, its lenders (or appropriate representatives on their behalf) and any other applicable parties, in form and substance reasonably satisfactory to the Administrative Agent (as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time in accordance with the terms hereof and thereof) and governing, among other things, the terms of the applicable Approved Co-Financing Venture Transaction as between the Credit Parties and the Administrative Agent on the one hand, and the applicable Approved Co-Financing Venture Counterparty and its lenders (or such representatives) on the other hand, consistent, as to intercreditor matters, with the terms and conditions set forth on Schedule 1.3 hereto.

“Co-Financing Venture Item of Product” shall mean an Item of Product produced or acquired through an Approved Co-Financing Venture Transaction.

“Collateral” shall mean, with respect to each Credit Party, all of such Credit Party’s right, title and interest in and to all personal and real property, tangible and intangible, wherever located or situated and whether now owned, currently existing or hereafter acquired or created, including, but not limited to, all goods, accounts, instruments, intercompany obligations, partnership and joint venture interests, contract rights, documents, chattel paper, general intangibles, goodwill, equipment, fixtures, machinery, inventory, investment property, copyrights, patents, trademarks, trade names, insurance policies (including any key man policies), insurance proceeds, cash, deposit accounts, securities accounts, letter of credit rights, the Pledged Securities and other securities, all amounts on deposit in any Collection Account, any Cash Collateral Account or in any other deposit account and any proceeds of any thereof, products of any thereof or income from any thereof, further including, but not limited to, all of such Credit Party’s right, title and interest in and to each and every Item of Product, all of the properties thereof, tangible and intangible, and all domestic and foreign copyrights and all other rights therein and thereto, of every kind and character, whether now in existence or hereafter to be made or produced, and whether or not in the possession of such Credit Party, including with respect to each and every Item of Product and without limiting the foregoing language, each and all of the following particular rights and properties (in each case to the extent they are now owned, currently existing or hereafter acquired or created by such Credit Party):

(i)              all scenarios, screenplays, teleplays and/or scripts at every stage thereof;

 16

 

(ii)            all common law and/or statutory copyright and other rights in all literary and other properties (hereinafter called “said literary properties”) which form the basis of such Item of Product and/or which are or will be incorporated into such Item of Product, all component parts of such Item of Product consisting of said literary properties, all motion picture, television program or other rights (including digital rights) in and to the story, all treatments of said story and said literary properties, together with all preliminary and final screenplays used and to be used in connection with such Item of Product, and all other literary material upon which such Item of Product is based or from which it is adapted;

(iii)          all rights for all media in and to all music and musical compositions used and to be used in such Item of Product, if any, including, each without limitation, all rights to record, re-record, produce, reproduce or synchronize all of said music and musical compositions, including, without limitation, reuse fees, royalties and all other amounts payable with respect to said music and musical compositions;

(iv)          all tangible personal property relating to such Item of Product, including, without limitation, all exposed film, developed film, positives, negatives, prints, positive prints, answer prints, magnetic tapes and other digital or electronic storage media, special effects, preparing materials (including interpositives, duplicate negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and matrices, and all other forms of pre-print elements), sound tracks, cutouts, trims and any and all other physical properties of every kind and nature relating to such Item of Product whether in completed form or in some state of completion, and all masters, duplicates, drafts, versions, variations and copies of each thereof, in all formats whether on film, videotape, disk or other optical or electronic media or otherwise and all music sheets and promotional materials relating to such Item of Product (collectively, the “Physical Materials”);

(v)            all collateral, allied, subsidiary and merchandising rights appurtenant or related to such Item of Product including, without limitation, the following rights: all rights to produce remakes, spin-offs, sequels or prequels to such Item of Product based upon such Item of Product, said literary properties or the theme of such Item of Product and/or the text or any part of said literary properties; all rights throughout the world to broadcast, transmit and/or reproduce by means of television (including commercially sponsored, sustaining and subscription or “pay” television) or by streaming video or by other means over the internet or any other open or closed physical or wireless network or by any process analogous to any of the foregoing, now known or hereafter devised, such Item of Product or any remake, spin-off, sequel or prequel to such Item of Product; all rights to produce primarily for television or digital exploitation or similar use, a motion picture or series of motion pictures, or other Item of Product by use of film or any other recording device or medium now known or hereafter devised, based upon such Item of Product, said literary properties or any part thereof, including, without limitation, based upon any script, scenario or the like used in such Item of Product; all merchandising rights including, without limitation, all rights to use, exploit and license others to use and exploit any and all commercial tie-ups of any kind arising out of or

 17

 

connected with said literary properties, such Item of Product, the title or titles of such Item of Product, the characters of such Item of Product and/or said literary properties and/or the names or characteristics of said characters and including further, without limitation, any and all commercial exploitation in connection with or related to such Item of Product, any remake, spin-off, sequel or prequel thereof and/or said literary properties;

(vi)          all copyrights, domestic and foreign, obtained or to be obtained on such Item of Product, together with any and all copyrights obtained or to be obtained in connection with such Item of Product or any underlying or component elements of such Item of Product, including, in each case without limitation, all copyrights on the property described in subparagraphs (i) through (v) inclusive, of this definition, together with the right to copyright (and all rights to renew or extend such copyrights, if applicable) and the right to sue in the name of such Credit Party for past, present and future infringements of copyright;

(vii)        all insurance policies and completion bonds connected with such Item of Product and all proceeds which may be derived therefrom;

(viii)      all rights to distribute, sell, rent, license the exhibition of and otherwise exploit and turn to account such Item of Product in all media (whether now known or hereafter developed), the Physical Materials, the motion picture, television program or other rights in and to the story and/or other literary material upon which such Item of Product is based or from which it is adapted, and the music and musical compositions used or to be used in such Item of Product;

(ix)          any and all sums, claims, proceeds, money, products, profits or increases, including money profits or increases (as those terms are used in the UCC or otherwise) or other property obtained or to be obtained from the distribution, exhibition, sale or other uses or dispositions of such Item of Product or any part of such Item of Product in all media (whether now known or hereafter developed), including, without limitation, all sums, claims, proceeds, profits, products and increases, whether in money or otherwise, from a sale and leaseback or other sale, rental or licensing of such Item of Product and/or any of the elements of such Item of Product including, without limitation, from collateral, allied, subsidiary and merchandising rights, and further including, without limitation, all monies held in any Collection Account;

(x)            the dramatic, nondramatic, stage, television, radio and publishing rights, title and interest in and to such Item of Product, and the right to obtain copyrights and renewals of copyrights therein, if applicable;

(xi)          the name or title of such Item of Product and all rights of such Credit Party to the use thereof, including, without limitation, rights protected pursuant to trademark, service mark, unfair competition and/or any other applicable statutes, common law, or other rule or principle of law;

(xii)        any and all contract rights and/or chattel paper which may arise in connection with such Item of Product;

 18

 

(xiii)      all accounts and/or other rights to payment which such Credit Party currently owns or which may arise in favor of such Credit Party in the future, including, without limitation, any refund or rebate in connection with a completion bond or otherwise, any and all refunds in connection with any value added tax, all accounts and/or rights to payment due from Persons in connection with the distribution of such Item of Product, or from the exploitation of any and all of the collateral, allied, subsidiary, merchandising and other rights in connection with such Item of Product, including tax refunds and tax rebates received in connection with tax incentives;

(xiv)       any and all “general intangibles” (as that term is defined in Section 9-102(42) of the UCC) not elsewhere included in this definition, including, without limitation, any and all general intangibles consisting of any right to payment which may arise in connection with the distribution or exploitation of any of the rights set out herein, and any and all general intangible rights in favor of such Credit Party for services or other performances by any third parties, including actors, writers, directors, individual producers and/or any and all other performing or nonperforming artists in any way connected with such Item of Product, any and all general intangible rights in favor of such Credit Party relating to licenses of sound or other equipment, or licenses for any photograph or photographic or other processes, and any and all general intangibles related to the distribution or exploitation of such Item of Product including general intangibles related to or which grow out of the exhibition of such Item of Product and the exploitation of any and all other rights in such Item of Product set out in this definition;

(xv)         any and all “goods” (as defined in Section 9-102(44) of the UCC) including, without limitation, “inventory” (as defined in Section 9-102(48) of the UCC) and “equipment” (as defined in Section 9-102(33) of the UCC) which may arise in connection with the creation, production or delivery of such Item of Product, which goods are owned by such Credit Party pursuant to any production agreement or Distribution Agreement or otherwise;

(xvi)       all and each of the rights, regardless of denomination, which arise in connection with the acquisition, creation, production, completion of production, delivery, distribution, or other exploitation of such Item of Product, including, without limitation, any and all rights in favor of such Credit Party, the ownership or control of which are or may become necessary or desirable, in the reasonable opinion of the Administrative Agent, in order to complete production of such Item of Product in the event that the Administrative Agent exercises any rights it may have to take over and complete production of such Picture;

(xvii)     any and all documents issued by any pledgeholder or bailee with respect to such Item of Product or any Physical Materials (whether or not in completed form) with respect thereto;

(xviii)   any and all Production Accounts, Collection Accounts or other bank accounts established by such Credit Party with respect to such Item of Product;

 19

 

(xix)       any and all rights of such Credit Party under any Distribution Agreements relating to such Item of Product, including, without limitation, all rights to payment thereunder;

(xx)         any and all rights of such Credit Party under contracts relating to the production or acquisition of such Item of Product or otherwise, including, but not limited to, all such contracts which have been delivered to the Administrative Agent pursuant to this Credit Agreement;

(xxi)       any and all patents, patent rights, software, proprietary processes or other rights with respect to the creation or production of computer animated Item of Product; and

(xxii)     any rebates, credits, grants or other similar benefits relating to such Picture.

Notwithstanding the foregoing or any contrary provision herein or in any other Fundamental Document, “Collateral” shall not include (a) the “Permitted Key Man Policy” (as defined in the Subordination Agreement), (b) any assets of a CFC or FSHCO, (c) any contract or agreement to which a Credit Party is a party if and to the extent such contract or agreement is subject to express contractual provisions prohibiting the creation of a security interest in the right, title or interest of such Credit Party therein and such creation would, in and of itself, cause or result in a default thereunder enabling another Person party to such contract or agreement to terminate the same or enforce material remedies thereunder; except in each case to the extent that (i) such prohibition has been waived or such other Person has otherwise consented to the creation hereunder of a security interest in such contract or agreement, or (ii) such prohibition would be rendered ineffective pursuant to Section 9-406, 9-407 or 9-408 of Article 9 of the UCC, as applicable and as then in effect in any relevant jurisdiction, or any other applicable law (including the Bankruptcy Code) or principles of equity and provided further that immediately upon the ineffectiveness, lapse or termination of any such provision, such Credit Party shall be automatically deemed to have granted a security interest hereunder to the Administrative Agent (for the benefit of the Secured Parties) in, all of its rights, title and interest in and to such contract or agreement as if such provision had never been in effect, (d) any voting Equity Interests issued by a CFC or FSHCO, in each case, to any Credit Party in excess of 65% of the issued and outstanding voting Equity Interests in such CFC or FSHCO, or (e) any “intent to use” trademark application for which a statement of use has not been filed with the U.S. Patent and Trademark Office, but only to the extent that the grant of a Lien thereon would invalidate such trademark application. In addition, the exclusion in clause (c) of the foregoing proviso shall in no way be construed so as to limit, impair or otherwise affect the Administrative Agent’s unconditional continuing security interest in and to (x) all rights, title and interests of each Credit Party in or to any rights to payment or other rights to receive monies due or to become due under any such contract or agreement and in any such monies and other proceeds of such contract or agreement, or (y) all rights, title and interests of each Credit Party in or to any Item of Product to which such contract or agreement relates, including any copyright therein or proceeds therefrom, except, in the case of clause (y) but not clause (x), to the extent such contract or agreement contains an express and enforceable contractual provision(s) prohibiting the creation of a security interest in the right, title or interest of such Credit Party therein or such creation would, in and of itself,

 20

 

cause or result in a default thereunder enabling another Person party to such contract or agreement to terminate the same or enforce material remedies thereunder.

“Collection Accounts” shall mean the collection accounts of the Credit Parties maintained with respect to Collateral pursuant to Section 8.3(a), including the Corporate Priority Collection Account and the Production Priority Collection Account described therein.

“Commitment” shall mean with respect to any Lender, the commitment of such Lender to make Loans to the Borrower and participate in the Letters of Credit up to an aggregate amount not in excess at any one time outstanding of the amount set forth (i) opposite such Lender’s name under the column entitled “Commitment” in the Schedule of Commitments, or (ii) in any applicable Assignment and Assumption(s) to which such Lender may be a party, as such amount may be increased or reduced from time to time in accordance with the terms of this Credit Agreement.

“Commitment Fees” shall have the meaning given to such term in Section 2.5(a).

“Commodity Exchange Act” shall mean the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“Communications” shall have the meaning given to such term in Section 13.1(d)(ii).

“Competitor” shall mean a Person (or an Affiliate of such Person or a member of an Affiliate Group related to such Person) that competes with the Borrower or any of the Borrower’s Subsidiaries in their primary businesses of (i) the production, development, marketing, distribution and/or exploitation of motion pictures or television programs or (ii) production of digital media content; provided, that each of the following persons shall not constitute a Competitor hereunder: (a) an institutional investor that invests in media and entertainment companies but (x) does not actively participate in the management of such companies and (y) does not actively participate in the management or control of any Competitor, and (b) the Administrative Agent, the Issuing Bank or any Lender that would otherwise become a Competitor by virtue of having foreclosed on or otherwise exercised any right or remedy resulting in, or having as a creditor received any recovery in any insolvency proceeding resulting in, the acquisition or ownership of the equity or assets of a Competitor and related activities, including, without limitation, directly or indirectly managing a Competitor as a result thereof.

“Complete” or “Completed” or “Completion” shall mean that, with respect to any Item of Product, (a) sufficient elements thereof (i) have been delivered by the applicable Credit Party, Co-Financing Venture Entity, Approved Co-Financier or Major Studio (as applicable) to, and accepted, deemed accepted and/or exploited by, the Approved Domestic Distributor and any other Distributor whose obligations are included in the Borrowing Base, to permit such Distributor(s) to exhibit the Item of Product in the theatrical or other medium for which the Item of Product is intended for initial exploitation in the Domestic Territory or elsewhere, or (ii) satisfies the completion and delivery requirements under the Approved Completion Bond, and (b) if such Item of Product was acquired by a Credit Party or Co-Financing Venture Entity from a third Person, or if a Credit Party acquired a Revenue Participation in such Item of Product, the

 21

 

entire fixed acquisition price, minimum advance or such Credit Party’s or such Co-Financing Venture Entity’s share of the direct costs of the Item of Product shall have been paid to the extent then due, and there are no unsatisfied or unwaived conditions to such Credit Party’s or such Co-Financing Venture Entity’s rights in such Item of Product and there is no right of reversion or divestiture with respect thereto.

“Compliance Certificate” shall have the meaning given to such term in Section 5.1(g).

“Connection Income Taxes” shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Consolidated Subsidiaries” shall mean, with respect to any Person at any time, all Subsidiaries of such Person which are required to be consolidated with such Person for financial reporting purposes in accordance with GAAP then in effect.

“Contribution Agreement” shall mean a Contribution Agreement, substantially in the form of Exhibit M, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time in accordance with the terms thereof.

“Copyright Security Agreement” shall mean a Copyright Security Agreement, substantially in the form of Exhibit E-1, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time by delivery of a Copyright Security Agreement Supplement or otherwise.

“Copyright Security Agreement Supplement” shall mean a Copyright Security Agreement Supplement substantially in the form of Exhibit E-2.

“Corporate Priority Collateral” shall have the meaning given to such term in the Senior Intercreditor Agreement.

“Corporate Priority Collateral Availability” shall mean as of any date of determination the sum (if positive) of (a) Corporate Priority Collateral Sub-Borrowing Base minus (b) the sum of (i) the aggregate principal amount of all then-outstanding loans and Letters of Credit as of any date of determination that were originally extended on the basis of Remaining Ultimates credits and P&A Credits plus (ii) the aggregate principal amount of all Borrowings and Letters of Credit that were originally extended on the basis of Remaining Ultimates credits and P&A Credits or Eligible Receivables included in the Corporate Priority Collateral Sub-Borrowing Base on the basis of domestic exploitation of Pictures but in any such case were repaid or cash collateralized with Production Priority Collateral proceeds or Borrowing Base Credit Extended on the basis of same.

“Corporate Priority Collection Account” shall mean the Collection Account of such name described in Section 8.3(a).

 22

 

“Corporate Priority Collateral Sub-Borrowing Base” shall mean a sub-calculation of the Borrowing Base constituting, as of any date of determination, the sum of (a) the aggregate value of the Remaining Ultimates credits in the Borrowing Base pursuant to clause (ii) thereof plus (b) the aggregate value of P&A Credits in the Borrowing Base pursuant to clause (i) thereof plus (c) the aggregate value of Borrowing Base credit attributable to Eligible Receivables relating to the domestic rights in any medium for any Picture plus (d) the aggregate value of cash in the Borrowing Base pursuant to clause (xiii) thereof that constitutes proceeds of Corporate Priority Collateral which has been released to the Borrower in accordance with the Proceeds Application Provisions (as such term is defined in the Senior Intercreditor Agreement) minus (e) the aggregate P&A Reserves. For the avoidance of doubt, the aggregate Remaining Ultimates under clause (a) shall be computed net of any deductions or other limitations required in accordance with the definition of the “Borrowing Base” for third party payments.

“Covered Swap Agreement” shall mean a Swap Agreement between a Credit Party and a Lender or an Affiliate of a Lender as to which the applicable Lender or its Affiliates has satisfied the requirements contained in the definition of “Obligations.”

“Credit Exposure” shall mean, at any time, the principal amount of all Loans outstanding at such time plus the L/C Exposure at such time.

“Credit Party” and “Credit Parties” shall mean, individually and collectively as the context so requires, the Borrower and each of the Guarantors.

“Default” shall mean a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Defaulting Lender” shall mean any Lender, as determined by the Administrative Agent, that has (i) failed to fund any portion of its Loans or participations in Letters of Credit within three (3) Business Days after the date required to be funded by it hereunder, unless determined by the Administrative Agent in its sole discretion to be the subject of a good faith dispute, (ii) notified the Administrative Agent, the Issuing Bank, any Lender (subject to such Lender having given notice thereof to the Administrative Agent) or the Borrower (subject to the Borrower having given notice thereof to the Administrative Agent) in writing that it does not intend to comply with any of its funding obligations under this Credit Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Credit Agreement or under other agreements in which it commits to extend credit, unless with respect to such other agreements, the Administrative Agent, in its sole discretion, determines there to be a good faith dispute, (iii) failed, within three (3) Business Days after request by the Administrative Agent, to confirm that it will comply with the terms of this Credit Agreement relating to its obligations to fund prospective Loans and participations in then outstanding Letters of Credit, (iv) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three (3) Business Days after the date when due, unless determined by the Administrative Agent in its sole discretion to be the subject of a good faith dispute, or (v) on or after the Closing Date (A) become or is insolvent or has a parent company that has become or is insolvent, (B) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, custodian, assignee for the benefit of creditors, or similar Person charged with the reorganization

 23

 

or liquidation of its business, appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, custodian, assignee for the benefit of creditors, or similar Person charged with the reorganization or liquidation of its business, appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment, except that a Lender shall not become a Defaulting Lender pursuant to this clause (v) solely as a result of the acquisition or maintenance of an ownership interest in such Lender or Person controlling such Lender, or the exercise of control over such Lender or Person controlling such Lender, in each case by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or provides such Lender or Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender or Person (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person or Lender, or (C) has become the subject of a Bail-In Action.

“Defaulting Lender’s L/C Exposure” shall have the meaning given to such term in Section 2.15(c)(i).

“Deficit Percentage” shall mean the ratio, determined as of each applicable P&A Test Date (for the five most recent Seasoned Pictures distributed by the Borrower and for which P&A Expenses have been funded by the Borrower (with “Free State of Jones” to be the first picture to be included in the first testing pool)), expressed as a percentage, equal to (i) one hundred percent plus (ii) the lesser of (a) twenty five percent (25%) and (b) the quotient of (x) the aggregate Production Exposures for the five subject Pictures divided by (y) the Credit Parties’ share of aggregate gross P&A expenditures for the five subject Pictures.

“Determination Date” shall have the meaning set forth in the definition of “Ultimates Percentage”.

“Development Carry-Over Amount” shall have the meaning given to such term in Section 6.24(b).

“Development Cost Cap” shall have the meaning given to such term in Section 6.24(b).

“Digital Product” shall mean any short-form digital content (other than a Picture or a Program) intended for initial exploitation through the internet (e.g. YouTube) or mobile applications; provided that the term “Digital Product” shall not include long form episodic Programs or motion pictures intended for initial exploitation on a SVOD platform like Netflix or on Amazon.

“Digital Product Declaration” shall mean, with respect to any Digital Product produced or acquired by or on behalf of a Credit Party, a declaration, substantially in the form of Exhibit I-3.

 24

 

“Direct Negative Costs” shall mean, with respect to an Item of Product, the aggregate of all costs, charges and expenses incurred or paid, or to be incurred and paid, by any Person in connection with the acquisition (including, without limitation, payments with respect to guarantees, advances and other payments made to rights holders) and/or development, preparation, production, completion and delivery of such Item of Product, including, but not limited to, payments for acquisition of underlying rights, pre-production expenses, fees and expenses (including development fees) for producers, directors, writers, actors, visual and special effects personnel, camera personnel, set designers, makeup and hair artists, film editors and other creative, artistic, technical and production personnel, charges for studio space, stages, and facilities, security, reproduction and processing equipment, film supplies, laboratory and sound services, visual and special effects, and facilities, location construction expenses, travel and living expenses (including per diems and similar allowances) in connection with pre-production production, and post-production activities, outside legal charges, outside accounting charges, financing costs, interest, insurance and (if applicable) any Approved Completion Guarantor fees.

“Distribution Agreement” shall mean any distribution agreement or license agreement heretofore or hereafter entered into by a Credit Party or Co-Financing Venture Entity (or by an Approved Foreign Sales Agent or Licensing Intermediary on behalf of such Credit Party or Co-Financing Venture Entity), as licensor, with a Distributor, as licensee, with respect to the distribution, license or other exploitation of one or more Items of Product in any medium or territory, in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof.

“Distributor” shall mean any Person which a Credit Party or Co-Financing Venture Entity (or an Approved Foreign Sales Agent or Licensing Intermediary on behalf of such Credit Party or Co-Financing Venture Entity) engages to distribute, license or otherwise exploit an Item of Product in any medium.

“Dollars” and “$” shall mean lawful money of the United States of America.

“Domestic Territory” shall mean the United States of America and its territories and possessions; provided, that solely in the context of P&A Expenses, on a picture by picture basis, to the extent that the Credit Parties are responsible for any such P&A Expenses in Canada and its territories and possessions, “Domestic Territory” shall also include Canada and its territories and possessions.

“EEA Financial Institution” means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 25

 

“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.

“Electronic System” means any electronic system, including e-mail, e-fax, Intralinks®, ClearPar®, Debt Domain, Syndtrak and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent or any Issuing Bank and any of its respective Related Parties or any other Person, providing for access to data protected by passcodes or other security system.

“Eligible Receivables” shall mean, at any date at which the amount thereof is to be determined, an amount equal to the following (discounted to present value, in the case of amounts which are not due and payable within twelve (12) months following the date of determination, on a quarterly basis by a rate of interest equal to the interest rate in effect on the Alternate Base Rate Loans on the date of computation): (i) all net amounts which pursuant to a binding agreement are contractually obligated to be paid to the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) either unconditionally or subject only to customary delivery requirements, and which are reasonably expected by the Credit Parties or Co-Financing Venture Entities to be payable and collected from the relevant obligors (or backed by Acceptable L/Cs, cash deposits or other form of credit support acceptable to the Administrative Agent in its sole discretion) minus (ii) the sum of (x) without double counting, the following items payable by a Credit Party or Co-Financing Venture Entity (with respect to the Credit Parties’ share thereof) in respect of such amount (based on the Credit Parties’ then best estimates): royalties, residuals, commissions, participations and other payments to third Persons, collection/distribution expenses and commissions, fulfillment costs, Taxes (including foreign withholding, remittance and similar Taxes) chargeable in respect of such accounts receivable, and any other projected expenses of the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) arising in connection with such amounts, and (y) any portion of the Eligible Receivables subject to repayment or deduction pursuant to contractual obligations. Eligible Receivables may include any payment obligations of an Approved Co-Financier to a Credit Party pursuant to a Co-Financing Agreement or a Revenue Participation which otherwise satisfy the requirements for Eligible Receivables under the Credit Agreement (including this definition). Eligible Receivables shall not include amounts:

(i)              which are attributable to an acquired Item of Product, until such time that (x) solely in the case of Pictures, the applicable Credit Party (or, if applicable, Co-Financing Venture Entity) is included as a beneficiary under an Approved Completion Bond with respect to such Credit Party’s share of the production cost for such Picture and (y) such Credit Party (or, if applicable, Co-Financing Venture Entity) has acquired the ownership or any distribution rights to such Item of Product; it being understood that credit will be given on a determination date when proceeds of the extension of credit requested hereunder are being used to fund the acquisition of such Item of Product;

 26

 

(ii)            which are in the aggregate due from a single Acceptable Obligor in excess of the Allowable Amount with respect to such Acceptable Obligor or, in the case of an Affiliated Group, in the aggregate due from the entities in such Affiliated Group in excess of the Allowable Amount with respect to such Affiliated Group (but in each case only to the extent of such excess), in each case unless secured by an Acceptable L/C or other financial assurances satisfactory to the Administrative Agent in its sole discretion;

(iii)          which are or will be subject to material conditions precedent to payment (including a material performance obligation, a material executory aspect on the part of the Credit Parties or any other party or obligations contingent upon future events not within the Credit Parties’ direct control), other than customary delivery requirements; provided, that Eligible Receivables may be conditioned on (x) a minimum expenditure in respect of P&A Expenses or (y) a minimum screen release requirement so long as the applicable requirements set forth in paragraph (i) of the definition of “Borrowing Base” are satisfied;

(iv)          which are more than one hundred twenty (120) days past due;

(v)            which, in the case of all Eligible Receivables in excess of the Dollar equivalent of $1,000,000, are to be paid in a currency other than Dollars, unless hedged in a manner reasonably satisfactory to the Administrative Agent;

(vi)          to the extent included in the estimated bad debts of a Credit Party;

(vii)        which are due from any obligor which has 15% or more of the total receivable amount from such obligor one hundred twenty (120) or more days contractually past due (exclusive of amounts that are being disputed or contested in good faith);

(viii)      for which there is a bona fide request for a material credit, adjustment, compromise, offset, counterclaim or dispute; provided, however, only the amount in question shall be excluded from such receivable;

(ix)          which are attributable to an Item of Product or right in which the Credit Parties cannot warrant sufficient title to the underlying rights to justify such receivable;

(x)            in which the Administrative Agent (for the benefit of the Secured Parties) does not have a first priority perfected security interest under the UCC (other than with respect to Revenue Participations, in which case such first priority perfected security interest requirement shall only apply to the payment obligation of the Major Studio in favor of the Credit Party) and applicable copyright law (subject only to the Specified Permitted Encumbrances described in Section 6.2(b) or (h)) or which is not subject to a fully-executed Notice of Assignment (provided, that the Administrative Agent may waive the requirement that a domestic obligor countersign a Notice of Assignment);

(xi)          which are determined by the Administrative Agent in its reasonable discretion, acting in good faith, upon written notice from the Administrative Agent to the Borrower, and effective upon the Borrower’s receipt of such notice, to be unacceptable (it being understood that certain unacceptable receivables may be made acceptable and may be included

 27

 

in the Borrowing Base if secured by an Acceptable L/C or other financial assurances satisfactory to the Administrative Agent in its sole discretion); provided, that, except in the case of a bankruptcy or other insolvency event of an Acceptable Obligor, to the extent that giving effect to such determination would result in a mandatory prepayment by the Borrower under Section 2.9(e) or an Event of Default occurring, no such mandatory prepayment shall be due or Event of Default shall have occurred; and provided further, that with respect to receivables that have been included in the Borrowing Base prior to a determination in accordance with this clause (xi), the Administrative Agent shall (subject to confidentiality requirements imposed by contract or Applicable Law), if it gave the notice of ineligibility, advise the Borrower of the rationale for any exclusion under this clause (xi));

(xii)        which are attributable to a Picture, Program or (if applicable) Digital Product as to which the Administrative Agent has not received a fully executed copy of a Pledgeholder Agreement or a Laboratory Access Letter (as applicable) from each Laboratory holding Physical Materials for such Picture, Program or (if applicable) Digital Product (it being understood that this clause (xii) shall (A) not apply to Revenue Participations and (B) with respect to Co-Financed Items of Product, be subject to the first paragraph of Section 4.2(f));

(xiii)      which will not become due and payable until after the first anniversary of the scheduled Maturity Date (but for these purposes ignoring clause (iii) of the definition of Maturity Date);

(xiv)       which are rendered unenforceable against the obligor due to the failure of any Credit Party to be in good standing as a foreign limited liability company (unless the applicable Credit Party has subsequently obtained the necessary good standing status to allow enforcement);

(xv)         which are payment obligations of an Approved Co-Financier to a Credit Party pursuant to a Co-Financing Agreement or of an Approved Co-Financing Venture Counterparty to a Credit Party pursuant to a Co-Financing Venture Agreement (as applicable), unless in each case approved by the Administrative Agent and otherwise satisfying the requirements for Eligible Receivables under the Credit Agreement (including this definition); or

(xvi)       which are included in the calculation of the Remaining Ultimates component of the Borrowing Base.

“Environmental Laws” shall mean any and all federal, state, local or municipal laws, statutes, ordinances, orders, common law, codes, rules, regulations, environmental permits, judgments, decrees, injunctions, or agreements with any Governmental Authority, relating to the protection of health and the environment, worker health and safety, and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of or exposure to Hazardous Materials, as now or at any time hereafter in effect, including without limitation, the Clean Water Act also known as the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq., the Surface Mining Control and Reclamation Act, 30 U.S.C. §§ 1201 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq., the

 28

 

Superfund Amendments and Reauthorization Act of 1986, Public Law 99-499, 100 Stat. 1613, the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§ 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., the Occupational Safety and Health Act as amended, 29 U.S.C. § 655 and § 657, together, in each case, with the publications promulgated thereunder and all substitutions thereof.

“Equity Interests” shall mean shares of the capital stock, partnership interests, membership interests or other ownership units in a limited liability company, beneficial interests in a trust or other equity or voting interests in any Person, or any warrants, options or other rights to acquire such interests.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” shall mean each Person (as defined in Section 3(9) of ERISA) which is treated as a single employer with any Credit Party under Section 414(b), (c), (m) or (o) of the Code.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

“Eurodollar” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to LIBOR.

“Event of Default” shall have the meaning given to such term in Section 7.1.

“Excluded Subsidiary” shall mean:

(i) each Co-Financing Venture Entity;

(ii) any CFC;

(iii) each Immaterial Subsidiary;

(iv) each Unrestricted Subsidiary;

(v) each Special Purpose Producer;

(vi) any FSHCO; and

(vii) each direct or indirect Subsidiary of any of the foregoing.

“Excluded Swap Obligation” shall mean, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule,

 29

 

regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) (i) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guaranty of such Guarantor or the grant of such security interest becomes or would become effective with respect to such Swap Obligation or (ii) in the case of a Swap Obligation subject to a clearing requirement pursuant to Section 2(h) of the Commodity Exchange Act, because such Guarantor is a “financial entity,” as defined in Section 2(h)(7)(C)(i) the Commodity Exchange Act, at the time the Guaranty of such Guarantor becomes or would become effective with respect to such related Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or security interest is or becomes illegal.

“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 13.10(b)) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 2.13, amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.13(g) and (d) any Taxes imposed under FATCA.

“Existing Corporate Facility Agent” shall mean JPMorgan Chase Bank, N.A., as administrative agent on behalf of the lenders and the issuing bank party to the Existing Corporate Facility Agreement.

“Existing Corporate Facility Agreement” shall mean that certain Amended and Restated Credit, Security, Guaranty and Pledge Agreement (Corporate Facility) dated as of May 2, 2014, among the Borrower, the Parent, the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent and issuing bank on behalf of such lenders, as amended, supplemented or otherwise modified, renewed or replaced prior to the date hereof.

“Existing Production Facility Agent” shall mean JPMorgan Chase Bank, N.A., as administrative agent on behalf of the lenders and the issuing bank party to the Existing Production Facility Agreement.

“Existing Production Facility Agreement” shall mean that certain Amended and Restated Credit, Security, Guaranty and Pledge Agreement (Production Facility), dated as of

 30

 

May 2, 2014, among the Borrower, the Parent, the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent and issuing bank on behalf of such lenders, as amended, supplemented or otherwise modified, renewed or replaced prior to the date hereof.

“Facility” shall have the meaning given to such term in the Introductory Statement hereto.

“FATCA” shall mean sections 1471 through 1474 of the Code, as in effect on the Closing Date (and any amended or successor version that is substantively comparable and not materially more onerous to comply with), current or future United States Treasury Regulations promulgated thereunder and official published guidance with respect thereto and any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.

                         “Federal Flood Insurance” means federally backed Flood Insurance available under the National Flood Insurance Program to owners of real property improvements located in Special Flood Hazard Areas in a community participating in the National Flood Insurance Program.

"Federal Funds Effective Rate" means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions (as determined in such manner as the NYFRB shall set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as the federal funds effective rate.

“Federal Securities Laws” shall have the meaning given to such term in Section 10.7.

“FFI” shall have the meaning set forth in the definition of “Approved Completion Guarantor”.

“First Cycle Period” shall mean, for any Seasoned Picture, (i) the seven (7) year period commencing on the date of the initial theatrical release of such Seasoned Picture in the Domestic Territory (or, if the Ultimates Provider is a Major Studio or Anchor Bay (solely for home entertainment distribution) that reports ultimates on a ten (10) year basis, then the ten (10) year period commencing on such date), or (ii) such shorter period for which Remaining Ultimates are actually reported by the applicable Ultimates Provider.

“Five Picture Rolling P&A Coverage Ratio” shall mean the ratio (expressed as a percentage), determined on each applicable P&A Test Date, of (i) (x) the Net Ultimates for the five most recent Pictures distributed by the Borrower and for which P&A Expenses have been funded by the Borrower (with “Free State of Jones” to be the first picture to be included in the first testing pool), plus (y) the Unlicensed Free TV Ultimates with respect to such Pictures to (ii) all P&A Expenses with respect to such Pictures.

 31

 

“Flood Insurance” means, for any real property that is Collateral that is located in a Special Flood Hazard Area, Federal Flood Insurance or private insurance reasonably satisfactory to the Administrative Agent, in either case, that (a) meets the requirements set forth by FEMA in its Mandatory Purchase of Flood Insurance Guidelines, (b) shall include a deductible not to exceed $50,000 and (c) shall have a coverage amount equal to the lesser of (i) the “replacement cost value” of the buildings located on owned real property and any personal property Collateral located on the real property as determined under the National Flood Insurance Program or (ii) the maximum policy limits set under the National Flood Insurance Program.

“Foreign Lender” shall mean a Lender that is not a U.S. Person.

“FSHCO” shall mean any Subsidiary all or substantially all of the assets of which are equity interests (or equity and debt interests) in one or more CFCs.

“Fundamental Documents” shall mean this Credit Agreement, including the schedules and exhibits hereto, and any agreements entered into in connection herewith by the Borrower, or any other Credit Party with or in favor of the Administrative Agent and/or the Lenders, including, the Notes, the Pledgeholder Agreements, the Laboratory Access Letters, the Copyright Security Agreement, the Copyright Security Agreement Supplements, the Trademark Security Agreement, the Notices of Assignment, the Instruments of Assumption and Joinder, the Account Control Agreements, the Contribution Agreement, the Senior Intercreditor Agreement, the Subordination Agreement, the Interparty Agreements, the Co-Financing Intercreditor Agreements, each of the UCC financing statements (or foreign equivalent), all security documentation executed by a Licensing Intermediary in favor of the Administrative Agent or a Credit Party, Letter of Credit applications and any agreements between the Borrower and the Issuing Bank regarding the Issuing Bank’s commitment to issue Letters of Credit or the respective rights and obligations between the Borrower and the Issuing Bank in connection with the issuance of Letters of Credit, and any other security or ancillary documentation which is required to be or is otherwise executed and delivered to the Administrative Agent, any Lender or the Issuing Bank in connection with this Credit Agreement or any of the documents listed above (including any amendments or modifications to any of the documents listed above).

“Funding Office” shall mean the offices of JPMorgan Chase Bank, N.A., JPMorgan Loan Services, 10 South Dearborn, 7th Floor, Chicago, Illinois 60603, Attention: Commercial Loan Services.

“GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time consistently applied (except for accounting changes in response to FASB releases, or other authoritative pronouncements).

“Governmental Authority” shall mean any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, or any court, tribunal or arbitrator, in each case whether of the United States of America or any foreign jurisdiction.

 32

 

“Guarantors” “Guarantor” or “Guarantors” shall mean, individually and collectively as the context so requires, all direct and indirect Subsidiaries of the Borrower (other than Excluded Subsidiaries) whether now existing or hereafter formed or acquired.

“Guaranty” shall mean, as to any Person, any direct or indirect obligation of such Person guaranteeing or intended to guarantee any Indebtedness, Capital Lease, dividend or other monetary obligation (“primary obligation”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (a) for the purchase or payment of any such primary obligation, or (b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or (iii) to purchase property, securities or services, in each case, primarily for the purpose of assuring the performance by the primary obligor of any such primary obligation; provided, however, the term “Guaranty” shall not include endorsements for collection or collections for deposit, in either case, in the ordinary course of business. The amount of any Guaranty shall be deemed to be an amount equal to the lesser of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranty is made (or, if the amount of such primary obligation is not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder)), or (y) the stated maximum liability under such Guaranty.

“Hazardous Material” shall mean petroleum, petroleum hydrocarbons or petroleum products, petroleum by-products, radioactive materials, asbestos or asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea formaldehyde, mold, lead or lead-containing materials, polychlorinated biphenyls; and any other chemicals, materials, substances or wastes in any amount or concentration which are now or hereafter (i) become defined as or included in the definition of “hazardous substances,” “hazardous materials,” “hazardous wastes,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “pollutants,” “regulated substances,” “solid wastes,” or “contaminants” or words of similar import, under any Environmental Law or (ii) are regulated by or for which Liability can be imposed under any Environmental Law.

“Hony Investors” shall have the meaning set forth in the definition of “Approved Co-Financier”.

“Huayi” shall mean Huayi Brothers Pictures, LLC.

“Huayi Escrow Account” shall mean the escrow account established pursuant to the terms of that certain Agreement Regarding Huayi Assigned Receipts dated as of October 21, 2015, by and among the Borrower, Huayi, the Administrative Agent, and East West Bank, a California corporation as escrow agent (and any of their respective successors and assigns approved by the Administrative Agent in accordance with the terms of the underlying escrow agreement), which shall be in form and substance satisfactory to the Administrative Agent.

“Immaterial Subsidiary” shall mean, at any date of determination, each direct or indirect Subsidiary of the Borrower (i) which has assets with an aggregate book value of less

 33

 

than $50,000 and which, taken together with all other Immaterial Subsidiaries, collectively have assets with an aggregate book value of less than $250,000, and (ii) in the case of such Subsidiaries as of the Closing Date, which are listed on Schedule 1.2 hereto.

“Impacted Interest Period” shall have the meaning set forth in the definition of “LIBOR Base Rate”.

“Indebtedness” shall mean (without double counting), at any time and with respect to any Person, (i) indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase price of property or services purchased (excluding (x) amounts constituting trade payables (payable within 120 days or such longer term as may be customary in the industry) and (y) other amounts due for the rental of space in connection with the production of an Item of Product, to the extent such amounts are or will be included in the Production Cost Reserve (and in the Bonded Budget in the case of Pictures), in each case arising in the ordinary course of business), (ii) obligations of such Person in respect of letters of credit, acceptance facilities, or drafts or similar instruments issued or accepted by banks and other financial institutions for the account of such Person, (iii) obligations of such Person under Capital Leases and any financing lease involving substantially the same economic effect, (iv) deferred payment obligations of such Person resulting from the adjudication or settlement of any litigation to the extent not already reflected as a current liability on the balance sheet of such Person, and (v) indebtedness of others of the type described in clauses (i) through (iv) hereof which such Person has (a) directly or indirectly assumed or guaranteed in connection with a Guaranty, or (b) secured by a Lien on the assets of such Person, whether or not such Person has assumed such indebtedness. For the avoidance of doubt, Indebtedness shall not include non-refundable advances made by a third party distributor to “cash flow” the production, distribution or sale of any Item of Product or any amounts payable under a Co-Financing Agreement or Co-Financing Venture Agreement (as applicable).

“Indemnified Party” shall have the meaning given to such term in Section 13.5.

“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Fundamental Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Ineligible Assignee” shall mean a (i) natural person, (ii) holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof, except that such holding company, investment vehicle or trust shall not constitute an Ineligible Assignee if it (x) has not been established for the primary purpose of acquiring any Loans or Commitments, (y) is managed by a professional advisor, who is not such natural person or a relative thereof, having significant experience in the business of making or purchasing commercial loans, and (z) has assets greater than $50,000,000 and a significant part of its activities consist of making or purchasing commercial loans and similar extensions of credit in the ordinary course of its business, (iii) Credit Party or an Affiliate of a Credit Party (other than the Subordinated Agent or the Subordinated Lenders to the extent permitted by clause (iv) hereof), (iv) Subordinated Agent or any Subordinated Lender except to the extent they become Lenders in accordance with a “buyout right” permitted under the Subordination

 34

 

Agreement, (v) officer, director or manager of a Credit Party or a member of a Credit Party (whether or not such Person is an Affiliate of a Credit Party) or (vi) at all times prior to the occurrence and continuance of an Event of Default, any Competitor.

“Instrument of Assumption and Joinder” shall mean an Instrument of Assumption and Joinder, substantially in the form of Exhibit J.

“Interest Deficit” shall have the meaning given to such term in Section 2.14(a).

“Interest Payment Date” shall mean (i) as to any LIBOR Loan having an Interest Period of one (1), two (2) or three (3) months, the last day of such Interest Period, (ii) as to any LIBOR Loan having an Interest Period of more than three (3) months, the last day of such Interest Period and, in addition, each date during such Interest Period that would be the last day of an Interest Period commencing on the same day as the first day of such Interest Period but having a duration of three (3) months or an integral multiple thereof, and (iii) with respect to any Alternate Base Rate Loan, the last Business Day of each March, June, September and December (commencing December 2016).

“Interest Period” shall mean as to any LIBOR Loan, the period commencing on the date such Loan is made, continued as or converted to a LIBOR Loan, and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is one (1), two (2), three (3), six (6) or (to the extent available from all Lenders and consented to by all Lenders) twelve (12) months thereafter as the Borrower may elect; provided, however, (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) no Interest Period may be selected which would end later than the Maturity Date.

“Interparty Agreement” shall mean, with respect to an Item of Product, an interparty agreement among (i) the Administrative Agent, the Seer P&A Facility Agent and Subordinated Agent, (ii) each applicable Credit Party, (iii) the applicable Distributor, (iv) if applicable, the Approved Completion Guarantor, (v) the Approved Foreign Sales Agent and/or (vi) such other applicable Persons, which agreement (a) is necessary in the reasonable judgment of the Administrative Agent to allocate the risks of Completion of such Item of Product and (b) shall be in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time.

“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period for which the LIBO Screen Rate is available that is shorter than the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which that LIBO Screen Rate is available that exceeds the Impacted Interest Period, in each case, at such time.

 35

 

“Investment” shall mean any stock, evidence of indebtedness or other securities of any Person, any loan, advance, contribution of capital, extension of credit or commitment therefor (including, without limitation, the Guaranty of obligations of others, but excluding current trade and customer accounts receivable arising in the ordinary course of business and payable in accordance with customary trading terms in the ordinary course of business) and any purchase of (i) any Equity Interests of another Person, or (ii) any business or undertaking of any Person or any commitment to make any such purchase, or any other investment.

“IRS” shall mean the Internal Revenue Service.

“Issuing Bank” shall mean JPMorgan Chase Bank, N.A., in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 12.12.

“Item of Product Declaration” shall mean a Picture Declaration, a Program Declaration or a Digital Product Declaration, as applicable.

“Items of Product” shall mean, individually or collectively, any Picture, any Program and any Digital Product, as applicable.

“JPMorgan Clearing Account” shall mean the account of the Administrative Agent (for the benefit of the Secured Parties) maintained at the office of JPMorgan Chase Bank, N.A., JPMorgan Loan Services, 10 South Dearborn, 7th Floor, Chicago, Illinois 60603, Attention: Commercial Loan Services, Facsimile No. (888) 292-9533, email jpm.agency.servicing.4@jpmchase.com; designated as LS2 Incoming Account, Account No. 9008113381C4802, ABA/Routing No. 021000021; Reference: STX Financing, LLC.

“Laboratory” shall mean any laboratory reasonably acceptable to the Administrative Agent (with Technicolor, Deluxe and their respective Affiliates being hereby pre-approved), which laboratory is a party to a Pledgeholder Agreement or a Laboratory Access Letter and is located in (i) the United States of America, (ii) Canada, (iii) the United Kingdom or (iv) such other jurisdiction which is acceptable to the Administrative Agent.

“Laboratory Access Letter” shall mean a letter agreement among (i) a Laboratory holding any Physical Materials (including data backups of work in progress) of any Item of Product to which any Credit Party has a right of access, (ii) each applicable Credit Party and (iii) the Administrative Agent and any other parties deemed necessary by the Administrative Agent, substantially in the form of Exhibit H or in such other form as shall be reasonably acceptable to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time.

“L/C Disbursement” shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit.

“L/C Exposure” shall mean, at any time, the amount expressed in Dollars of the aggregate face amount of all drafts which may then or thereafter be presented by beneficiaries under all Letters of Credit then outstanding (excluding any Letter of Credit or portions thereof

 36

 

that have been cash collateralized) plus (without duplication) the face amount of all drafts which have been presented or accepted under all Letters of Credit but have not yet been paid by the Issuing Bank plus the aggregate amount of all L/C Disbursements that have not yet been reimbursed by or on behalf of the Borrower (whether directly or from the proceeds of a Loan) at such time.

“L/C Sublimit” shall mean an amount equal to 5% of the Total Commitments, or such lesser amount to which the Borrower has reduced the L/C Sublimit pursuant to Section 2.6.

“Lender” and “Lenders” shall mean the financial institutions whose names appear on the signature pages hereof, any assignee of a Lender pursuant to Section 13.3 and their respective successors.

“Lending Office” shall mean, with respect to any Lender, the branch or branches (or Affiliate or Affiliates of such Lender) from which such Lender’s LIBOR Loans or Alternate Base Rate Loans, as the case may be, are made or maintained and for the account of which all payments of principal of, and interest on, such Lender’s LIBOR Loans or Alternate Base Rate Loans are made, as notified to the Administrative Agent from time to time.

“Letter of Credit” shall mean a letter of credit issued by the Issuing Bank pursuant to Section 2.17.

“LIBOR” shall mean with respect to each LIBOR Loan for any Interest Period, an interest rate per annum (rounded upward to the next 1/16th of 1%) equal to (a) the LIBOR Base Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“LIBOR Base Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the LIBO Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) then the LIBO Rate shall be the Interpolated Rate; provided that if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

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

“LIBO Screen Rate” shall mean, for any day and time with respect to any Eurodollar Borrowing for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for U.S. Dollars for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; provided that if the LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Credit Agreement.

 37

 

“Licensing Intermediary” shall mean a Person reasonably acceptable to the Administrative Agent through which any distribution or other exploitation rights are sold, leased, licensed or assigned as a conduit between a Credit Party and the ultimate Distributor in order to mitigate withholding taxes or to satisfy local quota requirements; provided, in each case that the Administrative Agent may from time to time by written notice to the Borrower withdraw its approval of any such Person as a Licensing Intermediary on a prospective basis.

“Lien” shall mean any mortgage, copyright mortgage, pledge, security interest, encumbrance, lien or charge or any other claim of any kind whatsoever (including, without limitation, any conditional sale or other title retention agreement, any agreement to grant a security interest at a future date, any lease in the nature of security, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction). “Liens” shall not include contractual agreements which do not provide security, encumbrances, charges or claims of the type described in this definition.

“Liquidity Certificate” shall mean a certificate, substantially in the form of Exhibit O, duly executed by an Authorized Officer of the Borrower.

“Loan” or “Loans” shall mean individually and collectively, as the context so requires, the revolving loans made hereunder in accordance with Section 2.1.

“Major Studio” shall mean: (i) each of the following and its primary motion picture distribution Subsidiary with respect to Pictures, primary television distribution Subsidiary with respect to Programs and/or distribution Subsidiaries (or any other Subsidiary of such studios so long as its performance is guaranteed by such studio or primary distribution Subsidiary) and “specialty divisions”: (a) Paramount Pictures Corporation, (b) Twentieth Century Fox Film Corporation (including Fox Searchlight Pictures), (c) Sony Pictures Entertainment Inc. (including Screen Gems), (d) Walt Disney Motion Pictures Group, Inc., (e) Warner Bros. Entertainment Inc. (including New Line Cinema), (f) Universal Pictures, a division of Universal City Studios LLC (including Focus Features), and (g) Lions Gate Entertainment (including Lions Gate Films Inc., Lions Gate Entertainment, Inc. and Summit Entertainment, LLC), (ii) any Person succeeding to all or substantially all of the respective assets of any of the foregoing, or (iii) any other motion picture Distributor acceptable to the Administrative Agent (on a Picture by Picture basis), and notice of such acceptability shall be given to the Lenders.

“Major Territories” shall mean (a) in the case of Pictures, Australia, Benelux, Canada, France, Germany, Italy, Japan, Scandinavia, Spain and the United Kingdom and (b) in the case of Programs, such territories as are mutually agreed by the Administrative Agent and the Borrower.

“Major Territory Value Forecast” shall mean, with respect to a Picture or Program, and in each case subject to adjustment pursuant to the below proviso, the dollar amount anticipated to be received by a Credit Party or Co-Financing Venture Entity (with respect to the Credit Party’s share thereof) from the pre-sale of such Item of Product in a Major Territory, as estimated (using the “lowest” or most conservative estimate provided) by an Approved Foreign Sales Agent; provided, that (i) if the Credit Parties’ good faith estimate of the anticipated receivable from the pre-sale of an Item of Product in a Major Territory is lower than the most

 38

 

conservative estimate provided by the Approved Foreign Sales Agent for such Major Territory, the Credit Parties’ lower estimate shall constitute the Major Territory Value Forecast for such Major Territory, (ii) the Borrower shall use commercially reasonable efforts to cause the Major Territory Value Forecast with respect to each Picture or Program to be updated (if applicable) on a semi-annual basis and shall, if the Borrower is the Approved Foreign Sales Agent, cause such Major Territory Value Forecast to be updated or confirmed in writing on at least a quarterly basis, (iii) the Major Territory Value Forecasts may be updated by the Approved Foreign Sales Agent from time to time to reflect changes in the principal assumptions or facts relating to an Item of Product, but once the Major Territory Value Forecasts have been prepared for any applicable Major Territory, the Credit Parties may not seek to leverage a subsequent higher estimate, and (iv) if the actual aggregate sale proceeds received or to be received by the Credit Parties or Co-Financing Venture Entity (with respect to the Credit Party’s share thereof) (as applicable) with respect to the Major Territories of an Item of Product which have theretofore been sold are less than the aggregate Major Territory Value Forecasts of the Major Territories of such Item of Product which have been sold, the Major Territory Value Forecasts of the remaining unsold Major Territories for such Item of Product shall be adjusted downward by multiplying such Major Territory Value Forecasts by a fraction, the numerator of which is (x) the actual aggregate sale proceeds received or to be received by the Credit Parties or Co-Financing Venture Entity (with respect to the Credit Party’s share thereof) for the Major Territories theretofore sold for such Item of Product and the denominator of which is (y) the aggregate of the Major Territory Value Forecasts originally projected for such previously sold Major Territories (or the applicable Credit Party’s share thereof (as applicable) (any such downward adjustment pursuant to this clause (iv), an “Indexing Adjustment”).

“Margin Stock” shall be as defined in Regulation U of the Board.

“Material Adverse Effect” shall mean any change or effect that (i) has a materially adverse effect on the business, assets, liabilities (actual or contingent), properties, operations or condition (financial or otherwise) of the Credit Parties, taken as a whole, (ii) materially impairs the legal right, power or authority of any Credit Party to perform its respective obligations under the Fundamental Documents to which it is a party, (iii) materially impairs the validity or enforceability of, or materially impairs the rights, remedies or benefits available to the Administrative Agent (for the benefit of the Secured Parties), the Issuing Bank or the Lenders under the Fundamental Documents or (iv) has a materially adverse effect on the Collateral or the Administrative Agent’s Liens (on behalf of itself and other Secured Parties) on the Collateral or the priority of such Liens.

“Materials” shall have the meaning given to such term in Section 13.19.

“Maturity Date” shall mean the earlier of (i) October 7, 2021, (ii) such other date as the Loans shall become due and payable in accordance with Article 7 hereof; and (iii) March 1, 2019; provided that clause (iii) shall only apply if by such date the Borrower has not either (a) extended the deadline for the mandatory repayment of Parent’s Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock (collectively, “Parent Preferred”) from December 3, 2019 to a date that is at least nine months and one day after October 7, 2021, (b) redeemed all such Parent Preferred or (c) converted all of the Parent Preferred into common stock of the Parent.

 39

 

“Moody’s” shall mean Moody’s Investors Service, Inc.

“Multiemployer Plan” shall mean a plan described in Section 4001(a)(3) of ERISA contributed to by any Credit Party or any ERISA Affiliate or any such plan to which a Credit Party or an Affiliate of a Credit Party has any liability.

“National Flood Insurance Program” means the program created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as revised by the National Flood Insurance Reform Act of 1994, that mandates the purchase of flood insurance to cover real property improvements located in Special Flood Hazard Areas in participating communities and provides protection to property owners through a federal insurance program.

“Net Ultimates” shall mean, with respect to any Picture, as of the applicable date of determination, the sum (without duplication) of (i) Remaining Ultimates plus (ii) amounts actually paid to the Credit Parties during the First Cycle Period under the applicable Distribution Agreement from all media in the Domestic Territory (or in cases where a Major Studio is the distributor and Ultimates Provider, any medium and from any territory), in each case calculated based on the most recent Remaining Ultimates Reports for such Picture but net of all payments made or to be made to third parties (other than payments made or to be made for P&A Expenses, to co-financiers, to equity investors or to the Seer P&A Facility Agent or any lender under the Seer P&A Facility Credit Agreement directly in connection with such proceeds (including for the avoidance of doubt, the mandatory principal prepayments and Profit Participation Fees (as defined in the Seer P&A Facility Credit Agreement and any other required application of such proceeds pursuant to the Senior Intercreditor Agreement)), which for this purpose shall not be netted out).

“Note” or “Notes” shall have the meaning given to such term in Section 2.3(a).

“Notice of Assignment” shall mean a notice of assignment and irrevocable instructions (i) subject to clause (ii) below, substantially in the form of Exhibit L-1 or Exhibit L-2, as applicable, or in such other form (including instructions incorporated into a Distribution Agreement or Interparty Agreement) as shall be reasonably acceptable to the Administrative Agent or (ii) in such other form as may be required by the Administrative Agent for inclusion in the Borrowing Base or by the Approved Completion Guarantor with regard to its guaranty obligations and which shall be reasonably acceptable to the Administrative Agent. The Notices of Assignment shall direct any payments that constitute Production Priority Collateral to the Production Priority Collection Account and shall direct any payments that constitute Corporate Priority Collateral to the Corporate Priority Collection Account.

“NYFRB” means the Federal Reserve Bank of New York.

“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. on such day received to the

 40

 

Administrative Agent from a Federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Credit Agreement.

“Obligations” shall mean (i) the obligation of the Borrower to make due and punctual payment of principal and interest on the Loans, the Commitment Fees, reimbursement obligations in respect of Letters of Credit, costs and attorneys’ fees, and all other monetary obligations of the Borrower to the Administrative Agent, the Issuing Bank or any Lender under this Credit Agreement, the Notes, any other Fundamental Document or any fee letter in respect of the Facility, (ii) all amounts payable by any Credit Party to any Lender or its Affiliates under any Swap Agreement permitted under Section 6.18; provided, that the Administrative Agent shall have received written notice thereof from the applicable Credit Party or the applicable Lender (other than the Administrative Agent) within ten (10) Business Days after execution of such Swap Agreement and, in the case of an Affiliate of lender that is a counterparty to such Swap Agreement, the applicable Lender shall cause such Affiliate, to the extent it is legally entitled to do so, to provide such properly completed and executed documentation reasonably requested by the Administrative Agent as will permit payments made by the Administrative Agent pursuant to Section 12.2 including with respect to such Swap Agreement to be made without withholding or at a reduced rate of withholding, (iii) all amounts payable to a Lender or any of its Affiliates in connection with any bank account maintained by any Credit Party at such Lender or its Affiliates or any other treasury, depository, purchasing card, cash management or other banking services provided to any Credit Party by such Lender or its Affiliates, including any automated clearing house transfers of funds or similar services, and (iv) any other monetary obligations of any Credit Party to the Administrative Agent, the Issuing Bank or any Lender (and their respective related Indemnified Parties) under and to the extent required by the Fundamental Documents; provided, however, that the definition of the term “Obligations” shall not create any guarantee by any Guarantor of (or grant of security interest by any Guarantor to support, as applicable) any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of any Guarantor.

“Other Connection Taxes” shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Fundamental Document, or sold or assigned an interest in any Loan or Fundamental Document).

“Other Investments Basket” shall have the meaning set forth in Section 6.4 hereof.

“Other Taxes” shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Fundamental Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 13.10(b)).

 41

 

“Overhead” shall mean cash selling, general and administrative expenses determined in accordance with GAAP consistently applied.

“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight Eurodollar borrowings by U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the NYFRB as set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate (from and after such date as the NYFRB shall commence to publish such composite rate).

“P&A Advance Rate” shall initially mean 75%; provided that (i) if the Five Picture Rolling P&A Coverage Ratio is less than the Deficit Percentage, the P&A Advance Rate shall be the percentage equal to 75% less 1.00% for each 1.00% by which the Five Picture Rolling P&A Coverage Ratio is less than the Deficit Percentage (e.g., if the Five Picture Rolling P&A Coverage Ratio is 110% and the Deficit Percentage is 120%, the P&A Advance Rate will be reduced from 75% to 65%) and (ii) if the Five Picture Rolling P&A Coverage Ratio is determined to be less than 100%, the P&A Advance Rate shall be zero percent (0%) (other than for new Pictures for which P&A Credits had not previously been taken but that are scheduled to be released theatrically domestically within six months of the date of determination, for which the P&A Advance Rate shall be fifty percent (50%)) until (if ever) the Five Picture Rolling P&A Coverage Ratio for five new Pictures (i.e. Pictures that were not included in any computation of the Five Picture Rolling P&A Coverage Ratio that yielded a percentage of less than 100%) exceeds 125%.

“P&A Control Account” shall have the meaning given to such term in Section 4.2(a).

“P&A Credit” shall have the meaning set forth in the definition of “Borrowing Base”.

“P&A Expenses” shall mean print and advertising expenses in respect of a Picture in the Domestic Territory.

“P&A Picture” shall mean each Seasoned Picture for which any proceeds of the Facility were used to fund P&A Expenses.

“P&A Reserve” shall mean (without duplication), (A) with respect to any Eligible Receivable to be included in the Borrowing Base that requires that the Picture be released theatrically in the Domestic Territory with minimum P&A Expenses, a reserve established by the Borrower from its cash equity, availability under the Seer P&A Facility Credit Agreement and/or availability under this Credit Agreement (as applicable) (and satisfactory evidence of such reserve shall have been provided to the Administrative Agent) in the amount necessary to pay the Credit Parties’ share of the aggregate remaining P&A Expenses in order to meet such requirements, in each case net of remaining amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such

 42

 

remaining P&A Expenses; and (B) a reserve, to be established upon the inclusion of any P&A Credits for a Qualifying Picture in the Borrowing Base for which a Credit Party has committed to pay or is otherwise responsible for paying P&A Expenses, in an amount equal as of any date of determination to (x) 100% of the remaining unspent portion of the Approved P&A Budget minus (y) the sum of (i) the portion of the remaining unspent Approved P&A Budget that will be funded under the Seer P&A Credit Agreement, (ii) the portion of the remaining unspent Approved P&A Budget that will be funded with amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such remaining P&A Expenses and (iii) the portion of the remaining unspent Approved P&A Budget that is covered by a back-stop or other funding assurance reasonably acceptable to the Administrative Agent.

“P&A Test Date” shall mean, with respect to the Five Picture Rolling P&A Coverage Ratio, (a) initially, the date on which the fifth Picture (with “Free State of Jones” to be the first picture to be included in the first testing pool) becomes a P&A Picture and (b) at all times thereafter, (1) as of the last day of each fiscal quarter of the Borrower, and (2) on the date on which each subsequent Picture becomes a P&A Picture.

“Parent” shall mean STX Filmworks, Inc., a Delaware corporation.

“Parent Preferred” shall have the meaning given to such term in the definition of “Maturity Date”.

“Participant Register” shall have the meaning given to such term in Section 13.3(h).

“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto.

“Percentage” shall mean with respect to any Lender at any time, the percentage of the Total Commitments represented by such Lender’s Commitment at such time, provided that if the Commitments have terminated or expired, the Percentage shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

“Permitted Encumbrances” shall mean Liens permitted under Section 6.2.

“Permitted Holders” shall mean TPG STAR BDH, L.P., TPG STAR AIV II, L.P., RSC Pictures, LLC, Great Mission International Limited, Marco Alliance Limited, Wump of Gump, LLC, and their respective Affiliates.

“Permitted Seer P&A Payments” shall have the meaning given to such term in the Senior Intercreditor Agreement.

“Permitted Subordinated Payments” shall have the meaning given to such term in the Subordination Agreement.

 43

 

“Person” shall mean any natural person, corporation, division of a corporation, limited liability company, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof.

“Physical Materials” shall have the meaning given to such term in clause (iv) of the definition of the term “Collateral” herein.

“Picture” shall mean any motion picture, film or videotape, whether recorded on film, videotape, cassette, cartridge, disc or on or by any other means, method, process or device whether now known or hereafter developed, with respect to which a Credit Party (i) has (either directly or through a Co-Financing Venture Entity) an ownership interest in the copyright under U.S. law, (ii) acquires any distribution rights or (iii) acquires a Revenue Participation. The term “Picture” shall include, without limitation, the scenario, screenplay or script upon which such Picture is based, all of the properties thereof, tangible and intangible, and whether now in existence or hereafter to be made or produced, whether or not in possession of a Credit Party, and all rights therein and thereto, of every kind and character. For the avoidance of doubt, the term “Picture” shall not include any Program or any Digital Product.

“Picture Declaration” shall mean, with respect to any Picture produced or acquired by or on behalf of a Credit Party, a declaration, substantially in the form of Exhibit I-1.

“Plan” shall mean an employee benefit plan within the meaning of Section 3(3) of ERISA, other than a Multiemployer Plan, maintained or contributed to by any Credit Party, or, with respect to any such plan covered by Title IV of ERISA, any ERISA Affiliate.

“Platform” shall have the meaning given to such term in Section 13.19.

“Pledged Collateral” shall mean the Pledged Securities and any proceeds (as defined in Section 9-102(64) of the UCC) including cash proceeds (as defined in Section 9-102(9) of the UCC) of the Pledged Securities.

“Pledged Securities” shall mean collectively, all of the issued and outstanding Equity Interests issued by any Credit Party (including the Borrower) and all other Equity Interests now owned or hereafter acquired by any Credit Party (including interests in Co-Financing Venture Entities); provided, that (i) if a direct or indirect Subsidiary of the Borrower is a CFC or FSHCO, then the definition of “Pledged Securities” with respect to any such first-tier CFC or first-tier FSHCO shall not include in excess of 65% of the voting Equity Interests in such CFC or FSHCO, (ii) in the case of any Subsidiary not wholly-owned by a Credit Party, “Pledged Securities” shall not include the Equity Interests of such Subsidiary to the extent that a pledge hereunder of such Equity Interests would violate a contractual restriction in the organizational documents of such Subsidiary in effect on the Closing Date, and (iii) to the extent the pledge thereof is prohibited by the production financing agreement for the applicable Item of Product, “Pledged Securities” shall not include the Equity Interest in a Special Purpose Producer with respect to such Item of Product until the Special Purpose Producer’s obligations under such production financing agreement are repaid in full and such production financing agreement is terminated.

 44

 

“Pledgeholder Agreement” shall mean a laboratory pledgeholder agreement among (i) the applicable Laboratory, (ii) each applicable Credit Party, (iii) the Administrative Agent, and any other parties deemed necessary by the Administrative Agent and (iv) any other applicable parties, substantially in the form of Exhibit G-1 and Exhibit G-2, as applicable, or in such form as shall be reasonably acceptable to the Administrative Agent, in each case, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time.

“Pledgors” shall mean the Parent and each Credit Party that from time to time owns any of the Pledged Securities.

“Prepayment Date” shall have the meaning given to such term in Section 2.9(j).

"Prime Rate" means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its office located at 270 Park Avenue, New York, New York; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Pro Rata Share” shall mean (i) in the case of any Obligation owed or allocable to a Lender in respect of the Loans or with respect to any Commitment, such Lender’s pro rata share of such Obligation or Commitment determined in accordance with such Lender’s Percentage, and (ii) in the case of any other Obligation to a Person, such Person’s pro rata share of such Obligation determined in comparison to all pari passu Obligations of like kind.

“Production Account” shall mean, individually and collectively, as the context so requires, a demand deposit account established by a Credit Party at a commercial bank located in (i) the United States of America and subject to a deposit account control agreement in form and substance satisfactory to the Administrative Agent, (ii) the United Kingdom or Canada, in each case so long as, if requested by the Administrative Agent, appropriate local law security documents in form and substance satisfactory to the Administrative Agent are delivered to the Administrative Agent or (iii) any other jurisdiction acceptable to the Administrative Agent, for the sole purpose of paying the negative cost of a particular Item of Product.

“Production/Acquisition Cost Reserve” shall mean, in respect of an Item of Product, a reserve from the Total Commitments and from the Borrowing Base (x) established with regard to pay or play commitments for each “green-lit” Item of Product on the date on which a Credit Party or Co-Financing Venture Entity has made such commitments and such Item of Product is “green-lit”, in the amount payable (if the counterparty’s services and/or property are not used) until the earlier of (i) such payable being paid, or (ii) the inclusion of such payable in the Bonded Budget, and (y) with regard to other costs of production, at the time a Credit Party requests inclusion of such Item of Product in the Borrowing Base, in an amount equal to: (i) in the case of any Picture being produced by a Credit Party or Co-Financing Venture Entity, the remaining portion of the Bonded Budget necessary to reach the “strike price” under the applicable Approved Completion Bond (net of amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement has either previously funded, or committed to fund on a cash flow basis towards the negative cost of such Item of

 45

 

Product and committed unrestricted cash), (ii) in the case of any Program or Digital Product being produced by a Credit Party or Co-Financing Venture Entity, the remaining unpaid portion of the Budgeted Negative Costs thereof (net of amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement has either previously funded, or committed to fund on a cash flow basis towards such unpaid Budgeted Negative Costs and committed unrestricted cash), (iii) in the case of an Item of Product (other than a Revenue Participation) being acquired by a Credit Party or a Co-Financing Venture Entity, the unpaid portion of the acquisition price therefor (net of amounts that an Approved Co-Financier or Co-Financing Venture Entity which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement has either previously funded, or committed to fund on a cash flow basis towards the negative cost of such Item of Product and committed unrestricted cash), and (iii) in the case of Revenue Participation, an amount equal to the unpaid balance of the Credit Party’s or Co-Financing Venture Entity’s funding obligation (net of committed unrestricted cash). The Production/Acquisition Cost Reserve for an Item of Product shall be reduced on a dollar-for-dollar basis as Loans are made (or Letters of Credit are issued or amounts are deposited into the Production Account for such Item of Product) to fund pay or play commitments or the amount of the Budgeted Negative Cost and shall be reduced to zero upon the earlier of Completion of such Item of Product or the actual or constructive abandonment thereof.

“Production Exposure” for an Uncompleted Program or Picture shall mean the Credit Parties’ share of the total negative cost for such Program or Picture (as applicable) minus (without duplication) the sum of (w) the gross amount of the Credit Parties’ share of amounts committed and reasonably expected to be paid pursuant to a binding agreement by a third person relating to the exploitation or licensing of such Programs or Pictures (as applicable, and in each case without regard to advance rates or present value discount rates) plus (x) the gross amount of the Credit Parties’ share of any tax incentives relating to such Programs or Pictures (as applicable, and in each case without regard to advance rates or present value discount rates) plus (y) the Credit Parties’ share of all proceeds received in respect of such Programs or Pictures (as applicable) prior to the applicable date of determination plus (z) the value (if any) of the Unsold TV Rights Credit attributable to any such Program that is eligible for Borrowing Base credit as of any date of determination.

“Production Priority Collateral” shall have the meaning given to such term in the Senior Intercreditor Agreement.

“Production Priority Collection Account” shall mean the Collection Account of such name described in Section 8.3(a).

“Production Priority Collateral Sub-Borrowing Base” shall mean a sub-calculation of the Borrowing Base constituting, as of any date of determination, the sum of (i) (a) the aggregate value of the Eligible Receivables in the Borrowing Base pursuant to clauses (iv) through (ix) thereof other than Eligible Receivables included in the Corporate Priority Sub-Borrowing base pursuant to clause (d) thereof plus (b) the aggregate value of the Tax Incentive Receivables in the Borrowing Base pursuant to clause (x) thereof plus (c) the aggregate value of the Unsold Rights Credits and the aggregate value of the Unsold TV Rights Credits in the Borrowing Base pursuant to clauses (xi) and (xii) plus (d) the aggregate value of cash in the

 46

 

Borrowing Base pursuant to clause (xiii) thereof that is not included in the Corporate Priority Collateral Sub-Borrowing Base pursuant to clause (c) thereof minus (ii) the sum of (a) the aggregate of the Production/Acquisition Cost Reserves and (b) the aggregate of the P&A Reserves (but for these purposes only including P&A Reserves arising under clause (A) of the definition of P&A Reserves). For the avoidance of doubt, the credits under clause (i) shall be computed net of any deductions or other limitations required in accordance with the definition of the “Borrowing Base” for third party payments.

“Program” shall mean any made-for-television product (including movies of the week, mini-series and series, and any episode thereof) produced for release on cable or free television and any entertainment project produced for initial release on the internet or on a digital service such as Netflix or Amazon, in any case whether recorded on film, videotape, cassette, cartridge, disc or on or by any other means, method, process or device whether now known or hereafter developed, with respect to which a Credit Party (a) is a copyright owner or exclusive licensee, or (b) acquires any distribution rights; provided that (i) all episodes of any television series for a broadcast season shall be collectively regarded as one Program and (ii) all of the episodes or webisodes of any internet series for a “season” or production cycle shall be collectively regarded as being one Program. The term “Program” includes, without limitation, the scenario, screenplay, teleplay or script upon which such Program is based, all of the properties thereof, tangible and intangible, and whether now in existence or hereafter to be made or produced, whether or not in possession of a Credit Party, and all rights therein and thereto, of every kind and character. For the avoidance of doubt, the term “Program” shall not include any Digital Product.

“Program Declaration” shall mean, with respect to any Program produced or acquired by or on behalf of a Credit Party, a declaration, substantially in the form of Exhibit I-2.

“Public Lender” shall have the meaning given to such term in Section 13.19.

“Public-Sider” shall mean a Lender whose representatives may trade in securities of the Borrower or its controlling person or any of its Subsidiaries, including 144A securities, while in possession of the financial statements provided by the Borrower under the terms of this Credit Agreement.

“Qualified ECP Guarantor” shall mean, in respect of any Swap Obligation, each Credit Party that has total assets exceeding $10,000,000 at the time the relevant Guaranty or grant of the relevant security interest becomes or would become effective with respect to such Swap Obligation or such other Person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Qualifying Picture” shall mean a Picture which satisfies the following criteria: (1) it is being distributed in the Domestic Territory by the Borrower and/or another Approved Domestic Distributor under a Distribution Agreement, and the Borrower has secured a wide theatrical release on premium, first run screens satisfactory to the Administrative Agent and downstream distribution generally consistent with the Significant Exploitation Agreements, and

 47

 

(2) it is a feature length Picture to be produced or acquired by a Credit Party or Co-Financing Venture Entity or a Major Studio (in the case of a Revenue Participation) which (i) is scheduled to be delivered no later than one year after the Maturity Date, (ii) unless the Administrative Agent otherwise agrees, shall not be a stage play or concert film, (iii) shall be filmed predominately in color, (iv) shall be predominately in the English language, (v) is expected to receive an MPAA rating of not more restrictive than “R” (or the equivalent thereof) (or, if following receipt thereof, such rating is no more restrictive than “R” (or the equivalent thereof)), (vi) has satisfied or is capable of satisfying all other specifications set forth in each applicable Distribution Agreement to be included in the Borrowing Base, if any, (vii) shall have a running time of no less than 80 minutes, and (viii) unless the Administrative Agent otherwise agrees, has a negative cost of at least $10,000,000.

“Quiet Enjoyment” shall have the meaning given to such term in Section 8.12.

“Recipient” shall mean (a) the Administrative Agent, (b) any Lender, (c) any Issuing Bank, or (d) any other recipient of any payment to be made by or on account of any Obligation.

“Refinanced Indebtedness” shall have the meaning given to such term in Section 6.1(l).

“Register” shall have the meaning given to such term in Section 13.3(e).

“Regulation D” shall mean Regulation D of the Board.

“Related Fund” shall have the meaning given to such term in Section 13.3(c).

"Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates.

“Release” shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of Hazardous Materials into the indoor or outdoor environment, including the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata.

“Remaining Ultimates” shall mean, with respect to each Seasoned Picture being distributed by an Approved Domestic Distributor and which was released theatrically, the amounts during the First Cycle Period which are projected to thereafter become payable (but in the case of home entertainment ultimates, limited to rolling 18-month forward looking projections unless home entertainment is being distributed by, and ultimates are being provided by, a Major Studio, and such ultimates from the Major Studio show a longer tenor for projections) to the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) or to a Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation) under the applicable Distribution Agreement for the Domestic Territory from theatrical, home entertainment (including electronic sell-through, SVOD, TVOD and other digital forms) and pay television and (subject to the limitation set forth

 48

 

below) free television (or solely in cases where a Major Studio is the distributor and Ultimates Provider, any medium and from any territory for any tenor not in excess of the First Cycle Period) after deduction (without duplication) for any and all amounts deductible, recoupable or which may be offset by the applicable Approved Domestic Distributor from its obligation to make payments to the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) or Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation) (including without limitation, recoupments of any advances, print and advertising or other distribution expenses, and any distribution fees or any payments made or to be made directly by such Approved Domestic Distributor (including, without limitation, any residual, participation or contingent payment) to any Person other than a Credit Party or Co-Financing Venture Entity (with respect to the Credit Parties’ share thereof) or Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation), who is entitled to any portion of the proceeds of such Picture). The calculations of the Remaining Ultimates shall be determined solely based on the written ultimates reports provided by the Ultimates Provider that have been delivered to the Administrative Agent. The Remaining Ultimates for a Picture shall be calculated initially on the date on which such Picture becomes a Seasoned Picture (which initial calculation shall be provided to the Administrative Agent in accordance with Section 5.1(k)(i)) and thereafter in accordance with Section 5.1(k)(ii). The Remaining Ultimates (i) in the case of any receipts anticipated to be received and expenses expected to be incurred beyond one (1) year from the applicable date of determination, will be discounted to a present value based on a notional discount rate equal to the greater of (1) 8% and (2) the rate then accruing on Alternate Base Rate Loans on the applicable calculation date, and (ii) will not include any amounts in which the Administrative Agent (for the benefit of the Secured Parties) does not have a first priority perfected security interest under the UCC and applicable copyright law (subject only to the Specified Permitted Encumbrances described in Section 6.2(b)), other than with respect to Revenue Participations, in which case such perfected security interest requirement shall only apply to the payment obligation of the Major Studio in favor of the Credit Party. For the avoidance of doubt, pay-TV ultimates will be subject to the terms of the applicable rate card agreement. Additionally, Remaining Ultimates may be attributable to theatrical revenue only to the extent that (a) the Credit Parties are the theatrical distributor in the Domestic Territory and (b) the Credit Parties’ calculations of the Remaining Ultimates attributable to theatrical revenues shall be determined on conventional market standards for theatrical films. For the avoidance of doubt, the Remaining Ultimates shall not include any First Cycle Period free television value attributable to a Picture except to the extent attributable to a sale or license (including a partial-window sale) to a third party distributor of such rights.

“Remaining Ultimates Report” shall mean, with respect to any Seasoned Picture, a written estimate of the Remaining Ultimates for such Picture prepared by a Credit Party on the basis of a written ultimate report provided by an Ultimates Provider (it being understood that, in the case of anticipated free television revenues in the Domestic Territory, only the relevant underlying license agreement(s) may constitute such written ultimates reports, unless such report is prepared by a Major Studio) (that has been, or is concurrently with the Remaining Ultimates Report, delivered to the Administrative Agent), which estimate shall be calculated in the manner described in the definition of “Remaining Ultimates” and shall otherwise be in form and substance reasonably acceptable to the Administrative Agent.

 49

 

“Reportable Event” shall mean any reportable event as defined in Section 4043(c) of ERISA, other than a reportable event as to which provision for 30-day notice to the PBGC has been waived under applicable regulations.

“Required Lenders” shall mean, at any time, Lenders holding greater than 50% of the Total Commitments (or, if the Commitments have been terminated or have expired, the Credit Exposure), subject to adjustment as provided in Section 2.15.

“Reserves” shall mean collectively, the sum of the Production/Acquisition Cost Reserves and the P&A Reserves.

“Restricted Payment” shall mean (a)(i) any dividend, distribution or other direct or indirect payment on account of any Equity Interest issued by any Credit Party, (ii) any redemption or other acquisition, re-acquisition or retirement by a Credit Party of any Equity Interests issued by any Credit Party or any Affiliate thereof, now or hereafter outstanding, (iii) any payment made by any Credit Party to retire, or obtain the surrender of, any outstanding warrants, puts or options or other rights to purchase or otherwise acquire any Equity Interest issued by any Credit Party or any Affiliate thereof, now or hereafter outstanding, (iv) any payment by a Credit Party of principal of, premium, if any, or interest on, or any redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to, the Subordinated Loan Agreement or any other Subordinated Debt, (v) any payment under any Synthetic Purchase Agreement and (vi) any other payment by a Credit Party to or for the benefit of any Affiliate of such Credit Party (other than a Credit Party), or any direct or indirect members or shareholders of such Credit Party, and (b) any direct or indirect payment by a Credit Party of any obligation under the Seer P&A Facility Credit Agreement.

“Revenue Participation” shall mean any investment arising in connection with a commitment (which may be a general unsecured obligation) from a Major Studio to remit to a Credit Party the proceeds of an Equity Interest or an economic interest (as opposed to copyright ownership or distribution rights) held by a Credit Party in a Qualifying Picture.

“Revenue Participation Documentation” shall mean any and all documents or contracts by which the Credit Parties have obtained rights in any Revenue Participation.

“S&P” shall mean Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.

“Sanctions” shall mean economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or any other relevant sanctions authority.

“Sanctioned Country” shall mean, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Credit Agreement, Cuba, Iran, North Korea, Sudan, Syria and Crimea).

 50

 

“Sanctioned Person” shall mean, at any time, (i) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the European Union or any European Union member state, Her Majesty’s Treasury of the United Kingdom, or other relevant sanctions authority, (ii) any Person operating, organized or resident in a Sanctioned Country or (iii) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (i) or (ii).

“Schedule of Commitments” shall mean the schedule of Commitments of the Lenders set forth on Schedule 1.1.

“Seasoned Picture” shall mean any Picture which has been theatrically released in the Domestic Territory for at least eight (8) weeks (or such shorter period as may be requested by the Borrower and agreed by the Administrative Agent in its sole discretion).

“Second Amendment and Restatement Effective Date” shall mean the Closing Date.

“Secured Party” or “Secured Parties” shall mean the Administrative Agent, the Issuing Bank, the Lenders (including any Lender or Affiliate of a Lender to the extent that it is a Credit Party’s counterparty under a Swap Agreement permitted under Section 6.18), and any other Person owed obligations that are secured by the Liens granted to the Administrative Agent under the Fundamental Documents from time to time pursuant to the terms thereof.

“Security Document” shall have the meaning given to such term in Section 7.1(k).

“Seer P&A Facility Agent” shall mean Seer Capital Partners Master Fund L.P., as administrative agent for the lenders under the Seer P&A Facility Credit Agreement (or such successor administrative agent as may be appointed pursuant to the terms thereof).

“Seer P&A Facility Credit Agreement” shall mean the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (and as amended from time to time in accordance with the terms hereof, thereof and of the Senior Intercreditor Agreement, including as required by Section 4.1 hereof), among the Borrower, the guarantors party thereto, the lenders party thereto and the Seer P&A Facility Agent.

“Senior Intercreditor Agreement” shall mean the Amended and Restated Senior Facility Intercreditor Agreement dated as of the date hereof (and as amended from time to time), among the Administrative Agent, the Seer P&A Facility Agent and the Credit Parties.

“Significant Exploitation Agreements” shall mean (i) the Borrower’s license/exhibitor agreements in effect on the Closing Date with American Multi-Cinema, Inc., Cinemark USA, Inc., Carmike Cinemas, Inc. and Regal Entertainment Group, (ii) the film license agreement (if any) entered into by the Borrower with Cineplex Inc., and (iii) the Borrower’s multi-picture or output agreements for domestic home entertainment distribution and domestic pay television distribution and (if a multi-picture agreement is executed) free television exploitation (in the cases of clauses (i) through (iii), in form and substance satisfactory to the

 51

 

Administrative Agent and the Seer P&A Facility Agent and as amended, modified, supplemented or replaced in accordance with the terms hereof and thereof).

“Soft Dollar Transaction” shall mean any tax benefit or subsidy transaction, or other transaction commonly referred to as a “soft dollar transaction” entered into by a Credit Party in connection with the production and/or exploitation of an Item of Product.

“Special Purpose Producer” shall mean a Subsidiary of a Credit Party or other entity jointly owned by a Credit Party constituting a special purpose entity which satisfies the following criteria:

(i)        such special purpose entity is formed solely for the purpose of producing a particular Item of Product and obtaining production financing for such Item of Product directly from a third party lender or a non-Credit Party affiliate of the Borrower, in each case to the extent permitted by Section 6.27;

(ii)       (a) any such production financing shall be non-recourse to any Credit Party or any of its assets other than the Equity Interests in the relevant Special Purpose Producer, (b) in the case of financing from a non-Credit Party Affiliate, such financing shall be on terms at least as favorable to such special purpose entity as could be obtained in an arm’s length transaction with a non-affiliate, and (c) after any such financing has been repaid, such special purpose entity shall distribute all of its rights in such Item of Product and the proceeds therefrom (or an economic interest therein) to a Credit Party or such special purpose entity shall become a Credit Party; provided, that if such Item of Product was co-financed, the Administrative Agent shall (upon request of the Borrower) enter into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (as applicable) with the applicable co-financier, which agreement is in form and substance reasonably satisfactory to the Administrative Agent;

(iii)       no Credit Party shall make Investments in such special purpose entity (either in the form of cash, credit support, services or other assets, including the payment of taxes attributable to the income of such subsidiary) or otherwise be liable to make such Investments;

(iv)       the Credit Parties shall cause such special purpose entity to comply with the applicable requirements of Section 5.18(b); and

(v)       for the avoidance of doubt, such special purpose entity shall not produce any sequels, prequels, spin-offs, television series or other derivative products with respect to such Item of Product (i.e., only a separate special purpose entity or a Credit Party may do so to the extent otherwise permitted hereunder).

“Special Flood Hazard Area” means an area that FEMA’s current flood maps indicate has at least a one percent (1%) chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.

“Specified Permitted Encumbrances” shall mean (i) those Liens permitted under Sections 6.2(c), (f), (k) and (n) and (ii) to the extent the Administrative Agent has agreed in

 52

 

writing pursuant to the terms of an Interparty Agreement or intercreditor agreement, those Liens permitted under Sections 6.2(b), (g), (h), (i), (l), (m), (q), (r), (s) and (t) hereof.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to LIBOR, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentage shall include those imposed pursuant to such Regulation D. LIBOR Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Submitting Party” shall have the meaning given to such term in Section 13.12.

“Subordinated Agent” shall mean Red Fish Blue Fish, LLC, as administrative agent for the lenders under the Subordinated Loan Agreement (or such successor administrative agent as may be appointed pursuant to the terms thereof).

“Subordinated Debt” shall mean any subordinated Indebtedness of any Credit Party which is unsecured and has interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to the Required Lenders.

“Subordinated Loan Agreement” shall mean the Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (and as amended from time to time in accordance with the terms thereof and of the Subordination Agreement), among the Borrower, the guarantors party thereto, the lenders party thereto and the Subordinated Agent, pursuant to which such lenders made a subordinated loan to the Borrower in the principal amount of $35,000,000.

“Subordination Agreement” shall mean the Amended and Restated Subordination and Intercreditor Agreement dated as of October 7, 2016 (and as amended from time to time, including as required by Section 4.1 hereof), among the Administrative Agent, the Seer P&A Facility Agent, the Subordinated Agent and the Credit Parties.

“Subsidiary” shall mean with respect to any Person, any corporation, limited liability company, association, joint venture, partnership or other Person (whether now existing or hereafter organized) of which at least a majority of the voting stock or other ownership interests therein having ordinary voting power for the election of directors (or the equivalent) is, at the time as of which any determination is being made, owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person; provided, however, that for purposes of this Credit Agreement (other than in the

 53

 

definition of Unrestricted Subsidiary) and the other Fundamental Documents, an Unrestricted Subsidiary shall be deemed not to be a Subsidiary of any Credit Party.

“Supermajority Lenders” shall mean, at any time, Lenders holding greater than 66 and 2/3% of the Total Commitments (or, if the Commitments have been terminated or have expired, the Credit Exposure), subject to adjustment as provided in Section 2.15.

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

“Swap Obligation” shall mean, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Synthetic Purchase Agreement” shall mean any Swap Agreement or similar agreement or combination of agreements pursuant to which any Credit Party is or may become obligated to make (i) any payment in connection with a purchase by any third Person from a Person other than a Credit Party of any Equity Interest issued by any Credit Party or in respect of the Subordinated Loan Agreement or any other Subordinated Debt, or (ii) any payment (other than on account of a permitted purchase by it of any Equity Interest issued by any Credit Party or in respect of the Subordinated Loan Agreement or any other Subordinated Debt) the amount of which is determined by reference to the price or value at any time of any Equity Interest issued by any Credit Party or in respect of the Subordinated Loan Agreement or any other any Subordinated Debt.

“Tang” shall mean Tang Film Financing Fund I (US), Inc.

“Tang Escrow Account” shall mean the escrow account established pursuant to the terms of that certain Escrow Agreement dated as of October 18, 2015, by and among the Borrower, Tang, the Administrative Agent, and East West Bank, a California corporation as escrow agent (and any of their respective successors and assigns approved by the Administrative Agent in accordance with the terms of the underlying escrow agreement), which shall be in form and substance satisfactory to the Administrative Agent.

“Tax Incentive Consultant” has the meaning set forth in the definition of ‘Tax Incentive Receivable’.

“Tax Incentive Receivable” shall mean a monetary amount that a Credit Party or Co-Financing Venture Entity (with respect to the Credit Parties’ share thereof) is entitled to receive in cash, by no later than one year subsequent to the Maturity Date, pursuant to a tax incentive law or other similar program, including rebate and grant programs, of a jurisdiction reasonably acceptable to the Administrative Agent, in each case relating to the development, production or exploitation of an Item of Product in that jurisdiction (discounted to present value

 54

 

on a quarterly basis in the case of amounts which are not expected to be received within twelve (12) months following the date of determination, by a rate of interest equal to the interest rate in effect on the date of computation with regard to Alternate Base Rate Loans) that meets the conditions and criteria that the Administrative Agent, in its reasonable discretion, determines to be appropriate. Such receivables must be payable either (a) directly to a Credit Party or Co-Financing Venture Entity (as applicable) by the relevant granting authority or (b) directly to a Credit Party or Co-Financing Venture Entity (as applicable) by a Major Studio which is receiving such receivable directly from the relevant granting authority (i.e., there may not be credit risk of an intervening conduit), pursuant to the terms of a Co-Financing Agreement (“Acceptable Major Studio Tax Incentive”) and the conditions and criteria will, in any event, require the following:

 

(i)       All incentives (other than Acceptable Major Studio Tax Incentives) shall require the engagement of an independent third party acceptable to the Administrative Agent (a “Tax Incentive Consultant”; Global Incentives, Inc., and CFC (only with respect to Canadian incentives) are approved as of the Closing Date as Tax Incentive Consultants, subject to the Administrative Agent’s right to withdraw that approval prospectively), to supervise the application for, the monitoring of and the process for satisfying the conditions to receive, the payment of such incentive. The arrangement with the Tax Incentive Consultant must provide for a certificate from the Tax Incentive Consultant in form and substance reasonably satisfactory to the Administrative Agent (the “Tax Incentive Consultant’s Certificate”) and periodic reports (other than with respect to Acceptable Major Studio Tax Incentives) from the Tax Incentive Consultant, and such other information as shall be reasonably required by the Administrative Agent.

 

(ii)       In the case of Acceptable Major Studio Tax Incentives, delivery by the Major Studio of the following items as required by the Administrative Agent (A) a written estimate of the Credit Party’s or Co-Financing Venture Entity’s (as applicable) share of the incentives, (B) a list of the programs and jurisdictions pursuant to which the incentives are payable, (C) an agreement to provide the Administrative Agent with copies of the relevant acceptances from the relevant incentive granting authority and (D) a statement in form and substance acceptable to the Administrative Agent that the Credit Party, Co-Financing Venture Entity or Major Studio (as the case may be) plans to produce the relevant Item of Product in a manner which will satisfy the requirements of the relevant incentive program; provided that the foregoing deliverables required under this clause (ii) may be provided indirectly by the applicable Credit Party or Co-Financing Venture Entity (as applicable) so long as such items are unaltered.

 

(iii)       At the option of the Administrative Agent, that the relevant Credit Party or Co-Financing Venture Entity (as applicable) has applied for incentives and either (x) received from the appropriate granting authority a clear acceptance or approval of the incentives (including an eligibility certificate in respect of such incentive if the same is offered by the relevant jurisdiction) (such acceptance or approval, an “Approval Certificate”) and has been provided with (or has at least requested to be provided with) an estimate from the appropriate granting authority of the amount of the incentive or (y) the Credit Parties or Co-Financing Venture Entity (as applicable) have either (1) demonstrated to the satisfaction of the

 55

 

Administrative Agent that the tax incentive program has no annual cap and that sufficient appropriations exist for the Tax Incentive Receivable or (2) provided confirmation (in form and substance reasonably satisfactory to the Administrative Agent) from the granting authority that there are sufficient appropriations and/or space under any budgeting cap to pay the incentive in the amount anticipated.

 

(iv)       Except in the case of Major Studio Tax Incentive Receivables, the Approved Completion Bond for the relevant Item of Product must provide for a commitment (in form and substance satisfactory to the Administrative Agent) from the relevant Approved Completion Guarantor, as the case may be, that if it takes over the production or is the producer of such Item of Product, it will continue to produce such Item of Product so as not to knowingly (x) lessen the ability of the Item of Product to qualify for the Tax Incentive Receivable or (y) otherwise jeopardize the collectability of the Tax Incentive Receivable.

 

(v)       The incentive is for these purposes calculated net of (without double counting) any actual or anticipated (x) filing fees payable in order to obtain the incentive, (y) tax, interest, penalty, any other filing fees or other amount payable to any Governmental Authority under the Applicable Law, and (z) other amount payable to any Governmental Authority to which the credit may be or has been applied by set-off or in any other manner whatsoever by any Governmental Authority.

 

(vi)       The Administrative Agent (for the benefit of the Secured Parties) has a first priority perfected security interest in the incentive and proceeds thereof, or in the case of an Acceptable Major Studio Tax Incentive, in the Credit Party’s or Co-Financing Venture Entity’s (as applicable) claim against the Major Studio for the Credit Party’s or Co-Financing Venture Entity’s (as applicable) share of the Incentive.

 

(vii)       The Administrative Agent has received a certificate executed by an Authorized Officer of the Borrower, in form and substance satisfactory to the Administrative Agent, which confirms (x) the statutory and regulatory regime to the incentive, and (y) compliance with the conditions required by the Administrative Agent with respect to the incentive and the estimated date of receipt thereof.

 

(viii)       In the case of all Tax Incentive Receivables in excess of $1,000,000 (other than Acceptable Major Studio Tax Incentives) if the incentive is payable in a currency other than Dollars, the risk of conversion into Dollars shall be hedged in a manner satisfactory to the Administrative Agent.

(ix)       To the extent that circumstances arise or occur that would cause (or which would cause the Administrative Agent to reasonably believe) the payment for the incentive will be less than the amount that would be determined based on any estimated amounts as set forth on any Approval Certificate or on any certificate delivered by a Tax Incentive Consultant or in the estimate provided by the Major Studio, which is the counterparty to the applicable Co-Financing Agreement (as applicable), the Borrowing Base credit shall be adjusted to reflect the revised estimate (e.g., (x) the relevant party fails to comply with any requirements of the Administrative Agent under this definition, (y) the Administrative Agent determines in its reasonable discretion

 56

 

that as a result of a Change in Law it is unlikely that the Administrative Agent will receive payment for the underlying incentive or that the amount to be received will be more or less than the estimate or (z) the relevant granting authority has (A) denied the application with respect to the incentive, (B) revoked or notified the relevant party of its intention to revoke, the relevant Approval Certificate, or (C) publicly announced that it will not have sufficient appropriations to pay the incentive or that it is terminating the program pursuant to which the incentive is to be paid or modifying the program in a manner adverse to the Credit Parties’ or Co-Financing Venture Entity’s (as applicable) entitlement to the applicable incentive in any material respect). In such case, the Borrowing Base credit will be decreased as deemed appropriate by the Administrative Agent in its discretion after consultation with the Borrower.

Subject in all cases to the foregoing clause (ix), any determination by the Administrative Agent that a tax incentive jurisdiction or similar program is not acceptable for purposes of constituting a Tax Incentive Receivable hereunder shall be prospective only in that it shall not require the removal of Tax Incentive Receivables previously included in the Borrowing Base.

“Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Television Joint Ventures” shall mean any formal or effective joint venture arrangement entered into between a Credit Party and a third Person in connection with the development, production or exploitation of more than one Program or “slate” of Programs.

“Total Commitments” shall mean, at any time, the aggregate amount of the Commitments then in effect of all of the Lenders, as such aggregate amount shall be adjusted upwards or downwards from time to time in accordance with the terms of this Credit Agreement (including, without limitation, pursuant to Section 2.6).

“Trademark Security Agreement” shall mean a Trademark Security Agreement substantially in the form of Exhibit F, as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time.

“TV JV/Digital Product Investments Basket” shall have the meaning set forth in Section 6.4 hereof.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Alternate Base Rate or to LIBOR.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York on the date of execution of this Credit Agreement and as amended from time to time.

“U.K. Debenture” shall mean a debenture governed by the laws of England and Wales executed by STX Entertainment UK, Ltd. and the Administrative Agent in an agreed form between the parties.

 57

 

“Ultimates Advance Rate” shall mean, as of any date of determination, (a) with respect to home entertainment ultimates prior to the first shipping of principal packaged home entertainment materials, 70% and (b) with respect to any other ultimates permitted to be leveraged hereunder, 80%; provided, that if the Ultimates Percentage is less than 100%, then the Ultimates Advance Rate shall be 70% or 80% (as applicable) multiplied by such Ultimates Percentage, except that the Ultimates Advance Rate may never be greater than the applicable percentage set forth above.

“Ultimates Percentage” shall mean, for any date at which it is to be determined (the “Determination Date”) with respect to the four most recent Seasoned Pictures for which Remaining Ultimates have been included in the calculation of the Borrowing Base and for which six months have elapsed from the date upon which each such Picture became a Seasoned Picture, a ratio (expressed as a percentage) of (i) the sum of (a) Remaining Ultimates for such Seasoned Pictures as of the Determination Date, plus (b) the actual proceeds received by the Borrower or any Guarantor (and not payable to a third party) with respect to each such Picture after it became a Seasoned Picture but prior to the Determination Date to (ii) the total Remaining Ultimates for each such Seasoned Picture as determined on the date it first became a Seasoned Picture (including under the Existing Corporate Facility Agreement). Notwithstanding the foregoing, no ultimates, Remaining Ultimates or proceeds attributable to free television rights for any Picture shall be included in any calculation of the Ultimates Percentage.

“Ultimates Provider” shall mean (a) in the case of anticipated home entertainment revenues in the Domestic Territory, a Major Studio that is distributing home entertainment for the relevant Qualifying Picture, or other home entertainment distributor that is acceptable to the Administrative Agent under an additional or replacement home entertainment distribution agreement that is acceptable to the Administrative Agent, (b) in the case of anticipated pay television revenues in the Domestic Territory, Showtime Networks, and any other pay television distributor that is acceptable to the Administrative Agent under a replacement pay television distribution agreement that is acceptable to the Administrative Agent, (c) in the case of contracted anticipated free television revenues in the Domestic Territory, the relevant free television distributors for the Domestic Territory, (d) in the case of anticipated domestic free television revenues for a Picture prior to a sale or license of the domestic free television rights by the Credit Parties, the Borrower, (e) a Major Studio, in the context of any territory and media for which it is distributing the relevant Qualifying Picture and (f) in the case of domestic theatrical revenues, the Borrower if it is directly exploiting the rights in such medium in the Domestic Territory.

“Unasserted Contingent Obligations” shall have the meaning given to such term in the Senior Intercreditor Agreement.

“Uncompleted” shall mean, with respect to an Item of Product, such Item of Product is not Completed.

“Uniform Customs” shall have the meaning given to such term in Section 13.6.

“Unlicensed Free TV Ultimates” shall mean the Borrower’s good faith estimation of anticipated value to be realized by the Credit Parties in the First Cycle Period from the

 58

 

licensing or sale of the domestic free television rights in a Seasoned Picture that was released theatrically to the extent such domestic free television rights remain unsold or unlicensed as of the relevant date. The Unlicensed Free TV Ultimates shall be reduced to zero for a Picture upon the earlier of (a) a sale or license of the First Cycle Period domestic free television rights for such Picture, provided that in the event of only a partial-window sale of First Cycle Period domestic free television rights for such Picture, the portion of the First Cycle Period that has not been sold may remain in the Unlicensed Free TV Ultimates, and (b) two (2) years from the date on which such Picture became a Seasoned Picture. Notwithstanding anything to the contrary in the foregoing, during any such time as the Unlicensed Free TV Ultimate Percentage is determined to be less than ninety percent (90%), the Administrative Agent shall be entitled to require that a written third party valuation of Unlicensed Free TV Ultimates be delivered by a valuation firm acceptable to the Administrative Agent as to the Borrower’s contemplated value estimates (which must be refreshed or confirmed in writing at least as frequently as an updated written ultimates report of the Ultimates Provider is required to be delivered pursuant to clause (e) of the Borrowing Base), and if the third party valuation firm’s valuation is lower than the Credit Parties’, the third party valuation firm’s valuation shall govern.

“Unlicensed Free TV Ultimates Advance Rate” shall mean, as of any date of determination, with respect to unsold Domestic Territory free television rights in any Picture, 65%; provided, that if the Unlicensed Free TV Ultimates Percentage is less than 100%, then the Unlicensed Free TV Ultimates Advance Rate shall be 65% multiplied by such Unlicensed Free TV Ultimates Percentage, except that the Unlicensed Free TV Ultimates Advance Rate may never be greater than 65%.

“Unlicensed Free TV Ultimates Percentage” shall mean, for any date at which it is to be determined (the “Determination Date”) with respect to the four most recent Seasoned Pictures for which Unlicensed Free TV Ultimates have been included in the calculation of the Borrowing Base subsequent to the Closing Date and for which six months have elapsed from the date upon which each such Picture became a Seasoned Picture, a ratio (expressed as a percentage) of (i) the sum of (a) Remaining Ultimates, Unlicensed Free TV Ultimates and uncollected Eligible Receivables (without double counting) for such Seasoned Pictures as of the Determination Date, in each case to the extent attributable to domestic free television rights of the subject Pictures plus (b) the actual proceeds received by the Borrower or any Guarantor (and not payable to a third party) with respect to the free television rights in each such Picture after it became a Seasoned Picture but prior to the Determination Date to (ii) the total Unlicensed Free TV Ultimates for each such Seasoned Picture as determined on the date it first became a Seasoned Picture. Notwithstanding the requirement above that four Seasoned Pictures be included in the calculation of Unlicensed Free TV Ultimates Percentage, until such time as four Seasoned Pictures are available, the Unlicensed Free TV Ultimates Percentage shall be calculated using such lesser amount of Seasoned Pictures as are available. The initial calculation of Unlicensed Free TV Ultimates Percentage shall take place upon the earlier of (A) six months following the date upon which the second Picture released by the Borrower after the closing date becomes a Seasoned Picture and (B) one year following the date upon which the first Picture released by the Borrower after the closing date becomes a Seasoned Picture. Until the initial calculation of Unlicensed Free TV Ultimates Percentage as set forth above, the Unlicensed Free TV Ultimates Percentage shall be deemed to be 100%.

 59

 

“Unrestricted Subsidiary” shall mean:

(i)              any Subsidiary of the Borrower that is designated as an Unrestricted Subsidiary by the Managing Member of the Borrower in the manner provided below and has nominal assets and value at the time of such designation; and

(ii)            each Subsidiary of an Unrestricted Subsidiary.

The Managing Member of the Borrower may designate any Subsidiary of the Borrower (including any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger or consolidation or Investment therein) to be an Unrestricted Subsidiary only if:

(1)       neither such Subsidiary nor any of its Subsidiaries owns any Equity Interest or Indebtedness of or has any Investment in, or owns or holds any Lien on any property of, any other Subsidiary of the Borrower that is not a Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary;

(2)       all the Indebtedness of such Subsidiary and its Subsidiaries shall, at the date of designation, and will at all times thereafter, consist of debt that is not in any way recourse to the Credit Parties;

(3)       such Subsidiary is a Person with respect to which neither the Borrower nor any Subsidiary (other than any Unrestricted Subsidiary) has any direct or indirect obligation:

(a)       to subscribe for additional Equity Interests, or make additional contributions to the capital, of such Person; or

(b)       to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and

(4)       after giving effect to such designation, no Default or Event of Default shall be continuing.

Any such designation by the Managing Member of the Borrower shall be evidenced by delivering to the Administrative Agent a written resolution of the Managing Member of the Borrower giving effect to such designation and an officers’ certificate certifying that such designation complies with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Credit Agreement and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date.

The Managing Member of the Borrower may designate any Unrestricted Subsidiary to no longer be an Unrestricted Subsidiary; provided, that immediately after giving effect to such redesignation, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

“Unsold Rights Credit” shall mean, with respect to a Picture to be exploited internationally through an Approved Foreign Sales Agent on behalf of a Credit Party and

 60

 

intended to be exploited in the Domestic Territory by the Borrower or another Approved Domestic Distributor, in each case, on behalf of a Credit Party (and as to which the proceeds will be paid to such Credit Party), on any date of determination, an amount equal to:

(i)       50% (subject to decrease on a Picture by Picture basis, as described below) of the aggregate of the Major Territory Value Forecasts for such Picture attributed to the Major Territories that remain unsold as of the date of determination, minus

(ii)       any Borrowing Base credit attributable to receivables derived from any pre-sales in respect of such Picture relating to foreign non-Major Territories, which pre-sales are consummated after any Unsold Rights Credit in respect of such Picture is first included in the Borrowing Base, minus

(iii)       the positive difference of (i) the Borrowing Base credit attributable to receivables derived from pre-sales in respect of such Picture relating to Major Territories, which Major Territories were unsold when the Unsold Rights Credit in respect of such Picture is first included in the Borrowing Base, minus (ii) the Borrowing Base credit attributable to such Major Territories prior to such pre-sales, i.e., 50% of the Major Territory Value Forecast in respect of each such pre-sold Major Territory (before giving effect to any Indexing Adjustments that may have arisen), minus

(iv)       the amount of actual sale proceeds received by a Credit Party in respect of a pre-sale of such Picture in any foreign territory (whether or not a Major Territory) to the extent exceeding the Borrowing Base credit previously attributed to receivables derived from a pre-sale in such foreign territory;

provided, that on any date of determination (x) at least three (3) Major Territories shall have been sold and (y) at least two (2) Major Territories remain unsold. Notwithstanding the foregoing, commencing with the first Picture for which an Unsold Rights Credit is requested (and tested as set forth below), the 50% advance rate for such Picture shall be subject to decrease (but not increase) to a percentage equal to the product of 50% multiplied by a fraction: (a) the numerator of which is the actual aggregate sale proceeds received (or receivable pursuant to Eligible Receivables) with respect to sold Major Territories for such Picture, and (b) the denominator of which is the aggregate Major Territory Value Forecast for such Major Territories included in the calculation of the Unsold Rights Credit given at the time of the initial determination of each such component of the aggregate Unsold Rights Credit for such Picture. Such computation for each such Picture will be made upon the sale of a third Major Territory in respect of such Picture and at each subsequent Major Territory sale in respect of such Picture, and the adjustment shall apply to the entire Unsold Rights Credit in respect of such Picture at all times from the date of such computation but prior to the next adjustment computation. The Unsold Rights Credit for a Picture (which, as set forth above, shall not become available for inclusion in the Borrowing Base until at least three (3) Major Territories have been sold) shall be calculated initially on the first date on which such Picture is included in any component of the Borrowing Base, and may not be subsequently increased.

 

“Unsold TV Rights Credit” shall mean, with respect to a Program to be exploited internationally through an Approved Foreign Sales Agent on behalf of a Credit Party (and as to

 61

 

which the proceeds will be paid to such Credit Party), on any date of determination, an amount equal to:

(i)       25%, increasing to 50% with the inclusion of Unsold TV Rights Credit in the Borrowing Base for the third Program for which the Unsold TV Rights Credit is utilized (subject to decrease on a Program by Program basis, as described below) of the aggregate of the Major Territory Value Forecasts for such Program attributed to the Major Territories that remain unsold as of the date of determination, minus

(ii)       any Borrowing Base credit attributable to receivables derived from any pre-sales in respect of such Program relating to foreign non-Major Territories, which pre-sales are consummated after any Unsold TV Rights Credit in respect of such Program is first included in the Borrowing Base, minus

(iii)       the positive difference of (i) the Borrowing Base credit attributable to receivables derived from pre-sales in respect of such Program relating to Major Territories, which Major Territories were unsold when the Unsold TV Rights Credit in respect of such Program is first included in the Borrowing Base, minus (ii) the Borrowing Base credit attributable to such Major Territories prior to such pre-sales, i.e., 50% of the Major Territory Value Forecast in respect of each such pre-sold Major Territory (before giving effect to any Indexing Adjustments that may have arisen), minus

(iv)       the amount of actual sale proceeds received by a Credit Party in respect of a pre-sale of such Program in any foreign territory (whether or not a Major Territory) to the extent exceeding the Borrowing Base credit previously attributed to receivables derived from a pre-sale in such foreign territory;

provided, that on any date of determination (x) the Domestic Territory and at least two (2) Major Territories shall have been sold and (y) at least two (2) Major Territories remain unsold. Notwithstanding the foregoing, commencing with the first Program for which an Unsold TV Rights Credit is requested (and tested as set forth below), the 25% (or 50%, as the case may be) advance rate for such Program shall be subject to decrease (but not increase) to a percentage equal to the product of 25% (or 50%, as the case may be) multiplied by a fraction: (a) the numerator of which is the actual aggregate sale proceeds received (or receivable pursuant to Eligible Receivables) with respect to sold Major Territories for such Program, and (b) the denominator of which is the aggregate Major Territory Value Forecast for such Major Territories included in the calculation of the Unsold TV Rights Credit given at the time of the initial determination of each such component of the aggregate Unsold TV Rights Credit for such Program. Such computation for each such Program will be made upon the sale of a third Major Territory in respect of such Program and at each subsequent Major Territory sale in respect of such Program, and the adjustment shall apply to the entire Unsold TV Rights Credit in respect of such Program at all times from the date of such computation but prior to the next adjustment computation. The Unsold TV Rights Credit for a Program (which, as set forth above, shall not become available for inclusion in the Borrowing Base until the Domestic Territory and at least two (2) Major Territories have been sold) shall be calculated initially on the first date on which such Program is included in any component of the Borrowing Base, and may not be subsequently increased.

 62

 

 

“USA Patriot Act” shall mean the U.S.A. Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“U.S. Person” shall mean any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in clause (f) of Section 2.13.

“Withholding Agent” shall mean any Credit Party and the Administrative Agent.

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

2.               THE LOANS

SECTION 2.1           Loans.

(a)             Each Lender, severally and not jointly, agrees, upon the terms and subject to the conditions hereof, to make Loans to the Borrower on any Business Day on and after the Closing Date to but excluding the Maturity Date each in a principal amount which, when added to such Lender’s Pro Rata Share of the Credit Exposure, plus such Lender’s Pro Rata Share of the Reserves, does not exceed such Lender’s Commitment.

(b)            Notwithstanding anything to the contrary in this Section 2.1, a Lender shall not be obligated to make any Loan or participate in any Letter of Credit if, as a result thereof, either (i) the sum of the Credit Exposure plus the aggregate amount of the Reserves, would exceed the Total Commitment or (ii) the Credit Exposure would exceed the Borrowing Base then in effect.

(c)             Subject to the terms and conditions of this Credit Agreement, the Borrower may borrow, repay and re-borrow amounts not to exceed, at any given time, the lesser of (i) the Total Commitment minus the aggregate amount of the Reserves and (ii) the Borrowing Base then in effect; provided, that as of the date of any Borrowing of any amount included in a Reserve, the applicable Reserve amount shall not be deducted for purposes of determining availability hereunder for such Borrowing.

SECTION 2.2           Making of Loans.

(a)             Each Loan shall be an Alternate Base Rate Loan or a LIBOR Loan, as the Borrower may request, subject to and in accordance with this Section 2.2.

(b)            The Borrower shall give the Administrative Agent at least three (3) Business Days’ prior written, facsimile or telephonic (promptly confirmed in writing) notice of

 63

 

each Borrowing which is to consist of LIBOR Loans, and at least one (1) Business Day’s prior written, facsimile or telephonic (promptly confirmed in writing) notice of each Borrowing which is to consist of Alternate Base Rate Loans. Each such written or facsimile notice or written confirmation under this Section 2.2(b) shall be in the form of a Borrowing Notice. Each Borrowing Notice in order to be effective must be received by the Administrative Agent not later than 2:00 p.m., New York City time, on the day required and shall specify the date (which shall be a Business Day) on which such Borrowing is to be made and the aggregate principal amount of the requested Borrowing. Each such Borrowing Notice shall be irrevocable and shall specify whether the Borrowing then being requested is to consist of Alternate Base Rate Loans or LIBOR Loans and in the case of a Borrowing consisting of LIBOR Loans, the Interest Period or Interest Periods with respect thereto. If no election of an Interest Period is specified in such Borrowing Notice in the case of a Borrowing consisting of LIBOR Loans, such notice shall be deemed to be a request for an Interest Period of one (1) month. If no election is made as to the Type of Loan, such Borrowing Notice shall be deemed a request for a Borrowing consisting of Alternate Base Rate Loans. No Borrowing shall consist of LIBOR Loans if after giving effect thereto an aggregate of more than twelve (12) separate LIBOR Loans would be outstanding hereunder with respect to each Lender (determined in accordance with Section 2.8(c)). In the event a Default or an Event of Default shall have occurred and be continuing, unless the Required Lenders otherwise consent, the Borrower may not elect to have any new Borrowings be treated as LIBOR Loans.

(c)             The Administrative Agent shall promptly notify each Lender of its Pro Rata Share of each Borrowing under this Section 2.2, the date of such Borrowing, the Type of Loans being requested and the Interest Period or Interest Periods applicable thereto. On the borrowing date specified in such notice, each Lender shall make its Pro Rata Share of the Borrowing available at the Funding Office for credit to the JPMorgan Clearing Account (with a specific reference to “STX Financing, LLC ”) no later than 2:00 p.m., New York City time, in Federal or other immediately available funds solely by wire transfer. Except in the case of the provisions of this Credit Agreement covering the reimbursement of the Letters of Credit, upon receipt of the funds to be made available by the Lenders to fund any Borrowing hereunder, the Administrative Agent shall disburse such funds by depositing the requested amounts into the account specified in the applicable Borrowing Notice.

(d)            Each Lender may, at its option, fulfill its obligation to make LIBOR Loans by causing a foreign branch or Affiliate of such Lender to fund such LIBOR Loans; provided, that any exercise of such option shall not affect the obligation of the Borrower to repay Loans in accordance with the terms hereof or increase the costs to the Borrower payable hereunder in respect of LIBOR Loans. Subject to the other provisions of this Section 2.2 and the provisions of Section 2.8, Loans of more than one Type may be outstanding at the same time.

(e)             Each Loan requested hereunder on any date shall be made as part of a Borrowing consisting of Loans of the same Type made by the Lenders ratably in accordance with their respective Percentages.

(f)             On the date requested by the Borrower for the funding of each Loan, the Administrative Agent shall be authorized (but not obligated) to advance, for the account of each

 64

 

Lender, the amount of the Loan to be made by such Lender in accordance with its Percentage hereunder. Each Lender hereby authorizes and requests the Administrative Agent to advance for its account, pursuant to the terms hereof, the amount of the Loan to be made by it, and each Lender agrees forthwith to reimburse the Administrative Agent in immediately available funds for the amount so advanced on its behalf by the Administrative Agent. If any such reimbursement is not made in immediately available funds on the same day on which the Administrative Agent shall have made any such amount available on behalf of any Lender, then such Lender shall pay interest to the Administrative Agent on the unreimbursed amount at a rate per annum equal to the rate of interest on Alternate Base Rate Loans. If and to the extent that any such reimbursement shall not have been made by any such Lender to the Administrative Agent, the Borrower agrees to repay to the Administrative Agent forthwith on demand a corresponding amount with interest thereon for each day from the date such amount is made available to the Borrower to (but excluding) the date such amount is repaid to the Administrative Agent at the rate of interest on Alternate Base Rate Loans.

(g)            The amount of any Borrowing consisting of new Loans shall be in an aggregate principal amount of at least $100,000 (or such lesser amount as shall equal (i) the available but unused portion of the Commitments, (ii) the amount of available Borrowing Base then in effect or (iii) the amount of any Borrowing required to fund drawings under a Letter of Credit), or such greater amount which is an integral multiple of $50,000.

(h)            Notwithstanding the provisions of Section 2.2(b) above and/or the absence of a request from the Borrower that the Lenders make a Loan, the Administrative Agent may direct the Lenders to make Loans in accordance with Section 12.1(b)(xi) with respect to any Item of Product for which Loans have been made hereunder so as to ensure Completion of such Item of Product and/or the collection of accounts receivable.

SECTION 2.3           Notes; Repayment.

(a)             At the request of any Lender, each Loan made by such Lender hereunder shall be evidenced by a promissory note in such Lender’s favor substantially in the form of Exhibit A (each, a “Note” and collectively, the “Notes”) in the face amount of such Lender’s Commitment, payable to the order of such Lender, duly executed by an Authorized Officer of the Borrower and dated as of the Second Amendment and Restatement Effective Date. The Notes issued by the Borrower in favor of the lenders under the Corporate Credit Agreement and the Production Credit Agreement shall be returned to the Borrower for cancellation upon the issuance of new Notes as of the Closing Date.

(b)            The outstanding principal balance of each Loan shall be payable in full and all outstanding Letters of Credit shall be cash collateralized on the Maturity Date, subject to mandatory prepayment as provided in Section 2.9 and acceleration as provided in Article 7.

(c)             Each of the Loans shall bear interest on the outstanding principal balance thereof as set forth in Section 2.4. Each Lender and the Administrative Agent on its behalf is hereby authorized by the Borrower, but not obligated, to enter the amount of each Loan and the amount of each payment or prepayment of principal or interest thereon in the appropriate spaces on the reverse of or on an attachment to any Notes; provided, however, the failure of any Lender

 65

 

or the Administrative Agent to set forth such Loans, principal payments or other information shall not in any manner affect the obligations of the Borrower to repay such Loans.

SECTION 2.4           Interest on Loans.

(a)             In the case of a LIBOR Loan, interest shall be payable at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to LIBOR plus the Applicable Margin. Interest shall be payable on each LIBOR Loan in arrears on each applicable Interest Payment Date, on the Maturity Date, on the date of a conversion of such LIBOR Loan to an Alternate Base Rate Loan and on the date of any prepayment hereunder. The Administrative Agent shall determine the applicable LIBOR for each Interest Period as soon as practicable on the date when such determination is to be made in respect of such Interest Period and shall notify the Borrower and the Lenders of the applicable interest rate so determined. Such determination shall be conclusive absent manifest error.

(b)            In the case of an Alternate Base Rate Loan, interest shall be payable at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365/366 days, as the case may be, during such times as the Alternate Base Rate is based upon the Prime Rate and over a year of 360 days at all other times) equal to the Alternate Base Rate plus the Applicable Margin. Interest shall be payable in arrears on each Alternate Base Rate Loan on each applicable Interest Payment Date, on the Maturity Date and on the date of any prepayment hereunder.

(c)             Interest in respect of any Loan hereunder shall accrue from and including the date such Loan is made to but excluding the date on which such Loan is paid or converted to a Loan of a different Type.

(d)            Anything in this Credit Agreement or the Notes to the contrary notwithstanding, the interest rate on the Loans or with respect to any drawing under a Letter of Credit shall in no event be in excess of the maximum rate permitted by Applicable Law.

SECTION 2.5           Commitment Fees and Other Fees.

(a)             The Borrower agrees to pay to the Administrative Agent for the account of each Lender on the last Business Day of each March, June, September and December (commencing on the last Business Day of December 2016) prior to the Maturity Date and on the date of any termination or reduction of the Commitments, as applicable, and on the Maturity Date, an aggregate fee (the “Commitment Fees”), payable in arrears and equal to (i) 0.75% per annum so long as the Credit Exposure is less than 50% of the Total Commitments, and (ii) 0.50% per annum so long as the Credit Exposure is greater than or equal to 50% of the Total Commitments, in each case, computed on a daily basis and on the basis of a 360 day year, on the amount by which such Lender’s Commitment in effect on such day exceeds such Lender’s Pro Rata Share of the Credit Exposure in effect on such day.

(b)            The Commitment Fees shall commence to accrue from the Closing Date and shall continue to accrue until the earlier of (i) the Maturity Date and (ii) the date upon which the Total Commitments are otherwise terminated in accordance herewith.

 66

 

(c)             The Borrower agrees to pay all other fees that are then due and payable pursuant hereto or pursuant to any fee letter executed by any Credit Party with respect to the Facility.

SECTION 2.6           Optional Termination or Reduction of Commitments.

(a)             Upon at least three (3) Business Days’ prior written, facsimile or telephonic (promptly confirmed in writing) notice given prior to 2:00 p.m., New York City time, to the Administrative Agent, the Borrower may at any time in whole or in part permanently reduce or terminate the Total Commitments (without premium or penalty but subject to Section 2.6(b) and Section 2.9(b)). In the case of a partial reduction, each such reduction of the Total Commitments shall be in a minimum aggregate principal amount of $500,000 or an integral multiple of $100,000; provided, however, the Total Commitments may in no event (i) be reduced by more than the amount of the then unused Total Commitments (after giving effect to any prepayment by the Borrower in accordance with Section 2.9) or (ii) be reduced to an amount less than the sum of the Credit Exposure plus the aggregate amount of the Reserves. Any partial reduction of the Total Commitments shall be made among the Commitments of the Lenders in accordance with their respective Percentages.

(b)            Simultaneously with each such termination or reduction of the Total Commitments pursuant to Section 2.6(a), the Borrower shall pay to the Administrative Agent for the benefit of each Lender all accrued and unpaid Commitment Fees on the amount of the Commitments so terminated or reduced through the date of such termination or reduction.

(c)             At any time the L/C Exposure would exceed the L/C Sublimit as a result of a decrease in the Total Commitments, the Borrower shall cash collateralize Letters of Credit in an amount such that the L/C Exposure (excluding in any such calculation for the purposes of this Section 2.6(c), any previously cash collateralized Letters of Credit) is equal to or less than the L/C Sublimit.

SECTION 2.7           Default Interest; Alternate Rate of Interest.

(a)             Upon the occurrence and during the continuance of an Event of Default, (after, as well as before judgment), the Borrower shall on demand from time to time pay interest on any then unpaid amount of the Obligations at a rate per annum of 2.00% in excess of the rate otherwise then in effect (computed as aforesaid).

(b)            In the event, and on each occasion, that two (2) Business Days prior to the commencement of any Interest Period for a LIBOR Loan, (i) the Administrative Agent shall have received notice from any Lender of such Lender’s determination (which determination shall be conclusive absent manifest error) that Dollar deposits in the amount of the principal amount of such LIBOR Loan are not generally available in the London Interbank Market or that the rate at which such Dollar deposits are being offered will not adequately and fairly reflect the cost to such Lender of making or maintaining the principal amount of such LIBOR Loan during such Interest Period, or (ii) the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that reasonable means do not exist for ascertaining the applicable LIBOR, then the Administrative Agent shall, as soon as practicable

 67

 

thereafter, give written or facsimile notice of such determination to the Borrower and the Lenders, and (x) any request by the Borrower for a conversion to or continuation as a LIBOR Borrowing pursuant to Section 2.8 made after receipt of such notice and until the circumstances giving rise to such notice no longer exist, shall be ineffective and (y) any request by the Borrower for a LIBOR Borrowing made after receipt of such notice and until the circumstances giving rise to such notice no longer exist, shall be deemed to be a request for an Alternate Base Rate Borrowing; provided, however, that in the circumstance described in clause (i) above such deemed request shall only apply to the affected Lender’s portion thereof. After such notice shall have been given and until the circumstances giving rise to such notice no longer exist, each request (or portion thereof, as the case may be) for a LIBOR Borrowing, to the extent such request relates to such affected Lender’s portion shall be deemed to be a request for an Alternate Base Rate Borrowing.

SECTION 2.8           Continuation and Conversion of Loans. The Borrower shall have the right, at any time, (i) to convert any LIBOR Loan or portion thereof to an Alternate Base Rate Loan or to continue such LIBOR Loan or a portion thereof for a successive Interest Period, or (ii) to convert any Alternate Base Rate Loan or a portion thereof to a LIBOR Loan, subject to the following:

(a)             the Borrower shall give the Administrative Agent prior written, facsimile or telephonic (promptly confirmed in writing) notice of each continuation or conversion hereunder of (i) at least three (3) Business Days for continuation as or conversion to a LIBOR Loan and (ii) one (1) Business Day for conversion to an Alternate Base Rate Loan; such notice shall be irrevocable and, to be effective, must be received by the Administrative Agent not later than 2:00 p.m., New York City time, on the day required;

(b)            unless the Required Lenders otherwise consent, no Default or Event of Default shall have occurred and be continuing at the time of any conversion to a LIBOR Loan, any request for a new LIBOR Loan or any continuation of any such LIBOR Loan into a subsequent Interest Period;

(c)             no Alternate Base Rate Loan (or portion thereof) may be converted to a LIBOR Loan and no LIBOR Loan may be continued as a LIBOR Loan if, after such conversion or continuation, and after giving effect to any concurrent prepayment of Loans, an aggregate of more than twelve (12) separate LIBOR Loans would be outstanding hereunder with respect to each Lender (for purposes of determining the number of such Loans outstanding, Loans with different Interest Periods shall be counted as different Loans even if made on the same date);

(d)            if fewer than all Loans at the time outstanding shall be continued or converted, such continuation or conversion shall be made pro rata among the Lenders in accordance with the respective Percentage of the principal amount of such Loans held by the Lenders immediately prior to such continuation or conversion;

(e)             the aggregate principal amount of Loans continued as or converted to LIBOR Loans as part of the same Borrowing shall be in a minimum aggregate principal amount of $100,000 or such greater amount that is an integral multiple of $50,000;

 68

 

(f)             accrued interest on the LIBOR Loans (or portion thereof) being continued shall be paid by the Borrower at the time of continuation;

(g)            the Interest Period with respect to a new LIBOR Loan effected by a continuation or conversion shall commence on the date of such continuation or conversion;

(h)            if a LIBOR Loan is converted to another Type of Loan prior to the last day of the Interest Period with respect thereto, the amounts required by Section 2.9(b) shall be paid as provided in such Section;

(i)              each request for a continuation as or conversion to a LIBOR Loan which fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period of one (1) month; and

(j)              in the event that the Borrower shall not timely give the Administrative Agent a notice to continue or convert any LIBOR Loan as provided above, then such Loan (unless repaid) shall automatically be converted to an Alternate Base Rate Loan at the expiration of the then current Interest Period.

The Administrative Agent shall, after it receives notice from the Borrower, promptly give the Lenders notice of any continuation or conversion.

SECTION 2.9           Voluntary and Mandatory Prepayment of Loans; Reimbursement of Lenders.

(a)             Subject to the terms of the Senior Intercreditor Agreement and Section 2.9(b) below, the Borrower shall have the right at its option at any time and from time to time to prepay without premium or penalty (i) any Alternate Base Rate Loan, in whole or in part, upon at least one (1) Business Day’s prior written, facsimile or telephonic (promptly confirmed in writing) notice given prior to 2:00 p.m., New York City time, to the Administrative Agent, in a minimum aggregate principal amount of $100,000 or such greater amount that is an integral multiple of $50,000 if prepaid in part, or the remaining balance of such Loan if prepaid in full, and (ii) any LIBOR Loan, in whole or in part, upon at least three (3) Business Days’ prior written, facsimile or telephonic (promptly confirmed in writing) notice, in a minimum aggregate principal amount of $100,000 or such greater amount which is an integral multiple of $50,000 if prepaid in part, or the remaining balance of such Loan if prepaid in full. Each notice of prepayment shall specify the prepayment date, each Loan to be prepaid and the principal amount thereof, shall be irrevocable and shall commit the Borrower to prepay such Loan in the amount and on the date stated therein. All prepayments under this Section 2.9(a) shall be accompanied by accrued but unpaid interest on the principal amount being prepaid to (but excluding) the date of prepayment. Notwithstanding anything to the contrary contained in this Credit Agreement, the Borrower may rescind any notice of prepayment given under this Section 2.9(a) in anticipation of a proposed refinancing of the Facility if such refinancing is not consummated or is otherwise delayed; provided, that the Borrower shall compensate each Secured Party in accordance with Section 2.9(b) below for any loss, cost or expense incurred by such Secured Party and payable by the Borrower as a result thereof.

 69

 

(b)            The Borrower shall reimburse each Lender on demand for any loss, cost or expense incurred or to be incurred by any such Lender in the reemployment of the funds released (i) by any prepayment (for any reason) of any LIBOR Loan if such Loan is repaid prior to the last day of the Interest Period for such Loan, or (ii) in the event that, after the Borrower delivers a notice of Borrowing under Section 2.2(b) or a notice of continuation or conversion of a Borrowing under Section 2.8(a) in respect of LIBOR Loans, such Loan is not made, converted to or continued as a LIBOR Loan on the first day of the Interest Period specified in such notice of Borrowing for any reason other than (A) a suspension or limitation under Section 2.7(b) of the right of the Borrower to select a LIBOR Loan, (B) a breach by any such Lender of its obligation to fund such Borrowing when it is otherwise required to do so hereunder, or (C) a repayment resulting from a conversion required by a Lender pursuant to Section 2.11(a). Such loss, cost or expense shall be the amount as reasonably determined by such Lender as the excess, if any, of (I) the amount of interest which would have accrued to such Lender on the amount so paid or not borrowed, continued or converted at a rate of interest equal to the interest rate applicable to such Loan pursuant to Section 2.4, for the period from the date of such payment or failure to borrow, continue or convert to the last day (x) in the case of a payment prior to the last day of the Interest Period for such Loan, of the then current Interest Period for such Loan, or (y) in the case of a failure to borrow, continue or convert, of the Interest Period for such Loan which would have commenced on the date of such failure to borrow, continue or convert, over (II) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. Each Lender shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss, cost or expense as determined by such Lender, which certificates shall be conclusive absent manifest error. The Borrower shall pay such Lender the amounts shown on such certificate within ten (10) Business Days of the Borrower’s receipt of such certificate. The Administrative Agent or any affected Lender is hereby authorized (but not obligated) to debit any deposit account of any Credit Party now or hereafter maintained by such Credit Party at such entity (including, without limitation, the JPMorgan Clearing Account, any Cash Collateral Account or any Collection Account), upon notice to the Borrower (which may be delivered telephonically), to pay any such amounts that are not paid when due.

(c)             In the event the Borrower fails to prepay any Loan on the date specified in any prepayment notice delivered pursuant to Section 2.9(a), the Borrower shall pay to the Administrative Agent for the account of the applicable Lender any amounts required to compensate such Lender for any actual loss incurred by such Lender as a result of such failure to prepay, including, without limitation, any loss, cost or expenses incurred by reason of the acquisition of deposits or other funds by such Lender to fulfill deposit obligations incurred in anticipation of such prepayment. Each Lender shall deliver to the Borrower and the Administrative Agent from time to time one or more certificates setting forth the amount of such loss, cost or expense as determined by such Lender, which certificates shall be conclusive absent manifest error. The Borrower shall pay such Lender the amounts shown on such certificate within ten (10) Business Days of the Borrower’s receipt of such certificate. The Administrative Agent or any affected Lender is hereby authorized (but not obligated) to debit any deposit account of any Credit Party now or hereafter maintained by such Credit Party at such entity (including, without limitation, the JPMorgan Clearing Account, any Cash Collateral

 70

 

Account or any Collection Account), upon notice to the Borrower (which may be delivered telephonically), to pay any such amounts that are not paid when due.

(d)            The Obligations (other than the Unasserted Contingent Obligations) shall be paid in full and all outstanding Letters of Credit shall be terminated or cash collateralized on the Maturity Date.

(e)             If at any time the Credit Exposure exceeds the lesser of (i) the Total Commitments, minus the aggregate amount of the Reserves and (ii) the Borrowing Base then in effect (other than, for the avoidance of doubt, as a direct and immediate result of the change in status of an Acceptable Obligor or Allowable Amount pursuant to Section 2.16 or removal of a Tax Incentive Receivable from the Borrowing Base at the election of the Administrative Agent or the Required Lenders), the Borrower shall, within five (5) Business Days after the first day on which such excess exists, repay the Loans and/or cash collateralize outstanding Letters of Credit in an amount necessary to eliminate such excess.

(f)             All proceeds of Collateral paid (or required to be paid) into the Corporate Priority Collection Account and received as of the last day of the immediately preceding month shall be applied by the Borrower on the 20th day of each month (or more frequently at the Borrower’s option) in accordance with the Senior Intercreditor Agreement; provided, that if an Event of Default has occurred and is continuing, all such proceeds and all other amounts that the Credit Parties are entitled to receive, including proceeds of Production Priority Collateral (but subject to any third-party rights under any applicable intercreditor agreement, Interparty Agreement or Co-Financing Intercreditor Agreement) shall (to the extent payable to the Administrative Agent pursuant to the Senior Intercreditor Agreement) be applied upon receipt to satisfy the Obligations in the manner set forth in Section 8.7.

(g)            Simultaneously with the optional termination and/or reduction of the Total Commitments pursuant to Section 2.6, the Borrower shall repay Loans and/or cash collateralize outstanding Letters of Credit in an amount equal to the excess (if any) of (i) the sum of the Credit Exposure plus the aggregate amount of the Reserves, over (ii) the Total Commitments after giving effect to such termination or reduction.

(h)            Unless otherwise designated in writing by the Borrower and subject to the provisions of Section 2.9(k), all prepayments of principal shall be applied to the applicable principal payment set forth in this Section 2.9, first to the repayment of the principal amount of all then outstanding Alternate Base Rate Loans and then, to the repayment of the principal amount of all then outstanding LIBOR Loans in order of the scheduled expiry of Interest Periods with respect thereto.

(i)              All prepayments shall be accompanied by accrued but unpaid interest on the principal amount being prepaid to but not including the date of prepayment.

(j)              If, on any day on which Loans are required to be prepaid (each, a “Prepayment Date”), the aggregate principal amount of the Loans required to be so prepaid would exceed the then outstanding aggregate principal amount of the Loans that constitute Alternate Base Rate Loans, and no Default or Event of Default is then continuing, then on such

 71

 

Prepayment Date the Borrower may, at its option, deposit Dollars into the Cash Collateral Account in an amount equal to such excess. If the Borrower makes such deposit, then (i) only the outstanding Alternate Base Rate Loans shall be required to be prepaid on such Prepayment Date, and (ii) on the last day of each Interest Period with respect to any LIBOR Loan ending after such Prepayment Date, the Administrative Agent is irrevocably authorized and directed to apply funds from the Cash Collateral Account, if any (and liquidate investments held in such Cash Collateral Account as necessary) to prepay LIBOR Loans for which the Interest Period is then ending until the aggregate principal amount of all Loans prepaid pursuant to clauses (i) and (ii) above equals the aggregate principal amount of Loans which would have been required to be prepaid on such Prepayment Date but for the operation of this Section 2.9(j).

(k)            Except as otherwise specifically provided in this Article 2, should any payment or prepayment of principal of or interest on the Loans or any other amount due hereunder, become due and payable on a day other than a Business Day, the due date of such payment or prepayment shall be extended to the next succeeding Business Day and, in the case of a payment or prepayment of principal, interest shall be payable thereon at the rate herein specified during such extension.

SECTION 2.10        Increased Costs.

(a)             If any Change in Law shall:

(i)              impose, modify or deem applicable any reserve, special deposit, liquidity, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in LIBOR) or any Issuing Bank;

(ii)            subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii)          impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Credit Agreement or Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender, such Issuing Bank or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender, Issuing Bank or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, Issuing Bank or other Recipient, the Borrower will pay to such Lender, Issuing Bank or other Recipient, as the case may be, such additional amount or amounts (without duplication) as will

 72

 

compensate such Lender, Issuing Bank or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

(b)            Capital Requirements. If any Lender or Issuing Bank determines that any Change in Law affecting such Lender or Issuing Bank or any lending office of such Lender or such Lender’s or Issuing Bank’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s or Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence of this Credit Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by any Issuing Bank, to a level below that which such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company for any such reduction suffered.

(c)             Certificates for Reimbursement. A certificate of a Lender or Issuing Bank or other Recipient setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or Issuing Bank or other Recipient or its holding company, as the case may be, as specified in clause (a) or (b) of this Section and delivered to the Borrower, shall be conclusive absent manifest error. The Borrower shall pay such Lender or Issuing Bank or other Recipient, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. The Administrative Agent, the Issuing Bank or such Lender are hereby authorized (but not obligated) to debit any deposit account of any Credit Party now or hereafter maintained by such Credit Party at such entity (including, without limitation, the JPMorgan Clearing Account, any Cash Collateral Account or any Collection Account), upon notice to the Borrower (which may be delivered telephonically), to pay such amount if not paid when due.

(d)            Delay in Requests. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided, that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to this Section 2.10 for any increased costs incurred or reductions suffered more than two hundred seventy (270) days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s or Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof).

(e)             The Issuing Bank and each Lender agree that after it becomes aware of the occurrence of an event or the existence of a condition that (i) would cause it to incur any increased cost hereunder or render it unable to perform its agreements hereunder for the reasons specifically set forth in Section 2.7(b), this Section 2.10 or Section 2.11, or (ii) would require the Borrower to pay an increased amount under Section 2.7(b), this Section 2.10 or Section 2.13, it will use commercially reasonable efforts to notify the Borrower of such event or

 73

 

condition and, to the extent not inconsistent with the Issuing Bank’s or such Lender’s internal policies, will use commercially reasonable efforts to make, fund or maintain the affected Loans of such Lender, or if applicable, to issue, make, maintain or participate in Letters of Credit as required under Section 2.17, through another Lending Office of the Issuing Bank or such Lender if as a result thereof the additional monies which would otherwise be required to be paid or the reduction of amounts receivable by the Issuing Bank or such Lender thereunder in respect of such Loans or Letters of Credit or participations therein would be materially reduced, or such inability to perform would cease to exist, or the increased costs which would otherwise be required to be paid in respect of such Loans or Letters of Credit or participations therein pursuant to Section 2.7(b), this Section 2.10 or Section 2.13 would be materially reduced or Taxes or other amounts otherwise payable under Section 2.7(b), this Section 2.10 or Section 2.13 would be materially reduced, and if, as determined by the Issuing Bank or such Lender, in its sole discretion, the making, funding or maintaining of such Loans, or the issuance, making, maintaining or participation in such Letters of Credit, through such other Lending Office would not otherwise adversely affect such Loans or Letters of Credit or the Issuing Bank or such Lender. Notwithstanding the foregoing, a failure on the part of the Issuing Bank or any Lender to provide notice or take any other action pursuant to this Section 2.10(e) shall not affect the Borrower’s obligation to make any payments or deductions required by this Article 2. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by the Issuing Bank or any Lender in connection with any such designation or assignment.

SECTION 2.11        Change in Legality.

(a)             Notwithstanding anything to the contrary contained elsewhere in this Credit Agreement, if any change after the Closing Date in any Applicable Law, guideline or order, or in the interpretation thereof by any Governmental Authority charged with the administration thereof, shall make it unlawful for any Lender to make or maintain any LIBOR Loan or to give effect to its obligations as contemplated hereby with respect to a LIBOR Loan, then, by written notice to the Borrower and the Administrative Agent, such Lender may (i) declare that LIBOR Loans will not thereafter be made by such Lender hereunder for as long as such condition may be continuing, and/or (ii) require that, subject to Section 2.9(b), all outstanding LIBOR Loans made by it be converted to Alternate Base Rate Loans, whereupon all of such LIBOR Loans shall automatically be converted to Alternate Base Rate Loans, as of the effective date of such notice as provided in Section 2.11(b) below. Such Lender’s Pro Rata Share of any subsequent LIBOR Borrowing shall instead, be an Alternate Base Rate Loan unless such declaration is subsequently withdrawn.

(b)            A notice to the Borrower by any Lender pursuant to Section 2.11(a) above shall be effective for purposes of clause (ii) thereof, if lawful to delay its effectiveness, on the last day of the current Interest Period for each outstanding LIBOR Loan; and in all other cases, on the date of receipt of such notice by the Borrower.

SECTION 2.12        Manner of Payments. Subject to Section 2.15, all payments of principal and interest by the Borrower in respect of any Loans shall be remitted to the Lenders in accordance with their Pro Rata Share of the outstanding Loans and all Borrowings hereunder shall be made by the Lenders in accordance with their Pro Rata Share thereof. All payments by the Borrower hereunder shall be absolute and unconditional obligations not subject to offset,

 74

 

counterclaim, recoupment or reduction of any kind and shall be made in Dollars in Federal or other immediately available funds at the Funding Office for credit to the JPMorgan Clearing Account (with a specific reference to “STX Financing LLC) no later than 2:00 p.m., New York City time, on the date on which such payment shall be due.

SECTION 2.13        Taxes.

(a)             Defined Terms. For purposes of this Section 2.13, the term “Lender” includes any Issuing Bank and the term “Applicable Law” includes FATCA.

(b)            Payments Free of Taxes. Any and all payments by or on account of any obligation of any Credit Party under any Fundamental Document shall be made without deduction or withholding for any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Credit Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(c)             Payment of Other Taxes by the Credit Parties. The Credit Parties shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Administrative Agent timely reimburse the Administrative Agent for the payment (provided the Administrative Agent delivers to the Credit Parties evidence of such payment, which shall be conclusive absent manifest error) of, any Other Taxes.

(d)            Indemnification by the Credit Parties. The Credit Parties shall jointly and severally indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.13) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate setting forth in reasonable detail the basis for and amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. The Administrative Agent or such Lender is hereby authorized (but not obligated) to debit any deposit account of any Credit Party now or hereafter maintained by such Credit Party at such entity (including, without limitation, the JPMorgan Clearing Account, any Cash Collateral Account or any Collection Account) upon notice to the Borrower (which may be delivered telephonically), to pay such amount if not paid when due.

 75

 

(e)             Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender or to such Lender’s Affiliate that is a counterparty to a Swap Agreement that is an Obligation (but only to the extent that any Credit Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Credit Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 13.3(h) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender or to such Lender’s Affiliate that is a counterparty to a Swap Agreement that is an Obligation, in each case, that are payable or paid by the Administrative Agent in connection with any Fundamental Document (including, for the avoidance of doubt, payments by the Administrative Agent pursuant to Section 12.2 made with respect to Swap Agreement), and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Fundamental Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this clause (e).

(f)             Evidence of Payments. As soon as practicable after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section 2.13, such Credit Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(g)            Status of Lenders. (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Fundamental Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.13(g) (ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender. If the Administrative Agent is not a Lender and it is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Fundamental Document, it shall deliver to the Borrower, at the time or times reasonably requested by the Borrower, such properly completed

 76

 

and executed documentation reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, the Administrative Agent (if not a Lender) shall deliver such other documentation reasonably requested by the Borrower as will enable the Borrower to determine whether or not the Administrative Agent is subject to backup withholding or information reporting requirements.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Credit Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent) (and in each case, if the Administrative Agent is making the request, it shall request a sufficient number of copies so as to be able to provide one copy to the Borrower, and shall promptly provide such copy to the Borrower upon receipt by the Administrative Agent), whichever of the following is applicable:

(i) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States of America is a party (x) with respect to payments of interest under any Fundamental Document, executed originals of IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Fundamental Document, IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” or other similar article of such tax treaty;

(ii) executed originals of IRS Form W-8ECI;

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit N-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN or W-8BEN-E; or

(iv) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form

 77

 

W-8BEN or W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit N-2 or Exhibit N-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided, that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit N-4 on behalf of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent) (and in each case, if the Administrative Agent is making the request, it shall request a sufficient number of copies so as to be able to provide one copy to the Borrower, and shall promptly provide such copy to the Borrower upon receipt by the Administrative Agent), executed originals of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Fundamental Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment under FATCA. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Credit Agreement.

Each Lender (as well as the Administrative Agent, if the Administrative Agent is not a Lender) agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(h)            Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.13 (including by the payment of additional amounts pursuant to this Section 2.13), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.13 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the

 78

 

request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this clause (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. If the indemnifying party in such instance is a Credit Party and the indemnified party is the Administrative Agent or a Lender, the Administrative Agent or such Lender is hereby authorized (but not obligated) to debit any deposit account of any Credit Party now or hereafter maintained by such Credit Party at such entity (including, without limitation, the JPMorgan Clearing Account, any Cash Collateral Account or any Collection Account) upon notice to the Borrower (which may be delivered telephonically), to pay such refund if the applicable Credit Party fails to do so within ten (10) Business Days following a request therefor. Notwithstanding anything to the contrary in this clause (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this clause (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This clause (h) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i)              Each party’s obligations under this Section 2.13 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Fundamental Document.

SECTION 2.14        Interest Adjustments.

(a)             If the provisions of this Credit Agreement or any Note would at any time require payment by the Borrower to a Lender of any amount of interest in excess of the maximum amount then permitted by the law applicable to any Loan, the interest payments to that Lender shall be reduced to the extent necessary so that such Lender shall not receive interest in excess of such maximum amount. If, as a result of the foregoing, a Lender receives interest payments hereunder or under a Note in an amount less than the amount otherwise provided hereunder, such deficit (hereinafter called the “Interest Deficit”) will, to the fullest extent permitted by Applicable Law, cumulate and will be carried forward (without interest) until the termination of this Credit Agreement. Interest otherwise payable to a Lender hereunder or under a Note for any subsequent period shall be increased by the maximum amount of the Interest Deficit that may be so added without causing such Lender to receive interest in excess of the maximum amount then permitted by the law applicable to the Loans.

(b)            The amount of any Interest Deficit relating to a particular Loan or Note shall be treated as a prepayment penalty and shall, to the fullest extent permitted by Applicable Law, be paid in full at the time of any optional prepayment by the Borrower to the Lenders of all the Loans at that time outstanding pursuant to Section 2.9(a). The amount of any Interest Deficit relating to a particular Loan or Note at the time of any complete payment of the Loans at that time outstanding (other than an optional prepayment thereof pursuant to Section 2.9(a)), shall be canceled and not paid.

SECTION 2.15       

 79

 

Defaulting Lenders. Notwithstanding any provision of this Credit Agreement to the contrary, if any Lender becomes a Defaulting Lender, the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(a)             Fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.5.

(b)            The Commitment and Credit Exposure of such Defaulting Lender shall not be included in determining whether all Lenders or the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or modification pursuant to Section 13.10(a)), except that any amendment, waiver or modification requiring the consent of all Lenders or each affected Lender which affects such Defaulting Lender or all Defaulting Lenders differently than other affected Lenders shall require the consent of such Defaulting Lender.

(c)             If any L/C Exposure exists at the time that a Lender becomes a Defaulting Lender, then:

(i)              all or any part of such Defaulting Lender’s Pro Rata Share of the L/C Exposure (the “Defaulting Lender’s L/C Exposure”) shall be reallocated among the non-Defaulting Lenders in accordance with their respective Percentages, but only to the extent that (x) (A) the sum of all non-Defaulting Lenders’ Pro Rata Shares of the Credit Exposure prior to giving effect to such reallocation, plus the Defaulting Lender’s L/C Exposure, does not exceed (B) the sum of all non-Defaulting Lenders’ Commitments minus the non-Defaulting Lenders’ Pro Rata Shares of the Reserves, (y) (A) each Non-Defaulting Lender’s Pro Rata Share of the Credit Exposure prior to giving effect to such reallocation, plus such Lender’s share of the Defaulting Lender’s L/C Exposure does not exceed (B) such Lender’s Commitment minus such Lender’s Pro Rata Share of the Reserves, and (z) the conditions set forth in Section 4.4 are satisfied at such time;

(ii)            if the reallocation described in Section 2.15(c)(i) above cannot, or can only partially, be effected, then the Borrower shall, within three (3) Business Days following notice by the Administrative Agent, cash collateralize the Defaulting Lender’s L/C Exposure (after giving effect to any partial reallocation pursuant to Section 2.15(c)(i) above) in accordance with the procedures set forth in Section 2.17(i) for so long as the Defaulting Lender’s L/C Exposure is outstanding and such Defaulting Lender’s Commitment has not been assigned to a non-Defaulting Lender;

(iii)          if the Borrower cash collateralizes any portion of the Defaulting Lender’s L/C Exposure pursuant to Section 2.15(c)(ii) above, then the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.17(h) with respect to the Defaulting Lender’s L/C Exposure during the period that the Defaulting Lender’s L/C Exposure is cash collateralized;

(iv)          if the non-Defaulting Lenders’ Pro Rata Shares of the L/C Exposure are reallocated pursuant this Section 2.15(c), then the fees payable to the Lenders pursuant to

 80

 

Section 2.5(a) and Section 2.17(h) shall be adjusted in accordance with such non-Defaulting Lenders’ Percentages after giving effect to such reallocation; and

(v)            if the Defaulting Lender’s L/C Exposure is neither cash collateralized nor reallocated pursuant to this Section 2.15(c), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all fees payable under Section 2.17(h) with respect to the Defaulting Lender’s L/C Exposure shall be payable to the Issuing Bank until such Defaulting Lender’s L/C Exposure is cash collateralized and/or reallocated.

(d)            So long as any Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit unless it is satisfied that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or cash collateral is provided by the Borrower in accordance with Section 2.15(c) above, and participating interests in any such newly issued, amended or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.15(c)(i) above (and Defaulting Lenders shall not participate therein).

(e)             Any of the Reserves in existence at a time that a Lender becomes a Defaulting Lender shall be reallocated among the non-Defaulting Lenders in accordance with their respective Percentages but only to the extent that the sum of (A) all non-Defaulting Lenders’ Pro Rata Shares of the Credit Exposure (after adjustment pursuant to this Section 2.15) and of the Reserves immediately prior to giving effect to such reallocation, plus (B) the Defaulting Lender’s Pro Rata Share of the Reserves, in each case at such time, does not exceed the sum of all non-Defaulting Lenders’ Commitments at such time.

(f)             So long as no Event of Default shall have occurred and be continuing, any amount payable hereunder to such Defaulting Lender (other than a Lender which is a Defaulting Lender solely as a result of clause (v) of the definition of Defaulting Lender herein, but which Defaulting Lender has otherwise fulfilled all of its obligations under this Credit Agreement) (whether on account of principal, interest, fees or otherwise and including any amount that would otherwise be payable to such Defaulting Lender pursuant to Section 12.3 but excluding payments to the Defaulting Lender pursuant to Section 13.10(b)) shall, in lieu of being distributed to such Defaulting Lender, be retained by the Administrative Agent in a segregated account and, subject to any Applicable Law, be applied at such time or times as may be determined by the Administrative Agent (i) first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, (ii) second, to the payment of any amounts owing by such Defaulting Lender to the Issuing Bank hereunder, (iii) third, to the funding or cash collateralization of any participating interest in any Letter of Credit in respect of which such Defaulting Lender has failed to fund its Pro Rata Share as required by this Credit Agreement, (iv) fourth, to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its Pro Rata Share as required by this Credit Agreement, (v) fifth, if so determined by the Administrative Agent and the Borrower, held in such account as cash collateral for future funding obligations of the Defaulting Lender under this Credit Agreement, (vi) sixth, pro rata, to the payment of any amounts owing to the Borrower or the Lenders as a result of (A) a written acknowledgement of such Defaulting Lender of its breach of its obligations under this Credit Agreement or (B) any judgment of a court of competent jurisdiction obtained by the Borrower or any Lender against such Defaulting Lender as a result

 81

 

of such Defaulting Lender’s breach of its obligations under this Credit Agreement, and (vii) seventh, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided, however, that if such payment is (x) a prepayment of the principal amount of any outstanding Loans or reimbursement obligations in respect of Letters of Credit with respect to which a Defaulting Lender has funded its participation obligations, and (y) made at a time when the conditions set forth in Section 4.4 are satisfied, such payment shall be applied solely to prepay the outstanding Loans of, and reimbursement obligations owed to, all non-Defaulting Lenders pro rata prior to being applied to the prepayment of any outstanding Loans of, or reimbursement obligations owed to, such Defaulting Lender.

(g)            Upon the occurrence and during the continuance of an Event of Default, all amounts which would otherwise be payable to the Defaulting Lender (other than a Lender which is a Defaulting Lender solely as a result of clause (v) of the definition of “Defaulting Lender” herein, but which Defaulting Lender has otherwise fulfilled its obligations under this Credit Agreement) shall, in lieu of being distributed to such Defaulting Lender, be applied first, to satisfy in full the Obligations owing to the Administrative Agent, the Issuing Bank and the non-Defaulting Lenders in accordance with the other provisions of this Credit Agreement, second, to satisfy any damage claims of the Administrative Agent, the Issuing Bank and the non-Defaulting Lenders against such Defaulting Lender for its failure to fulfill its obligations under this Credit Agreement, and third, the balance, if any, to satisfy the Obligations owing to such Defaulting Lender.

(h)            In the event that the Administrative Agent, the Borrower and the Issuing Bank each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to become a Defaulting Lender, then the L/C Exposure shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Percentage and such Lender shall thereafter no longer constitute a Defaulting Lender hereunder (unless and until such Lender again becomes a Defaulting Lender).

(i)              Neither the provisions of this Section 2.15, nor the provisions of any other Section of this Credit Agreement relating to a Defaulting Lender, are intended by the parties hereto to constitute liquidated damages. Subject to the limitations contained in Section 13.8 regarding special, indirect, consequential and punitive damages, each of the Administrative Agent each non-Defaulting Lender and each Credit Party hereby reserves its respective rights to proceed against such Defaulting Lender for any damages incurred as a result of it becoming a Defaulting Lender hereunder. For purposes of establishing a damages claim, with regard to any obligations of a Defaulting Lender allocated to and/or performed by another party to this Credit Agreement, that Defaulting Lender shall be deemed to have received a notice from the Administrative Agent with regard to such obligations and to have failed to perform them.

SECTION 2.16        Provisions Relating to the Borrowing Base.

(a)             The Administrative Agent or Required Lenders may from time to time by written notice to the Borrower (i) remove any Acceptable Obligor or Affiliated Group from Schedule 2.16, or (ii) decrease the Allowable Amount for any Acceptable Obligor or Affiliated

 82

 

Group or (iii) reclassify any Acceptable Obligor or Affiliated Group into a different category of Acceptable Obligor with the effect of reducing the advance rates in the Borrowing Base with respect to Eligible Receivables from such Acceptable Obligor, in each case as the Administrative Agent or the Required Lenders, as the case may be, acting in good faith may deem appropriate as a result of an adverse change in the circumstances of such Acceptable Obligor or Affiliated Group; provided, however, that any such removal, decrease or reclassification shall be effective on a prospective basis only and shall not be effective (x) with respect to any Acceptable Obligor or Affiliated Group if, prior to the Borrower’s receipt of such notice, any of the Credit Parties has executed a deal memo or other written agreement with such Acceptable Obligor or Affiliated Group with respect to amounts to be paid to such Person solely in connection with an Item of Product and such execution occurs not more than thirty (30) days prior to the initial extension of credit hereunder in respect of such Item of Product, and (y) to the extent that giving effect to such notice would otherwise result in a mandatory prepayment by the Borrower under Section 2.9(e) ((but, subject to the provisos in Section 2.16(d) and (e) below regarding changes to Allowable Amounts and reclassified Acceptable Obligors or Affiliated Groups and extensions of credit for Borrower Items of Product in respect to which an initial funding has occurred, such notice shall nevertheless be effective for all other purposes under this Credit Agreement). The Administrative Agent or the Required Lenders (as applicable) agree to consult with the Borrower regarding any removal, decrease or reclassification contemplated hereby to the extent practicable and permitted by Applicable Law, provided, that the failure to do so shall not render ineffective any such removal, decrease or reclassification, and any such removal, decrease or reclassification shall be effective notwithstanding any such consultation.

(b)            The Required Lenders may (either independently or after a request has been received from the Borrower) from time to time by written notice to the Borrower, as they may in their discretion deem appropriate, (i) add or reinstate an Acceptable Obligor or Affiliated Group to Schedule 2.16, or (ii) increase the Allowable Amount for any Acceptable Obligor or Affiliated Group or (iii) reclassify any Acceptable Obligor into a different category of Acceptable Obligor with the effect of increasing the advance rates in the Borrowing Base with respect to Eligible Receivables from such Acceptable Obligor.

(c)             In the event the Administrative Agent or the Required Lenders notify the Borrower that an Acceptable Obligor or Affiliated Group is removed from Schedule 2.16 in accordance with Section 2.16(a), no new Eligible Receivables from such Person or Affiliated Group may be included in the Borrowing Base, and any existing Eligible Receivables may no longer be included in the Borrowing Base for purposes of further Loans made hereunder, in each case subsequent to such notice, unless supported by an Acceptable L/C or Required Lenders thereafter notify the Borrower that such Acceptable Obligor or Affiliated Group is reinstated as an Acceptable Obligor in accordance with Section 2.16(b).

(d)            In the event the Administrative Agent or the Required Lenders notify the Borrower that the Allowable Amount with respect to an Acceptable Obligor or Affiliated Group is to be reduced in accordance with Section 2.16(a), (i) no new Eligible Receivables from such Acceptable Obligor or Affiliated Group may be included in a Borrowing Base subsequent to such notice if such inclusion would result in the aggregate amount of Eligible Receivables from

 83

 

such Acceptable Obligor or Affiliated Group being in excess of the Allowable Amount for such Acceptable Obligor or Affiliated Group after giving effect to such reduction, and (ii) no further Loans shall be made on the basis of Eligible Receivables from such Acceptable Obligor or Affiliated Group subsequent to such notice if such Loans would result in the Credit Exposure exceeding the Borrowing Base after giving effect to such reduction, in each case to the extent of such excess only, unless such excess is supported by an Acceptable L/C or Required Lenders thereafter notify the Borrower that the Allowable Amount for such Acceptable Obligor or Affiliated Group is increased in accordance with Section 2.16(b); provided, however, that notwithstanding the foregoing, any reduction of an Allowable Amount with respect to an Acceptable Obligor or Affiliated Group shall have no effect on existing Eligible Receivables included in the Borrowing Base for purposes of Loans to fund the Direct Negative Cost of an Item of Product for which an initial Loan was made prior to such reduction.

(e)             In the event the Administrative Agent or the Required Lenders notify the Borrower that any Acceptable Obligor or Affiliated Group is reclassified into a different category of Acceptable Obligor with the effect of reducing the advance rates in the Borrowing Base with respect to Eligible Receivables from such Acceptable Obligor or Affiliated Group in accordance with Section 2.16(a), (i) any additional Eligible Receivables from such Acceptable Obligor may be included in a Borrowing Base subsequent to such notice only if classified at the new category of Acceptable Obligor or Affiliated Group and at the new advance rate after giving effect to such reclassification, and (ii) no further Loans shall be made on the basis of existing Eligible Receivables from such Acceptable Obligor or Affiliated Group subsequent to such notice if such Loans would result in the Credit Exposure exceeding the Borrowing Base after giving effect to such reduction, in each case unless Required Lenders thereafter notify the Borrower that such Acceptable Obligor or Affiliated Group is reclassified in accordance with Section 2.16(b); provided, however, that notwithstanding the foregoing, any reclassification of an Acceptable Obligor shall have no effect on existing Eligible Receivables included in the Borrowing Base for purposes of Loans to fund the Direct Negative Cost of an Item of Product for which an initial Loan was made prior to such reclassification.

(f)             Notwithstanding anything to the contrary contained on Schedule 2.16 hereof, subject to their respective delivery of an executed Notice of Assignment to the Administrative Agent, Tang and Huayi shall each be deemed to constitute an Acceptable Obligor in the context of their commitments to provide co-financing contributions to the Borrower’s films to the extent that their respective co-financing commitments are secured by an Acceptable L/C or by amounts deposited in the Tang Escrow Account or the Huayi Escrow Account, respectively.

SECTION 2.17          Letters of Credit.

(a)             Subject to the terms and conditions hereof and Applicable Law, the Issuing Bank agrees to issue Letters of Credit denominated in Dollars from time to time on and after the Closing Date and prior to the Maturity Date upon the request of the Borrower in order to support one or more uses described in Section 5.16; provided, however, (i) the Borrower shall not request that any Letter of Credit be issued and the Issuing Bank shall not be obligated to issue, amend, renew or extend any such Letter of Credit if, after giving effect thereto (and upon any such issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall

 84

 

be deemed to represent and warrant that), (A) the then current L/C Exposure would exceed the L/C Sublimit, or (B) the Credit Exposure would exceed the lesser of (x) the Total Commitments minus the aggregate amount of the Reserves and (y) the Borrowing Base then in effect, and (ii) in no event shall the Issuing Bank issue any Letter of Credit having an expiration date (A) later than five (5) Business Days prior to the Maturity Date or pursuant to which drafts drawn thereunder would be payable later than five (5) Business Days prior to the Maturity Date, or (B) more than one (1) year after its issuance (or, in the case of any renewal or extension thereof, one (1) year after such renewal or extension), unless the Issuing Bank agrees to issue a Letter of Credit for a period longer than one (1) year.

(b)            Each Letter of Credit may, at the option of the Issuing Bank, provide that the Issuing Bank may (but shall not be required to) pay all or any part of the maximum amount which may at any time be available for drawing thereunder to the beneficiary thereof upon the occurrence and continuation of an Event of Default; provided, however, that if payment is not then due to the beneficiary, the Issuing Bank may deposit the funds in question in a segregated account with the Issuing Bank to secure payment to the beneficiary and any funds so deposited shall be paid to the beneficiary of the Letter of Credit if the conditions to such payment are satisfied, or returned to the Issuing Bank (or, (x) if all Obligations shall have been paid in full in cash and all other outstanding Letters of Credit are cash collateralized, to the Borrower or (y) if the Lenders shall have reimbursed the Issuing Bank for such amounts pursuant to the terms hereof, to the Lenders) if no payment to the beneficiary has been made and the final date available for drawings under the Letter of Credit has passed. Each payment or deposit of funds by the Issuing Bank as provided in this clause (b) shall be treated for all purposes of this Credit Agreement as a drawing duly honored by the Issuing Bank under the related Letter of Credit.

(c)             Whenever the Borrower desires the issuance of a Letter of Credit (which, for purposes of this Section 2.17(c), includes any amendment, renewal or extension of an outstanding Letter of Credit), it shall deliver to the Issuing Bank and the Administrative Agent a written notice no later than 2:00 p.m., New York City time, at least five (5) Business Days prior to the proposed date of issuance. Such notice shall specify (i) the proposed date of issuance (which shall be a Business Day), (ii) the face amount of the Letter of Credit, (iii) the expiration date of the Letter of Credit, (iv) the name and address of the beneficiary, (v) the Item of Product in respect of which the Letter of Credit is being issued (if applicable), and (vi) the other applicable information that would be required to be included in a Borrowing Notice. Such notice shall be accompanied by a brief description of the underlying transaction and upon request of the Issuing Bank the Borrower shall provide additional details regarding the underlying transaction. Concurrently with the giving of written notice of a request for the issuance of a Letter of Credit, the Borrower shall specify a precise description of the documents and the verbatim text of any certificate to be presented by the beneficiary of such Letter of Credit which, if presented by such beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Bank to make payment under the Letter of Credit; provided, however, that the Issuing Bank, in its reasonable discretion, may require customary changes in any such documents and certificates. Upon issuance, the Issuing Bank shall notify the Administrative Agent and the Borrower of the issuance of such Letter of Credit. Promptly after receipt of such notice, the Administrative Agent shall notify each Lender of the issuance and the amount of each such Lender’s respective participation therein. At the Borrower’s request, the

 85

 

Issuing Bank shall provide the Borrower with a copy of the form of Letter of Credit to be issued for the Borrower’s review and approval prior to issuance. If requested by the Issuing Bank, the Borrower shall also submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Credit Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Credit Agreement shall control.

(d)            The payment of drafts under any Letter of Credit shall be made in accordance with the terms of such Letter of Credit and the International Standby Practices 1998 of the International Chamber of Commerce Publication No. 590, as adopted or amended from time to time. The Issuing Bank shall be entitled to honor any drafts and accept any documents presented to it by the beneficiary of such Letter of Credit in accordance with the terms of such Letter of Credit and believed by the Issuing Bank in good faith to be genuine. The Issuing Bank shall not have any duty to inquire as to the accuracy or authenticity of any draft or other drawing documents which may be presented to it, but shall be responsible only to determine in accordance with customary commercial practices that the documents which are required to be presented before payment or acceptance of a draft under any Letter of Credit have been delivered and that they comply on their face with the requirements of that Letter of Credit.

(e)             If the Issuing Bank makes an L/C Disbursement (regardless of whether a Default or Event of Default or acceleration has occurred), the Issuing Bank shall give notice of such L/C Disbursement to the Lenders and each Lender hereby authorizes and requests the Issuing Bank to advance for its account pursuant to the terms hereof its share of such L/C Disbursement based upon its participation in the Letter of Credit and agrees promptly to reimburse the Issuing Bank in immediately available funds for the amount so advanced on its behalf. If such reimbursement is not made by any Lender in immediately available funds on the same day on which the Issuing Bank shall have made such L/C Disbursement, then such Lender shall pay interest to the Issuing Bank on such unreimbursed amount at a rate per annum equal to the rate of interest on Alternate Base Rate Loans. In the case of any draft presented under a Letter of Credit which is required to be paid at any time on or before the Maturity Date, such payment of the unreimbursed L/C Disbursement by any Lender shall constitute an Alternate Base Rate Loan hereunder and interest shall accrue thereon from the date the Issuing Bank made such L/C Disbursement at the rate specified in Section 2.4.

(f)             If the Issuing Bank makes any L/C Disbursements, the Borrower hereby requests a Loan in the amount of any such L/C Disbursement be made automatically, without further action by the Borrower. If any draft is presented under a Letter of Credit, payment of which is required to be made after the Maturity Date or when there is insufficient availability under this Facility, then the Borrower will, upon demand by the Issuing Bank, pay to the Issuing Bank, in immediately available funds, the full amount of such draft (or in the case of insufficient availability, the amount of such deficiency). If such payment is not made by the Borrower and the Issuing Bank shall make an L/C Disbursement, the Issuing Bank shall give notice of such L/C Disbursement to the Lenders and each Lender hereby authorizes and requests the Issuing Bank to advance for its account pursuant to the terms thereof its share of such L/C

 86

 

Disbursement based upon its participation in the Letter of Credit and agrees promptly to reimburse the Issuing Bank in immediately available funds for the amount so advanced on its behalf. If such reimbursement is not made by any Lender in immediately available funds on the same day on which the Issuing Bank shall have made such L/C Disbursement, then such Lender shall pay interest thereon to the Issuing Bank on such unreimbursed amount at a rate per annum equal to the rate of interest on Alternate Base Rate Loans. Such payment of the unreimbursed L/C Disbursement by any Lender shall constitute an Alternate Base Rate Loan hereunder and interest shall accrue thereon from the date the Issuing Bank made such L/C Disbursement at the rate specified in Section 2.4.

(g)            The Borrower’s obligation to reimburse L/C Disbursements as provided in Section 2.17(f) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Credit Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Credit Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.17, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. None of the Administrative Agent, the Lenders, the Issuing Bank, or any of their respective directors, officers, employees, agents or advisors, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided, however, that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by Applicable Law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. In the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the Person seeking indemnification does not appeal within the time required), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

 87

 

(h)            (i) The Borrower shall pay the following amount to the Issuing Bank with respect to Letters of Credit issued by it hereunder:

A.       with respect to the issuance, amendment, transfer or any other transaction related to each Letter of Credit and each drawing made thereunder, documentary and processing charges (provided, that no commitment fee shall be charged in relation thereto) in accordance with the Issuing Bank’s standard schedule for such charges in effect at the time of such issuance, amendment, transfer or drawing, as the case may be; and

B.       a fronting fee payable to the Issuing Bank for the period from and including the date of issuance of each Letter of Credit to its expiration, computed at a rate equal to 0.25% per annum of the daily average L/C Exposure (calculated in the same manner as interest is calculated on LIBOR Loans), such fee to be due and payable in arrears on and through the last Business Day of each March, June, September and December (commencing with the last Business Day of December 2016) prior to the Maturity Date, on the Maturity Date and on the expiration of the last outstanding Letter of Credit.

(ii)            The Borrower shall pay to the Administrative Agent for distribution to each Lender in respect of its L/C Exposure, such Lender’s Pro Rata Share of a commission calculated at a rate per annum equal to the Applicable Margin for LIBOR Loans (calculated in the same manner as interest) of the L/C Exposure. Such commission shall be payable in arrears on and through the last Business Day of each March, June, September and December (commencing with the last Business Day of December 2016) prior to the Maturity Date, on the Maturity Date and on the expiration of the last outstanding Letter of Credit.

(iii)          Promptly upon receipt by the Issuing Bank or the Administrative Agent, as applicable, of any amount described in clause (ii) of this Section 2.17(h), or any amount described in Sections 2.17(f) and (g) above previously reimbursed to the Issuing Bank by the Lenders, the Issuing Bank shall distribute to each Lender its Pro Rata Share of such amount. Amounts payable under sub-clauses (i)(A) and (i)(B) of this Section 2.17(h) shall be paid directly to the Issuing Bank and shall be for its exclusive use.

(i)              If at any time when an Event of Default shall have occurred and be continuing, any Letters of Credit shall remain outstanding, then the Required Lenders, the Administrative Agent or the Issuing Bank may, at their or its option, require the Borrower to deliver to the Issuing Bank cash or Cash Equivalents in an amount equal to the full amount of the L/C Exposure or to furnish other security acceptable to the Issuing Bank. Any amounts so delivered pursuant to the preceding sentence shall be applied to reimburse the Issuing Bank for the amount of any L/C Disbursements; provided, however, that if at any time after any such delivery of cash or Cash Equivalents or any such furnishing of other security no Default or Event of Default is then continuing, the Issuing Bank shall return all of such Collateral relating to such deposit to the Borrower upon request.

 88

 

(j)              The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

(k)            Notwithstanding the termination of the Commitments and the repayment of the Loans, the obligations of the Borrower under this Section 2.17 shall remain in full force and effect until the Issuing Bank and the Lenders shall have been irrevocably released from their obligations with regard to any and all Letters of Credit.

(l)              Upon at least three (3) Business Days’ prior written, facsimile or telephonic (promptly confirmed in writing) notice given prior to 2:00 p.m., New York City time, to the Administrative Agent and the Issuing Bank, the Borrower may at any time reduce the amount of the L/C Sublimit; provided that no such reduction of the L/C Sublimit shall be permitted if, after giving effect thereto (i) the L/C Exposure exceeds the L/C Sublimit, (ii) any Lender’s outstanding Loans and its portion of L/C Disbursements that have not yet been reimbursed by or on behalf of the Borrower exceeds its Commitment and (iii) the sum of the outstanding Loans and L/C Disbursements exceeds the Total Commitments.

(m)           Notwithstanding anything herein to the contrary, the Issuing Bank shall have no obligation hereunder to issue, and shall not issue, any Letter of Credit the proceeds of which would be made available to any Person (i) to fund any activity or business of or with any Sanctioned Person, or in any country or territory that, at the time of such funding, is the subject of any Sanctions or (ii) in any manner that would result in a violation of any Sanctions by any party to this Agreement.

(n)            Each Letter of Credit may, at the option of the Issuing Bank, provide that the Issuing Bank may (but shall not be required to) pay all or any part of the maximum amount which may at any time be available for drawing thereunder to the beneficiary thereof upon the occurrence and continuation of an Event of Default and the acceleration of the maturity of the Loans; provided that, if payment is not then due to the beneficiary, the Issuing Bank may deposit the funds in question in a segregated account with the Issuing Bank to secure payment to the beneficiary and any funds so deposited shall be paid to the beneficiary of the Letter of Credit if the conditions to such payment are satisfied, or returned to the Issuing Bank (or, (x) if all Obligations shall have been paid in full in cash, to the Borrower or (y) if the Lenders shall have reimbursed the Issuing Bank for such amounts and all other outstanding Letters of Credit are cash collateralized pursuant to the terms hereof, to the Lenders) if no payment to the beneficiary has been made and the final date available for drawings under the Letter of Credit has passed. Each payment or deposit of funds by the Issuing Bank as provided in this clause (n) shall be treated for all purposes of this Credit Agreement as a drawing duly honored by the Issuing Bank under the related Letter of Credit.

(o)            The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank; provided that such replacement Issuing Bank has a credit rating at least equal to that of the Issuing Bank being replaced. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing

 89

 

Bank pursuant to this Credit Agreement. From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Credit Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. Subject to the appointment and acceptance of a successor Issuing Bank, the Issuing Bank may resign as the Issuing Bank at any time upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, the Issuing Bank shall be replaced in accordance with this Section 2.17(o).

SECTION 2.18        Increase of Commitments.

(a)             The Borrower may, by written notice to the Administrative Agent from time to time after the Effective Date, request that the Total Commitments be increased by up to $200,000,000 in the aggregate (any such increase in the Total Commitments shall be referred to as an “Upsize”); provided that (i) the Loans under the Upsize shall for all purposes be Loans borrowed pursuant to the terms of this Credit Agreement, (ii) the financial institutions providing such Upsize shall be reasonably acceptable to the Administrative Agent and the Borrower (but shall not in any event include an Ineligible Assignee), (iii) after giving effect to such increase, the sum of the total outstanding principal amount of the Loans does not exceed $600,000,000, (iv) as a condition to such increase, the Borrower shall have delivered any necessary amendments to the Senior Intercreditor Agreement and the Subordination Agreement (in form and substance satisfactory to the Administrative Agent) to ensure that any portion of such Upsize will be accommodated within the Bank Principal Limit (as defined in the Senior Intercreditor Agreement) and the Senior Principal Limit (as defined in the Subordination Agreement), (v) no Default or Event of Default shall have occurred and be continuing or will exist after giving effect to such Upsize and (vi) the minimum amount of any incremental commitments in any such Upsize is $5,000,000. To achieve the full amount of a requested increase, the Borrower may solicit increased commitments from existing Lenders and (after first offering the existing Lenders an opportunity to provide the incremental commitments) also invite additional financial institutions to become Lenders; provided, however, that no existing Lender shall be obligated and/or required to increase its Commitment pursuant to this Section 2.18 unless it specifically consents in writing to provide such increase.

(b)            If the Total Commitments are increased in accordance with this Section 2.18, the Administrative Agent shall determine the effective date (the “Upsize Effective Date”) and, in consultation with the Borrower, the final allocation of such increase. The Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation of such increase and the Upsize Effective Date. As a condition precedent to such increase, in addition to any deliveries pursuant to Section 2.18(a), the Borrower shall deliver to the Administrative Agent each of the following in form and substance reasonably satisfactory to the Administrative Agent: (i) a certificate of each Credit Party dated as of the Upsize Effective

 90

 

Date signed by an Authorized Officer of such Credit Party (A) certifying and attaching the resolutions adopted by such Credit Party approving or consenting to such increase, and (B) certifying that, before and after giving effect to such increase, (I) the representations and warranties contained in Article 3 hereof and the other Fundamental Documents are true and correct in all material respects on and as of the Upsize Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, and except that for purposes of this Section 2.18, the representations and warranties contained in Section 3.5 shall be deemed to refer to the most recent financial statements furnished pursuant to Section 5.1 hereof, and (II) no Default or Event of Default shall have occurred and be continuing and (ii) a statement of reaffirmation from each Credit Party pursuant to which each such Credit Party ratifies this Credit Agreement and the other Fundamental Documents and acknowledges and reaffirms that, after giving effect to such increase, it is bound by all terms of this Credit Agreement and the other Fundamental Documents.

(c)             Each Upsize shall be effected by a joinder agreement (the “Upsize Joinder”) executed by the Credit Parties, the Administrative Agent and each Lender providing the Upsize, in form and substance satisfactory to each such Person. The Upsize Joinder may, without the consent of any other Lenders, effect such amendments to this Credit Agreement and the other Fundamental Documents as may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this Section 2.18.

(d)            The Administrative Agent may require (i) the Borrower to prepay any Loans outstanding on the Upsize Effective Date on a non-pro rata basis (and pay any additional amounts required pursuant to Section 2.9), (ii) the Lenders providing any Upsize to make their initial Loans on a non-pro rata basis, (iii) the L/C Exposure to be reallocated among all Lenders (after giving effect to the Upsize) in accordance with their respective Percentages and/or (iv) all Lenders and the Credit Parties to take such other actions as it may deem reasonably appropriate in order to keep the outstanding Loans ratable among the Lenders based on their respective Commitment after giving effect to any new or increased Commitment pursuant to the terms of this Section 2.18.

3.               REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES

In order to induce the Administrative Agent, the Issuing Bank and the Lenders to enter into this Credit Agreement, to make the Loans provided for herein, to issue the Letters of Credit and to participate in such Letters of Credit (as applicable), the Credit Parties, jointly and severally make the following representations and warranties to, and agreements with, the Administrative Agent, the Issuing Bank and the Lenders, all of which shall survive the execution and delivery of this Credit Agreement, the issuance of the Notes, the making of the Loans and the issuance of the Letters of Credit:

SECTION 3.1           Existence and Power.

(a)             Each of the Parent and the Credit Parties is either a limited liability company or corporation, duly formed or organized, validly existing and in good standing under

 91

 

the laws of its jurisdiction of formation or organization, and in good standing as a foreign entity in all other jurisdictions where (i) the nature of its properties or business so requires, or (ii) the failure to be so qualified or be in good standing in such other jurisdictions could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. A list of the foregoing jurisdictions as of the Closing Date is attached hereto as Schedule 3.1.

(b)            The Parent and each of the Credit Parties has the power and authority (i) to own its respective properties and carry on its respective business as now being conducted and as intended to be conducted, (ii) to execute, deliver and perform, as applicable, its obligations under the Fundamental Documents and any other documents contemplated thereby to which it is or will be a party, (iii) in the case of the Credit Parties, to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in the Collateral as contemplated by Article 8, (iv) in the case of the Pledgors, to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in the Pledged Collateral as contemplated by Article 10, and (v) in the case of the Guarantors, to guaranty the Obligations as contemplated by Article 9.

SECTION 3.2           Authority and No Violation. (a) The execution, delivery and performance by the Parent and each Credit Party of the Fundamental Documents to which it is a party, the grant by each Credit Party and each Pledgor to the Administrative Agent (for the benefit of the Secured Parties) of the security interest in the Collateral and the Pledged Collateral, respectively, as contemplated by the Fundamental Documents, in the case of the Borrower, the Borrowings hereunder and the execution, delivery and performance of the Notes and, in the case of each Guarantor, the guaranty of the Obligations as contemplated by Article 9, (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, limited liability agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate, any Distribution Agreement, or any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents.

(b)            There are no restrictions on the transfer of any of the Pledged Securities other than as a result of this Credit Agreement, the Seer P&A Facility Credit Agreement, the Subordinated Loan Agreement or Applicable Law, including any securities laws and the regulations promulgated thereunder.

SECTION 3.3           Governmental Approvals. All authorizations, consents, approvals, registrations or filings from or with any Governmental Authority (other than the Copyright Security Agreement and the Trademark Security Agreement that, if applicable, will be delivered

 92

 

to the Administrative Agent on or prior to the Closing Date, in form suitable for recording or filing with the appropriate filing office) required for the consummation of the execution, delivery and performance by the Parent and each Credit Party of the Fundamental Documents to which it is a party, and the execution and delivery by the Borrower of the Notes, have been duly obtained or made and are in full force and effect and, if any further such authorizations, consents, approvals, registrations or filings should hereafter become necessary, such Person shall obtain or make all such authorizations, consents, approvals, registrations or filings.

SECTION 3.4           Binding Agreements. This Credit Agreement and the other Fundamental Documents to which the Parent and/or any Credit Party is party have been duly executed and delivered by the Parent and/or each of the Credit Parties and constitute the legal, valid and binding obligations of each such Person (in each case, to the extent such Person is a party thereto), enforceable against each such Person in accordance with their respective terms, subject, as to the enforcement of remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

SECTION 3.5           Financial Statements. The (a)(i) annual audited consolidated balance sheets of the Parent and its Consolidated Subsidiaries, as at, and for the years ended September 30, 2014 and September 30, 2015, respectively, together with the related statements of income, members’ equity and cash flows, and the related notes and supplemental information, and (ii) the unaudited consolidated balance sheet statements of income, member’s equity and cash flows of the Parent and its Consolidated Subsidiaries as of, and for the fiscal quarter ending June 30, 2016, in each case, delivered pursuant to Section 4.1 and (b) the balance sheets and related statements of income, members’ equity and cash flows (and the related notes and supplemental information for such statements) delivered pursuant to Section 5.1, fairly present in all material respects the financial position or the results of operations of the Parent and its Consolidated Subsidiaries on a consolidated basis and (commencing with the first balance sheet and statements delivered pursuant to Section 5.1) in conformity with GAAP, at the dates or for the periods indicated, subject, in the case of unaudited statements, to changes resulting from year-end and audit adjustments and the absence of footnotes, and reflect all known liabilities, contingent or otherwise as of such dates.

SECTION 3.6           No Material Adverse Change. There has been no material adverse change, or any occurrence, condition or circumstance which could reasonably be expected to be a material adverse change, with respect to the business, operations, performance, assets, properties or condition (financial or otherwise) of the Credit Parties (taken as a whole) since the date on which the last dollar of equity contributions required by Section 4.1(k) has been contributed.

SECTION 3.7           Ownership of Pledged Securities, Subsidiaries, etc.

(a)             Attached hereto as Schedule 3.7(a) is a correct and complete list as of the Closing Date, in respect of each Credit Party, showing as to each (i) the name of such Person, (ii) the jurisdiction of formation or organization (as the case may be) of such Person, (iii) if such Person is a corporation, the authorized capitalization and the number of shares of its capital

 93

 

stock outstanding, (iv) the name of each Person holding ownership interests in such Person, (v) the nature of such ownership interests, and (vi) the percentage of ownership represented by such ownership interests.

(b)            Except as disclosed on Schedule 3.7(b), (i) no Credit Party owns any voting stock, Equity Interest or other beneficial interest, either directly or indirectly, in any Person other than another Credit Party, and (ii) no Credit Party is a general or limited partner in any partnership or a participant in a joint venture.

(c)             Attached hereto as Schedule 3.7(c) is a correct and complete organizational chart as of the Closing Date reflecting the organizational structure of the Borrower and its Subsidiaries as of the Closing Date.

SECTION 3.8           Copyrights, Trademarks and Other Rights.

(a)             The Items of Product listed on Schedule 3.8(a) comprise all of the Items of Product (other than development projects) in which any Credit Party has any right, title or interest (either directly, through a joint venture, partnership license or otherwise, other than a Revenue Participation, which will be set forth on Schedule 3.8(d)). Set forth across from the title of each such Item of Product on Schedule 3.8(a) is listed (i) the copyright registration number (or with respect to pending applications for registration, the filing receipt/control number, when available), (ii) the name of the relevant copyright registrant (or, with respect to pending applications the applicant for copyright registration), and (iii) the nature of all interests held by the relevant Credit Party (i.e., whether owned by, optioned by, assigned to, and/or licensed to, such Credit Party) in such Item of Product. The Credit Party holding such interests has duly recorded or caused to be duly recorded (or, with respect to pending applications for registration, has submitted for recordation) such interests with the U.S. Copyright Office and has delivered copies of all such recordations to the Administrative Agent (it being understood that prior to initial theatrical release in the case of Pictures and the initial broadcast or streaming of the final episode of a “season” or production cycle in the case of Programs and Digital Product, the only recordation required under this provision for such Item of Product will be with regard to the chain of title for the underlying intellectual property and for the script in existence prior to the commencement of principal photography thereof). Schedule 3.8(a) also identifies the location of the best available Physical Materials owned by any Credit Party or to which any Credit Party has a right to access in relation to each Item of Product. All such Items of Product and all component parts thereof do not and will not violate or infringe upon any copyright, right of privacy, trademark, patent, trade name, performing right or any literary, dramatic, musical, artistic, personal, private, civil, contract, property or copyright right or any other right of any Person or contain any libelous or slanderous material, other than, in each case, either individually or in the aggregate, which could not reasonably be expected to have a Material Adverse Effect. There is no claim, suit, action or proceeding pending or, to the best of each Credit Party’s knowledge, threatened against any Credit Party or any other Person that involves a claim of infringement of any copyright with respect to any Item of Product listed on Schedule 3.8(a), and no Credit Party has any knowledge of any existing infringement by any other Person of any copyright held by or licensed to any Credit Party with respect to any Item of Product listed on Schedule 3.8(a) which, in each case, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 94

 

(b)            Schedule 3.8(b) (i) lists all the trademarks registered and applications for trademark registration filed by any Credit Party and identifies the Credit Party which registered or filed each such trademark, (ii) specifies as to each, the jurisdictions in which such trademark registrations have been issued (or, if applicable, in which applications for such registrations have been filed), including the respective registration or application numbers and applicable dates of registration or application, and (iii) specifies as to any and all, as applicable, material licenses, material sublicenses and other material agreements to which any Credit Party is a party and/or pursuant to which any Person is authorized to use such trademark.

(c)             Except as disclosed on Schedule 3.8(c), all applications and registrations for all copyrights, trademarks, service marks, trade names and service names in which any Credit Party has any right, title or interest are valid and in full force and effect (other than applications and registrations for copyrights, trademarks, service marks, trade names and service names that in the aggregate are not material) and are not and will not be subject to the payment of any Taxes or maintenance fees or the taking of any other actions by any Credit Party to maintain their validity or effectiveness, other than renewals to maintain the effectiveness thereof.

(d)            Schedule 3.8(d) lists all Pictures in which any Credit Party holds a Revenue Participation and identifies as to each, the relevant Credit Party and relevant Approved Domestic Distributor. To the best of each Credit Party’s knowledge, all such Pictures and all component parts thereof do not and will not violate or infringe upon any copyright, right of privacy, trademark, patent, trade name, performing right or any literary, dramatic, musical, artistic, personal, private, civil, contract, property or copyright right or any other right of any Person or contain any libelous or slanderous material. To the best of each Credit Party’s knowledge, except as disclosed on Schedule 3.12, there is no claim, suit, action or proceeding pending or threatened against any Credit Party or any other Person that involves a claim of infringement of any copyright with respect to any Picture listed on Schedule 3.8(d), and no Credit Party has any knowledge of any existing infringement or any other violation by any other Person of any copyright with respect to any Picture listed on Schedule 3.8(d).

SECTION 3.9           Fictitious Names. Except as disclosed on Schedule 3.9, no Credit Party has done business, is doing business or intends to do business other than under its full legal name, including, without limitation, under any trade name or other “doing business as” name.

SECTION 3.10        Title to Properties. Each Credit Party has good title to, or valid leasehold or license interests in, each of the properties and assets reflected on the most recent financial statements referred to in Section 3.5, and all such properties and assets are free and clear of Liens except Permitted Encumbrances.

SECTION 3.11        Chief Executive Office; Location of Collateral and Records; Tax Identification Number. Schedule 3.11 lists (i) the chief executive office of each Credit Party as of the Closing Date, (ii) all of the places where any Credit Party keeps (or intends to keep) the material records concerning the Collateral or keeps (or intends to keep) any material goods included in the Collateral as of the Closing Date and (iii) each Credit Party’s tax identification number and, as applicable, organizational number.

SECTION 3.12       

 95

 

Litigation. Schedule 3.12 sets forth a list as of the Closing Date of all actions, suits or other proceedings at law or in equity by or before any arbitrator, arbitration panel or Governmental Authority, and to the best of each Credit Party’s knowledge, any investigation by any Governmental Authority of the affairs of, or threatened action, suit or other proceeding against or affecting, any Credit Party or its properties or rights. There are no actions, suits or other proceedings at law or in equity by or before any arbitrator, arbitration panel or Governmental Authority (including, but not limited to, matters relating to environmental liability) or, to the best of each Credit Party’s knowledge, any investigation by any Governmental Authority of the affairs of, or threatened action, suit or other proceeding against or affecting, any Credit Party or its properties or rights which could reasonably be expected to have a Material Adverse Effect. No Credit Party is in default with respect to any order, writ, injunction, decree, rule or regulation of any Governmental Authority binding upon such Person.

SECTION 3.13        Federal Reserve Regulations. No Credit Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Loans or Letters of Credit will be used, directly or indirectly, whether immediately, incidentally or ultimately (i) to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or (ii) for any other purpose, which in the case of either clauses (i) or (ii) above, would violate or be inconsistent with any of the provisions of any regulation of the Board, including, without limitation, Regulations T, U and X thereto.

SECTION 3.14        Investment Company Act. No Credit Party is, or will during the term of this Credit Agreement be, (i) an “investment company,” within the meaning of the Investment Company Act of 1940, as amended or (ii) subject to regulation under any foreign, federal or local statute or any other Applicable Law of the United States of America or any other jurisdiction, in each case limiting its ability to incur indebtedness for money borrowed as contemplated hereby or by any other Fundamental Document.

SECTION 3.15        Taxes. Each Credit Party has filed or caused to be filed all material federal, state, local and foreign Tax returns which are required to be filed with any Governmental Authority after giving effect to applicable extensions, and has paid or has caused to be paid all Taxes as shown on said returns or on any assessment received by it in writing, to the extent that such Taxes have become due, except as permitted under Section 5.12. No Credit Party knows of any material additional assessments or any basis therefor. The Credit Parties believe that the charges, accruals and reserves on its books in respect of Taxes or other governmental charges are accurate and adequate, in accordance with GAAP.

SECTION 3.16        Compliance with ERISA. Schedule 3.16 sets forth a true and complete list, as of the date hereof, of each Plan subject to Title IV of the Credit Parties. Each Plan has been maintained and operated in all material respects in accordance with all Applicable Laws, including ERISA and the Code, and each Plan intended to qualify under section 401(a) of the Code has received a favorable determination letter or is entitled to rely on a favorable opinion letter from the IRS, in either case, that has not been revoked and, to each Credit Party’s knowledge no event or circumstance exists that has adversely affected such qualification or exemption. As of the Closing Date, except as set forth on Schedule 3.16, and as of the date of each subsequent Borrowing hereunder, except as (either alone or in the aggregate) would not

 96

 

result in liability that would reasonably be expected to result in a Material Adverse Effect, no Reportable Event has occurred in the last five (5) years as to any Plan, and the present value of all benefits under all Plans subject to Title IV of ERISA (based on those assumptions used to fund such Plans) did not, in the aggregate, as of the last annual valuation date applicable thereto, exceed the actuarial value of the assets of such Plans allocable to such benefits. As of the Closing Date, except as set forth on Schedule 3.16, and as of the date of each subsequent Borrowing hereunder, except as (either alone or in the aggregate) would not result in liability that would reasonably be expected to result in a Material Adverse Effect, no liability has been, and no circumstances exist pursuant to which any liability is reasonably likely to be, imposed upon any Credit Party or ERISA Affiliate (i) under sections 4971 through 4980E of the Code, sections 502(i) or 502(l) of ERISA, or under Title IV of ERISA (other than premiums due and not delinquent) with respect to any Plan or Multiemployer Plan, or with respect to any plan maintained in the last six years by any Credit Party or ERISA Affiliate, or any entity that heretofore was an ERISA Affiliate, (ii) for the failure to fulfill any obligation to contribute to any Multiemployer Plan, or (iii) with respect to any Plan that provides post-retirement welfare coverage (other than as required pursuant to Section 4980B of the Code). As of the Closing Date, except as set forth on Schedule 3.16, and as of the date of each subsequent Borrowing hereunder, except as (either alone or in the aggregate) would not result in liability that would reasonably be expected to result in a Material Adverse Effect, neither any Credit Party nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in “reorganization” or has been terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in “reorganization” or to be terminated.

SECTION 3.17        Agreements.

(a)             No Credit Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which such Credit Party is a party, except where such default could not reasonably be expected to result in a Material Adverse Effect.

(b)            Schedule 3.17 is a true and complete list as of the Closing Date of all material contractual arrangements entered into by any Credit Party or by which any Credit Party is bound, including but not limited to, material Guarantees and material employment agreements. The Credit Parties have delivered or made available to the Administrative Agent a true and complete copy of each agreement (or, if not yet executed, the most recent draft) described on Schedule 3.17, including all exhibits and schedules thereto. For purposes of the foregoing, a contract, agreement or arrangement shall be deemed “material” if any Credit Party reasonably expects that any Credit Party would, pursuant to the terms thereof (A) recognize future revenues in excess of $2,000,000, (B) incur liabilities or obligations in excess of $1,000,000 (excluding (x) any contract, agreement or arrangement with respect to which the liabilities or obligations incurred thereunder are included in the bonded budget of a Picture and (y) any contingent compensation in connection therewith prior to the date on which such Picture becomes a Seasoned Picture), or (C) could reasonably be likely to suffer damages or losses in excess of $1,000,000 by reason of the breach or termination thereof.

SECTION 3.18        Security Interest. This Credit Agreement and the other Fundamental Documents, when executed and delivered and, upon the making of the initial Loan hereunder

 97

 

(including, but not limited to an accrual pursuant to Section 2.5), will create and grant to the Administrative Agent (for the benefit of the Secured Parties), upon (i) the filing of the appropriate UCC financing statements (or foreign equivalent) with the filing offices listed on Schedule 3.18, (ii) the filing of the Copyright Security Agreement with the U.S. Copyright Office, (iii) the filing of any Trademark Security Agreement with the U.S. Patent and Trademark Office, (iv) subject to the terms of the Senior Intercreditor Agreement, the delivery to the Administrative Agent of any certificated Pledged Securities accompanied by undated stock powers (or any comparable document for non-corporate entities to the extent certificated), duly endorsed or executed in blank by the appropriate Pledgors (and the Administrative Agent having taken possession or control of such Pledged Securities), (v) the execution and delivery of any applicable Account Control Agreements, and (vi) the payment of all applicable filing fees for the documents referenced in the preceding clauses (i), (ii) and (iii), a valid and perfected security interest in the Collateral (prior to all other Liens other than any Specified Permitted Encumbrances and, in the case of certificated Pledged Securities so delivered, prior to all other Liens).

SECTION 3.19        Rights. Each of the Credit Parties has sufficient right, title and interest in each Item of Product owned by or licensed to it (including under copyright) to enable it (i) with regard to each Item of Product produced by it or on its behalf, to produce such Item of Product, (ii) to perform under the Distribution Agreements relating to each such Item of Product and to satisfy any qualification requirements thereunder, and (iii) to perform under any sales agency agreement or licensing agreement entered into with an Approved Foreign Sales Agent or Licensing Intermediary.

SECTION 3.20        Environmental Liabilities.

(a)             No Credit Party (and to the best of each Credit Party’s knowledge no other Person) has used, stored, treated, transported, manufactured, refined, handled, produced, Released or disposed of any Hazardous Materials on, under, at, from or in any way affecting, any of the properties or assets owned, operated, occupied or leased by a Credit Party, in material violation of any Environmental Law or in a manner that could result in a material liability to any Credit Party.

(b)            (i) No Credit Party has any obligations or liabilities, known or unknown, matured or not matured, absolute or contingent, or assessed or unassessed, arising under or related to Environmental Laws or Hazardous Materials which could reasonably be expected to have a Material Adverse Effect, and (ii) no claims have been made against any of the Credit Parties in the past five (5) years and no pending, threatened or outstanding citations, orders, proceedings or notices have been issued against any of the Credit Parties arising under or related to Environmental Laws or Hazardous Materials, which could reasonably be expected to have a Material Adverse Effect, in each case of (i) and (ii) including, without limitation, any such obligations or liabilities relating to or arising out of activities of any of its respective employees, agents, representatives, affiliates or predecessors in interest or any other Person with respect to which any Credit Party is responsible, either contractually, by operation of law or otherwise.

SECTION 3.21        Pledged Securities.

 98

 

(a)             All of the Pledged Securities are duly authorized, validly issued, fully paid and non-assessable, and are owned and held by the Pledgors, as applicable, free and clear of any Liens, other than those created pursuant to this Credit Agreement, the Seer P&A Facility Credit Agreement and the Subordinated Loan Agreement. There are no restrictions on the transfer of the Pledged Securities other than as a result of this Credit Agreement, the Seer P&A Facility Credit Agreement and the Subordinated Loan Agreement or Applicable Law, including any securities laws and the regulations promulgated thereunder. The Pledged Securities are owned by the Persons specified on Schedule 3.7(a).

(b)            There are no (i) outstanding rights, warrants, options, conversion or similar rights currently outstanding with respect to, and no agreements to purchase or otherwise acquire, any shares of the capital stock or other Equity Interests of any issuer of any of the Pledged Securities, or (ii) securities or obligations of any kind convertible into any shares of the capital stock or other Equity Interests of any issuer of any of the Pledged Securities.

(c)             Article 10 creates in favor of the Administrative Agent (on behalf of the Secured Parties), a valid, binding and enforceable security interest in, and Lien upon, all right, title and interest of the Pledgors in the Pledged Collateral and upon delivery to the Administrative Agent of the definitive instruments (if any and subject to the Senior Intercreditor Agreement) representing all Pledged Securities, accompanied by undated stock powers (or any comparable document for non-corporate entities to the extent certificated), duly endorsed or executed in blank by the appropriate Pledgor, shall constitute a fully perfected first priority security interest and Lien upon all right, title and interest of the Pledgors in such Pledged Collateral if certificated, prior to all Liens and, if not so certificated, prior to all Liens other than Specified Permitted Encumbrances.

SECTION 3.22        Compliance with Laws. No Credit Party is in material violation of any Applicable Law. The Borrowings hereunder, the intended use of the proceeds of the Loans and Letters of Credit as contemplated by Section 5.17 and any other transactions contemplated hereby will not violate any Applicable Law.

SECTION 3.23        Solvency. No Credit Party has entered, or is entering, into the arrangements contemplated hereby and by the other Fundamental Documents, or intends to make any transfer or incur any obligations hereunder or thereunder, with actual intent to hinder, delay or defraud either present or future creditors. On and as of the Closing Date and any date on which a Loan is made or a Letter of Credit is issued hereunder, on a pro forma basis after giving effect to all Indebtedness (including the Loans): (i) each Credit Party expects the cash available to such Credit Party from all sources, after taking into account all other anticipated uses of the cash of such Credit Party (including the payments on or in respect of debt referred to in clause (iii) below), will be sufficient to satisfy all final judgments for money damages which have been docketed against such Credit Party or which may be rendered against such Credit Party in any action in which such Credit Party is a defendant (taking into account the reasonably anticipated maximum amount of any such judgment and the earliest time at which such judgment might be entered); (ii) the sum of the present fair saleable value of the assets of each Credit Party will exceed the probable liability of such Credit Party on its debts (including its Guarantees after giving effect to the Contribution Agreement); (iii) no Credit Party will have incurred or intends to, or believes that it will, incur debts beyond its ability to pay such debts as such debts mature

 99

 

(taking into account the timing and amounts of cash to be received by such Credit Party from any source, and of amounts to be payable on or in respect of debts of such Credit Party and the amounts referred to in clause (ii) above); and (iv) each Credit Party believes it will have sufficient capital with which to conduct its present and proposed business and the property of such Credit Party does not constitute unreasonably small capital with which to conduct its present or proposed business. For purposes of this Section 3.23, “debt” means any liability or a claim, and “claim” means any (i) right to payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.

SECTION 3.24        True and Complete Disclosure. Neither any Fundamental Document nor any other agreement, document, instrument, certificate or statement (other than (i) the Business Plan, (ii) any other projections, estimates, or other forward-looking information, and (iii) any forward-looking pro forma financial information) furnished to the Administrative Agent and the Lenders by or on behalf of any Credit Party in connection with the transactions contemplated hereby, at the time it was furnished contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein, under the circumstances under which they were made, not misleading (considered in the context of all other information provided to the Lenders). The Business Plan and any other projections, estimates, forward-looking information or any forward-looking pro forma financial information furnished to the Administrative Agent pursuant to this Credit Agreement are based on good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being understood by the Administrative Agent and the Lenders that, without limiting the foregoing representation, (i) the Business Plan or such other information as they relate to future events is not to be viewed as fact and (ii) actual results during the period or periods covered by the Business Plan or such other information are subject to significant uncertainties and contingencies and may differ materially from the projected results set forth therein.

SECTION 3.25        Subsidiaries. Set forth on Schedule 3.25 is a true and complete list of all of the Subsidiaries of the Credit Parties, showing as to each, (i) the name of such Subsidiary, (ii) the jurisdiction of formation or organization (as the case may be) of such Subsidiary, (iii) if such Subsidiary is a corporation, the authorized capitalization and the number of shares of its capital stock outstanding, (iv) each Person holding ownership interests in such Subsidiary, (v) the nature of such ownership interests, and (vi) the percentage of such ownership interests.

SECTION 3.26        Status as a Pass-Through Entity. At all times since its formation, each Credit Party (other than Subsidiaries (1) which are required to be “C Corporations” in order to facilitate Soft Dollar Transactions; provided, that such Subsidiaries do not have any assets other than (i) assets having nominal value or (ii) cash which, promptly following receipt thereof, is applied towards such Soft Dollar Transactions or toward production costs or (2) for which the Borrower has otherwise determined with the reasonable approval of the Administrative Agent that it is necessary or desirable to form such Subsidiary as a corporation to facilitate permitted

 100

 

business activities of the Credit Parties) has been either a “disregarded entity” or a “partnership” for U.S. federal, state and local income and franchise tax purposes.

SECTION 3.27        Anti-Corruption Laws and Sanctions. The Credit Parties have implemented and maintain in effect, policies and procedures designed to ensure compliance by each Credit Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and each Credit Party, its Subsidiaries and their directors, officers and employees and, to the knowledge of such Credit Party and its Subsidiaries, its agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Credit Parties or their Subsidiaries or any of their respective directors, officers or employees, or (b) to the knowledge of any Credit Party or any agent of the Credit Parties or any of their Subsidiaries that will act in any capacity in connection with or benefit from the Facility, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds or any other transaction contemplated by this Credit Agreement will violate Anti-Corruption Laws or applicable Sanctions.

SECTION 3.28        No Registered or Publicly-Traded Securities. The Borrower hereby represents and warrants that it, its controlling Person and each of its and such controlling Person’s respective Subsidiaries, in each case, if any, either (i) has no registered or publicly traded securities outstanding, including no 144A securities or (ii) files its financial statements with the Securities and Exchange Commission and/or makes its financial statements available to potential holders of its 144A securities, and, accordingly, the Borrower hereby (i) authorizes the Administrative Agent to make the financial statements to be provided under Sections 4.1(m) and 5.1(a) and (b) hereof, along with the Fundamental Documents, available to Public-Siders and (ii) agrees that at the time such financial statements are provided hereunder, they shall also be made available to holders of its securities. The Borrower covenants that if any Lender has advised the Borrower that such Lender is a Public-Sider, the Borrower will not request that any other material be posted to Public-Siders without the Borrower first expressly representing and warranting to the Administrative Agent in writing that such materials do not constitute material non-public information within the meaning of the federal securities laws or that the Borrower has no outstanding publicly traded securities, including 144A securities. Notwithstanding anything herein to the contrary, if any Lender has advised the Borrower that such Lender is a Public-Sider, in no event shall the Borrower request that the Administrative Agent make available to Public-Siders any budgets or any certificates, reports or calculations with respect to the Borrower’s compliance with the covenants contained herein or with respect to the Borrowing Base.

SECTION 3.29        EEA Financial Institution. No Credit Party is an EEA Financial Institution.

4.               CONDITIONS OF LENDING

SECTION 4.1           Conditions Precedent to the Closing Date. The Closing Date shall occur, and the Commitment of each Lender became effective, on the date on which the following conditions precedent are satisfied in full or waived:

 101

 

(a)             Organizational Documents. The Administrative Agent shall have received:

(i)              a copy of the certificate of formation or articles or certificate of incorporation (or equivalent document) of the Parent and each Credit Party, certified as of a recent date by the Secretary of State or other relevant office of such Person’s jurisdiction of formation or incorporation, which certificate lists (if such type of list is generally available in the applicable jurisdiction) the charter documents on file in the office of such Secretary of State or such other relevant office;

(ii)            a certificate of the Secretary of State or such other relevant office of such jurisdiction of formation or incorporation, dated as of a recent date, as to the good standing of, and, if generally available in the applicable jurisdiction, the payment of Taxes by, the Parent and each Credit Party;

(iii)          a certificate dated as of a recent date as to the good standing and/or authority to do business of the Parent and each Credit Party, issued by the Secretary of State or other relevant office of each jurisdiction, if any, in which such Person is qualified as a foreign entity;

(iv)          a certificate of the Secretary, Assistant Secretary or other appropriate officer (or member or manager, as the case may be, in the case of limited liability companies) acceptable to the Administrative Agent, of the Parent and each Credit Party, dated as of the Closing Date and certifying (A) that attached thereto is a true and complete copy of the certificate of formation or articles or certificate of incorporation (or equivalent document) of such Person, (B) that attached thereto is a true and complete copy of the limited liability company agreement, by-laws, or equivalent document of such Person as in effect on the date of such certification, (C) that attached thereto is a true and complete copy of the resolutions adopted by the applicable managing body of such Person authorizing the execution, delivery and performance in accordance with their respective terms of the Fundamental Documents to which it is a party, and any other documents required or contemplated hereunder or thereunder, the grant of the security interests in the Collateral and the Pledged Collateral (as applicable), and in the case of the Borrower, the Borrowings hereunder, and that such resolutions have not been amended, rescinded or supplemented and are currently in effect, (D) that the certificate of formation or articles or certificate of incorporation (or equivalent document) of such Person has not been amended, cancelled or otherwise modified since the date of the last amendment thereto indicated on the certificates of the Secretary of State or other appropriate office furnished pursuant to clause (i) above and (E) as to the incumbency and specimen signature of each officer (or member or manager, as the case may be) of such Person executing any Fundamental Document (such certificate to contain a certification by another officer (or member or manager, as the case may be) of such Person as to the incumbency and signature of the officer signing the certificate referred to in this clause (iv); and

(v)            such additional supporting documents as the Administrative Agent or its counsel may reasonably request.

 102

 

(b)            Credit Agreement; Notes. On the Closing Date, the Administrative Agent shall have received (i) duly executed counterparts of this Credit Agreement which, when taken together, bear the signatures of the Administrative Agent, the Issuing Bank, the Borrower, the Parent, the Guarantors and each Lender, and (ii) Notes duly executed by the Borrower in favor of each Lender which has requested a Note.

(c)             Opinion of Counsel. The Administrative Agent shall have received on the Closing Date the written opinion of Latham & Watkins LLP, counsel to the Credit Parties and the Parent, dated the Closing Date and addressed to the Administrative Agent, the Issuing Bank and the Lenders, and which opinion shall be substantially in the form attached hereto as Exhibit B.

(d)            No Material Adverse Effect. On the Closing Date, no change or development shall have occurred and no new information shall have been received or discovered by the Administrative Agent or the Lenders since September 30, 2015 that either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

(e)             Anti-Corruption; Sanctions. The Credit Parties shall have implemented and thereafter maintain in effect policies and procedures designed to ensure compliance by their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and each Credit Party and its director, officers and employees and, to the knowledge of such Credit Party, its agents, is in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.

(f)             Security and Other Documentation. The Administrative Agent shall have received on the Closing Date fully executed (where applicable) copies of:

(i)              a Copyright Security Agreement, listing each Item of Product in which any Credit Party has a copyrightable interest (as listed on Schedule 3.8(a)), if any;

(ii)            a Trademark Security Agreement for each trademark in which any Credit Party has any interest (as listed on Schedule 3.8(b)), if any;

(iii)          the Pledged Securities accompanied by undated stock powers (or any comparable document for non-corporate entities to the extent certificated) duly executed or endorsed by the appropriate Pledgor (subject to the terms of the Senior Intercreditor Agreement);

(iv)          appropriate UCC financing statements (or foreign equivalent) that are required to be filed in order to perfect the Liens in the Collateral and the Pledged Collateral to the extent required by, and with the priority contemplated by Section 3.18;

(v)            to the extent not described in Section 5.22 or waived by the Administrative Agent in accordance with Section 6.14, Account Control Agreements for each deposit account of a Credit Party existing on the Closing Date, and a comparable account control agreement in respect of each securities account of a Credit Party existing at a bank or other securities intermediary as of the Closing Date;

 103

 

(vi)          to the extent not described in Section 5.22, Laboratory Access Letters and Pledgeholder Agreements, as applicable, for each Item of Product (whether Completed or Uncompleted), if any, including any Physical Materials relating to such Item of Product; and

(vii)        provided, that, in the context of Account Control Agreements, Pledgeholder Agreements and Laboratory Access Letters, the Administrative Agent may determine in its discretion that an account control agreement, laboratory pledgeholder agreement or laboratory access letter delivered in favor of JPMorgan Chase Bank, N.A. prior to the date hereof in the context of the Existing Corporate Facility Agreement or the Existing Production Facility Agreement shall survive the amendment and restatement of the Existing Corporate Facility Agreement or the Existing Production Facility Agreement (as applicable) via this Agreement and as such shall be satisfactory for purposes of meeting the foregoing clauses (v) and (vi).

(g)            Security Interests in Copyrights and other Collateral. The Administrative Agent shall have received on the Closing Date evidence satisfactory to it that (i) each Credit Party and each Pledgor, has sufficient right, title and interest in and to the Collateral and Pledged Collateral, respectively, and other assets which it purports to own (including appropriate licenses under copyright), as set forth in the documents and other materials presented to the Lenders, to enable the applicable Credit Party to perform under the Distribution Agreements to which it is a party, and as to each Credit Party and each Pledgor, to grant to the Administrative Agent (for the benefit of the Secured Parties) the security interests contemplated by the Fundamental Documents and (ii) all financing statements, copyright filings, trademark filings, debentures and other filings under Applicable Law necessary to provide the Administrative Agent (for the benefit of the Secured Parties) with a perfected Lien in the Collateral and the Pledged Collateral (with the priority contemplated by Section 3.18) have been filed or delivered to the Administrative Agent in satisfactory form for filing.

(h)            Payment of Fees. On or prior to the Closing Date, all fees and expenses then due and payable by the Borrower to the Administrative Agent, the Arrangers and the Lenders in connection with the transactions contemplated hereby, or as required by any fee letter in respect of this Facility, shall have been paid or shall be paid contemporaneously herewith.

(i)              Litigation. As of the Closing Date, no litigation, inquiry, injunction or restraining order shall be pending, entered or, to the knowledge of the Credit Parties, threatened, which involves any of the transactions contemplated hereby and by the other Fundamental Documents or could reasonably be expected to have a Material Adverse Effect.

(j)              Lien Searches. On or prior to the Closing Date, the Administrative Agent shall have received UCC, copyright office and other searches satisfactory to it indicating that no other filings, encumbrances or transfers (other than in connection with Permitted Encumbrances) with regard to the Collateral and the Pledged Collateral are of record in any jurisdiction in which it shall be necessary for the Administrative Agent to make a filing in order to provide the Administrative Agent (for the benefit of the Secured Parties) with a perfected security interest in that portion of the Collateral and the Pledged Collateral in which a security

 104

 

interest in such Collateral or Pledged Collateral can be perfected by a filing under applicable law.

(k)            Equity Contribution. On or prior to the Closing Date, the Administrative Agent shall have received satisfactory evidence that at least $65,000,000 of cash equity contributions have been received by the Borrower since June 1, 2016 with no voluntary redemptions or mandatory calls.

(l)              Contribution Agreement. On or prior to the Closing Date, the Administrative Agent shall have received a duly executed copy of the Contribution Agreement.

(m)           Liquidity Certificate. On or prior to the Closing Date, the Administrative Agent shall have received a Liquidity Certificate, compiled in the manner described in Section 5.1(i), reflecting that the ratio of (i) projected cash sources of the Credit Parties (including, without limitation, cash on hand, Borrowings under the Facility and projected cash receipts from operations) to (ii) projected cash uses of the Credit Parties, all as projected on a quarterly basis by the Borrower in good faith for the period from the first day of the four fiscal quarter period commenced on September 30, 2016 and ending on September 30, 2017, is greater than or equal to 1.10 to 1.00.

(n)            Financial Statements. On or prior to the Closing Date, the Administrative Agent shall have received the financial statements referred to in Section 3.5.

(o)            Insurance. On or prior to the Closing Date, the Credit Parties will have furnished the Administrative Agent with (i) a summary of all existing insurance coverage, (ii) evidence acceptable to the Administrative Agent that the insurance policies required by Section 5.5 have been obtained and are in full force and effect and (iii) certificates of insurance (accompanied by endorsements) with respect to all existing insurance coverage which certificates and endorsements shall name the Administrative Agent as additional insured and/or loss payee and shall evidence the Credit Parties’ compliance with Section 5.5(e).

(p)            Required Consents and Approvals. On or prior to the Closing Date, the Administrative Agent shall be satisfied that (i) all required consents and approvals have been obtained with respect to the transactions contemplated hereby and by the other Fundamental Documents from all Governmental Authorities with jurisdiction over the business and activities of any Credit Party and from any other Person whose consent or approval the Administrative Agent in its reasonable discretion deems necessary to the transactions contemplated hereby and by the other Fundamental Documents, and (ii) all such consents and approvals remain in full force and effect.

(q)            Federal Reserve Regulations. On or prior to the Closing Date, the Administrative Agent shall be satisfied that the provisions of Regulations T, U and X of the Board will not be violated by the transactions contemplated hereby.

(r)             Compliance with Laws; No Default under Subordinated Loan Agreement. On or prior to the Closing Date, the Administrative Agent shall be satisfied that the transactions contemplated hereby and by the other Fundamental Documents will not (i) violate

 105

 

any provision of Applicable Law, or any order of any court or other agency of the United States of America or any state thereof applicable to the Credit Parties or any of their respective properties or assets or (ii) conflict with, or result in a default, breach or right of termination or acceleration under, any material agreement to which any Credit Party is a party. No Default or Event of Default (each as defined in the Subordinated Loan Agreement) shall have occurred and be continuing under the Subordinated Loan Agreement.

(s)             Approval of Counsel to the Administrative Agent. On or prior to the Closing Date, all legal matters incident to this Credit Agreement and any other transactions explicitly contemplated hereby shall be reasonably satisfactory to Morgan, Lewis & Bockius LLP, counsel to the Administrative Agent.

(t)              USA Patriot Act. On or prior to the Closing Date, the Administrative Agent shall have received any information required and requested by the Administrative Agent, the Issuing Bank or any Lender under or in connection with the USA Patriot Act.

(u)            ERISA. On or prior to the Closing Date, the Administrative Agent shall have received copies of all Plans of the Credit Parties that are in existence on the Closing Date and descriptions of those that are committed to on the Closing Date.

(v)            Retirement of Credit Facilities. The Administrative Agent shall have received evidence satisfactory to it that (a) the initial extension of credit hereunder, together with other sources of cash, shall be sufficient to refinance (but not to novate or terminate) the Existing Corporate Facility Agreement and the Existing Production Facility Agreement and (b) the two aforementioned facilities shall have actually been amended and restated as contemplated herein.

(w)           Approval of Existing Corporate Facility Agreement Lenders and Existing Production Facility Agreement Lenders. The Administrative Agent shall have received evidence reasonably satisfactory to it that any action necessary or desirable to be taken or provided (including the written consent of each lender under the Existing Corporate Facility Agreement and the Existing Production Facility Agreement to the execution of this Credit Agreement and any appropriate assignment of commitments) by the Existing Corporate Facility Agent, the lenders under the Existing Corporate Facility Agreement, the Existing Production Facility Agent and/or the lenders under the Existing Production Facility Agreement, shall have been consummated in accordance with the terms of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement (as applicable) in order to amend and restate each of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement pursuant to this Credit Agreement.

(x)            Agreements relating to the Existing Corporate Facility Agreement and the Existing Production Facility Agreement. Except to the extent otherwise waived by the Administrative Agent, the Administrative Agent’s satisfaction, in its reasonable discretion, that all third party agreements or arrangements (such as intercreditor or subordination agreements, interparty agreements, collection account or account control agreements, completion bonds, laboratory pledgeholder agreements, etc.) entered into by or delivered to the Existing Corporate Facility Agent or the Existing Production Facility Agent shall either remain in place and in full

 106

 

force and effect following the second amendment and restatement of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement or shall have been replaced by a substantially equivalent agreement or arrangement, and that any security documentation entered into or delivered in favor of the Existing Corporate Facility Agent or the Existing Production Facility Agent shall remain in full force and effect with the same relative priority as existed prior to the Closing Date.

(y)            Amendments to Other Agreements. On or prior to the Closing Date, the Administrative Agent shall have received the following items, each in form and substance satisfactory to the Administrative Agent:

(1)       An amendment or amendment and restatement of the existing Seer P&A Facility Credit Agreement that reduces the funding commitments for P&A Expenses to 20% of the Credit Parties’ Approved P&A Budgets and amends the definition of ‘Qualifying Picture’ to conform with the construct set forth in this Agreement;

 

(2)       An amendment and restatement of the existing Senior Intercreditor Agreement, which shall include, among other things, a consent from Seer P&A Facility Agent to the increases in Commitments being implemented by this Credit Agreement and any other necessary consents and the making of other modifications to the existing Senior Intercreditor Agreement necessary to conform to the terms hereof, including Section 2.9(f) (including, without limitation, to cause the waterfall thereunder to apply to the Corporate Priority Collection Account, but not the Production Priority Collection Account, and modifying the creditors’ respective entitlements to proceeds of the Corporate Priority Collection Account to reflect the updated advance rates under this Facility and the Seer P&A Facility Credit Agreement);

 

(3)       An amendment or amendment and restatement of the existing Subordination Agreement, which shall include a consent from the Subordinated Agent to the increases in Commitments being implemented by this Credit Agreement and any other necessary consents; and

 

(4)       Amendments and restatements of the Subordinated Loan Agreement and the Seer P&A Facility Credit Agreement in order to limit the scope of the collateral securing such facilities to any assets that will not constitute Collateral securing the Obligations following the amendment and restatement contemplated hereby and extend the maturity date of (A) the Seer P&A Facility Credit Agreement to at least six (6) months and one day later than the Maturity Date and (B) the Subordinated Loan Agreement to at least nine (9) months later than the Maturity Date.

 

(a)           

(b)           

(c)           

(d)           

 107

 

(e)           

(f)           

(g)           

(h)           

(i)           

(j)           

(k)           

(l)           

(m)           

(n)           

(o)           

(p)           

(q)           

(r)           

(s)           

(t)           

(u)           

(v)           

(w)           

(x)           

(y)            Opening Borrowing Base Certificate. The Administrative Agent shall have received a Borrowing Base Certificate dated as of the Closing Date, which shall include calculations of the overall Borrowing Base as well as the Corporate Priority Collateral Sub-Borrowing Base and the Production Priority Collateral Sub-Borrowing Base.

(z)             Waiver of Existing Defaults. By the execution hereof, Administrative Agent and the Lenders that were party to the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, respectively, hereby waive any default or event of default resulting from noncompliance with both (i) the Limitations on Capital Expenditures

 108

 

covenant requirement in Section 6.10 of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, respectively, occurring on or prior to the date hereof and (ii) the Overhead covenant requirement in Section 6.23 of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, respectively, occurring on or prior to the date hereof.

SECTION 4.2           Conditions Precedent to Initial Extension of Credit for each Item of Product (Other than a Revenue Participation) and for Initial Inclusion of Credit in the Borrowing Base. The obligation of each Lender to make the initial extension of credit hereunder with respect to an Item of Product (including, in the case of Programs, that the following provisions be satisfied with respect to each season, regardless of whether credit was extended on the basis of prior seasons) (other than a Revenue Participation) and the ability of the Credit Parties to obtain initial Borrowing Base credit for an Item of Product (other than a Revenue Participation), is subject to the satisfaction of the following conditions precedent; provided that, notwithstanding anything to the contrary herein, if the Credit Parties have satisfied the conditions set forth in Sections 4.2(a) (“Item of Product Declaration”) and (e) (“Security Documents”) below for an Item of Product, and have not yet requested any Borrowing Base relating to such Item of Product or spent the proceeds of any Loans towards such Item of Product, the Credit Parties may proceed with (as applicable) the commencement of principal photography of or acquisition of rights in such Item of Product without having satisfied the balance of the following Section 4.2 requirements, so long as the Credit Parties achieve the balance of such Section 4.2 requirements within 15 Business Days (or such longer period as agreed to by the Administrative Agent in its sole discretion) after (as applicable) the commencement of principal photography of, or acquisition of rights in, such Item of Product; and provided further that the Administrative Agent may, in its discretion, waive any of the following conditions precedent for digital Items of Product and Items of Product being produced under a Television Joint Venture structure:

(a)             Item of Product Declaration. The Administrative Agent shall have received the applicable Item of Product Declaration in respect of such Item of Product, duly executed by an Authorized Officer of the Borrower and evidencing among other things the appropriate Reserve.

(b)            Item of Product Documents. The Administrative Agent shall have received:

(i)              in the case of an Item of Product produced or co-financed (as opposed to acquired after Completion or, if acquired previously, for which the minimum guarantee payment is due on or after Completion) by a Credit Party or Co-Financing Venture Entity, copies of the budget (and, if different, the Bonded Budget), current shooting script, production schedule and cash flow schedule in respect of such Item of Product;

(ii)            in the case of an acquired Item of Product, the acquisition agreement and any other documents reasonably incidental thereto;

(iii)          a copy of the Distribution Agreement in respect of such Item of Product for the Domestic Territory if the existence of such Distribution Agreement is a

 109

 

requirement under any foreign Distribution Agreement giving rise to Eligible Receivables included in the Borrowing Base, and in any event if such Distribution Agreement in respect of such Item of Product has been executed (unless such Item of Product is being self-distributed in the Domestic Territory by the Borrower through the Significant Exploitation Agreements);

(iv)          copies of all other pre-sale Distribution Agreements in respect of such Item of Product, if any;

(v)            a copy of a fully-executed Notice of Assignment with respect to each pre-sale Distribution Agreement in respect of such Item of Product then in existence and included in the Borrowing Base (provided, that the Administrative Agent may waive the requirement that a domestic obligor countersign a Notice of Assignment);

(vi)          certificates or binders of insurance for such Item of Product as required by Section 5.5, together with endorsements naming the Administrative Agent as an “additional insured” or “loss payee”, as applicable;

(vii)        a list of all agreements executed in connection with such Item of Product that provide for deferments or participations, together with copies of such agreements as the Administrative Agent may reasonably request (in each case only to the extent available to the Borrower in the event that a Credit Party is responsible for making payments of such deferments or participations); and

(viii)      unless the Administrative Agent otherwise consents in the context of a negative pick up arrangement or other acquired Item of Product, copies of fully-executed intercreditor agreements with all guilds granted a Lien on such Item of Product, which Lien is filed prior to the filing of the Liens granted to the Administrative Agent on such Item of Product.

(c)             Chain of Title. The Administrative Agent shall have received (i) copies of all agreements, instruments of transfer or other instruments (including, without limitation, the rights agreements) (the “Chain of Title Documents”), or (ii) a “clean” representation and warranty by a Major Studio, in each case necessary to establish, to the reasonable satisfaction of the Administrative Agent for such Item of Product, the applicable Credit Party’s or Co-Financing Venture Entity’s (as applicable) ownership or rights under license of sufficient rights in such Item of Product to enable such Credit Party or Co-Financing Venture Entity to produce and/or exploit the applicable rights to such Item of Product and to grant to the Administrative Agent (for the benefit of the Secured Parties) the security interests therein which are contemplated by this Credit Agreement; provided, that in the context of negative pickup arrangements which require delivery of Chain of Title Documents as a condition to payment, the Chain of Title Documents shall be promptly delivered to the Administrative Agent following receipt by the Credit Party or Co-Financing Venture Entity (as applicable), but in any event prior to inclusion of such Item of Product in the Borrowing Base (in each case except as contemplated by clause (ii) above).

 110

 

(d)            Completion Guaranty. Only in the case of Pictures, if such Picture is Uncompleted and a Credit Party is obligated to or otherwise will fund a portion of the Direct Negative Costs prior to Completion (or in the case of an acquired Picture, paying any portion of the purchase price prior to delivery to the Credit Party, other than deposits which do not exceed $750,000 in the aggregate for any Picture), the Administrative Agent shall have received an Approved Completion Bond from an Approved Completion Guarantor.

(e)             Security Documents. The Administrative Agent shall have received (it being understood that, with respect to any Co-Financed Picture (i) the availability of the following security documents shall be subject to the applicable Credit Party’s interest and right in and to such Co-Financed Picture and (ii) the security interest of the Administrative Agent under such security documents will be subject to the terms of the Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (as applicable)):

(i)              a Copyright Security Agreement Supplement for such Item of Product;

(ii)            Pledgeholder Agreements or Laboratory Access Letters, as applicable, for such Item of Product;

(iii)          an Account Control Agreement for each Production Account maintained by a Credit Party in relation to such Item of Product, if applicable; and

(iv)          any other security documents or filings necessary or reasonably requested by the Administrative Agent to provide to the Administrative Agent a first priority lien (prior to all Liens other than Specified Permitted Encumbrances) in the applicable Credit Party’s interest and right in and to such Item of Product.

(f)             Co-Financed Item of Product. If such Item of Product is a Co-Financed Item of Product, (a) (i) the Administrative Agent shall have received and approved (such approval not to be unreasonably withheld) fully executed copies of the Co-Financing Agreement and of any other applicable documentation reasonably requested by the Administrative Agent to evidence satisfaction of the requirements set forth in Section 6.25, and (ii) if required by Section 6.2(h) or 6.25, the Administrative Agent shall have received a fully executed Co-Financing Intercreditor Agreement or (b) in the case of an Approved Co-Financing Venture Transaction, the Credit Parties shall have satisfied the requirements set forth on Schedule 1.3.

(g)            Co-Financing Venture Entities. If such Item of Product is being produced pursuant to an Approved Co-Financing Venture Transaction, (i) the Administrative Agent shall have received fully executed copies of the Co-Financing Venture Agreement and any other applicable documentation reasonably requested and approved by the Administrative Agent (such approval not to be unreasonably withheld) to evidence satisfaction of the terms and conditions for qualification as an “Approved Co-Financing Venture Transaction” hereunder and (ii) if requested by the Administrative Agent, it shall have received a fully executed Co-Financing Venture Interparty Agreement.

 111

 

(h)            Interparty Agreements. If requested by the Administrative Agent, the Administrative Agent shall have received a fully executed Interparty Agreement with respect to such Item of Product.

(i)              Production/Acquisition Cost Reserve. If such Item of Product is Uncompleted, a Production/Acquisition Cost Reserve shall have been established for such Item of Product, by including such Production/Acquisition Cost Reserve in the Borrowing Base and by reserving the amount thereof from the Total Commitment.

(j)              P&A Reserve. If then applicable under the definition of P&A Reserve, a P&A Reserve shall have been established for such Picture by including such P&A Reserve in the Borrowing Base and by reserving the amount thereof from the Total Commitment.

(k)            Borrowing Base Certificate. The Administrative Agent shall have received a Borrowing Base Certificate dated as of a recent date showing sufficient Borrowing Base (and, as applicable, other available resources) to Complete and deliver such Item of Product after accounting for all Direct Negative Costs previously financed by and/or to be co-financed by, Approved Co-Financiers pursuant to a Co-Financing Agreement or Approved Co-Financing Venture Counterparties pursuant to a Co-Financing Venture Agreement (as applicable).

SECTION 4.3           Conditions Precedent to the Initial Extension of Credit for Revenue Participations and for Inclusion of Credit in the Borrowing Base. The obligation of each Lender to make the initial extension of credit hereunder with respect to any Revenue Participations and the ability of the Borrower in order to obtain initial Borrowing Base credit (in the context of Tax Incentive Receivables for such Revenue Participation), is subject to the satisfaction of the following conditions precedent:

(a)             Revenue Participation Documentation. The Administrative Agent shall have received fully executed copies of all Revenue Participation Documentation relating to such Revenue Participation which such documentation shall contain (i) commitments from the applicable Major Studio (x) to refund the applicable Credit Party’s investment plus a reasonable interest factor in the event such underlying Picture is not Completed and released by dates certain not to be outside the Maturity Date (or an Approved Completion Bond has been delivered to the applicable Credit Party and the Administrative Agent) and (y) to provide the applicable Credit Party or the Administrative Agent (A) Ultimates Reports with respect to such underlying Picture sufficient to determine the Remaining Ultimates, which shall be provided with the frequency required under the Credit Agreement, and (B) if applicable, the documentation, materials and other evidence of compliance with the requirements set forth in the definition of “Tax Incentive Receivable”, or (ii) terms of the economic interests in a Picture to which a Credit Party is entitled that are acceptable to the Administrative Agent.

(b)            Lien in Participation. The Administrative Agent holds or has taken action to hold a first priority security interest in the applicable Credit Party’s interest in such Revenue Participation giving rise to Borrowing Base credit.

 112

 

(c)             No Third Party Claims. The Administrative Agent shall have received a certificate executed by an Authorized Officer of the applicable Credit Party certifying that such Credit Party is not aware of any third party claim against such Revenue Participation.

(d)            Approved Distributor. The Approved Domestic Distributor that is distributing the underlying Picture to which such Revenue Participation relates is a Major Studio.

(e)             Acknowledgement of Assignment; Direction of Proceeds. The Administrative Agent shall have received from the applicable Approved Domestic Distributor an acknowledgment of the assignment of such Revenue Participation to the Administrative Agent for security in form and substance satisfactory to the Administrative Agent, which shall include an agreement by such Approved Domestic Distributor to remit all proceeds of such Revenue Participation into the applicable Collection Account.

(f)             Picture Declaration. The Administrative Agent shall have received a Picture Declaration (with the form to be modified as appropriate to reflect that the subject Picture is a Revenue Participation) in respect of such Revenue Participation, duly executed by an Authorized Officer of the Borrower.

(g)            Production/Acquisition Cost Reserve. A Production/Acquisition Cost Reserve shall have been established with respect to the applicable Credit Party’s unpaid funding obligation relating to such Revenue Participation.

(h)            P&A Reserve. If then applicable under the definition of P&A Reserve, a P&A Reserve shall have been established for such Picture by including such P&A Reserve in the Borrowing Base and by reserving the amount thereof from the Total Commitment.

(i)              Other Documents. The Administrative Agent shall have received such other documentation and information relating to such Revenue Participation as the Administrative Agent may reasonably request.

SECTION 4.4           Conditions Precedent to the Initial Loan or Letter of Credit and Each Subsequent Extension of Credit. The obligation of each Lender to make its initial Loan and any subsequent Loan and to participate in the initial Letter of Credit and any subsequent Letter of Credit and the obligation of the Issuing Bank to issue the initial Letter of Credit and any subsequent Letter of Credit, is subject to the satisfaction of the following conditions precedent:

(a)             Notice. The Administrative Agent shall have received a Borrowing Notice with respect to such Borrowing as required by Section 2.2(b) or the Issuing Bank shall have received a notice with respect to such Letter of Credit as required by Section 2.17(c), in each case, duly executed by an Authorized Officer of the Borrower.

(b)            Representations and Warranties. The representations and warranties of the Credit Parties set forth in Article 3 and in the other Fundamental Documents shall be true and correct in all material respects (unless qualified by materiality, in which case such representations and warranties shall be true and correct in all respects) on and as of the date of

 113

 

each such Borrowing or the issuance of each such Letter of Credit (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (unless qualified by materiality, in which case such representations and warranties shall be true and correct in all respects) as of such earlier date) with the same effect as if made on and as of such date.

(c)             No Material Adverse Effect. There has been no material adverse change, or any occurrence, condition or circumstance which could reasonably be expected to be a material adverse change, with respect to the business, operations, performance, assets, properties or condition (financial or otherwise) of the Credit Parties (taken as a whole) since the date on which the last dollar of equity contribution required by Section 4.1(k) has been contributed.

(d)            No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing, nor shall any such Default or Event of Default occur as a result of the making of such Borrowing or issuance of such Letter of Credit, or the application of the proceeds thereof.

(e)             No Takeover of Production. Unless otherwise agreed by the Administrative Agent, on the date of each Borrowing or issuance of such Letter of Credit, an Approved Completion Guarantor shall not have taken over from a Credit Party the production of any Item of Product; provided that the foregoing shall not prevent the Credit Parties from accessing credit the proceeds of which are applied to complete the production or theatrical exploitation of other Items of Product which have commenced principal photography at the time the Approved Completion Guarantor took over production.

Each request for a Borrowing or issuance of a Letter of Credit shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing or issuance of such Letter of Credit as to the matters specified in Sections 4.4(b), (c), (d) and (e) above.

5.               AFFIRMATIVE COVENANTS

From the Closing Date and for so long as the Commitments shall be in effect, any amount shall remain outstanding under any Loan, any Letter of Credit shall remain outstanding or any other Obligation shall remain unpaid or unsatisfied, each of the Credit Parties agrees that it will, and will cause each other Credit Party to:

SECTION 5.1           Financial Statements and Reports. Furnish or cause to be furnished to the Administrative Agent (and the Administrative Agent shall promptly make the same available to the Lenders, including their Public-Siders):

(a)             Within one hundred twenty (120) days after the end of each fiscal year of the Borrower, the audited consolidated balance sheets of the Parent and its Consolidated Subsidiaries (together with consolidating schedules reflecting adjustments to the relevant financial statements between the Parent and its Consolidated Subsidiaries on the one hand and the Borrower and its Consolidated Subsidiaries on the other hand),, as at the end of, and the

 114

 

related consolidated statements of income, stockholders’ equity and cash flows for, such fiscal year and the corresponding figures as at the end of, and for, the preceding fiscal year, accompanied by an unqualified report and opinion of independent public accountants of nationally recognized standing as shall be retained by the Borrower and be reasonably satisfactory to the Administrative Agent (it being understood that the “Big Four” accounting firms are hereby approved by the Administrative Agent), which report and opinion shall be prepared in accordance with generally accepted auditing standards relating to reporting and which report and opinion shall not be subject to any “going concern” or like explanation, qualification or exception or any explanation, qualification or exception as to the scope of such audit and shall contain no material exceptions or qualifications except for qualifications relating to accounting changes (with which such independent public accountants concur) in response to FASB releases or other authoritative pronouncements, together with a certificate signed by an Authorized Officer of the Parent, to the effect that such financial statements fairly present in all material respects the consolidated financial position of the Parent and its Consolidated Subsidiaries (and the Borrower and its Consolidated Subsidiaries in the case of the consolidating adjustments schedules) as at the dates indicated and the consolidated results of their operations for the periods indicated in conformity with GAAP.

(b)            Within sixty (60) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Borrower, commencing with the fiscal quarter ending June 30, 2016, the unaudited consolidated balance sheets of the Parent and its Consolidated Subsidiaries (together with consolidating schedules reflecting adjustments to the relevant financial statements between the Parent and its Consolidated Subsidiaries on the one hand and the Borrower and its Consolidated Subsidiaries on the other hand), and the related unaudited consolidated statements of income, stockholders’ equity and cash flows for, such fiscal quarter, and for the portion of the fiscal year through the end of such fiscal quarter and the corresponding figures, all as at the end of the corresponding quarter, and for the corresponding period, in the preceding fiscal year, together with a certificate signed by an Authorized Officer of the Parent, to the effect that such financial statements, while not examined by independent public accountants, reflect, in the opinion of the Parent, all adjustments necessary to present fairly in all material respects the consolidated financial position of the Parent and its Consolidated Subsidiaries (and the Borrower and its Consolidated Subsidiaries in the case of the consolidating adjustments schedules) as at the end of the fiscal quarter and the consolidated results of operations for the fiscal quarter then ended in conformity with GAAP, subject to normal year-end and audit adjustments and the absence of footnotes.

(c)             Within one hundred twenty (120) days after the end of each fiscal year of the Borrower, a copy of the Business Plan for the then current fiscal year (with quarterly figures) and the subsequent full fiscal year (with annual figures).

(d)            Concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b), a brief narrative report by management outlining the business, financial condition and results of operations of the Credit Parties, in a form reasonably acceptable to the Administrative Agent.

(e)             From time to time, upon the reasonable written request of the Administrative Agent, and after a reasonable time period to comply with such request, (i) copies

 115

 

of information prepared by or for a Credit Party or received by a Credit Party regarding prospective productions and estimated Direct Negative Costs of such productions, and (ii) as soon as available but no later than one hundred eighty (180) days following Completion of each Item of Product, the final Direct Negative Cost statement of such Item of Product.

(f)             From time to time, upon the reasonable written request of the Administrative Agent, and after a reasonable time period to comply with such request, all regular periodic financial reports prepared by or for a Credit Party, or received by a Credit Party, with respect to each Item of Product from the beginning of pre-production until such Item of Product is Completed; such reports shall include the Credit Parties’ cost basis in the Item of Product, the estimated cost to Complete such Item of Product (in the form provided to the Approved Completion Guarantor, if any), and the anticipated delivery and release dates for such Item of Product.

(g)            Concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b), a certificate of an Authorized Officer of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent (a “Compliance Certificate”) (i) stating whether or not such Authorized Officer has knowledge, after due inquiry, of any condition or event which would constitute a Default or Event of Default and, if so, specifying the details of each such condition or event and any action taken or proposed to be taken with respect thereto, (ii) certifying that all filings required under Section 5.7 have been made and listing each such filing that has been made since the later of the Closing Date and the date of the last Compliance Certificate, and also listing any recordation or registration number received by any Credit Party with respect to such filings or any prior filings that have not previously been provided pursuant to a certificate delivered under this Section 5.1(g), (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the most recent audited financial statements delivered to the Administrative Agent hereunder (or, until the delivery of the first audited financial statements hereunder, since the date of the financial statements referred to in Section 4.1) resulting in a change in the preparation of the financial statements accompanying such certification, and specifying such change and such effect, (iv) identifying (A) all Subsidiaries of each Credit Party existing on the date of such Compliance Certificate, (B) all Excluded Subsidiaries and a summary of assets and activities for such Excluded Subsidiaries, in each case indicating, for each such Subsidiary or Excluded Subsidiary, whether such Subsidiary was formed or acquired since the later of the Closing Date and the date of the last Compliance Certificate, (v) demonstrating in reasonable detail compliance with the provisions of Sections 6.10, 6.22, 6.23 and 6.24, (vi) identifying any changes of the type described in Section 6.9 that have not been previously reported by a Credit Party, (vii) identifying any events which give rise to an obligation by the Borrower hereunder to prepay all or any portion of the Loans or cash collateralize any Letters of Credit that have occurred since the later of the Closing Date and the date of the last Compliance Certificate and setting forth a reasonably detailed calculation of the amount of such prepayment obligation, (viii) listing and attaching (to the extent not previously delivered to the Administrative Agent) copies of all Notices of Assignment executed during the later of the Closing Date and the date of the last Compliance Certificate, (ix) providing updates (in a form reasonably acceptable to the Administrative Agent) to Schedules 3.7(b), 3.8(a), 3.8(b), 3.8(d) and 3.25 necessary to make the applicable representations set forth in Sections 3.7(b), 3.8(a), 3.8(b), 3.8(d) and 3.25 true

 116

 

and correct as of the date of such Compliance Certificate, (x) listing and attaching (to the extent not previously delivered to the Administrative Agent) copies of any material debt instruments or other evidence of material Indebtedness incurred by any Credit Party since the later of the Closing Date and the date of the last Compliance Certificate.

(h)             

(i)              Commencing with the first full month following the initial Borrowing hereunder, on or prior to the twentieth (20th) day of each month, a Borrowing Base Certificate computed as of the last day of the immediately prior month or as of the date of the Borrowing, as the case may be, setting forth the amount of each component included in the Borrowing Base, attached to which shall be such detailed information as is required by such certificate including, without limitation, (i) supporting schedules showing the calculation of each component of the Borrowing Base, (ii) the then current Remaining Ultimates for all Seasoned Pictures for which Remaining Ultimates are included in the Borrowing Base, together with the underlying Ultimates Provider’s underlying written ultimate report and (iii) the then-current estimate of Unlicensed Free TV Ultimates that are included in the Borrowing Base, together with the Borrower’s underlying written ultimate report (it being understood that the Borrower, at its option, may furnish additional Borrowing Base Certificates setting forth the foregoing information as of such more recent dates as it may deem appropriate).

(ii)            Simultaneous with the delivery of each third monthly Borrowing Base Certificate (commencing with the third Borrowing Base Certificate delivered in accordance with the foregoing clause 5.1(h)(i)), a reconciliation of inflows and outflows of all Corporate Priority Collateral and Production Priority Collateral, including cash proceeds thereof and utilization of such cash proceeds (including any payments of Obligations under the Facility and any Permitted Seer P&A Payments) as well as the use of proceeds of extensions of credit attributable to the Corporate Priority Collateral Sub-Borrowing Base and the Production Priority Collateral Sub-Borrowing Base.

(i)              Within sixty (60) days after the end of each calendar quarter, a Liquidity Certificate, reflecting that the ratio, tested at the end of such preceding fiscal quarter, of (i) projected cash sources of the Credit Parties (including, without limitation, cash on hand, capital contributions which have been committed in writing (either unconditionally or subject only to such conditions as shall be acceptable to the Administrative Agent), Borrowings under (x) the Facility (taking into account projected availability based upon the Borrowing Base) and (y) the Seer P&A Credit Agreement and projected cash receipts from operations) to (ii) projected cash uses of the Credit Parties (including debt service, amounts to be spent towards the production or acquisition of and P&A Expenses for Pictures, and all other projected cash expenditures), all as projected on a quarterly basis by the Borrower in good faith for the period from the first day of the current calendar quarter through the end of the four-quarter period commencing with the current calendar quarter, is greater than or equal to 1.10 to 1.00. The Liquidity Certificate for any unreleased Item of Product may not assume that the Credit Parties’ share of revenue or gross receipts will exceed the Credit Parties’ share of negative cost plus the Credit Parties’ share of P&A Expenses.

 117

 

(j)              So long as any Ultimates are included in the Borrowing Base, within sixty (60) days after the end of each calendar quarter, a computation of the Ultimates Percentage, with the Determination Date being the last day of the most recently elapsed calendar quarter;

(k)            (i) Within twenty (20) Business Days after a Picture becomes a Seasoned Picture and (ii) thereafter, simultaneously with the delivery of the financial statements required under Section 5.1(a) and (b), a Remaining Ultimates Report relating to the Picture, certified by the Borrower as, to its knowledge, being true and correct based on the underlying reports prepared by Ultimates Providers, together with the underlying written ultimate reports provided pursuant to the Distribution Agreements by an Ultimates Provider, and together with each Remaining Ultimates Report delivered hereunder, a calculation of the Five Picture Rolling P&A Coverage Ratio (if applicable).

(l)              Simultaneously with the delivery of each Borrowing Base Certificate pursuant to clause (h) above, at any time that a Tax Incentive Receivable is included in the Borrowing Base, an updated certification from the Tax Credit Consultant (if not already provided by the Tax Credit Consultant), as to the estimated amount of each Tax Incentive Receivable that the Credit Parties will receive and which is included in the Borrowing Base.

(m)           For each Qualifying Picture for which P&A Expenses have been funded by Loans supported or to be supported by the P&A Credit, an updated Approved P&A Budget, together with (if then applicable) an accounting of the amount of P&A Expenses spent to date and remaining to be spent with respect to such Picture, delivered (i) no less than five (5) Business Days prior to the date on which the Borrower shall request the initial Loan for such Picture using a P&A Credit, (ii) concurrently with each subsequent delivery of a Borrowing Base Certificate pursuant to Subsection 5.1(h) to the extent that the Approved P&A Budget has been increased or decreased from the amount reflected in the previous Borrowing Base Certificate, (iii) upon request by the Administrative Agent, but only if no such updated Approved P&A Budget has been delivered within the past thirty (30) days, and (iv) ninety (90) days after the initial theatrical release of such Qualifying Picture in the Domestic Territory.

(n)            Promptly upon their becoming available, copies of (x) 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, and (y) all reports, financial statements, press releases and other information which any Credit Party shall release, send or make available to the holders of its equity interests generally.

(o)            Within ten (10) days after receipt thereof by a Credit Party, copies of all management letters received by a Credit Party from its auditors.

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

(q)            Within sixty (60) days after the end of each calendar quarter, a report containing prospective release dates for each Item of Product together with a notation indicating

 118

 

whether the relevant exhibitors or counterparties, as the case may be, under the terms of the Significant Exploitation Agreements have confirmed such release date.

(r)             Within five (5) days after a Picture or Program has been “green-lit,” notice to the Administrative Agent that such Picture or Program has been “green-lit,” which notice shall contain the estimated production budget, list of principal cast, director and/or third party producers, anticipated P&A Expenses (in the case of Pictures), estimated production start date and delivery date and an estimated release date for the Qualifying Picture or Program in the Domestic Territory.

(s)             Within one (1) Business Day after receipt thereof by a Credit Party, pre-release tracking reports from any vendor providing such reports to such Credit Party for any Qualifying Picture or Program that has been “green-lit.”

(t)              From time to time such additional information regarding the financial condition or business of any Credit Party 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.

(u)            Within ten (10) days after execution of a Swap Agreement by any Credit Party, written notice thereof from the applicable Credit Party.

(v)            Promptly upon (i) their becoming available, copies of any amendment, modification, waiver or other agreement which modifies the terms of any Significant Exploitation Agreement and (ii) any Authorized Officer of a Credit Party obtaining knowledge of any event or circumstance which has, or may, result in a material change to a Significant Exploitation Agreement, such Credit Party shall promptly give written notice thereof to the Administrative Agent specifying the nature of such material change.

SECTION 5.2           Corporate Existence; Compliance with Laws. Do or cause to be done all things necessary (i) to preserve, renew and keep in full force and effect its legal existence, rights, licenses, permits and franchises except as otherwise permitted under Section 6.6, and (ii) to comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, any Governmental Authority, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect, and (iii) to maintain in effect and enforce policies and procedures designed to ensure compliance by it and its respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

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

 119

 

prevent any Credit Party from discontinuing the use, operation or maintenance of such properties or from disposing of them, in each case in accordance with Section 6.6.

SECTION 5.4           Notice of Material Events.

(a)             Promptly upon any Authorized Officer of a Credit Party obtaining knowledge of (i) any Default or Event of Default, (ii) any action or event which could reasonably be expected to materially and adversely affect the performance of the Credit Parties’ obligations under this Credit Agreement or any other Fundamental Document, 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 collectability of accounts receivable of the Credit Parties or otherwise materially decrease the value of any Collateral or Pledged Collateral, or (v) 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 Sections 7.1(h) or 7.1(i), such Credit Party shall promptly give written notice thereof to the Administrative Agent specifying the nature and period of existence of any such claimed default, condition or event, or specifying the notice given or action taken and the nature of such claimed default, condition or event and what action such Credit Party has taken, is taking and proposes to take with respect thereto.

(b)            Promptly upon any Authorized Officer of a Credit Party obtaining knowledge of (i) the institution of, or threat of, any action, suit, proceeding, investigation or arbitration by any Governmental Authority or other Person against or affecting any Credit Party or any assets of a Credit Party which, if adversely determined could reasonably be expected to result in a Material Adverse Effect, or (ii) any material development in any such action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Administrative Agent or the Lenders), such Credit Party shall (x) promptly give written notice thereof to the Administrative Agent and provide such other information as may be available to it to enable the Administrative Agent and the Lenders to evaluate such matters and (y) upon request promptly give notice of the status of any action, suit, proceeding, investigation or arbitration covered by a notice delivered to the Administrative Agent pursuant to clause (x) above and provide such other information as may be reasonably requested and available to it 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 replacement value of the property insured or such lesser amounts, and with such self-insured retention or deductible levels, as are 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

 120

 

consistent with, or greater than, customary standards, including Flood Insurance in connection with any Collateral that is real property (other than (x) real property not located in a Special Flood Hazard Area, or (y) real property located in a Special Flood Hazard Area in a community that does not participate in the National Flood Insurance Program).

(c)             Maintain, or cause to be maintained, in effect during the period from the commencement of principal photography of each Item of Product produced by any Credit Party, or from the date of acquisition of each Item of Product acquired by any Credit Party (other than a Picture in which a Credit Party holds a Revenue Participation), through the third anniversary of the date on which such Item of Product is released and as otherwise required by applicable contracts, a so-called “Errors and Omissions” policy covering all such Items of Product, and cause such Errors and Omissions policy to provide coverage to the extent and in such manner as is customary for Items of Product of 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 Item of Product produced by any Credit Party, or from the date of acquisition of each Item of Product acquired by any Credit Party (other than a Picture in which a Credit Party holds a Revenue Participation) (i) until such time as the Administrative Agent shall have been provided with satisfactory evidence 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 Item of Product, insurance on the negatives and sound tracks or master tapes of such Item of Product in an amount not less than the cost of re-shooting the principal photography of such Item of Product and otherwise re-creating such Item of Product and (ii) until principal photography of such Item of Product has been concluded, a cast insurance policy with respect to such Item of Product, which provides coverage to the extent and in such manner as is customary for Items of Product 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) (i) to provide for the benefit of the Administrative Agent that at least 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) to 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 Event of Default shall have occurred and be continuing, production insurance recoveries received by a Credit Party prior to Completion or abandonment of an Item of Product may be utilized to finance the production of such Item of Product, and; provided, further, that so long as no Event of Default has occurred or is 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, to name the Administrative Agent (for the benefit of the Secured Parties) as an additional insured, including, without limitation, under any “Errors and Omissions” insurance policy.

 121

 

(f)             Render to the Administrative Agent upon the request of 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           Music. With respect to any Item of Product produced by a Credit Party, when such Item of Product has been scored, if requested by the Administrative Agent and if available to a Credit Party, deliver to the Administrative Agent within a reasonable period of time after such request (i) written evidence of the music synchronization rights, if any, obtained from the composer or the licensor of the music, and (ii) copies of all the most current cue sheets with respect to such Item of Product.

SECTION 5.7           Copyrights and Trademarks.

(a)             As soon as practicable but no later than sixty (60) days after (i) the (x) the initial release of a Picture or (y) in the case of a Program or other Item of Product, the initial broadcast or streaming of the final episode of a “season” or production cycle for such Program or other Item of Product, to the extent any Credit Party is or becomes the copyright proprietor thereof or otherwise acquires a copyrightable interest therein, and (ii) any Credit Party acquires any trademark, trade name, service mark or service name, in each case of clauses (i) and (ii) above, take any and all actions necessary to register the copyright for, or such other copyrightable interest in, such Item of Product, or such trademark, service mark, trade name or service name, respectively, in the name of such Credit Party (subject to a Lien in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to the Copyright Security Agreement and a Trademark Security Agreement) in conformity with the laws of the United States of America and such other jurisdictions as the Administrative Agent may reasonably specify, and promptly deliver to the Administrative Agent, if not previously delivered, (x) written evidence of the submission for registration and subsequently of registration of any and all such copyrights, trademark, service mark, trade name or service name of the Credit Parties for inclusion in the Collateral, and (y) a Copyright Security Agreement Supplement relating to such copyright or such other copyrightable interest or a Trademark Security Agreement relating to such trademark, trade name, service mark or service name, in each case, executed by the relevant Credit Parties.

(b)            Obtain instruments of transfer or other documents evidencing the interest of any Credit Party with respect to the copyright relating to Items of Product in which such Credit Party owns a copyrightable interest and any trademark, trade name, service mark or service name which such Credit Party acquires, and promptly record, or cause to be recorded, if such interest may be recorded with the U.S. Copyright Office, the U.S. Patent and Trademark Office or such other jurisdictions, such instruments of transfer in the assignment records of the U.S. Copyright Office, the U.S. Patent and Trademark Office or such other jurisdictions as the Administrative Agent may reasonably specify.

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 (which shall be in accordance with GAAP) and provide

 122

 

the Administrative Agent and its representatives (and any time after an Event of Default shall have occurred and be continuing, the Lenders) access to such books and records and to any of its properties or assets upon reasonable notice (which may be delivered telephonically) and during regular business hours (in each case unless an Event of Default shall have occurred and be continuing, in which case no such limitations shall apply) in order that the Administrative Agent (and the Lenders, as applicable) may make such audits and examinations of, and make abstracts from, such books, accounts, records and other papers pertaining to the Collateral, and upon notification to the applicable Credit Party, permit the Administrative Agent and its representatives (and any time after an Event of Default shall have occurred and be continuing, the Lenders) to discuss the affairs, finances and accounts with, and be advised as to the same by, such Credit Party’s officers and independent accountants, all as the Administrative Agent may reasonably deem appropriate for the purpose of verifying the accuracy of each report delivered to the Administrative Agent, the Issuing Bank and/or the Lenders pursuant to this Credit Agreement or for otherwise ascertaining compliance with the Fundamental Documents; provided, however, that (i) if no Event of Default shall have occurred and be continuing, no more than one such visit shall occur in any twelve (12) month period and (ii) any such visit conducted by the Lenders (as opposed to the Administrative Agent) shall be coordinated through the Administrative Agent.

(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 any or all receivables of any Credit Party, the Administrative Agent will so notify such Credit Party. 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, the Administrative Agent may proceed to make such confirmations directly with account debtors and other payors after prior written notice to the Borrower. 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.

(c)             Permit the Administrative Agent and its representatives (accompanied by any Lenders) to conduct field audits of the Borrowing Base and procedures and controls relating thereto at the expense of the Credit Parties once each fiscal year upon reasonable notice (which may be delivered telephonically) and during regular business hours (in each case unless an Event of Default shall have occurred and be continuing, in which case no such limitations shall apply).

SECTION 5.9           Third Party Audit Rights. Promptly notify the Administrative Agent of, and at all times allow the Administrative Agent or its designee access to the results of, all audits conducted by (i) any Credit Party of any third party licensee, partnership, or joint venture, or (ii) any contract counterparty of any Credit Party, in each case, pertaining to the Collateral. Upon the reasonable request of the Administrative Agent, to the extent that the Credit Parties shall have the right to conduct such audits, the Credit Parties will exercise their audit rights with respect to any such third party licensees, partnerships and joint ventures. If any Credit Party fails to initiate such audit within thirty (30) days following the Administrative Agent’s request or if an

 123

 

Event of Default shall have occurred and be continuing, the Administrative Agent shall have the right to exercise directly such Credit Party’s audit rights under any agreement with respect to any Item of Product included in the Collateral.

SECTION 5.10        Observance of Agreements. Duly observe and perform all material terms and conditions of each Distribution Agreement, Co-Financing Agreement and Co-Financing Venture Agreement, all Revenue Participation Documentation and all other material agreements to which it is a party relating to the production, acquisition, distribution and other exploitation of each Item of Product and diligently protect and enforce (or cause to be protected and enforced) the rights of the Credit Parties under all such agreements in a manner consistent with prudent business judgment.

SECTION 5.11        Laboratories; No Removal.

(a)             To the extent any Credit Party has control over, or rights to receive, any of the Physical Materials relating to any Item of Product, deliver or cause to be delivered to a Laboratory or Laboratories all negative and preprint material, master tapes and all sound track materials with respect to each such Item of Product 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 preprint material or master tapes 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 a Credit Party requesting any such Laboratory to deliver any such negative or other preprint or sound track material or master tapes 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. Each Credit Party hereby agrees not to deliver or remove or cause the delivery or removal of the original negative and film or sound materials or master tapes with respect to any Item of Product owned by any Credit Party or in which any Credit Party has an interest to a location outside the United States of America, Canada or the United Kingdom without the prior written consent of the Administrative Agent; 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. For the avoidance of doubt, no Credit Party shall be required to deliver a Pledgeholder Agreement or Laboratory Access Letter with respect to a Picture in which a Credit Party holds a Revenue Participation.

(b)            During production of any Item of Product produced by a Credit Party, promptly deliver (or cause to be delivered) the daily rushes for such Item of Product to the appropriate Laboratory as soon as reasonably practicable and, in any event, no less frequently than weekly.

(c)             With respect to Items of Product that are Completed or acquired after the Closing Date, promptly after such Completion or acquisition, deliver to the Administrative

 124

 

Agent and the Laboratories that are signatories to Pledgeholder Agreements a revised schedule of the Physical Materials therefor on deposit with such Laboratories to the extent applicable.

SECTION 5.12        Taxes and Charges; Indebtedness in Ordinary Course of Business. Duly pay and discharge, or cause to be duly paid and discharged, (i) before the same shall become delinquent (after giving effect to applicable extensions), all Taxes imposed upon a Credit Party or its properties, sales and activities, or any part thereof, or upon the income or profits therefrom, (ii) all claims for labor, materials, or supplies which in the case of clause (i) or (ii) above, if unpaid might by law become a Lien (other than a Permitted Encumbrance) upon any property of any Credit Party; provided, however, that any such Tax or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and such Credit Party shall have set aside on its books reasonable reserves (the presentation of which is segregated to the extent required by GAAP) adequate with respect thereto or if the aggregate amount of such Taxes and claims does not exceed $50,000; and provided, further, that if such Credit Party will pay all such Taxes or charges forthwith upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor, or post a bond or other security therefor acceptable to the Administrative Agent. Each Credit Party will promptly pay when due, or in conformance with customary trade terms, all other Indebtedness incident to its operations.

SECTION 5.13        Liens. Defend the Collateral and the Pledged Collateral against any and all Liens howsoever arising (other than Permitted Encumbrances) and the first priority status of the Lien in favor of the Administrative Agent (on behalf of the Secured Parties) therein (prior to all Liens other than Specified Permitted Encumbrances in the case of all Collateral other than certificated Pledged Securities, and prior to all Liens in the case of certificated Pledged Securities), and in any event defend against any attempted foreclosure (other than a foreclosure by the Administrative Agent under the Fundamental Documents).

SECTION 5.14        Further Assurances; Security Interests.

(a)             Upon the reasonable request of the Administrative Agent, duly execute and deliver, or cause to be duly executed and delivered, at the cost and expense of the Credit Parties, such further instruments as may be necessary or proper in the reasonable judgment of the Administrative Agent to carry out the provisions and purposes of this Credit Agreement and the other Fundamental Documents.

(b)            Upon the reasonable request of the Administrative Agent, (i) promptly execute and deliver or cause to be executed and delivered, at the cost and expense of the Credit Parties, such further instruments as may be necessary or proper in the reasonable judgment of the Administrative Agent, to provide the Administrative Agent (for the benefit of the Secured Parties) a perfected Lien in the Collateral and the Pledged Collateral with the priority contemplated by Section 3.18 and any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the UCC and the rules and regulations thereunder, or any other Applicable Law, and (ii) perform or cause to be performed such other acts which are reasonably necessary or advisable, from time to time, in order to grant and maintain in favor of the Administrative Agent (for the benefit of the Secured Parties) the

 125

 

Lien in the Collateral and the Pledged Collateral (with the priority contemplated by Section 3.18) contemplated hereunder and under the other Fundamental Documents. The Administrative Agent or Borrower will give at least forty-five (45) days prior written notice to the Secured Parties prior to any Credit Party being required to execute or deliver any real estate mortgage or other real-estate specific security document in accordance with the Fundamental Documents and upon confirmation from all Secured Parties that flood insurance due diligence and flood insurance compliance has been completed, the Borrower may so execute such real estate security documentation.

(c)             Promptly undertake to deliver or cause to be delivered to the Administrative Agent from time to time such other documentation, consents, authorizations and approvals in form and substance reasonably satisfactory to the Administrative Agent, as the Administrative Agent shall deem reasonably necessary or advisable to perfect or maintain the Liens of the Administrative Agent (for the benefit of the Secured Parties).

(d)            Not create any Lien on any assets of any Credit Party securing any obligations under the Seer P&A Facility Credit Agreement or the Subordinated Loan Agreement if these same assets are not subject to, and do not become subject to, a Lien securing the Obligations.

SECTION 5.15        Environmental Laws.

(a)             Promptly notify the Administrative Agent upon an Authorized Officer of any Credit Party becoming aware of any violation or potential violation or non-compliance with, or liability or potential liability under any Environmental Laws which, when taken together with all other pending violations, could reasonably be expected to have a Material Adverse Effect, and promptly furnish to the Administrative Agent all notices of any nature which any Credit Party may receive from any Governmental Authority or other Person with respect to any violation, or potential violation, or non-compliance with, or liability or potential liability under any Environmental Laws which, in any case or when taken together with all such other notices, could reasonably be expected to have a Material Adverse Effect.

(b)            Comply with and use reasonable efforts to ensure compliance by all tenants and subtenants of a Credit Party with all Environmental Laws, and obtain and comply in all respects with and maintain and use commercially reasonable efforts to ensure that all tenants and subtenants of a Credit Party obtain and comply in all respects with and maintain any and all licenses, approvals, registrations or permits required by Environmental Laws, except in each case where failure to do so could not reasonably be expected to have a Material Adverse Effect.

(c)             Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under all Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities, except where failure to do so could not reasonably be expected to have a Material Adverse Effect. Any order or directive whose lawfulness is being contested in good faith by appropriate proceedings shall be considered a lawful order or directive when such proceedings, including any judicial review of such proceedings, have been finally concluded by the issuance of a final non-appealable order; provided, that the appropriate Credit Party shall

 126

 

have set aside on its books reasonable reserves (the presentation of which is segregated to the extent required by GAAP) adequate with respect thereto if reserves shall be deemed necessary.

(d)            Defend, indemnify and hold harmless the Administrative Agent, the Issuing Bank and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to: (i) any act or omission of any Credit Party arising under or related to Environmental Laws or Hazardous Materials, (ii) the violation of or non-compliance by any Credit Party with any Environmental Laws, (iii) the presence, Release or threatened Release, of any Hazardous Materials or exposure of any Person to any Hazardous Materials relating in any manner to any Credit Party or any property currently or formerly owned, operated, occupied or leased by any Credit Party, (iv) any breach of any representation, or violation of any covenant, made hereunder relating to Environmental Laws or Hazardous Materials, or (v) any orders, requirements or demands of Governmental Authorities or any other Persons related thereto, including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses, but excluding therefrom all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses arising out of or resulting from (x) the gross negligence or willful acts or willful misconduct of any indemnified party, to the extent so found in a final judgment of a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required or (y) acts or omissions of any indemnified party in possession or control of any such assets.

SECTION 5.16        Use of Proceeds. Use the proceeds of the Facility to (i) finance general working capital purposes, including (A) payment of interest, fees, costs and expenses under the Facility and transaction fees and costs associated with the Facility, (B) to fund the Credit Parties’ development, pre-production, production, acquisition, distribution, and prints and advertising expenses of Items of Product and (C) Permitted Seer P&A Payments, but solely to the extent funded with proceeds of extensions of credit derived from Corporate Priority Collateral Availability, (ii) repay a portion of loans that were advanced under the Seer P&A Facility Credit Agreement prior to the Closing Date utilizing the P&A Credit (as defined in the Seer P&A Facility Credit Agreement) in an amount necessary to reduce the outstandings thereunder to 20% of the Credit Parties’ domestic P&A Expenses for current Pictures on a pro forma basis (including any prepayment penalty or call protection thereunder), but excluding the Future Profit Participation Obligation and the Continuing Facility Fee Obligation (in each case, as defined in the Seer P&A Facility Credit Agreement), and (iii) to refinance (but not to novate or terminate) the loans under the Existing Corporate Facility Agreement and the loans under the Existing Production Facility Agreement and to pay transaction costs associated therewith). No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of

 127

 

funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, to the extent such activities, business or transaction would be prohibited by Sanctions if conducted by a corporation incorporated in the United States, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

SECTION 5.17        Distribution Agreements; Letters of Credit.

(a)             Promptly, and in any event within ten (10) Business Days of receipt thereof, deliver or make available to the Administrative Agent true and complete copies of (i) each Distribution Agreement, and (ii) all amendments and modifications to any existing Distribution Agreement; provided that the inadvertent failure to deliver the items set forth in this clause (a) in respect of a Distribution Agreement value for which has not been included in the Borrowing Base shall not be a Default or Event of Default hereunder.

(b)            From time to time (i) furnish to the Administrative Agent such information and reports in the possession of or available to a Credit Party regarding the Distribution Agreements as the Administrative Agent may reasonably request, and (ii) upon the occurrence and during the continuance of an Event of Default, at the request of the Administrative Agent, make such demands and requests to the other parties to such Distribution Agreements for information and reports or for action as the applicable Credit Party is entitled to make under each such Distribution Agreement.

(c)             Promptly upon receipt thereof by a Credit Party, deliver to the Administrative Agent to be held as part of the Collateral, the original of all letters of credit (including any amendments thereto) under which a Credit Party is the beneficiary (whether pursuant to a Distribution Agreement or otherwise) after the Closing Date; provided, that, so long as no Event of Default shall have occurred and be continuing, the Administrative Agent shall, upon written request by a Credit Party, release any such letter of credit to the applicable Credit Party in order to permit such Credit Party to present such letter of credit at the time of a drawing.

(d)            Take all action on its part to be performed necessary to effect timely payments under all letters of credit under which a Credit Party is the beneficiary, including, without limitation, timely preparation, acquisition and presentation of all documents, drafts or other instruments required to effect payment thereunder.

SECTION 5.18        Subsidiaries. Deliver to the Administrative Agent:

(a)             Promptly after (a) the formation or acquisition of a wholly-owned Subsidiary (other than an Excluded Subsidiary) of the Borrower (but in any event prior to commencement of operations by such Subsidiary), (b) the production financing incurred by a Special Purpose Producer having been repaid in full (unless such Special Purpose Producer has already transferred all of its assets to a Credit Party and is thus an Immaterial Subsidiary), (c) any other Excluded Subsidiary ceases to be an Excluded Subsidiary (as applicable), (d) any Subsidiary becomes a guarantor of the obligations under the Seer P&A Facility Credit Agreement or the Subordinated Loan Agreement, or (e) the Borrower elects to join a CFC or its

 128

 

Subsidiaries as a Credit Party hereunder, (i) an Instrument of Assumption and Joinder duly executed by such Subsidiary, (ii) an appropriate UCC financing statement (or foreign equivalent) naming such Subsidiary as debtor and the Administrative Agent as secured party, (iii) organizational documents of the type described in Section 4.1(a), and (iv) the certificates (if any) representing 100% of the Equity Interests issued by such Subsidiary to a Credit Party together with an undated stock power (or any comparable document for non-corporate entities) duly endorsed or executed in blank by the appropriate Pledgor.

(b)            Promptly following the creation or acquisition of an Excluded Subsidiary (but in any event prior to any Credit Party making any capital contribution or other Investment therein or loan thereto), the Credit Parties shall deliver or cause such Person to deliver to the Administrative Agent (unless expressly excluded from the definition of “Pledged Securities”): to the extent that the Equity Interests of such Person owned by a Credit Party have not previously been pledged to the Administrative Agent (for the benefit of the Secured Parties) and (in the case of Special Purpose Producers) are not required to be pledged to a production lender, an executed pledge agreement, and the certificates (if any) representing 100% of the Equity Interests owned by a Credit Party in such Person, together with an undated stock power (or any comparable document for non-corporate entities).

(c)             Promptly following the creation or acquisition of a Co-Financing Venture Entity (but in any event prior to any Credit Party making any capital contribution or other Investment therein or loan thereto), the Credit Parties shall deliver or cause such Person to deliver to the Administrative Agent an accommodation security agreement in accordance with paragraph 9 of Schedule 1.3.

(d)            Following the Closing Date, to the extent that the Administrative Agent has reasonably determined that the cost to a Credit Party is not disproportionate to the benefit to be realized by the Secured Parties, all non-U.S. Credit Parties (and the Credit Parties which hold Equity Interests therein) shall comply with any reasonable request of the Administrative Agent to provide local law security grants and stock pledges in order to provide perfected, first priority (subject to Specified Permitted Encumbrances) security interests to the Administrative Agent for the benefit of the Secured Parties, in form and substance reasonably satisfactory to the Administrative Agent.

SECTION 5.19        ERISA Compliance and Reports. Furnish to the Administrative Agent (a) as soon as possible, and in any event within thirty (30) days after any executive officer of a Credit Party has knowledge that (i) any Reportable Event with respect to any Plan has occurred, a statement of an executive officer of the Credit Party, setting forth on behalf of such Credit Party details as to such Reportable Event and the action which it proposes to take with respect thereto, together with a copy of the notice, if any, required to be filed of such Reportable Event given to the PBGC, or (ii) a failure to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred with respect to a Plan or an application has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard or an extension of any amortization period under Section 412 of the Code with respect to a Plan, a Plan subject to Title IV of ERISA or a Multiemployer Plan has been or is proposed to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA, proceedings have been instituted to terminate a Plan subject to Title IV of ERISA,

 129

 

or any such Credit Party or ERISA Affiliate has incurred any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan or Multiemployer Plan under Sections 4062, 4063, 4201 or 4204 of ERISA, a statement of an executive officer of the Credit Party, setting forth details as to such event and the action the applicable Credit Party proposes to take with respect thereto, and (b) promptly after receipt thereof, a copy of any notice any Credit Party or ERISA Affiliate may receive from the PBGC relating to the PBGC’s intention to terminate any Plan subject to Title IV of ERISA or to appoint a trustee to administer any such Plan.

SECTION 5.20        Location of Bank Accounts. Promptly upon the establishment thereof, inform the Administrative Agent of the location and purpose of each bank account of the Credit Parties.

SECTION 5.21        Licensing Intermediaries. To the extent a Credit Party retains a Licensing Intermediary in connection with the distribution or other exploitation of an Item of Product, cause such Licensing Intermediary to (i) execute and deliver security documentation (in form and substance acceptable to the Administrative Agent, which in any event shall provide that upon a Default or Event of Default the Administrative Agent may instruct the applicable Licensing Intermediary to remit all amounts owing to any Credit Party to a Collection Account) which grants the applicable Credit Party or the Administrative Agent a first priority security interest (subject to the Senior Intercreditor Agreement) in any such distribution or other exploitation rights, and in any proceeds thereof (including any letters of credit), and (ii) agree in writing to remit all gross receipts with respect to such Item of Product that are received by such Licensing Intermediary, net of its customary fees and expenses, to the applicable Collection Account (or, to the extent necessary to facilitate the transaction, a collection account in the name of such Credit Party at a bank located in the jurisdiction of such Licensing Intermediary; provided, that such Credit Party transfers such amounts immediately to a Collection Account) as soon as practicable after its receipt thereof.

SECTION 5.22        Post-Closing Conditions. Within (i) ten (10) Business Days following the Closing Date (or such later date as may be agreed to by the Administrative Agent in its sole discretion), deliver to the Administrative Agent (a) the fully executed U.K. Debenture and (b) the stock certificate evidencing the Equity Interests of Surreal, Inc. reflecting the Borrower as owner, accompanied by an undated stock power duly executed or endorsed by the Borrower and (ii) 30 days following the Closing Date (or such later date as may be agreed to by the Administrative Agent in its sole discretion), deliver to the Administrative Agent (a) to the extent mandated by Section 6.14, Account Control Agreements for each deposit account of a Credit Party held at the following financial institutions to the extent an Account Control Agreement is not already in place for such deposit account: City National Bank; JPMorgan Chase Bank, N.A.; Royal Bank of Canada plc and First Republic Bank and (b) Laboratory Access Letters and Pledgeholder Agreements, as applicable, covering the following Items of Product: “Secret In Their Eyes,” “The Boy,” “Desierto” and “Edge of Seventeen.”

6.               NEGATIVE COVENANTS

 130

 

From the Closing Date and for so long as the Commitments shall be in effect, any amount shall remain outstanding under any Loan, any Letter of Credit shall remain outstanding or any other Obligation shall remain unpaid or unsatisfied, each of the Credit Parties agrees that it will not, and will not allow any other Credit Party to, and solely with respect to Sections 6.27 and 6.29, the Parent agrees that it will not:

SECTION 6.1           Limitations on Indebtedness. Incur, create, assume or suffer to exist any Indebtedness or Equity Interests with liquidation preferences or permit any partnership or joint venture in which a Credit Party is a general partner to incur, create, assume or suffer to exist any Indebtedness or Equity Interests with liquidation preferences other than:

(a)             Indebtedness represented by the Loans, the Notes and the other Obligations;

(b)            to the extent constituting Indebtedness, Guarantees permitted pursuant to Section 6.3;

(c)             subject to the limitations set forth herein, unsecured liabilities for acquisitions of underlying rights in Items of Product and trade payables incurred in the ordinary course of business and payable on normal trade terms and not otherwise prohibited hereunder;

(d)            ordinary course liabilities relating to profit participations and other contingent compensation, including royalties, deferments, guild residuals and payments pursuant to Co-Financing Agreements or Co-Financing Venture Agreements (as applicable) with respect to the production, distribution, acquisition or other exploitation of Items of Product;

(e)             Indebtedness in respect of inter-company advances payable by one Credit Party to another Credit Party;

(f)             Indebtedness arising in connection with transactions permitted under Sections 6.7 and 6.8;

(g)            Indebtedness of a Credit Party to an Approved Co-Financier in relation to a Co-Financed Items of Product, subject to the relevant Co-Financing Intercreditor Agreement; provided, that such Indebtedness is non-recourse to the Credit Parties other than with respect to such Item of Product;

(h)            to the extent constituting Indebtedness, amounts payable to an Approved Completion Guarantor from the proceeds of a Picture to recoup its contribution to the Direct Negative Costs of such Picture and other amounts recoupable by such Approved Completion Guarantor with regard to such Picture pursuant to the terms of the applicable Approved Completion Bond;

(i)              Indebtedness pursuant to Swap Agreements permitted under Section 6.18;

 131

 

(j)              Indebtedness in respect of secured purchase money financing (including Capital Leases) to the extent permitted by Section 6.2(n), in an amount not to exceed $100,000 in the aggregate at any one time outstanding;

(k)            to the extent the same may constitute Indebtedness hereunder, liabilities incurred in respect of commitments to repay “prints and advertising” and other distribution expenses or residuals or other contingent compensation incurred by an Approved Co-Financier or Distributor;

(l)              Indebtedness outstanding on the Closing Date listed on Schedule 6.1(l) and any Indebtedness which represents an extension, refinancing or renewal (such Indebtedness being referred to herein as the “Refinancing Indebtedness”) of any such Indebtedness described on Schedule 6.1(l) (such Indebtedness being so extended, refinanced or renewed being referred to herein as the “Refinanced Indebtedness”); provided, that (i) such Refinancing Indebtedness does not increase the principal amount or interest rate of the Refinanced Indebtedness, (ii) any Liens securing such Refinanced Indebtedness are not extended to any additional property of any Credit Party, (iii) no Credit Party that is not originally obligated with respect to repayment of such Refinanced Indebtedness is required to become obligated with respect to such Refinancing Indebtedness, (iv) such Refinancing Indebtedness does not result in a shortening of the average weighted maturity of such Refinanced Indebtedness, (v) the terms of such Refinancing Indebtedness are not less favorable to the obligor thereunder than the original terms of such Refinanced Indebtedness and (iv) if such Refinanced Indebtedness was subordinated in right of payment to the Obligations, then the terms and conditions of such Refinancing Indebtedness must include subordination terms and conditions that are at least as favorable to the Administrative Agent and the Lenders as those that were applicable to such Refinanced Indebtedness;

(m)           Indebtedness of the Credit Parties under the Seer P&A Facility Credit Agreement and the Subordinated Loan Agreement and any extensions, refinancings or renewals thereof to the extent permitted under the Senior Intercreditor Agreement and Subordination Agreement.

(n)            Indebtedness of the Credit Parties with respect to other Subordinated Debt pursuant to subordination arrangements satisfactory to the Required Lenders;

(o)            Indebtedness provided by third party financiers in respect of tax incentive or tax rebate programs which may not be included in the Borrowing Base due to such tax incentive or rebate program not satisfying the requirements for an “Tax Incentive Receivable” hereunder due to the terms of such program (e.g. such program does not provide for payment until after one year following the Maturity Date, payment pursuant to such program is conditioned upon a content requirement, or the jurisdiction providing such program is not approved hereunder) or exceeding the Total Commitments; provided, that (A) at the time of the incurrence of such Indebtedness, no Default or Event of Default has occurred and is continuing, (B) such Indebtedness shall be non-recourse to the Credit Parties or any of their assets, other than such Credit Party’s rights to the applicable tax incentive or tax rebate, or is otherwise incurred in accordance with Section 6.27, (C) any lien securing such Indebtedness shall satisfy the requirements under Section 6.2(q) hereof, and (D) the aggregate amount of such

 132

 

Indebtedness does not exceed the gross dollar amount of the anticipated tax incentive or tax rebate; and

(p)            other Indebtedness of the Credit Parties not to exceed $2,500,000 in the aggregate at any one time outstanding.

SECTION 6.2           Limitations on Liens. Incur, create, assume or suffer to exist any Lien on any of its revenue stream, property or assets, whether now owned or hereafter acquired, except:

(a)             Liens of the Administrative Agent (for the benefit of the Secured Parties) under this Credit Agreement, the other Fundamental Documents and any other document contemplated hereby or thereby (including, for the avoidance of doubt, Liens securing amounts payable under Swap Agreements, but only to the extent included in the definition of the term “Obligations” herein);

(b)            Liens pursuant to written security agreements (on customary terms reasonably acceptable to the Administrative Agent) in favor of guilds that are required pursuant to collective bargaining agreements; provided, that, with respect to any such Lien which is filed after the Closing Date but prior to the filing of the Liens granted to the Administrative Agent on an Item of Product, the Administrative Agent receives an intercreditor agreement in form and substance reasonably satisfactory to it;

(c)             Liens customarily granted or incurred in the ordinary course of business with regard to goods provided or services rendered by laboratories and production houses, record warehouses, common carriers, landlords, warehousemen, mechanics and suppliers of materials and equipment; provided that such Liens are limited to the goods provided or to the goods relating to which services were rendered;

(d)            Liens arising out of attachments, judgments or awards as to which an appeal or other appropriate proceedings for contest or review are timely commenced (and as to which foreclosure and other enforcement proceedings shall not have been commenced (unless fully bonded or otherwise effectively stayed)) and as to which appropriate reserves have been established in accordance with GAAP and that do not otherwise result in an Event of Default;

(e)             Liens for Taxes not yet due or the validity or amount of which is currently being contested in good faith by appropriate proceedings pursuant to the terms of Section 5.12 and as to which appropriate reserves have been established in accordance with GAAP;

(f)             Liens arising by virtue of any statutory or common law provision relating to banker’s liens, rights of setoff or similar rights with respect to deposit accounts;

(g)            Liens in favor of Distributors to secure their right to enjoy their licensed rights pursuant to Distribution Agreements entered into in the ordinary course of business on terms reasonably satisfactory to the Administrative Agent; provided, that each such Distributor

 133

 

has entered into an interparty or intercreditor agreement with the Administrative Agent reasonably satisfactory to the Administrative Agent in all respects;

(h)            Liens granted by a Credit Party in favor of an Approved Co-Financier in connection with a Co-Financed Item of Product, provided, that such Liens are subject to a Co-Financing Intercreditor Agreement;

(i)              Liens to secure transactions contemplated by Sections 6.7 and 6.8 to the extent permitted thereunder;

(j)              [Intentionally Omitted];

(k)            deposits (i) under worker’s compensation, unemployment insurance, old age pensions, and social security and similar laws or (ii) to secure statutory obligations, or surety, appeal, performance or other similar bonds (other than completion bonds) and other obligations of a like nature, in each case incurred in the ordinary course of business;

(l)              Liens in favor of an Approved Completion Guarantor in connection with a Picture to secure the rights of such Approved Completion Guarantor to recoup its contribution to the Direct Negative Cost of such Picture and other amounts recoupable by such Approved Completion Guarantor with regard to such Picture, subject to an Interparty Agreement;

(m)           any Lien on any property or asset of a Credit Party existing on the Closing Date and set forth in Schedule 6.2; provided that (i) such Lien shall not apply to any other property or asset of such Credit Party and (ii) such Lien shall secure only those obligations which it secures on the Closing Date;

(n)            Liens securing purchase money Indebtedness permitted under Section 6.1(j) hereof and granted to a vendor or other Person financing the acquisition of property, plant or equipment; provided, that (i) such Liens only cover the property so purchased and are acceptable to the Administrative Agent in its reasonable discretion, and (ii) the Indebtedness secured by the Lien does not exceed the acquisition cost of the particular assets acquired;

(o)            Liens arising in connection with transactions permitted under Section 6.1(l);

(p)            possessory Liens (other than those of Laboratories and production houses permitted under Section 6.2(c)) that (i) occur in the ordinary course of business, (ii) secure normal trade debt that is not yet due and payable and (iii) do not secure Indebtedness;

(q)            Liens securing Indebtedness relating to outside tax incentive financing described in Section 6.1(o) hereof; provided, that such Lien shall (i) only attach to the Credit Party’s rights in the applicable tax incentive or tax rebate being financed and (ii) be subject to an intercreditor agreement in form and substance satisfactory to the Administrative Agent;

(r)             [Intentionally Omitted];

 134

 

(s)             Liens securing obligations under the Seer P&A Facility Credit Agreement, subject to the Senior Intercreditor Agreement;

(t)              Liens securing obligations under the Subordinated Loan Agreement, subject to the Subordination Agreement;

(u)            Liens in favor of a banking or other financial institution arising as a matter of law or in the ordinary course of business under customary general terms and conditions encumbering deposits or other funds maintained with a financial institution (including the right of set-off) and that are within the general parameters customary in the banking industry or arising pursuant to such banking institution’s general terms and conditions;

(v)            Liens on specific items of inventory or other goods and proceeds thereof of any Person securing such Person’s obligations in respect of bankers’ acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business;

(w)           Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes; and

(x)            other Liens securing obligations in an aggregate amount outstanding not to exceed (and so long as the fair market value of the assets subject thereto do not exceed) $2,500,000 at any one time.

SECTION 6.3           Limitation on Guaranties. Incur, create, assume or suffer to exist any Guaranty (including any obligation as a general partner of a partnership or as a joint venturer of a joint venture in respect of Indebtedness of such partnership or joint venture), either directly or indirectly, except:

(a)             performance guarantees in the ordinary course of business under guild agreements, or to suppliers, talent, licensees or laboratories which are providing services in connection with the production, acquisition, distribution or other exploitation of any Item of Product by or for any Credit Party;

(b)            the endorsement of negotiable instruments for deposit or collection in the ordinary course of business;

(c)             the Guarantees made by the Guarantors pursuant to Article 9;

(d)            customary Guarantees in connection with participations and deferments relating to an Item of Product;

(e)             Guarantees of obligations under the Seer P&A Facility Credit Agreement, and the Subordinated Loan Agreement; and

 135

 

(f)             Guarantees of obligations of another Credit Party that the Credit Party could have incurred directly as a primary obligor without violating the terms of any Fundamental Document;

provided that in the case of any guaranty by any Credit Party of obligations of a Credit Party engaged in a TV Joint Venture or in Digital Product shall be subject to the TV/JV Investments Basket and the Other Investments Basket, as appropriate, such that the maximum recourse to the Credit Party guarantor shall while the guaranty is outstanding constitute utilization of such baskets and if a payment is made by such Credit Party guarantor then the amount so paid shall reduce the applicable basket by a corresponding amount.

SECTION 6.4           Limitations on Investments. Create, make or incur any Investment, except:

(a)             Investments in Cash Equivalents;

(b)            to the extent constituting Investments, Guarantees permitted under Section 6.3;

(c)             Investments in or to any other Credit Party; provided, that any such Investments made in Credit Parties engaging in Television Joint Ventures or Digital Product shall be subject to the TV JV/Digital Product Investments Basket and the Other Investments Basket referred to below;

(d)            to the extent constituting Investments, inter-company Indebtedness permitted under Section 6.1(e);

(e)             Investments in connection with the development, production, acquisition and exploitation by Credit Parties of Items of Product, in each case subject to the limitations set forth in Section 6.24 and, to the extent applicable, to the TV JV/Digital Product Investments Basket and the Other Investments Basket;

(f)             Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers, customers or other debtors, or in settlement of delinquent obligations arising in the ordinary course of business;

(g)            other Investments (except for Investments permitted by clauses (j) or (k) below) in an amount not to exceed $1,000,000 in the aggregate at any one time outstanding;

(h)            Investments in a Co-Financing Venture Entity by contributing or otherwise transferring to such Co-Financing Venture Entity applicable rights with respect to an Item of Product to be produced, acquired or financed by such Co-Financing Venture Entity;

(i)              Investments of cash in or to a Co-Financing Venture Entity in an amount not to exceed the sum of (i) the Credit Parties’ portion of the Budgeted Negative Cost for an Item of Product to be produced or acquired by such Co-Financing Venture Entity, or such greater amount as shall be required to Complete such Item of Product if any other applicable co-

 136

 

financier defaults on its payment obligations pursuant such Co-Financing Venture and as a result of such over-funding the Credit Parties will be entitled to a corresponding pro rata increased share of the proceeds of such Item of Product, in each case so long as the use of investment proceeds by such Co-Financing Venture Entity is covered by an Approved Completion Bond if applicable, plus (ii) the Credit Parties’ share of (x) any nominal administrative costs to be incurred in connection with the formation and maintenance of such Co-Financing Venture Entity and (y) other permitted expenditures of such Co-Financing Venture Entity (other than production or acquisition costs);

(j)              Investments in Credit Parties engaged in any Television Joint Ventures or in Digital Product in an aggregate amount outstanding (net of returns) at any time not to exceed $15,000,000 (the “TV JV/Digital Product Investments Basket”); and

(k)            Investments (x) in Credit Parties engaged in Television Joint Ventures or Digital Product or (y) in non-Credit Party third parties or third party projects in Digital Product, Pictures, Programs or otherwise in an aggregate amount (for clauses (x) and (y)) not to exceed $5,000,000 at any time outstanding (net of returns) (the “Other Investments Basket”).

SECTION 6.5           Restricted Payments. Pay or declare or enter into any agreement to pay or otherwise become obligated to make any Restricted Payment, other than:

(a)             dividends or distributions either (i) payable solely in additional Equity Interests issued by a Credit Party; provided, that such Equity Interests (other than Equity Interest issued by Parent) are pledged to the Administrative Agent (for the benefit of the Secured Parties) as additional Pledged Securities, or (ii) payable to a Credit Party;

(b)            distributions to Parent in an amount equal to the lesser of (A) an amount necessary to pay any Tax burden or estimated Tax burden of Parent and (B) the excess of (1) the Tax burden that would have been borne by the Borrower had the Borrower been the parent of a consolidated federal Tax group, and consolidated, unitary or affiliates state or local Tax group with the Credit Parties and their Subsidiaries that are U.S. Persons over (2) the actual federal state and local Tax burden of the Credit Parties and their Subsidiaries that are U.S. Persons; provided, in each case, that (i) no Default or Event of Default shall have occurred and be continuing or would result from any such distribution unless the Administrative Agent otherwise consents, (ii) such distributions are computed after deduction of all losses, loss carry forwards and other deductions which may be claimed at such time in respect of such period or prior periods, and after giving effect to any foreign tax credits or other credits of which Parent or any Credit Party or any of its Subsidiaries may avail itself and (iii) the Borrower provides ten (10) days’ prior written notice of any such distribution to the Administrative Agent and, if requested by the Administrative Agent, the Borrower provides to the Administrative Agent a calculation, in sufficient detail as may be reasonably satisfactory to the Administrative Agent, of the amounts in (A) and (B) of this Section 6.5(b) with respect to such distribution and a copy of Parent’s income and franchise Tax returns for the relevant period;

(c)             Permitted Subordinated Payments;

 137

 

(d)            Permitted Seer P&A Payments, provided that Permitted Seer P&A Payments may only be made from the following sources: (i) Corporate Priority Collateral Availability; and (ii) proceeds of Corporate Priority Collateral in accordance with the Proceeds Application Provisions (as such term is defined in the Senior Intercreditor Agreement).

(e)             payments to Odd Lot Entertainment, LLC, Shanghai Media Group or the Hony Investors or any of their respective Affiliates in connection with a Co-Financed Item of Product or other arms-length contractual arrangements permitted under Section 6.11;

(f)             to the extent constituting Restricted Payments, Investments permitted pursuant to Section 6.4(g);

(g)            pay Allocated Overhead Costs for services which the Administrative Agent has approved (for payments directly by the Parent) to the extent within the overall limitations contained in Section 6.23 hereof; and

(h)            a one-time redemption or repayment in full but not in part of all of the Parent Preferred subject to:

(i)              no Default or Event of Default having occurred and continuing at the time of such redemption or repayment;

(ii)            the Credit Parties having pro forma “Available Liquidity” (with “Available Liquidity” being equal to the Borrower’s cash and (without double counting) Borrowing Base availability but ignoring for these purposes any Borrowing Base value attributable to P&A Credits, Unsold Rights Credits and Unsold TV Rights Credits) after giving effect to the proposed repayment or redemption of the greater of (A) $50,000,000 and (B) the amount of the proposed redemption or repayment;

(iii)          the Borrower having delivered an updated Liquidity Certificate reflecting the Credit Parties’ compliance with the 1.1:1.0 ratio for the next four calendar quarters on a pro forma basis after giving effect to such redemption or repayment; and

(iv)          the Borrower having delivered a certificate of an Authorized Officer demonstrating compliance with the foregoing requirements or included such a certification in the Liquidity Certificate delivered pursuant to clause (iii) above.

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 any item of Collateral or agree to do or suffer any of the foregoing, except:

(a)             any Credit Party 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;

 138

 

(b)            any Credit Party that is a production services company may dissolve so long as all of the assets owned by such production services company, if any, are transferred to another Credit Party;

(c)             any Guarantor that is a production services company may dissolve so long as all of the assets owned by such Guarantor, if any, are transferred to another Credit Party or sold for fair market value;

(d)            any sale, transfer, assignment or other disposition of used, obsolete, worn out or surplus equipment or property;

(e)             (a) licenses and sales of Items of Product, or of rights therein, (b) dispositions of any non-material items of Collateral and (c) dispositions of development properties for fair market value or the actual development costs of the Credit Parties, in each case in the ordinary course of business;

(f)             any sale, transfer or assignment to a Co-Financing Venture Entity pursuant to an Approved Co-Financing Venture Transaction;

(g)            as permitted under Section 6.7 or 6.8; and

(h)            Liens permitted by Section 6.2.

SECTION 6.7           Receivables. Sell, discount or otherwise dispose of notes, accounts receivable or other obligations owing to any Credit Party (including, without limitation, any right to receive payment under any Distribution Agreement) except for purposes of collection in the ordinary course of business, as permitted pursuant to Section 6.6 above, or otherwise with the prior written consent of the Administrative Agent; provided, however, that the Credit Parties shall be entitled to sell, liquidate or otherwise transfer tax deductions, rebates, credits and/or refunds so long as the transactions relating thereto are on terms (including an acceptable present-valued rate of return on the assets being transferred) and pursuant to documentation satisfactory to the Administrative Agent.

SECTION 6.8           Sale and Leaseback; Soft Dollar Transactions.

(a)             Enter into any sale and leaseback transaction with any Person or Persons, whereby in contemporaneous transactions any Credit Party sells essentially all of its right, title and interest in an Item of Product and acquires or licenses the right to distribute or exploit such Item of Product in media and markets accounting for substantially all the value of such Item of Product, except such transactions as are evidenced by documentation acceptable to the Administrative Agent in its sole discretion; provided, however, that with the consent of the Administrative Agent, a Credit Party may enter into a sale and leaseback transaction and the Administrative Agent will release its Liens relating to the relevant Item of Product, subject to reattachment to all of the distribution rights, for equivalent periods as were held by such Credit Party immediately prior to such sale and leaseback transaction provided, that the transaction (i) would not decrease the amount of revenue to be received by such Credit Party by more than a nominal amount (or delay the anticipated timing of receipt of such revenue), (ii) would not

 139

 

result in the Administrative Agent (for the benefit of the Secured Parties) not having a first priority perfected Lien in the portion of gross receipts to be applied in satisfaction of the Obligations or in the other items of Collateral subject, in each case, to Specified Permitted Encumbrances, and (iii) is subject to customary documentation reasonably acceptable to the Administrative Agent.

(b)            Enter into any Soft Dollar Transaction in violation of the terms hereof, except to the extent waived by the Administrative Agent pursuant to Section 12.1(b)(ix).

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 any material books and records with respect to the Collateral, or (iii) its name or jurisdiction of formation or organization without, in each case, (x) giving the Administrative Agent ten (10) days’ prior written notice of such change, and (y) filing (or authorizing the Administrative Agent to file) any additional Uniform Commercial Code financing statements (or foreign equivalent), 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 (for these purposes including any Capital Expenditures of the Parent) other than: (i) production or acquisition costs in respect of an Item of Product, which are properly includable in the Direct Negative Costs of Items of Product, (ii) development expenses for projects in development that are intended to become Items of Product and which would be properly includable in the Direct Negative Costs of Items of Product or (iii) other Capital Expenditures not to exceed (a) for the fiscal year ending September 30, 2016, $3,500,000, (b) for the fiscal year ending September 30, 2017, $4,500,000, and (c) for the fiscal year ending September 30, 2018, and each fiscal year thereafter, $1,750,000 (the “Capex Cap”); provided that, if for any fiscal year Capital Expenditures are less than such year’s Capex Cap (the difference being referred to herein as the “Capex Carry-Over Amount”), then the Capex Cap for the immediately succeeding year shall be increased by the Capex Carry-Over Amount; provided further, that the Capex Carry-Over Amount shall be deemed the last dollars spent toward Capital Expenditures in any fiscal year and, for the avoidance of doubt, the Capex Carry-Over Amount may not be carried over for more than one fiscal year; and, provided, further, that Capital Expenditures shall be net of any allowances or rebates received from a landlord.

SECTION 6.11        Transactions with Affiliates. Enter into any transaction with any of its Affiliates unless such transaction (i) is approved by the Administrative Agent, (ii) is listed on Schedule 6.11, (iii) is solely between or among Credit Parties, (iv) is on terms no less favorable to the Credit Parties than could be obtained in an arm’s length third-party transaction or (v) is a co-financing arrangement that satisfies the requirements for a Co-Financed Item of Product with Odd Lot Entertainment, LLC, Shanghai Media Group, a Hony Investor or any other Approved Co-Financier.

SECTION 6.12        Business Activities. Engage in any business activities of any kind other than (i) the development, production, acquisition, financing, distribution or other exploitation of Pictures and Programs (to the extent permitted by Section 6.27), in each case subject to the

 140

 

limitations set forth in Section 6.24 and (ii) the development, production, acquisition and financing of Programs or Digital Product; provided that all Credit Party activity relating to Digital Product and Television Joint Ventures shall be conducted only by Credit Parties whose activities are limited to Digital Product and Television Joint Ventures and Investments in which are subject to the TV JV/Digital Product Investments Basket and the Other Investments Basket.

SECTION 6.13        Fiscal Year End. Change its fiscal year end to other than September 30th.

SECTION 6.14        Bank Accounts. Unless permitted by the Administrative Agent, open or maintain any bank account other than (i) accounts maintained at the Administrative Agent or a Lender, and (ii) Production Accounts, in each case of clauses (i) and (ii) above, for which Account Control Agreements have been executed and delivered to the Administrative Agent (to the extent not waived by the Administrative Agent pursuant to Section 12.1(b)(ii)).

SECTION 6.15        ERISA. Engage in a non-exempt “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 non-exempt “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 violation of any Environmental Law, in each case except where the same could not have a Material Adverse Effect.

SECTION 6.17        Use of Proceeds. (a) Use, or permit the use of, the proceeds of Loans or Letters of Credit other than for the purposes set forth in Section 5.16.

(b)            Request a Borrowing, or use (or procure that its Subsidiaries or its or their respective directors, officers, employees or agents use) the proceeds of any Borrowing, in each case (i) in furtherance of an offer, payment, promise to pay, or authorization of the

 141

 

payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

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 the negative costs of Items of Product and anticipated receipts from Distributors; provided that the Administrative Agent shall have received written notice thereof from the Borrower, the applicable Guarantor or the applicable Lender (other than the Administrative Agent) within ten (10) Business Days after execution of any such Swap Agreement and, in the case of an affiliate of a Lender that is a counterparty to such Swap Agreement, the applicable Lender shall cause such affiliate, to the extent is it legally entitled to do so, to provide such properly completed and executed documentation reasonably requested by the Administrative Agent as will permit payments by the Administrative Agent pursuant to the Fundamental Documents made with respect to such Swap Agreement to be made without withholding or at a reduced rate of withholding.

SECTION 6.19        Amendments, Modifications and Terminations 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) or articles or certificate of incorporation, by-laws or other analogous organizational or governance document of any Credit Party or the Parent in any manner that is 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, without the prior written consent of the Administrative Agent, (iii) the Seer P&A Facility Credit Agreement, except as permitted under the Senior Intercreditor Agreement, (iv) the Subordinated Loan Agreement, except as permitted under the Subordination Agreement, or (v) any of the Significant Exploitation Agreements, any Revenue Participation Documentation, any other Distribution Agreement (or license agreement or sales agency agreement with a Licensing Intermediary) (if the amount payable to a Credit Party or to a Co-Financing Venture Entity thereunder is in excess of $500,000 individually or $1,000,000 in the aggregate for all such other Distribution Agreements under this clause (v)) or Co-Financing Agreement or Co-Financing Venture Agreement or any other material agreement to which any Credit Party or Co-Financing Venture Entity is a party, in each case under this clause (v), in any manner that (A) would materially increase the conditions to, delay the timing of or decrease the amount of any payments, contributions or loans to be made to the Credit Parties thereunder, (B) would materially decrease the conditions to, shorten the timing of or increase the amount of any payments, contributions or loans to be made by the Credit Parties thereunder, or (C) is otherwise materially adverse to any Secured Party or its respective rights under the Fundamental Documents, in each case of clauses (A), (B) and (C), without the prior written consent of the Administrative Agent.

 142

 

(b)            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 1.3 hereto.

(c)             [Intentionally Omitted].

(d)            Reduce or terminate or permit to be reduced or terminated the commitments under the Seer P&A Facility Credit Agreement (except to the extent of the mandatory commitment reductions applicable under the Seer P&A Facility Credit Agreement as in effect on the date hereof), or enter into any amendment to the Seer P&A Facility Credit Agreement, the effect of which would be to increase the conditions to borrowing thereunder or change the timing of the funding of such borrowings (or the amounts of such borrowings), in each case, without the prior approval of the Administrative Agent.

(e)             The applicable Credit Party shall provide the Administrative Agent with a substantially final form of any such amendment, alteration, modification, waiver or agreement referred to in clauses (a) and (d) above prior to the execution thereof, and promptly following the execution of any such document, the Borrower shall provide the Administrative Agent with an executed copy thereof.

SECTION 6.20        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, in each case, except for the Fundamental Documents.

SECTION 6.21        Subsidiaries. Acquire or create any new direct or indirect Subsidiary except to the extent that the requirements of Section 5.18 have been met with respect to such Subsidiary.

SECTION 6.22        Production Exposures (Program). Permit the aggregate Production Exposures for all Programs in active production to exceed at any one time the lesser of (a) 20% of the gross Budgeted Negative Costs of all of such Programs and (b) $ 20,000,000.

SECTION 6.23        Overhead. Pay or incur or permit to be paid or incurred overall Overhead (but for these purposes (i) removing any Overhead included in the Budgeted Negative Cost for any Item of Product that has been “green lit” and (ii) including Allocated Overhead Costs and any Overhead of the Parent funded by a Credit Party) in any fiscal year in excess of the following amounts with respect to the fiscal years set forth below, including without limitation Overhead attributable to Television Joint Ventures and the Digital Product line of business:

 143

 

 

Fiscal Year Ending Amount
   
September 30, 2016 $50,000,000

September 30, 2017

September 30, 2018   

September 30, 2019

September 30, 2020

September 30, 2021

$53,000,000

$57,000,000

$60,000,000

$61,000,000

$63,000,000

 

plus, for each fiscal year, an amount, not to exceed $10,000,000 in any such fiscal year, equal to 50% of the amount, if any, by which gross revenues received by a Credit Party from the production or exploitation of any Digital Product in the immediately preceding fiscal year exceeds $10,000,000;

provided, that paid or incurred Allocated Overhead Costs count (without duplication) against the amounts set forth in this Section 6.23.

SECTION 6.24        Pay or Play; Development.

(a)             Enter into (or allow to exist) any pay or play commitment for an Item of Product which has been “green-lit” prior to establishing a Production/Acquisition Cost Reserve for such pay or play commitment.

(b)            Pay or incur any development costs with respect to any rights or scripts in any potential content contemplated to take the form of a Picture or a Program in any fiscal year in excess of the following amounts with respect to the fiscal years set forth below (the “Development Cost Cap”) (it being understood that once an Approved Completion Bond, if required, has been received for a Picture or principal photography has commenced for any other Item of Product, all costs included within the Budgeted Negative Cost) will no longer be treated as development or production costs for purposes of this Section 6.24(b):

Fiscal Year Ending Amount
   
September 30, 2016 $8,000,000
September 30, 2017, and in each calendar year thereafter $10,000,000

 

provided that, if for any fiscal year development costs are less than such year’s Development Cost Cap (the difference being referred to herein as the “Picture/Program Development Carry-Over Amount”), then the Development Cost Cap for the immediately succeeding year shall be increased by the Picture/Program Development Carry-Over Amount; provided further, that the Picture/Program Development Carry-Over Amount shall be deemed the last dollars spent toward development costs in any fiscal year and, for the avoidance of doubt, the Picture/Program Development Carry-Over Amount may not be carried over for more than one fiscal year; provided further, that the Credit Parties may pay or incur development costs in excess of the

 144

 

Picture/Program Development Cost Cap in any year to the extent of any amounts recouped from the sale or license of any development property (such amounts not to exceed the Credit Parties’ actual development cost with respect to such development property), and once used, such recouped amount shall no longer be available to pay or incur additional development costs.

SECTION 6.25        Co-Financed Items of Product. Engage in any co-production or co-financing arrangement with respect to an Item of Product unless (i) it is an Approved Co-Financing Venture Transaction, (ii) it is a Revenue Participation that satisfies the requirements set forth in Section 4.3, or (iii) the following conditions have been and remain satisfied:

(a)             if the production of such Item of Product is not controlled by a Credit Party, then a Credit Party shall have customary approval rights (or shared approval rights) with respect to script, selection of the key elements for such Item of Product, and material amendments to the cash budget therefor;

(b)            unless otherwise agreed by the Administrative Agent, a Credit Party has ownership in a portion of the underlying copyrights relating to such Item of Product (and the related scenario, screenplay or script upon which such Item of Product is based) which corresponds (at a minimum) to its economic interest in such co-production or co-financing arrangement or is granted any distribution rights to such Item of Product, and which is sufficient to enable such Credit Party to grant a first priority perfected security interest to the Administrative Agent (for the benefit of the Secured Parties) in the Credit Party’s share of the receivables or ultimates relating to such Item of Product included in the Borrowing Base (subject to (i) the Liens described in clause (c) below and (ii) the Senior Intercreditor Agreement);

(c)             unless otherwise agreed by the Administrative Agent, any Lien retained by the Approved Co-Financier in any rights relating to such Item of Product may only be pari passu to the Lien of the Administrative Agent (for the benefit of the Secured Parties) to the extent of such Approved Co-Financier ’s contribution to the Direct Negative Cost of such Item of Product;

(d)            unless otherwise agreed by the Administrative Agent, the Approved Co-Financier shall not have a right to enforce any claim against any portion of the copyright or otherwise in relation to such Item of Product or the receivables related thereto that, in either case, is retained by the applicable Credit Party and included in the Borrowing Base, independent of the remedies to be pursued by the Administrative Agent (on behalf of the Secured Parties) and the Approved Co-Financier; provided, that the Interparty Agreement or Co-Financing Intercreditor Agreement will, to the extent required by the Administrative Agent, (x) prohibit any action by the Approved Co-Financier (including the exercise of any Liens) which would interfere with the distribution of such Item of Product pursuant to the applicable Distribution Agreements entered into by a Credit Party and the collection of amounts payable thereunder, (y) to the extent the applicable Credit Party is in charge of the collection of receivables related to such Co-Financed Item of Product, provide the Administrative Agent with the control of remedies against licensees of such Item of Product and the right to deduct the costs of enforcement of such remedies from amounts realized before making a distribution to the Approved Co-Financier of its share of such amounts payable, and (z) allow the Approved Co-

 145

 

Financier to pursue remedies only against the applicable Credit Parties (and only for money damages);

(e)             upon the request of the Administrative Agent, the applicable Credit Party shall provide to the Administrative Agent copies of chain of title documentation, security documentation, Laboratory Access Letters or Pledgeholder Agreements (as applicable), Notices of Assignment, Account Control Agreements and any other documentation reasonably necessary in the Administrative Agent’s discretion to perfect its first priority (subject only to Specified Permitted Encumbrances) security interest in the applicable Credit Party’s interest and rights in and to such Item of Product;

(f)             such Item of Product meets the parameters of a Co-Financed Item of Product; and

(g)            the Administrative Agent shall have received a fully executed Interparty Agreement or Co-Financing Intercreditor Agreement (whichever is requested by the Administrative Agent) with respect to such Item of Product.

Notwithstanding the foregoing or anything to the contrary contained herein, (i) in the case of a Revenue Participation, the Credit Parties’ economic interest in the applicable Picture shall not be greater than the Major Studio’s retained economic interest in such Picture and (ii) in the case of any other co-financing between the Credit Parties and a Major Studio, the Major Studio shall retain at least a 25% interest in the economic performance of such Item of Product.

SECTION 6.26        Item of Product Requirements.

(a)             Commence principal photography on any Item of Product or acquire an interest in any Item of Product or make any expenditure in respect of P&A Expenses for a Picture, unless each of the conditions precedent in Section 4.2 have been satisfied.

(b)            With respect to any Picture, enter into any Distribution Agreement (or permit a Licensing Intermediary to enter into any Distribution Agreement) with an Approved Domestic Distributor pursuant to which such Approved Domestic Distributor is entitled to retain a distribution fee greater than 13% of the gross receipts received by such Approved Domestic Distributor from its exploitation of the applicable Picture, unless (i) otherwise approved by the Administrative Agent prior to any Borrowing to fund P&A Expenses using the P&A Credit for such Picture, or (ii) no Borrowing is made to fund P&A Expenses using the P&A Credit for such Picture.

SECTION 6.27        No Adverse Selection. Produce, acquire, distribute or finance (or permit any of its Affiliates (except as set forth in the succeeding paragraph) or Subsidiaries to produce, finance, distribute or acquire) any Items of Product or interest therein, except in accordance with the following: All Items of Product (or interest therein) to be produced, acquired, distributed or financed, directly or indirectly, by the Borrower or any of its Subsidiaries or Affiliates (except as set forth in the succeeding paragraph) will be produced, acquired and distributed (as applicable) through a Credit Party and will be financed hereunder and/or in the case of Pictures under the Seer P&A Facility Credit Agreement or with cash of the Credit

 146

 

Parties; provided, that if (i) no Default or Event of Default is continuing, (ii) there is insufficient capacity under the overall Borrowing Base or the motion picture is not a Qualifying Picture, and (iii) the Lenders have been offered (but have not accepted within fifteen (15) Business Days after receipt of such offer) the opportunity to finance such Items of Product hereunder on the same or more favorable terms to the Credit Parties, then the Borrower shall be entitled to form a Special Purpose Producer to obtain limited recourse financing from third party lenders or non-Credit Party affiliates of the Borrower, subject to the conditions and requirements set forth in the definition of “Special Purpose Producer” (and if such a Special Purpose Producer is formed, the Borrower shall cause it to comply with such conditions and requirements); provided further, that the outside financing of tax incentives and rebates shall also be permitted in accordance with Sections 6.1(o) and 6.2(q), so long as (i) the Lenders have been offered (but have not accepted within fifteen (15) Business Days of such offer) the opportunity to finance such incentive or rebate under the Facility on the same or more favorable terms to the Lenders and Credit Parties, (ii) in the case of financing from a non-Credit Party affiliate, such financing shall be on terms at least as favorable to the Special Purpose Producer as could be obtained in an arm’s length transaction with a non-affiliate in respect of tax credits and (iii) such financing shall be subject to an intercreditor agreement reasonably acceptable to the Administrative Agent.

Notwithstanding the foregoing, the outside entertainment businesses (i.e., independent of the Parent and its Subsidiaries) of the direct and indirect shareholders of the Parent, and the respective Affiliates of such shareholders (other than the Parent and its Subsidiaries), shall not be “Affiliates” subject to this Section 6.27 (other than in clause (ii) above with respect to financing provided by non-Credit Party Affiliates).

SECTION 6.28        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 (other than Subsidiaries (1) which are required to be “C Corporations” in order to facilitate Soft Dollar Transactions; provided that such Subsidiaries do not have any assets other than (i) assets having nominal value or (ii) cash which, promptly following receipt thereof, is applied towards such Soft Dollar Transactions or toward production costs or (2) for which the Borrower has otherwise determined that it is necessary or desirable to form such Subsidiary as a corporation to facilitate permitted business activities of the Credit Parties).

SECTION 6.29        Holding Company. With respect to Parent (but not the Credit Parties), carry on any business, own any assets or incur any liabilities except for: (i) (a) the participation in tax, accounting and other administrative activities as the parent of the consolidated group of companies (including the Credit Parties) and provision of administrative services (excluding treasury services) to its Subsidiaries of a type customarily provided by a holding company to its Subsidiaries; (b) ownership of (A) Equity Interests in the Borrower (but only if those Equity Interests are subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties), (B) Equity Interest in other Subsidiaries of Parent (including activities relating to the formation and capitalization of such subsidiaries), (C) cash and Cash Equivalents to be used for administrative purposes and (D) certain other nominal assets incidental to the business or activities described in this clause (b); (c) the maintenance of its corporate existence; (d) the execution and delivery of the Fundamental Documents and the “Fundamental Documents”

 147

 

referenced in each of the Seer P&A Facility Credit Agreement and the Subordinated Loan Agreement to which it is a party and the performance of its obligations thereunder; (e) activities reasonably incidental to the businesses and activities described in the foregoing clauses (a) through (d), and (f) any other activities consented to by the Administrative Agent in writing in its sole discretion; and (ii) (a) any liabilities under the Fundamental Documents to which it is a party and under the “Fundamental Documents” referenced in each of the Seer P&A Facility Credit Agreement and the Subordinated Loan Agreement to which it is a party, (b) any non-recourse pledge of its Equity Interests in any other Subsidiary and (c) professional fees and administration costs incurred in the ordinary course of business as a holding company.

7.               EVENTS OF DEFAULT

SECTION 7.1           Events of Default. In the case of the happening and during the continuance of any of the following events (herein called “Events of Default”):

(a)             any representation or warranty made by a Credit Party in this Credit Agreement or any other Fundamental Document to which it is a party or any statement or representation made by a Credit Party in any report, financial statement, certificate or other document furnished to the Administrative Agent, the Issuing Bank or any Lender pursuant to this Credit Agreement or any other Fundamental Document, shall prove to have been false or misleading in any material respect when made or delivered;

(b)            default shall be made in the payment of principal of the Loans or any reimbursement obligation in respect of any L/C Disbursement as and when due and payable, whether by reason of maturity, mandatory prepayment, acceleration or otherwise;

(c)             default shall be made in the payment of interest on the Loans, Commitment Fees or other monetary Obligations, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise and such default shall continue unremedied for five (5) Business Days;

(d)            default shall be made by a Credit Party in the due observance or performance of any covenant, condition or agreement contained in Sections 5.1(a), (b) or (g), 5.2, 5.4 or Article 6;

(e)             failure to submit any Borrowing Base Certificate to the Administrative Agent within ten (10) Business Days after the date on which such Borrowing Base Certificate was due pursuant to the terms of this Credit Agreement; provided, however, that a failure to deliver a Borrowing Base Certificate when due shall not constitute an Event of Default if and for so long as there are no Loans or Letters of Credit outstanding;

(f)             default shall be made by a Credit Party in the due observance or performance of any other covenant, condition or agreement to be observed or performed pursuant to the terms of this Credit Agreement or any other Fundamental Document, and such default shall continue unremedied for thirty (30) days (or, in the case of Sections 5.1(j) or (k)

 148

 

for ten (10) Business Days) after the earlier of (i) the applicable Credit Party receiving written notice thereof from the Administrative Agent or a Lender, and (ii) an Authorized Officer of the applicable Credit Party obtaining knowledge of such occurrence;

(g)            default shall be made with respect to any payment of any Indebtedness of any Credit Party in excess of $1,000,000 in the aggregate at any one time outstanding when due, or in the performance of any other obligation incurred in connection with any such Indebtedness if the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity, and such default shall not be remedied, cured, waived or consented to within the period of grace with respect thereto;

(h)            any Credit Party or Co-Financing Venture Entity shall generally not pay its debts as they become due or shall admit in writing its inability to pay its debts, or shall make a general assignment for the benefit of creditors; or any Credit Party or Co-Financing Venture Entity shall commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property or shall file an answer or other pleading in any such case, proceeding or other action admitting the material allegations of any petition, complaint or similar pleading filed against it or consenting to the relief sought therein; or any Credit Party or Co-Financing Venture Entity shall take any action to authorize, or in contemplation of, any of the foregoing;

(i)              any involuntary case, proceeding or other action against any Credit Party or Co-Financing Venture Entity shall be commenced seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, and such case, proceeding or other action (i) results in the entry of any order for relief against it, or (ii) shall remain undismissed for a period of sixty (60) days;

(j)              final judgment(s) for the payment of money (to the extent not paid or fully covered by insurance) in excess of $500,000 in the aggregate shall be rendered against any Credit Party or Co-Financing Venture Entity, and within thirty (30) days from the entry of such judgment it shall not have been discharged or stayed pending appeal or which shall not have been discharged or bonded in full within thirty (30) days from the entry of a final order of affirmance on appeal;

(k)            this Credit Agreement, the Copyright Security Agreement, any Copyright Security Agreement Supplement, any Trademark Security Agreement, any Pledgeholder Agreement, any Laboratory Access Letter, any UCC financing statements (or foreign equivalent), any Account Control Agreement, any security documentation executed by a Licensing Intermediary in favor of a Credit Party or any other security agreement securing the

 149

 

Obligations (each a “Security Document”) shall, for any reason with respect to the Collateral or Pledged Collateral in excess of $500,000 in the aggregate, not be or shall cease to be in full force and effect or shall be declared null and void or any of the Security Documents shall not give or shall cease to give the Administrative Agent the Liens, or cease to give the Administrative Agent the rights, powers and privileges purported to be created thereby in favor of the Administrative Agent (for the benefit of the Secured Parties), superior to and prior to the Liens and other rights of all third Persons (subject to Specified Permitted Encumbrances except in the case of Pledged Securities) and subject to no other Liens (other than Permitted Encumbrances), or the validity or enforceability of the Guarantees under Article 9 or the Liens granted, to be granted, or purported to be granted, by any of the Security Documents shall be contested by any Credit Party or its Affiliates;

(l)              a Change in Control shall occur;

(m)           a Change in Management shall occur;

(n)            a material default shall be made by a Credit Party or Co-Financing Venture Entity under, or a material payment default shall be made by a Distributor or sales agent or co-financier under, a Distribution Agreement, Co-Financing Agreement or Co-Financing Venture Agreement, after giving effect to any applicable cure periods thereunder, in each case unless the removal of any Borrowing Base credit supported by the obligations of any such Distributor, Approved Co-Financier or Approved Co-Financing Venture Counterparty, or by any such Distribution Agreement, Co-Financing Agreement or Co-Financing Venture Agreement, did not or would not result in the sum of the Credit Exposure exceeding the Borrowing Base (as reduced);

(o)            (i) failure by any Credit Party or ERISA Affiliate to make any contributions required to be made to a Plan subject to Title IV of ERISA or Multiemployer Plan, (ii) any failure to satisfy the minimum funding standard (within the meaning of section 412 of the Code or section 302 of ERISA) shall occur with respect to any Plan (whether or not waived), (iii) the present value of all benefits under all Plans subject to Title IV of ERISA (based on those assumptions used to fund such Plans) exceeds, in the aggregate, as of the last annual valuation date applicable thereto, the actuarial value of the assets of such Plans allocable to such benefits, (iv) any Credit Party or ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan, or that a Multiemployer Plan is in “reorganization” (within the meaning of ERISA) or is being terminated, (v) a Reportable Event with respect to a Plan shall have occurred, (vi) the withdrawal by any Credit Party or ERISA Affiliate from a Plan during a plan year in which it was a substantial employer (within the meaning of section 4001(a)(2) or 4062(e) of ERISA), (vii) the termination of a Plan, or the filing of a notice of intent to terminate a Plan, under section 4041(c) of ERISA, (viii) the institution of proceedings to terminate, or the appointment of a trustee with respect to, a Plan by the PBGC, (ix) any other event or condition constituting grounds under section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (x) the imposition of a Lien pursuant to section 430(k) of the Code or section 303(k) of ERISA as to any Credit Party or ERISA Affiliate, in each case to the extent that any of the foregoing would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect;

 150

 

(p)            any Approved Completion Guarantor for an Uncompleted Picture for which value is included in the Borrowing Base shall have disaffirmed its obligations under its respective Approved Completion Bond and either (i) a replacement Approved Completion Bond for that Uncompleted Picture containing substantially the same terms and conditions to payment shall not have been executed within thirty (30) Business Days, or (ii) the removal of any Borrowing Base credit supported by such Approved Completion Bond did not or would not result in the sum of the Credit Exposure exceeding the Borrowing Base (as reduced);

(q)            any Approved Completion Bond for an Uncompleted Picture for which value is included in the Borrowing Base is void or voidable unless either (i) a replacement Approved Completion Bond containing substantially the same terms and conditions to payment shall have been executed within twenty (20) Business Days, or (ii) the removal of any Borrowing Base credit supported by such Approved Completion Bond did not or would not result in the sum of the Credit Exposure exceeding the Borrowing Base (as reduced); or

(r)             a Co-Financing Venture Entity or a Co-Financing Venture Transaction fails to comply with the requirements set forth in Schedule 1.3 and, with respect to a failure to comply with an affirmative and negative covenant incorporated by reference into Schedule 1.3, such failure remains unremedied following the expiration of the cure period (if any) set forth in this Section 7.1 for such covenant’s application to a Credit Party;

then, in every such event (other than an event specified in clause (h) or (i) above) and at any time thereafter during the continuance of such event, the Administrative Agent may, or if directed by the Required Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments (subject to Section 12.1(b)(xi), if applicable), and/or (ii) declare the principal of and the interest on the Loans and the Notes and all other amounts payable hereunder or thereunder to be forthwith due and payable and require and the Borrower to cash collateralize all outstanding Letters of Credit, whereupon the same shall become and be forthwith due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in this Credit Agreement or in the Notes to the contrary notwithstanding. If an Event of Default specified in clause (h) or (i) above shall have occurred, the Commitments shall automatically terminate and the principal of, and interest on, the Loans and the Notes and all other amounts payable hereunder and thereunder shall automatically become due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in this Credit Agreement or the Notes to the contrary notwithstanding. Such remedies shall be in addition to any other remedy available to the Administrative Agent, the Issuing Bank or the Lenders pursuant to Applicable Law or otherwise. Furthermore, upon the occurrence and during the continuation of an Event of Default, at the request of the Administrative Agent, (i) each Credit Party shall cause all of the assets of each wholly-owned CFC to be distributed to a Credit Party and (ii) each Credit Party shall pledge 100% of its Equity Interests in each non-wholly-owned CFC.

If any Event of Default shall have occurred and be continuing, the Administrative Agent, without demand or performance or any other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Credit Party or any other Person (all and each of which demands, defenses, advertisements and notices are hereby

 151

 

waived), may consent to the use by the Credit Party of any cash collateral arising in respect of the Collateral on terms as the Administrative Agent deems reasonable, or acquire by credit bid on behalf of the Lenders, the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Administrative Agent or any Lender or elsewhere, upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery, all without assignment of any credit risk.

8.               GRANT OF SECURITY INTEREST; REMEDIES

SECTION 8.1           Security Interests. The Borrower, as security for the due and punctual payment in full of the Obligations (including interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the Borrower whether or not post filing interest is allowed in such proceeding), and each Guarantor, as security for its obligations under Article 9, hereby grant, mortgage, pledge, assign, transfer, set over, convey and deliver to the Administrative Agent (for the benefit of the Secured Parties) a security interest in the Collateral.

SECTION 8.2           Use of Collateral. So long as no Event of Default shall have occurred and be continuing, and subject to the various provisions of this Credit Agreement and the other Fundamental Documents, a Credit Party may use its Collateral (including cash in each operating account and Production Account, and proceeds of letters of credit in favor of the Credit Parties, but expressly excluding cash in the Corporate Priority Collection Account, which shall be applied as set forth in the Senior Intercreditor Agreement prior to becoming available to the Credit Parties) in any lawful manner except as otherwise provided hereunder or thereunder; provided, that a Credit Party shall not have access to the cash referred to in item (xiii) of the Borrowing Base unless (i) the Administrative Agent shall have received at least three (3) Business Days’ prior written notice of the proposed date of the withdrawal, together with a pro forma Borrowing Base Certificate calculated after giving effect to such requested withdrawal and (ii) the removal of such cash shall not cause a Borrowing Base deficiency.

SECTION 8.3           Collection Accounts.

(a)             The Credit Parties will establish or maintain Collection Accounts at the office of the Administrative Agent or, solely with respect to two Collection Accounts in existence prior to the Closing Date, at the office of a Lender, or (with the Administrative Agent’s prior consent) a collection account maintained in the name of a third party escrow agent or collection agent in the context of individual Item of Product receipts pursuant to arrangements approved by the Administrative Agent. The Credit Parties will deposit and will direct and cause each Licensing Intermediary to direct, by Notice of Assignment (or by other substantially similar instructions satisfactory to the Administrative Agent contained within an Interparty Agreement, Co-Financing Intercreditor Agreement, Co-Financing Venture Interparty Agreement or other applicable agreement), all Persons who become licensees, buyers or account debtors of any Credit Party (whether directly or through a Licensing Intermediary), to make payments under or in connection with any Corporate Priority Collateral directly to the Corporate Priority Collection Account (or such other account in accordance with Section 5.20). The Credit Parties will deposit and will direct and cause each Licensing Intermediary to direct, by Notice of Assignment (or by other substantially similar instructions satisfactory to the

 152

 

Administrative Agent contained within an Interparty Agreement, Co-Financing Intercreditor Agreement, Co-Financing Venture Interparty Agreement or other applicable agreement), all Persons who become Distributors, licensees, buyers or account debtors of any Credit Party (whether directly or through a Licensing Intermediary), to make payments under or in connection with any Production Priority Collateral directly to the Production Priority Collection Account (or such other account in accordance with Section 5.21). An operating account of the Credit Parties maintained with the Administrative Agent may also serve as a “Collection Account” hereunder so long as it satisfies all of the requirements of this Section 8.3.

(b)            The Credit Parties will execute such documentation as may be reasonably required by the Administrative Agent in order to effectuate the provisions of this Section 8.3.

(c)             In the event a Credit Party receives payment from any Person or proceeds under a letter of credit or otherwise, which payment should have been remitted directly to a Collection Account, such Credit Party shall promptly remit such payment or proceeds to the appropriate Collection Account to be applied in accordance with the terms of this Credit Agreement.

(d)            Each Collection Account shall be under the control (within the meaning of Section 9-104 of the UCC) of the Administrative Agent (and to the extent required by Senior Intercreditor Agreement, the Administrative Agent shall be the “controlling agent” under a deposit account control agreement with respect to such accounts); provided, that unless an Event of Default has occurred and is continuing, the Borrower shall apply the proceeds in the Collection Accounts in accordance with the Senior Intercreditor Agreement and, if any proceeds remain and are available to the Credit Parties after such application pursuant the Senior Intercreditor Agreement, such remaining proceeds may be withdrawn by the Borrower and used for any expenditure not prohibited hereunder, subject only to the Administrative Agent’s right to withdraw and use such proceeds to make payments in accordance with any contractual commitments made by the Administrative Agent to third parties (such as guilds, Approved Co-Financiers and Approved Completion Guarantors) pursuant to any interparty or intercreditor agreements with respect to such proceeds.

SECTION 8.4           Credit Parties to Hold in Trust. Subject to the provisions of the Senior Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, each of the Credit Parties will, upon receipt by it of any revenue, income, profits or other sums in which a security interest is granted by this Article 8, payable pursuant to any agreement or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the sum or instrument in trust for the Administrative Agent (for the benefit of the Secured Parties), segregate such sum or instrument from their own assets and forthwith, without any notice, demand or other action whatsoever (all notices, demands, or other actions on the part of the Secured Parties being expressly waived), endorse, transfer and deliver any such sums or instruments or both, to the Administrative Agent to be applied to the repayment of the Obligations in accordance with the provisions of Section 8.7 (or to the Seer P&A Facility Agent, as applicable, if required under the Senior Intercreditor Agreement).

SECTION 8.5           Collections, etc. Subject to the provisions of the Senior Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, the

 153

 

Administrative Agent may, in its sole discretion, in its name (on behalf of the Secured Parties) or in the name of any Credit Party or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement deemed desirable with respect to, any of the Collateral, but shall be under no obligation to do so, or the Administrative Agent may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release, any of the Collateral, without thereby incurring responsibility to, or discharging or otherwise affecting any liability of, any Credit Party. The Administrative Agent will not be required to take any steps to preserve any rights against parties with prior claims on the Collateral. If any Credit Party fails to make any payment or take any action required hereunder, the Administrative Agent may make such payments and take all such actions as the Administrative Agent reasonably deems necessary to protect the Administrative Agent’s (on behalf of the Secured Parties) security interests in the Collateral and the value thereof, and the Administrative Agent is hereby authorized (without limiting the general nature of the authority hereinabove conferred) to pay, purchase, contest or compromise any Liens that in the judgment of the Administrative Agent appear to be equal to, prior to, or superior to, the security interest of the Administrative Agent (on behalf of the Secured Parties) in the Collateral (other than Specified Permitted Encumbrances) and any Liens not expressly permitted by this Credit Agreement.

SECTION 8.6           Possession, Sale of Collateral, etc. Subject to the provisions of the Senior Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent (on behalf of the Secured Parties) may enter upon the premises of any Credit Party or wherever the Collateral may be, and take possession of the Collateral, and may demand and receive such possession from any Person who has possession thereof, and the Administrative Agent may take such measures as it deems necessary or proper for the care or protection thereof, including the right to remove all or any portion of the Collateral, and with or without taking such possession may sell or cause to be sold, whenever the Administrative Agent shall decide, in one or more sales or parcels, at such prices as the Administrative Agent may deem appropriate, and for cash or on credit or for future delivery, without assumption of any credit risk, all or any portion of the Collateral, at any broker’s board or at a public or private sale, without demand of performance but with ten (10) days’ prior written notice to the Credit Parties of the time and place of any such public sale or sales (which notice the Credit Parties hereby agree is reasonable) and with such other notices as may be required by Applicable Law and cannot be waived, and none of the Administrative Agent, the Issuing Bank or the Lenders shall have any liability should the proceeds resulting from a private sale be less than the proceeds realizable from a public sale, and the Administrative Agent (on behalf of the Secured Parties) or any other Person may be the purchaser of all or any portion of the Collateral so sold and thereafter hold the same absolutely, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of any Credit Party, any such demand, notice, claim, right or equity being hereby expressly waived and released. At any sale or sales made pursuant to this Article 8, the Administrative Agent (on behalf of the Secured Parties) may bid for or purchase, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of any Credit Party, any such demand, notice, claim, right or equity being hereby expressly waived and released, any part of or all of the Collateral offered for sale, and may make any payment on account thereof by using any claim for moneys then due and

 154

 

payable to the Administrative Agent, the Issuing Bank and the Lenders by any Credit Party hereunder as a credit against the purchase price. The Administrative Agent (on behalf of the Secured Parties) shall in any such sale make no representations or warranties with respect to the Collateral or any part thereof, and none of the Administrative Agent, the Issuing Bank or the Lenders shall be chargeable with any of the obligations or liabilities of any Credit Party. Each Credit Party hereby agrees that (i) it will indemnify and hold the Administrative Agent, the Issuing Bank and the Lenders harmless from and against any and all claims with respect to the Collateral asserted before the taking of actual possession or control of the relevant Collateral by the Administrative Agent pursuant to this Article 8, or arising out of any act of, or omission to act on the part of, any Person (other than the Administrative Agent, the Issuing Bank or the Lenders) prior to such taking of actual possession or control by the Administrative Agent (whether asserted before or after such taking of possession or control), or arising out of any act on the part of any Credit Party or its Affiliates or agents before or after the commencement of such actual possession or control by the Administrative Agent, but excluding therefrom all claims with respect to the Collateral resulting from (x) the gross negligence or willful misconduct of any of the Administrative Agent or the Lenders, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required or (y) any claims with respect to the Collateral asserted against an indemnified party by a Credit Party in which such Credit Party is the prevailing party (i.e., the party in whose favor an award is issued); and (ii) none of the Administrative Agent, the Issuing Bank or any Lender shall have any liability or obligation to any Credit Party arising out of any such claim except for acts of willful misconduct or gross negligence of such Person, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required. Subject only to the lawful rights of third parties, any Laboratory which has possession of any of the Collateral is hereby constituted and appointed by the Credit Parties as pledgeholder for the Administrative Agent (on behalf of the Secured Parties) and, upon the occurrence and during the continuation of an Event of Default, each such pledgeholder is hereby authorized (to the fullest extent permitted by Applicable Law) to sell all or any portion of the Collateral upon the order and direction of the Administrative Agent, and each Credit Party hereby waives any and all claims, for damages or otherwise, for any action taken by such pledgeholder in accordance with the terms of the UCC not otherwise waived hereunder. In any action hereunder, the Administrative Agent shall be entitled, if permitted by Applicable Law, to the appointment of a receiver without notice, to take possession of all or any portion of the Collateral and to exercise such powers as a court shall confer upon the receiver. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent, the Issuing Bank and the Lenders shall be entitled to apply, without prior notice to any of the Credit Parties, any cash or cash items constituting Collateral in the possession of the Administrative Agent, the Issuing Bank and the Lenders in the manner set forth in Section 8.7.

SECTION 8.7           Application of Proceeds after Event of Default. Subject to the provisions of the Senior Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, or if directed by the Required Lenders shall, apply (subject to Section 2.9(f)) the balances in each Collection Account, the JPMorgan Clearing Account, each Cash Collateral Account and in any other account of any

 155

 

Credit Party with a Lender, all other income on the Collateral and all proceeds from any sale of the Collateral pursuant hereto, first toward payment of all out-of-pocket costs and expenses paid or incurred by the Administrative Agent in enforcing this Credit Agreement and the other Fundamental Documents, in realizing on or protecting any Collateral and in enforcing or collecting any Obligations or any Guaranty thereof, including, without limitation, court costs and attorney’s fees and out-of-pocket expenses incurred by the Administrative Agent, and second to the payment in full of all other Obligations in accordance with Section 12.2; provided, however, that, if confirmed by the Administrative Agent, the Borrower shall be permitted to withdraw from the Collection Account any amounts received in error by any Credit Party from any third party and paid into the Collection Account for the purpose of directing such amounts to such third party; provided further, that the Administrative Agent may in its discretion apply funds comprising the Collateral to pay the cost (i) of completing any Item of Product owned in whole or in part by any Credit Party in any stage of production, and (ii) of making delivery to the Distributors of such Item of Product. Any amounts remaining after such payment in full shall be remitted to the appropriate Credit Party or as a court of competent jurisdiction may otherwise direct.

SECTION 8.8           Power of Attorney. Each Credit Party does hereby irrevocably make, constitute and appoint the Administrative Agent or any of its officers or designees its true and lawful attorney-in-fact with full power in the name of the Administrative Agent, such other Person or such Credit Party, upon the occurrence and during the continuance of an Event of Default which is not waived in writing by the Required Lenders, to (in each case subject to the provisions of the Senior Intercreditor Agreement) receive, open and dispose of all mail addressed to any Credit Party, and to endorse any notes, checks, drafts, money orders or other evidences of payment relating to the Collateral that may come into the possession of the Administrative Agent with full power and right to cause the mail of any such Credit Party to be transferred to the Administrative Agent’s own offices or otherwise, and to do any and all other acts necessary or proper to carry out the intent of this Credit Agreement and the grant of the security interests hereunder and under the Fundamental Documents, and each Credit Party hereby ratifies and confirms all that the Administrative Agent or such other Person shall properly do by virtue hereof. In addition, each Credit Party does hereby further irrevocably make, constitute and appoint the Administrative Agent or any of its officers or designees its true and lawful attorney-in-fact in the name of the Administrative Agent, such other Person or any Credit Party, upon the occurrence and during the continuance of an Event of Default which is not waived in writing by the Required Lenders (in each case subject to the provisions of the Senior Intercreditor Agreement) (a) to enforce all of such Credit Party’s rights under and pursuant to all agreements with respect to the Collateral, all for the sole benefit of the Administrative Agent (for the benefit of the Secured Parties) as contemplated hereby and under the other Fundamental Documents and to enter into such other agreements as may be necessary or appropriate in the judgment of the Administrative Agent to complete the production, distribution or exploitation of any Item of Product which is included in the Collateral, (b) to enter into and perform such agreements as may be necessary in order to carry out the terms, covenants and conditions of the Fundamental Documents that are required to be observed or performed by any Credit Party, (c) to execute such other and further mortgages, pledges and assignments of the Collateral, and related instruments or agreements, as the Administrative Agent may reasonably require for the purpose of perfecting, protecting, maintaining or enforcing the security interests granted to the

 156

 

Administrative Agent (for the benefit of the Secured Parties) hereunder and under the other Fundamental Documents, and (d) to do any and all other acts necessary or proper to carry out the intention of this Credit Agreement and the grant of the security interests hereunder and under the other Fundamental Documents. Each of the Credit Parties hereby ratifies and confirms in advance all that the Administrative Agent or its officers or designees as such attorney-in-fact shall properly do by virtue of this power of attorney.

SECTION 8.9           Financing Statements; Direct Payments. Each Credit Party hereby authorizes the Administrative Agent to file UCC financing statements (or foreign equivalent) and any amendments thereto or continuations thereof, any Copyright Security Agreement, any Copyright Security Agreement Supplement, any Trademark Security Agreement and any other appropriate security documents or instruments and to give any notices necessary or desirable as determined by the Administrative Agent to perfect the Lien of the Administrative Agent (for the benefit of the Secured Parties) in the Collateral, in all cases without the signature of any Credit Party, or to execute such items as attorney-in-fact for any Credit Party. In the event the Administrative Agent exercises such power of attorney, the Administrative Agent shall provide to the Borrower copies of any such documents or instruments executed by the Administrative Agent. Each Credit Party authorizes the Administrative Agent to use the description “all assets” or a similar description in any such UCC financing statement. Each Credit Party further authorizes the Administrative Agent, at the time that any Event of Default shall have occurred and be continuing, to notify any account debtor that all sums payable to such Credit Party relating to the Collateral shall be paid directly to the Administrative Agent.

SECTION 8.10        Termination and Release. The security interests granted under this Article 8 shall terminate (i) when all of the Obligations (other than Unasserted Contingent Obligations) shall have been fully and indefeasibly paid and performed and the Commitments shall have terminated and (ii) with respect to any Credit Party, if such Credit Party is designated as an Unrestricted Subsidiary in accordance with the terms of this Credit Agreement. Upon request by the Credit Parties (and at the sole cost and expense of the Credit Parties) after such termination, the Administrative Agent will promptly take all reasonable action and do all things reasonably necessary, including authorizing UCC termination statements and executing Pledgeholder Agreement and Laboratory Access Letter terminations, termination letters to account debtors, terminations of Account Control Agreements and copyright and trademark releases, to terminate the security interest (x) granted to the Administrative Agent (for the benefit of the Secured Parties) hereunder or (y) granted by any Credit Party that is designated as an Unrestricted Subsidiary in accordance with the terms of this Credit Agreement after the Closing Date; provided, that the Administrative Agent shall only be required to deliver such documents to the Borrower and shall have no obligation to file or record any such document.

SECTION 8.11        Remedies Not Exclusive. The remedies conferred upon or reserved to the Administrative Agent in this Article 8 are intended to be in addition to, and not in limitation of, any other remedy or remedies available to the Administrative Agent. Without limiting the generality of the foregoing, the Administrative Agent, the Issuing Bank and the Lenders shall have all rights and remedies of a secured creditor under Article 9 of the UCC and under any other Applicable Law.

 157

 

SECTION 8.12        Quiet Enjoyment. The Administrative Agent, the Issuing Bank and the Lenders acknowledge and agree that the security interest hereunder of the Administrative Agent (on behalf of the Secured Parties) is subject to the rights of Quiet Enjoyment (as defined below) of the Distributors under Distribution Agreements, whether existing on the Closing Date or thereafter executed. For the purpose hereof, “Quiet Enjoyment” shall mean, in connection with the rights of a Distributor under a Distribution Agreement, the Administrative Agent’s and each other Secured Party’s agreement that their respective rights under this Credit Agreement and the other Fundamental Documents and in the Collateral are subject to the rights of such Distributor to distribute, exhibit and/or exploit the Items of Product licensed to it under such Distribution Agreement, and to receive prints or tapes and other delivery items or have access to preprint material or master tapes and other items to which such Distributor is entitled in connection therewith, and that even if a Secured Party shall become the owner of the Collateral in case of an Event of Default, such Secured Party’s ownership rights shall be subject to the rights of such Distributor under such agreement, subject to a reservation by the Administrative Agent (for the benefit of the Secured Parties) of any rights available to the applicable Credit Party if such Distributor is in default under the applicable Distribution Agreement. Neither the Administrative Agent nor any other Secured Party shall be responsible for any liability or obligation of any Credit Party, such Distributor or any Licensing Intermediary under the applicable Distribution Agreement. The Administrative Agent agrees that, upon the reasonable request of a Credit Party, it will provide written confirmation (pursuant to an Interparty Agreement, a Notice of Assignment or such other agreement in form and substance reasonably acceptable to the Administrative Agent) of such rights of Quiet Enjoyment to Distributors under the Distribution Agreements.

SECTION 8.13        Intellectual Property. Each of the Credit Parties agrees that if any Person shall do or perform any act(s) which the Administrative Agent reasonably believes constitute(s) a trademark infringement or a copyright infringement of the screenplay or of any of the literary, dramatic or musical material contained in any Item of Product or upon which any Item of Product is based, or constitute a plagiarism, or violate or infringe any right of any Credit Party, the Lenders or the Administrative Agent therein, or if any Person shall do or perform any act(s) which the Administrative Agent reasonably believes constitute(s) an unauthorized or unlawful distribution, exhibition, or use thereof, then and in any such event, upon thirty (30) days’ prior written notice to the Credit Parties (or if an Event of Default is at the time continuing, then without notice), the Administrative Agent (on behalf of the Secured Parties) may and shall have the right to take such steps and institute such suits or proceedings as the Administrative Agent may reasonably deem advisable or necessary to prevent such act(s) and/or conduct and to secure damages and other relief by reason thereof, and to generally take such steps as may be reasonably advisable or necessary or proper for the full protection of the rights of the parties. The Administrative Agent may take such steps or institute such suits or proceedings in its own name or in the name of any of the Credit Parties or in the names of the parties jointly. The Administrative Agent hereby agrees to give the Credit Parties notice of any steps taken or any suits or proceedings instituted by the Administrative Agent pursuant to this paragraph and the Credit Parties agree to assist the Administrative Agent with any steps taken, or any suits or proceedings instituted by the Administrative Agent pursuant to this paragraph at the Credit Parties’ sole expense.

 158

 

SECTION 8.14        Continuation and Reinstatement. The security interest granted hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any Obligation or any part thereof is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of any Credit Party or otherwise.

9.               GUARANTY OF GUARANTORS

SECTION 9.1           Guaranty.

(a)             Each Guarantor unconditionally and irrevocably guarantees to the Administrative Agent, the Issuing Bank and the Lenders the due and punctual payment by, and performance of, the Obligations (including interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the obligor whether or not post filing interest is allowed in such proceeding). Each Guarantor further agrees that the Obligations may be increased, extended or renewed, in whole or in part, without notice or further assent from it (except as may be otherwise required herein), and it will remain bound upon this Guaranty notwithstanding any extension or renewal of any Obligation.

(b)            Each Guarantor waives presentment to, demand for payment from and protest to, as the case may be, any Credit Party or any other guarantor of any of the Obligations, and also waives notice of protest for nonpayment, notice of acceleration and notice of intent to accelerate. The obligations of each Guarantor hereunder shall not be affected by (i) the failure of the Administrative Agent, the Issuing Bank or the Lenders to assert any claim or demand or to enforce any right or remedy against the Borrower or any Guarantor or any other guarantor under the provisions of this Credit Agreement or any other agreement or otherwise, (ii) any extension or renewal of any provision hereof or thereof, (iii) the failure of the Administrative Agent, the Issuing Bank or the Lenders to obtain the consent of the Guarantor with respect to any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of this Credit Agreement, the Notes or any other agreement, (iv) the release, exchange, waiver or foreclosure of any security held by the Administrative Agent (on behalf of the Secured Parties) for the Obligations or any of them, (v) the failure of a Secured Party to exercise any right or remedy against any other Guarantor or any other guarantor of the Obligations, (vi) any bankruptcy, reorganization, liquidation, dissolution or receivership proceeding or case by or against any Credit Party, or any change in the corporate existence, structure, ownership or control of any Credit Party (including any of the foregoing arising from any merger, consolidation, amalgamation, reorganization or similar transaction), or (vii) the release or substitution of any Guarantor or any other guarantor of the Obligations. Without limiting the generality of the foregoing or any other provision hereof (including, without limitation, Section 13.6 and Section 13.12), to the extent permitted by Applicable Law, each Guarantor hereby expressly waives any and all benefits which might otherwise be available to it under California Civil Code Sections 2799, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 or similar applicable law.

(c)             Each Guarantor further agrees that this Guaranty is a continuing guaranty, shall secure the Obligations and any ultimate balance thereof, notwithstanding that the

 159

 

Borrower or any other Persons may from time to time satisfy the Obligations in whole or in part and thereafter incur further Obligations, and that this Guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and waives any right to require that any resort be had by the Administrative Agent, the Issuing Bank or any Lender to any security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of the Administrative Agent, the Issuing Bank or any Lender in favor of the Borrower or any Guarantor, or to any other Person.

(d)            Each Guarantor hereby expressly assumes all responsibilities to remain informed of the financial condition of the Borrower, the other Guarantors and any other guarantors of the Obligations and any circumstances affecting the Collateral (including the Pledged Securities) or the ability of the Borrower to perform under this Credit Agreement.

(e)             Each Guarantor’s obligations under the Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations, the Notes or any other instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations which might otherwise constitute a defense to this Guaranty. The Administrative Agent, the Issuing Bank and the Lenders make no representation or warranty with respect to any such circumstances and have no duty or responsibility whatsoever to any Guarantor with respect to the management and maintenance of the Obligations or any collateral security for the Obligations.

SECTION 9.2           No Impairment of Guaranty, etc. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (except payment and performance in full of the Obligations), including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent, the Issuing Bank or any Lender to assert any claim or demand or to enforce any remedy under this Credit Agreement or any other agreement, by any waiver or modification of any provision hereof or thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law, unless and until the Obligations (other than the Unasserted Contingent Obligations) are indefeasibly paid and performed in full and the Commitments have terminated.

SECTION 9.3           Continuation and Reinstatement, etc.

(a)             Each Guarantor further agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any Obligation or any part thereof, is rescinded or must otherwise be restored by the Administrative Agent, the Issuing Bank or the Lenders upon the bankruptcy or reorganization of the Borrower or a Guarantor, or otherwise. In furtherance of the provisions of this Article 9, and not in limitation

 160

 

of any other right which the Administrative Agent, the Issuing Bank or the Lenders may have at law or in equity against the Borrower, a Guarantor or any other Person by virtue hereof, upon failure of the Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice or otherwise, each Guarantor hereby promises to and will, upon receipt of written demand by the Administrative Agent on behalf of itself and/or any of the other Secured Parties, forthwith pay or cause to be paid to the Administrative Agent (for the benefit of itself and/or the Secured Parties, as applicable), in cash an amount equal to the unpaid amount of such unpaid Obligations with interest thereon from the due date at a rate of interest equal to the rate specified in Section 2.7(a), and thereupon the Administrative Agent shall assign such Obligation, together with all security interests, if any, then held by the Administrative Agent in respect of such Obligation, to the Guarantor or Guarantors making such payment; such assignment to be subordinate and junior to the rights of the Administrative Agent (on behalf of the Secured Parties) with regard to amounts payable by the Borrower in connection with the remaining unpaid Obligations and to be pro tanto to the extent to which the Obligation in question was discharged by the Guarantor or Guarantors making such payments.

(b)            All rights of each Guarantor against the Borrower, arising as a result of the payment by such Guarantor of any sums to the Administrative Agent (for the benefit of the Secured Parties) or directly to the Lenders hereunder by way of right of subrogation or otherwise, shall in all respects be subordinated and junior in right of payment to, and shall not be exercised by such Guarantor until and unless, the indefeasible payment in full of all the Obligations (other than the Unasserted Contingent Obligations) and the termination of the Commitments. If any amount shall be paid to such Guarantor for the account of the Borrower, such amount shall be held in trust for the benefit of the Administrative Agent (on behalf of the Secured Parties), segregated from such Guarantor’s own assets, and shall forthwith be paid to the Administrative Agent to be credited and applied to the Obligations, whether matured or unmatured.

SECTION 9.4           Limitation on Guaranteed Amount, etc. Notwithstanding any other provision of this Article 9, the amount guaranteed by each Guarantor hereunder shall be limited to the extent, if any, required so that its obligations under this Article 9 shall not be subject to avoidance under Section 548 of the Bankruptcy Code or to being set aside or annulled under any Applicable Law relating to fraud on creditors. In determining the limitations, if any, on the amount of any Guarantor’s obligations hereunder pursuant to the preceding sentence, it is the intention of the parties hereto that any rights of subrogation or contribution which such Guarantor may have under this Article 9, any other agreement or Applicable Law shall be taken into account.

SECTION 9.5           Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Credit Party to honor all of its obligations under this Guaranty in respect of Swap Obligations; provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 9.5 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.5 or otherwise under this Guaranty voidable under Applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. The obligations of each Qualified ECP

 161

 

Guarantor under this Section 9.5 shall remain in full force and effect until a discharge of its Guaranty hereunder.  Each Qualified ECP Guarantor intends that this Section 9.5 constitute, and this Section 9.5 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

10.            PLEDGE

SECTION 10.1        Pledge. The Borrower, as security for the due and punctual payment in full of the Obligations (including interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the Borrower whether or not post filing interest is allowed in such proceeding), and each other Pledgor, as security for its obligations hereunder, hereby grant, pledge, hypothecate, assign, transfer, set over, convey and deliver unto the Administrative Agent (for the benefit of the Secured Parties), a security interest in all Pledged Collateral now owned or hereafter acquired by them. For the avoidance of doubt, for purposes of continuity of any pledge previously made under the Existing Corporate Facility Agreement and/or the Existing Production Facility Agreement, the “Administrative Agent” shall also be deemed to include the “collateral agent” (if applicable) for purposes of each grant, mortgage, pledge, assignment, transfer, set over, conveyance or delivery in the preceding sentence to the extent made by any Credit Party that was previously a “Credit Party” as defined under the Existing Corporate Facility Agreement or the Existing Production Facility Agreement, as applicable. Subject to the provisions of the Senior Intercreditor Agreement, on or prior to the Closing Date, the Pledgors delivered or shall deliver to the Administrative Agent the definitive instruments (if any) representing all Pledged Securities, accompanied by undated stock powers (or any comparable documents for non-corporate entities to the extent certificated), duly endorsed or executed in blank by the appropriate Pledgor, and such other instruments or documents relating thereto as the Administrative Agent or its counsel shall reasonably request. Schedule 10.1 sets forth all of the Pledged Securities as of the Closing Date.

SECTION 10.2        Covenant. Each Pledgor covenants that as the owner of Equity Interests in each of its respective Subsidiaries it will not take any action to allow any additional Equity Interests of any of such Subsidiaries or any securities convertible or exchangeable into Equity Interests of such Subsidiaries to be issued, or grant any options or warrants, unless all of such interests are pledged to the Administrative Agent (for the benefit of the Secured Parties) as security for the Obligations and, if applicable, such Pledgor’s obligations under Article 9.

SECTION 10.3        Registration in Nominee Name; Denominations. Subject to the provisions of the Senior Intercreditor Agreement, the Administrative Agent shall have the right (in its sole and absolute discretion) to hold the certificates representing any Pledged Securities (i) in its own name (on behalf of the Secured Parties) or in the name of its nominee, or (ii) in the name of the appropriate Pledgor, endorsed or assigned in blank or in favor of the Administrative Agent. The Administrative Agent shall have the right to exchange the certificates representing any of the Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Credit Agreement.

SECTION 10.4        Voting Rights; Dividends; etc.

 162

 

(a)             The appropriate Pledgor shall be entitled to exercise any and all voting and/or consensual rights and powers accruing to an owner of the Pledged Securities being pledged by it hereunder or any part thereof for any purpose not inconsistent with the terms hereof, at all times, except as expressly provided in Section 10.4(c).

(b)            All dividends or distributions of any kind whatsoever (other than cash dividends or cash distributions paid while no Event of Default is continuing) received by a Pledgor with respect to any Pledged Securities, whether declared on a regular periodic basis or resulting from a subdivision, combination, or reclassification of the outstanding capital stock or Equity Interests of the issuer or received in exchange for Pledged Securities or any part thereof or as a result of any merger, consolidation, acquisition, or other exchange of assets to which the issuer may be a party, or otherwise, shall be and become part of the Pledged Securities pledged hereunder and shall (subject to the provisions of the Senior Intercreditor Agreement) immediately be delivered to the Administrative Agent to be held subject to the terms hereof. All dividends and distributions which are received by a Pledgor contrary to the provisions of this Section 10.4(b) shall be received in trust for the benefit of the Secured Parties, segregated from such Pledgor’s own assets, and shall be delivered to the Administrative Agent.

(c)             Subject to the provisions of the Senior Intercreditor Agreement, upon the occurrence and during the continuance of an Event of Default and notice (which may be delivered telephonically followed by written notice) to the applicable Pledgor from the Administrative Agent of the transfer of such rights to the Administrative Agent, all rights of such Pledgor (i) to exercise the voting and/or consensual rights and powers which it is entitled to exercise pursuant to this Section 10.4, and (ii) to receive and retain cash dividends and cash distributions with respect to the Pledged Securities, shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to exercise such voting and/or consensual rights and receive such cash dividends and cash distributions, until such time as the Event of Default has been cured or waived.

(d)            So long as no Event of Default shall have occurred and be continuing, any dividends or cash distributions received by a Credit Party in accordance with the terms hereof and of the Senior Intercreditor Agreement may be used for any purpose permitted hereunder.

SECTION 10.5        Remedies Upon Default. If an Event of Default shall have occurred and be continuing, subject to the provisions of the Senior Intercreditor Agreement, the Administrative Agent (on behalf of the Secured Parties), may sell the Pledged Securities, or any part thereof, at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Administrative Agent shall deem appropriate subject to the terms hereof or as otherwise provided in the UCC. The Administrative Agent shall be authorized at any such sale (if the Administrative Agent deems it advisable to do so) to restrict to the fullest extent permitted by Applicable Law the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Pledged Securities for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale, the Administrative Agent shall have the right to assign, transfer, and deliver to the purchaser or purchasers thereof the Pledged Securities so sold. Each such

 163

 

purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor. The Administrative Agent shall give the Pledgors ten (10) days’ prior written notice of any such public or private sale, or sale at any broker’s board or on any such securities exchange, or of any other disposition of the Pledged Securities. Such notice, in the case of public sale, shall state the time and place for such sale and, in the case of sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Pledged Securities, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix and shall state in the notice of such sale. At any such sale, the Pledged Securities, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Administrative Agent may (in its sole and absolute discretion) determine. The Administrative Agent shall not be obligated to make any sale of the Pledged Securities if it shall determine not to do so, regardless of the fact that notice of sale of the Pledged Securities may have been given. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case the sale of all or any part of the Pledged Securities is made on credit or for future delivery, the Pledged Securities so sold may be retained by the Administrative Agent until the sale price is paid by the purchaser or purchasers thereof, but the Administrative Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Securities so sold and, in case of any such failure, such Pledged Securities may be sold again upon like notice. At any sale or sales made pursuant to this Section 10.5, the Administrative Agent (on behalf of the Secured Parties) may bid for or purchase, free from any claim or right of whatever kind, including any equity of redemption, of the Pledgors, any such demand, notice, claim, right or equity being hereby expressly waived and released, any or all of the Pledged Securities offered for sale, and may make any payment on the account thereof by using any claim for moneys then due and payable to the Administrative Agent or any consenting Lender by any Credit Party as a credit against the purchase price; and the Administrative Agent, upon compliance with the terms of sale, may hold, retain and dispose of the Pledged Securities without further accountability therefor to any Pledgor or any third party (other than the Lenders). The Administrative Agent shall in any such sale make no representations or warranties with respect to the Pledged Securities or any part thereof, and shall not be chargeable with any of the obligations or liabilities of the Pledgors with respect thereto. Each Pledgor hereby agrees that (i) it will indemnify and hold the Administrative Agent, the Issuing Bank and the Lenders harmless from and against any and all claims with respect to the Pledged Securities asserted before the taking of actual possession or control of the Pledged Securities by the Administrative Agent pursuant to this Credit Agreement, or arising out of any act of, or omission to act on the part of, any Person prior to such taking of actual possession or control by the Administrative Agent (whether asserted before or after such taking of possession or control), or arising out of any act on the part of any Pledgor or its Affiliates or agents before or after the commencement of such actual possession or control by the Administrative Agent, but excluding therefrom all claims with respect to the Pledged Securities resulting from (x) the gross negligence or willful misconduct of any of the Administrative Agent, the Issuing Bank or the Lenders, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the

 164

 

time required or (y) any claims with respect to the Pledged Securities asserted against an indemnified party by a Pledgor in which such Pledgor is the prevailing party (i.e., the party in whose favor an award is issued); and (ii) none of the Administrative Agent, the Issuing Bank or any Lender shall have any liability or obligation to any Pledgor arising out of any such claim except for acts of willful misconduct or gross negligence of such Person, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required. As an alternative to exercising the power of sale herein conferred upon it, the Administrative Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and Pledged Securities under this Credit Agreement and to sell the Pledged Securities, or any portion thereof, pursuant to a judgment or decree of a court or courts having competent jurisdiction.

SECTION 10.6        Application of Proceeds of Sale and Cash. The proceeds of sale of the Pledged Securities sold pursuant to Section 10.5, subject to the provisions of the Senior Intercreditor Agreement, shall be applied by the Administrative Agent (on behalf of the Secured Parties) as follows:

(a)             to the payment of all out-of-pocket costs and expenses paid or incurred by the Administrative Agent in connection with such sale, including, without limitation, all court costs and the fees and expenses of counsel for the Administrative Agent in connection therewith, and the payment of all out-of-pocket costs and expenses paid or incurred by the Administrative Agent in enforcing this Credit Agreement and the other Fundamental Documents, in realizing or protecting any Collateral and in enforcing or collecting any Obligations or any Guaranty thereof, including, without limitation, court costs and the attorney’s fees and expenses incurred by the Administrative Agent in connection therewith; and

(b)            to the payment in full of the Obligations in accordance with Section 12.2;

provided, however, that the Administrative Agent may in its discretion apply funds comprising the proceeds of sale of the Pledged Securities to pay the cost (i) of completing any Item of Product owned in whole or in part by any Credit Party in any stage of production, if applicable, and (ii) of making delivery to the Distributors of such Item of Product. Any amounts remaining after such payment in full shall be remitted to the appropriate Pledgor, or as a court of competent jurisdiction may otherwise direct.

SECTION 10.7        Securities Act, etc. In view of the position of each Pledgor in relation to the Pledged Securities pledged by it, or because of other present or future circumstances, a question may arise under the Securities Act of 1933, as amended, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being hereinafter called the “Federal Securities Laws”), with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws may very strictly limit the course of conduct of the Administrative Agent if the Administrative Agent were to attempt to dispose of all or any part of the Pledged Securities, and may also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities may dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Administrative Agent in any attempt to dispose of all or any part of the Pledged Securities under applicable Blue Sky

 165

 

or other state securities laws, or similar laws analogous in purpose or effect. Under Applicable Law, in the absence of an agreement to the contrary, the Administrative Agent may perhaps be held to have certain general duties and obligations to a Pledgor to make some effort towards obtaining a fair price even though the Obligations may be discharged or reduced by the proceeds of a sale at a lesser price. Each Pledgor waives to the fullest extent permitted by Applicable Law any such general duty or obligation to it, and the Pledgors and/or the Credit Parties will not attempt to hold the Administrative Agent responsible for selling all or any part of the Pledged Securities at an inadequate price, even if the Administrative Agent shall accept the first offer received or does not approach more than one possible purchaser. Without limiting the generality of the foregoing, the provisions of this Section 10.7 would apply if, for example, the Administrative Agent were to place all or any part of the Pledged Securities for private placement by an investment banking firm, or if such investment banking firm purchased all or any part of the Pledged Securities for its own account, or if the Administrative Agent placed all or any part of the Pledged Securities privately with a purchaser or purchasers.

SECTION 10.8        Continuation and Reinstatement. Each Pledgor further agrees that its pledge hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any Obligation or any part thereof, is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of any Pledgor or otherwise.

SECTION 10.9        Termination. The pledge referenced in this Article 10 shall terminate when all of the Obligations (other than Unasserted Contingent Obligations) shall have been fully and indefeasibly paid and performed and the Commitments shall have terminated. Upon request by the Pledgors (and at the sole cost and expense of the Pledgors) after such termination, the Administrative Agent will promptly reassign and deliver to the appropriate Pledgor, or to such Person or Persons as such Pledgor shall designate, against receipt, such of the Pledged Securities (if any) as shall not have been sold or otherwise applied by the Administrative Agent pursuant to the terms hereof and shall still be held by it hereunder, together with appropriate instruments of reassignment and release. Any such reassignment shall be free and clear of any Liens arising by, under or through the Administrative Agent (other than those created at the instruction of the applicable Pledgor) but shall otherwise be without recourse upon or warranty by the Administrative Agent.

11.            CASH COLLATERAL

SECTION 11.1        Cash Collateral Accounts. On or prior to the Closing Date, there shall be established and maintained with the Administrative Agent a collateral account or accounts in the name of the Borrower (the “Cash Collateral Account”), into which the appropriate Credit Parties shall from time to time deposit amounts pursuant to the express provisions of this Credit Agreement requiring or permitting such deposits. The Cash Collateral Account shall be under the control (within the meaning of Section 9-104 of the UCC) of the Administrative Agent; provided, that unless an Event of Default shall have occurred and be continuing, and except for any amount deposited as cash collateral pursuant to Section 2.9(j) upon the request of the Borrower, the Administrative Agent shall promptly release (or permit the release of) funds from the Cash Collateral Account in accordance with the directions of the Borrower, provided, that if

 166

 

cash on deposit in a Cash Collateral Account is included in the Borrowing Base, (a) the Administrative Agent shall have received at least three (3) Business Days’ prior written notice of the proposed date of the withdrawal, together with a pro forma Borrowing Base Certificate calculated after giving effect to such requested withdrawal and (b) the removal of such cash shall not cause a Borrowing Base deficiency.

SECTION 11.2        Investment of Funds.

(a)             The Administrative Agent is hereby authorized and directed to invest and reinvest the funds from time to time transferred or deposited into the Cash Collateral Account, so long as no Event of Default has occurred and is continuing, on the instructions of the Borrower (provided, that any such instructions given orally shall be confirmed promptly in writing) or, if the Borrower shall fail to give such instructions upon delivery of any such funds, in the sole discretion of the Administrative Agent; provided, that in no event may the Borrower give instructions to the Administrative Agent to, or may the Administrative Agent in its discretion, invest or reinvest funds in the Cash Collateral Account in any investments other than Cash Equivalents.

(b)            Any net income or gain on the investment of funds from time to time held in the Cash Collateral Account shall be promptly reinvested by the Administrative Agent as a part of the Cash Collateral Account; and any net loss on any such investment shall be charged against the Cash Collateral Account.

(c)             None of the Administrative Agent, the Issuing Bank or the Lenders shall be a trustee for any Credit Party, or shall have any obligations or responsibilities, or shall be liable for anything done or not done, in connection with the Cash Collateral Account except for any acts of gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required, except as expressly provided herein and except that the Administrative Agent shall have the obligations of a secured party under the UCC. The Administrative Agent, the Issuing Bank and the Lenders shall not have any obligation or responsibility and shall not be liable in any way for any investment decision made in accordance with this Section 11.2 or for any decrease in the value of the investments held in the Cash Collateral Account, except to the extent resulting from the gross negligence or willful misconduct of such party, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required.

SECTION 11.3        Grant of Security Interest. For value received and to induce the Issuing Bank to issue Letters of Credit and the Lenders to participate in such Letters of Credit and make Loans to the Borrower as provided for in this Credit Agreement, as security for the due and punctual payment in full of all of the Obligations, each of the Credit Parties hereby assigns to the Administrative Agent (for the benefit of the Secured Parties) and grants to the Administrative Agent (for the benefit of the Secured Parties), a first and prior Lien upon all of such Credit Party’s rights in and to the Cash Collateral Account, all cash, documents, instruments and securities from time to time held therein, and all rights pertaining to investments of funds in the Cash Collateral Account and all products and proceeds of any of the foregoing. All cash,

 167

 

documents, instruments and securities from time to time on deposit in the Cash Collateral Account, and all rights pertaining to investments of funds in the Cash Collateral Account shall immediately and without any need for any further action on the part of any Credit Party, the Administrative Agent, the Issuing Bank or any Lender become subject to the Lien set forth in this Section 11.3, be deemed Collateral for all purposes hereof and be subject to the provisions of this Credit Agreement.

SECTION 11.4        Remedies. At any time an Event of Default shall have occurred and be continuing, subject to the provisions of the Senior Intercreditor Agreement, the Administrative Agent may sell any documents, instruments and securities held in the Cash Collateral Account and the Administrative Agent may immediately apply the proceeds thereof and any other cash held in the Cash Collateral Account in accordance with Section 8.7.

12.            THE ADMINISTRATIVE AGENT AND THE ISSUING BANK

SECTION 12.1        Administration by the Administrative Agent.

(a)             The general administration of the Fundamental Documents and any other documents contemplated by the Fundamental Documents shall be by the Administrative Agent or its designees. Except as otherwise expressly provided herein, each of the Lenders hereby irrevocably authorizes the Administrative Agent, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Fundamental Documents and any other documents contemplated by the Fundamental Documents as are expressly delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto. The Administrative Agent shall have no duties or responsibilities except as set forth in the Fundamental Documents.

(b)            The Lenders and, where applicable, the Issuing Bank, hereby authorize the Administrative Agent (in its sole discretion):

(i)              in connection with the sale or other disposition of any asset included in the Collateral or the Pledged Collateral or the sale or other disposition of any Guarantor, in each case to the extent undertaken in accordance with the terms of this Credit Agreement, to release a Lien granted to the Administrative Agent (for the benefit of the Secured Parties) on such asset or Pledged Collateral and/or to release such Guarantor from its obligations hereunder;

(ii)            to determine that the cost to a Credit Party is disproportionate to the benefit to be realized by the Secured Parties by perfecting a Lien in a given asset or group of assets included in the Collateral (including any bank account) and that such Credit Party should not be required to perfect such Lien in favor of the Administrative Agent (for the benefit of the Secured Parties);

(iii)          to appoint subagents to be the holder of record of a Lien to be granted to the Administrative Agent (for the benefit of the Secured Parties);

 168

 

(iv)          to confirm in writing the right of Quiet Enjoyment of Distributors pursuant to the terms of Section 8.12;

(v)            in connection with an Item of Product being produced by a Credit Party with respect to which (A) the principal photography is being done outside of the United States of America, and (B) the original Physical Materials will not be processed in a Laboratory, to approve arrangements with such Credit Party as shall be satisfactory to the Administrative Agent with respect to the temporary storage of the original negative film, the original sound track materials or other Physical Materials of such Item of Product in a production laboratory located in such other jurisdiction;

(vi)          to enter into and perform its obligations under the other Fundamental Documents;

(vii)        to enter into and perform its obligations under any Approved Completion Bond entered into in connection with a Picture, together with such additional documentation customarily entered into in connection therewith and in connection therewith, to approve the applicable Approved Completion Guarantor’s insurance support package and/or credit support to the extent contemplated by the definition of the term “Approved Completion Guarantor” herein;

(viii)      to enter into Interparty Agreements, Co-Financing Intercreditor Agreements, Co-Financing Venture Interparty Agreements, intercreditor agreements and/or subordination agreements on terms acceptable to the Administrative Agent with (A) unions and/or guilds with respect to the security interests in favor of such unions and/or guilds required pursuant to the terms of collective bargaining agreements, (B) any Distributor, licensor, Approved Co-Financier, Approved Co-Financing Venture Counterparty or Approved Completion Guarantor having any rights to any Item of Product, (C) Persons providing any services in connection with any Item of Product, (D) Persons providing tax benefit, production subsidies and/or similar arrangements for any Item of Product, (E) sales agents or third party Licensing Intermediaries which are permitted by the terms hereof to be involved in the distribution of any Item of Product or (F) the Seer P&A Facility Agent and the Subordinated Agent;

(ix)          to approve the terms and conditions of (A) any transaction permitted under Section 6.7 or 6.8 and (B) any Soft Dollar Transaction that does not comply with the covenants contained in Article 6, to the extent the Administrative Agent reasonably determines that such Soft Dollar Transaction will provide a positive net benefit towards the negative cost of the applicable Item of Product and is otherwise consistent with the risk profile of the Credit Parties contemplated under the terms hereof relating to the production of Items of Product, and in each of the foregoing cases of sub-clauses (A) and (B) above to take any action it deems appropriate to facilitate the completion of such transaction;

(x)            to determine when a Lender is or becomes a Defaulting Lender;

 169

 

(xi)          notwithstanding the fact that a Default or an Event of Default shall have occurred and be continuing, to make the determination that (A) Loans shall continue to be funded by the Lenders (in accordance with their respective Pro Rata Shares) for any Item of Product (i) that remains Uncompleted and (ii) for which the Lenders have made an initial Loan or issued an initial Letter of Credit pursuant to Section 4.2 or 4.3 and (B) Loans to fund P&A Expenses included in the applicable Approved P&A Budget shall continue to be funded by the Lenders (in accordance with their respective Pro Rata Shares) for any Item of Product for which the Lenders have previously advanced Loans on the basis of a P&A Credit (i.e., for which a Credit Party has an existing binding contractual written commitment to fund P&A Expenses); provided, that any such post Default or post Event of Default Loans (1) are paid directly into a Production Account and the payments into such Production Account pursuant to the applicable Approved Completion Bond are deemed to satisfy any pre-condition to the obligation of the Approved Completion Guarantor to the Administrative Agent or the Administrative Agent is otherwise satisfied that such Loans will only be used to Complete such Item of Product, (2) are used directly to fund the remaining Acceptable Domestic Distribution Expenses for such Item of Product, and (3) such Default or Event of Default is not related to (w) the failure to pay any Obligations hereunder due and owing after the applicable grace period has expired, (x) a Credit Party making a general assignment for the benefit of its creditors, (y) the commencement of any case entered by or against any Credit Party, whether voluntary or involuntary, seeking to have an order for relief entered on its behalf or against it as debtor, as applicable, or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property under such law which, with respect to an involuntary case, (I) results in the entry of any order for relief against it under such law or (V) remains undismissed for a period of sixty (60) days or if a Credit Party files an answer or other pleading in any such case, proceeding or other action admitting the material allegations of any petition, complaint or similar pleading filed against it or consenting to the relief sought therein or a Credit Party shall take any action to authorize any of the foregoing, or (z) any challenge to or impairment of the Administrative Agent’s perfected Lien (with the priority contemplated by Section 3.18) in the Collateral; provided, that any such Loans shall bear interest at a rate per annum of 2.00% in excess of the rate then in effect for Alternate Base Rate Loans from time to time in effect from the date advanced to the date of repayment;

(xii)        to accept (and, subject to compliance with Section 13.10(c) hereof, the Administrative Agent shall accept) commitments from Persons which are reasonably acceptable to the Administrative Agent and the Borrower for an additional $200,000,000 of Commitments beyond the $400,000,000 in effect as of the Closing Date by (A) obtaining an executed counterpart of this Credit Agreement from each such Person, (B) amending the Schedule of Commitments to add each such Person’s name and Commitment and circulating the amended Schedule of Commitments to the Lenders, the Issuing Bank and the Borrower, and (C) recording in the Register the name and address of each such Person and the Commitment of, and principal amount of the Loans owing to

 170

 

it, whereupon (x) the Borrower shall, if such Person requests, execute and deliver to the Administrative Agent a Note payable to each such Person in an amount equal to its Commitment, and (y) each such Person shall be a party hereto, have the rights and obligations of a Lender hereunder and under the other Fundamental Documents and shall be bound by the provisions hereof and thereof; and

(xiii)      upon the acceptance of additional commitments pursuant to Section 12.1(b)(xii) hereof, to allocate equitably among the Lenders the Alternate Base Rate Loans and LIBOR Loans so as to achieve pro rata status.

SECTION 12.2        Payments. Subject to the provisions of the Senior Intercreditor Agreement and Section 2.15 hereof, as among the Administrative Agent, the Issuing Bank and the Lenders, any amounts received by the Administrative Agent in connection with the Fundamental Documents, the application of which is not otherwise provided for herein, shall be applied first, to pay the accrued but unpaid Commitment Fees ratably in accordance with each Lender’s Percentage and fees pursuant to Section 2.17(h), second, to pay accrued but unpaid interest on the Loans ratably in accordance with the amount of outstanding Loans owed to each Lender and current payments under Covered Swap Agreements, third, to pay the principal balance outstanding on the Loans (with amounts payable on the principal balance outstanding on any Loans in accordance with the amount of outstanding Loans owed to each Lender), to cash collateralize outstanding Letters of Credit and reimburse amounts drawn thereunder, and to pay termination amounts to any Secured Party outstanding under Covered Swap Agreements permitted by Section 6.18, fourth, to pay any other amounts then due to the Secured Parties under this Credit Agreement, and fifth, to pay any other outstanding Obligations. All amounts to be paid to any Lender by the Administrative Agent shall be credited to that Lender, after collection by the Administrative Agent, in immediately available funds either by wire transfer or deposit in such Lender’s correspondent account with the Administrative Agent, or as such Lender and the Administrative Agent shall from time to time agree. Notwithstanding the foregoing, amounts received from any Credit Party that is not a Qualified ECP Guarantor shall not be applied to any Excluded Swap Obligation of such Guarantor.

SECTION 12.3        Sharing of Setoffs and Cash Collateral. Each of the Lenders agrees that if it shall, through the exercise of a right of banker’s Lien, setoff or counterclaim against any Credit Party (including, but not limited to, a secured claim under Section 506 of the Bankruptcy Code or other security or interest arising from, or in lieu of, such secured claim and received by such Lender under any applicable bankruptcy, insolvency or other similar law) or otherwise, obtain payment in respect of its Loans or its participation in L/C Disbursements as a result of which the unpaid portion of its Loans or its participation in L/C Disbursements is proportionately less than the unpaid portion of Loans or participations in L/C Disbursements of any of the other Lenders (i) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Lenders a participation in the Loans or participations in L/C Disbursements of such other Lenders, so that the aggregate unpaid principal amount of each of the Lenders’ Loans and participations in L/C Disbursements shall be in the same proportion to the aggregate unpaid principal amount of all Loans and participations in L/C Disbursements then outstanding as the principal amount of its Loans and participations in L/C Disbursements prior to the obtaining of such payment was to the principal amount of all Loans and participations in L/C Disbursements

 171

 

outstanding prior to the obtaining of such payment, and (ii) such other adjustments shall be made from time to time as shall be equitable to ensure that the Lenders share such payment pro rata. If all or any portion of such excess payment is thereafter recovered from the Lender which originally received such excess payment, such purchase (or portion thereof) shall be canceled and the purchase price restored to the extent of such recovery. The Credit Parties expressly consent to the foregoing arrangements and agree that any Lender or Lenders holding (or deemed to be holding) a participation in a Loan or participations in L/C Disbursements may exercise any and all rights of banker’s Lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender or Lenders as fully as if such Lender or Lenders held a Loan or a participation in L/C Disbursements and was the original obligee thereon, in the amount of such participation. Notwithstanding the foregoing, a Defaulting Lender (other than a Lender which is a Defaulting Lender solely as a result of clause (v) of the definition of the term “Defaulting Lender” herein, but which Defaulting Lender has otherwise fulfilled its obligations under this Credit Agreement), shall not be entitled to share in any benefit contemplated by this Section 12.3 realized by a non-Defaulting Lender, until all of the Obligations (other than the Unasserted Contingent Obligations) owed to the non-Defaulting Lenders shall have been paid in full and the Commitments have been terminated.

SECTION 12.4        Notice to the Lenders.

(a)             Upon receipt by the Administrative Agent or the Issuing Bank from any Credit Party of any communication calling for an action on the part of the Lenders, or upon receipt by the Administrative Agent from any Credit Party of written notice of any Event of Default, the Administrative Agent or the Issuing Bank, as the case may be, will in turn promptly inform the Lenders in writing (which shall include facsimile communications) of the nature of such communication or of the Event of Default, as the case may be.

(b)            The Administrative Agent will make available (i) to each Lender copies of any materials delivered to the Administrative Agent pursuant to Section 5.1(a), (b), (c), (d), (g), (h), (i), (j) and (k) and (ii) at the request of any Lender, to such requesting Lender, copies of any other materials delivered to the Administrative Agent pursuant to Section 5.1.

SECTION 12.5        Liability of the Administrative Agent and the Issuing Bank.

(a)             The Administrative Agent or the Issuing Bank, when acting on behalf of any Secured Party, may execute any of its duties under this Credit Agreement or the other Fundamental Documents by or through its respective directors, officers, employees or agents and neither the Administrative Agent nor its directors, officers, employees or agents shall be liable to the other Secured Parties or any of them for any action taken or omitted to be taken in good faith, nor be responsible to the other Secured Parties or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required. The Administrative Agent and the Issuing Bank and their directors, officers, employees and agents shall in no event be liable to the other Secured Parties or to any of them for any action taken or omitted to be taken by it pursuant to instructions received by it from the Required Lenders or in reliance upon the

 172

 

advice of counsel selected by it with reasonable care. Without limiting the foregoing, neither the Administrative Agent, the Issuing Bank, nor any of their directors, officers, employees or agents shall be responsible to any of the Secured Parties for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty, or representation in, or for the perfection of any security interest contemplated by, this Credit Agreement, any other Fundamental Document or any related agreement, document or order, or for freedom of any of the Collateral or any of the Pledged Collateral from prior Liens or security interests, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower, any other Credit Party of any of the terms, conditions, covenants, or agreements of this Credit Agreement, any other Fundamental Document, or any related agreement or document.

(b)            None of the Administrative Agent (in its capacity as agent for the Lenders), the Issuing Bank or any of its directors, officers, employees or agents shall have any responsibility to the Borrower, any other Credit Party on account of the failure or delay in performance or breach by any of the Lenders of any of such Lender’s obligations under this Credit Agreement, the other Fundamental Documents or any related agreement or document or in connection herewith or therewith. No Lender nor any of its directors, officers, employees or agents shall have any responsibility to the Borrower, any other Credit Party on account of the failure or delay in performance or breach by any other Lender of such other Lender’s obligations under this Credit Agreement, the other Fundamental Documents or any related agreement or document or in connection herewith or therewith.

(c)             The Administrative Agent (in its capacity as agent for the Lenders) and the Issuing Bank shall be entitled to rely on any communication, instrument or document believed by it to be genuine or correct and to have been signed or sent by a Person or Persons believed by it to be the proper Person or Persons, and it shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by it.

SECTION 12.6        Reimbursement and Indemnification. (a) Each of the Lenders agrees (i) to reimburse the Administrative Agent for such Lender’s Pro Rata Share of any expenses and fees incurred for the benefit of the Lenders under the Fundamental Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, and any other expense incurred in connection with the operations or enforcement thereof to the extent not reimbursed by or on behalf of the Borrower or any other Credit Party, (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees and agents, on demand, ratably in accordance with such Lender’s Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, it or any of them in any way relating to or arising out of any of the Fundamental Documents or any related agreement or document, or any action taken or omitted by it or any of them under any of the Fundamental Documents or any related agreement or document, to the extent not reimbursed by or on behalf of the Borrower or any other Credit Party (except such as shall result from the gross negligence or willful misconduct of the Person to be reimbursed, indemnified or held harmless, as finally

 173

 

determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required) and (iii) to indemnify and hold harmless the Issuing Bank and any of its directors, officers, employees and agents, ratably on demand, in accordance with such Lender’s Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against it or any of them in any way relating to or arising out of the issuance of any Letters of Credit or the failure to issue any Letters of Credit if such issuance or failure was at the direction of the Required Lenders (except as shall result from the gross negligence or willful misconduct of the Person to be reimbursed, indemnified or held harmless, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required). To the extent indemnification payments made by the Lenders pursuant to this Section 12.6 are subsequently recovered by the Administrative Agent from a Credit Party, the Administrative Agent shall promptly refund such previously paid indemnity payments to the Lenders that paid them. Notwithstanding the foregoing, if there are at the time of computation of a reimbursement and/or indemnity obligation one or more Defaulting Lenders which have not fulfilled their obligations under this Section 12.6, the obligations of such non-performing Defaulting Lenders shall be reallocated among the other Lenders (including performing Defaulting Lenders), in proportion to the percentage of such Lender to the aggregate percentage of all Lenders (other than that of the non-performing Defaulting Lender or Defaulting Lenders).

(b)            The provisions of Section 12.6(a) above are agreements among the Administrative Agent and the Lenders and are not for the benefit of any of the Credit Parties and may not be asserted by any of the Credit Parties as a defense to, or a limitation of, their respective Obligations under this Credit Agreement.

SECTION 12.7        Rights of Administrative Agent. The Administrative Agent shall have the same duties, rights and powers as a Lender hereunder (including the right to give such instructions) as any of the other Lenders and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with any Credit Party or Affiliate thereof, as though it were not the Administrative Agent of the Lenders under this Credit Agreement and the other Fundamental Documents.

SECTION 12.8        Independent Investigation by Lenders. Each of the Lenders acknowledges that it has decided to enter into this Credit Agreement and the other Fundamental Documents and to make the Loans and participate in the Letters of Credit hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Credit Parties and agrees that neither the Administrative Agent, the Issuing Bank, nor any Lender shall bear any responsibility therefor.

SECTION 12.9        Agreement of Required Lenders. Except as set forth in Section 13.10, upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Lenders, action shall be taken by the Administrative Agent for and on behalf of, or for the benefit of, all Lenders upon the direction of the Required Lenders and any such

 174

 

action shall be binding on all Lenders. No amendment, modification, consent or waiver shall be effective except in accordance with the provisions of Section 13.10.

SECTION 12.10    Notice of Transfer. The Administrative Agent and the Issuing Bank may deem and treat any Lender which is a party to this Credit Agreement as the owner of such Lender’s respective portions of the Loans and participations in Letters of Credit for all purposes, unless and until a written notice of the assignment or transfer thereof executed by any such Lender shall have been received by the Administrative Agent and become effective in accordance with Section 13.3.

SECTION 12.11    Successor Administrative Agent. The Administrative Agent may resign at any time by giving fifteen (15) days’ prior written notice thereof to the Lenders and the Borrower, but, except as set forth below, such resignation shall not become effective until acceptance by a successor agent of its appointment pursuant hereto. Upon any such resignation, the retiring Administrative Agent shall consult with the Borrower and promptly appoint a successor agent from among the Lenders which successor agent shall be experienced and sophisticated in entertainment industry lending; provided, that such replacement is reasonably acceptable (as evidenced in writing) to the Required Lenders and the Borrower; provided, however, such approval by the Borrower shall not be required at any time when a Default or Event of Default shall have occurred and be continuing. If no successor agent shall have been so appointed by the retiring Administrative Agent and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent’s giving of notice of resignation, the Borrower may appoint a successor agent (which successor may be replaced by the Required Lenders; provided, that such replacement successor is an existing Lender or experienced and sophisticated in entertainment industry lending and, so long as no Default or Event of Default has occurred and is then continuing, reasonably acceptable to the Borrower (as evidenced in writing)), which shall be either a Lender or a commercial bank organized under the laws of the United States of America or of any State thereof and shall have a combined capital and surplus of at least $250,000,000 and shall be experienced and sophisticated in entertainment industry lending. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the date that is forty-five (45) days after the date of such notice. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor agent, such successor agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor agent or the effectiveness of any resignation notice without the appointment of a successor agent, the retiring Administrative Agent shall be discharged from its duties and obligations under this Credit Agreement, the other Fundamental Documents and any other credit documentation. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article 12 and Article 13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement.

SECTION 12.12    Successor Issuing Bank. The Issuing Bank may resign at any time by giving fifteen (15) days’ prior written notice thereof to the Lenders and the Borrower, but such resignation shall not become effective until acceptance by a successor issuing bank of its appointment pursuant hereto. Upon any such resignation, the retiring Issuing Bank shall consult

 175

 

with the Borrower and promptly appoint a successor issuing bank from among the Lenders; provided, that such replacement is reasonably acceptable (as evidenced in writing) to the Required Lenders and the Borrower and has a credit rating at least as high as that of the retiring Issuing Bank; provided, however, such approval by the Borrower shall not be required at any time when a Default or Event of Default shall have occurred and be continuing. If no successor issuing bank shall have been so appointed by the retiring Issuing Bank and shall have accepted such appointment within thirty (30) days after the retiring Issuing Bank’s giving of notice of resignation, the Borrower may appoint a successor issuing bank (which successor may be replaced by the Required Lenders); provided, that so long as no Default or Event of Default shall have occurred and be continuing, such successor is reasonably acceptable to the Borrower), which shall be either a Lender or a commercial bank organized, licensed, carrying on business under the laws of the United States of America or of any State thereof and shall have a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Issuing Bank hereunder by a successor issuing bank, such successor issuing bank shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Issuing Bank, and the retiring Issuing Bank shall be discharged from its duties and obligations under this Credit Agreement, the other Fundamental Documents and any other credit documentation, except with respect to Letters of Credit which are outstanding at the time of the resignation unless the successor issuing bank replaces the retiring Issuing Bank as the issuing bank on such Letters of Credit. The Borrower and each Lender hereby agrees that each will use its commercially reasonable efforts to replace any such outstanding Letters of Credit issued by the retiring Issuing Bank, or if such Letters of Credit cannot be replaced, to provide the retiring Issuing Bank with cash collateral and/or a back-to-back letter of credit from the successor issuing bank with respect to all such outstanding Letters of Credit. After any retiring Issuing Bank’s resignation hereunder as Issuing Bank, the provisions of this Article 12 and Article 13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Issuing Bank under this Credit Agreement.

SECTION 12.13    Other Agent Titles. Other than the title “Administrative Agent”, any title accorded to any Lender on the cover page hereof containing the word “Agent,” “Arranger” or “Bookrunner” is granted for recognition only and any such Lender granted such a title shall not have any right, power, obligation, liability, responsibility or duty under this Credit Agreement other than those applicable to all such Lenders as such. Without limiting the foregoing, by virtue of such titles, if any, no such Lender shall have or be deemed to have any fiduciary relationship with any other Lender or the Credit Parties. Each other Lender acknowledges that it has not relied, and will not rely, on any Lender having any such title in deciding to enter into this Credit Agreement or in taking or not taking action hereunder. In the event of any claim against any such Lender in any capacity or purported capacity inferred from any such title, such Lender shall have the benefit of Section 13.5 to the same extent as the Administrative Agent.

SECTION 12.14    Lender Acknowledgment. Each Lender acknowledges and agrees that the extensions of credit made hereunder are commercial loans and letters of credit and not investments in a business enterprise or securities. Each Lender further represents that it is engaged in making, acquiring or holding commercial loans in the ordinary course of its business and has, independently and without reliance upon the Administrative Agent or any other Lender

 176

 

and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement as a Lender, and to make, acquire or hold Loans hereunder. Each Lender shall, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information (which may contain material, non-public information within the meaning of the United States securities laws concerning the Borrower and its Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder and in deciding whether or to the extent to which it will continue as a Lender or assign or otherwise transfer its rights, interests and obligations hereunder.

SECTION 12.15    Credit Bidding. Subject to the Senior Intercreditor Agreement the Secured Parties hereby irrevocably authorize the Administrative Agent, at the direction of the Required Lenders to credit bid all or any portion of the applicable Obligations (including by accepting some or all of the Collateral in satisfaction of some or all of the applicable Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code, including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any similar laws in any other jurisdictions to which a Credit Party is subject, or (b) at any other sale, foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable law. In connection with any such credit bid and purchase, the applicable Obligations owed to the applicable Secured Parties shall be entitled to be, and shall be, credit bid by the Administrative Agent at the direction of the Required Lenders on a ratable basis (with applicable Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that shall vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) for the asset or assets so purchased (or for the equity interests or debt instruments of the acquisition vehicle or vehicles that are issued in connection with such purchase). In connection with any such bid (i) the Administrative Agent shall be authorized to form one or more acquisition vehicles and to assign any successful credit bid to such acquisition vehicle or vehicles, (ii) each of the applicable Secured Parties’ ratable interests in the applicable Obligations which were credit bid shall be deemed without any further action under this Credit Agreement to be assigned to such vehicle or vehicles for the purpose of closing such sale, (iii) the Administrative Agent shall be authorized to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Administrative Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or equity interests thereof, shall be governed, directly or indirectly, by, and the governing documents shall provide for, control by the vote of the Required Lenders or their permitted assignees under the terms of this Credit Agreement or the governing documents of the applicable acquisition vehicle or vehicles, as the case may be, irrespective of the termination of this Credit Agreement and without giving effect to the limitations on actions by the Required Lenders contained in Section 13.10 of this Credit Agreement), (iv) the Administrative Agent on behalf of such acquisition vehicle or vehicles shall be authorized to issue to each of the applicable Secured Parties, ratably on account of the relevant applicable Obligations which were credit bid, interests,

 177

 

whether as equity, partnership, limited partnership interests or membership interests, in any such acquisition vehicle and/or debt instruments issued by such acquisition vehicle, all without the need for any Secured Party or acquisition vehicle to take any further action, and (v) to the extent that Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (including as a result of another bid being higher or better, because the amount of applicable Obligations assigned to the acquisition vehicle exceeds the amount of applicable Obligations credit bid by the acquisition vehicle or otherwise), such applicable Obligations shall automatically be reassigned to the applicable Secured Parties pro rata and the equity interests and/or debt instruments issued by any acquisition vehicle on account of such applicable Obligations shall automatically be cancelled, without the need for any applicable Secured Party or any acquisition vehicle to take any further action. Notwithstanding that the ratable portion of the applicable Obligations of each applicable Secured Party are deemed assigned to the acquisition vehicle or vehicles as set forth in clause (ii) above, each applicable Secured Party shall execute such documents and provide such information regarding the applicable Secured Party (and/or any designee of such Secured Party which will receive interests in or debt instruments issued by such acquisition vehicle) as the Administrative Agent may reasonably request in connection with the formation of any acquisition vehicle, the formulation or submission of any credit bid or the consummation of the transactions contemplated by such credit bid.

13.            MISCELLANEOUS

SECTION 13.1        Notices.

(a)             Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to clause (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:

(i)              if to any Credit Party, to STX Financing, LLC, Attention: Noah Fogelson, 3900 W. Alameda Ave., 32nd Fl., Burbank, CA 91505 (Facsimile No. (310) 244-0348; email: nfogelson@stxentertainment.com), with a copy to Latham & Watkins LLP, 10250 Constellation Boulevard #1100, Los Angeles, CA 90067, Attention: Nancy A. Bruington (Facsimile No. (424) 653-5501; email: nancy.bruington@lw.com);

(ii)            if to the Administrative Agent or to JPMorgan Chase Bank, N.A., to (w) JPMorgan Chase Bank, N.A., 2029 Century Park East, 38th Floor, Los Angeles, California 90067, Attention: Gerardo Loera (Facsimile No. (310) 860-7260; email: gerardo.b.loera@jpmorgan.com), with copies to (x) JPMorgan Chase Bank, N.A., JPMorgan Loan Services, 10 South Dearborn, Floor L2S, Chicago, Illinois 60603-2300, Attention: Loan and Agency Services Group (Facsimile No. (844) 490-5663); (y) J.P. Morgan Securities LLC, 2029 Century Park East, 38th Floor, Los Angeles, California 90067, Attention: David Shaheen (Facsimile No. (310) 860-7260; email: david.shaheen@jpmorgan.com); and (z) Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, Attention: Michael A. Chapnick and Chris Owens (Facsimile No. (212) 309-6001; email: michael.chapnick@morganlewis.com and christopher.owens@morganlewis.com); and

 178

 

(iii)          if to any other Lender, to it at its address, facsimile number or e-mail address set forth on the signature pages hereto or via posting to a data sharing site (e.g., “Intralinks”) to which such Lender has been provided access.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through Electronic Systems, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b)            Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by Electronic Systems pursuant to procedures approved by the Administrative Agent; provided, that the foregoing shall not apply to notices pursuant to Article 2 unless otherwise agreed by the Administrative Agent, the Issuing Bank (if applicable) and the applicable Lender. Each of the Administrative Agent, the Issuing Bank, the Lenders, and each Credit Party may, each in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided, that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

(c)             Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to all of the other parties hereto. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 179

 

(d)               (i) Each Credit Party agrees that the Administrative Agent may, but shall not be obligated to, make Communications (as defined below) available to the Issuing Banks and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar Electronic System.

(ii)       Any Electronic System used by the Administrative Agent is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or any Electronic System. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower or the other Credit Parties, any Lender, the Issuing Bank or any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s, any Credit Party’s or the Administrative Agent’s transmission of communications through an Electronic System except in respect of any such losses or expenses incurred by reason of the gross negligence or willful misconduct of an Agent Party, as finally determined by a court of competent jurisdiction in a nonappealable decision or in an appealable decision that the relevant Agent Party does not appeal within the time required. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Credit Party pursuant to any Fundamental Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Lender or any Issuing Bank by means of electronic communications pursuant to this Section 13.1, including through an Electronic System.

SECTION 13.2        Survival of Agreement, Representations and Warranties, etc. All warranties, representations and covenants made by any Credit Party, in any other Fundamental Document or in any certificate or other instrument delivered by it or on its behalf in connection with this Credit Agreement or any other Fundamental Document shall be considered to have been relied upon by the Administrative Agent, the Issuing Bank and the Lenders and, except for any terminations, amendments, modifications or waivers thereof in accordance with the terms hereof, shall survive the making of the Loans and the issuance of the Letters of Credit herein contemplated and the execution and delivery to the Administrative Agent of the Notes (if any) regardless of any investigation made by the Administrative Agent, the Issuing Bank or the Lenders or on their behalf and shall continue in full force and effect so long as any Obligation is outstanding and unpaid and so long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute representations and warranties by the applicable Credit Party hereunder.

SECTION 13.3        Successors and Assigns; Syndications; Loan Sales; Participations.

(a)             Whenever in this Credit Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; provided, however, that no Credit Party may assign its rights or obligations hereunder without the prior

 180

 

written consent of the Administrative Agent, the Issuing Bank and all of the Lenders, and all covenants, promises and agreements by or on behalf of any of the Credit Parties which are contained in this Credit Agreement shall inure to the benefit of the successors and assigns of the Administrative Agent, the Issuing Bank and the Lenders; provided, further, that no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) and (c) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (g) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (k) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).

(b)            Each of the Lenders may (but only with (x) the prior written consent of the Administrative Agent and the Issuing Bank (not to be unreasonably withheld or delayed) and (y) so long as no Default or Event of Default shall have occurred and be continuing, the prior written consent of the Borrower (not to be unreasonably withheld or delayed; provided, that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after the Borrower’s receipt of written notice thereof), assign all or a portion of its interests, rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Commitment and the same portion of all Loans at the time owing to it, the Notes held by it (if any) and its rights and obligations with regard to any Letters of Credit; provided, however, that (i) each assignment shall be of a constant, and not a varying, percentage of the assigning Lender’s interests, rights and obligations under this Credit Agreement, (ii) each assignment shall be in a minimum Commitment amount equal to the lesser of $5,000,000 and such assigning Lender’s entire Commitment, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Assumption (or to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to a Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants), together with the assigning Lender’s original Note (if any) and a processing and recordation fee of $3,500 to be paid to the Administrative Agent by the assigning Lender or the assignee and (iv) no such assignment shall be effective until and unless recorded in the Register. In connection with any such assignment by a Lender that is a Defaulting Lender, no such assignment shall be effective unless and until, in addition to the other conditions set forth in this Section 13.3, the parties to such assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable Pro Rata Share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee or assignor hereby irrevocably consent), (I) to pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the Issuing Bank and each Lender (and interest accrued thereon), and (II) to acquire (and fund as appropriate) its full Pro Rata Share of all Loans in accordance with its Percentage. Notwithstanding the foregoing, in the event that any such assignment by a Lender that is a Defaulting Lender shall become effective under Applicable Law without compliance with the provisions of this clause (b), then the assignee shall be deemed to be a Defaulting Lender for all

 181

 

purposes of this Credit Agreement until such compliance occurs. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Assumption (or to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to a Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants), which effective date shall not (unless otherwise agreed to by the Administrative Agent) be earlier than five (5) Business Days after the date of acceptance and recording by the Administrative Agent, (x) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Assumption, have the rights and obligations of a Lender hereunder and under the other Fundamental Documents and shall be bound by the provisions hereof and thereof, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Assumption, relinquish its rights and be released from its obligations under this Credit Agreement except that, notwithstanding such assignment, (1) any rights and remedies available to the Borrower for any breaches by such assigning Lender of its obligations hereunder while a Lender shall be preserved after such assignment and such Lender shall not be relieved of any liability to the Borrower due to any such breach and (2) except to the extent otherwise expressly agreed by the affected parties, no assignment by a Lender that is a Defaulting Lender will constitute a waiver or release of any claim of any party hereto arising from that Lender’s having been a Defaulting Lender. In the case of an Assignment and Assumption (or to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to a Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants) covering all or the remaining portion of the assigning Lender’s rights and obligations under this Credit Agreement, such assigning Lender shall cease to be a party hereto except as provided in Sections 2.9(b) and (c), 2.10, 2.13, 13.4 and 13.5.

(c)             Notwithstanding any provision herein otherwise requiring the consent of the Borrower, each Lender may at any time make an assignment of its interests, rights and obligations under this Credit Agreement without the consent of the Borrower, to (i) any Affiliate of such Lender, (ii) any Person, or Affiliate of a Person that manages such Lender (a “Related Fund”), or (iii) any other Lender hereunder. None of the foregoing assignments shall be subject to the requirement of Section 13.3(b) that the amount of the Commitment (or Loans or L/C Exposure, if applicable) of the assigning Lender subject to each assignment be in a minimum principal amount of the lesser of $5,000,000 and such assigning Lender’s entire Commitment, and any such assignment to any Affiliate of the assigning Lender shall not release the assigning Lender of its remaining obligations hereunder, if any. All assignments pursuant to this Section 13.3(c) shall be subject to all other requirements of this Section.

(d)            By executing and delivering an Assignment and Assumption (or to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to a Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants), the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that (x) it is the legal and beneficial owner of the interest being assigned thereby, (y) such interest is free and clear of any Lien, encumbrance or other adverse claim, and (z) it has full power and authority, and has taken all action necessary, to execute and deliver such Assignment and Assumption and to consummate the transactions contemplated

 182

 

thereby, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or any other Fundamental Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Fundamental Documents or any other instrument or document furnished pursuant thereto or any collateral thereunder, (ii) such assignor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or Affiliates, or any other Person obligated in respect of any Fundamental Document, or the performance or observance by the Borrower, any of its Subsidiaries or Affiliates, or any other Person of any of their respective obligations under the Fundamental Documents or any other instrument or document furnished pursuant thereto, (iii) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Sections 5.1(a) and (b) (or, if no such financial statements shall have theretofore been delivered, then a copy of the financial statements referred to in Section 3.5) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption and to purchase the interest being assigned thereby on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent, the Issuing Bank or any Lender, (iv) such assignee agrees that it will, independently and without reliance upon the assigning Lender, the Administrative Agent, the Issuing Bank or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement or any other Fundamental Document, (v) such assignee appoints and authorizes the Administrative Agent to take such action as the agent on its behalf and to exercise such powers under this Credit Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will be bound by the provisions of this Credit Agreement and will perform in accordance with their terms all of the obligations which by the terms of this Credit Agreement are required to be performed by it as a Lender.

(e)             The Administrative Agent (acting for this purpose on behalf of the Borrower in a non-fiduciary capacity) shall maintain at its address at which notices are to be given to it pursuant to Section 13.1 a copy of each Assignment and Assumption (or to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to a Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants) and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount (and stated interest) of the Loans owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive, in the absence of manifest error, and the Credit Parties, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of the Fundamental Documents. The Register shall be available for inspection by any Credit Party, the Issuing Bank or any Lender at any reasonable time and from time to time upon reasonable prior notice.

(f)             Subject to the foregoing, upon its receipt of an Assignment and Assumption (or to the extent applicable, an agreement incorporating an Assignment and

 183

 

Assumption by reference pursuant to a Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants) executed by an assigning Lender and an assignee together with the assigning Lender’s original Note, if applicable, and the processing and recordation fee, the Administrative Agent shall, if such Assignment and Assumption has been completed, is in the form of Exhibit K, and has been consented to in writing by the Administrative Agent, the Issuing Bank and, to the extent applicable, the Borrower, (i) accept such Assignment and Assumption, and (ii) record the information contained therein in the Register. Within five (5) Business Days after receipt of any such notice, the Borrower shall, at its own expense, and if the assignee has so requested, execute and deliver to the Administrative Agent, in exchange for the surrendered Note (if any), a new Note to the order of such assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Assumption and if the assigning Lender has retained a Commitment hereunder and so requests, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Any new Notes shall be in substantially the form of Exhibit A. In addition, the Credit Parties will promptly, at their own expense, execute such amendments to the Fundamental Documents to which each is a party and such additional documents, and take such other actions as the Administrative Agent or the assignee Lender may reasonably request in order to give such assignee Lender the full benefit of the Liens contemplated by the Fundamental Documents.

(g)            Each of the Lenders may, without the consent of any of the Credit Parties, the Administrative Agent, the Issuing Bank or the other Lenders, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Commitment and the Loans owing to it and the Note (if any) held by it); provided, however, that (i) such Lender’s obligations under this Credit Agreement shall remain unchanged, (ii) such participant shall not be granted any voting rights or any right to control the vote of such Lender under this Credit Agreement, except with respect to proposed changes to interest rates, amount of Commitments, final maturity of any Loan, fees and releases of all or substantially all the Collateral (in each case, only as applicable to such participant), (iii) any such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) the participating banks or other entities shall be entitled to the cost protection provisions contained in Sections 2.9, 2.10, 2.11 and 2.13 (subject to the limitations of this Section 13.3(g)) but a participant shall not be entitled to receive pursuant to such provisions an amount larger than its share of the amount to which the Lender granting such participation would have been entitled to receive, and (v) the Credit Parties, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s and its participants’ rights and obligations under this Credit Agreement. No holder of a participating interest shall be entitled to the benefits of Section 2.13 unless the Borrower is notified of the participation sold to such holder and such holder agrees, for the benefit of the Borrower, to be subject to and comply with Section 2.10(e) and Section 2.13(g) as though it were a Lender (it being understood that the documentation required under Section 2.13(g) shall be delivered to the participating Lender). Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 13.10(b) with respect to any participant. Each of the Credit Parties and the Lenders, in each case on behalf of themselves and their affiliates, agree that the Administrative Agent shall have no liability for any participations made to an Ineligible Assignee.

 184

 

(h)            The applicable Lender, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain a register on which it enters the name and address of each participant to which such Lender has sold participating interests and the amount of each participant’s interest in such Lender’s rights and/or obligations under this Credit Agreement (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Credit Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(i)              A Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 13.3, disclose to the assignee or participant or proposed assignee or participant, any information relating to any Credit Party furnished to the Administrative Agent or such Lender by or on behalf of the Borrower or another Credit Party (provided, that such proposed assignee or participant agrees to hold such information confidential in accordance with Section 13.18).

(j)              Any assignment pursuant to Section 13.3(b) or (c) shall constitute an amendment of the Schedule of Commitments as of the effective date of such assignment without any other further action required.

(k)            The Credit Parties consent that any Lender may at any time and from time to time pledge or otherwise grant a security interest in any Loan or in any Note evidencing the Loans (or any part thereof) to secure obligations of such Lender, including any pledge or collateral assignment to secure obligations to a Federal Reserve Bank and any pledge to a trustee as security for the benefit of the noteholders and other securityholders or creditors of a Lender; provided, that no such pledge or grant of a security interest shall release such Lender from any of its obligations hereunder or substitute any such pledgee or creditor for such Lender as a party hereto until the provisions of this Section 13.3 regarding assignment are satisfied with respect to such pledge or security interest grant.

(l)              Notwithstanding anything to the contrary set forth herein, no assignment may be made pursuant to this Section 13.3 to an Ineligible Assignee.

SECTION 13.4        Expenses; Documentary Taxes. Whether or not the transactions hereby contemplated shall be consummated, the Borrower agrees to pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, the Arrangers and the Bookrunners in connection with, or growing out of, the performance of due diligence, the syndication of the Facility, the negotiation, preparation, execution, delivery, waiver or modification and administration of this Credit Agreement and any other documentation contemplated hereby, the making of the Loans, the issuance of Letters of Credit, the Collateral, the Pledged Securities or any Fundamental Document, including, but not limited to, the reasonable and documented out-of-pocket costs and charges of accountants and audit or field

 185

 

examinations of the Administrative Agent, in connection with the administration of this Credit Agreement, the verification of financial data and the transactions contemplated hereby, and the reasonable and documented fees and disbursements of Morgan, Lewis & Bockius, LLP, counsel for the Administrative Agent, and one local counsel in each applicable jurisdiction that the Administrative Agent shall retain, and (ii) all out-of-pocket expenses incurred by the Administrative Agent in the enforcement or protection (as distinguished from administration) of the rights and remedies of the Lenders or any participant in connection with this Credit Agreement, the Notes, the Letters of Credit or the other Fundamental Documents, or as a result of any transaction, action or non-action arising from any of the foregoing, including, but not limited to, the fees and disbursements of any counsel for the Administrative Agent. Such payments shall be made on the date this Credit Agreement is executed by the Borrower and thereafter on demand. The Borrower agrees that it shall indemnify the Administrative Agent, the Issuing Bank and the Lenders from and hold them harmless against any documentary Taxes, assessments or charges made by any Governmental Authority by reason of the execution and delivery of this Credit Agreement or the Notes or the issuance of any Letters of Credit. The obligations of the Borrower under this Section 13.4 shall survive the termination of this Credit Agreement, the payment of the Loans, the reimbursement of all L/C Exposure and the termination of any Swap Agreement.

SECTION 13.5        Indemnity. The Credit Parties agree to indemnify and hold harmless the Administrative Agent, the Issuing Bank, the Arrangers, the Bookrunners and the Lenders and their respective directors, officers, employees and agents (each an “Indemnified Party”) (to the full extent permitted by Applicable Law) from and against any and all claims, demands, losses, judgments, damages and liabilities (including liabilities for penalties) incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not any such Indemnified Party is a party thereto) related to the entering into and/or performance of any Fundamental Document or the use of the proceeds of any Loans or Letters of Credit hereunder or the consummation of the transactions contemplated in any Fundamental Document, including, without limitation, the fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding (i) any such claims, demands, losses, judgments, damages or liabilities of an Indemnified Party to the extent they are found to have been incurred by reason solely of the gross negligence or willful misconduct of such Indemnified Party, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required, (ii) litigation solely between a Credit Party or Credit Parties, on the one hand, and the Administrative Agent, the Issuing Bank or the Lenders, on the other hand, in connection with this Credit Agreement or the other Fundamental Documents or in any way relating to the transactions contemplated hereby or thereby if, after final non-appealable judgment, such Credit Party or Credit Parties is/are the prevailing party or parties in such litigation and (iii) litigation among the Lenders, or between any of the Indemnified Parties in connection with this Credit Agreement, the Fundamental Documents, or in any way relating to the transactions contemplated hereby or thereby that is not based on action or inaction of a Credit Party or one of its Affiliates). If any proceeding, including any governmental investigation, shall be instituted involving any Indemnified Party, in respect of which indemnity may be sought against the Credit Parties, such Indemnified Party shall promptly notify the Borrower in writing. The foregoing indemnity agreement includes any

 186

 

out-of-pocket costs incurred by an Indemnified Party in connection with any action or proceeding in connection with which any officer or employee of the Administrative Agent, the Issuing Bank, the Arrangers, the Bookrunners or the Lenders is called as a witness or deponent, including, but not limited to, the reasonable fees and disbursements of Morgan, Lewis & Bockius LLP, counsel to the Administrative Agent, the Arrangers and the Bookrunners and any reasonable out-of-pocket costs incurred by the Administrative Agent, the Issuing Bank, the Arrangers, the Bookrunners or the Lenders in appearing as a witness or deponent or in otherwise complying with legal process served upon them. The obligations of the Credit Parties under this Section 13.5 shall survive the termination of this Credit Agreement, the payment of the Loans, the reimbursement of all L/C Exposure, and the termination of any Swap Agreement, and shall inure to the benefit of any Person who was a Lender notwithstanding such Person’s assignment of all of its Loans, L/C Exposure and Commitment hereunder.

If a Credit Party shall fail to do any act or thing which it has covenanted to do hereunder or under any other Fundamental Document, or any representation or warranty of a Credit Party shall be breached, the Administrative Agent may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach and there shall be added to the Obligations hereunder the cost or expense incurred by the Administrative Agent in so doing, and any and all amounts expended by the Administrative Agent in taking any such action shall be repayable to it upon its demand therefor and shall bear interest at a rate per annum of 2.00% in excess of the rate then in effect for Alternate Base Rate Loans from time to time in effect from the date advanced to the date of repayment.

This Section 13.5 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages or liabilities arising from any non-Tax claim.

SECTION 13.6        CHOICE OF LAW. THIS CREDIT AGREEMENT AND THE NOTES SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS RELATING TO INTEREST RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL STANDBY PRACTICES 1998 OF THE INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER 590 (THE “UNIFORM CUSTOMS”) AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

SECTION 13.7        WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT OR THE

 187

 

SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THE PROVISIONS OF THIS SECTION 13.7 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELY IN ENTERING INTO THIS CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13.7 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY PARTY HERETO TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

SECTION 13.8        WAIVER WITH RESPECT TO DAMAGES. EACH CREDIT PARTY ACKNOWLEDGES THAT NONE OF THE ADMINISTRATIVE AGENT, THE ARRANGERS, THE BOOKRUNNERS, THE ISSUING BANK OR ANY LENDER HAS ANY FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, ANY CREDIT PARTY ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT AND THE RELATIONSHIP BETWEEN THE ADMINISTRATIVE AGENT, THE ARRANGERS, THE BOOKRUNNERS, THE ISSUING BANK AND THE LENDERS, ON THE ONE HAND, AND THE CREDIT PARTIES, ON THE OTHER HAND, IN CONNECTION THEREWITH IS SOLELY THAT OF CREDITOR AND DEBTOR. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO CREDIT PARTY SHALL ASSERT, AND EACH CREDIT PARTY HEREBY WAIVES, ANY CLAIMS AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGERS, THE BOOKRUNNERS, THE ISSUING BANK AND THE LENDERS ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS CREDIT AGREEMENT, ANY OTHER FUNDAMENTAL DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

SECTION 13.9        No Waiver. No failure on the part of the Administrative Agent, the Issuing Bank or any Lender to exercise, and no delay in exercising, any right, power or remedy hereunder, under the Notes or any other Fundamental Document or with regard to Letters of Credit shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

SECTION 13.10    Amendments, etc.

(a)             Subject to adjustments as provided in Section 2.15 and except as otherwise expressly provided herein (including, without limitation, in Section 13.3(j)), no modification, amendment or waiver of any provision of this Credit Agreement, and no consent to any departure by a Credit Party herefrom, shall in any event be effective unless the same shall be in writing and signed by either the Administrative Agent and the Required Lenders (or such other Lenders as required in the proviso below), or the Administrative Agent with the consent of the Required Lenders (or such other Lenders as required in the proviso below), and

 188

 

acknowledged and agreed to by the Borrower and the Guarantors, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (i) no such modification, amendment, waiver or consent shall, without the written consent of: (x) each affected Lender, (A) change the Commitment of such Lender or postpone the scheduled date of expiration thereof, (B) reduce the interest payable on such Lender’s Loans or change the definition of “Applicable Margin” in any manner which results in a reduction of the interest payable on such Lender’s Loans, (C) alter the principal amount of any Loan, (D) reduce the rate at which the Commitment Fees are payable to such Lender or the fees payable with respect to Letters of Credit issued hereunder as set forth in Section 2.17(h), or (E) delay the fixed scheduled maturity of any payment required to be made under this Credit Agreement or reduce the amount thereof; (y) all Lenders, (A) amend or modify any provision of this Credit Agreement which provides for the unanimous consent or approval of the Lenders, (B) release any material amount of Collateral (except as contemplated herein) or any of the Pledged Securities (in each case, except as contemplated herein) or release any Guarantor or any Pledgor from its obligations hereunder (in each case, except as contemplated herein), (C) subordinate the Obligations hereunder to other Indebtedness or subordinate the Liens of the Administrative Agent in the Collateral except as expressly contemplated hereunder or as permitted by Section 12.1, (D) amend the definitions of “Required Lenders” or “Supermajority Lenders” to decrease the percentage of Lenders referred to therein, (F) materially amend the definition of “Collateral” to delete assets therefrom, (G) change Sections 2.12, 12.2 or 12.3 in a manner that would alter the pro rata sharing of payments required thereby or (H) amend or modify this Section 13.10(a), and (z) the Supermajority Lenders, increase the advance rates of any components of, or add any new components to, the Borrowing Base (or amend the definition of Borrowing Base (or any defined terms contained therein) that would have the effect of the foregoing), subject in each case to the terms of Section 2.16, (ii) no such modification, amendment, waiver or consent shall amend Section 2.2 without the written consent of the Administrative Agent, (iii) no such modification, amendment, waiver or consent shall amend or modify the provisions of Section 2.15 or the definition of “Defaulting Lender” herein without the prior written consent of the Administrative Agent, the Issuing Bank and all the Lenders and (iv) no modification, amendment, waiver or consent shall without the written consent of the Administrative Agent and the Required Lenders modify the “Post-Default Waterfall” described in the Senior Intercreditor Agreement in a manner that is detrimental to the Lenders. No amendment, modification, waiver or consent may adversely affect the rights and obligations of the Administrative Agent or the Issuing Bank hereunder without its prior written consent (including, in the case of the Issuing Bank, any waiver of an Event of Default for the purpose of entitling the Borrower to request the issuance of a Letter of Credit). No notice to or demand on any of the Credit Parties shall entitle such Credit Party to any other or further notice or demand in the same, similar or other circumstances. Each holder of a Note shall be bound by any amendment, modification, waiver or consent authorized as provided herein, whether or not such Note shall have been marked to indicate such amendment, modification, waiver or consent and any consent by any holder of such Note shall bind any Person subsequently acquiring such Note, whether or not such Note is so marked.

(b)            If any Lender (i) requests compensation under Sections 2.7(b), 2.10 or 2.13, or (ii) becomes a Defaulting Lender, or (iii) does not consent to any waiver, consent or modification requested by the Borrower (but only where the consent of all the Lenders or each

 189

 

affected Lender is required for such waiver, consent or modification and the Borrower obtains approval for the waiver, consent or modification from Lenders holding at least 75% of the Total Commitments), then the Borrower may, at its sole expense and effort and upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 13.3), all of its interests, rights and obligations under this Credit Agreement and the other Fundamental Documents to an assignee which shall assume such obligations and which accepts such assignment; provided, that (w) the Borrower shall have received the prior written consent of the Administrative Agent and the Issuing Bank, in their sole discretion, (x) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees, and all other amounts then payable to it hereunder from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and a release of its liability with regard to its Pro Rata Share of the L/C Exposure, and if it was a Defaulting Lender, such assignee (A) shall have paid an amount necessary to remedy the matters that caused such assignor to become a Defaulting Lender (which amount shall be reallocated among the non-Defaulting Lenders) and (B) shall have assumed a participation in the L/C Exposure that was reallocated to the non-Defaulting Lenders as a result of such assignor’s status as a Defaulting Lender, (y) in the case of any such assignment resulting from a claim for compensation under Section 2.10 or payments required to be made pursuant to Sections 2.7(b) or 2.13, such assignment will result in a reduction in such compensation or payment on an ongoing basis and (z) in the case of any such assignment by a non-consenting Lender, the assignee consents to the proposed waiver, consent or modification. No Lender shall be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

(c)             Subject to compliance with the procedures described in Sections 12.1(b)(xii) and (xiii) hereof, the Total Commitments may be increased subsequent to the Closing Date in accordance with the requirements of Section 2.18, provided, that the Total Commitments after such increase do not exceed $600,000,000.

SECTION 13.11    Severability. Any provision of this Credit Agreement or of the Notes which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof, and any such invalidity, illegality or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 13.12    SERVICE OF PROCESS; SUBMISSION TO JURISDICTION. EACH PARTY HERETO (EACH A “SUBMITTING PARTY”) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT AND THE SUBJECT MATTER THEREOF. EACH

 190

 

SUBMITTING PARTY TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, THE OTHER FUNDAMENTAL DOCUMENTS OR THE SUBJECT MATTER THEREOF (AS APPLICABLE) MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE ADMINISTRATIVE AGENT, THE ISSUING BANK OR A LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER. EACH SUBMITTING PARTY HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TO IT PURSUANT TO SECTION 13.1. EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE OTHER PARTIES HERETO. FINAL JUDGMENT AGAINST ANY SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF THE CREDIT PARTY THEREIN DESCRIBED, OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE AGENT, THE ISSUING BANK OR A LENDER MAY, AT ITS OPTION, BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST A SUBMITTING PARTY OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OF AMERICA OR OF ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.

SECTION 13.13    Headings. Section headings used herein and the Table of Contents are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Credit Agreement.

SECTION 13.14    Execution in Counterparts. This Credit Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Credit Agreement by facsimile or by electronic transmission shall be equally effective as delivery of a manually executed counterpart of this Credit Agreement. Any party delivering an executed counterpart of this Credit Agreement by facsimile or by electronic transmission shall also deliver a manually executed counterpart of this Credit Agreement, but failure to do so shall

 191

 

not affect the validity, enforceability or binding effect of this Credit Agreement, and the parties hereby waive any right they may have to object to such treatment. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Credit Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Administrative Agent to accept electronic signatures in any form or format without its prior written consent.

SECTION 13.15    Subordination of Inter-company Indebtedness, Receivables and Advances.

(a)             Each Credit Party hereby agrees that any inter-company Indebtedness or other inter-company receivables or inter-company advances of any other Credit Party, directly or indirectly, in favor of such Credit Party of whatever nature at any time outstanding shall be completely subordinate in right of payment to the prior payment in full of the Obligations, and that no payment on any such Indebtedness, receivable or advance shall be made except (i) inter-company receivables and inter-company advances permitted pursuant to Article 6 may be repaid and inter-company Indebtedness permitted pursuant to Article 6 may be repaid, in each case so long as no Default or Event of Default shall have occurred and be continuing, and (ii) as specifically consented to by all the Lenders in writing, until the prior payment in full of all the Obligations (other than the Unasserted Contingent Obligations) and termination of the Commitments.

(b)            If any payment on any such Indebtedness shall be received by such Credit Party other than as permitted by Section 13.15(a) before payment in full of all Obligations (other than the Unasserted Contingent Obligations) and termination of the Commitments, such Credit Party shall receive such payments and hold the same in trust for, segregate the same from its own assets and shall immediately pay over to, the Administrative Agent (on behalf of the Secured Parties) all such sums to the extent necessary so that the Administrative Agent, the Issuing Bank and the Lenders shall have been paid all Obligations owed or which may become owing.

SECTION 13.16    USA Patriot Act. Each Lender hereby notifies each of the Credit Parties that, pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies such Person, which information includes the name and address of each such Person and other information that will allow such Lender to identify such Person in accordance with the USA Patriot Act.

SECTION 13.17    Entire Agreement. This Credit Agreement (including the Schedules and Exhibits hereto) represents the entire agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between any of the parties hereto (other than any fee letter) prior to the execution of this Credit Agreement

 192

 

which relate to Loans to be made hereunder and the Letters of Credit to be issued hereunder shall be replaced by the terms of this Credit Agreement.

SECTION 13.18    Confidentiality. Each of the Administrative Agent, the Issuing Bank and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority (including any self-regulatory authority), (c) to the extent required by Applicable Law or by any subpoena or similar legal process, (d) to any other party to this Credit Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Credit Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 13.18, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Credit Agreement, or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower, (h) any information pertaining to this Credit Agreement routinely provided by arrangers to data service providers, including league table providers, in each case, that customarily serve the lending industry, or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section 13.18, or (y) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis from a source other than a Credit Party that is not actually known by the recipient to have breached a binding confidentiality agreement by having remitted such Information. For the purposes of this Section 13.18, “Information” means all information received from any Credit Party relating to any Credit Party or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a non-confidential basis prior to disclosure by such Credit Party. Any Person required to maintain the confidentiality of Information as provided in this Section 13.18 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. The commitments under this Section 13.18 shall terminate two (2) years after the termination of the Facility or, if earlier, with respect to a particular Lender or other Secured Party, the date which is two (2) years from the date on which such Person ceases to be a party to this Credit Agreement or a swap provider to a Lender (including the Administrative Agent).

Each Lender is aware and acknowledges, and will advise its representatives that, the securities laws of certain jurisdictions, including the United States of America, prohibit any person who has received material, non-public information regarding the Parent, the Borrower or its Subsidiaries from purchasing or selling securities of the Parent, the Borrower or its Subsidiaries or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.

SECTION 13.19    Platform; Materials. The Credit Parties hereby acknowledge that (a) the Administrative Agent and the Arrangers will make available to the Lenders and the Issuing Bank materials and/or information provided by or on behalf of the Credit Parties hereunder (collectively, “Materials”) by posting the Materials on Debt Domain, IntraLinks, Syndtrak or another similar electronic system (the “Platform”), and (b) certain of the Lenders may be

 193

 

“public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Credit Parties or their securities) (each, a “Public Lender”). The Credit Parties hereby agree that, upon request by the Administrative Agent, they will use commercially reasonable efforts to identify that portion of the Materials that may be distributed to the Public Lenders and that (i) all such Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof, (ii) by marking Materials “PUBLIC,” the Credit Parties shall be deemed to have authorized the Administrative Agent, the Issuing Bank, the Arrangers and the Lenders to treat such Materials as either publicly available information or not material information (although it may be sensitive and proprietary) with respect to the Credit Parties or their respective securities for purposes of United States Federal and state securities laws, (iii) all Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor,” and (iv) the Administrative Agent and the Arrangers shall be entitled to treat any Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”

SECTION 13.20    Intercreditor Agreement. The exercise of remedies by the Administrative Agent and the Lenders are subject to the terms of the Senior Intercreditor Agreement. To the extent that there is any conflict between the terms of this Credit Agreement and the terms of the Senior Intercreditor Agreement, the Senior Intercreditor Agreement shall govern.

SECTION 13.21    Acknowledgment and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Fundamental Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Fundamental Document may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a)             the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(b)            the effects of any Bail-In Action on any such liability, including, if applicable:

(i)              a reduction in full or in part or cancellation of any such liability;

(ii)            a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Credit Agreement or any other Fundamental Document; or

(iii)          the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

 194

 

SECTION 13.22    Effect of Amendment and Restatement of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement.

(a)             On the Second Amendment and Restatement Effective Date, the Borrower shall remit to the lenders under the Existing Corporate Facility Agreement and the Existing Production Facility Agreement all accrued and unpaid Commitment Fees (as defined in the Existing Corporate Facility Agreement and the Existing Production Facility Agreement) under the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, in the manner set forth therein, as applicable.

(b)            On the Second Amendment and Restatement Effective Date, the Existing Corporate Facility Agreement and the Existing Production Facility Agreement shall each be amended, restated and superseded in their entirety. The parties hereto acknowledge and agree that (i) this Credit Agreement and the other documents entered into in connection herewith do not constitute a novation, payment and reborrowing, or termination of the “Obligations” (as defined in the Existing Corporate Facility Agreement or the Existing Production Facility Agreement, as applicable) under the Existing Corporate Facility Agreement or the Existing Production Facility Agreement, as applicable, as in effect prior to the Second Amendment and Restatement Effective Date and (ii) such “Obligations” are in all respects continuing (as amended and restated hereby) as indebtedness and obligations outstanding under this Credit Agreement.

(c)             [Reserved]

(d)            Each Fundamental Document (as defined in the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, as applicable) shall continue to be in full force and effect and is hereby ratified and confirmed in all respects, except that, from and after the Second Amendment and Restatement Effective Date, each reference in any such Fundamental Document to the “Credit Agreement”, “thereunder”, “thereof” or words of like import shall be deemed to mean references to this amended and restated Credit Agreement. Each Credit Party hereby (i) reaffirms each of its commitments in any such Fundamental Document, (ii) reaffirms each guarantee, pledge and grant of a security interest made in favor of the Administrative Agent under or in connection with the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, as applicable, and any Fundamental Documents entered into in connection therewith and agrees that notwithstanding the amendment and restatement of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement, such guarantees, pledges and grants in favor of the Administrative Agent shall continue in full force and effect.

[Signature Pages Follow]

 195

 

IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed as of the day and the year first above written.

BORROWER:

STX FINANCING, LLC

By: /s/ Noah Fogelson_______________________

Name:

Title:

 

 

PARENT, FOR PURPOSES OF SECTIONS

6.27 AND 6.29 AND ARTICLE 10 HEREOF

ONLY:

 

STX FILMWORKS, INC.

 

 

By: /s/ Noah Fogelson_______________________

Name:

Title:

[Signature Page to Credit Agreement]

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX MUSIC PUBLISHING, LLC

STX MUSIC, LLC

STX PRODUCTIONS, LLC

STX RECORDINGS, LLC

SURREAL, INC.

STX TV, INC.

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

FSO JONES, LLC

STX LOUISIANA, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name

Title:

 

[Signature Page to Credit Agreement]

 

 

STX ENTERTAINMENT UK, LTD.

By: /s/ Noah Fogelson____________________

Name:

Title:

 

[Signature Page to Credit Agreement]

 

 

 

LENDERS:

JPMORGAN CHASE BANK, N.A., as Administrative Agent, Issuing Bank and Lender

By: /s/ Patrick J. Minnick_______________________

Name: Patrick J. Minnick

Title: Vice President

[Signature Page to Credit Agreement]

 

 

BANK OF AMERICA, N.A., as Lender

By: /s/ Sharad C. Bhatt_______________________

Name: Sharad C. Bhatt

Title: Senior Vice President

Branch where Loans are booked: Los Angeles, CA

 

[Signature Page to Credit Agreement]

 

MUFG Union Bank, N.A., as Lender

By: /s/ Bryan LaCour_______________________

Bryan LaCour

Managing Director

 

[Signature Page to Credit Agreement]

 

East West Bank, as Lender

By: /s/ Jodi Chong_______________________

Name: Jodi Chong

Title: Vice President

Branch where Loans are Booked:

[Signature Page to Credit Agreement]

 

CIT Bank, N.A., as Lender

By: /s/ Daisy Stall_______________________

Name: Daisy Stall

Title: Managing Director

[Signature Page to Credit Agreement]

 

Comerica Bank as Lender

By: /s/ Adam J. Korn_______________________

Name: Adam J. Korn

Title: Vice President and AGM

Branch where Loans are booked: Century City

[Signature Page to Credit Agreement]

 

First Republic Bank, as Lender

By: /s/ Charles Heaphy_______________________

Name: Charles Heaphy

Title: Senior Managing Director

Branch where Loans are booked:

1888 Century Park East

Los Angeles, Ca 90064

[Signature Page to Credit Agreement]

 

CITY NATIONAL BANK, as Lender

By: /s/ Norman B. Starr______________________

Name: Norman B. Starr

Title: Senior Vice President

Branch where Loans are booked:

[Signature Page to Credit Agreement]

 

Bank Hapoalim B.M., as Lender

By: /s/ Lenroy Hackett_______________________

Name: Lenroy Hackett

Title: Senior Vice President

 

Bank Hapoalim B.M., as Lender

 

 

By: /s/ Martin Greenberg_____________________

Name: Martin Greenberg

Title: Senior Vice President, Deputy Chief Credit Officer, Head of Asset Based Lending

 

Branch where Loans are booked:

 

1177 Avenue of Americas

New York, NY 10036

 

[Signature Page to Credit Agreement]

 

Emigrant Bank, as Lender

By: /s/ John R. Hart_______________________

Name: John R. Hart

Title: Vice Chairman

Branch where Loans are booked:

5 East 42nd Street – New York, NY 1007

 

 

 

[Signature Page to Credit Agreement]

 

SCHEDULE 1.1

Schedule of Commitments

 

Lenders Commitment
JPMorgan Chase Bank, N.A. $51,000,000
Bank of America, N.A. $51,000,000
MUFG Union Bank, N.A. $51,000,000
East West Bank $51,000,000
CIT Bank, N.A. $45,000,000
Comerica Bank $40,000,000
City National Bank $34,500,000
First Republic Bank $32,500,000
Bank Hapoalim B.M. $24,500,000
Emigrant Bank $19,500,000
TOTAL: $400,000,000

 

Exhibit 10.6

AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

AMENDMENT NO. 1 dated as of June 2, 2017 (this “Amendment”) to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders and as Issuing Bank.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower has requested, and the Administrative Agent and the requisite Lenders (as described in Section 3 of this Amendment) have agreed, that the Credit Agreement be amended on the terms set forth herein in connection with the Europa Output Agreement (as defined below).

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.                  Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.                  Amendments to the Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as of the Effective Date (as defined below), as follows:

(a)                Section 1.2 of the Credit Agreement is amended by inserting the following terms in alphabetical order:

“Amendment No. 1” means that certain Amendment No. 1 to Second Amended and Restated Credit Agreement dated as of June 2, 2017.

"Amendment No. 1 Effective Date" means the “Effective Date” as defined in Amendment No. 1.

“EC Distribution” means EuropaCorp Distribution, LLC (f/k/a Relativity EuropaCorp Distribution, LLC).

“Europa” shall mean EuropaCorp Films USA, Inc. and any affiliates, successors and/or assigns thereof permitted pursuant to the terms of the Europa Output Agreement.

“Europa Film Guaranty Satisfaction Date” means:

 

(a) with respect to each Europa Picture (other than Valerian), the date on which the Credit Parties have received, from (i) P&A Recoupment Revenues and/or (ii) payments from Europa explicitly for the purpose of reimbursing the Credit Parties for the STX/EC P&A Breakeven Amount solely for such Picture, an amount equal to the STX/EC P&A Breakeven Amount for such Europa Picture; and

(b) with respect to Valerian, the date on which the Credit Parties have received, from (i) P&A Recoupment Revenues for Valerian and (ii) payments from Europa explicitly for the purpose of reimbursing the Credit Parties for the STX/EC P&A Breakeven Amount solely for Valerian, an amount equal to the sum of (A) the STX/EC P&A Breakeven Amount for Valerian minus (B) the STX Anticipated Europa Film Collections for Valerian.

Notwithstanding the foregoing, for purposes of clauses (a)(i) and (b)(i) of this definition, the P&A Recoupment Revenues shall be determined on a gross basis and shall not be reduced by any of the interest, fees, residuals, participations or non-P&A distribution expenses referred to in the definition of P&A Recoupment Revenues.

“Europa Film Theatrical Performance Percentage” shall mean, with respect to a Seasoned Europa Non-Valerian Picture , the lesser of (1) 35% and (2) the quotient (expressed as a percentage) of (a) the sum of (x) the P&A Recoupment Revenues for such Picture received on or before the Seasoning Date of such Picture plus (y) without duplication, the STX Anticipated Europa Film Collections for such Picture divided by (b) the lesser of (x) the Approved P&A Budget for such Picture and (y) $35,000,000.

“Europa Non-Valerian Picture” shall mean any Europa Picture other than Valerian.

“Europa Non-Valerian P&A Credit” shall have the meaning set forth in the definition of “Borrowing Base”.

“Europa Output Agreement” shall mean a collective reference to (a) that certain U.S. Co-Financing and Distribution Agreement dated as of June 2, 2017 between Borrower and Europa with respect to co-financing and U.S. distribution of Valerian and (b) that certain Distribution Services Agreement dated as of December 22, 2016 among Europa, EC Distribution and Borrower with respect to various other Europa Pictures (as the foregoing may be amended, supplemented, modified, renewed or replaced from time to time).

“Europa Output Documents” shall mean the Europa Output Agreement, together with any other agreements entered into by Europa, EC Distribution or a Credit Party in connection with the transactions contemplated thereunder.

2 

 

“Europa P&A Advance Rate” shall mean (x) for The Circle, 35% and (y) for any other Non-Valerian Europa Picture, initially, 35%, but if on the date that Europa initially funds print and advertising expenses towards a new Europa Non-Valerian P&A Picture (excluding for the avoidance of doubt, The Circle), the most recently released and Seasoned Europa Non-Valerian Picture had a Europa Film Theatrical Performance Percentage of less than 35%, then the Europa P&A Advance Rate shall be equal to the Europa Film Theatrical Performance Percentage of the preceding Seasoned Europa Non-Valerian Picture.

“Europa P&A Credit” shall have the meaning set forth in the definition of “Borrowing Base”.

“Europa Picture” shall mean Valerian and any other any motion picture produced or acquired by Europa and exploited or serviced by a Credit Party in accordance with the Europa Output Agreement. Europa Pictures shall constitute Pictures hereunder.

“Europa Rights Picture” shall mean any Europa Picture for which a Credit Party has received an irrevocable license of intellectual property rights from Europa. On the Amendment No. 1 Effective Date, Valerian shall be the only Europa Rights Picture, but any Europa Picture with a general theatrical release in the Territory (as defined in the Europa Output Agreement) on any date after the Rights Availability Date shall also be a Europa Rights Picture.

“Europa Servicing Picture” shall mean any Europa Picture for which a Credit Party is acting in a servicing capacity but does not hold a license of actual intellectual property rights serviced by such Credit Party.

“Europa Valerian P&A Credit” shall have the meaning set forth in the definition of “Borrowing Base”.

“P&A Recoupment Revenues” means, with respect to any Europa Picture, the proceeds received by a Credit Party directly from its sublicensees derived from the exploitation or servicing in the United States (plus other territories to the extent they constitute part of both the Territory as set forth in the relevant Europa Output Agreement and the Domestic Territory hereunder) by a Credit Party of such Picture, net of any interest, distribution or servicing fees, non-P&A distribution expenses, residuals or participations payable prior to the Europa Film Guaranty Satisfaction Date therefor to or retainable by a Credit Party with respect to any such proceeds in accordance with the Europa Output Agreement.

“Rights Availability Date” shall mean the date on which Europa agrees to grant a Credit Party rights in any future Europa Pictures thus having such future Europa Pictures constitute Europa Rights Pictures rather than Europa Servicing Pictures; provided, the Rights Availability Date shall not be deemed to occur until the date that Europa has in fact granted the Borrower exploitation rights in a Europa Picture.

3 

 

“STX Anticipated Europa Film Collections” shall mean for any Europa Picture, an amount equal to the total P&A Recoupment Revenues that are anticipated to be received by the Credit Parties after the Seasoning of such Picture, calculated on an ultimates basis in accordance with and as provided in the relevant Europa Output Agreement. The STX Anticipated Europa Film Collections shall be determined on or about the Seasoning Date of each Europa Rights Picture by Borrower’s delivery of a certificate delivered to the Administrative Agent and Europa. For the avoidance of doubt, for purposes of determining the Europa Film Guaranty Satisfaction Date pursuant to clause (b) of the definition thereof, the STX Anticipated Europa Film Collections shall only include anticipated revenues to be derived from Valerian from windows/media in which Borrower has received an irrevocable license of exploitation rights from Europa and shall not include any value attributable to claims against Europa for any portion of the revenues to be received by Europa from their exploitation of retained rights.

“STX P&A Credit” shall have the meaning set forth in the definition of “Borrowing Base.”

“STX Qualifying Picture” means any Qualifying Picture that is not a Europa Picture.

“STX/EC P&A Breakeven Amount” means, with respect to a Europa Picture, the amount equal to such Picture’s STX/EC P&A Contribution plus (in each case to the extent earned or accrued on or prior to the date of calculation): interest thereon computed in the manner set forth in the Europa Output Agreement, any residuals, participations and non-P&A distribution expenses paid or payable by the Credit Parties on account of STX’s servicing of such Picture; and STX’s distribution or servicing fee for such Picture.

“STX/EC P&A Contribution” means, with respect to a Europa Picture, the Credit Parties’ share of the Approved P&A Budget for such Picture.

“The Circle” means the motion picture currently entitled “The Circle.”

“Valerian” means the motion picture currently entitled “Valerian and the City of a Thousand Planets.”

(b)               Section 1.2 of the Credit Agreement is further amended replacing in its entirety the definition “Borrowing Base” with the following:

“Borrowing Base” shall mean, at any date for which the amount thereof is to be determined, an amount equal to the aggregate (without double counting) of the following:

(i)                 the P&A Advance Rate multiplied by the Credit Parties’ share of each STX Qualifying Picture’s Approved P&A Budget (the “STX P&A Credit”); provided that (A) the Borrowing Base credit under this clause (i) shall be capped at $30,000,000 for each STX Qualifying Picture and (B) the total amount ofP&A Credits in the Borrowing Base under this clause (i) and clauses (ii) and (iii) below, when added together, may not exceed $95,000,000 in the aggregate at any point in time, plus

4 

 

(ii)               the applicable Europa P&A Advance Rate multiplied by the gross Approved P&A Budget for each Europa Non-Valerian Picture that constitutes a Qualifying Picture (the “Europa Non-Valerian P&A Credit”); provided that (A) the aggregate Borrowing Base credit under this clause (ii) may not exceed $12,250,000 in the aggregate at any point in time and (B) an Europa P&A Credit may only be included in the Borrowing Base for one Europa Non-Valerian Picture at any time, plus

(iii)             75% of the gross Approved P&A Budget for Valerian (the “Valerian P&A Credit” and together with the Europa Non-Valerian P&A Credit, the “Europa P&A Credit”); provided that the Borrowing Base credit under this clause (iii) shall be capped at $45,000,000, plus

(iv)             the Ultimates Advance Rate multiplied by Remaining Ultimates, plus

(v)               the Unlicensed Free TV Ultimates Advance Rate multiplied by Unlicensed Free TV Ultimates; provided that aggregate the Borrowing Base credit under this clause (v) shall be capped at $20,000,000, plus

(vi)             (a) 100% of Eligible Receivables that are secured by an Acceptable L/C and (b) 100% (or such lower advance rate as shall be determined by the Administrative Agent in its reasonable discretion) of Eligible Receivables that are secured to the satisfaction of the Administrative Agent, and amounts owing to the Credit Parties in the Tang Escrow Account or the Huayi Escrow Account for which the Administrative Agent may make a draw request if the Borrower fails to do so, plus

(vii)           100% of Eligible Receivables from Approved Tier 1 Account Debtors, plus

(viii)         90% of Eligible Receivables from Approved Tier 2 Account Debtors, plus

(ix)             80% of Eligible Receivables from Approved Tier 3 Account Debtors, plus

(x)               50% of Eligible Receivables from Approved Tier 4 Account Debtors, plus

(xi)             50% of Eligible Receivables from other obligors not specified on Schedule 2.16 hereof; provided, that the aggregate amount of Borrowing Base credit under this clause (xi) shall at no time exceed (A) $500,000 for any single obligor or Affiliated Group or (B) $15,000,000 at any point in time, plus

5 

 

(xii)           90% of Tax Incentive Receivables for which all requirements of the definition thereof are satisfied and (B) 50% (or such higher advance rate as may be agreed by the Administrative Agent after consultation with the Lenders on a case-by-case basis) of other Eligible Receivables from sales of tax incentives or tax rebates from account debtors (other than Approved Tier 1 Account Debtors, Approved Tier 2 Account Debtors, Approved Tier 3 Account Debtors or Approved Tier 4 Account Debtors (for whom Eligible Receivables from sales of tax incentives or tax rebates would receive the relevant advance rates set forth in clauses (vii)-(ix) above)) acceptable to the Administrative Agent (and subject to any concentration limits imposed by the Administrative Agent) after consultation with the Lenders, plus

(xiii)         the Unsold Rights Credit for each applicable Qualifying Picture; provided, that (a) the Borrowing Base credit for any Qualifying Picture under this clause (xiii) shall at no time exceed the lesser of (1) 25% of the negative cost of such Qualifying Picture (without reference to any overhead fees) and (2) $8,500,000, (b) the aggregate amount of Borrowing Base credit under this clause (xi) shall at no time exceed 25% of the total Borrowing Base, and (c) the Borrowing Base credit for any Qualifying Picture under this clause (xiii) shall be reduced to zero upon the earlier of (x) eighteen (18) months following its initial inclusion in the Borrowing Base and (y) one hundred twenty (120) days following the Completion of such Qualifying Picture, plus

(xiv)         the Unsold TV Rights Credit for each applicable Program; provided, that (a) the Borrowing Base credit for any Program under this clause (xiv) shall at no time exceed the lesser of (1) 20% of the negative cost of such Program (without reference to any overhead fees) and (2) $10,000,000, (b) the aggregate amount of Borrowing Base credit under this clause (xii) shall at no time exceed 15% of the total Borrowing Base, (c) the aggregate amount of Borrowing Base credit under this clause (xii) and clause (xi) above shall at no time exceed 25% of the total Borrowing Base and (d) the Borrowing Base credit for any Program under this clause (xiv) shall be reduced to zero (x) upon the earlier of (i) twelve (12) months after the initially scheduled first airing in the United States of the first episode of the applicable season of such Program and (ii) nine (9) months following Completion of such Program (which for the avoidance of doubt shall treat all the episodes of a series for a relevant season as a single Program), and (y) with regard to any specific territory, the sale of that territory with respect to such Program.

(xv)           the aggregate amount of cash of the Credit Parties held in (A) blocked deposit accounts maintained at a Lender (pursuant to Account Control Agreements in favor of, and in form and substance satisfactory to, the Administrative Agent) or (B) blocked Cash Collateral Accounts, minus

(xvi)         the sum of the Reserves;

provided, however:

6 

 

(a)                Borrowing Base credit under the foregoing clauses (i) through (iii) shall only be available for Qualifying Pictures, and shall not be available for Revenue Participations (although P&A Credits may be taken for P&A Distribution Pictures as defined in clause (m) of this proviso in accordance with such clause (m)). Borrowing Base credit under the foregoing clause (xiii) shall only be available for STX Qualifying Pictures. Borrowing Base credit for Europa Pictures shall only be available under clauses (ii), (iii) and (iv), subject to the requirements in the case of clause (iv) that STX may only include Ultimates for Europa Rights Pictures (as opposed to Europa Servicing Pictures), and only to the extent attributable to any windows and media in which Borrower holds a license of rights (as opposed to merely provides services for), and after deducting any portion of the anticipated Borrower revenues that shall be payable by Borrower to Europa. For the avoidance of doubt, the Borrower shall not be prohibited from obtaining Borrowing Base credit for eligible contractual arrangements with Europa outside the Europa Output Agreement.

(b)               Borrowing Base credit under the foregoing clauses (iv) and (v) shall only be available for Pictures which are released theatrically.

(c)                All of the foregoing amounts are without duplication of any deductions contained within any of the components of the Borrowing Base and the amount of credit provided under any component of the Borrowing Base shall be reduced, prior to (except in the case of Borrowing Base credit under clauses (i), (ii), (iii), (xiii) and (xiv)) application of the applicable advance rate, dollar-for-dollar by any payments which a Credit Party is required to pay to any third party in respect of such receivable or credit (e.g., royalties, residuals, fees, commissions) and any other projected expenses of the Credit Parties arising in connection with such amounts (and including any amounts payable to the Seer P&A Facility Agent or any lender under the Seer P&A Facility Credit Agreement directly in connection with such anticipated proceeds (including for the avoidance of doubt, the mandatory principal prepayments and Profit Participation Fees (as defined in the Seer P&A Facility Credit Agreement and any other required application of such proceeds pursuant to the Senior Intercreditor Agreement);

(d)               The portion of the Borrowing Base attributable at any time to each Uncompleted Picture shall not exceed the portion of the negative cost or purchase price of such Picture (other than that provided by the Approved Completion Guarantor) which would be refunded to the Administrative Agent (for itself or on behalf of the Credit Parties) by the Approved Completion Guarantor or the Approved Domestic Distributor (excluding the Borrower for this purpose) and applied in accordance with the terms hereof if the Picture was then abandoned. The Borrowing Base attributable at any time to each Uncompleted Program shall not exceed the Credit Parties’ budgeted cost thereof.

7 

 

(e)                No Borrowing Base credit may be taken with respect to Remaining Ultimates for any Picture if the Administrative Agent has not received with respect thereto the related ultimates information as and when required under Section 5.1(k), and the Borrower must remove any Remaining Ultimates attributable to a Picture if the most recent underlying written ultimate report of the Ultimates Provider that has been delivered to the Administrative Agent was computed as of a date more than six months prior to the relevant date of determination.

(f)                No P&A Credit for a particular Picture shall be available unless (i) a P&A Reserve has been established with respect thereto, and (ii) the Borrower has provided a certification to the Administrative Agent in substantially the form attached hereto as Exhibit P as to the broad release pattern contemplated for such Picture, and with respect to Europa Pictures, the conditions set forth in Section 4.2(l) have been satisfied. The P&A Credit for a Picture will be reduced on a dollar-for-dollar basis as receipts from exploitation in the Domestic Territory are received by the Credit Parties with regard to the relevant Picture.

(g)               The P&A Credit for any Picture shall be reduced to zero upon the earlier of (i) the Seasoning Date of such Picture, (ii) the date that is six months from the date on which the P&A Credit for such Picture was first included in the Borrowing Base if such Picture has not been theatrically released in the Domestic Territory by such date, and (iii) solely with respect to a P&A Credit that is a Europa P&A Credit, the Europa Film Guaranty Satisfaction Date for such Europa Picture.

(h)               The STX P&A Credit shall not be available for any new Pictures if the Five Picture Rolling P&A Coverage Ratio has been determined to be less than 100% (other than for new Pictures for which STX P&A Credits had not previously been taken by the relevant date of determination but that are scheduled to be released theatrically domestically within six months of such determination date, for which the STX P&A Credit shall be available but at a 50% advance rate) until (if ever) the Five Picture Rolling P&A Coverage Ratio for five new Pictures (i.e. Pictures that were not included in any computation of the Five Picture Rolling P&A Coverage Ratio that yielded a percentage of less than 100%) exceeds 125%.

(i)                 To the extent any receivable included in the Borrowing Base is conditioned upon a general theatrical release of a Picture in the Domestic Territory, (i) (x) the Borrower shall self-release such Picture in the Domestic Territory or a Distribution Agreement for the Domestic Territory with another Approved Domestic Distributor shall have been entered into with respect to such Picture and (y) if applicable, such Picture shall meet, or be expected in good faith to meet, the requirements for distribution under the relevant Distribution Agreement for the Domestic Territory, or (ii) another Approved Domestic Distributor has committed to release such Picture in the Domestic Territory. A receivable under a contract requiring that a Picture be released theatrically in the

8 

 

Domestic Territory with minimum P&A Expenses may be included in the Borrowing Base only if: (i) the Borrower has established the P&A Reserve, and the Administrative Agent shall have received satisfactory evidence of establishment of such P&A Reserve; (ii) at all times prior to the general theatrical release date of such Picture in the Domestic Territory, (x) the receivable meets all of the other requirements of an Eligible Receivable and (y) the Borrower (if self-distributing) or other Approved Domestic Distributor (or, if it has the ability to instruct such Approved Domestic Distributor to do so, the Borrower (with respect to such other Approved Domestic Distributor’s distribution)) has committed to a release pattern that meets any such minimum requirements; and (iii) at all times thereafter, the general theatrical release of such Picture in the Domestic Territory actually satisfies such minimum requirements. In addition, any Approved Completion Bond relating to such Picture shall guarantee the delivery of any items which are a condition to such general theatrical release in the Domestic Territory under such Distribution Agreement (if applicable) and under any other Distribution Agreement for which Borrowing Base credit is requested. In addition, no receivable may be included in the Borrowing Base to the extent that it is conditioned upon a release in the Domestic Territory requiring any specific number of screens unless the Picture to which such receivable relates is being distributed in the Domestic Territory either (a) by a Major Studio or other Approved Domestic Distributor who has committed in the applicable Distribution Agreement or otherwise in a binding agreement to achieve a screen release sufficient to satisfy the relevant screen release condition or (b) by the Borrower, provided, that the Borrower shall have delivered to the Administrative Agent an officer’s certificate certifying that it shall achieve a screen release in the Domestic Territory sufficient to satisfy the relevant screen release condition.

(j)                 No Unsold Rights Credit or Unsold TV Rights Credit shall be given with respect to any Item of Product unless the Administrative Agent shall have received the Major Territory Value Forecasts prepared by an Approved Foreign Sales Agent within the preceding six (6) months as to each of the unsold Major Territories for the applicable Item of Product (it being understood that a Major Territory Value Forecast may be zero for a particular Major Territory). No Unsold Rights Credit or Unsold TV Rights Credit shall be given with respect to Revenue Participations.

(k)               The Administrative Agent after consultation with the Borrower is authorized to remove all Borrowing Base credit with respect to a Tax Incentive Receivable in the event that, in the good faith determination of the Administrative Agent, the Credit Parties, Co-Financing Venture Entity or Major Studio (in the case of a Revenue Participation) (as applicable) have not caused the production or post-production of the applicable Picture to comply in all respects with the relevant statutory requirements giving rise thereto or have not timely filed any and all forms with any governmental, administrative or regulatory body in order to claim the applicable Tax Incentive Receivable or have otherwise not timely complied with any of the other commitments or agreements contained within the definition of “Tax Incentive Receivable” (without the application of any grace or cure period).

9 

 

(l)                 The Credit Parties shall be in compliance with Section 4.2 or Section 4.3, as applicable, with respect to an Item of Product prior to receiving the initial Borrowing Base credit for such Item of Product.

(m)             In the case of rent-a-system Pictures for which the Credit Parties are not advancing print & advertising expenses, no P&A Credits shall be available. The following shall govern with respect to accessing P&A Credits for Pictures that constitute rent-a-system Pictures for which the Credit Parties are fronting print and advertising expenses for a third-party producer (such Picture, a “P&A Risk Distribution Picture”):

A.                P&A Credits may be accessed for Europa Pictures that constitute Qualifying Pictures so long as the Credit Parties are entitled to a domestic theatrical distribution fee of not less than 8.5% (or, solely in the case of Valerian, 8% reducing to 6% as a function of gross film rentals); and

B.                 for all other P&A Risk Distribution Pictures, P&A Credits may only be accessed if (A) such Picture constitutes a Qualifying Picture; (B) the Credit Parties are entitled to a domestic distribution fee of not less than ten percent (10%); and (C) P&A Credits may only be accessed under this clause (m)(ii) for up to two P&A Risk Distribution Pictures to be theatrically released in any calendar year, unless (for any additional P&A Risk Distribution Picture(s) beyond two per calendar year) the Borrower shall have made the request to the Administrative Agent and the Lenders constituting Required Lenders have not objected to the request during a ten (10) Business Day notice period.

(n)               Credit may not be obtained for any item in the Borrowing Base except to the extent that the Administrative Agent holds a perfected security interest therein, with the priority contemplated by Section 3.18 or such greater standard required under the definitions of “Tax Incentive Receivable”, “Eligible Receivables” and “Remaining Ultimates”.

(o)               In computing the maximum amount of the credits allowable pursuant to any component(s) of the Borrowing Base which contains a limitation that such component(s) individually or collectively may not exceed a stated percentage of the Borrowing Base, a stated percentage of the Total Commitments, or a dollar amount certain, such computation shall be made prior to making any deductions from the Borrowing Base for Production/Acquisition Cost Reserves and/or P&A Reserves.”

(p)               Borrowing Base credit attributable to Tax Incentive Receivables and Eligible Receivables which are denominated in a non-U.S. Dollar currency but are not hedged in a manner satisfactory to the Administrative Agent shall not exceed $5,000,000 in the aggregate at any time outstanding.

10 

 

(c)                Section 1.2 of the Credit Agreement is further amended by replacing the following additional terms in their entireties:

“Corporate Priority Collateral Sub-Borrowing Base” shall mean a sub-calculation of the Borrowing Base constituting, as of any date of determination, the sum of (a) the aggregate value of the Remaining Ultimates credits in the Borrowing Base pursuant to clause (iv) thereof plus (b) the aggregate value of P&A Credits in the Borrowing Base pursuant to clauses (i) through (iii) thereof plus (c) the aggregate value of Borrowing Base credit attributable to Eligible Receivables relating to the domestic rights in any medium for any Picture plus (d) the aggregate value of cash in the Borrowing Base pursuant to clause (xv) thereof that constitutes proceeds of Corporate Priority Collateral which has been released to the Borrower in accordance with the Proceeds Application Provisions (as such term is defined in the Senior Intercreditor Agreement) minus (e) the aggregate P&A Reserves. For the avoidance of doubt, the aggregate Remaining Ultimates under clause (a) shall be computed net of any deductions or other limitations required in accordance with the definition of the “Borrowing Base” for third party payments.

“Deficit Percentage” shall mean the ratio, determined as of each applicable P&A Test Date (for the five most recent Seasoned Pictures distributed by the Borrower and for which P&A Expenses have been funded by the Borrower (with “Free State of Jones” to be the first picture to be included in the first testing pool) excluding Europa Pictures), expressed as a percentage, equal to (i) one hundred percent plus (ii) the lesser of (a) twenty five percent (25%) and (b) the quotient of (x) the aggregate Production Exposures for the five subject Pictures divided by (y) the Credit Parties’ share of aggregate gross P&A expenditures for the five subject Pictures.

“Five Picture Rolling P&A Coverage Ratio” shall mean the ratio (expressed as a percentage), determined on each applicable P&A Test Date, of (i) the sum (without duplication) of (x) the Net Ultimates for the five most recent STX Pictures distributed by the Borrower and for which P&A Expenses have been funded by the Borrower (with “Free State of Jones” to be the first picture to be included in the first testing pool), plus (y) the Unlicensed Free TV Ultimates with respect to such STX Pictures plus (z) the Credit Parties share (net of third party payment obligations) of any other cash value collected or expected to be collected by the Credit Parties attributable to such STX Pictures to the extent such value extends beyond the portion (if any) thereof that has ever been included in the Borrowing Base and to the extent the Credit Parties are permitted under all applicable contractual arrangements to use such value towards recoupment of their P&A Expenses or loans extended to finance such P&A Expenses to (ii) all P&A Expenses with respect to such STX Pictures. Europa Pictures shall not be included in calculations of the Five Picture Rolling P&A Coverage Ratio or, for the avoidance of doubt, in calculations of the P&A Advance Rate.

11 

 

“P&A Credit” means, individually or collectively as the context may require, each STX P&A Credit and Europa P&A Credit.

“Production Priority Collateral Sub-Borrowing Base” shall mean a sub-calculation of the Borrowing Base constituting, as of any date of determination, the sum of (i) (a) the aggregate value of the Eligible Receivables in the Borrowing Base pursuant to clauses (vi) through (xi) thereof other than Eligible Receivables included in the Corporate Priority Sub-Borrowing base pursuant to clause (d) thereof plus (b) the aggregate value of the Tax Incentive Receivables in the Borrowing Base pursuant to clause (xii) thereof plus (c) the aggregate value of the Unsold Rights Credits and the aggregate value of the Unsold TV Rights Credits in the Borrowing Base pursuant to clauses (xiii) and (xiv) plus (d) the aggregate value of cash in the Borrowing Base pursuant to clause (xv) thereof that is not included in the Corporate Priority Collateral Sub-Borrowing Base pursuant to clause (c) thereof minus (ii) the sum of (a) the aggregate of the Production/Acquisition Cost Reserves and (b) the aggregate of the P&A Reserves (but for these purposes only including P&A Reserves arising under clause (A) of the definition of P&A Reserves). For the avoidance of doubt, the credits under clause (i) shall be computed net of any deductions or other limitations required in accordance with the definition of the “Borrowing Base” for third party payments.

“Qualifying Picture” shall mean a Picture which satisfies the following criteria: (1) it is being distributed in the Domestic Territory by the Borrower and/or another Approved Domestic Distributor under a Distribution Agreement, and the Borrower has secured a wide theatrical release on premium, first run screens satisfactory to the Administrative Agent and downstream distribution generally consistent with the Significant Exploitation Agreements, and (2) it is a feature length Picture to be produced or acquired by a Credit Party or Co-Financing Venture Entity or a Major Studio (in the case of a Revenue Participation) which (i) is scheduled to be delivered no later than one year after the Maturity Date, (ii) unless the Administrative Agent otherwise agrees, shall not be a stage play or concert film, (iii) shall be filmed predominately in color, (iv) shall be predominately in the English language, (v) is expected to receive an MPAA rating of not more restrictive than “R” (or the equivalent thereof) (or, if following receipt thereof, such rating is no more restrictive than “R” (or the equivalent thereof)), (vi) has satisfied or is capable of satisfying all other specifications set forth in each applicable Distribution Agreement to be included in the Borrowing Base, if any, (vii) shall have a running time of no less than 80 minutes, and (viii) unless the Administrative Agent otherwise agrees, has a negative cost of at least $10,000,000. Additionally, any Europa Picture that constitutes a “Qualifying Picture” under the Europa Output Agreement shall constitute a Qualifying Picture hereunder.

12 

 

(d)               Section 1.2 of the Credit Agreement is hereby further amended by amending the definition of “Approved P&A Budget” by adding the following language to the end of the definition:

“Notwithstanding anything to the contrary, the Approved P&A Budget for any Europa Picture shall be the amount certified by Europa and Borrower to the Administrative Agent on a Picture by Picture basis with respect to the United States (plus other territories to the extent they constitute part of both the Territory as set forth in the relevant Europa Output Agreement and part of the Domestic Territory hereunder) theatrical print and advertising expenses of the relevant Europa Picture prior to the Borrower contributing any sums toward the print and advertising of such Europa Picture or Borrower accepting any P&A Credit for such Europa Picture.”

(e)                Section 1.2 of the Credit Agreement is hereby further amended by amending the definition of “Eligible Receivable” by (i) deleting the word “or” from clause (xv) and (ii) adding the word “or” after the end of clause (xvi) and (iii) adding a new clause (xvii) as follows:

“(xvii) which are amounts owed to a Credit Party in connection with a Europa Picture.”

(f)                Section 1.2 of the Credit Agreement is hereby further amended by amending the definition of “Remaining Ultimates” by adding the following sentence to the end of the definition:

“For the avoidance of doubt, (i) no amounts payable by Europa to the Credit Parties with respect to any Europa Picture may be included as a Remaining Ultimate in the Borrowing Base, (ii) no amounts may be included as a Remaining Ultimate in the Borrowing Base with respect to a Europa Servicing Picture, and (iii) for the avoidance of doubt, any Remaining Ultimates credit for Europa Rights Pictures shall be included solely to the extent attributable to any windows and media in which Borrower holds a license of rights (as opposed to merely provides services for), and after deducting the portion of the anticipated Borrower revenues that shall be payable by the Borrower to Europa or that shall be required to pay applicable residuals or participations.”

(g)               Section 4.2 of the Credit Agreement is amended by inserting a new clause (l) as follows:

“(l) Europa Pictures. If such Item of Product is a Europa Picture, then in addition to satisfying all other conditions set forth under this Section 4.2, the following conditions shall be satisfied as a condition to the Credit Parties accessing a Europa P&A Credit or expending any sums towards print and advertising expenses of such Europa Picture:

(i)                 in the context of each Europa Picture, the Administrative Agent shall have received from an Authorized Officer of Europa one or more officer’s certificates addressed to the Administrative Agent in form and substance satisfactory to the Administrative Agent certifying:

13 

 

(a)                as to such Europa Picture’s Approved P&A Budget as described in the definition of Approved P&A Budget;

(b)               that 100% of the Approved P&A Budget other than the portion thereof to be funded by STX has been funded (i.e., the Approved P&A Budget minus the product of (x) the Europa P&A Advance Rate for such Picture times (y) the Approved P&A Budget for such Picture) with such supporting detail as shall be satisfactory to the Administrative Agent; and

(c)                as to the scheduled U.S. theatrical release date for such Europa Picture;

(ii)               in the context of each Europa Servicing Picture, as a condition to the initial inclusion of the Europa P&A Credit of such Europa Picture in the Borrowing Base (but not to Borrower’s initial print and advertising investment):

A.                except in the case of The Circle, which shall be exempted from this sub-clause (ii)A, the Administrative Agent shall have received a certificate from an Authorized Officer of Europa for such Picture, addressed to the Administrative Agent, certifying that Europa has availability from its cash on hand and its borrowing capacity readily available under Europa’s credit facilities in an amount at least equal to 50% of the Europa Picture’s Approved P&A Budget;

B.                 Europa shall have (and shall have caused any relevant Affiliates to have) granted a Lien in favor of Borrower in any and all rights and media for such Europa Picture for which the Borrower is providing services in accordance with the Europa Output Agreement and the products and proceeds thereof as security for Borrower’s continued enjoyment of such services and as security for Europa’s obligation to cause the occurrence of the Europa Film Guaranty Satisfaction Date to occur for such Europa Picture.

(iii)             in the context of the initial extension of credit relating to each Europa Picture that occurs after the Rights Availability Date, the Borrower shall have caused such Picture to be a Europa Rights Picture.

(h)               Section 6.2 of the Credit Agreement is amended by deleting from clause (j) the words “[Intentionally Omitted]” and inserting in lieu thereof the following:

“(j) Liens in favor of Europa in the distribution rights for Europa Rights Pictures granted to the Credit Parties under the Europa Output Documents together with the underlying intellectual property rights and the proceeds thereof, provided that such Liens are subject to an intercreditor agreement satisfactory to the Administrative Agent between (among others) the Administrative Agent, STX, Europa and the agents for the secured lender groups to Europa;” and

14 

 

(i)                 Section 6.19 of the Credit Agreement is amended by inserting immediately after the words “Significant Exploitation Agreements,” in clause (v) the following: “the Europa Output Documents,”;’

(j)                 Article 6 of the Credit Agreement is amended by inserting the following new Section 6.30 at the end thereof (and the table of contents to the Credit Agreement is amended accordingly):

“6.30. Europa Pictures.

(a)       Permit any revenues of any Credit Party derived from Valerian or any other Europa Picture to be remitted to Europa unless and until the STX/EC P&A Breakeven Amount has been received for such Picture.

(b)       Begin funding print and advertising contributions for any new Europa Picture, or request a new Europa P&A Credit, if as of the relevant date of determination (i) the Europa Film Guaranty Satisfaction Date did not occur for any Europa Picture within ten (10) business days of Borrower’s delivery to Europa on or about the Seasoning Date of a Europa Picture’s revenues and/or ultimates, (ii) Europa is otherwise in material default under any of its obligations under the Output Agreement, or (ii) any insolvency event of the type described in Sections 7(h) or (i) hereof shall have occurred with Europa or its French parent company.

(c)       Request a Europa Non-Valerian P&A Credit for any new Europa Non-Valerian Picture, if a separate Europa Non-Valerian P&A Credit is included at the Borrowing Base at such time and will not be removed prior to including the requested Europa P&A Credit.”

(k)               Section 12.1(b)(viii) of the Credit Agreement is amended by (i) deleting the word “or” appearing prior to clause (F) and inserting “,” in lieu thereof and (ii) adding after the words “on Schedule 6.1(m”) the following: “or (G) Europa and its secured creditors”.

3.                  Conditions to Effectiveness. The effectiveness of this Amendment is subject to the satisfaction in full of each of the conditions precedent set forth in this Section 3 (the date upon which each of such conditions precedent has been satisfied, the “Effective Date”):

(a)                the Administrative Agent shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors and the Supermajority Lenders;

(b)               the representations and warranties contained in Section 4 hereof are true and correct;

15 

 

(c)                all costs and expenses due and owing pursuant to Section 10 hereof to the Administrative Agent by the Borrower shall have been paid in full;

(d)               all legal matters incident to this Amendment shall be satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Administrative Agent;

(e)                the Administrative Agent shall have received an executed copy of the Europa Output Agreement, together with all other documents and agreements executed in connection therewith, each in form and substance satisfactory to the Administrative Agent;

(f)                simultaneous effectiveness of an intercreditor or interparty agreement with Europa and its lenders in form and agreement relating to the Europa Output Agreement in form and substance satisfactory to the Administrative Agent between the Borrower, Seer P&A Agent and the Subordinated Agent, Europa, the administrative agents for the secured lenders to Europa and EC Distribution; and

(g)               the Credit Parties shall have demonstrated to the satisfaction of the Administrative Agent that the Credit Parties and Europa have obtained any and all consents necessary under their respective organizational documents and material contracts (including in the case of STX, a consent or amendment with Showtime and any other applicable Significant Exploitation Agreements) for such party to enter into under the Europa Output Agreement and perform its obligations thereunder.

4.                  Representations and Warranties. Each of the Credit Parties represents and warrants that:

(a)                each of the Credit Parties has the power and authority to execute and deliver this Amendment and perform its obligations under this Amendment and the Credit Agreement as amended hereby;

(b)               the execution and delivery by each of the Credit Parties of this Amendment, and the performance by such Person of its obligations under this Amendment and the Credit Agreement as amended hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents;

16 

 

(c)                the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) with the same effect as if made on and as of the date hereof; and

(d)               immediately before and immediately after giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.

5.                  Fundamental Document. This Amendment is designated a Fundamental Document by the Administrative Agent.

6.                  Full Force and Effect. Except as expressly set forth herein, this Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly amended hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its obligations under the Credit Agreement and the other Fundamental Documents to which it is a party and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as amended by this Amendment.

7.                  Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Amendment.

8.                  APPLICABLE LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

9.                  Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

17 

 

10.              Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

11.              Headings. The headings of this Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Amendment.

 

 

[Signature pages follow]

18 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP, Corporate Strategy & General Counsel

 

GUARANTORS:

 

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP, Corporate Strategy & General Counsel

 


 

 

Amendment No. 1 to Second Amended and Restated Credit Agreement

 

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and as a Lender

 

By: /s/ Patrick J. Minnick_______________________

Name: Patrick J. Minnick

Title: Executive Director

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

BANK OF AMERICA, N.A.

By: /s/ Sharad C. Bhatt_______________________

Name: Sharad C. Bhatt

Title: Senior Vice President

 

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

MUFG Union Bank, N.A.

By: /s/ Ryan Bannan_______________________

Name: Ryan Bannan

Title: Vice President

 

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

Name of Lender:

East West Bank

By: /s/ Jodi Chong_______________________

Name: Jodi Chong

Title: Vice President

 

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

Name of Lender:

CIT Bank, N.A.

By: /s/ Kevin Cullen______________________

Name: Kevin Cullen

Title: Managing Director

 

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

Name of Lender: Comerica Bank

By: /s/ Adam J. Korn_______________________

 

Name: Adam J. Korn

Title: Senior Vice President/ AGM

 

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

Name of Lender:

CITY NATIONAL BANK

By: /s/ Crockett Woodruff____________________

Name: Crockett Woodruff

Title: Senior Vice President

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

Name of Lender:

First Republic Bank

By: /s/ Charles Heaphy____________________

Name: Charles Heaphy

Title: Senior Managing Director

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

 

Name of Lender:

BANK HAPOALIM B.M.

By: /s/ Lavea Eisenberg____________________

Name: Lavea Eisenberg

Title: FVP

 

By: /s/ Howard Applebaum_________________

Name: Howard Applebaum

Title: EVP

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

Name of Lender:

Emigrant Bank

By: /s/ John R. Hart_______________________

Name: John R. Hart

Title: Vice Chairman

 

Signature Page to Amendment No. 1 to Second Amended and Restated Credit Agreement

 

 

Exhibit 10.7 

AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

AMENDMENT NO. 2 dated as of October 4, 2017 (this “Amendment”) to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders and as Issuing Bank.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower has requested, and the Administrative Agent and the requisite Lenders (as described in Section 3 of this Amendment) have agreed, that the Credit Agreement be amended on the terms set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Amendments to the Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as of the Effective Date (as defined below), as follows:

(a)             Section 1.2 of the Credit Agreement is amended by inserting the following terms in alphabetical order:

“A Bad Moms Christmas” shall mean the motion picture currently entitled “A Bad Moms Christmas.”

“Approved UK P&A Budget” shall mean, for each Qualifying Picture being self-distributed theatrically in the UK Territory by the Borrower, the Dollar equivalent of the Sterling budget that is to be contributed by all Persons towards UK P&A Expenses for the theatrical distribution of such Picture in the UK Territory, which shall be in an amount not less than the minimum P&A budget necessary to theatrically release such Qualifying Picture in the UK Territory, as determined by the Borrower using its reasonable business judgment. Except with respect to the Dollar equivalent of $1,000,000 (in the aggregate for all Pictures), which need not be hedged, in order for any UK P&A Credit to be taken hereunder, the amount of the Approved UK Budget must be hedged from Sterling into Dollars in a manner satisfactory to the Administrative Agent.

 

 

“Five Picture Rolling UK P&A Coverage Ratio” shall mean the ratio (expressed as a percentage), determined on each applicable P&A Test Date, of (i) the Net UK Value of the five most recently Seasoned STX Pictures self-distributed theatrically by the Borrower in the UK Territory and for which UK P&A Expenses have been funded by the Borrower (the “Subject UK Pictures”) to (ii) all UK P&A Expenses with respect to such Subject UK Pictures (from first dollar, whether or not recouped); provided that if the foregoing calculation would (in the absence of this proviso) have resulted in a Five Picture Rolling UK P&A Coverage Ratio of less than 150%, the Borrower may upon written notice to the Administrative Agent elect to include in the foregoing numerator (i.e., in the foregoing clause (i)) the excess (if positive) of the Net Ultimates attributable to the Subject UK Pictures in the Domestic Territory less the P&A Expenses (from first dollar, whether or not recouped) for such Subject UK Pictures in the Domestic Territory (the amounts included in this proviso, the “Reallocated US-UK Excess Value”). For purposes hereof, the Five Picture Rolling UK P&A Coverage Ratio shall be expressed in Dollars, converting from Sterling any component thereof pursuant to a current exchange rate acceptable to the Administrative Agent.

“Molly’s Game” shall mean the motion picture currently entitled “Molly’s Game.”

“Net UK Value” shall mean, with respect to any STX Pictures self-distributed theatrically by the Borrower in the UK Territory and for which UK P&A Expenses have been funded by the Borrower, as of the applicable date of determination, the sum (without duplication) of (i) Remaining UK Value plus (ii) amounts actually paid to the Borrower during the First Cycle Period solely attributable to the UK Territory, in each case calculated based on the most recent Remaining UK Value Report for such Picture but in each case net of all payments made or to be made to third parties (other than payments made or to be made for P&A Expenses, to co-financiers or to equity investors, which for this purpose shall not be netted out). For purposes hereof, the Net UK Values shall be expressed in Dollars, converting from Sterling any component thereof pursuant to a current exchange rate acceptable to the Administrative Agent.

“Remaining UK Value” shall mean, with respect to each Seasoned Picture that has been self-distributed theatrically by the Borrower in the UK Territory, the amounts attributable solely to the UK Territory during the First Cycle Period which are projected to thereafter become payable (but in the case of home entertainment ultimates, limited to rolling 18-month forward looking projections unless home entertainment is being sub-distributed by, and ultimates are being provided by, a Major Studio, and such ultimates from the Major Studio show a longer tenor for projections) to the Borrower either directly or under applicable sub-Distribution Agreements for the UK Territory from theatrical, home entertainment (including electronic sell-through, SVOD, TVOD and other digital forms) and pay television, free television or any other any medium and from any territory for any tenor not in excess of the First Cycle Period) after deduction

2 

 

(without duplication) for any and all amounts deductible, recoupable or which may be offset by any of Borrower’s sub-Distributors in the UK Territory from its obligation to make payments to the Borrower (including without limitation, recoupments of any advances, print and advertising or other distribution expenses, and any distribution fees or any payments made or to be made directly by any such sub-Distributor in the UK Territory (including, without limitation, any residual, participation or contingent payment) to any Person other than the Borrower, who is entitled to any portion of the proceeds of such Picture from the UK Territory). The calculations of the Remaining UK Value shall be determined solely based on the written ultimates reports provided by the Borrower that have been delivered to the Administrative Agent, and for any UK Territory media in which the Borrower is not directly self-distributing, any value included in the Remaining UK Value must be supported by a written estimate that has been prepared by the Borrower’s applicable UK Territory sub-Distributor that has been delivered to the Administrative Agent. The Remaining UK Value for a Picture shall be calculated initially on the date on which such Picture becomes a Seasoned Picture when required in accordance with Section 5.1(k) and shall also be updated as required by Section 5.1(k). The Remaining UK Value (i) in the case of any receipts anticipated to be received and expenses expected to be incurred beyond one (1) year from the applicable date of determination, will be discounted to a present value based on a notional discount rate equal to the greater of (1) 8% and (2) the rate then accruing on Alternate Base Rate Loans on the applicable calculation date, and (ii) will not include any amounts in which the Administrative Agent (for the benefit of the Secured Parties) does not have a first priority perfected security interest under the UCC and applicable copyright law (subject only to the Specified Permitted Encumbrances described in Section 6.2(b)). For purposes hereof, the Remaining UK Value shall be expressed in Dollars, converting from Sterling any component thereof (including reporting provided by third parties in Sterling) pursuant to a current exchange rate acceptable to the Administrative Agent.

“Reallocated US-UK Excess Value” shall have the meaning ascribed in the definition of the Five Picture Rolling UK P&A Coverage Ratio.

“Sterling” and “£” shall mean lawful money of the United Kingdom of Great Britain and Northern Ireland.

“UK P&A Advance Rate” shall initially mean 75% (including for the avoidance of doubt for A Bad Mom’s Christmas and Molly’s Game); provided that if the Five Picture Rolling UK P&A Coverage Ratio is as of the relevant date of determination determined to be less than 150%, the UK P&A Advance Rate shall as of such date of determination be zero percent (0%) on a prospective basis for new Pictures for which no UK P&A Credit has yet been taken until such time as the Five Picture Rolling UK P&A Coverage Ratio is at least 150%.

“UK P&A Expenses” shall mean print and advertising expenses in respect of a Picture in the UK Territory (expressed on the basis of a Dollar equivalent of any Sterling component at a current exchange rate acceptable to the Administrative Agent).

3 

 

“UK Territory” shall mean the United Kingdom and its territories and possessions to the extent that STX and its competitors typically distribute in such territories and possessions when distributing United Kingdom rights.

“UK Value Report” shall mean, with respect to any Seasoned Picture that has been self-distributed theatrically by the Borrower in the UK Territory, a written estimate of the Remaining UK Value for such Picture prepared by Borrower, which estimate shall be calculated in the manner described in the definition of “Remaining UK Value”, including that any value attributable to media or windows in which STX is not directly distributing is supported by either a receivable-based contract or a written estimate prepared by the sub-Distributor that has been delivered to the Administrative Agent. The UK Value Reports shall contain at least as much supporting detail and back-up as Remaining Ultimates Reports, and shall otherwise be in form and substance reasonably acceptable to the Administrative Agent. For purposes hereof, the UK Value Reports shall be expressed in Dollars, converting from Sterling any component thereof (including reporting provided by third parties in Sterling) pursuant to a current exchange rate acceptable to the Administrative Agent.

(b)            Section 1.2 of the Credit Agreement is further amended by:

(i)              replacing in their entireties the following definitions:

“Borrowing Base” shall mean, at any date for which the amount thereof is to be determined, an amount equal to the aggregate (without double counting) of the following:

(i)              the P&A Advance Rate multiplied by the Credit Parties’ share of each STX Qualifying Picture’s Approved P&A Budget (the “STX P&A Credit”); provided that (A) the Borrowing Base credit under this clause (i) shall be capped at $30,000,000 for each STX Qualifying Picture (or, solely in the case of A Bad Moms Christmas and Molly’s Game, $33,250,000) and (B) the total amount of P&A Credits in the Borrowing Base under this clause (i) and clauses (ii) and (iii) below, when added together, may not exceed $95,000,000 in the aggregate at any point in time, plus

(ii)            the applicable Europa P&A Advance Rate multiplied by the gross Approved P&A Budget for each Europa Non-Valerian Picture that constitutes a Qualifying Picture (the “Europa Non-Valerian P&A Credit”); provided that (A) the aggregate Borrowing Base credit under this clause (ii) may not exceed $12,250,000 in the aggregate at any point in time and (B) an Europa P&A Credit may only be included in the Borrowing Base for one Europa Non-Valerian Picture at any time, plus

4 

 

(iii)          75% of the gross Approved P&A Budget for Valerian (the “Valerian P&A Credit” and together with the Europa Non-Valerian P&A Credit, the “Europa P&A Credit”); provided that the Borrowing Base credit under this clause (iii) shall be capped at $45,000,000, plus

(iv)          the applicable UK P&A Advance Rate multiplied by the Credit Parties’ share of the Approved UK P&A Budget for each STX Qualifying Picture scheduled to be released in the UK Territory after the effectiveness of Amendment No. 2 dated as of October 4, 2017 (the “UK P&A Credit”); provided that the Borrowing Base credit under this clause (iv) shall be capped at US$10 million in the aggregate at any point in time (provided, that as a sublimit within the aforementioned US$10 million cap, up to US$3.5 million of UK P&A Credits may be taken for Pictures that do not meet the all of the requirements for being a Qualifying Picture as provided in the second sentence of the definition of “Qualifying Picture”) , plus

(v)            the Ultimates Advance Rate multiplied by Remaining Ultimates, plus

(vi)          the Unlicensed Free TV Ultimates Advance Rate multiplied by Unlicensed Free TV Ultimates; provided that aggregate the Borrowing Base credit under this clause (vi) shall be capped at $20,000,000 at any point in time, plus

(vii)        (a) 100% of Eligible Receivables that are secured by an Acceptable L/C and (b) 100% (or such lower advance rate as shall be determined by the Administrative Agent in its reasonable discretion) of Eligible Receivables that are secured to the satisfaction of the Administrative Agent, and amounts owing to the Credit Parties in the Tang Escrow Account or the Huayi Escrow Account for which the Administrative Agent may make a draw request if the Borrower fails to do so, plus

(viii)      100% of Eligible Receivables from Approved Tier 1 Account Debtors, plus

(ix)          90% of Eligible Receivables from Approved Tier 2 Account Debtors, plus

(x)            80% of Eligible Receivables from Approved Tier 3 Account Debtors, plus

(xi)          50% of Eligible Receivables from Approved Tier 4 Account Debtors, plus

(xii)        50% of Eligible Receivables from other obligors not specified on Schedule 2.16 hereof; provided, that the aggregate amount of Borrowing Base credit under this clause (xii) shall at no time exceed (A) $500,000 for any single obligor or Affiliated Group or (B) $15,000,000 at any point in time, plus

5 

 

(xiii)      90% of Tax Incentive Receivables for which all requirements of the definition thereof are satisfied and (B) 50% (or such higher advance rate as may be agreed by the Administrative Agent after consultation with the Lenders on a case-by-case basis) of other Eligible Receivables from sales of tax incentives or tax rebates from account debtors (other than Approved Tier 1 Account Debtors, Approved Tier 2 Account Debtors, Approved Tier 3 Account Debtors or Approved Tier 4 Account Debtors (for whom Eligible Receivables from sales of tax incentives or tax rebates would receive the relevant advance rates set forth in clauses (viii)-(xi) above)) acceptable to the Administrative Agent (and subject to any concentration limits imposed by the Administrative Agent) after consultation with the Lenders, plus

(xiv)       the Unsold Rights Credit for each applicable Qualifying Picture; provided, that (a) the Borrowing Base credit for any Qualifying Picture under this clause (xiv) shall at no time exceed the lesser of (1) 25% of the negative cost of such Qualifying Picture (without reference to any overhead fees) and (2) $8,500,000, (b) the aggregate amount of Borrowing Base credit under this clause (xiv) shall at no time exceed 25% of the total Borrowing Base, and (c) the Borrowing Base credit for any Qualifying Picture under this clause (xiv) shall be reduced to zero upon the earlier of (x) eighteen (18) months following its initial inclusion in the Borrowing Base and (y) one hundred twenty (120) days following the Completion of such Qualifying Picture, plus

(xv)         the Unsold TV Rights Credit for each applicable Program; provided, that (a) the Borrowing Base credit for any Program under this clause (xv) shall at no time exceed the lesser of (1) 20% of the negative cost of such Program (without reference to any overhead fees) and (2) $10,000,000, (b) the aggregate amount of Borrowing Base credit under this clause (xv) shall at no time exceed 15% of the total Borrowing Base, (c) the aggregate amount of Borrowing Base credit under this clause (xv) and clause (xiv) above shall at no time exceed 25% of the total Borrowing Base and (d) the Borrowing Base credit for any Program under this clause (xiv) shall be reduced to zero (x) upon the earlier of (i) twelve (12) months after the initially scheduled first airing in the United States of the first episode of the applicable season of such Program and (ii) nine (9) months following Completion of such Program (which for the avoidance of doubt shall treat all the episodes of a series for a relevant season as a single Program), and (y) with regard to any specific territory, the sale of that territory with respect to such Program.

(xvi)       the aggregate amount of cash of the Credit Parties held in (A) blocked deposit accounts maintained at a Lender (pursuant to Account Control Agreements in favor of, and in form and substance satisfactory to, the Administrative Agent) or (B) blocked Cash Collateral Accounts, minus

(xvii)     the sum of the Reserves;

provided, however:

6 

 

 

(a)             Borrowing Base credit under the foregoing clauses (i) through (iv) shall only be available for Qualifying Pictures, and shall not be available for Revenue Participations (although P&A Credits may be taken for P&A Distribution Pictures as defined in clause (m) of this proviso in accordance with such clause (m)). Borrowing Base credit under the foregoing clause (xiv) shall only be available for STX Qualifying Pictures. Borrowing Base credit for Europa Pictures shall only be available under clauses (ii), (iii) and (v), subject to the requirements in the case of clause (v) that STX may only include Ultimates for Europa Rights Pictures (as opposed to Europa Servicing Pictures), and only to the extent attributable to any windows and media in which Borrower holds a license of rights (as opposed to merely provides services for), and after deducting any portion of the anticipated Borrower revenues that shall be payable by Borrower to Europa. For the avoidance of doubt, the Borrower shall not be prohibited from obtaining Borrowing Base credit for eligible contractual arrangements with Europa outside the Europa Output Agreement.

(b)            Borrowing Base credit under the foregoing clauses (v) and (vi) shall only be available for Pictures which are released theatrically.

(c)             All of the foregoing amounts are without duplication of any deductions contained within any of the components of the Borrowing Base and the amount of credit provided under any component of the Borrowing Base shall be reduced, prior to (except in the case of Borrowing Base credit under clauses (i), (ii), (iii), (iv), (xiv) and (xv)) application of the applicable advance rate, dollar-for-dollar by any payments which a Credit Party is required to pay to any third party in respect of such receivable or credit (e.g., royalties, residuals, fees, commissions) and any other projected expenses of the Credit Parties arising in connection with such amounts (and including any amounts payable to the Seer P&A Facility Agent or any lender under the Seer P&A Facility Credit Agreement directly in connection with such anticipated proceeds (including for the avoidance of doubt, the mandatory principal prepayments and Profit Participation Fees (as defined in the Seer P&A Facility Credit Agreement and any other required application of such proceeds pursuant to the Senior Intercreditor Agreement);

(d)            The portion of the Borrowing Base attributable at any time to each Uncompleted Picture shall not exceed the portion of the negative cost or purchase price of such Picture (other than that provided by the Approved Completion Guarantor) which would be refunded to the Administrative Agent (for itself or on behalf of the Credit Parties) by the Approved Completion Guarantor or the Approved Domestic Distributor (excluding the Borrower for this purpose) and applied in accordance with the terms hereof if the Picture was then abandoned. The Borrowing Base attributable at any time to each Uncompleted Program shall not exceed the Credit Parties’ budgeted cost thereof.

(e)             No Borrowing Base credit may be taken with respect to Remaining Ultimates for any Picture if the Administrative Agent has not received with

7 

 

respect thereto the related ultimates information as and when required under Section 5.1(k), and the Borrower must remove any Remaining Ultimates attributable to a Picture if the most recent underlying written ultimate report of the Ultimates Provider that has been delivered to the Administrative Agent was computed as of a date more than six months prior to the relevant date of determination.

(f)             No P&A Credit for a particular Picture shall be available unless (i) the P&A Reserves have been established with respect thereto, and (ii) the Borrower has provided a certification to the Administrative Agent in substantially the form attached hereto as Exhibit P as to the broad release pattern contemplated for such Picture (with such Exhibit P modified as appropriate in a manner satisfactory to the Administrative Agent to include certifications relating to the UK Territory release in the context of Pictures for which UK P&A Credits are to be requested), and with respect to Europa Pictures, the conditions set forth in Section 4.2(l) have been satisfied. The P&A Credit (excluding solely any UK P&A Credits) for a Picture will be reduced on a dollar-for-dollar basis as receipts from exploitation in the Domestic Territory are received by the Credit Parties with regard to the relevant Picture. The UK P&A Credit for a Picture will be reduced on a dollar-for-dollar basis as receipts from exploitation in the UK Territory are received by the Credit Parties with regard to the relevant Picture.

(g)            The P&A Credits for any Picture shall be reduced to zero upon the earlier of (i) the Seasoning Date of such Picture, (ii) the date that is six months from the date on which the applicable P&A Credit for such Picture was first included in the Borrowing Base if such Picture has not been theatrically released in the Domestic Territory (or in the UK Territory in the case of UK P&A Credits) by such date, and (iii) solely with respect to a P&A Credit that is a Europa P&A Credit, the Europa Film Guaranty Satisfaction Date for such Europa Picture.

(h)            The STX P&A Credit shall not be available for any new Pictures if the Five Picture Rolling P&A Coverage Ratio has been determined to be less than 100% (other than for new Pictures for which STX P&A Credits had not previously been taken by the relevant date of determination but that are scheduled to be released theatrically domestically within six months of such determination date, for which the STX P&A Credit shall be available but at a 50% advance rate) until (if ever) the Five Picture Rolling P&A Coverage Ratio for five new Pictures (i.e. Pictures that were not included in any computation of the Five Picture Rolling P&A Coverage Ratio that yielded a percentage of less than 100%) exceeds 125%. The UK P&A Credit shall not be available for any new Pictures if the Five Picture Rolling UK P&A Coverage Ratio as computed on the date of determination is less than 150% until such time as the Five Picture Rolling UK P&A Coverage Ratio is at least 150%.

8 

 

(i)              To the extent any receivable included in the Borrowing Base is conditioned upon a general theatrical release of a Picture in the Domestic Territory, (i) (x) the Borrower shall self-release such Picture in the Domestic Territory or a Distribution Agreement for the Domestic Territory with another Approved Domestic Distributor shall have been entered into with respect to such Picture and (y) if applicable, such Picture shall meet, or be expected in good faith to meet, the requirements for distribution under the relevant Distribution Agreement for the Domestic Territory, or (ii) another Approved Domestic Distributor has committed to release such Picture in the Domestic Territory. A receivable under a contract requiring that a Picture be released theatrically in the Domestic Territory with minimum P&A Expenses in the Domestic Territory may be included in the Borrowing Base only if: (i) the Borrower has established the P&A Reserve, and the Administrative Agent shall have received satisfactory evidence of establishment of such P&A Reserve; (ii) at all times prior to the general theatrical release date of such Picture in the Domestic Territory, (x) the receivable meets all of the other requirements of an Eligible Receivable and (y) the Borrower (if self-distributing) or other Approved Domestic Distributor (or, if it has the ability to instruct such Approved Domestic Distributor to do so, the Borrower (with respect to such other Approved Domestic Distributor’s distribution)) has committed to a release pattern that meets any such minimum requirements; and (iii) at all times thereafter, the general theatrical release of such Picture in the Domestic Territory actually satisfies such minimum requirements. In addition, any Approved Completion Bond relating to such Picture shall guarantee the delivery of any items which are a condition to such general theatrical release in the Domestic Territory under such Distribution Agreement (if applicable) and under any other Distribution Agreement for which Borrowing Base credit is requested. In addition, no receivable may be included in the Borrowing Base to the extent that it is conditioned upon a release in the Domestic Territory requiring any specific number of screens unless the Picture to which such receivable relates is being distributed in the Domestic Territory either (a) by a Major Studio or other Approved Domestic Distributor who has committed in the applicable Distribution Agreement or otherwise in a binding agreement to achieve a screen release sufficient to satisfy the relevant screen release condition or (b) by the Borrower, provided, that the Borrower shall have delivered to the Administrative Agent an officer’s certificate certifying that it shall achieve a screen release in the Domestic Territory sufficient to satisfy the relevant screen release condition.

(j)              No Unsold Rights Credit or Unsold TV Rights Credit shall be given with respect to any Item of Product unless the Administrative Agent shall have received the Major Territory Value Forecasts prepared by an Approved Foreign Sales Agent within the preceding six (6) months as to each of the unsold Major Territories for the applicable Item of Product (it being understood that a Major Territory Value Forecast may be zero for a particular Major Territory). No Unsold Rights Credit or Unsold TV Rights Credit shall be given with respect to Revenue Participations.

9 

 

(k)            The Administrative Agent after consultation with the Borrower is authorized to remove all Borrowing Base credit with respect to a Tax Incentive Receivable in the event that, in the good faith determination of the Administrative Agent, the Credit Parties, Co-Financing Venture Entity or Major Studio (in the case of a Revenue Participation) (as applicable) have not caused the production or post-production of the applicable Picture to comply in all respects with the relevant statutory requirements giving rise thereto or have not timely filed any and all forms with any governmental, administrative or regulatory body in order to claim the applicable Tax Incentive Receivable or have otherwise not timely complied with any of the other commitments or agreements contained within the definition of “Tax Incentive Receivable” (without the application of any grace or cure period).

(l)              The Credit Parties shall be in compliance with Section 4.2 or Section 4.3, as applicable, with respect to an Item of Product prior to receiving the initial Borrowing Base credit for such Item of Product.

(m)           In the case of rent-a-system Pictures for which the Credit Parties are not advancing print & advertising expenses in the Domestic Territory, no P&A Credits shall be available. UK P&A Credits shall not be available for Pictures that are being exploited on a rent-a-system basis in the UK Territory. The following shall govern with respect to accessing P&A Credits (other than UK P&A Credits) for Pictures that constitute rent-a-system Pictures for which the Credit Parties are fronting print and advertising expenses for a third-party producer (such Picture, a “P&A Risk Distribution Picture”):

A.              P&A Credits may be accessed for Europa Pictures that constitute Qualifying Pictures so long as the Credit Parties are entitled to a domestic theatrical distribution fee of not less than 8.5% (or, solely in the case of Valerian, 8% reducing to 6% as a function of gross film rentals); and

B.              for all other P&A Risk Distribution Pictures, P&A Credits may only be accessed if (A) such Picture constitutes a Qualifying Picture; (B) the Credit Parties are entitled to a domestic distribution fee of not less than ten percent (10%); and (C) P&A Credits may only be accessed under this clause (m)(ii) for up to two P&A Risk Distribution Pictures to be theatrically released in any calendar year, unless (for any additional P&A Risk Distribution Picture(s) beyond two per calendar year) the Borrower shall have made the request to the Administrative Agent and the Lenders constituting Required Lenders have not objected to the request during a ten (10) Business Day notice period.

(n)            Credit may not be obtained for any item in the Borrowing Base except to the extent that the Administrative Agent holds a perfected security interest therein, with the priority contemplated by Section 3.18 or such greater standard required under the definitions of “Tax Incentive Receivable”, “Eligible Receivables” and “Remaining Ultimates”.

10 

 

(o)            In computing the maximum amount of the credits allowable pursuant to any component(s) of the Borrowing Base which contains a limitation that such component(s) individually or collectively may not exceed a stated percentage of the Borrowing Base, a stated percentage of the Total Commitments, or a dollar amount certain, such computation shall be made prior to making any deductions from the Borrowing Base for Production/Acquisition Cost Reserves and/or P&A Reserves.

(p)            Borrowing Base credit attributable to Tax Incentive Receivables and Eligible Receivables which are denominated in a non-U.S. Dollar currency but are not hedged in a manner satisfactory to the Administrative Agent shall not exceed $5,000,000 in the aggregate at any time outstanding.

“Corporate Priority Collateral Sub-Borrowing Base” shall mean a sub-calculation of the Borrowing Base constituting, as of any date of determination, the sum of (a) the aggregate value of the Remaining Ultimates credits in the Borrowing Base pursuant to clause (iv) thereof plus (b) the aggregate value of P&A Credits in the Borrowing Base pursuant to clauses (i) through (iv) thereof plus (c) the aggregate value of Borrowing Base credit attributable to Eligible Receivables relating to the domestic rights in any medium for any Picture plus (d) the aggregate value of cash in the Borrowing Base pursuant to clause (xv) thereof that constitutes proceeds of Corporate Priority Collateral which has been released to the Borrower in accordance with the Proceeds Application Provisions (as such term is defined in the Senior Intercreditor Agreement) minus (e) the aggregate P&A Reserves. For the avoidance of doubt, the aggregate Remaining Ultimates under clause (a) shall be computed net of any deductions or other limitations required in accordance with the definition of the “Borrowing Base” for third party payments.

“Five Picture Rolling P&A Coverage Ratio” shall mean the ratio (expressed as a percentage), determined on each applicable P&A Test Date, of (i) the sum (without duplication) of (v) the Net Ultimates for the five most recent STX Pictures distributed by the Borrower and for which P&A Expenses have been funded by the Borrower (with “Free State of Jones” to be the first picture to be included in the first testing pool), plus (w) the Unlicensed Free TV Ultimates with respect to such STX Pictures, plus (x) the Credit Parties’ share (net of third party payment obligations) of any other cash value collected or expected to be collected by the Credit Parties attributable to such STX Pictures to the extent such value extends beyond the portion (if any) thereof that has ever been included in the Borrowing Base and to the extent the Credit Parties are permitted under all applicable contractual arrangements to use such value towards recoupment of their P&A Expenses or loans extended to finance such P&A Expenses, minus (y) solely to the extent that any Reallocated US-UK Excess Value is then in effect under the Five Picture UK Rolling P&A Coverage Ratio, an amount equal to all UK P&A Expenses (from first dollar, whether or not recouped) for the

11 

 

Subject UK Pictures that are also included in the Five Picture Rolling P&A Coverage Ratio, plus (z) solely to the extent that any Reallocated US-UK Excess Value is then in effect under the Five Picture UK Rolling P&A Coverage Ratio, an amount equal to the Net UK Value for the Subject UK Pictures that are also included in the Five Picture Rolling P&A Coverage Ratio divided by (ii) all P&A Expenses with respect to such STX Pictures. Europa Pictures shall not be included in calculations of the Five Picture Rolling P&A Coverage Ratio or, for the avoidance of doubt, in calculations of the P&A Advance Rate.

“P&A Advance Rate” shall initially mean 75% (or solely in the case of A Bad Moms Christmas and Molly’s Game, 95%); provided that (i) if the Five Picture Rolling P&A Coverage Ratio is less than the Deficit Percentage, the P&A Advance Rate shall be the percentage equal to 75% (or solely in the case of A Bad Moms Christmas and Molly’s Game, 95%) less 1.00% for each 1.00% by which the Five Picture Rolling P&A Coverage Ratio is less than the Deficit Percentage (e.g., if the Five Picture Rolling P&A Coverage Ratio is 110% and the Deficit Percentage is 120%, the P&A Advance Rate will be reduced from 75% to 65% (or solely in the case of A Bad Moms Christmas and Molly’s Game, reduced from 95% to 85%)) and (ii) if the Five Picture Rolling P&A Coverage Ratio is determined to be less than 100%, the P&A Advance Rate shall be zero percent (0%) (other than for new Pictures for which P&A Credits had not previously been taken but that are scheduled to be released theatrically domestically within six months of the date of determination, for which the P&A Advance Rate shall be fifty percent (50%)) until (if ever) the Five Picture Rolling P&A Coverage Ratio for five new Pictures (i.e. Pictures that were not included in any computation of the Five Picture Rolling P&A Coverage Ratio that yielded a percentage of less than 100%) exceeds 125%.

“P&A Credit” means, individually or collectively as the context may require, each STX P&A Credit, Europa P&A Credit and UK P&A Credit.

“P&A Reserve” shall mean (1) in the context of all P&A Credits other than UK P&A Credits (without duplication), (A) with respect to any Eligible Receivable to be included in the Borrowing Base that requires that the Picture be released theatrically in the Domestic Territory with minimum P&A Expenses, a reserve established by the Borrower from its cash equity, availability under the Seer P&A Facility Credit Agreement and/or availability under this Credit Agreement (as applicable) (and satisfactory evidence of such reserve shall have been provided to the Administrative Agent) in the amount necessary to pay the Credit Parties’ share of the aggregate remaining P&A Expenses in order to meet such requirements, in each case net of remaining amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such remaining P&A Expenses; and (B) a reserve, to be established upon the inclusion of any P&A Credits for a Qualifying

12 

 

Picture in the Borrowing Base for which a Credit Party has committed to pay or is otherwise responsible for paying P&A Expenses, in an amount equal as of any date of determination to (x) 100% of the remaining unspent portion of the Approved P&A Budget minus (y) the sum of (i) the portion of the remaining unspent Approved P&A Budget that will be funded under the Seer P&A Credit Agreement, (ii) the portion of the remaining unspent Approved P&A Budget that will be funded with amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such remaining P&A Expenses and (iii) the portion of the remaining unspent Approved P&A Budget that is covered by a back-stop or other funding assurance reasonably acceptable to the Administrative Agent and (2) in the context of UK P&A Credits, a reserve, to be established upon the inclusion of any UK P&A Credits for a Qualifying Picture, in an amount equal as of any date of determination to (x) 100% of the remaining unspent portion of the Approved UK P&A Budget minus (y) (i) the portion of the remaining unspent Approved UK P&A Budget that will be funded with amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such remaining UK P&A and (ii) the portion of the remaining unspent Approved UK P&A Budget that is covered by a back-stop or other funding assurance reasonably acceptable to the Administrative Agent.

“P&A Test Date” shall mean, (A) with respect to the Five Picture Rolling P&A Coverage Ratio, (a) initially, the date on which the fifth Picture (with “Free State of Jones” to be the first picture to be included in the first testing pool) becomes a P&A Picture and (b) at all times thereafter, (1) as of the last day of each fiscal quarter of the Borrower, and (2) on the date on which each subsequent Picture becomes a P&A Picture and (B) with respect to the Five Picture Rolling UK P&A Coverage Ratio, (a) initially, the date on which the fifth Picture released in the UK Territory on a self-distribution basis after the effectiveness of Amendment No. 2 dated as of October 4, 2017 to this Credit Agreement becomes Seasoned and (b) at all times thereafter, (1) as of the last day of each fiscal quarter of the Borrower, and (2) on the date on which each subsequent Picture released in the UK Territory on a self-distribution basis becomes Seasoned..

“Production Priority Collateral Sub-Borrowing Base” shall mean a sub-calculation of the Borrowing Base constituting, as of any date of determination, the sum of (i) (a) the aggregate value of the Eligible Receivables in the Borrowing Base pursuant to clauses (vii) through (xii) thereof other than Eligible Receivables included in the Corporate Priority Sub-Borrowing base pursuant to clause (d) thereof plus (b) the aggregate value of the Tax Incentive Receivables in

13 

 

the Borrowing Base pursuant to clause (xiii) thereof plus (c) the aggregate value of the Unsold Rights Credits and the aggregate value of the Unsold TV Rights Credits in the Borrowing Base pursuant to clauses (xiv) and (xv) plus (d) the aggregate value of cash in the Borrowing Base pursuant to clause (xvi) thereof that is not included in the Corporate Priority Collateral Sub-Borrowing Base pursuant to clause (c) thereof minus (ii) the sum of (a) the aggregate of the Production/Acquisition Cost Reserves and (b) the aggregate of the P&A Reserves (but for these purposes only including P&A Reserves arising under clause (A) of the definition of P&A Reserves). For the avoidance of doubt, the credits under clause (i) shall be computed net of any deductions or other limitations required in accordance with the definition of the “Borrowing Base” for third party payments.

“Qualifying Picture” shall mean a Picture which satisfies the following criteria: (1) it is being distributed in the Domestic Territory by the Borrower and/or another Approved Domestic Distributor under a Distribution Agreement, and the Borrower has secured a wide theatrical release on premium, first run screens satisfactory to the Administrative Agent and downstream distribution generally consistent with the Significant Exploitation Agreements, and (2) it is a feature length Picture to be produced or acquired by a Credit Party or Co-Financing Venture Entity or a Major Studio (in the case of a Revenue Participation) which (i) is scheduled to be delivered no later than one year after the Maturity Date, (ii) unless the Administrative Agent otherwise agrees, shall not be a stage play or concert film, (iii) shall be filmed predominately in color, (iv) shall be predominately in the English language, (v) is expected to receive an MPAA rating of not more restrictive than “R” (or the equivalent thereof) (or, if following receipt thereof, such rating is no more restrictive than “R” (or the equivalent thereof)), (vi) has satisfied or is capable of satisfying all other specifications set forth in each applicable Distribution Agreement to be included in the Borrowing Base, if any, (vii) shall have a running time of no less than 80 minutes, and (viii) unless the Administrative Agent otherwise agrees, has a negative cost of at least $10,000,000. In addition to the foregoing, in the context of a Picture for which a UK P&A Credit is requested, (A) the distributor in the Domestic Territory must be either the Borrower (on a self-distribution basis) or another distributor so long as the Borrower has demonstrated that the Picture will receive a wide theatrical release of not less than 1,000 screens in the Domestic Territory, (B) the Borrower must prior to accessing any UK P&A Credits hold (and have paid any acquisition price for) such Picture’s theatrical exploitation rights in the UK and must be self-distributing such Picture’s theatrical exploitation rights in the UK Territory and hold downstream rights in the UK Territory that are reasonably satisfactory to the Administrative Agent and (C) the Borrower must provide a certification in form and substance satisfactory to the Administrative Agent that such Picture shall have a theatrical screen count of not less than 300 screens in the UK Territory; provided that up to US$3,500,000 of UK P&A Credits may be taken for Pictures that meet all of the aforementioned requirements but for the requirements of clauses (A) and (C) of this sentence. Additionally, any

14 

 

Europa Picture that constitutes a “Qualifying Picture” under the Europa Output Agreement shall constitute a Qualifying Picture hereunder.

“Seasoned Picture” shall mean any Picture which has been theatrically released in the Domestic Territory for at least eight (8) weeks (or such shorter period as may be requested by the Borrower and agreed by the Administrative Agent in its sole discretion); provided that solely for purposes of determining the Remaining UK Value or delivering UK Value Reports, the Picture shall be deemed to have been seasoned in the UK Territory when it has been theatrically released therein for at least eight (8) weeks.

(c)             Section 1.2 of the Credit Agreement is further amended adding the word “domestic” immediately before “free television rights” in clause (b) of the first sentence of the definition of “Unlicensed Free TV Ultimates Percentage” appearing therein.

(d)            Sections 5.1(i), 5.1(r) and 12.1(b)(xi) of the Credit Agreement are hereby amended by replacing the references to “P&A Expenses” wherever they appear therein with references to “P&A Expenses and/or UK P&A Expenses”.

(e)             Sections 5.1(k) and 5.1(m) of the Credit Agreement are hereby restated in their entireties as follows:

“(k) (i) Within twenty (20) Business Days after a Picture becomes a Seasoned Picture and (ii) thereafter, simultaneously with the delivery of the financial statements required under Section 5.1(a) and (b), a Remaining Ultimates Report relating to the Picture, certified by the Borrower as, to its knowledge, being true and correct based on the underlying reports prepared by Ultimates Providers, together with the underlying written ultimate reports provided pursuant to the Distribution Agreements by an Ultimates Provider, and together with each Remaining Ultimates Report delivered hereunder, a calculation of the Five Picture Rolling P&A Coverage Ratio (if applicable). Within twenty (20) Business Days after a Picture that is self-distributed theatrically by the Borrower in the UK Territory becomes a Seasoned Picture, and thereafter, simultaneously with the delivery of the financial statements required under Section 5.1(a) and (b), a UK Value Report relating to the Picture, certified by the Borrower as, to its knowledge, being true and correct based its own estimates and either receivables contracts or written estimates provided by Borrower’s sub-Distributors in the UK Territory, together with the underlying written estimates provided by Borrower’s sub-Distributors, and together with each UK Value Report delivered hereunder, and a calculation of the Five Picture Rolling UK P&A Coverage Ratio (if applicable).

…

(m)       For each Qualifying Picture for which P&A Expenses have been funded by Loans supported or to be supported by a P&A Credit, an updated Approved P&A Budget (and, if applicable an updated Approved UK P&A Budget),

15 

 

together with (if then applicable) an accounting of the amount of P&A Expenses (and, if applicable, UK P&A Expenses) spent to date and remaining to be spent with respect to such Picture, delivered (i) no less than five (5) Business Days prior to the date on which the Borrower shall request the initial Loan for such Picture using a P&A Credit or UK P&A Credit, (ii) concurrently with each subsequent delivery of a Borrowing Base Certificate pursuant to Subsection 5.1(h) to the extent that the Approved P&A Budget or Approved UK P&A Budget, as applicable has been increased or decreased from the amount reflected in the previous Borrowing Base Certificate, (iii) upon request by the Administrative Agent, but only if no such updated Approved P&A Budget or Approved UK P&A Budget, as applicable, has been delivered within the past thirty (30) days, and (iv) ninety (90) days after the initial theatrical release of such Qualifying Picture in the Domestic Territory and/or the UK Territory as applicable.”

3.               Conditions to Effectiveness. The effectiveness of this Amendment is subject to the satisfaction in full of each of the conditions precedent set forth in this Section 3 (the date upon which each of such conditions precedent has been satisfied, the “Effective Date”):

(a)             the Administrative Agent shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors and the Supermajority Lenders;

(b)            the representations and warranties contained in Section 4 hereof are true and correct;

(c)             all costs and expenses due and owing pursuant to Section 10 hereof to the Administrative Agent by the Borrower shall have been paid in full;

(d)            all legal matters incident to this Amendment shall be satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Administrative Agent;

(e)             the Administrative shall have received in immediately available funds, for the benefit of each Lender that executes this Amendment, a fee equal to 0.10% of the Commitments of such approving Lenders;

(f)             the Seer P&A Agent shall have executed an amendment or consent to the Senior Intercreditor Agreement acknowledging and agreeing to (i) the changes to the Corporate Priority Collateral Sub-Borrowing Base and the Production Priority Collateral Sub-Borrowing Base being implemented hereby; and (ii) changes to the definition of Pre-Default Corporate Priority Waterfall and Post-Default Corporate Priority Waterfall as defined in the Senior Intercreditor Agreement to provide for recoupment of loans extended on the basis of UK P&A Credits in a manner at least as favorable to the Lenders as in the context of the P&A Credits.

4.               Representations and Warranties. Each of the Credit Parties represents and warrants that:

(a)             as of the date hereof, there is no capacity under the Capacity Cap in the Seer P&A Facility Credit Agreement (and there will be no capacity throughout the theatrical runs of A Bad Moms Christmas and Molly’s Game) such that the Credit Parties are not and will not be able to make any additional borrowing under the Seer P&A Facility Credit Agreement for A Bad Moms Christmas or Molly’s Game.

16 

 

(b)            each of the Credit Parties has the power and authority to execute and deliver this Amendment and perform its obligations under this Amendment and the Credit Agreement as amended hereby;

(c)             the execution and delivery by each of the Credit Parties of this Amendment, and the performance by such Person of its obligations under this Amendment and the Credit Agreement as amended hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents;

(d)            the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) with the same effect as if made on and as of the date hereof; and

(e)             immediately before and immediately after giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.

5.               Fundamental Document. This Amendment is designated a Fundamental Document by the Administrative Agent.

6.               Full Force and Effect. Except as expressly set forth herein, this Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly amended hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its

17 

 

obligations under the Credit Agreement and the other Fundamental Documents to which it is a party and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as amended by this Amendment.

7.               Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Amendment.

8.               APPLICABLE LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

9.               Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

10.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

11.            Headings. The headings of this Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Amendment.

 

 

[Signature pages follow]

18 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

 

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP, Corporate Strategy & General Counsel

   

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP, Corporate Strategy & General Counsel

 

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and as a Lender

 

By: /s/ Patrick J. Minnick_______________________

Name: Patrick J. Minnick

Title: Executive Director

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

CIT Bank, N.A.

By: /s/ Nicholas Dang_______________________

Name: Nicholas Dang

Title: Vice President

 

 

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

Name of Lender:

BANK OF AMERICA, N.A.

By: /s/ Sharad C Bhatt_______________________

Name: Sharad C Bhatt

Title: Senior Vice President

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

 

MUFG Union Bank, N.A.

By: /s/ Mike Richman_______________________

Name: Mike Richman

Title: Director

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

Name of Lender:

City National Bank

By: /s/ David Acosta______________________

Name: David Acosta

Title: Senior Vice President & Team Leader

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

Comerica Bank

 

 

By: /s/ Adam J. Korn_______________________

Name: Adam J. Korn

Title: Senior Vice President/ AGM

 

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

Name of Lender:

First Republic Bank

By: /s/ Charles Heaphy____________________

Name: Charles Heaphy

Title: Senior Managing Director

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

Name of Lender:

East West Bank

By: /s/ Jodi Chong____________________

Name: Jodi Chong

Title: Vice President

Amendment No. 2 to Second Amended and Restated Credit Agreement

 

 

Name of Lender:

BANK HAPOALIM B.M.

 

 

By: /s/ Lenroy Hackett____________________

Name: Lenroy Hackett

Title: Senior Vice President

 

By: /s/ Marline Alexander____________________

Name: Marline Alexander

Title: First Vice President

 

Amendment No. 2 to Second Amended and Restated Credit Agreement

Exhibit 10.8

WAIVER AND AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

WAIVER AND AMENDMENT NO. 3 dated as of February 22, 2018 (this “Waiver and Amendment”) to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders and as Issuing Bank.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower is in breach of the Overhead covenant set forth in Section 6.23 of the Credit Agreement for the fiscal year ending September 30, 2017 as a result of the Overhead balance at the end of such fiscal year totaling $58,462,542 (the “Overhead Covenant Default”);

WHEREAS, the Borrower has requested, and the Administrative Agent and the requisite Lenders (as described in Section 4 of this Waiver and Amendment) have agreed, that the Overhead Covenant Default be waived and the Credit Agreement be amended on the terms set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Waiver. Subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the undersigned Lenders hereby waive the Overhead Covenant Default notwithstanding anything to the contrary in Section 6.23 of the Credit Agreement.

3.               Amendments to the Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended as of the Effective Date (as defined below), as follows:

(a)             Section (vi) of the definition of “Borrowing Base” in Section 1.2 is replaced in its entirety with “[intentionally omitted]”.

(b)            Paragraph (b) of the definition of “Borrowing Base” in Section 1.2 is hereby amended by both deleting the phrase “clauses (v) and (vi)” there in and replacing it with “clause (v)” and by adding the following language immediately prior to the end of such paragraph (b): “, and the aggregate amount of credit under clause (v) that is attributable to free television rights that have not yet been sold or licensed by the Credit Parties may not at any time exceed $20,000,000.”

 

 

(c)             Section 1.2 of the Credit Agreement is hereby amended by inserting the following defined terms:

“Mile 22” shall mean that certain motion picture currently entitled Mile 22.

“Mile 22 Stretch Debt” shall mean Indebtedness from one or more Credit Parties to Aperture Media Partners, LLC (“Stretch Lender”), the incurrence of which shall be subject to the following requirements:

(a) (i) the aggregate principal amount thereof shall not exceed $5,500,000, (ii) the interest rate (excluding default interest) thereon shall not exceed LIBOR plus ten percent per annum, (iii) the borrowings thereunder shall be based solely on value attributable to the portion of foreign receivables and/or tax incentives for Mile 22 in excess of the Borrowing Base value available therefor under the Facility, (iv) the fees payable to Stretch Lender thereunder shall not exceed 3.00% of the total commitments provided by Stretch Lender, (iv) the obligors of such Indebtedness shall be limited to Mile 22, LLC or any other Credit Party involved solely in the production of Mile 22 (a “Permitted Obligor”) (and for the avoidance of doubt the Borrower may not be an obligor or guarantor of such Indebtedness, other than an unsecured “good boy” guaranty (the enforcement of which shall be subject to the intercreditor agreement described below) from the Borrower in favor of Stretch Lender guaranteeing that the shooting locations of Mile 22 will not be moved from the currently anticipated locations) and such Indebtedness shall otherwise be recourse solely to the products and proceeds of Mile 22 and the tax incentives relating thereto, and not to the general credit of any other Credit Party; provided, that if the foreign (excluding UK) distribution rights are held by a Credit Party that otherwise distributes foreign rights in the Borrower’s Pictures, such foreign rights may be subject to Stretch Lenders’ Liens as permitted by clause (c) below;

(b) all interest and fees contemplated to be payable to Stretch Lender must be self-liquidating in that it they must be reserved from the Mile 22 Stretch Debt borrowings or otherwise payable only pursuant to the terms of the intercreditor agreement referenced in clause (h) below;

(c) any Lien in favor of Stretch Lender securing such Indebtedness shall be limited to Liens in the tax incentives for Mile 22, foreign (excluding UK) rights for Mile 22, and the products and proceeds directly relating thereto, but shall not extend to any distribution rights in the Domestic Territory, the UK Territory or the products or proceeds thereof; provided, that solely to the extent necessary to enable Stretch Lender to, subject in all cases to the intercreditor agreement described below, exercise remedies on the collateral described before this proviso, Stretch Lender may also have (i) a Lien in the physical materials relating to Mile 22 and the copyright in Mile 22 and (ii) an equity pledge in the

2 

 

stock of a Permitted Obligor, but only so long as such Permitted Obligor holds no right or interest in or to: (x) any domestic or UK rights in Mile 22; (y) any physical materials or the copyright in Mile 22 or (z) any assets unrelated to Mile 22;

(d) the Lenders shall have recouped 100% of all loans extended hereunder on the basis of any receivables or tax incentives for Mile 22, together with any interest, fees and expenses relating to Mile 22 with proceeds from foreign (excluding the UK Territory) revenues and tax incentives attributable to Mile 22 (the occurrence thereof, the “Senior Production Debt Recoupment”) before Stretch Lender may be repaid any of the Mile 22 Stretch Debt;

(e) Stretch Lender may have a claim against the proceeds of Mile 22 from the Domestic Territory and UK Territory (the “Self-Distribution Territories”) but only after any P&A Credit and any UK P&A Credit extended against Mile 22 have been recouped, and any loans extended under the Seer P&A Credit Agreement for Mile 22 have been recouped, solely via proceeds of Mile 22 from the Self-Distribution Territories (the occurrence thereof, the “Senior P&A Recoupment”);

(f) prior to the Seasoning Date, no Borrowing Base value may be included on the basis of foreign receivables or tax incentives for Mile 22, even if foreign receivables or tax incentive receivables exist that would in the absence of the Mile 22 Stretch Debt be eligible for Borrowing Base credit, until such point as the Mile 22 Stretch Debt has been repaid in full, unless the intercreditor agreement described below clearly provides for the Loans extended hereunder on the basis thereof to be recouped prior to any recoupment by Stretch Lender. Following the Seasoning Date, foreign receivables or tax incentive receivables that would in the absence of the Mile 22 Stretch Debt be eligible for Borrowing Base credit may be included in the Borrowing Base subject to clause (g) below;

(g) upon the Seasoning of Mile 22, 100% of the aggregate outstanding principal amount (if any) of the Mile 22 Stretch Debt must be deducted from the Borrowing Base;

(h) Stretch Lender must have executed an intercreditor agreement in form and substance satisfactory to the Administrative Agent with the Administrative Agent, Seer P&A Agent and Subordinated Agent, which is consistent with the above and provides for, among other things, that:

(i)       Stretch Lender may take collection and enforcement actions only against Borrower’ foreign (non-UK) obligors and tax credit obligors for Mile 22 or enforcement actions against the equity interests of a Permitted Obligor and may in each case do so only after the occurrence of Senior Production Debt Recoupment and only then if an event of default is in existence under the documentation for the Mile 22 Stretch Debt; provided further that no such collection or enforcement action may

3 

 

be taken against any output partner of the Credit Parties or any sublicensee with multiple sub-license agreements with a Credit Party without prior consultation with the Administrative Agent;

(ii)       any exercise of remedies by the Stretch Lender involving either the copyright or physical materials relating to Mile 22 shall be exercised solely to the extent necessary for Stretch Lender to collect foreign value or tax credit value from Mile 22 or to re-license foreign rights in Mile 22 or to make delivery of copies of Mile 22 to sublicenses in connection with same, and shall in all cases remain subject to the Administrative Agent’s continuing lien therein;

(iii)       other standstill and intercreditor provisions satisfactory to the Administrative Agent.

(d)            Section 1.2 of the Credit Agreement is hereby amended by replacing the following terms in their entireties:

“Five Picture Rolling P&A Coverage Ratio” shall mean the ratio (expressed as a percentage), determined on each applicable P&A Test Date, of (i) the sum (without duplication) of (a) the Net Ultimates for the five most recent STX Pictures distributed by the Borrower and for which P&A Expenses have been funded by the Borrower (with “Free State of Jones” to be the first picture to be included in the first testing pool), plus (b) the Credit Parties’ share (net of third party payment obligations) of any other cash value collected or expected to be collected by the Credit Parties attributable to such STX Pictures to the extent such value extends beyond the portion (if any) thereof that has ever been included in the Borrowing Base and to the extent the Credit Parties are permitted under all applicable contractual arrangements to use such value towards recoupment of their P&A Expenses or loans extended to finance such P&A Expenses, minus (c) solely to the extent that any Reallocated US-UK Excess Value is then in effect under the Five Picture UK Rolling P&A Coverage Ratio, an amount equal to all UK P&A Expenses (from first dollar, whether or not recouped) for the Subject UK Pictures that are also included in the Five Picture Rolling P&A Coverage Ratio, plus (d) solely to the extent that any Reallocated US-UK Excess Value is then in effect under the Five Picture UK Rolling P&A Coverage Ratio, an amount equal to the Net UK Value for the Subject UK Pictures that are also included in the Five Picture Rolling P&A Coverage Ratio divided by (ii) all P&A Expenses with respect to such STX Pictures. Europa Pictures shall not be included in calculations of the Five Picture Rolling P&A Coverage Ratio or, for the avoidance of doubt, in calculations of the P&A Advance Rate.

“Remaining Ultimates” shall mean, with respect to each Seasoned Picture being distributed by an Approved Domestic Distributor and which was released theatrically, the amounts during the First Cycle Period which are projected to thereafter become payable (but in the case of home entertainment ultimates (whether physical or digital home entertainment), limited to rolling 18-month

4 

 

forward looking projections unless home entertainment is being distributed by, and ultimates are being provided by, a Major Studio, and such ultimates from the Major Studio show a longer tenor for projections) to the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) or to a Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation) under the applicable Distribution Agreement for the Domestic Territory from theatrical, home entertainment (including electronic sell-through, SVOD, TVOD and other digital forms) and pay television and free television in the Domestic Territory (or solely in cases where a Major Studio is the distributor and Ultimates Provider, any medium and from any territory for any tenor not in excess of the First Cycle Period) after deduction (without duplication) for any and all amounts deductible, recoupable or which may be offset by the applicable Approved Domestic Distributor from its obligation to make payments to the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) or Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation) (including without limitation, recoupments of any advances, print and advertising or other distribution expenses, and any distribution fees or any payments made or to be made directly by such Approved Domestic Distributor (including, without limitation, any residual, participation or contingent payment) to any Person other than a Credit Party or Co-Financing Venture Entity (with respect to the Credit Parties’ share thereof) or Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation), who is entitled to any portion of the proceeds of such Picture). The calculations of the Remaining Ultimates shall be determined solely based on the written ultimates reports provided by the Ultimates Provider that have been delivered to the Administrative Agent. The Remaining Ultimates for a Picture shall be calculated initially on the date on which such Picture becomes a Seasoned Picture (which initial calculation shall be provided to the Administrative Agent in accordance with Section 5.1(k)(i)) and thereafter in accordance with Section 5.1(k)(ii). The Remaining Ultimates (i) in the case of any receipts anticipated to be received and expenses expected to be incurred beyond one (1) year from the applicable date of determination, will be discounted to a present value based on a notional discount rate equal to the greater of (1) 8% and (2) the rate then accruing on Alternate Base Rate Loans on the applicable calculation date, and (ii) will not include any amounts in which the Administrative Agent (for the benefit of the Secured Parties) does not have a first priority perfected security interest under the UCC and applicable copyright law (subject only to the Specified Permitted Encumbrances described in Section 6.2(b)), other than with respect to Revenue Participations, in which case such perfected security interest requirement shall only apply to the payment obligation of the Major Studio in favor of the Credit Party. For the avoidance of doubt, pay-TV ultimates will be subject to the terms of the applicable rate card agreement. Additionally, Remaining Ultimates may be attributable to theatrical revenue only to the extent that (a) the Credit Parties are the theatrical distributor in the Domestic Territory and (b) the Credit Parties’ calculations of the Remaining Ultimates attributable to theatrical revenues shall be determined on conventional market standards for

5 

 

theatrical films. For the avoidance of doubt, (i) no amounts payable by Europa to the Credit Parties with respect to any Europa Picture may be included as a Remaining Ultimate in the Borrowing Base, (ii) no amounts may be included as a Remaining Ultimate in the Borrowing Base with respect to a Europa Servicing Picture, and (iii) for the avoidance of doubt, any Remaining Ultimates credit for Europa Rights Pictures shall be included solely to the extent attributable to any windows and media in which Borrower holds a license of rights (as opposed to merely provides services for), and after deducting the portion of the anticipated Borrower revenues that shall be payable by the Borrower to Europa or that shall be required to pay applicable residuals or participations.

“Remaining Ultimates Report” shall mean, with respect to any Seasoned Picture, a written estimate of the Remaining Ultimates for such Picture prepared by a Credit Party on the basis of a written ultimate report provided by an Ultimates Provider (that has been, or is concurrently with the Remaining Ultimates Report, delivered to the Administrative Agent), which estimate shall be calculated in the manner described in the definition of “Remaining Ultimates” and shall otherwise be in form and substance reasonably acceptable to the Administrative Agent.

“Ultimates Advance Rate” shall mean, as of any date of determination, (a) with respect to home entertainment ultimates (whether attributable to physical or digital) prior to the first shipping of principal packaged home entertainment materials, 70% and (b) with respect to any other ultimates permitted to be leveraged hereunder, 80%; provided, that if the Ultimates Percentage is less than 100%, then the Ultimates Advance Rate shall be 70% or 80% (as applicable) multiplied by such Ultimates Percentage, except that the Ultimates Advance Rate may never be greater than the applicable percentage set forth above.

“Ultimates Percentage” shall mean, for any date at which it is to be determined (the “Determination Date”) with respect to the four most recent Seasoned Pictures for which Remaining Ultimates have been included in the calculation of the Borrowing Base and for which six months have elapsed from the date upon which each such Picture became a Seasoned Picture, a ratio (expressed as a percentage) of (i) the sum of (a) Remaining Ultimates for such Seasoned Pictures as of the Determination Date, plus (b) the actual proceeds received by the Borrower or any Guarantor (and not payable to a third party) with respect to each such Picture after it became a Seasoned Picture but prior to the Determination Date to (ii) the total Remaining Ultimates for each such Seasoned Picture as determined on the date it first became a Seasoned Picture (including under the Existing Corporate Facility Agreement). Each computation of the Ultimates Percentage performed hereunder shall contain detail satisfactory to the Administrative Agent breaking out the projections and performance relating to the relevant rights by window and by Ultimates Provider (including specifically isolating the media in which Credit Parties self-distribute (e.g., digital home entertainment) versus those where the Credit Parties sub-license rights (e.g., physical home entertainment)).

6 

 

“Ultimates Provider” shall mean, in the case of: (a) anticipated home entertainment revenues in the Domestic Territory (with respect to physical home entertainment), a Major Studio that is distributing home entertainment for the relevant Qualifying Picture, or other home entertainment distributor that is acceptable to the Administrative Agent under an additional or replacement home entertainment distribution agreement that is acceptable to the Administrative Agent, (b) anticipated home entertainment revenues in the Domestic Territory (with respect to digital home entertainment), (i) prior to a license or sale of the relevant home entertainment rights by the Credit Parties, the Borrower and (ii) thereafter, a Major Studio that is distributing home entertainment for the relevant Picture, the Borrower, or other home entertainment distributor that is acceptable to the Administrative Agent under a home entertainment distribution agreement that is acceptable to the Administrative Agent, (c) anticipated pay television revenues in the Domestic Territory, Showtime Networks, and any other pay television distributor that is acceptable to the Administrative Agent under a replacement pay television distribution agreement that is acceptable to the Administrative Agent, (d) free television revenues in the Domestic Territory (i) prior to a license of sale or license of the relevant free television rights, the Borrower and (ii) thereafter, the relevant free television distributors for the Domestic Territory, (e) any territory and media for which it is distributing the relevant Picture, the relevant Major Studio and (g) domestic theatrical revenues, the Borrower if it is directly exploiting the rights in such medium in the Domestic Territory.

(e)             Section 1.2 of the Credit Agreement is hereby amended by deleting the following defined terms and their respective definitions in their entirety: “Unlicensed Free TV Ultimates”, “Unlicensed Free TV Ultimates Advance Rates” and “Unlicensed Free TV Ultimates Percentages”.

(f)             Section 5.1(h)(i) of the Credit Agreement is hereby amended by adding the word “and” immediately before clause (ii), and deleting the following language which directly precedes the parenthetical at the end of Section 5.1(h)(i):

“and (iii) the then current estimate of Unlicensed Free TV Ultimates that are included in the Borrowing Base, together with the Borrower’s underlying written ultimate report”

(g)            Section 5.1(i) of the Credit Agreement is hereby amended by amending and restating the first sentence thereof in its entirety as follows:

“(i)        For each fiscal quarter concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a)), a Liquidity Certificate, reflecting that the ratio, tested at the end of the preceding fiscal quarter, of (i) projected cash sources of the Credit Parties (including, without limitation, cash on hand, capital contributions which have been committed in writing (either unconditionally or subject only to such conditions as

7 

 

shall be acceptable to the Administrative Agent), Borrowings under (x) the Facility (taking into account projected availability based upon the Borrowing Base) and (y) the Seer P&A Credit Agreement and projected cash receipts from operations) to (ii) projected cash uses of the Credit Parties (including debt service, amounts to be spent towards the production or acquisition of and P&A Expenses and/or UK P&A Expenses for Pictures, and all other projected cash expenditures), all as projected on a quarterly basis by the Borrower in good faith for the period from the first day of the current calendar quarter through the end of the four-quarter period commencing with the current calendar quarter, is greater than or equal to 1.10 to 1.00.”

(h)            Section 6.1 of the Credit Agreement is hereby amended by (i) deleting “and” at the end of subsection (o) thereof, (ii) replacing the period at the end of subsection (p) thereof with “; and” and (iii) adding a new subsection (q) as follows:

“(q) the Mile 22 Stretch Debt so long as all provisions of the definition thereof are satisfied”

(i)              Section 6.2 of the Credit Agreement is hereby amended by (i) deleting “and” at the end of subsection (w) thereof, (ii) replacing the period at the end of subsection (x) thereof with “; and” and (iii) adding a new subsection (y) as follows:

“(y) Liens on Mile 22 and assets relating thereto to the extent permitted by the definition of Mile 22 Stretch Debt.”

(j)              Section 8.3(a) of the Credit Agreement is amended by replacing the first sentence thereof in its entirety with the following:

The Credit Parties will establish or maintain Collection Accounts at the office of the Administrative Agent or, solely with respect to two Collection Accounts in existence prior to the Closing Date, at the office of a Lender, or (with the Administrative Agent’s prior consent) a collection account maintained in the name of a third party escrow agent or collection agent in the context of individual Item of Product receipts (including Mile 22 so long as none of the proceeds from the exploitation or sublicensing of Mile 22 in the Domestic Territory or UK Territory are directed or remitted to such account) pursuant to arrangements approved by the Administrative Agent.

(k)            The Credit Agreement is hereby further amended by replacing Schedule 2.16 thereto (“Acceptable Obligors and Allowable Amounts”) with the replacement Schedule 2.16 attached hereto.

4.               Conditions to Effectiveness. The effectiveness of this Waiver and Amendment is subject to the satisfaction in full of each of the conditions precedent set forth in this Section 4 (the date upon which each of such conditions precedent has been satisfied, the “Effective Date”) as follows:

8 

 

(a)             for the effectiveness of Sections 3(a), 3(b), and 3(d) – (f) hereof, the Administrative Agent shall have received counterparts of this Waiver and Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors and the Supermajority Lenders;

(b)            for the effectiveness of Sections 3(c), and 3(g) – (k) hereof, the Administrative Agent shall have received counterparts of this Waiver and Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors and the Required Lenders;

(c)             the representations and warranties contained in Section 5 hereof are true and correct;

(d)            all costs and expenses due and owing pursuant to Section 11 hereof to the Administrative Agent by the Borrower shall have been paid in full;

(e)             all legal matters incident to this Waiver and Amendment shall be satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Administrative Agent;

(f)             the Administrative Agent shall have received a modified Compliance Certificate for the fiscal year ending September 30, 2017 executed by an Authorized Officer of the Borrower, certifying that the Overhead expenditures of the Credit Parties for such fiscal year were not in excess of $58,462,542;

(g)            the Seer P&A Agent shall have executed an amendment to the Seer P&A Facility Credit Agreement granting substantively identical amendments to those set forth in this Waiver and Amendment to the extent applicable to the Seer P&A Facility Credit Agreement (i.e., excluding the amendments set forth herein relating to modifications to the Borrowing Base or Borrowing Base reporting), in form and substance satisfactory to the Administrative Agent; and

(h)            the Subordinated Agent shall have executed an amendment to the Subordinated Loan Agreement granting substantively identical amendments to those set forth in this Waiver and Amendment to the extent applicable to the Subordinated Loan Agreement (i.e., excluding the amendments set forth herein relating to modifications to the Borrowing Base or Borrowing Base reporting), in form and substance satisfactory to the Administrative Agent.

5.               Representations and Warranties. Each of the Credit Parties represents and warrants that:

(a)             each of the Credit Parties has the power and authority to execute and deliver this Waiver and Amendment and perform its obligations under this Waiver and Amendment and the Credit Agreement as amended hereby;

(b)            the execution and delivery by each of the Credit Parties of this Waiver and Amendment, and the performance by such Person of its obligations under this Waiver and Amendment and the Credit Agreement as amended hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement

9 

 

or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents;

(c)             the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) with the same effect as if made on and as of the date hereof; and

(d)            immediately before and immediately after giving effect to this Waiver and Amendment, no Default or Event of Default shall have occurred and be continuing.

6.               Fundamental Document. This Amendment is designated a Fundamental Document by the Administrative Agent.

7.               Full Force and Effect. Except as expressly set forth herein, this Waiver and Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly amended hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its obligations under the Credit Agreement and the other Fundamental Documents to which it is a party and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as amended by this Waiver and Amendment.

8.               Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Waiver and Amendment.

10 

 

9.               APPLICABLE LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

10.            Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Waiver and Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

11.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Waiver and Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

12.            Headings. The headings of this Waiver and Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Waiver and Amendment.

 

 

[Signature pages follow]

11 

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Amendment to be duly executed as of the date first written above.

 

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP, Corporate Strategy & General Counsel

   

Amendment No. 3 to Second Amended and Restated Credit Agreement

 

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP, Corporate Strategy & General Counsel

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and as a Lender

 

By: /s/ Patrick J. Minnick_______________________

Name: Patrick J. Minnick

Title: Executive Director

Amendment No. 3 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

BANK OF AMERICA, N.A.

By: /s/ Sharad C. Bhatt_______________________

Name: Sharad C. Bhatt

Title: Senior Vice President

 

 

Amendment No. 3 to Second Amended and Restated Credit Agreement

 

Name of Lender:

MUFG Union Bank, N.A.

By: /s/ Ryan Bannan_______________________

Name: Ryan Bannan

Title: Vice President

 

Amendment No. 3 to Second Amended and Restated Credit Agreement

 

Name of Lender:

East West Bank

By: /s/ Jodi Chong_______________________

Name: Jodi Chong

Title: First Vice President

Amendment No. 3 to Second Amended and Restated Credit Agreement

 

Name of Lender:

First Republic Bank

By: /s/ Charles Heaphy______________________

Name: Charles Heaphy

Title: Senior Managing Director

Amendment No. 3 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

Emigrant Bank

 

 

By: /s/ John Hart_______________________

Name: John Hart

Title: Vice Chairman

Amendment No. 3 to Second Amended and Restated Credit Agreement

 

 

SCHEDULE 2.16

 

Acceptable Obligors and Allowable Amounts

 

[Schedule omitted.]

Exhibit 10.9 

 

WAIVER AND AMENDMENT NO. 4

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

WAIVER AND AMENDMENT NO. 4 dated as of February 11, 2019 (this “Waiver and Amendment”) to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders and as Issuing Bank.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower has requested that the Lenders consent to an exclusion of up to $21.6 million of non-recurring costs incurred during the fiscal year ended September 30, 2018 from calculations of Overhead for purposes of Section 6.23 of the Credit Agreement during (only) such fiscal year (the “Non-Recurring Cost Exclusion”);

WHEREAS, the Borrower is in breach of the Overhead covenant set forth in Section 6.23 of the Credit Agreement for the fiscal year ending September 30, 2018 as a result of the Overhead balance at the end of such fiscal year totaling $70.3 million on a “net” basis (after giving effect to the Non-Recurring Cost Exclusion described above) (the “Overhead Covenant Default”);

WHEREAS, the Borrower has requested that the Non-Recurring Cost Exclusion be approved and that Overhead Covenant Default be waived, and that the Credit Agreement be amended on the terms set forth herein;

WHEREAS, the Borrower has requested certain modifications to the “Maturity Date” as they relate to the Parent Preferred redemption date;

WHEREAS, while the Borrower has provided drafts of the financial statements for the fiscal year ended September 30, 2018, the Borrower has also requested that the Lenders consent to an extension of the required delivery date for the actual audited financial statements required under Section 5.1(a) of the Credit Agreement, and for the related Compliance Certificate, for the fiscal year ended September 30, 2018, and any reports or other documents required to be delivered concurrently therewith (including those required pursuant to Sections 5.1(c), (d), (i) and (k) of the Credit Agreement) (collectively, the “FY 2018 Financials Materials”); and

WHEREAS, the Borrower and the Lenders have agreed to certain other amendments to the Credit Agreement as more fully set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

 

 

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Waiver and Consent. Subject to the occurrence of the First Option Effective Date (as defined below), the undersigned Lenders hereby (a) consent to the Non-Recurring Cost Exclusion set forth above, (b) consent to an extension of the delivery deadline for the FY 2018 Financials Materials from January 28, 2019 to February 18, 2019 and (c) waive the Overhead Covenant Default, in each case notwithstanding anything to the contrary in Section 6.23 of the Credit Agreement; provided that it shall be a condition subsequent to the foregoing waiver and consent that the Compliance Certificate for the fiscal year ending September 30, 2018, when delivered, reflect the Overhead expenditures of the Credit Parties for such fiscal not in excess (on a “net basis” after giving effect to the $21.6 million Non-Recurring Cost Exclusion) of $70.3 million. Upon the achievement of the First Option Effective Date, the consent granted under the foregoing clause 2(b) shall be effective as of January 27, 2019.

3.               Amendments to the Credit Agreement. Subject to the occurrence of the First Option Effective Date, the Credit Agreement is hereby amended as follows:

(a)             Article 1 of the Credit Agreement is amended by adding the following new Section 1.3 at the end thereof:

“SECTION 1.3 Interest Rates; LIBOR Notification. The interest rate on Eurodollar Loans is determined by reference to the LIBO Rate, which is derived from the London interbank offered rate. The London interbank offered rate is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is possible that commencing in 2022, the London interbank offered rate may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on Eurodollar Loans. In light of this eventuality, public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of the London interbank offered rate. In the event that the London interbank offered rate is no longer available or in certain other circumstances as set forth in Section 2.7(b)(ii) of this Agreement, such Section 2.7(c) provides a mechanism for determining an alternative rate of interest. The Administrative Agent will notify the Borrower, pursuant to Section 2.7, in advance of any change to the reference rate upon which the interest rate on Eurodollar Loans is based. However, the Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definition of “LIBO Rate” or with respect to any alternative or successor rate thereto, or replacement rate thereof, including

2 

 

without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate, as it may or may not be adjusted pursuant to Section 2.7(c), will be similar to, or produce the same value or economic equivalence of, the LIBO Rate or have the same volume or liquidity as did the London interbank offered rate prior to its discontinuance or unavailability.”

(b)            Section (i) of the definition of “Borrowing Base” in Section 1.2 is amended and restated in its entirety as follows:

“(i) the P&A Advance Rate multiplied by the Credit Parties’ share of each STX Qualifying Picture’s Approved P&A Budget (the “STX P&A Credit”); provided that (A) the Borrowing Base credit under this clause (i) shall be capped at $30,000,000 for each STX Qualifying Picture and (B) the total amount of P&A Credits in the Borrowing Base under this clause (i) and clauses (ii) and (iii) below, when added together, may not exceed $95,000,000 in the aggregate at any point in time (but with any STX P&A Credit for Uglydolls not counting against the aforementioned $95,000,000 aggregate cap), plus”

(c)             Section (xii) of the definition of “Borrowing Base” in Section 1.2 is amended and restated in its entirety as follows:

“(xii) 50% of Eligible Receivables from other obligors not specified on Schedule 2.16 hereof; provided, that the aggregate amount of Borrowing Base credit under this clause (xii) shall at no time exceed (A) $750,000 for any single obligor or Affiliated Group or (B) $20,000,000 at any point in time, plus”

(d)            The proviso at the end of the definition of “Unsold Rights Credit” in Section 1.2 is amended and restated in its entirety as follows:

“provided, that on any date of determination (x) at least three (3) Major Territories shall have been sold and (y) at least two (2) Major Territories remain unsold. Notwithstanding the foregoing, commencing with the first Picture for which an Unsold Rights Credit is requested (and tested as set forth below), the 50% advance rate for such Picture shall be subject to decrease (but not increase) to a percentage equal to the product of 50% multiplied by a fraction: (a) the numerator of which is the actual aggregate sale proceeds received (or receivable pursuant to Eligible Receivables) with respect to sold Major Territories for such Picture (but only to the extent Unsold Rights Credit value had previously been included in the Borrowing Base), and (b) the denominator of which is the aggregate Major Territory Value Forecast for such Major Territories included in the calculation of the Unsold Rights Credit given at the time of the initial determination of each such component of the aggregate Unsold Rights Credit for such Picture. Such computation for each such Picture will be made upon the sale of a third Major Territory in respect of such Picture and at each subsequent Major Territory sale in respect of such Picture, and the adjustment shall apply to the entire Unsold Rights Credit in respect of such Picture at all times from the date of

3 

 

such computation but prior to the next adjustment computation. The Unsold Rights Credit for a Picture may not, after it has been included in the Borrowing Base, be subsequently increased.”

(e)             The proviso at the end of the definition of “Unsold TV Rights Credit” in Section 1.2 is amended and restated in its entirety as follows:

“provided, that on any date of determination (x) the Domestic Territory and at least two (2) Major Territories shall have been sold and (y) at least two (2) Major Territories remain unsold. Notwithstanding the foregoing, commencing with the first Program for which an Unsold TV Rights Credit is requested (and tested as set forth below), the 25% (or 50%, as the case may be) advance rate for such Program shall be subject to decrease (but not increase) to a percentage equal to the product of 25% (or 50%, as the case may be) multiplied by a fraction: (a) the numerator of which is the actual aggregate sale proceeds received (or receivable pursuant to Eligible Receivables) with respect to sold Major Territories for such Program (but only to the extent Unsold TV Rights Credit value had previously been included in the Borrowing Base), and (b) the denominator of which is the aggregate Major Territory Value Forecast for such Major Territories included in the calculation of the Unsold TV Rights Credit given at the time of the initial determination of each such component of the aggregate Unsold TV Rights Credit for such Program. Such computation for each such Program will be made upon the sale of a third Major Territory in respect of such Program and at each subsequent Major Territory sale in respect of such Program, and the adjustment shall apply to the entire Unsold TV Rights Credit in respect of such Program at all times from the date of such computation but prior to the next adjustment computation. The Unsold TV Rights Credit for a Program may not, after it has been included in the Borrowing Base, be subsequently increased.”

(f)             Section 1.2 of the Credit Agreement is hereby amended by adding the following new defined terms in the appropriate alphabetical order:

“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.

“Distribution Partner Corridor Reserve” shall mean a reserve to be established at the election of the Administrative Agent to cover projected corridor entitlements of any Approved Co-Financier to revenues of a Qualifying Picture that would be payable to such Approved Co-Financier before the recoupment in full of all P&A Expenses of such Picture plus interest thereon.

“P&R Liabilities” shall mean any participation, deferment, residual and box office bonus obligations of the Credit Parties, whether owed to talent, producers, co-financiers or other third parties.

4 

 

“P&R Reserve” shall mean a reserve to be established for any P&R Liabilities not otherwise deducted from amounts included in the Borrowing Base that have accrued and become payable in accordance with Section 3.30 hereof but have not yet been paid.

(g)            Section 1.2 of the Credit Agreement is hereby amended by replacing the following terms in their entireties:

“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 NYFRB 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%; provided that, for purposes of this definition, LIBOR for any day shall be based on the LIBO Screen Rate (or if the LIBO Screen Rate is not available for such one month Interest Period, the Interpolated Rate) at approximately 11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or LIBOR shall be effective from and including the effective date of such change in the Prime Rate, NYFRB Rate or LIBOR, respectively. If the Alternate Base Rate is being used as an alternative rate of interest pursuant to Section 2.7 hereof, then the Alternate Base Rate shall be the greater of clauses (i) and (ii) above and shall be determined without reference to clause (iii) above. For the avoidance of doubt, if the Alternate Base Rate as determined pursuant to the foregoing would be less than zero, such rate shall be deemed to be zero for purposes of this Credit Agreement.

“Digital Product” shall mean any short-form digital content (other than a Picture or a Program) intended for initial exploitation through the internet (e.g. YouTube) or mobile applications and/or intended to be consumed via an interactive computer generated experience taking place within a simulated environment (i.e., “virtual reality”); provided that the term “Digital Product” shall not include short form or long form episodic Programs or motion pictures intended for initial exploitation on a SVOD platform like Netflix or on Amazon.

“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions (as determined in such manner as the NYFRB shall set forth on its public website from time to time) and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate; provided that if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Credit Agreement.

“LIBOR Base Rate” shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the LIBO Screen Rate at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) then the LIBO Rate shall be the Interpolated Rate.

5 

 

“P&A Reserve” shall mean (1) in the context of all P&A Credits other than UK P&A Credits (without duplication), (A) with respect to any Eligible Receivable to be included in the Borrowing Base that requires that the Picture be released theatrically in the Domestic Territory with minimum P&A Expenses, a reserve established by the Borrower from its cash equity, availability under the Seer P&A Facility Credit Agreement and/or availability under this Credit Agreement (as applicable) (and satisfactory evidence of such reserve shall have been provided to the Administrative Agent) in the amount necessary to pay the Credit Parties’ share of the aggregate remaining P&A Expenses in order to meet such requirements, in each case net of remaining amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such remaining P&A Expenses; and (B) a reserve, to be established upon the inclusion of any P&A Credits for a Qualifying Picture in the Borrowing Base for which a Credit Party has committed to pay or is otherwise responsible for paying P&A Expenses, in an amount equal as of any date of determination to (x) 100% of the portion of the Approved P&A Budget that remains unspent in cash minus (y) the sum of (i) the portion of the Approved P&A Budget that remains unspent in cash that will be funded under the Seer P&A Credit Agreement, (ii) the portion of the Approved P&A Budget that remains unspent in cash that will be funded with amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such remaining P&A Expenses and (iii) the portion of the Approved P&A Budget that remains unspent in cash that is covered by a back-stop or other funding assurance reasonably acceptable to the Administrative Agent and (2) in the context of UK P&A Credits, a reserve, to be established upon the inclusion of any UK P&A Credits for a Qualifying Picture, in an amount equal as of any date of determination to (x) 100% of the portion of the Approved UK P&A Budget that remains unspent in cash minus (y) (i) the portion of the Approved UK P&A Budget that remains unspent in cash that will be funded with amounts that an Approved Co-Financier or an Approved Co-Financing Venture Counterparty which has entered into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (if such an agreement is otherwise required hereunder) has committed to fund on a cash flow basis towards such remaining UK P&A and (ii) the portion of the Approved UK P&A Budget that remains unspent in cash that is covered by a back-stop or other funding assurance reasonably acceptable to the Administrative Agent.

“Prime Rate” shall mean the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases

6 

 

to quote such rate, the highest per annum interest rate published by the Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.

“Remaining Ultimates” shall mean, with respect to each Seasoned Picture being distributed by an Approved Domestic Distributor and which was released theatrically, the amounts during the First Cycle Period which are projected to thereafter become payable (but in the case of home entertainment ultimates (whether physical or digital home entertainment), limited to rolling 18-month forward looking projections unless home entertainment is being distributed by, and ultimates are being provided by, a Major Studio, and such ultimates from the Major Studio show a longer tenor for projections) to the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) or to a Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation) under the applicable Distribution Agreement for the Domestic Territory from theatrical, home entertainment (including electronic sell-through, SVOD, TVOD and other digital forms) and pay television and free television in the Domestic Territory (or solely in cases where a Major Studio is the distributor and Ultimates Provider, any medium and from any territory for any tenor not in excess of the First Cycle Period) after deduction (without duplication) for any and all amounts deductible, recoupable or which may be offset by the applicable Approved Domestic Distributor from its obligation to make payments to the Credit Parties or Co-Financing Venture Entities (with respect to the Credit Parties’ share thereof) or Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation) (including without limitation, recoupments of any advances, print and advertising or other distribution expenses, and any distribution fees or any payments made or to be made directly by such Approved Domestic Distributor (including, without limitation, any residual, participation or contingent payment) to any Person other than a Credit Party or Co-Financing Venture Entity (with respect to the Credit Parties’ share thereof) or Major Studio (with respect to the Credit Parties’ share thereof pursuant to a Revenue Participation), who is entitled to any portion of the proceeds of such Picture). The calculations of the Remaining Ultimates shall be determined solely (subject to the proviso at the end of this sentence) based on the written ultimates reports provided by the Ultimates Provider that have been delivered to the Administrative Agent, provided that, in the case of physical home entertainment ultimates, the Remaining Ultimates shall be determined by deducting the greater of the unrecouped costs and expenses that may be recouped by the Major Studio Ultimates Provider as reflected in (x) the most recent Ultimates Report and (y) the most recent accounting statement delivered by the Major Studio Ultimates Provider. The Remaining Ultimates for a Picture shall be calculated initially on the date on which such Picture

7 

 

becomes a Seasoned Picture (which initial calculation shall be provided to the Administrative Agent in accordance with Section 5.1(k)(i)) and thereafter in accordance with Section 5.1(k)(ii). The Remaining Ultimates (i) in the case of any receipts anticipated to be received and expenses expected to be incurred beyond one (1) year from the applicable date of determination, will be discounted to a present value based on a notional discount rate equal to the greater of (1) 8% and (2) the rate then accruing on Alternate Base Rate Loans on the applicable calculation date, and (ii) will not include any amounts in which the Administrative Agent (for the benefit of the Secured Parties) does not have a first priority perfected security interest under the UCC and applicable copyright law (subject only to the Specified Permitted Encumbrances described in Section 6.2(b)), other than with respect to Revenue Participations, in which case such perfected security interest requirement shall only apply to the payment obligation of the Major Studio in favor of the Credit Party. For the avoidance of doubt, pay-TV ultimates will be subject to the terms of the applicable rate card agreement. Additionally, Remaining Ultimates may be attributable to theatrical revenue only to the extent that (a) the Credit Parties are the theatrical distributor in the Domestic Territory and (b) the Credit Parties’ calculations of the Remaining Ultimates attributable to theatrical revenues shall be determined on conventional market standards for theatrical films. For the avoidance of doubt, (i) no amounts payable by Europa to the Credit Parties with respect to any Europa Picture may be included as a Remaining Ultimate in the Borrowing Base, (ii) no amounts may be included as a Remaining Ultimate in the Borrowing Base with respect to a Europa Servicing Picture, and (iii) for the avoidance of doubt, any Remaining Ultimates credit for Europa Rights Pictures shall be included solely to the extent attributable to any windows and media in which Borrower holds a license of rights (as opposed to merely provides services for), and after deducting the portion of the anticipated Borrower revenues that shall be payable by the Borrower to Europa or that shall be required to pay applicable residuals or participations.

“Remaining Ultimates Report” shall mean, with respect to any Seasoned Picture, a written estimate of the Remaining Ultimates for such Picture prepared by a Credit Party on the basis of a written ultimate report provided by an Ultimates Provider (that has been, or is concurrently with the Remaining Ultimates Report, delivered to the Administrative Agent), which estimate shall be calculated in the manner described in the definition of “Remaining Ultimates” and shall otherwise be in form and substance reasonably acceptable to the Administrative Agent. To the extent the computation of the Ultimates Percentage, as determined solely in the context of digital home video Remaining Ultimates for Pictures for which Borrower is the initial Ultimates Provider, yields a percentage of less than 100% for more than one Determination Date, the Administrative Agent or Required Lenders may thereafter request that the Remaining Ultimates Reports prepared by the Credit Parties for digital home entertainment ultimates be reviewed by a third party acceptable to the Administrative Agent or the Required Lenders, as applicable, in their reasonable discretion (any such review a “Third Party Review”) prior to the inclusion of such ultimates in the Borrowing Base. If the Third Party Review indicates that a

8 

 

lower “Remaining Ultimates” calculation should be utilized in respect of such digital home entertainment ultimates, then the Third Party Review’s estimate for such Remaining Ultimates shall be included in the Remaining Ultimates Report for such digital home entertainment ultimates in place of the Credit Parties’ estimate.

“Reserves” shall mean collectively, the sum of the Production/Acquisition Cost Reserves, the P&A Reserves, the P&R Reserves and the Distribution Partner Corridor Reserves.

(h)            Section 2.7 of the Credit Agreement is hereby amended by adding the following new clause (c) at the end thereof:

“(c) If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (b)(ii) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (b)(ii) have not arisen but either (w) the supervisor for the administrator of the LIBO Screen Rate has made a public statement that the administrator of the LIBO Screen Rate is insolvent (and there is no successor administrator that will continue publication of the LIBO Screen Rate), (x) the administrator of the LIBO Screen Rate has made a public statement identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely cease to be published by it (and there is no successor administrator that will continue publication of the LIBO Screen Rate), (y) the supervisor for the administrator of the LIBO Screen Rate has made a public statement identifying a specific date after which the LIBO Screen Rate will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the LIBO Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the LIBO Screen Rate may no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to the LIBO Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Credit Agreement to reflect such alternate rate of interest and such other related changes to this Credit Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Margin); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Credit Agreement. Notwithstanding anything to the contrary in Section 13.10, such amendment shall become effective without any further action or consent of any other party to this Credit Agreement so long as the Administrative Agent shall not have received, within five Business Days of the date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Required Lenders stating that such Required Lenders object to such amendment. Until an alternate rate of interest shall be determined in accordance with this clause (c) (but, in the case of the circumstances described in

9 

 

clause (ii)(w), clause (ii)(x) or clause (ii)(y) of the first sentence of this Section 2.7(c), only to the extent the LIBO Screen Rate for such Interest Period is not available or published at such time on a current basis), (x) any interest election request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Borrowing based on LIBOR shall be ineffective and (y) if any Borrowing Notice requests a Borrowing based on LIBOR, such Borrowing shall be made as a Borrowing based on the Alternate Base Rate.”

(i)              Section 3.24 of the Credit Agreement is hereby amended by adding the following sentence at the end thereof: “As of the First Option Effective Date (as defined in Amendment No. 4 to this Credit Agreement), to the best knowledge of the Borrower, the information included in the Beneficial Ownership Certification provided on or prior to the First Option Effective Date to any Lender in connection with this Credit Agreement is true and correct in all material respects.”

(j)              Article 3 of the Credit Agreement is hereby amended by adding the following new Section 3.30 at the end thereof:

“Section 3.30 Participation Payments. Each Credit Party has complied in all material respects with any its payment obligations for P&R Liabilities as and when due on a timely basis; provided, that the Credit Parties may make interpretations in their reasonable judgment as to the appropriate dates of accrual and payment for any such P&R Liabilities, so long as balance sheet reserves (or a P&R Reserve, which may be offset by cash in the Borrowing Base pursuant to clause (xvi) of the Borrowing Base) shall be taken for any amounts accrued and payable but not yet paid.”

(k)            Section 5.1(g) of the Credit Agreement is hereby amended by adding the following language immediately after the reference to 6.24 in clause (v) therein: “and demonstrating the utilization of the Investment Baskets described in Section 6.4 hereof,”.

(l)              Section 5.1(h) of the Credit Agreement is hereby amended by deleting Subsection 5(h)(ii) in its entirety, and by deleting the designation of “(i)” appearing at the beginning of the current Subsection 5(h)(i), such that what is presently Subsection 5(h)(i) shall become the entirety of Section 5.1(h).

(m)           Section 5.1(i) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Within sixty (60) days after the end of each calendar quarter, a Liquidity Certificate, reflecting that the ratio, tested at the end of such preceding fiscal quarter, of (i) projected cash sources of the Credit Parties (including, without limitation, cash on hand, capital contributions which have been committed in writing (either unconditionally or subject only to such conditions as shall be acceptable to the Administrative Agent), Borrowings under (x) the Facility (taking into account projected availability based upon the Borrowing Base) and (y) the Seer P&A Credit Agreement and projected cash receipts from operations)

10 

 

to (ii) projected cash uses of the Credit Parties (including debt service, amounts to be spent towards the production or acquisition of and P&A Expenses and/or UK P&A Expenses for Pictures, and all other projected cash expenditures), all as projected on a quarterly basis by the Borrower in good faith for the period from the first day of the current calendar quarter through the end of the four-quarter period commencing with the current calendar quarter, is greater than or equal to 1.10 to 1.00. The Liquidity Certificate for any unreleased Item of Product may not assume that the Credit Parties’ share of revenue or gross receipts will exceed the Credit Parties’ share of negative cost plus the Credit Parties’ share of P&A Expenses and/or UK P&A Expenses. Additionally, the Borrowers shall provide supporting details and back-up for any calculation contained within any Liquidity Certificate, including the underlying performance assumptions for unreleased Pictures reflected in the projected cash sources upon the request from the Administrative Agent or any Lender (any such request by a Lender to be coordinated through the Administrative Agent)”.

(n)            Section 5.1(j) of the Credit Agreement is hereby amended by deleting “within sixty (60) days after the end of each calendar quarter” therein and replacing it with “concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a))”.

(o)            Section 5.1(p) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(p) Promptly upon written request therefor, any information required by the Administrative Agent, the Issuing Bank or any Lender under or in connection with the USA Patriot Act, the Beneficial Ownership Regulation and any other applicable “know your customer” or anti-money laundering rules and regulations.”

(p)            Section 5.1(q) of the Credit Agreement is hereby amended by deleting “Within sixty (60) days after the end of each calendar quarter” therein and replacing it with “Concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a))”

(q)            Section 5.1 of the Credit Agreement is hereby amended by adding the following new clauses (w) and (x) at the end thereof:

“(w) For each fiscal quarter, concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a)), detailed reports in form and substance satisfactory to the Administrative Agent (and with supporting details satisfactory to the Administrative Agent) with respect to any P&R Liabilities that constitute accrued liabilities on the balance sheet as of such quarter-end date, reflecting: (i) an aging schedule, on a product-by-product basis, detailing the payment windows during which such balance sheet P&R Liabilities are anticipated to become due and payable (with the time windows to be

11 

 

satisfactory to the Administrative Agent), or, if applicable, the extent to which such P&R Liabilities already became due and payable prior to such quarter-end date, (ii) the extent to which any such P&R Liabilities were paid prior to the delivery of the reporting required by this clause (w); (iii) a break-out aging schedule with respect to any balance sheet P&R Liabilities described in clause (i) above that are attributable to income or payments that were already received by or credited to the Credit Parties prior to such quarter-end date; and (iv) reconciliations against prior P&R Liability reporting, in each case with supporting detail; and

(x) for each fiscal quarter, concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a)), detailed reports in form and substance satisfactory to the Administrative Agent, (i) detailing the P&A Expenses and UK P&A Expenses of the Credit Parties that were incurred but not yet paid as of the last Business Day of the preceding fiscal quarter, on a Picture-by-Picture Basis, (ii) an aging schedule detailing the payment terms on which such P&A Expenses and UK P&A Expenses are to become due and payable and (iii) the extent to which any such accrued but unpaid P&A Expenses and UK P&A Expenses were paid between the end of the preceding fiscal quarter and the date of the reporting required by this clause (x), in each case with supporting detail;”

(r)             Section 5.4 of the Credit Agreement is hereby amended by adding the following new clause (c) at the end thereof:

“(c) Promptly upon any Authorized Officer of a Credit Party obtaining knowledge of any change in the information provided in the Beneficial Ownership Certification delivered to such Lender that would result in a change to the list of beneficial owners identified in such certification, such Credit Party shall promptly give written notice thereof to the Administrative Agent and provide such other information as may be available to it to enable the Administrative Agent and the Lenders to evaluate such matters.”

(s)             Section 6.2 of the Credit Agreement is hereby amended by inserting the following new clause (z) at the end thereof:

“(z) Liens held by third-party producers of Pictures in which STX is acquiring distribution rights, or in favor of production lenders or production financiers to such producers, in each case so long as the scope of such Liens and the obligations secured thereby are both (i) limited to the relevant Picture(s) in which STX is acquiring distribution rights and (ii) satisfactory to the Administrative Agent in its reasonable discretion, and so long as any holder of such Liens is the subject of an interparty agreement or an intercreditor agreement with the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent in all respects.”

12 

 

(t)              Section 6.22 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Section 6.22 Production Exposures.

(a)             Permit the Production Exposure for any Program to exceed 40% of such Program’s Budgeted Negative Cost.

(b)            Permit the aggregate Production Exposures for all Programs (which shall include any Programs and any pilots of Programs that have been both ordered by a domestic network or SVOD or AVOD platform such as Netflix, Amazon, Hulu or YouTube and that have been green-lit by the Borrower) in active production to exceed at any one time $20,000,000.

(c)             Permit the aggregate at-risk capital for all non-virtual reality Digital Product (“at-risk capital” to mean for purposes of clauses (c) and (d) of this Section 6.22 the Credit Parties’ share of Budgeted Negative Cost for Digital Product net of any anticipated tax incentives and contracted receivables) in active production (including pilots in active production) to exceed at any one time $500,000.

(d)            Permit the aggregate at-risk capital for all virtual reality Digital Product in active production (including pilots in active production) to exceed at any one time $1,500,000.

For the avoidance of doubt, pure producer-for-hire Programs (and pilots for pure producer-for-hire Programs), in which all (or substantially all, but solely in the case of Programs for which the net production costs are cash flowed by an unaffiliated third party and for which the Borrower or any other Credit Party is cash flowing production costs solely with respect to the territorial production spend necessary to collect a Tax Incentive Receivable) production costs are being cash-flowed by third parties and with no intellectual property rights (or only de minimis intellectual property rights) to be held by Credit Parties, shall not be considered for purposes of Sections 6.22(a) or (b).”

(u)            The Credit Agreement is hereby further amended by replacing Schedule 2.16 thereto (“Acceptable Obligors and Allowable Amounts”) with the replacement Schedule 2.16 attached hereto.

4.               Additional Amendments to Credit Agreement. Subject to the occurrence of the Second Option Effective Date (as defined below), the Credit Agreement is hereby amended as follows:

(a)             Section 1.2 of the Credit Agreement is hereby amended by adding the following defined terms in the proper alphabetical order:

13 

 

“Amendment No. 4” shall mean that certain Waiver and Amendment No. 4 to Second Amended and Restated Credit Agreement dated as of February 11, 2019 among inter alios the Administrative Agent and the Credit Parties.

“Non-Extending Preferred Holder” shall mean any holder of Parent Preferred who, did not execute the Parent Charter Amendment (as defined in Amendment No. 4).

“Parent Retained Equity” shall mean cash equity retained by the Parent in connection with Amendment No. 4, in an amount not to exceed $20,000,000.

(b)            Section 1.2 of the Credit Agreement is hereby amended by replacing the following terms in their entirety:

“Maturity Date” shall mean the earlier of (i) October 7, 2021, and (ii) such other date as the Loans shall become due and payable in accordance with Article 7 hereof; and (iii) March 1, 2019; provided that clause (iii) shall only apply if by such date the Borrower has not either (a) extended the deadline for the mandatory repayment of Parent’s Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock (collectively, “Parent Preferred”) from December 3, 2019 to a date that is at least nine months and one day after October 7, 2021, (b) redeemed all such Parent Preferred or (c) converted all of the Parent Preferred into common stock of the Parent.

“Parent Preferred” shall mean, collectively, Parent’s Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock and any other class of preferred Equity Interests issued by the Parent.

(c)             Section 6.29 of the Credit Agreement is hereby amended and restated in its entirety as follows:

SECTION 6.29 Holding Company. With respect to Parent (but not the Credit Parties), carry on any business, own any assets or incur any liabilities except for: (i) (a) the participation in tax, accounting and other administrative activities as the parent of the consolidated group of companies (including the Credit Parties) and provision of administrative services (excluding treasury services) to its Subsidiaries of a type customarily provided by a holding company to its Subsidiaries; (b) ownership of (A) Equity Interests in the Borrower (but only if those Equity Interests are subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties), (B) Equity Interest in other Subsidiaries of Parent (including activities relating to the formation and capitalization of such subsidiaries), (C) cash and Cash Equivalents to be used for administrative purposes and (D) certain other nominal assets incidental to the business or activities described in this clause (b); (c) the maintenance of its corporate existence; (d) the execution and delivery of the Fundamental Documents and the “Fundamental Documents” referenced in each of the Seer P&A Facility Credit Agreement and the Subordinated Loan Agreement to which it is a party and the

14 

 

performance of its obligations thereunder; (e) activities reasonably incidental to the businesses and activities described in the foregoing clauses (a) through (d), (f) holding the Parent Retained Equity until payment of the Parent Equity to Non-Extending Preferred Holders and/or payment of any applicable consent fee to consenting holders of the Parent Preferred, so long as the consent fee to any such consenting holder shall not exceed the amount of the liquidation value of the Parent Preferred held by such holder (the “Parent Preferred Consent Fees”); provided that (1) such Parent Retained Equity shall be subject to the security arrangements and the covenants and agreements required by Amendment No. 4 and (2) that such payment to the Non-Extending Preferred Holders or payments of Parent Preferred Consent Fees may not be made to the extent that any Default or Event of Default is continuing at such time or would result therefrom, and (g) any other activities consented to by the Administrative Agent in writing in its sole discretion; and (ii) (a) any liabilities under the Fundamental Documents to which it is a party and under the “Fundamental Documents” referenced in each of the Seer P&A Facility Credit Agreement and the Subordinated Loan Agreement to which it is a party, (b) any non-recourse pledge of its Equity Interests in any other Subsidiary and (c) professional fees and administration costs incurred in the ordinary course of business as a holding company.

5.               Conditions to Effectiveness:

5A. The effectiveness of any of Section 2, Section 3 or Section 4 of this Waiver and Amendment is subject to (in addition to the applicable conditions set forth in Sections 5B and 5C) the satisfaction in full of each of the conditions precedent set forth in this Section 5A as follows (the following, the “Baseline Conditions”):

(i)              the Administrative Agent shall have received counterparts of this Waiver and Amendment that, when taken together, bear the signatures of the Parent, Borrower and the Guarantors;

(ii)            the Administrative Agent shall have received satisfactory evidence that at least $100,000,000 of cash equity contributions have been received by the Parent, in each case since November 30, 2018 and with no put or redemption rights exercisable prior to nine months plus one day after the scheduled Maturity Date and otherwise on terms and conditions satisfactory to the Administrative Agent and that Parent shall have contributed at least $80,000,000 of such proceeds to Borrower (the portion of such equity proceeds that are retained at the Parent, which may not exceed the lesser of (a) $20,000,000, and (b) the aggregate amount of the sum of all amounts required to redeem the Non-Extending Preferred Holders (including any accrued interest and/or accrued dividends to be owed to the Non-Extending Preferred Holders described below) on December 31, 2019 plus Parent Preferred Consent Fees owed to holders of the Parent Preferred in connection with the Parent Charter Amendment, is referred to herein as the “Parent Retained Equity”);

(iii)          the Administrative Agent shall have received the Third Amended and Restated Certificate of Incorporation of Parent approved by holders of at least two-thirds of each

15 

 

class of Parent Preferred in the form attached hereto as Exhibit A (the “Parent Charter Amendment”), which Parent Charter Amendment shall formally amend the date of the mandatory redemption rights with respect to all Parent Preferred owned by each holder that executes the Parent Charter Amendment such that they may not be exercised prior to nine months plus one day after October 7, 2021 pursuant to documentation satisfactory to the Administrative Agent;

(iv)          the aggregate amount required to redeem the Parent Preferred (including any accrued interest and/or accrued dividends) for all holders of Parent Preferred that have not executed the Parent Charter Amendment (each such holder a “Non-Extending Preferred Holder”) may not exceed $20,000,000 in the aggregate;

(v)            the representations and warranties contained in Section 6 hereof are true and correct;

(vi)          all costs and expenses due and owing pursuant to Section 12 hereof to the Administrative Agent by the Borrower shall have been paid in full; and

(vii)        all legal matters incident to this Waiver and Amendment shall be satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Administrative Agent.

For the avoidance of doubt, in addition to the achievement of the Baseline Conditions, (i) the provisions of Sections 2 and 3 of this Amendment shall not be effective until the satisfaction of the conditions precedent in Section 5B and (ii) the provisions of Section 4 of this Amendment shall not be effective until the satisfaction of the conditions precedent in Section 5C.

5B. The effectiveness of Section 2 and Section 3 of this Waiver and Amendment are also subject to the satisfaction in full of each of the conditions precedent set forth in this Section 5B (the date on which each of such conditions precedent has been satisfied, the “First Option Effective Date”):

(i)              the satisfaction of each of the Baseline Conditions;

(ii)            the Administrative Agent shall have received counterparts of this Waiver and Amendment that, when taken together, bear signatures from Lenders who have checked Box 1 on their counterpart signature page who collectively constitute the Required Lenders;

(iii)          the Administrative Agent shall have received from the Borrower, for the benefit of each Lender that has executed this Amendment and checked Box 1 of their counterpart signature page (any such Lender a “First Option Approving Lender”), an amendment fee equal to 0.025% of the Commitments held by each such First Option Approving Lender immediately prior to the First Option Effective Date; and

(iv)          immediately before (but giving pro forma effect to the Non-Recurring Cost Exclusion and the Waiver of the Overhead Covenant Default that would become effective upon the First Option Effective Date) and immediately after giving effect to the amendments and waivers to occur on the First Option Effective Date, no Default or Event of Default shall have occurred and be continuing.

16 

 

5C. The effectiveness of Section 4 of this Waiver and Amendment is also subject to the satisfaction in full of each of the conditions precedent set forth in this Section 5C (the date upon which each of such conditions precedent has been satisfied, the “Second Option Effective Date”) as follows:

(i)              the satisfaction of each of the Baseline Conditions;

(ii)            the Administrative Agent shall have received counterparts of this Waiver and Amendment that, when taken together, bear the signatures of all of the Lenders, and all such Lenders have checked Box 2 on their counterpart signature page;

(iii)          the Administrative Agent shall have received from the Borrower, for the benefit of each Lender an amendment fee equal to 0.025% of the Commitments held by each such Lender;

(iv)          the Administrative Agent shall have received (i) from Parent, a first priority security interest (for the benefit of the Secured Parties) in the Parent Retained Equity and all proceeds thereof, and (ii) to the extent requested by the Administrative Agent, a deposit account control agreement granting the Administrative Agent (for the benefit of the Secured Parties) springing cash dominion over any deposit account in which any proceeds of the Parent Equity Contribution are held, or other cash collateral arrangements acceptable to the Administrative Agent, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent;

(v)            the Parent shall have also executed parallel security documents granting liens on the Parent Retained Equity in favor of the Seer P&A Agent and the Subordinated Agent (but on a subordinated basis as set forth in the Senior Intercreditor Agreement with respect to the Seer P&A Agent and the Subordination Agreement with respect to the Subordinated Agent), in each case in form and substance satisfactory to the Administrative Agent and, if required pursuant to the Senior Intercreditor Agreement or Subordination Agreement, such documentation shall constitute an acknowledgment from the Seer P&A Agent and the Subordinated Agent of the amendments to Section 6.29 of the Credit Agreement set forth herein, in form and substance satisfactory to the Administrative Agent and that such amendments are effectively binding on them;

(vi)          immediately before and immediately after giving effect to the amendments and waivers to occur on the Second Option Effective Date, no Default or Event of Default shall have occurred and be continuing (with the sole exception of the Overhead Covenant Default if the First Option Effective Date has not yet occurred); and

(vii)        all legal matters related to the foregoing Section 5C shall be satisfactory to Morgan, Lewis & Bockius LLP, counsel to the Administrative Agent.

5D. It is acknowledged and agreed that the First Option Effective Date may occur without the Second Option Date occurring (i.e., if the Baseline Conditions and the conditions set forth in Section 5B but not those set forth in Section 5C are satisfied), and that the Second Option Effective Date may occur without the First Option Effective Date occurring (i.e., if the Baseline Conditions and the conditions set forth in Section 5C but not those set forth in Section 5B are satisfied).

17 

 

6.               Representations and Warranties. Each of the Credit Parties represents and warrants that:

(a)             each of the Credit Parties has the power and authority to execute and deliver this Waiver and Amendment and perform its obligations under this Waiver and Amendment and the Credit Agreement as amended hereby;

(b)            the execution and delivery by each of the Credit Parties of this Waiver and Amendment, and the performance by such Person of its obligations under this Waiver and Amendment and the Credit Agreement as amended hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents; and

(c)             the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) with the same effect as if made on and as of the date hereof.

7.               Fundamental Document. This Amendment is designated a Fundamental Document by the Administrative Agent.

8.               Full Force and Effect. Except as expressly set forth herein, this Waiver and Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly amended hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its

18 

 

obligations under the Credit Agreement and the other Fundamental Documents to which it is a party and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as amended by this Waiver and Amendment.

9.               Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Waiver and Amendment.

10.            APPLICABLE LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

11.            Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Waiver and Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

12.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Waiver and Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

13.            Headings. The headings of this Waiver and Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Waiver and Amendment.

14.            Parent Agreement. By its execution hereof, Parent acknowledges and agrees that (a) it will not utilize or deploy any Parent Retained Equity for any purpose other than to either contribute such sums to the Borrower or to (subject to the terms hereof) redeem the Parent Preferred (as such term is defined in the Credit Agreement on the date hereof, i.e., before the changes that would be implemented upon the Second Option Effective Date) held by the Non-Extending Preferred Holders or pay any applicable Parent Preferred Consent Fees payable to holders of the Parent Preferred in connection with the Parent Charter Amendment; (b) it shall not make any such redemption payment if any Default or Event of Default shall have occurred and be continuing or would result therefrom; (c) it shall take any action reasonably requested by the Administrative Agent to perfect its security interest (on behalf of the Secured Parties) in the Parent Retained Equity and have dominion over any deposit account in which it is held; and (d) the Administrative Agent shall be fully entitled to exercise dominion over any and all Parent

19 

 

Retained Equity, and apply such Parent Retained Equity against the Obligations, upon the occurrence and during the continuance of any Event of Default.

 

 

[Signature pages follow]

20 

 

IN WITNESS WHEREOF, the parties hereto have caused this Waiver and Amendment to be duly executed as of the date first written above.

 

 

 

PARENT:

 

STX FILMWORKS, INC.

 

By: /s/ Noah Fogelson_______________________

Name:

Title:

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

 

By: /s/ Noah Fogelson_______________________

Name:

Title:

   

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

 

 

GUARANTORS:

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

SEVENTEEN BRIDGES, LLC

MINNETONKA DREAMS, LLC

UGLY INDUSTRIES, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name:

Title:

 

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and as a Lender

 

By: ______________________________

Name:

Title:

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

 

 

GUARANTORS:

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

SEVENTEEN BRIDGES, LLC

MINNETONKA DREAMS, LLC

UGLY INDUSTRIES, LLC

 

 

By: _____________________________

Name:

Title:

 

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and as a Lender

 

By: /s/ Patrick J. Minnick_______________________

Name: Patrick J. Minnick

Title: Executive Director

 

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

 

Name of Lender:

 

 

BANK OF AMERICA, N.A.

By: /s/ Sharad C. Bhatt_______________________

Name: Sharad C. Bhatt

Title: Senior Vice President

Box 1 S The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

 

 

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

MUFG Union Bank, N.A.

By: /s/ Ryan Bannan_______________________

Name: Ryan Bannan

Title: Vice President

Box 1 S The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

East West Bank

By: /s/ Jodi Chong_______________________

Name: Jodi Chong

Title: First Vice President

Box 1 £ The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

CIT Bank, N.A.

By: /s/ Jennifer Del Preore____________________

Name: Jennifer Del Preore

Title: Director

Box 1 S The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

Comerica Bank

By: /s/ David A. Shaver______________________

Name: David A. Shaver

Title: Portfolio Manager, Entertainment

Box 1 £ The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

CITY NATIONAL BANK, a national banking association

By: /s/ Judy Tu_______________________

Name: Judy Tu

Title: SVP

Box 1 £ The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

SunTrust Bank

By: /s/ J. Matthew Rowand____________________

Name: J. Matthew Rowand

Title: Director

Box 1 S The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

 

BANK HAPOALIM B.M.

By: /s/ Lenroy Hackett_______________________

Name: Lenroy Hackett

Title: Senior Vice President

By: /s/ Marline Alexander_____________________

Name: Marline Alexander

Title: First Vice President

Box 1 S The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

Name of Lender:

Emigrant Bank

By: /s/ Angelo Gambino_____________________

Name: Angelo Gambino

Title: Vice Chairman

 

 

Box 1 S The above-signed Lender hereby agrees to the waiver set forth in Section 2 and the amendments set forth in Section 3 of this Waiver and Amendment.

Box 2 S The above-signed Lender hereby agrees to the amendments set forth in Section 4 of this Waiver and Amendment.

 

Signature Page to Amendment No. 4 to Second Amended and Restated Credit Agreement

 

 

SCHEDULE 2.16

 

Acceptable Obligors and Allowable Amounts

 

[Schedule omitted.]

 

 

 

 

Exhibit A

 

Third Amended and Restated Certificate of Incorporation of STX Filmworks, Inc.

 

[Exhibit omitted.]

Exhibit 10.10

 

CONSENT AND AMENDMENT NO. 5

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

CONSENT AND AMENDMENT NO. 5 dated as of January 30, 2020 (this “Consent and Amendment”) to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders and as Issuing Bank.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower has requested that the Lenders consent to an extension of the required delivery date for the audited financial statements required under Section 5.1(a) of the Credit Agreement, and for the related Compliance Certificate, for the fiscal year ended September 30, 2019, and any reports or other documents required to be delivered concurrently therewith (including those required pursuant to Sections 5.1(c), (d) and (k) of the Credit Agreement) (collectively, the “FY 2019 Financials Materials”); and

WHEREAS, the Borrower has also requested that the Credit Agreement be amended on the terms set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Consent. Subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the undersigned Lenders hereby consent to an extension of the delivery deadline for the FY 2019 Financials Materials from January 28, 2020 to February 27, 2020.

3.               Amendment. Subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the first sentence of Section 5.1(i) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(i) Concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b), a Liquidity Certificate, reflecting that the ratio, tested at the end of such preceding fiscal quarter, of (i) projected cash sources of the Credit Parties (including, without limitation, cash on hand, capital contributions which have been committed in writing (either unconditionally or subject only to such conditions as shall be acceptable to the Administrative Agent), Borrowings under the Facility (taking into account projected availability based upon the Borrowing Base) and projected cash receipts from operations) to (ii) projected cash uses of the Credit Parties (including debt

 

 

service, amounts to be spent towards the production or acquisition of and P&A Expenses and/or UK P&A Expenses for Pictures, and all other projected cash expenditures), all as projected on a quarterly basis by the Borrower in good faith for the period from the first day of the current calendar quarter through the end of the four-quarter period commencing with the current calendar quarter, is greater than or equal to 1.10 to 1.00.”

4.               Conditions to Effectiveness. The effectiveness of this Consent and Amendment is subject to the satisfaction in full of each of the conditions precedent set forth in this Section 4 (the date upon which each of such conditions precedent has been satisfied, the “Effective Date”) as follows:

(a)             the Administrative Agent shall have received counterparts of this Consent and Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors and the Required Lenders;

(b)            the representations and warranties contained in Section 5 hereof are true and correct;

(c)             all costs and expenses due and owing pursuant to Section 11 hereof to the Administrative Agent by the Borrower shall have been paid in full;

(d)            all legal matters incident to this Consent and Amendment shall be satisfactory to Morgan, Lewis & Bockius LLP, counsel for the Administrative Agent; and

(e)             the Subordinated Agent shall have executed a consent and amendment under the Subordinated Loan Agreement granting substantively identical consents and amendments to those set forth in this Consent and Amendment to the extent applicable to the Subordinated Loan Agreement, in form and substance satisfactory to the Administrative Agent.

5.               Representations and Warranties. Each of the Credit Parties represents and warrants that:

(a)             each of the Credit Parties has the power and authority to execute and deliver this Consent and Amendment and perform its obligations under this Consent and Amendment and the Credit Agreement as modified hereby;

(b)            the execution and delivery by each of the Credit Parties of this Consent and Amendment, and the performance by such Person of its obligations under this Consent and Amendment and the Credit Agreement as modified hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a

2 

 

Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents;

(c)             the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) with the same effect as if made on and as of the date hereof; and

(d)            immediately before and immediately after giving effect to this Consent and Amendment, no Default or Event of Default shall have occurred and be continuing.

6.               Fundamental Document. This Consent and Amendment is designated a Fundamental Document by the Administrative Agent.

7.               Full Force and Effect. Except as expressly set forth herein, this Consent and Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly modified hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its obligations under the Credit Agreement and the other Fundamental Documents to which it is a party and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as modified by this Consent and Amendment.

8.               Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Consent and Amendment.

9.               APPLICABLE LAW. THIS CONSENT AND AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

3 

 

10.            Counterparts. This Consent and Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Consent and Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

11.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Consent and Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

12.            Headings. The headings of this Consent and Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Consent and Amendment.

[Signature pages follow]

4 

 

IN WITNESS WHEREOF, the parties hereto have caused this Consent and Amendment to be duly executed as of the date first written above.

 

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

 

By: /s/ Noah Fogelson______________________

Name:

Title:

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

 

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

SEVENTEEN BRIDGES, LLC

MINNETONKA DREAMS, LLC

UGLY INDUSTRIES, LLC

 

 

By: /s/ Noah Fogelson______________________

Name:

Title:

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and as a Lender

 

By: /s/ David I. Tepper______________________

Name: David I. Tepper

Title: Vice President

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

 

 

BANK OF AMERICA, N.A.

By: /s/ Sharad C. Bhatt_______________________

Name: Sharad C. Bhatt

Title: Senior Vice President

 

 

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

MUFG Union Bank, N.A.

By: /s/ Mike Richman_______________________

Name: Mike Richman

Title: Director

 

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

East West Bank

By: /s/ Jodi Chong_______________________

Name: Jodi Chong

Title: First Vice President

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

CIT Bank, N.A.

By: /s/ Suzanne James______________________

Name: Suzanne James

Title: Vice President

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

 

Comerica Bank

 

 

By: /s/ David A. Shaver_____________________

Name: David A. Shaver

Title: AVP

 

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

Truist Bank, successor by merger to SunTrust Bank

By: /s/ J. Matthew Rowand____________________

Name: J. Matthew Rowand

Title: Director

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

 

Name of Lender: Bank Hapoalim B.M.

By: /s/ Elliot Winter____________________

Name: Elliot Winter

Title: Senior Vice President

 

By: /s/ Victor Liu____________________

Name: Victor Liu

Title: Vice President

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

 

 

Name of Lender:

Emigrant Bank

By: /s/ Angelo Gambino____________________

Name: Angelo Gambino

Title: Senior Vice President

 

Consent and Amendment No. 5 to
Second Amended and Restated Credit Agreement

Exhibit 10.11 

 

CONSENT AND AMENDMENT NO. 6

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

CONSENT AND AMENDMENT NO. 6 dated as of April 17, 2020 (this “Consent and Amendment”) to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders and as Issuing Bank.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower desires for Parent and Eros International Plc, an Isle of Man company (“Eros Plc”) to enter into a merger transaction (whether consummated as described in clauses (a) through (c) below or otherwise, the “Proposed Eros Transaction”) pursuant to which, among other things, (a) certain stockholders of Parent are contemplated to invest: (i) $75,000,000 to purchase A ordinary shares, each of £0.30 par value (“A Ordinary Shares”), of Eros Plc and (ii) $750 to purchase Class E preferred stock, par value $0.01 per share (“Class E Preferred Stock”), of Parent, (b) a wholly owned indirect subsidiary of Eros Plc is contemplated to merge with and into Parent, with Parent surviving (the “Merger”), and (c) the holders of Parent preferred stock are contemplated to receive contingent value rights of Eros Plc to be settled at a later time for an aggregate number of A Ordinary Shares equal to the fully diluted outstanding shares of Eros Plc.

WHEREAS, in connection with the Proposed Eros Transaction, the Borrower has requested that the Credit Agreement be amended on the terms set forth herein.

WHEREAS, pursuant to Section 2.6 of the Credit Agreement, but subject to Section 2.18 of the Credit Agreement, the Borrower has notified the Administrative Agent that it intends to permanently reduce the Total Commitments from $400,000,000 to $350,000,000 in connection with this Consent and Amendment.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Consents. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 hereof, the Administrative Agent and the Lenders party hereto (constituting Required Lenders) hereby:

(a)             consent to the consummation of Proposed Eros Transaction, notwithstanding any provision to the contrary in the Credit Agreement; and

 

 

(b)            consent to a one-time prepayment by the Borrower of up to $21,500,000 towards outstanding principal and accrued interest owed under the Subordinated Loan Agreement notwithstanding any contrary provision in the Credit Agreement or the Subordination Agreement, provided that such prepayment must be made substantially simultaneously with the consummation of the Proposed Eros Transaction.

3.               Amendments to Credit Agreement. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended as follows:

(a)             Section 1.2 of the Credit Agreement is hereby amended by:

(i)              adding thereto the following definitions, which shall be inserted in proper alphabetical order:

“Amendment No. 6” shall mean that certain Consent and Amendment No. 6 dated as of April 17, 2020 to this Credit Agreement.

“CARES Act” shall mean Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act, as now and hereafter in effect.

“Eros Closing Date” shall mean the date of the consummation of the Proposed Eros Transaction, as defined in Amendment No. 6.

“Eros B Shareholders” shall mean each of the following persons: (i) Eros Ventures Limited; (ii) Beech Investments Limited; (iii) the trustees for the time being of the Ganges Trust; (iv) Kishore Lulla and his estate, guardian, or conservator; (v) Kishore Lulla’s descendants; (vi) any other descendants of Arjan Lulla and their respective estates, guardians or conservators; (vii) any Family Controlled Entity; (viii) the trustees, solely in their respective capacities as such, of any Family Trust; and (ix) any custodian or bare nominee for any person within (i) – (viii) inclusive.

“Eros Plc” shall mean Eros International Plc, an Isle of Man company.

“Family Controlled Entity” shall have the meaning set forth in the Articles of Association of Eros Plc.

“Family Trust” shall have the meaning set forth in the Articles of Association of Eros Plc.

“PPP Loans” shall mean small business “Payroll Protection Loans” under Section 1102 of the CARES Act.

“PPP Regulations” shall mean any and all rules and regulations implemented by the United States Small Business Administration, the United States Department of Treasury or any other Governmental Authority with respect to PPP Loans.

2 

 

(ii)            amending the definition of “Affiliate” appearing therein by adding the following text after the second sentence of the definition:

“For clarity, Eros Plc and its Subsidiaries shall be deemed Affiliates of the Borrower.”

(iii)          amending and restating the following definitions in their entireties as follows:

“Allocated Overhead Costs” shall mean the fully-absorbed costs for overhead and certain services (such as sales, human resources, accounting, legal and treasury functions) furnished to or on behalf of the Borrower and the other Credit Parties by Parent (or furnished by Eros Plc and on behalf of Parent or the Credit Parties), in each to the extent directly attributable to costs or services for the Borrower or the other Credit Parties (but not, for the avoidance of doubt, to the extent attributable to Eros Plc or any of Eros Plc’s Subsidiaries); provided that Allocated Overhead Costs (x) may not be billed more frequently than monthly by Parent or by Eros Plc, and (y) may not include any mark-up.

“Change in Control” shall mean (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) other than the Permitted Holders and/or the Eros B Shareholders of equity interests representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of Eros Plc, (ii) the acquisition of ownership, directly or indirectly, beneficially or of record, by the Eros B Shareholders of equity interests in the aggregate representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of Eros Plc, (iii) Eros Plc shall cease to directly or indirectly own 100% of the equity interests issued of Parent, or shall cease to have voting control of Parent, (iv) the Parent shall cease to directly own 100% of the Equity Interests issued by the Borrower or shall cease to have voting control of the Borrower, or (v) except as otherwise permitted pursuant to the terms hereof, the Borrower (or, if applicable, any Guarantor) shall cease to own directly or indirectly 100% of the Equity Interests issued by any Guarantor to the Borrower (or, if applicable, to any Guarantor) or shall cease to have voting control of any Guarantor or (v) occupation at any time of a majority of the seats (other than vacant seats) on the board of directors of Eros Plc by Persons who were not (x) directors of Eros Plc on the Eros Closing Date or (y) nominated by directors who were directors of Eros Plc on the Eros Closing Date (or nominated by directors so nominated).

“Change in Management” shall mean (i) any two of the following shall occur: (a) Robert Simonds shall cease to act as chief executive officer of Eros Plc, (b) Adam Fogelson shall cease to act as chairman of the motion picture group at Parent or (c) Noah Fogelson shall cease to act as Co-President of Eros Plc (in each case

3 

 

under clause (a)-(c), for any reason, including, without limitation, termination of employment, death or disability) and (ii) the Borrower shall have failed to appoint a replacement or replacements (as applicable) reasonably acceptable to the Administrative Agent and the Required Lenders within 90 days of such discontinuance. Additionally, should Robert Simonds cease to act as chief executive officer of Eros Plc for any reason, including without limitation, termination of employment, death or disability, and a replacement reasonably acceptable to the Administrative Agent and the Required Lenders has not been appointed within 180 days (but for purposes of this sentence a replacement shall be deemed to be acceptable to the Administrative Agent and the Lenders if the Lenders constituting the Required Lenders or the Administrative Agent have not objected to a proposed replacement in writing within ten (10) Business Days of written notice from the Borrower of the proposed replacement), that shall constitute a Change in Management for purposes of Section 4.4 hereof (but not for purposes of Section 7.1 hereof).

“P&A Advance Rate” shall initially mean 50%; provided that (i) if the Five Picture Rolling P&A Coverage Ratio is less than the Deficit Percentage, the P&A Advance Rate shall be the percentage equal to 50% less 1.00% for each 1.00% by which the Five Picture Rolling P&A Coverage Ratio is less than the Deficit Percentage (e.g., if the Five Picture Rolling P&A Coverage Ratio is 110% and the Deficit Percentage is 120%, the P&A Advance Rate will be reduced from 50% to 40%) and (ii) if the Five Picture Rolling P&A Coverage Ratio is determined to be less than 100%, the P&A Advance Rate shall be zero percent (0%) (other than for new Pictures for which P&A Credits had not previously been taken but that are scheduled to be released theatrically domestically within six months of the date of determination, for which the P&A Advance Rate shall be fifty percent (50%)) until (if ever) the Five Picture Rolling P&A Coverage Ratio for five new Pictures (i.e. Pictures that were not included in any computation of the Five Picture Rolling P&A Coverage Ratio that yielded a percentage of less than 100%) exceeds 125%.

(iv)          amending and restating the definition of “Approved Co-Financier” in its entirety as follows:

“Approved Co-Financier” shall mean (i) a Major Studio, (ii) Shanghai Media Group (including Great Mission International Limited and Marco Alliance Limited (each, a “Hony Investor”)) and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Administrative Agent, (iii) Odd Lot Entertainment, LLC and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Administrative Agent, (iv) Metro-Goldwyn-Mayer Inc. and its Affiliates, (v) Eros International Media Limited and its Affiliates, provided however that the unfunded commitments of the entities described in this clause (v) to make payments towards the negative cost, Budgeted Negative Cost or acquisition cost of any Item of Product shall not give rise to any reduction of such Item of

4 

 

Product’s Production Cost Reserve, and (vi) any other Person acceptable (with respect to such Person’s identity and creditworthiness, with consideration to be given to any credit enhancement being offered by or on behalf of such Person) to the Administrative Agent.

(v)            amending and restating clause (a)(vi) of the definition of “Restricted Payment” in its entirety as follows:

“(vi) any other payment by a Credit Party to or for the benefit of any Affiliate of such Credit Party (other than a Credit Party) or any direct or indirect members or shareholder of such Credit Party (other than a Credit Party), including, without limitation, Eros Plc or its (non-Credit Party) Subsidiaries, including, without limitation, any payment to Eros Plc or its (non-Credit Party) Subsidiaries relating to Overhead,”

(vi)          amending the definition of “UK P&A Advance Rate” appearing therein by replacing “75%” with “50%” in lieu thereof.

(b)            Section 2.18(a) of the Credit Agreement is hereby amended by replacing reference therein to $200,000,000 to $250,000,000.

(c)             Section 3.28 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“SECTION 3.28. Public Side Materials. The Borrower covenants that if any Lender has advised the Borrower that such Lender is a Public-Sider, the Borrower will not request that any other material be posted to Public-Siders without the Borrower first expressly representing and warranting to the Administrative Agent in writing that such materials do not constitute material non-public information within the meaning of the federal securities laws. Notwithstanding anything herein to the contrary, if any Lender has advised the Borrower that such Lender is a Public-Sider, in no event shall the Borrower request that the Administrative Agent make available to Public-Siders any budgets or any certificates, reports or calculations with respect to the Borrower’s compliance with the covenants contained herein or with respect to the Borrowing Base.”

(d)            Section 4.4 of the Credit Agreement is hereby amended by inserting the following clause (f) after clause (e) appearing therein:

“(f) Change in Management Stop Funding. No Change in Management shall have occurred under the second sentence of the definition thereof.”

(e)             Section 6.1 of the Credit Agreement is hereby amended by inserting the following new clause (r) at the end thereof with appropriate punctuation adjustments to existing clauses (p) and (q):

5 

 

“(r) unsecured obligations in connection with PPP Loans, in an aggregate principal amount not to exceed the maximum loan amount permitted under the applicable payroll-based formula specified under the CARES Act or any PPP Regulations applicable to the Credit Parties; provided that (i) nothing in this clause (r) shall be construed to give rise to any obligation on the part of the Administrative Agent or any Lender to extend any PPP Loans, (ii) the interest rate on such PPP Loans does not exceed 1% and (iii) the Credit Parties covenant and agree that (A) they shall submit to the lender of the PPP Loans as soon as permitted under Section 1106(e) of the CARES Act or any PPP Regulations any and all documentation necessary or appropriate to obtain forgiveness of all principal on the PPL Loans, (B) the proceeds of each PPP Loan shall be applied solely towards permitted uses under the PPP Regulations and the CARES Act and shall be so applied within three (3) months of receipt thereof, and shall in no case be utilized for any purpose other than forgivable purposes under the PPP Regulations and the CARES Act and (C) they shall neither take nor omit to take any action that would cause or permit any portion of the principal amount of any PPP Loans to be deemed ineligible for forgiveness under Section 1106 of the CARES Act (including without limitation any reduction in headcount or salary(ies) that would have such an effect), nor otherwise allow any such principal to no longer be eligible for such forgiveness (provided, that solely with respect to the covenants in this clause (iii)(A)-(C), if a failure to comply is a direct result of a Change in Law that occurs after the date on which a PPP Loan is issued, the Credit Parties shall have fifteen (15) days following such Change in Law to cure such non-compliance); provided further that if there is a Change in Law between April 17, 2020 and the date on which the Credit Parties intend to request a PPP Loan, such changes must be satisfactory to the Administrative Agent in its reasonable discretion in order for the Indebtedness thereunder to be incurred.”

(f)             Section 6.5(e) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(e) payments to Odd Lot Entertainment, LLC, Shanghai Media Group, the Hony Investors, Eros Plc or any of their respective Affiliates in connection with a Co-Financed Item of Product or other arms-length contractual arrangements permitted under Section 6.11.”

(g)            Section 6.5(g) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(g) either (i) pay Allocated Overhead Costs for services which the Administrative Agent has approved (in reimbursement payments attributable to the Credit Parties that were directly paid by the Parent or Eros Plc) or (ii) so long as no Default or Event of Default is in existence or would result therefrom, dividends or distributions to Parent for further distribution to Eros Plc for payment of c-suite level Overhead expenses of Eros Plc to the extent directly attributable to the Credit Parties (but not to any non-Credit Party subsidiaries of Eros Plc), subject in either case to Section 6.23 hereof; and”

6 

 

(h)            Section 6.11(v) of the Credit Agreement is hereby amended and restated as follows:

“(v) is a co-financing arrangement that satisfies the requirements for a Co-Financed Item of Product with Odd Lot Entertainment, LLC, Shanghai Media Group, a Hony Investor, Eros Plc or any other Approved Co-Financier”

(i)              The proviso appearing in Section 6.23 of the Credit Agreement is replaced in its entirety as follows:

“It is acknowledged and agreed that paid or incurred Allocated Overhead Costs count (without duplication) against the amounts set forth in this Section 6.23. Additionally, the Borrower shall cause itself and Eros Plc to keep records of all Overhead attributable to Borrower and its Subsidiaries versus Eros Plc and its Subsidiaries (other than Borrower and its Subsidiaries), and provide such information to the Administrative Agent upon the request of the Administrative Agent. In addition to reimbursements of Allocated Overhead costs as described in the foregoing, the Parent or the Credit Parties may reimburse Eros Plc for Overhead expenses related (solely) to the payment of “C-suite” salaries and other related “C-Suite” expenses that are directly attributable to the Credit Parties, but any such payments shall also count against the amounts set forth in this Section 6.23.”

(j)              The second paragraph of Section 6.27 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Notwithstanding the foregoing, nothing in this Section 6.27 shall in any way limit the ability of Eros Plc and its non-Credit Party Subsidiaries to operate their businesses as historically conducted.”

(k)            The following text is hereby inserted as Section 6.31 of the Credit Agreement:

“SECTION 6.31. Eros Holding Company. The Credit Parties shall not permit Eros Plc to carry on any business, own any assets or incur any liabilities except for: (i) (a) the participation in tax, accounting and other administrative activities as a publicly listed holding company and provision of administrative services to its Subsidiaries of a type customarily provided by a holding company to its Subsidiaries; (b) activities necessary or reasonably advisable for or incidental to the registration and listing of Eros Plc’s (or its direct or indirect parent’s) common stock and the continued existence of Eros Plc as a public company, (c) engaging in any activities incidental to compliance with the provisions of the Securities Act and the Exchange Act and similar laws and regulations of other jurisdictions and the rules of securities exchanges, in each case, as applicable to companies with listed equity or debt securities, as well as activities incidental to investor relations, shareholder meetings and reports to shareholders or debt-holders, (d) engaging in activities required to comply with applicable laws or maintain its corporate existence, (e) establishing, creating,

7 

 

developing, registering, enforcing, prosecuting and maintaining, as applicable, bank accounts, (f) entering into employment agreements and other arrangements with officers and directors, (g) providing indemnification to officers, managers and directors, (h) ownership of (A) Equity Interests in other Subsidiaries of Eros Plc (including activities relating to the formation and capitalization of such subsidiaries), (B) cash and Cash Equivalents to be used for administrative purposes described above including not less than $50,000,000 in proceeds from new equity remaining as of the Eros Closing Date at Eros Plc pro forma after consummation of the Proposed Eros Transaction as described in Amendment No. 6 as well as proceeds from equity issuances from time to time; and (C) certain other nominal assets incidental to the business or activities described above, (i) activities reasonably incidental to the businesses and activities described in the foregoing clauses (a) through (h), and (j) any other activities consented to by the Administrative Agent in writing in its sole discretion; and (ii) professional fees and administration costs incurred in the ordinary course of business as a holding company.”

 

(l)              Section 7.1(g) through Section 7.1(j) of the Credit Agreement are hereby amended and restated in their entireties as follows:

(g)       default shall be made with respect to any payment of any Indebtedness (i) of any Credit Party in excess of $1,000,000 in the aggregate at any one time outstanding when due or (ii) of Eros Plc or any Subsidiary of Eros Plc (other than the Credit Parties) in excess of $7,500,000 in the aggregate at any one time outstanding when due, or, in each case, in the performance of any other obligation incurred in connection with any such Indebtedness if the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity, and such default shall not be remedied, cured, waived or consented to within the period of grace with respect thereto;

(h)       any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall generally not pay its debts as they become due or shall admit in writing its inability to pay its debts, or shall make a general assignment for the benefit of creditors; or any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property or shall file an answer or other pleading in any such case, proceeding or other action admitting the material allegations of any petition, complaint or similar pleading filed against it or consenting to the relief sought therein; or any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall take any action to authorize, or in contemplation of, any of the foregoing;

8 

 

(i)       any involuntary case, proceeding or other action against any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall be commenced seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, and such case, proceeding or other action (i) results in the entry of any order for relief against it, or (ii) shall remain undismissed for a period of sixty (60) days;

(j)       final judgment(s) for the payment of money (to the extent not paid or fully covered by insurance) in excess of $1,000,000 in the aggregate shall be rendered against any Credit Party, Eros Plc any Subsidiary of Eros Plc or Co-Financing Venture Entity, and within thirty (30) days from the entry of such judgment it shall not have been discharged or stayed pending appeal or which shall not have been discharged or bonded in full within thirty (30) days from the entry of a final order of affirmance on appeal;

(m)           Section 12.1(b)(xii) of the Credit Agreement is hereby amended by replacing the phrase “an additional $200,000,000 of Commitments beyond the $400,000,000 in effect as of the Closing Date” appearing therein with the phrase “an additional $250,000,000 of Commitments beyond the $350,000,000 as of the effective date of Amendment No. 6” in lieu thereof.

(n)            Schedule 1.1 of the Credit Agreement is hereby amended and restated in its entirety and replaced with the attached Schedule 1.1 to reflect a permanent reduction in the Total Commitments from $400,000,000 to $350,000,000.

4.               Conditions to Effectiveness. The effectiveness of the consents set forth in Section 2 and the amendments set forth under Section 3 of this Consent and Amendment is subject to the satisfaction in full (or waiver by the Required Lenders) of each of the conditions precedent set forth in this Section 4 (the date upon which each of such conditions precedent in this Section 4 have been satisfied or waived, the “Consent and Amendment Effective Date”):

(i)              the Administrative Agent shall have received counterparts of this Consent and Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors and the Required Lenders;

(ii)            as consideration for the Lenders’ agreement to enter into the Consent and Amendment, the Administrative Agent shall have received, for the benefit of each of the Lenders that has executed this Consent and Amendment by no later than the Consent and Amendment Effective Date, an amendment fee in an aggregate amount equal to 0.20% of the Commitments reflected on Schedule 1.1 attached hereto for each such Lender;

9 

 

(iii)          all costs and expenses due and owing pursuant to Section 12 hereof to the Administrative Agent by the Borrower shall have been paid in full and the Borrower shall have paid any other fees or invoiced expenses of the Administrative Agent;

(iv)          the Proposed Eros Transaction shall have been consummated or, shall be consummated substantially concurrently with the Consent and Amendment Effective Date, in accordance with the terms set forth in that certain Agreement and Plan of Merger, dated as of an even date herewith, by and among Eros Plc, England Holdings 2, Inc., England Merger Corp., and Parent (the “Merger Agreement”), a copy of which has been previously provided to the Administrative Agent, without giving effect to any modifications, amendments, consents or waivers thereto that in the aggregate are material and adverse to the Lenders without the prior consent of the Required Lenders; provided that the final terms of the Proposed Eros Transaction include: (A) Parent being the indirect wholly-owned subsidiary of Eros Plc and Parent existing as an indirect “sister” subsidiary of Eros International Media Limited; (B) Parent surviving the Merger and continuing to have no business activities other than as permitted pursuant to Section 6.29 of the Credit Agreement and continuing to directly hold 100% of the Equity Interests in the Borrower; and (C) each of the Borrower and the other Credit Parties surviving the Merger; and (D) any changes to the certificate of incorporation (or equivalent) or bylaws (or equivalent) of Parent or any Credit Party shall be satisfactory to the Administrative Agent;

(v)            not less than $110,000,000 of new equity investment shall have been contributed to Parent or Eros Plc, of which not less than $25,000,000 (which amount is in excess of any amounts being used to repay the Subordinated Debt substantially simultaneously with the consummation of the Proposed Eros Transaction) shall have been contributed to Borrower and not less than $50,000,000 shall remain at Eros Plc pro forma after consummation of the Proposed Eros Transaction;

(vi)          on a pro forma basis after giving effect to the prepayment of the Subordinated Debt described in Section 2 hereof (the “Proposed Prepayment”), neither any material Default nor any Event of Default shall have occurred and be continuing as of the Consent and Amendment Effective Date; provided that, for the avoidance of doubt, this clause (vi) shall in no event be construed to permit the consummation of the Proposed Eros Transaction but not the Proposed Prepayment;

(vii)        the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date of the Consent and Amendment Effective Date (except to the extent that such representations and warranties (a) expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date and/or (b) cannot be made as of the Consent and Amendment Effective Date solely due to the existence of a Default that is not material);

(viii)      upon the reasonable request of any Lender, the Borrower shall have provided to such Lender, and such Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and

10 

 

anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act, in each case at least five (5) days prior to the Consent and Amendment Effective Date;

(ix)          at least three (3) days prior to the Consent and Amendment Effective Date, to the extent that the Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, Borrower shall deliver, to each Lender that so requests the same at least seven (7) days prior to the Consent and Amendment Effective Date, a Beneficial Ownership Certification;

(x)            the Administrative Agent shall have received a certificate of the Secretary, Assistant Secretary or other appropriate officer (or member or manager, as the case may be, in the case of limited liability companies), acceptable to the Administrative Agent, of the Parent and the Borrower, attesting that the conditions precedent set forth in this Section 4 have been satisfied; and

(xi)          the Administrative Agent shall have received, for the benefit of each of the Lenders, all accrued and unpaid Commitment Fees on the amount of the Commitments so reduced pursuant to Section 2.6 of the Credit Agreement.

5.               Representations and Warranties. As of the date hereof, each of the Credit Parties represents and warrants that:

(a)             each of the Credit Parties has the power and authority to execute and deliver this Consent and Amendment and perform its obligations under this Consent and Amendment and the Credit Agreement as modified hereby;

(b)            the execution and delivery by each of the Credit Parties of this Consent and Amendment, and the performance by such Person of its obligations under this Consent and Amendment and the Credit Agreement as modified hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents;

(c)             the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date); and

11 

 

(d)            no Default or Event of Default shall have occurred and be continuing.

6.               CARES Act. Notwithstanding anything to the contrary contained herein, the amendments described in Section 3 hereof that relate solely to the CARES Act, PPP Loans, and PPP Regulations shall become effective upon satisfaction of the condition precedent set forth in Section 4(i) hereof.

7.               Fundamental Document. This Consent and Amendment is designated a Fundamental Document by the Administrative Agent.

8.               Full Force and Effect. Except as expressly set forth herein, this Consent and Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly modified hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its obligations under the Credit Agreement and the other Fundamental Documents to which it is a party, including on a pro forma basis after giving effect to the Proposed Eros Transaction, and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as modified by this Consent and Amendment.

9.               Notice. “Clause (a)(ii)(z) of Section 13.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:

O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY 10036, Attention: Chris Owens (email: cowens@omm.com); and”

10.            Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Consent and Amendment.

11.            APPLICABLE LAW. THIS CONSENT AND AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE

12 

 

LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

12.            Counterparts. This Consent and Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Consent and Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

13.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Consent and Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

14.            Headings. The headings of this Consent and Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Consent and Amendment.

[Signature pages follow]

13 

 

IN WITNESS WHEREOF, the parties hereto have caused this Consent and Amendment No. 6 to be duly executed as of the date first written above.

 

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: Executive Vice President, General Counsel

and Secretary

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

 

 

 

PARENT:

 

STX FILMWORKS, INC.

 

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: Executive Vice President, General Counsel

and Secretary

 

 

By its execution of the above, the Parent hereby acknowledges agrees that its obligations under the Credit Agreement as a Pledgor or otherwise under the Credit Agreement shall remain unaffected by the Proposed Eros Transaction referred to in this Consent and Amendment No. 6, and covenants and agrees that it shall in connection with the Proposed Eros Transaction execute a reaffirmation agreement or other documentation in form and substance satisfactory to the Administrative Agent evidencing its agreement to continue be bound by such obligations.

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

 

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

SEVENTEEN BRIDGES, LLC

MINNETONKA DREAMS, LLC

UGLY INDUSTRIES, LLC

TIME OF DEATH, LLC

POLE SISTERS, LLC

STX ANIMATION, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: Executive Vice President, General Counsel

and Secretary

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and as a Lender

 

By: /s/ David Tepper_______________________

Name: David Tepper

Title: Vice President

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

MUFG Union Bank, N.A.

By: /s/ Mike Richman_______________________

Name: Mike Richman

Title: Director

 

 

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

East West Bank

By: /s/ Jodi Chong_______________________

Name: Jodi Chong

Title: Senior Vice President

 

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

Cit Bank, N.A.

By: /s/ Suzanne James_______________________

Name: Suzanne James

Title: Vice President

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

Comerica Bank

By: /s/ David A. Shaver______________________

Name: David A. Shaver

Title: AVP

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

Name of Lender: Truist Bank, successor by merger to SunTrust Bank

 

 

By: /s/ J. Matthew Rowand____________________

Name: J. Matthew Rowand

Title: Director

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

BANK HAPOALIM B.M.

By: /s/ Maxine Levy ____________________

Name: Maxine Levy

Title: FVP

 

By: /s/ Victor Liu_______________________

Name: Victor Liu

Title: VP

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

Name of Lender:

Emigrant Bank

By: /s/ John R. Hart______________________

Name: John R. Hart

Title: Vice Chairman

Consent and Amendment No. 6 to
Second Amended and Restated Credit Agreement

 

 

SCHEDULE 1.1

Schedule of Commitments

Lenders Commitment
JPMorgan Chase Bank, N.A. $44,625,000
Bank of America, N.A. $44,625,000
MUFG Union Bank, N.A. $44,625,000
East West Bank $44,625,000
CIT Bank, N.A. $39,375,000
Comerica Bank $35,000,000
City National Bank $30,187,500
SunTrust Bank $28,437,500
Bank Hapoalim B.M. $21,437,500
Emigrant Bank $17,062,500
TOTAL: $350,000,000

 

The Total Commitments were permanently reduced from $400,000,000 to $350,000,000 in connection with Amendment No. 6 to the Credit Agreement.

Exhibit 10.12 

 

EXECUTION COPY

 

The security interests and payment of the principal amount of the indebtedness evidenced by this instrument and the interest accruing thereon is subordinated to other indebtedness pursuant to, and to the extent provided in, and is otherwise subject to the terms of, the Amended and Restated Subordination and Intercreditor Agreement dated as of October 7, 2016 by and among STX Financing, LLC, as Borrower, its subsidiaries party thereto, Red Fish Blue Fish, LLC, as Subordinated Agent (as defined therein), JPMorgan Chase Bank, N.A., as administrative agent under the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016, and Seer Capital Partners Master Fund L.P., as administrative agent under the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement (P&A Facility) dated as of October 7, 2016.

 

 

 

 

 

 

SECOND AMENDED AND RESTATED SUBORDINATED CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT

 

 

Dated as of October 7, 2016

 

among

 

stx fiNAnCING, LLC

as Borrower,

 

STX FILMWORKS, INC.

as Parent,

 

THE GUARANTORS REFERRED TO HEREIN,

 

THE LENDERS REFERRED TO HEREIN,

 

and

 

RED FISH BLUE FISH, LLC,

as Administrative Agent

 

 

 

 

TABLE OF CONTENTS

Page

1.   DEFINITIONS 2
SECTION 1.1   Terms Generally 2
SECTION 1.2   Definitions. 2
2.   THE LOANS 36
SECTION 2.1   Loans. 36
SECTION 2.2   Making of Loans. 36
SECTION 2.3   Notes; Repayment. 36
SECTION 2.4   Interest on Loans. 37
SECTION 2.5   Fees. 37
SECTION 2.6   Termination of Commitments. 38
SECTION 2.7   Default Interest. 38
SECTION 2.8   [Intentionally Omitted]. 38
SECTION 2.9   Voluntary and Mandatory Prepayment of Loans; Change in Control Offer. 38
SECTION 2.10   Increased Costs. 41
SECTION 2.11   [Intentionally Omitted]. 43
SECTION 2.12   Manner of Payments 43
SECTION 2.13   Taxes. 43
SECTION 2.14   Interest Adjustments. 47
SECTION 2.15   AHYDO Provisions. 48
3.   REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES 48
SECTION 3.1   Existence and Power. 49
SECTION 3.2   Authority and No Violation 49
SECTION 3.3   Governmental Approvals 50
SECTION 3.4   Binding Agreements 50
SECTION 3.5   Financial Statements 50
SECTION 3.6   No Material Adverse Change 50
SECTION 3.7   Ownership of Pledged Securities, Subsidiaries, etc. 51
SECTION 3.8   Copyrights, Trademarks and Other Rights. 51
SECTION 3.9   Fictitious Names 52
SECTION 3.10   Title to Properties 52
SECTION 3.11   Chief Executive Office; Location of Collateral and Records; Tax Identification Number 52
SECTION 3.12   Litigation 53
SECTION 3.13   Federal Reserve Regulations 53
SECTION 3.14   Investment Company Act 53
SECTION 3.15   Taxes 53
SECTION 3.16   Compliance with ERISA 53
SECTION 3.17   Agreements. 54
SECTION 3.18   Security Interest 55

i 

 

TABLE OF CONTENTS
(continued)

Page

SECTION 3.19   Rights 55
SECTION 3.20   Environmental Liabilities. 55
SECTION 3.21   Pledged Securities. 56
SECTION 3.22   Compliance with Laws 56
SECTION 3.23   Solvency 56
SECTION 3.24   True and Complete Disclosure 57
SECTION 3.25   Subsidiaries 57
SECTION 3.26   Status as a Pass-Through Entity 57
SECTION 3.27   Anti-Corruption Laws and Sanctions 58
SECTION 3.28   No Registered or Publicly-Traded Securities 58
4.   CONDITIONS OF LENDING 58
SECTION 4.1   Conditions Precedent to the Closing Date 58
5.   AFFIRMATIVE COVENANTS 64
SECTION 5.1   Financial Statements and Reports 64
SECTION 5.2   Corporate Existence; Compliance with Laws 68
SECTION 5.3   Maintenance of Properties 68
SECTION 5.4   Notice of Material Events. 68
SECTION 5.5   Insurance. 69
SECTION 5.6   Music 70
SECTION 5.7   Copyrights and Trademarks. 70
SECTION 5.8   Books and Records; Examination. 71
SECTION 5.9   Third Party Audit Rights 71
SECTION 5.10   Observance of Agreements 72
SECTION 5.11   Laboratories; No Removal. 72
SECTION 5.12   Taxes and Charges; Indebtedness in Ordinary Course of Business 73
SECTION 5.13   Liens 73
SECTION 5.14   Further Assurances; Security Interests. 73
SECTION 5.15   Environmental Laws. 74
SECTION 5.16   Use of Proceeds 75
SECTION 5.17   Distribution Agreements; Letters of Credit. 76
SECTION 5.18   Subsidiaries 76
SECTION 5.19   ERISA Compliance and Reports 77
SECTION 5.20   Location of Bank Accounts 78
SECTION 5.21   Licensing Intermediaries 78
SECTION 5.22   Items of Product 78
SECTION 5.23   Post-Closing Conditions. 81
SECTION 5.24   Issuance of Agent Fee Shares 81
SECTION 5.25   Revenue Participations 81

ii 

 

TABLE OF CONTENTS
(continued)

Page

6.   NEGATIVE COVENANTS 82
SECTION 6.1   Limitations on Indebtedness 82
SECTION 6.2   Limitations on Liens 84
SECTION 6.3   Limitation on Guarantees 86
SECTION 6.4   Limitations on Investments 87
SECTION 6.5   Restricted Payments 88
SECTION 6.6   Consolidation, Merger or Sale of Assets, etc. 89
SECTION 6.7   Receivables 90
SECTION 6.8   Sale and Leaseback; Soft Dollar Transactions. 90
SECTION 6.9   Places of Business; Change of Name, Jurisdiction 90
SECTION 6.10   Limitations on Capital Expenditures 91
SECTION 6.11   Transactions with Affiliates 91
SECTION 6.12   Business Activities 91
SECTION 6.13   Fiscal Year End 91
SECTION 6.14   Bank Accounts 91
SECTION 6.15   ERISA 92
SECTION 6.16   Hazardous Materials 92
SECTION 6.17   Use of Proceeds 92
SECTION 6.18   Swap Agreements 92
SECTION 6.19   Amendments, Modifications and Terminations of Material Agreements. 93
SECTION 6.20   No Negative Pledge 93
SECTION 6.21   Subsidiaries 94
SECTION 6.22   Anti-Layering 94
SECTION 6.23   Production Exposures (Program) 94
SECTION 6.24   [Intentionally Omitted]. 94
SECTION 6.25   [Intentionally Omitted]. 94
SECTION 6.26   Co-Financed Items of Product 94
SECTION 6.27   Item of Product Requirements. 95
SECTION 6.28   No Adverse Selection 96
SECTION 6.29   No Election to be Treated as a Corporation 96
SECTION 6.30   Holding Company 97
7.   EVENTS OF DEFAULT 97
SECTION 7.1   Events of Default 97
8.   GRANT OF SECURITY INTEREST; REMEDIES 101
SECTION 8.1   Security Interests 101
SECTION 8.2   Use of Collateral 101
SECTION 8.3   Collection Accounts 101
SECTION 8.4   Credit Parties to Hold in Trust 102
SECTION 8.5   Collections, etc. 102

iii 

 

TABLE OF CONTENTS
(continued)

Page

SECTION 8.6   Possession, Sale of Collateral, etc. 102
SECTION 8.7   Application of Proceeds after Event of Default 104
SECTION 8.8   Power of Attorney 104
SECTION 8.9   Financing Statements; Direct Payments 105
SECTION 8.10   Termination and Release 105
SECTION 8.11   Remedies Not Exclusive 106
SECTION 8.12   Quiet Enjoyment 106
SECTION 8.13   Continuation and Reinstatement 106
9.   GUARANTY OF GUARANTORS 106
SECTION 9.1   Guaranty. 107
SECTION 9.2   No Impairment of Guaranty, etc. 108
SECTION 9.3   Continuation and Reinstatement, etc. 108
SECTION 9.4   Limitation on Guaranteed Amount, etc. 109
SECTION 9.5   Keepwell 109
10.   PLEDGE 109
SECTION 10.1   Pledge 109
SECTION 10.2   Covenant 110
SECTION 10.3   Registration in Nominee Name; Denominations 110
SECTION 10.4   Voting Rights; Dividends; etc. 110
SECTION 10.5   Remedies Upon Default 111
SECTION 10.6   Application of Proceeds of Sale and Cash 112
SECTION 10.7   Securities Act, etc. 113
SECTION 10.8   Continuation and Reinstatement 114
SECTION 10.9   Termination 114
11.   [INTENTIONALLY OMITTED] 114
12.   THE ADMINISTRATIVE AGENT 114
SECTION 12.1   Administration by the Administrative Agent. 114
SECTION 12.2   Payments 116
SECTION 12.3   Sharing of Setoffs and Cash Collateral 116
SECTION 12.4   Notice to the Lenders. 117
SECTION 12.5   Liability of the Administrative Agent. 117
SECTION 12.6   Reimbursement and Indemnification 118
SECTION 12.7   Rights of Administrative Agent 118
SECTION 12.8   Independent Investigation by Lenders 119
SECTION 12.9   Agreement of Required Lenders 119
SECTION 12.10   Notice of Transfer 119
SECTION 12.11   Successor Administrative Agent 119
SECTION 12.12   [Intentionally Omitted]. 120
SECTION 12.13   Other Agent Titles 120

iv 

 

TABLE OF CONTENTS
(continued)

Page

SECTION 12.14   Credit Bidding 120
13.   MISCELLANEOUS 121
SECTION 13.1   Notices. 121
SECTION 13.2   Survival of Agreement, Representations and Warranties, etc. 122
SECTION 13.3   Successors and Assigns; Syndications; Loan Sales; Participations. 123
SECTION 13.4   Expenses; Documentary Taxes 127
SECTION 13.5   Indemnity 127
SECTION 13.6   CHOICE OF LAW 128
SECTION 13.7   WAIVER OF JURY TRIAL 129
SECTION 13.8   WAIVER WITH RESPECT TO DAMAGES 129
SECTION 13.9   No Waiver 129
SECTION 13.10   Amendments, etc. 130
SECTION 13.11   Severability 131
SECTION 13.12   SERVICE OF PROCESS; SUBMISSION TO JURISDICTION 131
SECTION 13.13   Headings 132
SECTION 13.14   Execution in Counterparts 132
SECTION 13.15   Subordination of Inter-company Indebtedness, Receivables and Advances. 133
SECTION 13.16   USA Patriot Act 133
SECTION 13.17   Entire Agreement 133
SECTION 13.18   Confidentiality 133
SECTION 13.19   [Intentionally Omitted]. 134
SECTION 13.20   Subordination Agreement 134
SECTION 13.21   Effect of Amendment and Restatement of the Existing Subordinated Credit Agreement. 134

v 

 

 

SCHEDULES:

 

1.1 Schedule of Commitments
1.2 Immaterial Subsidiaries
1.3 Co-Financing Venture Terms and Conditions
3.1 List of Jurisdictions
3.7(a) Ownership of Equity Interests of the Credit Parties
3.7(b) Ownership of Pledged Securities other than Credit Parties
3.7(c) Organizational Chart
3.8(a) Items of Product
3.8(b) Trademarks
3.8(c) Applications and Registrations Not in Full Force and Effect
3.8(d) Pictures in which any Credit Party Holds a Revenue Participation
3.9 Fictitious Names
3.11 Chief Executive Office; Location of Collateral and Records; Tax Identification Numbers
3.12 Litigation
3.16 ERISA Matters
3.17 Material Agreements
3.18 Filing Offices for Financing Statements
3.25 Subsidiaries
6.1(l) Existing Indebtedness
6.2 Existing Liens
6.11 Transactions with Affiliates
10.1 Initial Pledged Securities

vi 

 

 

EXHIBITS:

 

A Form of Note
B Form of Opinion of Latham & Watkins LLP, counsel to Parent and the Credit Parties
C Form of Borrowing Notice
D [Intentionally Omitted]
E-1 Form of Copyright Security Agreement
E-2 Form of Copyright Security Agreement Supplement
F Form of Trademark Security Agreement
G-1 Form of Pledgeholder Agreement (Uncompleted Items of Product)
G-2 Form of Pledgeholder Agreement (Completed Items of Product)
H Form of Laboratory Access Letter
I-1 Form of Picture Declaration
I-2 Form of Program Declaration
I-3 Form of Digital Product Declaration
J Form of Instrument of Assumption and Joinder
K Form of Assignment and Assumption
L-1 Form of Notice of Assignment and Irrevocable Instructions
M Form of Contribution Agreement
N-1 U.S. Tax Compliance Certificate (For Foreign Lenders that are not Partnerships for U.S. Federal Income Tax Purposes)
N-2 U.S. Tax Compliance Certificate (For Foreign Participants that are Partnerships for U.S. Federal Income Tax Purposes)
N-3 U.S. Tax Compliance Certificate (For Foreign Lenders that are Partnerships for U.S. Federal Income Tax Purposes)
N-4 U.S. Tax Compliance Certificate (For Foreign Participants that are not Partnerships for U.S. Federal Income Tax Purposes)

vii 

 

SECOND AMENDED AND RESTATED SUBORDINATED CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT dated as of October 7, 2016 (as amended, supplemented or otherwise modified, renewed, restated or replaced from time to time, this “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as the Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as the Parent, (iii) the GUARANTORS referred to herein, (iv) the LENDERS referred to herein and (v) RED FISH BLUE FISH, LLC, as Administrative Agent.

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 requested that the Lenders make available to the Borrower a $35,210,000 second lien subordinated term loan credit facility (the “Facility”). The proceeds of the Facility have been and will be used to, among other things, finance the production and acquisition of Items of Product. In that regard, the Borrower, certain Guarantors, the Lenders party hereto and the Administrative Agent executed an Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement dated as of May 2, 2014 (the “Existing Subordinated Credit Agreement”) documenting the terms of the Facility.

This Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement was executed and became effective as of October 7, 2016 (the “Second Amendment and Restatement Effective Date”). All references herein to the “Credit Agreement” or this “Agreement” are to this Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement.

To provide assurance for the repayment of the Loans and the other Obligations, the Credit Parties have, 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 Lender is willing to make Loans to the Borrower in an aggregate principal amount at any one time outstanding not in excess of its Commitment hereunder.

Accordingly, the parties hereto hereby agree as follows:

 1

 

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 and the plural as well as the singular, (ii) references to any agreement, instrument or other documents (including any organizational document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified, renewed or replaced (subject to any restrictions on such amendments, restatements, supplements, modifications, renewals or replacements set forth herein or in any other Fundamental Documents) and shall 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) references to an Article, Section, Exhibit or Schedule shall refer to the applicable Article or Section of, or Exhibit or Schedule to, this Credit Agreement, (v) the terms “include” and all variations thereof shall be deemed to be followed by the phrase “without limitation,” (vi) all terms defined in the UCC and not otherwise defined herein shall have the respective meanings accorded to them therein, (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. Notwithstanding anything to the contrary hereunder, the Credit Parties shall not be required to deliver financial statements in conformity with GAAP prior to the first delivery of the financial statements pursuant to Section 5.1.

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:

“Account Control Agreement” shall mean an account control agreement among the applicable Credit Party, the Administrative Agent and the applicable depository bank, which agreement shall be in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time.

“Administrative Agent” shall mean Red Fish Blue Fish, LLC, a Delaware limited liability company, 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.

 2

 

“Affiliated Group” shall mean a group of Persons, each of which is an Affiliate (other than by reason of having common directors or officers) of some other Person in the group.

“Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to the Person in question from time to time concerning or relating to bribery or corruption.

“Applicable Law” shall mean all provisions of statutes, rules, regulations and orders of any Governmental Authority applicable to the Person in question, and all orders and decrees of all courts, tribunals and arbitrators in proceedings or actions in which the Person in question is a party.

“Approved Co-Financier” shall mean (i) a Major Studio, (ii) Shanghai Media Group (including Great Mission International Limited and Marco Alliance Limited (each, a “Hony Investor”)) and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Senior Facility Agent, (iii) Odd Lot Entertainment, LLC and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Senior Facility Agent, (iv) Metro-Goldwyn Mayer Inc. and its Affiliates, and (v) any other Person acceptable (with respect to such Person’s identity and creditworthiness, with consideration to be given to any credit enhancement being offered by or on behalf of such Person) to the Senior Facility Agent.

“Approved Co-Financing Venture Counterparty” shall mean any Approved Co-Financier.

“Approved Co-Financing Venture Transaction” shall mean a co-financing venture transaction with respect to an Item of Product between a Credit Party and an Approved Co-Financing Venture Counterparty that (i) satisfies all of the terms and conditions set forth on Schedule 1.3 hereto or (ii) is otherwise approved by the Administrative Agent, provided that each transaction approved under this clause (ii) must satisfy the terms and conditions set forth in paragraphs 1, 2, 3, 4 and 9 set forth on Schedule 1.3 as well as the first sentence of paragraph 10 of such Schedule 1.3.

“Approved Completion Bond” shall mean with respect to a Picture, any completion bond issued in connection with the production of such Picture, to the extent approved by the Senior Facility Agent.

“Approved Completion Guarantor” shall mean with respect to an Item of Product, a financially sound and reputable completion guarantor approved by the Senior Facility Agent.

“Approved Domestic Distributor” shall mean (A) with respect to Pictures, (i) the Borrower, (ii) a Major Studio, and (iii) any other Person acceptable (with respect to such Person’s identity and creditworthiness) to the Senior Facility Agent (on a Picture by Picture basis) so long as the Senior Facility Agent has not received an objection from the Required Lenders under the Senior Facility Credit Agreement upon five (5) days’ written notice of such potential approval, (B) with respect to Programs, a U.S. broadcast network (i.e., ABC, CBS, NBC, CW or Fox), major cable television network (e.g., TBS, Lifetime, A&E, FX, Comedy Central, HBO, Starz, VH1, CMT, TNT, TBS or MTV), Netflix, Hulu, Amazon, or such other

 3

 

network or internet distributor as may be acceptable (on a Program by Program basis) to the Senior Facility Agent with respect to such Program so long as the Senior Facility Agent has not received an objection from the Required Lenders under the Senior Facility Credit Agreement upon five (5) days’ written notice of such potential approval , and (C) with respect to Digital Product, YouTube, Netflix, Hulu, Amazon, or such other internet distributor as may be acceptable to the Senior Facility Agent (on a Digital Product by Digital Product basis and so long as the Senior Facility Agent has not received an objection from the Required Lenders under the Senior Facility Credit Agreement upon five (5) days’ written notice of such potential approval).

“Approved Foreign Sales Agent” shall mean (A) in the case of Pictures (i) Good Universe, Summit Entertainment/Lions Gate Entertainment, FilmNation, Mister Smith, Sierra/Affinity LLC, eOne, any Major Studio, (ii) the Borrower, and (iii) any other foreign sales agent approved by the Required Lenders under the Senior Facility Credit Agreement and (B) in the case of Programs, (i) the Borrower and (ii) any other foreign sales agent approved by the Senior Facility Agent so long as the Senior Facility Agent has not received an objection from the Required Lenders under the Senior Facility Credit Agreement upon five (5) Business Days’ written notice of such potential approval. Any foreign sales agent pre-approved under clauses (A)(i), (A)(ii) or (B)(i) above or approved pursuant to clauses (A)(iii) or (B)(ii) above may be removed by the Senior Facility Agent or the Required Lenders under the Senior Facility Credit Agreement by written notice to the Borrower on a prospective basis with respect to territories for Items of Product for which such foreign sales agent has not yet been engaged.

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

“Authorized Officer” shall mean, with respect to any Person, its Chairman, Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer or General Counsel, in each case which have signing authority on behalf of such Person.

“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.

“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 funding for such Picture under the Facility commences, which final budget includes (i) all Direct Negative Costs in respect of such Picture, (ii) any contingency required by the applicable Approved Completion Guarantor, (iii) a completion bond fee payable to an Approved Completion Guarantor in respect of an Approved Completion Bond and (iv) other amounts required to be included in such budget pursuant to the Senior Loan Documents.

“Borrower” shall mean STX Financing, LLC, a Delaware limited liability company.

“Borrower LLC Agreement” shall mean the Limited Liability Company Agreement of STX Financing, LLC, dated as of February 12, 2014.

 4

 

“Borrowing” shall mean a borrowing consisting of Loans.

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

“Budgeted Negative Cost” shall mean, for any Item of Product, the aggregate amount of the development and pre-production expenses of such Item of Product plus the cost of all production elements usually and customarily included as part of the negative cost of an Item of Product of like cost and quality plus the usual and customary post-production costs of such Item of Product and all other delivery items, and shall specifically include charges for any completion guaranty fee which is to be paid (or, in the case of passive co-financings, including Revenue Participations, and Items of Product that are acquired rather than produced by a Credit Party, the acquisition price or co-financing or equity contribution to be paid by such Credit Party for such Item of Product pursuant to the applicable negative pick-up documentation or co-financing documentation), all as reflected in the budget referenced in the applicable Item of Product Declaration (or, in the case of an Item of Product with an Approved Completion Bond, approved in writing by the relevant Approved Completion Guarantor). In the case of an Item of Product for which an Approved Completion Bond has been delivered, the Budgeted Negative Cost shall mean the Bonded Budget of such Picture.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on which banks are required or permitted to close in the State of New York or the State of California.

“Business Plan” shall mean each annual business plan of the Borrower and its Subsidiaries, substantially in the form of the business plan delivered to the Administrative Agent on June 8, 2016.

“Capex Cap” shall have the meaning given to such term in Section 6.10.

“Capex Carry-Over Amount” shall have the meaning given to such term in Section 6.10.

“Capital Expenditures” shall mean, with respect to any Person for any period, the sum of (i) the aggregate of all expenditures, whether paid in cash or accrued as a liability, by such Person during that period which, in accordance with GAAP, are or should be included in “additions to property, plant or equipment” or similar items included in the statement of cash flows (including Capital Leases), and (ii) to the extent not covered by clause (i) hereof, the aggregate of all expenditures properly capitalized in accordance with GAAP by such Person to acquire, by purchase or otherwise, the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, in part or in whole, any other Person (other than the portion of such expenditures allocable in accordance with GAAP to net current assets or which is allocable to the production or acquisition of Items of Product). For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds actually received shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time, or the amount of such proceeds, as the case may be.

 5

 

“Capital Lease” shall mean, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of such Person, and the amount of obligations in respect of a Capital Lease shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Equivalents” shall mean: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one (1) year from the date of acquisition thereof, (ii) investments in commercial paper maturing within two hundred seventy (270) days from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A-1 from S&P or Prime-1 from Moody’s, (iii) investments in certificates of deposit, banker’s acceptances and time deposits maturing within one hundred eighty (180) days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $2,000,000,000 or that is a Lender, (iv) fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above, and (v) money market funds that (a) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (b) are rated AAA by S&P or Aaa by Moody’s, and (c) have portfolio assets of at least $5,000,000,000.

“Casualty Event” shall have the meaning given to such term in Section 2.9(e).

“CFC” shall mean a Subsidiary that is a “controlled foreign corporation” as defined in Section 957(a) of the Code or any successor provision thereto; provided that a Subsidiary shall not constitute a CFC under this Facility unless, at the relevant date of determination, there is a reasonable expectation of substantial earnings and profits in the United States of America, tax on which may be deferred.

“Chain of Title Documents” shall have the meaning given to such term in Section 5.22(c).

“Change in Control” shall mean (i) the Permitted Holders shall cease to directly own the Equity Interests issued by the Parent in an amount sufficient to entitle the Permitted Holders to a majority of the distributions payable to holders of any Equity Interests of the Parent upon the liquidation, dissolution or sale of the Parent, (ii) the Permitted Holders shall cease to have voting control of the Parent, (iii) the Parent shall cease to directly own 100% of the Equity Interests issued by the Borrower or shall cease to have voting control of the Borrower, or (iv) except as otherwise permitted pursuant to the terms hereof, the Borrower (or, if applicable, any Guarantor) shall cease to own 100% of the Equity Interests issued by any Guarantor to the Borrower (or, if applicable, to any Guarantor) or shall cease to have voting control of any Guarantor.

 6

 

“Change in Control Offer” shall have the meaning given to such term in Section 2.9(f).

“Change in Control Payment” shall have the meaning given to such term in Section 2.9(f).

“Change in Control Payment Date” shall have the meaning given to such term in Section 2.9(f).

“Change in Law” shall mean the occurrence after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes a party to this Credit Agreement) of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) compliance by any Lender (or, for purposes of Section 2.10(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline, requirement or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Closing Date; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

“Change in Management” shall mean (i) either (a) Robert Simonds or (b) two out of three of Noah Fogelson, Thomas McGrath and Adam Fogelson, shall cease for any reason (including, without limitation, termination of employment, death or disability) to perform the functions and services currently being performed by him or them, as applicable and (ii) the Borrower shall have failed to appoint a replacement or replacements (as applicable) reasonably acceptable to the Administrative Agent and the Required Lenders within 90 days of such discontinuance.

“Closing Date” shall mean the date on which all of the conditions precedent set forth in Section 4.1 have been satisfied or waived.

“Closing Date Agent Fee Shares” shall mean 26,525 shares of common stock of the Parent, par value $0.01 per share, issued to the Administrative Agent on the Closing Date.

“Code” shall mean the Internal Revenue Code of 1986, as now and hereafter in effect, as codified at 26 U.S.C. § 1 et seq.

“Co-Financed Item of Product” shall mean any Item of Product (a) a portion of the negative cost or acquisition cost of which, shall be co-financed by an Approved Co-Financier

 7

 

(i) by funding such portion of the negative cost as incurred during the production period thereof, (ii) by paying such portion upon Completion of such Item of Product, or (iii) in a manner otherwise acceptable to the Administrative Agent, in each case pursuant to a Co-Financing Agreement, and which co-financing shall, in any case, satisfy the conditions set forth in Section 6.25 or (b) which satisfies the requirements for an Approved Co-Financing Venture Transaction.

“Co-Financing Agreement” shall mean an agreement between a Credit Party and an Approved Co-Financier relating to the co-financing arrangements in respect of a Co-Financed Item of Product permitted hereunder and which is in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time in accordance with the terms hereof and thereof. A co-financing transaction which contains economic terms no less favorable to the Credit Parties than those described in the Strategic Collaboration Agreement dated as of the Closing Date, by and between STX Financing, LLC and Odd Lot Entertainment, LLC or an Affiliate thereof is hereby pre-approved for purposes of this definition. For the avoidance of doubt, Co-Financing Agreement shall not include a Co-Financing Venture Agreement.

“Co-Financing Intercreditor Agreement” shall mean an intercreditor agreement among (i) the Administrative Agent, the Senior Facility Agent and the Seer P&A Facility Agent, (ii) each applicable Credit Party, (iii) the applicable Approved Co-Financier (and, if applicable, its lender), (iv) if appropriate, the applicable Approved Completion Guarantor, and (v) such other Person(s) as the Administrative Agent may deem appropriate (as amended, supplemented or otherwise modified, renewed, restated or replaced from time to time in accordance with the terms hereof and thereof) governing, among other things, the terms of the co-financing arrangements with respect to the applicable Co-Financed Item of Product, which such agreement shall be in form and substance reasonably satisfactory to the Administrative Agent and in any case shall comply with the provisions set forth in Section 6.25.

“Co-Financing Venture Agreement” shall mean an agreement between a Credit Party and an Approved Co-Financing Venture Counterparty relating to an Approved Co-Financing Venture Transaction, in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time in accordance with the terms hereof and thereof.

“Co-Financing Venture Entity” shall mean a special purpose, joint venture entity, created to produce, acquire, own or control any right, title or interest in and to an Item of Product pursuant to an Approved Co-Financing Venture Transaction, and 100% of the Equity Interests of which are owned by a Credit Party and by an Approved Co-Financing Venture Counterparty pro rata in proportion to their respective beneficial ownership interests in the relevant Item of Product and the Direct Negative Cost thereof.

“Co-Financing Venture Interparty Agreement” shall mean, in respect of any Co-Financing Venture Item of Product, an interparty agreement among the Administrative Agent, the applicable Credit Party, the applicable Approved Co-Financing Venture Counterparty and, if applicable, its lenders (or appropriate representatives on their behalf) and any other applicable parties, in form and substance reasonably satisfactory to the Administrative Agent (as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time

 8

 

to time in accordance with the terms hereof and thereof) and governing, among other things, the terms of the applicable Approved Co-Financing Venture Transaction as between the Credit Parties and the Administrative Agent on the one hand, and the applicable Approved Co-Financing Venture Counterparty and its lenders (or such representatives) on the other hand, consistent, as to intercreditor matters, with the terms and conditions set forth on Schedule 1.3 hereto.

“Co-Financing Venture Item of Product” shall mean an Item of Product produced or acquired through an Approved Co-Financing Venture Transaction.

“Collateral” shall mean, with respect to each Credit Party, all of such Credit Party’s right, title and interest in and to all personal and real property, tangible and intangible, wherever located or situated and whether now owned, currently existing or hereafter acquired or created, including, but not limited to, all goods, accounts, instruments, intercompany obligations, partnership and joint venture interests, contract rights, documents, chattel paper, general intangibles, goodwill, equipment, fixtures, machinery, inventory, investment property, copyrights, patents, trademarks, trade names, insurance policies (including any key man policies), insurance proceeds, cash, deposit accounts, securities accounts, letter of credit rights, the Pledged Securities and other securities, all amounts on deposit in any collection account or cash collateral account established pursuant to the terms of the Senior Loan Documents or in any other deposit account and any proceeds of any thereof, products of any thereof or income from any thereof, further including, but not limited to, all of such Credit Party’s right, title and interest in and to each and every Item of Product, all of the properties thereof, tangible and intangible, and all domestic and foreign copyrights and all other rights therein and thereto, of every kind and character, whether now in existence or hereafter to be made or produced, and whether or not in the possession of such Credit Party, including with respect to each and every Item of Product and without limiting the foregoing language, each and all of the following particular rights and properties (in each case to the extent they are now owned, currently existing or hereafter acquired or created by such Credit Party):

(i)              all scenarios, screenplays, teleplays and/or scripts at every stage thereof;

(ii)            all common law and/or statutory copyright and other rights in all literary and other properties (hereinafter called “said literary properties”) which form the basis of such Item of Product and/or which are or will be incorporated into such Item of Product, all component parts of such Item of Product consisting of said literary properties, all motion picture, television program or other rights (including digital rights) in and to the story, all treatments of said story and said literary properties, together with all preliminary and final screenplays used and to be used in connection with such Item of Product, and all other literary material upon which such Item of Product is based or from which it is adapted;

(iii)          all rights for all media in and to all music and musical compositions used and to be used in such Item of Product, if any, including, each without limitation, all rights to record, re-record, produce, reproduce or synchronize all of said

 9

 

music and musical compositions, including, without limitation, reuse fees, royalties and all other amounts payable with respect to said music and musical compositions;

(iv)          all tangible personal property relating to such Item of Product, including, without limitation, all exposed film, developed film, positives, negatives, prints, positive prints, answer prints, magnetic tapes and other digital or electronic storage media, special effects, preparing materials (including interpositives, duplicate negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and matrices, and all other forms of pre-print elements), sound tracks, cutouts, trims and any and all other physical properties of every kind and nature relating to such Item of Product whether in completed form or in some state of completion, and all masters, duplicates, drafts, versions, variations and copies of each thereof, in all formats whether on film, videotape, disk or other optical or electronic media or otherwise and all music sheets and promotional materials relating to such Item of Product (collectively, the “Physical Materials”);

(v)            all collateral, allied, subsidiary and merchandising rights appurtenant or related to such Item of Product including, without limitation, the following rights: all rights to produce remakes, spin-offs, sequels or prequels to such Item of Product based upon such Item of Product, said literary properties or the theme of such Item of Product and/or the text or any part of said literary properties; all rights throughout the world to broadcast, transmit and/or reproduce by means of television (including commercially sponsored, sustaining and subscription or “pay” television) or by streaming video or by other means over the internet or any other open or closed physical or wireless network or by any process analogous to any of the foregoing, now known or hereafter devised, such Item of Product or any remake, spin-off, sequel or prequel to such Item of Product; all rights to produce primarily for television or digital exploitation or similar use, a motion picture or series of motion pictures, or other Item of Product by use of film or any other recording device or medium now known or hereafter devised, based upon such Item of Product, said literary properties or any part thereof, including, without limitation, based upon any script, scenario or the like used in such Item of Product; all merchandising rights including, without limitation, all rights to use, exploit and license others to use and exploit any and all commercial tie-ups of any kind arising out of or connected with said literary properties, such Item of Product, the title or titles of such Item of Product, the characters of such Item of Product and/or said literary properties and/or the names or characteristics of said characters and including further, without limitation, any and all commercial exploitation in connection with or related to such Item of Product, any remake, spin-off, sequel or prequel thereof and/or said literary properties;

(vi)          all copyrights, domestic and foreign, obtained or to be obtained on such Item of Product, together with any and all copyrights obtained or to be obtained in connection with such Item of Product or any underlying or component elements of such Item of Product, including, in each case without limitation, all copyrights on the property described in subparagraphs (i) through (v) inclusive, of this definition, together with the right to copyright (and all rights to renew or extend such copyrights, if applicable) and the right to sue in the name of such Credit Party for past, present and future infringements of copyright;

 10

 

(vii)        all insurance policies and completion bonds connected with such Item of Product and all proceeds which may be derived therefrom and the Key-Man Policy;

(viii)      all rights to distribute, sell, rent, license the exhibition of and otherwise exploit and turn to account such Item of Product in all media (whether now known or hereafter developed), the Physical Materials, the motion picture, television program or other rights in and to the story and/or other literary material upon which such Item of Product is based or from which it is adapted, and the music and musical compositions used or to be used in such Item of Product;

(ix)          any and all sums, claims, proceeds, money, products, profits or increases, including money profits or increases (as those terms are used in the UCC or otherwise) or other property obtained or to be obtained from the distribution, exhibition, sale or other uses or dispositions of such Item of Product or any part of such Item of Product in all media (whether now known or hereafter developed), including, without limitation, all sums, claims, proceeds, profits, products and increases, whether in money or otherwise, from a sale and leaseback or other sale, rental or licensing of such Item of Product and/or any of the elements of such Item of Product including, without limitation, from collateral, allied, subsidiary and merchandising rights, and further including, without limitation, all monies held in any collection account established pursuant to the terms of the Senior Loan Documents;

(x)            the dramatic, nondramatic, stage, television, radio and publishing rights, title and interest in and to such Item of Product, and the right to obtain copyrights and renewals of copyrights therein, if applicable;

(xi)          the name or title of such Item of Product and all rights of such Credit Party to the use thereof, including, without limitation, rights protected pursuant to trademark, service mark, unfair competition and/or any other applicable statutes, common law, or other rule or principle of law;

(xii)        any and all contract rights and/or chattel paper which may arise in connection with such Item of Product;

(xiii)      all accounts and/or other rights to payment which such Credit Party currently owns or which may arise in favor of such Credit Party in the future, including, without limitation, any refund or rebate in connection with a completion bond or otherwise, any and all refunds in connection with any value added tax, all accounts and/or rights to payment due from Persons in connection with the distribution of such Item of Product, or from the exploitation of any and all of the collateral, allied, subsidiary, merchandising and other rights in connection with such Item of Product, including tax refunds and tax rebates received in connection with tax incentives;

(xiv)       any and all “general intangibles” (as that term is defined in Section 9-102(42) of the UCC) not elsewhere included in this definition, including, without limitation, any and all general intangibles consisting of any right to payment

 11

 

which may arise in connection with the distribution or exploitation of any of the rights set out herein, and any and all general intangible rights in favor of such Credit Party for services or other performances by any third parties, including actors, writers, directors, individual producers and/or any and all other performing or nonperforming artists in any way connected with such Item of Product, any and all general intangible rights in favor of such Credit Party relating to licenses of sound or other equipment, or licenses for any photograph or photographic or other processes, and any and all general intangibles related to the distribution or exploitation of such Item of Product including general intangibles related to or which grow out of the exhibition of such Item of Product and the exploitation of any and all other rights in such Item of Product set out in this definition;

(xv)         any and all “goods” (as defined in Section 9-102(44) of the UCC) including, without limitation, “inventory” (as defined in Section 9-102(48) of the UCC) and “equipment” (as defined in Section 9-102(33) of the UCC) which may arise in connection with the creation, production or delivery of such Item of Product, which goods are owned by such Credit Party pursuant to any production agreement or Distribution Agreement or otherwise;

(xvi)       all and each of the rights, regardless of denomination, which arise in connection with the acquisition, creation, production, completion of production, delivery, distribution, or other exploitation of such Item of Product, including, without limitation, any and all rights in favor of such Credit Party, the ownership or control of which are or may become necessary or desirable, in the reasonable opinion of the Administrative Agent, in order to complete production of such Item of Product in the event that the Administrative Agent exercises any rights it may have to take over and complete production of such Item of Product;

(xvii)     any and all documents issued by any pledgeholder or bailee with respect to such Item of Product or any Physical Materials (whether or not in completed form) with respect thereto;

(xviii)   any and all Production Accounts, collection accounts or other bank accounts established by such Credit Party with respect to such Item of Product;

(xix)       any and all rights of such Credit Party under any Distribution Agreements relating to such Item of Product, including, without limitation, all rights to payment thereunder;

(xx)         any and all rights of such Credit Party under contracts relating to the production or acquisition of such Item of Product or otherwise, including, but not limited to, all such contracts which have been delivered to the Administrative Agent pursuant to this Credit Agreement;

(xxi)       any and all patents, patent rights, software, proprietary processes or other rights with respect to the creation or production of computer animated Items of Product; and

 12

 

(xxii)     any rebates, credits, grants or other similar benefits relating to such Item of Product.

Notwithstanding the foregoing or any contrary provision herein or in any other Fundamental Document, “Collateral” shall not include (a) any assets of a CFC or FSHCO, (b) any contract or agreement to which a Credit Party is a party if and to the extent such contract or agreement is subject to express contractual provisions prohibiting the creation of a security interest in the right, title or interest of such Credit Party therein and such creation would, in and of itself, cause or result in a default thereunder enabling another Person party to such contract or agreement to terminate the same or enforce material remedies thereunder; except in each case to the extent that (i) such prohibition has been waived or such other Person has otherwise consented to the creation hereunder of a security interest in such contract or agreement, or (ii) such prohibition would be rendered ineffective pursuant to Section 9-406, 9-407 or 9-408 of Article 9 of the UCC, as applicable and as then in effect in any relevant jurisdiction, or any other applicable law (including the Bankruptcy Code) or principles of equity and provided further that immediately upon the ineffectiveness, lapse or termination of any such provision, such Credit Party shall be automatically deemed to have granted a security interest hereunder to the Administrative Agent (for the benefit of the Secured Parties) in, all of its rights, title and interest in and to such contract or agreement as if such provision had never been in effect, (c) any voting Equity Interests issued by a CFC or FSHCO, in each case, to any Credit Party in excess of 65% of the issued and outstanding voting Equity Interests in such CFC or FSHCO, or (d) any “intent to use” trademark application for which a statement of use has not been filed with the U.S. Patent and Trademark Office, but only to the extent that the grant of a Lien thereon would invalidate such trademark application. In addition, the exclusion in clause (b) of the foregoing proviso shall in no way be construed so as to limit, impair or otherwise affect the Administrative Agent’s unconditional continuing security interest in and to (x) all rights, title and interests of each Credit Party in or to any rights to payment or other rights to receive monies due or to become due under any such contract or agreement and in any such monies and other proceeds of such contract or agreement, or (y) all rights, title and interests of each Credit Party in or to any Item of Product to which such contract or agreement relates, including any copyright therein or proceeds therefrom, except, in the case of clause (y) but not clause (x), to the extent such contract or agreement contains an express and enforceable contractual provision(s) prohibiting the creation of a security interest in the right, title or interest of such Credit Party therein or such creation would, in and of itself, cause or result in a default thereunder enabling another Person party to such contract or agreement to terminate the same or enforce material remedies thereunder.

“Commitment” shall mean with respect to any Lender, the commitment of such Lender to make Loans to the Borrower up to an aggregate amount not in excess at any one time outstanding of the amount set forth (i) opposite such Lender’s name under the column entitled “Commitment” in the Schedule of Commitments, or (ii) in any applicable Assignment and Assumption(s) to which such Lender may be a party, as such amount may be reduced from time to time in accordance with the terms of this Credit Agreement.

 13

 

“Commodity Exchange Act” shall mean the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

“Competitor” shall mean a Person (or an Affiliate of such Person or a member of an Affiliated Group related to such Person) that competes with the Borrower or any of the Borrower’s Subsidiaries in their primary businesses of (i) the production, development, marketing, distribution and/or exploitation of motion pictures or television programs or (ii) the production of digital media content; provided, that each of the following persons shall not constitute a Competitor hereunder: (a) an institutional investor that invests in media and entertainment companies but (x) does not actively participate in the management of such companies and (y) does not actively participate in the management or control of any Competitor, and (b) the Administrative Agent or any Lender that would otherwise become a Competitor by virtue of having foreclosed on or otherwise exercised any right or remedy resulting in, or having as a creditor received any recovery in any insolvency proceeding resulting in, the acquisition or ownership of the equity or assets of a Competitor and related activities, including, without limitation, directly or indirectly managing a Competitor as a result thereof.

“Complete” or “Completed” or “Completion” shall mean that, with respect to any Item of Product, (a) sufficient elements thereof (i) have been delivered by the applicable Credit Party, Co-Financing Venture Entity, Approved Co-Financier or Major Studio (as applicable) to, and accepted, deemed accepted and/or exploited by, the Approved Domestic Distributor and any other Distributor whose obligations are included in the Borrowing Base under and as defined in the Senior Facility Credit Agreement, to permit such Distributor(s) to exhibit the Item of Product in the theatrical or other medium for which the Item of Product is intended for initial exploitation in the Domestic Territory or elsewhere, or (ii) satisfies the completion and delivery requirements under the Approved Completion Bond, and (b) if such Item of Product was acquired by a Credit Party or Co-Financing Venture Entity from a third Person, or if a Credit Party acquired a Revenue Participation in such Item of Product, the entire fixed acquisition price, minimum advance or such Credit Party’s or such Co-Financing Venture Entity’s share of the direct costs of the Item of Product shall have been paid to the extent then due, and there are no unsatisfied or unwaived conditions to such Credit Party’s or such Co-Financing Venture Entity’s rights in such Item of Product and there is no right of reversion or divestiture with respect thereto.

“Compliance Certificate” shall have the meaning given to such term in Section 5.1(g).

“Connection Income Taxes” shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Consolidated Subsidiaries” shall mean, with respect to any Person at any time, all Subsidiaries of such Person which are required to be consolidated with such Person for financial reporting purposes in accordance with GAAP then in effect.

“Contribution Agreement” shall mean a Contribution Agreement, substantially in the form of Exhibit M, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time in accordance with the terms thereof.

 14

 

“Copyright Security Agreement” shall mean a Copyright Security Agreement, substantially in the form of Exhibit E-1, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time by delivery of a Copyright Security Agreement Supplement or otherwise.

“Copyright Security Agreement Supplement” shall mean a Copyright Security Agreement Supplement substantially in the form of Exhibit E-2.

“Credit Exposure” shall mean, at any time, the principal amount of all Loans outstanding at such time.

“Credit Party” and “Credit Parties” shall mean, individually and collectively as the context so requires, the Borrower and each of the Guarantors.

“Default” shall mean a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Default PIK Interest” shall have the meaning given to such term in Section 2.7.

“Digital Product” shall mean any short-form digital content (other than a Picture or a Program) intended for initial exploitation through the internet (e.g. YouTube) or mobile applications; provided that the term “Digital Product” shall not include long form episodic Programs or motion pictures intended for initial exploitation on a SVOD platform like Netflix or Amazon.

“Digital Product Declaration” shall mean, with respect to any Digital Product produced or acquired by or on behalf of a Credit Party, a declaration, substantially in the form of Exhibit I-3.

“Direct Negative Costs” shall mean, with respect to an Item of Product, the aggregate of all costs, charges and expenses incurred or paid, or to be incurred and paid, by any Person in connection with the acquisition (including, without limitation, payments with respect to guarantees, advances and other payments made to rights holders) and/or development, preparation, production, completion and delivery of such Item of Product, including, but not limited to, payments for acquisition of underlying rights, pre-production expenses, fees and expenses (including development fees) for producers, directors, writers, actors, visual and special effects personnel, camera personnel, set designers, makeup and hair artists, film editors and other creative, artistic, technical and production personnel, charges for studio space, stages, and facilities, security, reproduction and processing equipment, film supplies, laboratory and sound services, visual and special effects, and facilities, location construction expenses, travel and living expenses (including per diems and similar allowances) in connection with pre-production production, and post-production activities, outside legal charges, outside accounting charges, financing costs, interest, insurance and (if applicable) any Approved Completion Guarantor fees.

“Distribution Agreement” shall mean any distribution agreement or license agreement heretofore or hereafter entered into by a Credit Party or Co-Financing Venture Entity (or by an Approved Foreign Sales Agent or Licensing Intermediary on behalf of such Credit Party or Co-Financing Venture Entity), as licensor, with a Distributor, as licensee, with respect to

 15

 

the distribution, license or other exploitation of one or more Items of Product in any medium or territory, in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof.

“Distributor” shall mean any Person which a Credit Party or Co-Financing Venture Entity (or an Approved Foreign Sales Agent or Licensing Intermediary on behalf of such Credit Party or Co-Financing Venture Entity) engages to distribute, license or otherwise exploit an Item of Product in any medium.

“Dollars” and “$” shall mean lawful money of the United States of America.

“Domestic Territory” shall mean the United States of America and its territories and possessions; provided, that solely in the context of P&A Expenses, on a picture by picture basis, to the extent that the Credit Parties are responsible for any such P&A Expenses in Canada and its territories and possessions, “Domestic Territory” shall also include Canada and its territories and possessions.

“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.

“Environmental Laws” shall mean any and all federal, state, local or municipal laws, statutes, ordinances, orders, common law, codes, rules, regulations, environmental permits, judgments, decrees, injunctions, or agreements with any Governmental Authority, relating to the protection of health and the environment, worker health and safety, and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of or exposure to Hazardous Materials, as now or at any time hereafter in effect, including without limitation, the Clean Water Act also known as the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq., the Surface Mining Control and Reclamation Act, 30 U.S.C. §§ 1201 et seq., the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq., the Superfund Amendments and Reauthorization Act of 1986, Public Law 99-499, 100 Stat. 1613, the Emergency Planning and Community Right to Know Act, 42 U.S.C. §§ 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., the Occupational Safety and Health Act as amended, 29 U.S.C. § 655 and § 657, together, in each case, with the publications promulgated thereunder and all substitutions thereof.

“Equity Interests” shall mean shares of the capital stock, partnership interests, membership interests or other ownership units in a limited liability company, beneficial interests in a trust or other equity or voting interests in any Person, or any warrants, options or other rights to acquire such interests.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 16

 

“ERISA Affiliate” shall mean each Person (as defined in Section 3(9) of ERISA) which is treated as a single employer with any Credit Party under Section 414(b), (c), (m) or (o) of the Code.

“Event of Default” shall have the meaning given to such term in Section 7.1.

“Excluded Subsidiary” shall mean:

(i) each Co-Financing Venture Entity;

(ii) any CFC;

(iii) each Immaterial Subsidiary;

(iv) each Unrestricted Subsidiary;

(v) each Special Purpose Producer;

(vi) any FSHCO; and

(vii) each direct or indirect Subsidiary of any of the foregoing.

“Excluded Swap Obligation” shall mean, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) (i) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guaranty of such Guarantor or the grant of such security interest becomes or would become effective with respect to such Swap Obligation or (ii) in the case of a Swap Obligation subject to a clearing requirement pursuant to Section 2(h) of the Commodity Exchange Act, because such Guarantor is a “financial entity,” as defined in Section 2(h)(7)(C)(i) the Commodity Exchange Act, at the time the Guaranty of such Guarantor becomes or would become effective with respect to such related Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or security interest is or becomes illegal.

“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date

 17

 

on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 13.10(b)) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 2.13, amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.13(g) and (d) any Taxes imposed under FATCA.

“Existing Agent Fee Shares” shall mean the issuance to the Administrative Agent on the closing date of the Existing Subordinated Credit Agreement of shares of common stock of the Parent, par value $0.01 per share, constituting 3.0% of shares of common stock of Parent on a fully diluted basis.

“Existing Subordinated Credit Agreement” shall have the meaning given to such term in the Introductory Statement hereto.

“Facility” shall have the meaning given to such term in the Introductory Statement hereto.

“FATCA” shall mean sections 1471 through 1474 of the Code, as in effect on the Closing Date (and any amended or successor version that is substantively comparable and not materially more onerous to comply with), current or future United States Treasury Regulations promulgated thereunder and official published guidance with respect thereto and any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.

“Federal Flood Insurance” means federally backed Flood Insurance available under the National Flood Insurance Program to owners of real property improvements located in Special Flood Hazard Areas in a community participating in the National Flood Insurance Program.

“Federal Securities Laws” shall have the meaning given to such term in Section 10.7.

“Flood Insurance” means, for any real property that is Collateral that is located in a Special Flood Hazard Area, Federal Flood Insurance or private insurance reasonably satisfactory to the Administrative Agent, in either case, that (a) meets the requirements set forth by FEMA in its Mandatory Purchase of Flood Insurance Guidelines, (b) shall include a deductible not to exceed $50,000 and (c) shall have a coverage amount equal to the lesser of (i) the “replacement cost value” of the buildings located on owned real property and any personal property Collateral located on the real property as determined under the National Flood Insurance Program or (ii) the maximum policy limits set under the National Flood Insurance Program.

“Foreign Lender” shall mean a Lender that is not a U.S. Person.

 18

 

“FSHCO” shall mean any Subsidiary all or substantially all of the assets of which are equity interests (or equity and debt interests) in one or more CFCs.

“Fundamental Documents” shall mean this Credit Agreement, including the schedules and exhibits hereto, and any agreements entered into in connection herewith by the Borrower or any other Credit Party with or in favor of the Administrative Agent and/or the Lenders, including the Notes, the Pledgeholder Agreements, the Laboratory Access Letters, the Copyright Security Agreement, the Copyright Security Agreement Supplements, the Trademark Security Agreement, the Notices of Assignment, the Instruments of Assumption and Joinder, the Account Control Agreements, the Contribution Agreement, the Senior Intercreditor Agreement, the Subordination Agreement, the Interparty Agreements, the Co-Financing Intercreditor Agreements, each of the UCC financing statements (or foreign equivalent), all security documentation executed by a Licensing Intermediary in favor of the Administrative Agent or a Credit Party and any other security or ancillary documentation which is required to be or is otherwise executed and delivered to the Administrative Agent or any Lender in connection with this Credit Agreement or any of the documents listed above (including any amendments or modifications to any of the documents listed above).

“Funding Office” shall mean the offices of Red Fish Blue Fish, LLC, 71 South Wacker Drive, Suite 4700, Chicago, Illinois 60606, Attention: Glen Miller.

“GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time consistently applied (except for accounting changes in response to FASB releases, or other authoritative pronouncements).

“Governmental Authority” shall mean any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, or any court, tribunal or arbitrator, in each case whether of the United States of America or any foreign jurisdiction.

“GPP Business Interests” shall mean (A) Gigi Pritzker Pucker, her lineal descendants and her spouse, (B) all trusts for the benefit of any of the persons described in clause (A), and (C) all companies controlled by the persons described in clauses (A) and (B).

“Guarantors” “Guarantor” or “Guarantors” shall mean, individually and collectively as the context so requires, all direct and indirect Subsidiaries of the Borrower (other than Excluded Subsidiaries) whether now existing or hereafter formed or acquired.

“Guaranty” shall mean, as to any Person, any direct or indirect obligation of such Person guaranteeing or intended to guarantee any Indebtedness, Capital Lease, dividend or other monetary obligation (“primary obligation”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (a) for the purchase or payment of any such primary obligation, or (b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or (iii) to purchase property, securities or services, in each case, primarily for the

 19

 

purpose of assuring the performance by the primary obligor of any such primary obligation; provided, however, the term “Guaranty” shall not include endorsements for collection or collections for deposit, in either case, in the ordinary course of business. The amount of any Guaranty shall be deemed to be an amount equal to the lesser of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranty is made (or, if the amount of such primary obligation is not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder)), or (y) the stated maximum liability under such Guaranty.

“Hazardous Material” shall mean petroleum, petroleum hydrocarbons or petroleum products, petroleum by-products, radioactive materials, asbestos or asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea formaldehyde, mold, lead or lead-containing materials, polychlorinated biphenyls; and any other chemicals, materials, substances or wastes in any amount or concentration which are now or hereafter (i) become defined as or included in the definition of “hazardous substances,” “hazardous materials,” “hazardous wastes,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “pollutants,” “regulated substances,” “solid wastes,” or “contaminants” or words of similar import, under any Environmental Law or (ii) are regulated by or for which Liability can be imposed under any Environmental Law.

“Hony Investors” shall have the meaning set forth in the definition of “Approved Co-Financier”.

“Immaterial Subsidiary” shall mean, at any date of determination, each direct or indirect Subsidiary of the Borrower (i) which has assets with an aggregate book value of less than $50,000 and which, taken together with all other Immaterial Subsidiaries, collectively have assets with an aggregate book value of less than $250,000, and (ii) in the case of such Subsidiaries as of the Closing Date, which are listed on Schedule 1.2 hereto.

“Indebtedness” shall mean (without double counting), at any time and with respect to any Person, (i) indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase price of property or services purchased (excluding (x) amounts constituting trade payables (payable within 120 days or such longer term as may be customary in the industry) and (y) other amounts due for the rental of space in connection with the production of an Item of Product, to the extent such amounts are or will be included in the Production/Acquisition Cost Reserve under the Senior Facility Credit Agreement (and in the Bonded Budget in the case of Pictures), in each case arising in the ordinary course of business), (ii) obligations of such Person in respect of letters of credit, acceptance facilities, or drafts or similar instruments issued or accepted by banks and other financial institutions for the account of such Person, (iii) obligations of such Person under Capital Leases and any financing lease involving substantially the same economic effect, (iv) deferred payment obligations of such Person resulting from the adjudication or settlement of any litigation to the extent not already reflected as a current liability on the balance sheet of such Person, and (v) indebtedness of others of the type described in clauses (i) through (iv) hereof which such Person has (a) directly or indirectly assumed or guaranteed in connection with a Guaranty, or (b) secured by a Lien on the assets of such Person, whether or not such Person has assumed such indebtedness. For the avoidance of doubt, Indebtedness shall not include non-

 20

 

refundable advances made by a third party distributor to “cash flow” the production, distribution or sale of any Item of Product or any amounts payable under a Co-Financing Agreement or Co-Financing Venture Agreement (as applicable).

“Indemnified Party” shall have the meaning given to such term in Section 13.5.

“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Fundamental Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Ineligible Assignee” shall mean a (i) natural person, (ii) holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof, except that such holding company, investment vehicle or trust shall not constitute an Ineligible Assignee if it (x) has not been established for the primary purpose of acquiring any Loans or Commitments, (y) is managed by a professional advisor, who is not such natural person or a relative thereof, having significant experience in the business of making or purchasing commercial loans, and (z) has assets greater than $50,000,000 and a significant part of its activities consist of making or purchasing commercial loans and similar extensions of credit in the ordinary course of its business, (iii) Credit Party or an Affiliate of a Credit Party or (iv) at all times prior to the occurrence and continuance of an Event of Default, any Competitor; provided that notwithstanding the foregoing, “Ineligible Assignee” shall not include any GPP Business Interests, BDT Capital Partners and any limited partners of its related investment funds.

“Instrument of Assumption and Joinder” shall mean an Instrument of Assumption and Joinder, substantially in the form of Exhibit J.

“Interest Deficit” shall have the meaning given to such term in Section 2.14(a).

“Interest Deficit PIK Amount” shall have the meaning given to such term in Section 2.14(b).

“Interest Payment Date” shall mean (i) the last Business Day of the six month period beginning on and including the date of the Borrowing and (ii) the last Business Day of each six month period thereafter.

“Interparty Agreement” shall mean, with respect to an Item of Product, an interparty agreement among (i) the Administrative Agent, the Senior Facility Agent and the Seer P&A Facility Agent, (ii) each applicable Credit Party, (iii) the applicable Distributor, (iv) if applicable, the Approved Completion Guarantor, (v) the Approved Foreign Sales Agent and/or (vi) such other applicable Persons, which agreement (a) is necessary in the reasonable judgment of the Administrative Agent to allocate the risks of Completion of such Item of Product and (b) shall be in form and substance reasonably satisfactory to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time.

“Investment” shall mean any stock, evidence of indebtedness or other securities of any Person, any loan, advance, contribution of capital, extension of credit or commitment

 21

 

therefor (including, without limitation, the Guaranty of obligations of others, but excluding current trade and customer accounts receivable arising in the ordinary course of business and payable in accordance with customary trading terms in the ordinary course of business) and any purchase of (i) any Equity Interests of another Person, or (ii) any business or undertaking of any Person or any commitment to make any such purchase, or any other investment.

“IRS” shall mean the Internal Revenue Service.

“Item of Product Declaration” shall mean a Picture Declaration, a Program Declaration or a Digital Product Declaration, as applicable.

“Items of Product” shall mean, individually or collectively, any Picture, any Program and any Digital Product, as applicable.

“Key-Man Policy” shall mean a key man insurance policy insuring the life of Robert Simonds in an amount equal to $35,000,000.

“Laboratory” shall mean any laboratory approved by the Senior Facility Agent.

“Laboratory Access Letter” shall mean a letter agreement among (i) a Laboratory holding any Physical Materials (including data backups of work in progress) of any Item of Product to which any Credit Party has a right of access, (ii) each applicable Credit Party and (iii) the Administrative Agent, the Senior Facility Agent and any other parties deemed necessary by the Administrative Agent, substantially in the form of Exhibit H or in such other form as shall be reasonably acceptable to the Administrative Agent, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time.

“Lender” and “Lenders” shall mean the financial institutions whose names appear on the signature pages hereof, any assignee of a Lender pursuant to Section 13.3 and their respective successors.

“Lending Office” shall mean, with respect to any Lender, the branch or branches (or Affiliate or Affiliates of such Lender) from which such Lender’s Loans are made or maintained and for the account of which all payments of principal of, and interest on, such Lender’s Loans are made, as notified to the Administrative Agent from time to time.

“Licensing Intermediary” shall mean a Person approved by the Senior Facility Agent through which any distribution or other exploitation rights are sold, leased, licensed or assigned as a conduit between a Credit Party and the ultimate Distributor in order to mitigate withholding taxes or to satisfy local quota requirements; provided, in each case that the Senior Facility Agent may from time to time by written notice to the Borrower withdraw its approval of any such Person as a Licensing Intermediary on a prospective basis.

“Lien” shall mean any mortgage, copyright mortgage, pledge, security interest, encumbrance, lien or charge or any other claim of any kind whatsoever (including, without limitation, any conditional sale or other title retention agreement, any agreement to grant a security interest at a future date, any lease in the nature of security, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any

 22

 

jurisdiction). “Liens” shall not include contractual agreements which do not provide security, encumbrances, charges or claims of the type described in this definition.

“Loan” or “Loans” shall mean individually and collectively, as the context so requires, the term loan made hereunder in accordance with Section 2.1. For the avoidance of doubt, the definition of “Loan” shall include all “PIK Interest” (under and as defined in the Existing Subordinated Credit Agreement), Default PIK Interest and Interest Deficit PIK Amounts.

“Major Studio” shall mean: (i) each of the following and its primary motion picture distribution Subsidiary with respect to Pictures, primary television distribution Subsidiary with respect to Programs and/or distribution Subsidiaries (or any other Subsidiary of such studios so long as its performance is guaranteed by such studio or primary distribution Subsidiary) and “specialty divisions”: (a) Paramount Pictures Corporation, (b) Twentieth Century Fox Film Corporation (including Fox Searchlight Pictures), (c) Sony Pictures Entertainment Inc. (including Screen Gems), (d) Walt Disney Motion Pictures Group, Inc., (e) Warner Bros. Entertainment Inc. (including New Line Cinema), (f) Universal Pictures, a division of Universal City Studios LLC (including Focus Features), and (g) Lions Gate Entertainment (including Lions Gate Films Inc., Lions Gate Entertainment, Inc. and Summit Entertainment, LLC) (ii) any Person succeeding to all or substantially all of the respective assets of any of the foregoing, or (iii) any other motion picture Distributor acceptable to the Administrative Agent (on a Picture by Picture basis), and notice of such acceptability shall be given to the Lenders.

“Margin Stock” shall be as defined in Regulation U of the Board.

“Material Adverse Effect” shall mean any change or effect that (i) has a materially adverse effect on the business, assets, liabilities (actual or contingent), properties, operations or condition (financial or otherwise) of the Credit Parties, taken as a whole, (ii) materially impairs the legal right, power or authority of any Credit Party to perform its respective obligations under the Fundamental Documents to which it is a party, (iii) materially impairs the validity or enforceability of, or materially impairs the rights, remedies or benefits available to the Administrative Agent (for the benefit of the Secured Parties) or the Lenders under the Fundamental Documents or (iv) has a materially adverse effect on the Collateral or the Administrative Agent’s Liens (on behalf of itself and other Secured Parties) on the Collateral or the priority of such Liens.

“Maturity Date” shall mean the earlier of (i) July 7, 2022, (ii) such other date as the Loans shall become due and payable in accordance with Article 7 hereof, and (iii) March 3, 2020; provided that clause (iii) shall only apply if by such date the Borrower has not either (a) extended the deadline for the mandatory repayment of Parent’s Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock (collectively “Parent Preferred”) from December 3, 2019 to a date that is at least nine months and one day after October 7, 2021, (b) redeemed all such Parent Preferred or (c) converted all of the Parent Preferred into common stock of the Parent.

“Moody’s” shall mean Moody’s Investors Service, Inc.

 23

 

“Multiemployer Plan” shall mean a plan described in Section 4001(a)(3) of ERISA contributed to by any Credit Party or any ERISA Affiliate or any such plan to which a Credit Party or an Affiliate of a Credit Party has any liability.

“National Flood Insurance Program” means the program created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as revised by the National Flood Insurance Reform Act of 1994, that mandates the purchase of flood insurance to cover real property improvements located in Special Flood Hazard Areas in participating communities and provides protection to property owners through a federal insurance program.

“Net Cash Proceeds” shall mean, (a) with respect to any disposition of property, an amount equal to: (i) any cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by any Credit Party in connection with such disposition minus (ii) any bona fide direct costs incurred in connection with such disposition, including (A) all legal, accounting, investment banking, title and recording tax commissions, fees and expenses, and all Taxes required to be paid or accrued as a liability under GAAP in connection with such disposition (including any Tax distributions permitted pursuant to Section 6.5(b) relating thereto), (B) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the property subject to such disposition and that is required to be repaid under the terms thereof as a result of such disposition, (C) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such disposition and (D) a reasonable reserve in accordance with GAAP for any liabilities undertaken by any Credit Party in connection with such disposition; provided that upon release of any such reserve, the amount released shall be considered Net Cash Proceeds, and (b) with respect to any Casualty Event, an amount equal to: (i) any cash payments or proceeds received by any Credit Party under any casualty insurance policy in respect of a covered loss thereunder minus (ii) any actual and reasonable costs incurred by any Credit Party in connection with the adjustment or settlement of any claims of any Credit Party in respect thereof.

“Note” or “Notes” shall have the meaning given to such term in Section 2.3(a).

“Notice of Assignment” shall mean a notice of assignment and irrevocable instructions (i) subject to clause (ii) below, substantially in the form of Exhibit L-1 or Exhibit L-2, as applicable, or in such other form (including instructions incorporated into a Distribution Agreement or Interparty Agreement) as shall be reasonably acceptable to the Administrative Agent or (ii) in such other form as may be required by the Approved Completion Guarantor with regard to its guaranty obligations and which shall be reasonably acceptable to the Administrative Agent.

“Obligations” shall mean (i) the obligation of the Borrower to make due and punctual payment of principal and interest on the Loans, costs and attorneys’ fees, and all other monetary obligations of the Borrower to the Administrative Agent or any Lender under this Credit Agreement, the Notes, any other Fundamental Document or any fee letter in respect of the Facility, and (ii) any other monetary obligations of any Credit Party to the Administrative Agent

 24

 

or any Lender (and their respective related Indemnified Parties) under and to the extent required by the Fundamental Documents; provided, however, that the definition of the term “Obligations” shall not create any guarantee by any Guarantor of (or grant of security interest by any Guarantor to support, as applicable) any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of any Guarantor.

“Other Connection Taxes” shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Fundamental Document, or sold or assigned an interest in any Loan or Fundamental Document).

“Other Investments Basket” shall have the meaning set forth in Section 6.4 hereof.

“Other Taxes” shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Fundamental Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 13.10(b)).

“Overhead” shall mean cash selling, general and administrative expenses determined in accordance with GAAP consistently applied.

“P&A Credit” shall have the meaning given to such term in the Senior Facility Credit Agreement.

“P&A Expenses” shall mean print and advertising expenses in respect of an Item of Product in the Domestic Territory.

“Parent” shall mean STX Filmworks, Inc., a Delaware corporation.

“Parent Preferred” shall have the meaning given to such term in the definition of “Maturity Date”.

“Participant Register” shall have the meaning given to such term in Section 13.3(h).

“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto.

“Percentage” shall mean with respect to any Lender at any time, the percentage of the Total Commitments represented by such Lender’s Commitment at such time, provided that if the Commitments have terminated or expired, the Percentage shall be determined based upon the then outstanding principal amount of Loans, giving effect to any assignments.

 25

 

“Permitted Encumbrances” shall mean Liens permitted under Section 6.2.

“Permitted Holders” shall mean TPG STAR BDH, L.P., TPG STAR AIV II, L.P., RSC Pictures, LLC, Great Mission International Limited, Marco Alliance Limited, Wump of Gump, LLC, and their respective Affiliates.

“Permitted Subordinated Payments” shall have the meaning given to such term in the Subordination Agreement.

“Person” shall mean any natural person, corporation, division of a corporation, limited liability company, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof.

“Physical Materials” shall have the meaning given to such term in clause (iv) of the definition of the term “Collateral” herein.

“Picture” shall mean any motion picture, film or videotape, whether recorded on film, videotape, cassette, cartridge, disc or on or by any other means, method, process or device whether now known or hereafter developed, with respect to which a Credit Party (i) has (either directly or through a Co-Financing Venture Entity) an ownership interest in the copyright under U.S. law, (ii) acquires any distribution rights or (iii) acquires a Revenue Participation. The term “Picture” shall include, without limitation, the scenario, screenplay or script upon which such Picture is based, all of the properties thereof, tangible and intangible, and whether now in existence or hereafter to be made or produced, whether or not in possession of a Credit Party, and all rights therein and thereto, of every kind and character. For the avoidance of doubt, the term “Picture” shall not include any Program or any Digital Product.

“Picture Declaration” shall mean, with respect to any Picture produced or acquired by or on behalf of a Credit Party, a declaration, substantially in the form of Exhibit I-1.

“Plan” shall mean an employee benefit plan within the meaning of Section 3(3) of ERISA, other than a Multiemployer Plan, maintained or contributed to by any Credit Party, or, with respect to any such plan covered by Title IV of ERISA, any ERISA Affiliate.

“Pledged Collateral” shall mean the Pledged Securities and any proceeds (as defined in Section 9-102(64) of the UCC) including cash proceeds (as defined in Section 9-102(9) of the UCC) of the Pledged Securities.

“Pledged Securities” shall mean collectively, all of the issued and outstanding Equity Interests issued by any Credit Party (including the Borrower) and all other Equity Interests now owned or hereafter acquired by any Credit Party (including interests in Co-Financing Venture Entities); provided, that (i) if a direct or indirect Subsidiary of the Borrower is a CFC or FSHCO, then the definition of “Pledged Securities” with respect to any such first-tier CFC or first-tier FSHCO shall not include in excess of 65% of the voting Equity Interests in such CFC or FSHCO, (ii) in the case of any Subsidiary not wholly-owned by a Credit Party, “Pledged Securities” shall not include the Equity Interests of such Subsidiary to the extent that a pledge hereunder of such Equity Interests would violate a contractual restriction in the organizational documents of such Subsidiary in effect on the Closing Date, and (iii) to the extent the pledge

 26

 

thereof is prohibited by the production financing agreement for the applicable Item of Product, “Pledged Securities” shall not include the Equity Interest in a Special Purpose Producer with respect to such Item of Product until the Special Purpose Producer’s obligations under such production financing agreement are repaid in full and such production financing agreement is terminated.

“Pledgeholder Agreement” shall mean a laboratory pledgeholder agreement among (i) the applicable Laboratory, (ii) each applicable Credit Party, (iii) the Administrative Agent, the Senior Facility Agent and any other parties deemed necessary by the Administrative Agent and (iv) any other applicable parties, substantially in the form of Exhibit G-1 and Exhibit G-2, as applicable, or in such form as shall be reasonably acceptable to the Administrative Agent, in each case, as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time.

“Pledgors” shall mean the Parent and each Credit Party that from time to time owns any of the Pledged Securities.

“Production Account” shall mean, individually and collectively, as the context so requires, a demand deposit account established by a Credit Party at a commercial bank located in (i) the United States of America and subject to a deposit account control agreement in form and substance satisfactory to the Administrative Agent, (ii) the United Kingdom or Canada, in each case so long as, if requested by the Administrative Agent, appropriate local law security documents in form and substance satisfactory to the Administrative Agent are delivered to the Administrative Agent or (iii) any other jurisdiction acceptable to the Senior Facility Agent, for the sole purpose of paying the negative cost of a particular Item of Product.

“Production Exposure” for an Uncompleted Program or Picture shall mean the Credit Parties’ share of the total negative cost for such Program or Picture (as applicable) minus (without duplication) the sum of (w) the gross amount of the Credit Parties’ share of amounts committed and reasonably expected to be paid pursuant to a binding agreement by a third person relating to the exploitation or licensing of such Programs or Pictures (as applicable, and in each case without regard to advance rates or present value discount rates) plus (x) the gross amount of the Credit Parties’ share of any tax incentives relating to such Programs or Pictures (as applicable, and in each case without regard to advance rates or present value discount rates) plus (y) the Credit Parties’ share of all proceeds received in respect of such Programs or Pictures (as applicable) prior to the applicable date of determination plus (z) the value (if any) of the Unsold TV Rights Credit attributable to any such Program that is eligible for Borrowing Base credit (under and as defined in the Senior Facility Credit Agreement) as of any date of determination.

“Program” shall mean any made-for-television product (including movies of the week, mini-series and series, and any episode thereof) produced for release on cable or free television and any entertainment project produced for initial release on the internet or on a digital service such as Netflix or Amazon, in any case whether recorded on film, videotape, cassette, cartridge, disc or on or by any other means, method, process or device whether now known or hereafter developed, with respect to which a Credit Party (a) is a copyright owner or exclusive licensee, or (b) acquires any distribution rights; provided that (i) all episodes of any television series for a broadcast season shall be collectively regarded as one Program and (ii) all of the

 27

 

episodes or webisodes of any internet series for a “season” or production cycle shall be collectively regarded as being one Program. The term “Program” includes, without limitation, the scenario, screenplay, teleplay or script upon which such Program is based, all of the properties thereof, tangible and intangible, and whether now in existence or hereafter to be made or produced, whether or not in possession of a Credit Party, and all rights therein and thereto, of every kind and character. For the avoidance of doubt, the term “Program” shall not include any Digital Product.

“Program Declaration” shall mean, with respect to any Program produced or acquired by or on behalf of a Credit Party, a declaration, substantially in the form of Exhibit I-2.

“Pro Rata Share” shall mean (i) in the case of any Obligation owed or allocable to a Lender in respect of the Loans or with respect to any Commitment, such Lender’s pro rata share of such Obligation or Commitment determined in accordance with such Lender’s Percentage, and (ii) in the case of any other Obligation to a Person, such Person’s pro rata share of such Obligation determined in comparison to all pari passu Obligations of like kind.

“Public-Sider” shall mean a Lender whose representatives may trade in securities of the Borrower or its controlling person or any of its Subsidiaries, including 144A securities, while in possession of the financial statements provided by the Borrower under the terms of this Credit Agreement.

“Qualified ECP Guarantor” shall mean, in respect of any Swap Obligation, each Credit Party that has total assets exceeding $10,000,000 at the time the relevant Guaranty or grant of the relevant security interest becomes or would become effective with respect to such Swap Obligation or such other Person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Qualifying Picture” shall mean a Picture which satisfies the following criteria: (1) it is being distributed in the Domestic Territory by the Borrower and/or another Approved Domestic Distributor under a Distribution Agreement, and the Borrower has secured a wide theatrical release on premium, first run screens satisfactory to the Administrative Agent, the Senior Facility Agent and the Seer P&A Facility Agent and downstream distribution generally consistent with the Significant Exploitation Agreements, and (2) it is a feature length Picture to be produced or acquired by a Credit Party or Co-Financing Venture Entity or a Major Studio (in the case of a Revenue Participation) which (i) is scheduled to be delivered no later than one year after the Maturity Date, (ii) unless the Administrative Agent otherwise agrees, shall not be a stage play or concert film, (iii) shall be filmed predominately in color, (iv) shall be predominately in the English language, (v) is expected to receive an MPAA rating of not more restrictive than “R” (or the equivalent thereof) (or, if following receipt thereof, such rating is no more restrictive than “R” (or the equivalent thereof)), (vi) unless otherwise approved by the Senior Facility Agent, has satisfied or is capable of satisfying all other specifications set forth in each applicable Distribution Agreement to be included in the Borrowing Base (under and as defined in the Senior Facility Credit Agreement), if any, (vii) shall have a running time of no less than 80 minutes, and (viii) unless otherwise approved by the Senior Facility Agent, has a negative cost of at least $10,000,000.

 28

 

“Quiet Enjoyment” shall have the meaning given to such term in Section 8.12.

“Recipient” shall mean (a) the Administrative Agent, (b) any Lender, or (c) any other recipient of any payment to be made by or on account of any Obligation.

“Refinanced Indebtedness” shall have the meaning given to such term in Section 6.1(l).

“Refinancing Indebtedness” shall have the meaning given to such term in Section 6.1(l).

“Register” shall have the meaning given to such term in Section 13.3(e).

“Regulation D” shall mean Regulation D of the Board.

“Related Fund” shall have the meaning given to such term in Section 13.3(c).

“Release” shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of Hazardous Materials into the indoor or outdoor environment, including the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata.

“Reportable Event” shall mean any reportable event as defined in Section 4043(c) of ERISA, other than a reportable event as to which provision for 30-day notice to the PBGC has been waived under applicable regulations.

“Required Lenders” shall mean, at any time, Lenders holding greater than 50% of the Total Commitments, or, if the Commitments have terminated or expired, Lenders holding greater than 50% of the Credit Exposure.

“Restricted Payment” shall mean (i) any dividend, distribution or other direct or indirect payment on account of any Equity Interest issued by any Credit Party, (ii) any redemption or other acquisition, re-acquisition or retirement by a Credit Party of any Equity Interests issued by any Credit Party or any Affiliate thereof, now or hereafter outstanding, (iii) any payment made by any Credit Party to retire, or obtain the surrender of, any outstanding warrants, puts or options or other rights to purchase or otherwise acquire any Equity Interest issued by any Credit Party or any Affiliate thereof, now or hereafter outstanding, (iv) any payment by a Credit Party of principal of, premium, if any, or interest on, or any redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Subordinated Debt, (v) any payment under any Synthetic Purchase Agreement and (vi) any other payment by a Credit Party to or for the benefit of any Affiliate of such Credit Party (other than a Credit Party), or any direct or indirect members or shareholders of such Credit Party.

“Revenue Participation” shall mean any investment arising in connection with a commitment (which may be a general unsecured obligation) from a Major Studio to remit to a

 29

 

Credit Party the proceeds of an Equity Interest or an economic interest (as opposed to copyright ownership or distribution rights) held by a Credit Party in a Qualifying Picture.

“Revenue Participation Documentation” shall mean any and all documents or contracts by which the Credit Parties have obtained rights in any Revenue Participation.

“S&P” shall mean Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.

“Sanctioned Country” shall mean, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Credit Agreement, Cuba, Iran, North Korea, Sudan, Syria and Crimea).

“Sanctioned Person” shall mean, at any time, (i) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the European Union or any European Union member state, Her Majesty’s Treasury of the United Kingdom, or other relevant sanctions authority, (ii) any Person operating, organized or resident in a Sanctioned Country or (iii) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (i) or (ii).

“Sanctions” shall mean economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or any other relevant sanctions authority.

“Schedule of Commitments” shall mean the schedule of Commitments of the Lenders set forth on Schedule 1.1.

“Second Amendment and Restatement Effective Date” shall have the meaning given to such term in the Introductory Statement hereto.

“Secured Party” or “Secured Parties” shall mean the Administrative Agent, the Lenders, and any other Person owed obligations that are secured by the Liens granted to the Administrative Agent under the Fundamental Documents from time to time pursuant to the terms thereof.

“Security Document” shall have the meaning given to such term in Section 7.1(k).

“Seer P&A Facility Agent” shall mean Seer Capital Partners Master Fund L.P., a Cayman Islands limited partnership, as administrative agent for the lenders under the Seer P&A Facility Credit Agreement (or such successor administrative agent as may be appointed pursuant to the terms thereof).

“Seer P&A Facility Credit Agreement” shall mean the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (and as

 30

 

amended from time to time in accordance with the terms hereof (including as required by Section 4.1 hereof), thereof and of the Senior Intercreditor Agreement and the Subordination Agreement), among the Borrower, the guarantors party thereto, the lenders party thereto and the Seer P&A Facility Agent.

“Senior Facility Agent” shall mean JPMorgan Chase Bank, N.A., as administrative agent for the lenders under the Senior Facility Credit Agreement (or such successor administrative agent as may be appointed pursuant to the terms thereof).

“Senior Facility Credit Agreement” shall mean the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (and as amended from time to time in accordance with the terms hereof (including as required by Section 4.1 hereof), thereof and of the Senior Intercreditor Agreement and the Subordination Agreement), among the Borrower, the guarantors party thereto, the lenders party thereto and the Senior Facility Agent, pursuant to which such lenders have agreed to make up to $400,000,000 of revolving loans (which may be increased by up to $200,000,000) to the Borrower for general working capital purposes, including (i) overhead, development and payment of interest, fees, costs and expenses under such facility, and (ii) to fund the Credit Parties’ development, pre-production, production, acquisition, distribution and prints and advertising expenses of Items of Product, as well as to refinance certain loans and to repay outstanding loans under the Seer P&A Facility Credit Agreement.

“Senior Facilities” shall mean, collectively, the credit facilities evidenced by the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement.

“Senior Intercreditor Agreement” shall mean the Amended and Restated Senior Facility Intercreditor Agreement dated as of the date hereof (and as amended from time to time (including as required by Section 4.1 hereof)), among the Senior Facility Agent, the Seer P&A Facility Agent and the Credit Parties.

“Senior Loan Documents” shall mean the Seer P&A Facility Credit Agreement, the Senior Facility Credit Agreement and the other “Fundamental Documents” as defined in each of the foregoing, in each case as amended from time to time in accordance with the terms hereof and of the Subordination Agreement.

“Significant Exploitation Agreements” shall mean (i) the Borrower’s license/exhibitor agreements in effect on the Closing Date with American Multi-Cinema, Inc., Cinemark USA, Inc., Carmike Cinemas, Inc. and Regal Entertainment Group, (ii) the film license agreement (if any) entered into by the Borrower with Cineplex Inc., and (iii) the Borrower’s multi-picture or output agreements for domestic home entertainment distribution and domestic pay television distribution and (if a multi-picture agreement is executed) free television exploitation (in the cases of clauses (i) through (iii), in form and substance satisfactory to the Senior Facility Agent and the Seer P&A Facility Agent and as amended, modified, supplemented or replaced in accordance with the terms hereof and thereof).

 31

 

“Soft Dollar Transaction” shall mean any tax benefit or subsidy transaction, or other transaction commonly referred to as a “soft dollar transaction” entered into by a Credit Party in connection with the production and/or exploitation of an Item of Product.

“Special Flood Hazard Area” means an area that FEMA’s current flood maps indicate has at least a one percent (1%) change of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.

“Special Purpose Producer” shall mean a Subsidiary of a Credit Party or other entity jointly owned by a Credit Party constituting a special purpose entity which satisfies the following criteria:

(i)        such special purpose entity is formed solely for the purpose of producing a particular Item of Product and obtaining production financing for such Item of Product directly from a third party lender or a non-Credit Party affiliate of the Borrower, in each case to the extent permitted by Section 6.27;

(ii)       (a) any such production financing shall be non-recourse to any Credit Party or any of its assets other than the Equity Interests in the relevant Special Purpose Producer, (b) in the case of financing from a non-Credit Party Affiliate, such financing shall be on terms at least as favorable to such special purpose entity as could be obtained in an arm’s length transaction with a non-affiliate, and (c) after any such financing has been repaid, such special purpose entity shall distribute all of its rights in such Item of Product and the proceeds therefrom (or an economic interest therein) to a Credit Party or such special purpose entity shall become a Credit Party; provided, that if such Item of Product was co-financed, the Administrative Agent shall (upon request of the Borrower) enter into a Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (as applicable) with the applicable co-financier, which agreement is in form and substance reasonably satisfactory to the Administrative Agent;

(iii)       no Credit Party shall make Investments in such special purpose entity (either in the form of cash, credit support, services or other assets, including the payment of taxes attributable to the income of such subsidiary) or otherwise be liable to make such Investments;

(iv)       the Credit Parties shall cause such special purpose entity to comply with the applicable requirements of Section 5.18(b); and

(v)       for the avoidance of doubt, such special purpose entity shall not produce any sequels, prequels, spin-offs, television series or other derivative products with respect to such Item of Product (i.e., only a separate special purpose entity or a Credit Party may do so to the extent otherwise permitted hereunder).

“Specified Permitted Encumbrances” shall mean (i) those Liens permitted under Sections 6.2(c), (f), (k), (n), (s) and (t) and (ii) to the extent the Administrative Agent has agreed in writing pursuant to the terms of an Interparty Agreement or intercreditor agreement, those Liens permitted under Sections 6.2(b), (g), (h), (i), (l), (m) and (q) hereof.

“Submitting Party” shall have the meaning given to such term in Section 13.12.

 32

 

“Subordinated Debt” shall mean any subordinated Indebtedness of any Credit Party which is unsecured and has interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to the Required Lenders. For the avoidance of doubt, the Obligations do not constitute Subordinated Debt.

“Subordination Agreement” shall mean the Amended and Restated Subordination and Intercreditor Agreement dated as of October 7, 2016 (and as amended from time to time), among the Administrative Agent, the Senior Facility Agent, the Seer P&A Facility Agent and the Credit Parties.

“Subsidiary” shall mean with respect to any Person, any corporation, limited liability company, association, joint venture, partnership or other Person (whether now existing or hereafter organized) of which at least a majority of the voting stock or other ownership interests therein having ordinary voting power for the election of directors (or the equivalent) is, at the time as of which any determination is being made, owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person; provided, however, that for purposes of this Credit Agreement (other than in the definition of Unrestricted Subsidiary) and the other Fundamental Documents, an Unrestricted Subsidiary shall be deemed not to be a Subsidiary of any Credit Party.

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

“Swap Obligation” shall mean, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Synthetic Purchase Agreement” shall mean any Swap Agreement or similar agreement or combination of agreements pursuant to which any Credit Party is or may become obligated to make (i) any payment in connection with a purchase by any third Person from a Person other than a Credit Party of any Equity Interest issued by any Credit Party or in respect of this Credit Agreement or any Subordinated Debt, or (ii) any payment (other than on account of a permitted purchase by it of any Equity Interest issued by any Credit Party or in respect of this Credit Agreement or any Subordinated Debt) the amount of which is determined by reference to the price or value at any time of any Equity Interest issued by any Credit Party or in respect of this Credit Agreement or any Subordinated Debt.

“Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 33

 

“Television Joint Ventures” shall mean any formal or effective joint venture arrangement entered into between a Credit Party and a third Person in connection with the development, production or exploitation of more than one Program or “slate” of Programs.

“Total Commitments” shall mean, at any time, the aggregate amount of the Commitments then in effect of all of the Lenders, as such aggregate amount shall be adjusted upwards or downwards from time to time in accordance with the terms of this Credit Agreement (including, without limitation, pursuant to Section 2.6).

“Trademark Security Agreement” shall mean a Trademark Security Agreement substantially in the form of Exhibit F, as the same may be amended, supplemented or otherwise modified, renewed, restated or replaced from time to time.

“Treasury Rate” shall mean, as of any date of voluntary or mandatory prepayment of the Loans, the yield to maturity as of such date of the United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to such date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such date to the Maturity Date; provided, however, that if the period from such date to the Maturity Date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

“TV JV/Digital Product Investments Basket” shall have the meaning set forth in Section 6.4 hereof.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York on the date of execution of this Credit Agreement and as amended from time to time.

“U.K. Debenture” shall mean a debenture governed by the laws of England and Wales executed by STX Entertainment UK, Ltd. and the Administrative Agent in an agreed form between the parties.

“Unasserted Contingent Obligations” shall mean, at any time, Obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities (excluding the principal of, and interest and premium (if any) on, and fees and expenses relating to, any Obligation) in respect of which no written assertion of liability and no written claim or demand for payment has been made (and, in the case of Obligations for indemnification, no notice for indemnification has been issued by the indemnitee) at such time.

“Uncompleted” shall mean, with respect to an Item of Product, such Item of Product is not Completed.

“Unrestricted Subsidiary” shall mean:

(i)              any Subsidiary of the Borrower that is designated as an Unrestricted Subsidiary by the managing member of the Borrower in the manner provided below and has nominal assets and value at the time of such designation; and

 34

 

(ii)            each Subsidiary of an Unrestricted Subsidiary.

The managing member of the Borrower may designate any Subsidiary of the Borrower (including any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger or consolidation or Investment therein) to be an Unrestricted Subsidiary only if:

(1)       neither such Subsidiary nor any of its Subsidiaries owns any Equity Interest or Indebtedness of or has any Investment in, or owns or holds any Lien on any property of, any other Subsidiary of the Borrower that is not a Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary;

(2)       all the Indebtedness of such Subsidiary and its Subsidiaries shall, at the date of designation, and will at all times thereafter, consist of debt that is not in any way recourse to the Credit Parties;

(3)       such Subsidiary is a Person with respect to which neither the Borrower nor any Subsidiary (other than any Unrestricted Subsidiary) has any direct or indirect obligation:

(a)       to subscribe for additional Equity Interests, or make additional contributions to the capital, of such Person; or

(b)       to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and

(4)       after giving effect to such designation, no Default or Event of Default shall be continuing.

Any such designation by the managing member of the Borrower shall be evidenced by delivering to the Administrative Agent a written resolution of the managing member of the Borrower giving effect to such designation and an officers’ certificate certifying that such designation complies with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Credit Agreement and any Indebtedness of such Subsidiary shall be deemed to be incurred as of such date.

The managing member of the Borrower may designate any Unrestricted Subsidiary to no longer be an Unrestricted Subsidiary; provided that immediately after giving effect to such redesignation, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

“USA Patriot Act” shall mean the U.S.A. Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“U.S. Person” shall mean any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in clause (f) of Section 2.13.

 35

 

“Withholding Agent” shall mean any Credit Party and the Administrative Agent.

2.               THE LOANS

 

SECTION 2.1             Loans.

(a)             Prior to the Closing Date, certain loans were made to the Borrower under the Existing Subordinated Credit Agreement, which loans may remain outstanding as of the date of this Credit Agreement (such outstanding loans, if any, being hereinafter referred to as the “Existing Loans”). Subject to the terms and conditions set forth in this Credit Agreement, the Borrower and each of the Lenders agree that on the Closing Date, any Existing Loans under the Existing Subordinated Credit Agreement shall be reevidenced as Loans under this Credit Agreement and the terms of the Existing Loans shall be restated in their entirety and shall be evidenced by this Credit Agreement. The Existing Loans were issued in exchange for payment in cash of an amount equal to 99% of the Lenders’ Commitments.

(b)            [Intentionally Omitted].

(c)             Amounts borrowed under this Section 2.1 and repaid or prepaid may not be reborrowed.

SECTION 2.2             Making of Loans.

(a)             [Intentionally Omitted].

(b)            The Borrower shall give the Administrative Agent at least one (1) Business Day’s prior written, facsimile or telephonic (promptly confirmed in writing) notice of the Borrowing. Each such written or facsimile notice or written confirmation under this Section 2.2(b) shall be in the form of a Borrowing Notice. The Borrowing Notice in order to be effective must be received by the Administrative Agent not later than 2:00 p.m., New York City time, on the day required and shall specify the date (which shall be a Business Day) on which the Borrowing is to be made and the aggregate principal amount of the requested Borrowing. The Borrowing Notice shall be irrevocable.

(c)             The Administrative Agent shall promptly notify each Lender of its Pro Rata Share of the Borrowing under this Section 2.2 and the date of the Borrowing. On the borrowing date specified in such notice, each Lender shall make its Pro Rata Share of the Borrowing available at the Funding Office no later than 2:00 p.m., New York City time, in Federal or other immediately available funds. Upon receipt of the funds to be made available by the Lenders to fund the Borrowing hereunder, the Administrative Agent shall disburse such funds by depositing the requested amounts into the account specified in the applicable Borrowing Notice.

SECTION 2.3             Notes; Repayment.(a)             At the request of any Lender, each Loan made by such Lender hereunder shall be evidenced by a promissory note in such Lender’s favor substantially in the form of Exhibit A (each, a “Note” and collectively, the “Notes”) in the face amount of such Lender’s Commitment, payable to the order of such Lender, duly executed by an Authorized Officer of the Borrower and

 36

 

dated as of the Second Amendment and Restatement Effective Date. The Note(s) issued to the Lenders under the Existing Subordinated Credit Agreement shall be returned to the Borrower for cancellation upon the issuance of new Notes as of the Closing Date.

(b)            The outstanding principal balance of each Loan shall be payable in full on the Maturity Date, subject to mandatory prepayment as provided in Section 2.9 and acceleration as provided in Article 7.

(c)             Each of the Loans shall bear interest on the outstanding principal balance thereof as set forth in Section 2.4. Each Lender and the Administrative Agent on its behalf is hereby authorized by the Borrower, but not obligated, to enter the amount of each Loan and the amount of each payment or prepayment of principal or interest thereon in the appropriate spaces on the reverse of or on an attachment to any Notes; provided, however, the failure of any Lender or the Administrative Agent to set forth such Loans, principal payments or other information shall not in any manner affect the obligations of the Borrower to repay such Loans.

SECTION 2.4             Interest on Loans.

(a)             Interest shall be payable on the Loans at a rate per annum equal to 11.0%. The interest rate applicable to the Loans shall be payable on each Interest Payment Date as follows:

(i)              in cash in an amount equal to 9.0% per annum; plus

(ii)            in kind in an amount equal to 2.0% per annum by adding an amount equal to such unpaid interest to the principal amount of the Loans.

(b)            Interest shall be payable in arrears on each Interest Payment Date, on the Maturity Date and on the date of any prepayment hereunder. All computations of interest for the Loans shall be made on the basis of the actual number of days elapsed over a year of 365/366 days, as the case may be, and shall compound on each applicable Interest Payment Date.

(c)             Interest in respect of any Loan hereunder shall accrue from and including the date such Loan is made to but excluding the date on which such Loan is paid.

(d)            Anything in this Credit Agreement or the Notes to the contrary notwithstanding, the interest rate on the Loans shall in no event be in excess of the maximum rate permitted by Applicable Law.

SECTION 2.5             Fees.

On the closing date of the Existing Subordinated Credit Agreement, the Borrower paid to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share, an upfront fee in respect of the Commitments equal to 1.0% of the aggregate amount of the Commitments, which was paid in full by delivery of the Existing Agent Fee Shares in accordance with Section 5.24 below. On the Closing Date, the Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Pro Rata Share, an amendment fee, which shall be payable in full by delivery of the Closing Date Agent Fee Shares in accordance with Section 5.24 below. The Borrower agrees to pay all other fees that are then

 37

 

due and payable pursuant hereto or pursuant to any fee letter executed by any Credit Party with respect to the Facility.

SECTION 2.6             Termination of Commitments.

The Commitment of each Lender shall be automatically and permanently reduced to $0 upon the making of such Lender’s Loan pursuant to Section 2.1(a).

SECTION 2.7             Default Interest.

If (a) Borrower defaults in any payment of interest on the Loans or other monetary Obligations, (b) a default under Section 7.1(h) or (i) has occurred and is continuing and/or (c) an Event of Default has occurred and is continuing, (after, as well as before judgment), the Borrower shall on demand from time to time pay interest on any then unpaid amount of the Obligations at a rate per annum of 2.00% in excess of the rate otherwise then in effect (computed as aforesaid). Such interest shall be payable in cash to the extent permitted by the Subordination Agreement, otherwise such interest shall be payable in kind by adding an amount equal to such unpaid interest to the principal amount of the Loans (interest so paid, “Default PIK Interest”). All Default PIK Interest shall be deemed added to the outstanding principal amount of the Loans as of the date of demand therefor, and the Loans shall bear interest on such increased principal amount from and after such date. The obligation of the Borrower to pay all Default PIK Interest shall automatically be evidenced by any Notes issued to the Lenders.

SECTION 2.8             [Intentionally Omitted].SECTION 2.9             Voluntary and Mandatory Prepayment of Loans; Change in Control Offer.(a)             Subject to the terms of the Subordination Agreement and Sections 2.9(b) and 2.15(a) below, the Borrower shall have the right at its option at any time and from time to time to prepay, without premium or penalty except as set forth in Sections 2.9(b) and 2.15(a), any Loans, in whole or in part, upon at least three (3) Business Days’ prior written, facsimile or telephonic (promptly confirmed in writing) notice given prior to 2:00 p.m., New York City time, to the Administrative Agent, in a minimum aggregate principal amount of $100,000 or such greater amount that is an integral multiple of $50,000 if prepaid in part, or the remaining balance of such Loan if prepaid in full. Each notice of prepayment shall specify the prepayment date, each Loan to be prepaid and the principal amount thereof, shall be irrevocable and shall commit the Borrower to prepay such Loan in the amount and on the date stated therein. All prepayments under this Section 2.9(a) shall be accompanied by accrued but unpaid interest on the principal amount being prepaid to (but excluding) the date of prepayment, together with any additional amounts required pursuant to Sections 2.9(b) and 2.15(a). Notwithstanding anything to the contrary contained in this Credit Agreement, the Borrower may rescind any notice of prepayment given under this Section 2.9(a) in anticipation of a proposed refinancing of the Facility if such refinancing is not consummated or is otherwise delayed.

(b)            In the event all or any portion of the Loans are repaid (or repriced or effectively refinanced through any waiver, consent or amendment of the Loans) for any reason on or prior to May 2, 2019, such repayments, repricings or refinancings will be made as follows:

 38

 

(i)              with a prepayment premium in an amount equal to the present value at such prepayment date of all required interest payments due on the Loans through the Maturity Date (computed on the basis of actual days elapsed over a year of 360 days and using a discount rate equal to the Treasury Rate as of such prepayment date plus 50 basis points), if such repayment, repricing or refinancing occurs on or prior to May 2, 2017;

(ii)            at 105.0% of the amount repaid, repriced or effectively refinanced if such repayment, repricing or refinancing occurs after May 2, 2017 but on or prior to May 2, 2018; and

(iii)          at 102.5% of the amount repaid, repriced or effectively refinanced if such repayment, repricing or refinancing occurs after May 2, 2018 but on or prior to May 2, 2019.

(c)             [Intentionally Omitted].

(d)            The Obligations (other than the Unasserted Contingent Obligations) shall be paid in full on the Maturity Date.

(e)             Subject to the terms of the Subordination Agreement, (i) no later than the first Business Day following the date of receipt by any Credit Party of any Net Cash Proceeds as a result of a disposition of any of its property except (x) dispositions of Collateral permitted under Section 6.6, (y) in the ordinary course of business or (z) any dispositions that do not exceed $3,000,000 individually or $10,000,000 in the aggregate, Borrower shall prepay the Loans in an aggregate amount equal to such Net Cash Proceeds; provided, so long as no Event of Default shall have occurred and be continuing, Borrower shall have the option, directly or through one or more of its Subsidiaries, to either use such Net Cash Proceeds to repay the Loans and permanently reduce the Commitments in each case under (and as defined in) any of the Senior Facilities or to invest such Net Cash Proceeds within three hundred sixty-five (365) days of receipt thereof in assets of the general type used in the business of Borrower and its Subsidiaries (including, without limitation, investments in connection with the development, production, financing, acquisition or distribution of Items of Product), it being agreed that pending any such investment, the Borrower may temporarily repay the Loans without permanently reducing the Commitments in each case under (and as defined in) any of the Senior Facilities; and (ii) no later than the first Business Day following the date of receipt by any Credit Party or Administrative Agent as loss payee, of any Net Cash Proceeds as a result of any casualty, loss, damage, destruction or other similar loss with respect to real or personal property or improvements of any Credit Party (each, a “Casualty Event”), Borrower shall prepay the Loans in an aggregate amount equal to such Net Cash Proceeds; provided, so long as no Event of Default shall have occurred and be continuing, Borrower shall have the option, directly or through one or more of its Subsidiaries to invest such Net Cash Proceeds within one hundred eighty days of receipt thereof to repair damage in respect of which such Net Cash Proceeds were received; provided, further, that so long as no Event of Default shall have occurred and be continuing, production insurance recoveries received by a Credit Party prior to Completion or abandonment of an Item of Product may be utilized to finance the production of such Item of Product.

 39

 

(f)             Upon the occurrence of a Change in Control, Borrower will make an offer (a “Change in Control Offer”) to each Lender to repurchase all of such Lender’s Loans at a purchase price in cash equal to the amount required to be paid by Borrower pursuant to this Credit Agreement in connection with a voluntary prepayment of all Loans (including, without limitation, any additional amounts required by Sections 2.9(b) and 2.15(a)) on the date of such Change in Control (the “Change in Control Payment”). Within ten (10) Business Days following any Change in Control, Borrower will notify each Lender in writing describing the transaction or transactions that constitute the Change in Control and stating:

(i)              that the Change in Control Offer is being made pursuant to this Section 2.9(f) and that all Loans tendered will be repurchased;

(ii)            the purchase price and the purchase date, which shall be no earlier than 10 days and no later than 45 days from the date such notice is mailed (the “Change in Control Payment Date”);

(iii)          that any Loan not tendered will continue to accrue interest;

(iv)          that, unless Borrower defaults in the payment of the Change in Control Payment, all Loans repurchased pursuant to the Change in Control Offer will cease to accrue interest after the Change in Control Payment Date;

(v)            that Lenders will be entitled to withdraw their election if the Administrative Agent receives, not later than the close of business on the third Business Day preceding the Change in Control Payment Date, a written notice setting forth the name of the Lender, the principal amount of Loans tendered for repurchase, and a statement that such Lender is withdrawing his election to have such Loans repurchased;

(vi)          that Lenders whose Loans are being repurchased only in part will, upon request of such Lender, be issued new Notes equal in principal amount to the unpurchased portion of the Loans; and

(vii)        following the repurchase of all Loans tendered pursuant to the Change in Control Offer, all such Loans shall, without further action by any Person, be deemed cancelled for all purposes and no longer outstanding (and may not be resold) for all purposes of this Credit Agreement and all other Fundamental Documents.

(g)            On the Change in Control Payment Date, the Borrower will (A) repurchase all Loans tendered pursuant to the Change in Control Offer and (B) deposit with the Administrative Agent (for the benefit of the Lenders) an amount equal to the Change in Control Payment in respect of all Loans properly tendered. Following such repurchase, all Loans tendered pursuant to the Change in Control Offer shall, without further action by any Person, be deemed cancelled for all purposes and no longer outstanding (and may not be resold) for all purposes of this Credit Agreement and all other Fundamental Documents, and the Administrative Agent is authorized to make appropriate entries in the Register to reflect any such cancellation.

 40

 

(h)            Notwithstanding anything to the contrary contained herein, a Change in Control Offer may be made in advance of a Change in Control, conditioned upon the consummation of such Change in Control, if a definitive agreement is in place for the Change in Control at the time the Change in Control Offer is made.

(i)              [Intentionally Omitted].

(j)              [Intentionally Omitted].

(k)            [Intentionally Omitted].

(l)              All prepayments shall be accompanied by accrued but unpaid interest on the principal amount being prepaid to but not including the date of prepayment and any payments required pursuant to Sections 2.9(b) and 2.15(a).

(m)           [Intentionally Omitted].

(n)            Except as otherwise specifically provided in this Article 2, should any payment or prepayment of principal of or interest on the Loans or any other amount due hereunder, become due and payable on a day other than a Business Day, the due date of such payment or prepayment shall be extended to the next succeeding Business Day and, in the case of a payment or prepayment of principal, interest shall be payable thereon at the rate herein specified during such extension.

(o)            All payment obligations under this Section 2.9 are subject to the terms of the Subordination Agreement. For avoidance of doubt, if the Subordination Agreement prohibits the Borrower from making any payment when due under this Credit Agreement, such failure shall nevertheless constitute a Default and\or Event of Default if such failure, in the absence of such prohibition, would constitute a Default or Event of Default.

SECTION 2.10          Increased Costs.

(a)             If any Change in Law shall:

(i)              impose, modify or deem applicable any reserve, special deposit, liquidity, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender;

(ii)            subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii)          impose on any Lender any other condition, cost or expense (other than Taxes) affecting this Credit Agreement or Loans made by such Lender;

 41

 

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to reduce the amount of any sum received or receivable by such Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the case may be, such additional amount or amounts (without duplication) as will compensate such Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

(b)            Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Credit Agreement, the Commitments of such Lender or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(c)             Certificates for Reimbursement. A certificate of a Lender or other Recipient setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or other Recipient or its holding company, as the case may be, as specified in clause (a) or (b) of this Section and delivered to the Borrower, shall be conclusive absent manifest error. The Borrower shall pay such Lender or other Recipient, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)            Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided, that the Borrower shall not be required to compensate a Lender pursuant to this Section 2.10 for any increased costs incurred or reductions suffered more than two hundred seventy (270) days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof).

(e)             Each Lender agrees that after it becomes aware of the occurrence of an event or the existence of a condition that (i) would cause it to incur any increased cost hereunder or render it unable to perform its agreements hereunder for the reasons specifically set forth in this Section 2.10, or (ii) would require the Borrower to pay an increased amount under this Section 2.10 or Section 2.13, it will use commercially reasonable efforts to notify the Borrower of such event or condition and, to the extent not inconsistent with such Lender’s internal policies, will use commercially reasonable efforts to make, fund or maintain the affected Loans of such Lender through another Lending Office of such Lender if as a result thereof the additional monies which would otherwise be required to be paid or the reduction of amounts receivable by such Lender thereunder in respect of such Loans would be materially reduced, or such inability to perform

 42

 

would cease to exist, or the increased costs which would otherwise be required to be paid in respect of such Loans pursuant to Section 2.7(b), this Section 2.10 or Section 2.13 would be materially reduced or Taxes or other amounts otherwise payable under Section 2.7(b), this Section 2.10 or Section 2.13 would be materially reduced, and if, as determined by such Lender, in its sole discretion, the making, funding or maintaining of such Loans through such other Lending Office would not otherwise adversely affect such Loans or such Lender. Notwithstanding the foregoing, a failure on the part of any Lender to provide notice or take any other action pursuant to this Section 2.10(e) shall not affect the Borrower’s obligation to make any payments or deductions required by this Article 2. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

SECTION 2.11          [Intentionally Omitted].

SECTION 2.12          Manner of Payments. All payments of principal and interest by the Borrower in respect of any Loans shall be remitted to the Lenders in accordance with their Pro Rata Share of the outstanding Loans and all Borrowings hereunder shall be made by the Lenders in accordance with their Pro Rata Share thereof. All payments by the Borrower hereunder shall be absolute and unconditional obligations not subject to offset, counterclaim, recoupment or reduction of any kind and shall be made in Dollars in Federal or other immediately available funds at the address set forth in Section 13.1(a)(ii)(A) no later than 2:00 p.m., New York City time, on the date on which such payment shall be due.

SECTION 2.13          Taxes.

(a)             Defined Terms. For purposes of this Section 2.13, the term “Applicable Law” includes FATCA.

(b)            Payments Free of Taxes. Any and all payments by or on account of any obligation of any Credit Party under any Fundamental Document shall be made without deduction or withholding for any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Credit Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(c)             Payment of Other Taxes by the Credit Parties. The Credit Parties shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Administrative Agent timely reimburse the Administrative Agent for the payment (provided the Administrative Agent delivers to the Credit Parties evidence of such payment, which shall be conclusive absent manifest error) of, any Other Taxes.

 43

 

(d)            Indemnification by the Credit Parties. The Credit Parties shall jointly and severally indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.13) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate setting forth in reasonable detail the basis for and amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(e)             Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Credit Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Credit Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 13.3(h) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Fundamental Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Fundamental Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this clause (e).

(f)             Evidence of Payments. As soon as practicable after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section 2.13, such Credit Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(g)            Status of Lenders. (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Fundamental Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.13(g) (ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject

 44

 

such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender. If the Administrative Agent is not a Lender and it is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Fundamental Document, it shall deliver to the Borrower, at the time or times reasonably requested by the Borrower, such properly completed and executed documentation reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, the Administrative Agent (if not a Lender) shall deliver such other documentation reasonably requested by the Borrower as will enable the Borrower to determine whether or not the Administrative Agent is subject to backup withholding or information reporting requirements.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Credit Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent) (and in each case, if the Administrative Agent is making the request, it shall request a sufficient number of copies so as to be able to provide one copy to the Borrower, and shall promptly provide such copy to the Borrower upon receipt by the Administrative Agent), whichever of the following is applicable:

(i) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States of America is a party (x) with respect to payments of interest under any Fundamental Document, executed originals of IRS Form W-8BEN or W-8BENE establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Fundamental Document, IRS Form W-8BEN or W-8BENE establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” or other similar article of such tax treaty;

 

(ii) executed originals of IRS Form W-8ECI;

 

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit N-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN or W-8BENE; or

 45

 

 

(iv) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BENE, a U.S. Tax Compliance Certificate substantially in the form of Exhibit N-2 or Exhibit N-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided, that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit N-4 on behalf of each such direct and indirect partner;

 

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent) (and in each case, if the Administrative Agent is making the request, it shall request a sufficient number of copies so as to be able to provide one copy to the Borrower, and shall promptly provide such copy to the Borrower upon receipt by the Administrative Agent), executed originals of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Fundamental Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment under FATCA. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Credit Agreement.

Each Lender (as well as the Administrative Agent, if the Administrative Agent is not a Lender) agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(h)            Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.13 (including by the payment of additional amounts

 46

 

pursuant to this Section 2.13), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.13 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this clause (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this clause (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this clause (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This clause (h) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i)              Each party’s obligations under this Section 2.13 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Fundamental Document

(j)              OID Calculations. The parties agree that for U.S. federal income tax purposes, including for purposes of determining original issue discount under Section 1271-1275 of the Code, the “issue price” of the Loans equals $34,857,900. The Borrower shall consult with the Lenders regarding the calculation of (i) the “yield to maturity” (within the meaning of Section 1272 of the Code and the Treasury regulations promulgated thereunder) of the Facility, (ii) the accrual of original issue discount (within the meaning of the Code), and (iii) amounts to be included on IRS Form 1099-OID with respect to the Facility, and such calculations shall be subject to the reasonable approval of the Lenders.

SECTION 2.14          Interest Adjustments.

(a)             If the provisions of this Credit Agreement or any Note would at any time require payment by the Borrower to a Lender of any amount of interest in excess of the maximum amount then permitted by the law applicable to any Loan, the interest payments to that Lender shall be reduced to the extent necessary so that such Lender shall not receive interest in excess of such maximum amount. If, as a result of the foregoing, a Lender receives interest payments hereunder or under a Note in an amount less than the amount otherwise provided hereunder, such deficit (hereinafter called the “Interest Deficit”) will, to the fullest extent permitted by Applicable Law, cumulate and will be carried forward (without interest) until the termination of this Credit Agreement. Interest otherwise payable to a Lender hereunder or under a Note for any subsequent period shall be increased by the maximum amount of the Interest Deficit that may be so added without causing such Lender to receive interest in excess of the maximum amount then permitted by the law applicable to the Loans.

 47

 

(b)            The amount of any Interest Deficit relating to a particular Loan or Note shall be treated as a prepayment penalty and shall, to the fullest extent permitted by Applicable Law, be paid in full at the time of any optional prepayment by the Borrower to the Lenders of all the Loans at that time outstanding pursuant to Section 2.9(a). The amount of any Interest Deficit relating to a particular Loan or Note at the time of any complete payment of the Loans at that time outstanding (other than an optional prepayment thereof pursuant to Section 2.9(a)), shall be canceled and not paid. The amount of any Interest Deficit shall be payable in cash to the extent permitted by the Subordination Agreement, otherwise such interest shall be payable in kind by adding an amount equal to the amount of such Interest Deficit (any amounts so paid, “Interest Deficit PIK Amount”). All Interest Deficit PIK Amounts shall be deemed added to the outstanding principal amount of the Loans as of the date of such optional prepayment, and the Loans shall bear interest on such increased principal amount from and after such date. The obligation of the Borrower to pay all Interest Deficit PIK Amounts shall automatically be evidenced by any Notes issued to the Lenders.

SECTION 2.15          AHYDO Provisions.

(a)             Applicable High Yield Discount Obligation Mandatory Prepayment. On any Interest Payment Date following the fifth anniversary of the date of the Borrowing, if the aggregate amounts which would be includible in gross income of the Lenders with respect to such Loans for all periods ending on or before such Interest Payment Date (within the meaning of section 163(i) of the Code) (the “Aggregate Accrual”), would exceed an amount equal to the sum of (x) the aggregate amount of interest to be paid in cash (within the meaning of section 163(i) of the Code) under the Loans on or before such Interest Payment Date (determined without regard to the amounts payable on such Interest Payment Date under this Section 2.15), and (y) the product of (A) the issue price (as defined in sections 1273(b) and 1274(a) of the Code) of the Loans and (B) the yield to maturity (interpreted in accordance with section 163(i) of the Code) of the Loans (such sum, the “Maximum Accrual”), then the Borrower shall mandatorily pay to the Lenders ratably in cash, on each Interest Payment Date following the fifth anniversary of the date of the Borrowing, an amount equal to the excess, if any, of the Aggregate Accrual over the Maximum Accrual and the amount of such payment shall be treated for purposes of section 163(i) of the Code as interest paid on the Loans. The Borrower shall consult with the Lenders regarding the calculation of the Aggregate Accrual and the Maximum Accrual and such calculations shall be subject to the reasonable approval of the Lenders. Each accrual period with respect to the Loans shall end on an Interest Payment Date. Notwithstanding anything to the contrary contained herein, all payments of Principal, premium and interest due from the Borrower hereunder shall be made to the Lenders on an equal and ratable basis. All Loans which have been prepaid may not be reborrowed.

3.               REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES

In order to induce the Administrative Agent and the Lenders to enter into this Credit Agreement and to make the Loans provided for herein, the Credit Parties, jointly and severally make the following representations and warranties to, and agreements with, the Administrative Agent and the Lenders, all of which shall survive the execution and delivery of this Credit Agreement and the issuance of the Notes:

 48

 

SECTION 3.1             Existence and Power.

(a)             Each of the Parent and the Credit Parties is either a limited liability company or corporation, duly formed or organized, validly existing and in good standing under the laws of its jurisdiction of formation or organization, and in good standing as a foreign entity in all other jurisdictions where (i) the nature of its properties or business so requires, or (ii) the failure to be so qualified or be in good standing in such other jurisdictions could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. A list of the foregoing jurisdictions as of the Closing Date is attached hereto as Schedule 3.1.

(b)            The Parent and each of the Credit Parties has the power and authority (i) to own its respective properties and carry on its respective business as now being conducted and as intended to be conducted, (ii) to execute, deliver and perform, as applicable, its obligations under the Fundamental Documents and any other documents contemplated thereby to which it is or will be a party, (iii) in the case of the Credit Parties, to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in the Collateral as contemplated by Article 8, (iv) in the case of the Pledgors, to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in the Pledged Collateral as contemplated by Article 10, and (v) in the case of the Guarantors, to guaranty the Obligations as contemplated by Article 9.

SECTION 3.2             Authority and No Violation. (a) The execution, delivery and performance by the Parent and each Credit Party of the Fundamental Documents to which it is a party, the grant by each Credit Party and each Pledgor to the Administrative Agent (for the benefit of the Secured Parties) of the security interest in the Collateral and the Pledged Collateral, respectively, as contemplated by the Fundamental Documents, in the case of the Borrower, the Borrowings hereunder and the execution, delivery and performance of the Notes and, in the case of each Guarantor, the guaranty of the Obligations as contemplated by Article 9, (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, limited liability agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate, any Distribution Agreement, or any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents.

(b)            There are no restrictions on the transfer of any of the Pledged Securities other than as a result of this Credit Agreement, the Senior Facility Credit Agreement, the Seer P&A Facility Credit Agreement or Applicable Law, including any securities laws and the regulations promulgated thereunder.

 49

 

SECTION 3.3             Governmental Approvals. All authorizations, consents, approvals, registrations or filings from or with any Governmental Authority (other than the Copyright Security Agreement and the Trademark Security Agreement that, if applicable, will be delivered to the Administrative Agent on or prior to the Closing Date, in form suitable for recording or filing with the appropriate filing office) required for the consummation of the execution, delivery and performance by the Parent and each Credit Party of the Fundamental Documents to which it is a party, and the execution and delivery by the Borrower of the Notes, have been duly obtained or made and are in full force and effect and, if any further such authorizations, consents, approvals, registrations or filings should hereafter become necessary, such Person shall obtain or make all such authorizations, consents, approvals, registrations or filings.

SECTION 3.4             Binding Agreements. This Credit Agreement and the other Fundamental Documents to which the Parent and/or any Credit Party is party have been duly executed and delivered by the Parent and/or each of the Credit Parties and constitute the legal, valid and binding obligations of each such Person (in each case, to the extent such Person is a party thereto), enforceable against each such Person in accordance with their respective terms, subject, as to the enforcement of remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

SECTION 3.5             Financial Statements. The (a)(i) annual audited consolidated balance sheets of the Parent and its Consolidated Subsidiaries (together with consolidating schedules reflecting adjustments to the relevant financial statements between the Parent and its Consolidated Subsidiaries on the one hand and the Borrower and its Consolidated Subsidiaries on the other hand), as at, and for the years ended September 30, 2014 and September 30, 2015, respectively, together with the related statements of income, members’ equity and cash flows, and the related notes and supplemental information, and (ii) the unaudited consolidated balance sheet, statements of income, members’ equity and cash flows of the Parent and its Consolidated Subsidiaries as of, and for the fiscal quarter ending June 30, 2016, in each case, delivered pursuant to Section 4.1 and (b) the balance sheets and related statements of income, members’ equity and cash flows (and the related notes and supplemental information for such statements) delivered pursuant to Section 5.1, fairly present in all material respects the financial position or the results of operations of the Parent and its Consolidated Subsidiaries on a consolidated basis and (commencing with the first balance sheet and statements delivered pursuant to Section 5.1) in conformity with GAAP, at the dates or for the periods indicated, subject, in the case of unaudited statements, to changes resulting from year-end and audit adjustments and the absence of footnotes, and reflect all known liabilities, contingent or otherwise as of such dates.

SECTION 3.6             No Material Adverse Change. There has been no material adverse change, or any occurrence, condition or circumstance which could reasonably be expected to be a material adverse change, with respect to the business, operations, performance, assets, properties or condition (financial or otherwise) of the Credit Parties (taken as a whole) since the date on which the last dollar of equity contributions required by Section 4.1(k) has been contributed.

 50

 

SECTION 3.7             Ownership of Pledged Securities, Subsidiaries, etc. Attached hereto as Schedule 3.7(a) is a correct and complete list as of the Closing Date, in respect of each Credit Party, showing as to each (i) the name of such Person, (ii) the jurisdiction of formation or organization (as the case may be) of such Person, (iii) if such Person is a corporation, the authorized capitalization and the number of shares of its capital stock outstanding, (iv) the name of each Person holding ownership interests in such Person, (v) the nature of such ownership interests, and (vi) the percentage of ownership represented by such ownership interests.

(b)            Except as disclosed on Schedule 3.7(b), (i) no Credit Party owns any voting stock, Equity Interest or other beneficial interest, either directly or indirectly, in any Person other than another Credit Party, and (ii) no Credit Party is a general or limited partner in any partnership or a participant in a joint venture.

(c)             Attached hereto as Schedule 3.7(c) is a correct and complete organizational chart as of the Closing Date reflecting the organizational structure of the Borrower and its Subsidiaries as of the Closing Date.

SECTION 3.8             Copyrights, Trademarks and Other Rights.

(a)             The Items of Product listed on Schedule 3.8(a) comprise all of the Items of Product (other than development projects) in which any Credit Party has any right, title or interest (either directly, through a joint venture, partnership license or otherwise, other than a Revenue Participation, which will be set forth on Schedule 3.8(d)). Set forth across from the title of each such Item of Product on Schedule 3.8(a) is listed (i) the copyright registration number (or with respect to pending applications for registration, the filing receipt/control number, when available), (ii) the name of the relevant copyright registrant (or, with respect to pending applications the applicant for copyright registration), and (iii) the nature of all interests held by the relevant Credit Party (i.e., whether owned by, optioned by, assigned to, and/or licensed to, such Credit Party) in such Items of Product. The Credit Party holding such interests has duly recorded or caused to be duly recorded (or, with respect to pending applications for registration, has submitted for recordation) such interests with the U.S. Copyright Office and has delivered copies of all such recordations to the Administrative Agent (it being understood that prior to initial theatrical release in the case of Pictures and the initial broadcast or streaming of the final episode of a “season” or production cycle in the case of Programs and Digital Product, the only recordation required under this provision for such Item of Product will be with regard to the chain of title for the underlying intellectual property and for the script in existence prior to the commencement of principal photography thereof). Schedule 3.8(a) also identifies the location of the best available Physical Materials owned by any Credit Party or to which any Credit Party has a right to access in relation to each Item of Product. All such Items of Product and all component parts thereof do not and will not violate or infringe upon any copyright, right of privacy, trademark, patent, trade name, performing right or any literary, dramatic, musical, artistic, personal, private, civil, contract, property or copyright right or any other right of any Person or contain any libelous or slanderous material, other than, in each case, either individually or in the aggregate, which could not reasonably be expected to have a Material Adverse Effect. There is no claim, suit, action or proceeding pending or, to the best of each Credit Party’s knowledge, threatened against any Credit Party or any other Person that involves a claim of infringement of any copyright with respect to any Item of Product listed on Schedule 3.8(a), and

 51

 

no Credit Party has any knowledge of any existing infringement by any other Person of any copyright held by or licensed to any Credit Party with respect to any Item of Product listed on Schedule 3.8(a) which, in each case, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(b)            Schedule 3.8(b) (i) lists all the trademarks registered and applications for trademark registration filed by any Credit Party and identifies the Credit Party which registered or filed each such trademark, (ii) specifies as to each, the jurisdictions in which such trademark registrations have been issued (or, if applicable, in which applications for such registrations have been filed), including the respective registration or application numbers and applicable dates of registration or application, and (iii) specifies as to any and all, as applicable, material licenses, material sublicenses and other material agreements to which any Credit Party is a party and/or pursuant to which any Person is authorized to use such trademark.

(c)             Except as disclosed on Schedule 3.8(c), all applications and registrations for all copyrights, trademarks, service marks, trade names and service names in which any Credit Party has any right, title or interest are valid and in full force and effect (other than applications and registrations for copyrights, trademarks, service marks, trade names and service names that in the aggregate are not material) and are not and will not be subject to the payment of any Taxes or maintenance fees or the taking of any other actions by any Credit Party to maintain their validity or effectiveness, other than renewals to maintain the effectiveness thereof.

(d)            Schedule 3.8(d) lists all Pictures in which any Credit Party holds a Revenue Participation and identifies as to each, the relevant Credit Party and relevant Approved Domestic Distributor. To the best of each Credit Party’s knowledge, all such Pictures and all component parts thereof do not and will not violate or infringe upon any copyright, right of privacy, trademark, patent, trade name, performing right or any literary, dramatic, musical, artistic, personal, private, civil, contract, property or copyright right or any other right of any Person or contain any libelous or slanderous material. To the best of each Credit Party’s knowledge, except as disclosed on Schedule 3.12, there is no claim, suit, action or proceeding pending or threatened against any Credit Party or any other Person that involves a claim of infringement of any copyright with respect to any Picture listed on Schedule 3.8(d), and no Credit Party has any knowledge of any existing infringement or any other violation by any other Person of any copyright with respect to any Picture listed on Schedule 3.8(d).

SECTION 3.9             Fictitious Names. Except as disclosed on Schedule 3.9, no Credit Party has done business, is doing business or intends to do business other than under its full legal name, including, without limitation, under any trade name or other “doing business as” name.

SECTION 3.10          Title to Properties. Each Credit Party has good title to, or valid leasehold or license interests in, each of the properties and assets reflected on the most recent financial statements referred to in Section 3.5, and all such properties and assets are free and clear of Liens except Permitted Encumbrances.SECTION 3.11          Chief Executive Office; Location of Collateral and Records; Tax Identification Number. Schedule 3.11 lists (i) the chief executive office of each Credit Party as of the Closing Date, (ii) all of the places where any Credit Party keeps (or intends to keep) the

 52

 

material records concerning the Collateral or keeps (or intends to keep) any material goods included in the Collateral as of the Closing Date and (iii) each Credit Party’s tax identification number and, as applicable, organizational number.

SECTION 3.12          Litigation. Schedule 3.12 sets forth a list as of the Closing Date of all actions, suits or other proceedings at law or in equity by or before any arbitrator, arbitration panel or Governmental Authority, and to the best of each Credit Party’s knowledge, any investigation by any Governmental Authority of the affairs of, or threatened action, suit or other proceeding against or affecting, any Credit Party or its properties or rights. There are no actions, suits or other proceedings at law or in equity by or before any arbitrator, arbitration panel or Governmental Authority (including, but not limited to, matters relating to environmental liability) or, to the best of each Credit Party’s knowledge, any investigation by any Governmental Authority of the affairs of, or threatened action, suit or other proceeding against or affecting, any Credit Party or its properties or rights which could reasonably be expected to have a Material Adverse Effect. No Credit Party is in default with respect to any order, writ, injunction, decree, rule or regulation of any Governmental Authority binding upon such Person.

SECTION 3.13          Federal Reserve Regulations. No Credit Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Loans will be used, directly or indirectly, whether immediately, incidentally or ultimately (i) to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or (ii) for any other purpose, which in the case of either clauses (i) or (ii) above, would violate or be inconsistent with any of the provisions of any regulation of the Board, including, without limitation, Regulations T, U and X thereto.

SECTION 3.14          Investment Company Act. No Credit Party is, or will during the term of this Credit Agreement be, (i) an “investment company,” within the meaning of the Investment Company Act of 1940, as amended or (ii) subject to regulation under any foreign, federal or local statute or any other Applicable Law of the United States of America or any other jurisdiction, in each case limiting its ability to incur indebtedness for money borrowed as contemplated hereby or by any other Fundamental Document.

SECTION 3.15          Taxes. Each Credit Party has filed or caused to be filed all material federal, state, local and foreign Tax returns which are required to be filed with any Governmental Authority after giving effect to applicable extensions, and has paid or has caused to be paid all Taxes as shown on said returns or on any assessment received by it in writing, to the extent that such Taxes have become due, except as permitted under Section 5.12. No Credit Party knows of any material additional assessments or any basis therefor. The Credit Parties believe that the charges, accruals and reserves on its books in respect of Taxes or other governmental charges are accurate and adequate, in accordance with GAAP.SECTION 3.16          Compliance with ERISA. Schedule 3.16 sets forth a true and complete list, as of the date hereof, of each Plan subject to Title IV of the Credit Parties. Each Plan has been maintained and operated in all material respects in accordance with all Applicable Laws, including ERISA and the Code, and each Plan intended to qualify under section 401(a) of the Code has received a favorable determination letter or is entitled to rely on a favorable opinion

 53

 

letter from the IRS, in either case, that has not been revoked and, to each Credit Party’s knowledge, no event or circumstance exists that has adversely affected such qualification or exemption. As of the Closing Date, except as set forth on Schedule 3.16, and as of the date of the Borrowing, except as (either alone or in the aggregate) would not result in liability that would reasonably be expected to result in a Material Adverse Effect, no Reportable Event has occurred in the last five (5) years as to any Plan, and the present value of all benefits under all Plans subject to Title IV of ERISA (based on those assumptions used to fund such Plans) did not, in the aggregate, as of the last annual valuation date applicable thereto, exceed the actuarial value of the assets of such Plans allocable to such benefits. As of the Closing Date, except as set forth on Schedule 3.16, and as of the date of the Borrowing, except as (either alone or in the aggregate) would not result in liability that would reasonably be expected to result in a Material Adverse Effect, no liability has been, and no circumstances exist pursuant to which any liability is reasonably likely to be, imposed upon any Credit Party or ERISA Affiliate (i) under sections 4971 through 4980E of the Code, sections 502(i) or 502(l) of ERISA, or under Title IV of ERISA (other than premiums due and not delinquent) with respect to any Plan or Multiemployer Plan, or with respect to any plan maintained in the last six years by any Credit Party or ERISA Affiliate, or any entity that heretofore was an ERISA Affiliate, (ii) for the failure to fulfill any obligation to contribute to any Multiemployer Plan, or (iii) with respect to any Plan that provides post-retirement welfare coverage (other than as required pursuant to Section 4980B of the Code). As of the Closing Date, except as set forth on Schedule 3.16, and as of the date of the Borrowing, except as (either alone or in the aggregate) would not result in liability that would reasonably be expected to result in a Material Adverse Effect, neither any Credit Party nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in “reorganization” or has been terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in “reorganization” or to be terminated.

SECTION 3.17          Agreements.

(a)             No Credit Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which such Credit Party is a party, except where such default could not reasonably be expected to result in a Material Adverse Effect.

(b)            Schedule 3.17 is a true and complete list as of the Closing Date of all material contractual arrangements entered into by any Credit Party or by which any Credit Party is bound, including but not limited to, material Guarantees and material employment agreements. The Credit Parties have delivered or made available to the Administrative Agent a true and complete copy of each agreement (or, if not yet executed, the most recent draft) described on Schedule 3.17, including all exhibits and schedules thereto. For purposes of clause the foregoing, a contract, agreement or arrangement shall be deemed “material” if any Credit Party reasonably expects that any Credit Party would, pursuant to the terms thereof (A) recognize future revenues in excess of $2,000,000, (B) incur liabilities or obligations in excess of $1,000,000 (excluding (x) any contract, agreement or arrangement with respect to which the liabilities or obligations incurred thereunder are included in the bonded budget of a Picture and (y) any contingent compensation in connection therewith prior to the date on which such Picture becomes a Seasoned Picture (as defined in the Senior Facility Credit Agreement), or (C) could reasonably be likely to suffer damages or losses in excess of $1,000,000 by reason of the breach or termination thereof.

 54

 

SECTION 3.18          Security Interest. This Credit Agreement and the other Fundamental Documents, when executed and delivered and, upon the making of the Loan hereunder, will create and grant to the Administrative Agent (for the benefit of the Secured Parties), upon (i) the filing of the appropriate UCC financing statements (or foreign equivalent) with the filing offices listed on Schedule 3.18, (ii) the filing of the Copyright Security Agreement with the U.S. Copyright Office, (iii) the filing of any Trademark Security Agreement with the U.S. Patent and Trademark Office, (iv) subject to the terms of the Subordination Agreement, the delivery to the Administrative Agent of any certificated Pledged Securities accompanied by undated stock powers (or any comparable document for non-corporate entities to the extent certificated), duly endorsed or executed in blank by the appropriate Pledgors (and the Administrative Agent having taken possession or control of such Pledged Securities), (v) the execution and delivery of any applicable Account Control Agreements, and (vi) the payment of all applicable filing fees for the documents referenced in the preceding clauses (i), (ii) and (iii), a valid and perfected security interest in the Collateral (prior to all other Liens other than any Specified Permitted Encumbrances and, in the case of certificated Pledged Securities so delivered, prior to all other Liens). The Administrative Agent (for the benefit of the Secured Parties) has a valid first priority perfected security interest in the Key-Man Policy and the Key-Man Policy is free and clear of all Liens other than a Lien in favor of the Administrative Agent.

SECTION 3.19          Rights. Each of the Credit Parties has sufficient right, title and interest in each Item of Product owned by or licensed to it (including under copyright) to enable it (i) with regard to each Item of Product produced by it or on its behalf, to produce such Item of Product, (ii) to perform under the Distribution Agreements relating to each such Item of Product and to satisfy any qualification requirements thereunder, and (iii) to perform under any sales agency agreement or licensing agreement entered into with an Approved Foreign Sales Agent or Licensing Intermediary.SECTION 3.20          Environmental Liabilities.

(a)             No Credit Party (and to the best of each Credit Party’s knowledge no other Person) has used, stored, treated, transported, manufactured, refined, handled, produced, Released or disposed of any Hazardous Materials on, under, at, from or in any way affecting, any of the properties or assets owned, operated, occupied or leased by a Credit Party, in material violation of any Environmental Law or in a manner that could result in a material liability to any Credit Party.

(b)            (i) No Credit Party has any obligations or liabilities, known or unknown, matured or not matured, absolute or contingent, or assessed or unassessed, arising under or related to Environmental Laws or Hazardous Materials which could reasonably be expected to have a Material Adverse Effect, and (ii) no claims have been made against any of the Credit Parties in the past five (5) years and no pending, threatened or outstanding citations, orders, proceedings or notices have been issued against any of the Credit Parties arising under or related to Environmental Laws or Hazardous Materials, which could reasonably be expected to have a Material Adverse Effect, in each case of (i) and (ii) including, without limitation, any such

 55

 

obligations or liabilities relating to or arising out of activities of any of its respective employees, agents, representatives, affiliates or predecessors in interest or any other Person with respect to which any Credit Party is responsible, either contractually, by operation of law or otherwise.

SECTION 3.21          Pledged Securities.

(a)             All of the Pledged Securities are duly authorized, validly issued, fully paid and non-assessable, and are owned and held by the Pledgors, as applicable, free and clear of any Liens, other than those created pursuant to this Credit Agreement, the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement. There are no restrictions on the transfer of the Pledged Securities other than as a result of this Credit Agreement, the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement or Applicable Law, including any securities laws and the regulations promulgated thereunder. The Pledged Securities are owned by the Persons specified on Schedule 3.7(a).

(b)            There are no (i) outstanding rights, warrants, options, conversion or similar rights currently outstanding with respect to, and no agreements to purchase or otherwise acquire, any shares of the capital stock or other Equity Interests of any issuer of any of the Pledged Securities, or (ii) securities or obligations of any kind convertible into any shares of the capital stock or other Equity Interests of any issuer of any of the Pledged Securities.

(c)             Article 10 creates in favor of the Administrative Agent (on behalf of the Secured Parties), a valid, binding and enforceable security interest in, and Lien upon, all right, title and interest of the Pledgors in the Pledged Collateral and upon delivery to the Administrative Agent of the definitive instruments (if any and subject to the Subordination Agreement) representing all Pledged Securities, accompanied by undated stock powers (or any comparable document for non-corporate entities to the extent certificated), duly endorsed or executed in blank by the appropriate Pledgor, shall constitute a fully perfected first priority security interest and Lien upon all right, title and interest of the Pledgors in such Pledged Collateral if certificated, prior to all Liens and, if not so certificated, prior to all Liens other than Specified Permitted Encumbrances.

SECTION 3.22          Compliance with Laws. No Credit Party is in material violation of any Applicable Law. The Borrowing hereunder, the intended use of the proceeds of the Loans as contemplated by Section 5.16 and any other transactions contemplated hereby will not violate any Applicable Law.

SECTION 3.23          Solvency. No Credit Party has entered, or is entering, into the arrangements contemplated hereby and by the other Fundamental Documents, or intends to make any transfer or incur any obligations hereunder or thereunder, with actual intent to hinder, delay or defraud either present or future creditors. On and as of the Closing Date, on a pro forma basis after giving effect to all Indebtedness (including the Loans and the Indebtedness under the Senior Loan Documents): (i) each Credit Party expects the cash available to such Credit Party from all sources, after taking into account all other anticipated uses of the cash of such Credit Party (including the payments on or in respect of debt referred to in clause (iii) below), will be sufficient to satisfy all final judgments for money damages which have been docketed against such Credit Party or which may be rendered against such Credit Party in any action in which such Credit Party is a defendant (taking into account the reasonably anticipated maximum

 56

 

amount of any such judgment and the earliest time at which such judgment might be entered); (ii) the sum of the present fair saleable value of the assets of each Credit Party will exceed the probable liability of such Credit Party on its debts (including its Guarantees after giving effect to the Contribution Agreement); (iii) no Credit Party will have incurred or intends to, or believes that it will, incur debts beyond its ability to pay such debts as such debts mature (taking into account the timing and amounts of cash to be received by such Credit Party from any source, and of amounts to be payable on or in respect of debts of such Credit Party and the amounts referred to in clause (ii) above); and (iv) each Credit Party believes it will have sufficient capital with which to conduct its present and proposed business and the property of such Credit Party does not constitute unreasonably small capital with which to conduct its present or proposed business. For purposes of this Section 3.23, “debt” means any liability or a claim, and “claim” means any (i) right to payment whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.

SECTION 3.24          True and Complete Disclosure. Neither any Fundamental Document nor any other agreement, document, instrument, certificate or statement (other than (i) the Business Plan, (ii) any other projections, estimates, or other forward-looking information, and (iii) any forward-looking pro forma financial information) furnished to the Administrative Agent and the Lenders by or on behalf of any Credit Party in connection with the transactions contemplated hereby, at the time it was furnished contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or therein, under the circumstances under which they were made, not misleading (considered in the context of all other information provided to the Lenders). The Business Plan and any other projections, estimates, forward-looking information or any forward-looking pro forma financial information furnished to the Administrative Agent pursuant to this Credit Agreement are based on good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being understood by the Administrative Agent and the Lenders that, without limiting the foregoing representation, (i) the Business Plan or such other information as they relate to future events is not to be viewed as fact and (ii) actual results during the period or periods covered by the Business Plan or such other information are subject to significant uncertainties and contingencies and may differ materially from the projected results set forth therein.

SECTION 3.25          Subsidiaries. Set forth on Schedule 3.25 is a true and complete list of all of the Subsidiaries of the Credit Parties, showing as to each, (i) the name of such Subsidiary, (ii) the jurisdiction of formation or organization (as the case may be) of such Subsidiary, (iii) if such Subsidiary is a corporation, the authorized capitalization and the number of shares of its capital stock outstanding, (iv) each Person holding ownership interests in such Subsidiary, (v) the nature of such ownership interests, and (vi) the percentage of such ownership interests.

SECTION 3.26          Status as a Pass-Through Entity. At all times since its formation, each Credit Party (other than Subsidiaries (1) which are required to be “C Corporations” in order to facilitate Soft Dollar Transactions; provided, that such Subsidiaries do not have any assets other

 57

 

than (i) assets having nominal value or (ii) cash which, promptly following receipt thereof, is applied towards such Soft Dollar Transactions or toward production costs or (2) for which the Borrower has otherwise determined with the reasonable approval of the Administrative Agent that it is necessary or desirable to form such Subsidiary as a corporation to facilitate permitted business activities of the Credit Parties) has been either a “disregarded entity” or a “partnership” for U.S. federal, state and local income and franchise tax purposes.

SECTION 3.27          Anti-Corruption Laws and Sanctions. The Credit Parties have implemented and maintain in effect policies and procedures designed to ensure compliance by each Credit Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and each Credit Party, its Subsidiaries and their directors, officers and employees and, to the knowledge of such Credit Party and its Subsidiaries, its agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Credit Parties or their Subsidiaries or any of their respective directors, officers or employees, or (b) to the knowledge of any Credit Party or any agent of the Credit Parties or any of their Subsidiaries that will act in any capacity in connection with or benefit from the Facility, is a Sanctioned Person. No Borrowing, use of proceeds or any other transaction contemplated by this Credit Agreement will violate Anti-Corruption Laws or applicable Sanctions.

SECTION 3.28          No Registered or Publicly-Traded Securities. The Borrower hereby represents and warrants that it, its controlling Person and each of its and such controlling Person’s respective Subsidiaries, in each case, if any, either (i) has no registered or publicly traded securities outstanding, including no 144A securities or (ii) files its financial statements with the Securities and Exchange Commission and/or makes its financial statements available to potential holders of its 144A securities, and, accordingly, the Borrower hereby (i) authorizes the Administrative Agent to make the financial statements to be provided under Sections 4.1(m) and 5.1(a) and (b) hereof, along with the Fundamental Documents, available to Public-Siders and (ii) agrees that at the time such financial statements are provided hereunder, they shall also be made available to holders of its securities. The Borrower covenants that if any Lender has advised the Borrower that such Lender is a Public-Sider, the Borrower will not request that any other material be posted to Public-Siders without the Borrower first expressly representing and warranting to the Administrative Agent in writing that such materials do not constitute material non-public information within the meaning of the federal securities laws or that the Borrower has no outstanding publicly traded securities, including 144A securities. Notwithstanding anything herein to the contrary, if any Lender has advised the Borrower that such Lender is a Public-Sider, in no event shall the Borrower request that the Administrative Agent make available to Public-Siders any budgets or any certificates, reports or calculations with respect to the Borrower’s compliance with the covenants contained herein.

4.               CONDITIONS OF LENDING

 

SECTION 4.1             Conditions Precedent to the Closing Date. The Closing Date shall occur on the date on which the following conditions precedent are satisfied in full or waived in accordance with this Credit Agreement:(a)             Organizational Documents. The Administrative Agent shall have received:

 58

 

(i)              a copy of the certificate of formation or articles or certificate of incorporation (or equivalent document) of the Parent and each Credit Party, certified as of a recent date by the Secretary of State or other relevant office of such Person’s jurisdiction of formation or incorporation, which certificate lists (if such type of list is generally available in the applicable jurisdiction) the charter documents on file in the office of such Secretary of State or such other relevant office;

(ii)            a certificate of the Secretary of State or such other relevant office of such jurisdiction of formation or incorporation, dated as of a recent date, as to the good standing of, and, if generally available in the applicable jurisdiction, the payment of Taxes by, the Parent and each Credit Party;

(iii)          a certificate dated as of a recent date as to the good standing and/or authority to do business of the Parent and each Credit Party, issued by the Secretary of State or other relevant office of each jurisdiction, if any, in which such Person is qualified as a foreign entity;

(iv)          a certificate of the Secretary, Assistant Secretary or other appropriate officer (or member or manager, as the case may be, in the case of limited liability companies) acceptable to the Administrative Agent, of the Parent and each Credit Party, dated as of the Closing Date and certifying (A) that attached thereto is a true and complete copy of the certificate of formation or articles or certificate of incorporation (or equivalent document) of such Person, (B) that attached thereto is a true and complete copy of the limited liability company agreement, by-laws, or equivalent document of such Person as in effect on the date of such certification, (C) that attached thereto is a true and complete copy of the resolutions adopted by the applicable managing body of such Person authorizing the execution, delivery and performance in accordance with their respective terms of the Fundamental Documents to which it is a party, and any other documents required or contemplated hereunder or thereunder, the grant of the security interests in the Collateral and the Pledged Collateral (as applicable), and in the case of the Borrower, the Borrowing hereunder, and that such resolutions have not been amended, rescinded or supplemented and are currently in effect, (D) that the certificate of formation or articles or certificate of incorporation (or equivalent document) of such Person has not been amended, cancelled or otherwise modified since the date of the last amendment thereto indicated on the certificates of the Secretary of State or other appropriate office furnished pursuant to clause (i) above and (E) as to the incumbency and specimen signature of each officer (or member or manager, as the case may be) of such Person executing any Fundamental Document (such certificate to contain a certification by another officer (or member or manager, as the case may be) of such Person as to the incumbency and signature of the officer signing the certificate referred to in this clause (iv); and

(v)            such additional supporting documents as the Administrative Agent or its counsel may reasonably request.

 59

 

(b)            Credit Agreement; Notes. On the Closing Date, the Administrative Agent shall have received (i) duly executed counterparts of this Credit Agreement which, when taken together, bear the signatures of the Administrative Agent, the Parent, the Borrower, the Guarantors and each Lender, and (ii) Notes duly executed by the Borrower in favor of each Lender which has requested a Note.

(c)             Opinion of Counsel. The Administrative Agent shall have received on the Closing Date the written opinion of Latham & Watkins LLP, counsel to the Parent and the Credit Parties, dated the Closing Date and addressed to the Administrative Agent and the Lenders, and which opinion shall be substantially in the form attached hereto as Exhibit B.

(d)            No Material Adverse Effect. On the Closing Date, no change or development shall have occurred and no new information shall have been received or discovered by the Administrative Agent or the Lenders since September 30, 2015 that either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

(e)             Anti-Corruption; Sanctions. The Credit Parties shall have implemented and thereafter maintain in effect policies and procedures designed to ensure compliance by their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and each Credit Party and its director, officers and employees and, to the knowledge of such Credit Party, its agents, is in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.

(f)             Security and Other Documentation. The Administrative Agent shall have received on the Closing Date fully executed (where applicable) copies of:

(i)              a Copyright Security Agreement, listing each Item of Product in which any Credit Party has a copyrightable interest (as listed on Schedule 3.8(a)), if any;

(ii)            a Trademark Security Agreement for each trademark in which any Credit Party has any interest (as listed on Schedule 3.8(b)), if any;

(iii)          the Pledged Securities accompanied by undated stock powers (or any comparable document for non-corporate entities to the extent certificated) duly executed or endorsed by the appropriate Pledgor (subject to the terms of the Subordination Agreement);

(iv)          appropriate UCC financing statements (or foreign equivalent) and UCC financing statement amendments that are required to be filed in order to perfect the Liens in the Collateral and the Pledged Collateral to the extent required by, and with the priority contemplated by Section 3.18;

(v)            to the extent not described in Section 5.23 or waived by the Administrative Agent in accordance with Section 6.14, Account Control Agreements for each deposit account of a Credit Party existing on the Closing Date, and a comparable account control agreement in respect of each securities account of a Credit Party existing at a bank or other securities intermediary as of the Closing Date;

 60

 

(vi)          to the extent not described in Section 5.23, Laboratory Access Letters and Pledgeholder Agreements, as applicable, for each Item of Product (whether Completed or Uncompleted), if any, including any Physical Materials relating to such Item of Product;

provided, that, in the context of Account Control Agreements, Pledgeholder Agreements and Laboratory Access Letters, the Administrative Agent may determine in its discretion that an account control agreement, laboratory pledgeholder agreement or laboratory access letter delivered in favor of Red Fish Blue Fish, LLC prior to the date hereof in the context of the Existing Subordinated Credit Agreement shall survive the amendment and restatement thereof via this Credit Agreement and as such shall be satisfactory for purposes of meeting the foregoing clauses (v) and (vi).

 

(g)            Security Interests in Copyrights and other Collateral. The Administrative Agent shall have received on the Closing Date evidence satisfactory to it that (i) each Credit Party and each Pledgor, has sufficient right, title and interest in and to the Collateral and Pledged Collateral, respectively, and other assets which it purports to own (including appropriate licenses under copyright), as set forth in the documents and other materials presented to the Lenders, to enable the applicable Credit Party to perform under the Distribution Agreements to which it is a party, and as to each Credit Party and each Pledgor, to grant to the Administrative Agent (for the benefit of the Secured Parties) the security interests contemplated by the Fundamental Documents and (ii) all financing statements, copyright filings, trademark filings, debentures and other filings under Applicable Law necessary to provide the Administrative Agent (for the benefit of the Secured Parties) with a perfected Lien in the Collateral and the Pledged Collateral (with the priority contemplated by Section 3.18) have been filed or delivered to the Administrative Agent in satisfactory form for filing.

(h)            Payment of Fees. On or prior to the Closing Date, all fees and expenses then due and payable by the Borrower to the Administrative Agent and the Lenders in connection with the transactions contemplated hereby, or as required by any fee letter in respect of this Facility, shall have been paid or shall be paid contemporaneously herewith, including, without limitation, payment of the Closing Date Agent Fee Shares pursuant to Section 2.5.

(i)              Litigation. As of the Closing Date, no litigation, inquiry, injunction or restraining order shall be pending, entered or, to the knowledge of the Credit Parties, threatened, which involves any of the transactions contemplated hereby and by the other Fundamental Documents or could reasonably be expected to have a Material Adverse Effect.

(j)              Lien Searches. On or prior to the Closing Date, the Administrative Agent shall have received UCC, copyright office and other searches satisfactory to it indicating that no other filings, encumbrances or transfers (other than in connection with Permitted Encumbrances) with regard to the Collateral and the Pledged Collateral are of record in any jurisdiction in which it shall be necessary for the Administrative Agent to make a filing in order to provide the Administrative Agent (for the benefit of the Secured Parties) with a perfected security interest in that portion of the Collateral and the Pledged Collateral in which a security interest in such Collateral or Pledged Collateral can be perfected by a filing under applicable law.

 61

 

(k)            Equity Contribution. On or prior to the Closing Date, the Administrative Agent shall have received satisfactory evidence that at least $65,000,000 of cash equity contributions have been received by the Borrower since June 1, 2016 with no voluntary redemptions or mandatory calls.

(l)              Contribution Agreement. On or prior to the Closing Date, the Administrative Agent shall have received a duly executed copy of the Contribution Agreement.

(m)           Financial Statements. On or prior to the Closing Date, the Administrative Agent shall have received the financial statements referred to in Section 3.5.

(n)            Insurance. On or prior to the Closing Date, the Credit Parties will have furnished the Administrative Agent with (i) a summary of all existing insurance coverage, (ii) evidence acceptable to the Administrative Agent that the insurance policies required by Section 5.5 have been obtained and are in full force and effect, (iii) certificates of insurance (accompanied by endorsements) with respect to all existing insurance coverage which certificates and endorsements shall name the Administrative Agent as additional insured and/or loss payee and shall evidence the Credit Parties’ compliance with Section 5.5(e) and (iv) an assignment of beneficial interest naming the Administrative Agent as beneficiary under the Key-Man Policy.

(o)            Required Consents and Approvals. On or prior to the Closing Date, the Administrative Agent shall be satisfied that (i) all required consents and approvals have been obtained with respect to the transactions contemplated hereby and by the other Fundamental Documents from all Governmental Authorities with jurisdiction over the business and activities of any Credit Party and from any other Person whose consent or approval the Administrative Agent in its reasonable discretion deems necessary to the transactions contemplated hereby and by the other Fundamental Documents, and (ii) all such consents and approvals remain in full force and effect.

(p)            Federal Reserve Regulations. On or prior to the Closing Date, the Administrative Agent shall be satisfied that the provisions of Regulations T, U and X of the Board will not be violated by the transactions contemplated hereby.

(q)            Compliance with Laws; No Default under Senior Facility Credit Agreement. On or prior to the Closing Date, the Administrative Agent shall be satisfied that the transactions contemplated hereby and by the other Fundamental Documents will not (i) violate any provision of Applicable Law, or any order of any court or other agency of the United States of America or any state thereof applicable to the Credit Parties or any of their respective properties or assets or (ii) conflict with, or result in a default, breach or right of termination or acceleration under, any material agreement to which any Credit Party is a party. No Default or Event of Default (each as defined in the Senior Facility Credit Agreement) shall have occurred and be continuing under the Senior Facility Credit Agreement.

(r)             Approval of Counsel to the Administrative Agent. On or prior to the Closing Date, all legal matters incident to this Credit Agreement and any other transactions explicitly contemplated hereby shall be reasonably satisfactory to Sidley Austin LLP, counsel to the Administrative Agent.

 62

 

(s)             USA Patriot Act. On or prior to the Closing Date, the Administrative Agent shall have received any information required and requested by the Administrative Agent or any Lender under or in connection with the USA Patriot Act.

(t)              ERISA. On or prior to the Closing Date, the Administrative Agent shall have received copies of all Plans of the Credit Parties that are in existence on the Closing Date and descriptions of those that are committed to on the Closing Date.

(u)            Approval of Existing Subordinated Credit Agreement Lenders. The Administrative Agent shall have received evidence reasonably satisfactory to it that any action necessary or desirable to be taken or provided (including the written consent of each lender under the Existing Subordinated Credit Agreement to the execution of this Credit Agreement and any appropriate assignment of commitments) by the Administrative Agent pursuant to the Existing Subordinated Credit Agreement, the lenders under the Existing Subordinated Credit Agreement shall have been consummated in accordance with the terms of the Existing Subordinated Credit Agreement in order to amend and restate the Existing Subordinated Credit Agreement pursuant to this Credit Agreement.

(v)            Agreements relating to the Existing Subordinated Credit Agreement. Except to the extent otherwise waived by the Administrative Agent, the Administrative Agent’s satisfaction, in its reasonable discretion, that all third party agreements or arrangements (such as intercreditor or subordination agreements, interparty agreements, collection account or account control agreements, completion bonds, laboratory pledgeholder agreements, etc.) entered into by or delivered to the Administrative Agent pursuant to the Existing Subordinated Credit Agreement shall either remain in place and in full force and effect following the second amendment and restatement hereof or shall have been replaced by a substantially equivalent agreement or arrangement, and that any security documentation entered into or delivered in favor of the Administrative Agent pursuant to the Existing Subordinated Credit Agreement shall remain in full force and effect with the same relative priority as existed prior to the Closing Date.

(w)           Amendments to Other Agreements. On or prior to the Closing Date, the Administrative Agent shall have received the following items, each in form and substance satisfactory to the Administrative Agent, and all conditions precedent set forth in Section 4.1 of each of the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement shall have been satisfied or waived:

(1)       An amendment and restatement of the Existing Corporate Facility Agreement and the Existing Production Facility Agreement (each as defined in the Senior Facility Credit Agreement) combining the obligations under each such agreement into the Senior Facility Credit Agreement.

 

(2)       An amendment to or amendment and restatement of the existing Seer P&A Facility Credit Agreement that reduces the funding commitments for P&A Expenses to 20% of the Credit Parties’ Approved P&A Budgets (as defined therein) and amends the definition of “Qualifying Picture” to conform with the construct set forth in this Credit Agreement;

 

 63

 

(3)       An amendment and restatement of the existing Senior Intercreditor Agreement, which shall include, among other things, a consent from Seer P&A Facility Agent to the increases in commitments under and as being implemented by the Senior Facility Credit Agreement and any other necessary consents and the making of other modifications to the existing Senior Intercreditor Agreement necessary to conform to the terms of the Senior Facility Credit Agreement, including Section 2.9(f) thereof; and

 

(4)       An amendment or amendment and restatement of the existing Subordination Agreement, which shall include a consent from the Administrative Agent to the increases in commitments under and as being implemented by the Senior Facility Credit Agreement and any other necessary consents.

 

(x)            Representations and Warranties. The representations and warranties of the Credit Parties set forth in Article 3 and in the other Fundamental Documents shall be true and correct in all material respects (unless qualified by materiality, in which case such representations and warranties shall be true and correct in all respects) on and as of the Closing Date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (unless qualified by materiality, in which case such representations and warranties shall be true and correct in all respects) as of such earlier date).

(y)            No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing, nor shall any such Default or Event of Default occur as a result of the execution hereof.

(z)             Other Documents. On or prior to the Closing Date, the Administrative Agent shall have received such other documentation and information as the Administrative Agent may reasonably request.

5.               AFFIRMATIVE COVENANTS

 

From the Closing Date and for so long as the Commitments shall be in effect, any amount shall remain outstanding under any Loan or any other Obligation shall remain unpaid or unsatisfied, each of the Credit Parties agrees that it will, and will cause each other Credit Party to:

SECTION 5.1             Financial Statements and Reports. Furnish or cause to be furnished to the Administrative Agent (and the Administrative Agent shall promptly make the same available to the Lenders, including their Public-Siders):

(a)             Within one hundred twenty (120) days after the end of each fiscal year of the Borrower, the audited consolidated balance sheets of the Parent and its Consolidated Subsidiaries (together with consolidating schedules reflecting adjustments to the relevant financial statements between the Parent and its Consolidated Subsidiaries on the one hand and the Borrower and its Consolidated Subsidiaries on the other hand), as at the end of, and the related consolidated statements of income, stockholders’ equity and cash flows for, such fiscal year and the corresponding figures as at the end of, and for, the preceding fiscal year, accompanied by an unqualified report and opinion of independent public accountants of nationally recognized

 64

 

standing as shall be retained by the Borrower and be reasonably satisfactory to the Administrative Agent (it being understood that the “Big Four” accounting firms are hereby approved by the Administrative Agent), which report and opinion shall be prepared in accordance with generally accepted auditing standards relating to reporting and which report and opinion shall not be subject to any “going concern” or like explanation, qualification or exception or any explanation, qualification or exception as to the scope of such audit and shall contain no material exceptions or qualifications except for qualifications relating to accounting changes (with which such independent public accountants concur) in response to FASB releases or other authoritative pronouncements, together with a certificate signed by an Authorized Officer of the Parent, to the effect that such financial statements fairly present in all material respects the consolidated financial position of the Parent and its Consolidated Subsidiaries (and the Borrower and its Consolidated Subsidiaries in the case of the consolidating adjustments schedules) as at the dates indicated and the consolidated results of their operations for the periods indicated in conformity with GAAP.

(b)            Within sixty (60) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Borrower, commencing with the fiscal quarter ending June 30, 2016, the unaudited consolidated balance sheets of the Parent and its Consolidated Subsidiaries (together with consolidating schedules reflecting adjustments to the relevant financial statements between the Parent and its Consolidated Subsidiaries on the one hand and the Borrower and its Consolidated Subsidiaries on the other hand), and the related unaudited consolidated statements of income, stockholders’ equity and cash flows for, such fiscal quarter, and for the portion of the fiscal year through the end of such fiscal quarter and the corresponding figures, all as at the end of the corresponding quarter, and for the corresponding period, in the preceding fiscal year, together with a certificate signed by an Authorized Officer of the Parent, to the effect that such financial statements, while not examined by independent public accountants, reflect, in the opinion of the Parent, all adjustments necessary to present fairly in all material respects the consolidated financial position of the Parent and its Consolidated Subsidiaries (and the Borrower and its Consolidated Subsidiaries in the case of the consolidating adjustments schedules) as at the end of the fiscal quarter and the consolidated results of operations for the fiscal quarter then ended in conformity with GAAP, subject to normal year-end and audit adjustments and the absence of footnotes.

(c)             Within one hundred twenty (120) days after the end of each fiscal year of the Borrower, a copy of the Business Plan for the then current fiscal year (with quarterly figures) and the subsequent full fiscal year (with annual figures).

(d)            Concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b), a brief narrative report by management outlining the business, financial condition and results of operations of the Credit Parties, in a form reasonably acceptable to the Administrative Agent.

(e)             From time to time, upon the reasonable written request of the Administrative Agent, and after a reasonable time period to comply with such request, (i) copies of information prepared by or for a Credit Party or received by a Credit Party regarding prospective productions and estimated Direct Negative Costs of such productions, and (ii) as soon as available but no

 65

 

later than one hundred eighty (180) days following Completion of each Item of Product, the final Direct Negative Cost statement of such Item of Product.

(f)             From time to time, upon the reasonable written request of the Administrative Agent, and after a reasonable time period to comply with such request, all regular periodic financial reports prepared by or for a Credit Party, or received by a Credit Party, with respect to each Item of Product from the beginning of pre-production until such Item of Product is Completed; such reports shall include the Credit Parties’ cost basis in the Item of Product, the estimated cost to Complete such Item of Product (in the form provided to the Approved Completion Guarantor, if any), and the anticipated delivery and release dates for such Item of Product.

(g)            Concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b), a certificate of an Authorized Officer of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent (a “Compliance Certificate”) (i) stating whether or not such Authorized Officer has knowledge, after due inquiry, of any condition or event which would constitute a Default or Event of Default and, if so, specifying the details of each such condition or event and any action taken or proposed to be taken with respect thereto, (ii) certifying that all filings required under Section 5.7 have been made and listing each such filing that has been made since the later of the Closing Date and the date of the last Compliance Certificate, and also listing any recordation or registration number received by any Credit Party with respect to such filings or any prior filings that have not previously been provided pursuant to a certificate delivered under this Section 5.1(g), (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the most recent audited financial statements delivered to the Administrative Agent hereunder (or, until the delivery of the first audited financial statements hereunder, since the date of the financial statements referred to in Section 4.1) resulting in a change in the preparation of the financial statements accompanying such certification, and specifying such change and such effect, (iv) identifying (A) all Subsidiaries of each Credit Party existing on the date of such Compliance Certificate and (B) all Excluded Subsidiaries and a summary of assets and activities for such Excluded Subsidiaries, in each case indicating, for each such Subsidiary or Excluded Subsidiary, whether such Subsidiary was formed or acquired since the later of the Closing Date and the date of the last Compliance Certificate, (v) demonstrating in reasonable detail compliance with the provisions of Sections 6.10 and 6.22, (vi) identifying any changes of the type described in Section 6.9 that have not been previously reported by a Credit Party, (vii) identifying any events which give rise to an obligation by the Borrower hereunder to prepay all or any portion of the Loans that have occurred since the later of the Closing Date and the date of the last Compliance Certificate and setting forth a reasonably detailed calculation of the amount of such prepayment obligation, (viii) listing and attaching (to the extent not previously delivered to the Administrative Agent) copies of all Notices of Assignment executed during the later of the Closing Date and the date of the last Compliance Certificate, (ix) providing updates (in a form reasonably acceptable to the Administrative Agent) to Schedules 3.7(b), 3.8(a), 3.8(b), 3.8(d) and 3.25 necessary to make the applicable representations set forth in Sections 3.7(b), 3.8(a), 3.8(b), 3.8(d) and 3.25 true and correct as of the date of such Compliance Certificate, (x) listing and attaching (to the extent not previously delivered to the Administrative Agent) copies of any material debt instruments or other evidence of material Indebtedness incurred by any Credit Party since the later of the Closing Date and the date of the last Compliance Certificate.

 66

 

(h)            [Intentionally Omitted].

(i)              Concurrently with the provision of such certificate to the Senior Facility Agent, a Liquidity Certificate (as defined in the Senior Facility Credit Agreement).

(j)              Promptly upon their becoming available, copies of (x) 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, and (y) all reports, financial statements, press releases and other information which any Credit Party shall release, send or make available to the holders of its equity interests generally.

(k)            Within ten (10) days after receipt thereof by a Credit Party, copies of all management letters received by a Credit Party from its auditors.

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

(m)           Within sixty (60) days after the end of each calendar quarter, a report containing prospective release dates for each Item of Product together with a notation indicating whether the relevant exhibitors or counterparties, as the case may be, under the terms of the Significant Exploitation Agreements have confirmed such release date.

(n)            Within five (5) days after a Picture or Program has been “green-lit,” notice to the Administrative Agent that such Picture or Program has been “green-lit,” which notice shall contain the estimated production budget, list of principal cast, director and/or third party producers, anticipated P&A Expenses (in the case of Pictures), estimated production start date and delivery date and an estimated release date for the Qualifying Picture or Program in the Domestic Territory.

(o)            Within one (1) Business Day after receipt thereof by a Credit Party, pre-release tracking reports from any vendor providing such reports to such Credit Party for any Qualifying Picture or Program that has been “green-lit.”

(p)            From time to time such additional information regarding the financial condition or business of any Credit Party 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.

(q)            Within ten (10) days after execution of a Swap Agreement by any Credit Party, written notice thereof from the applicable Credit Party.

(r)             Promptly upon (i) their becoming available, copies of any amendment, modification, waiver or other agreement which modifies the terms of any Significant Exploitation Agreement and (ii) any Authorized Officer of a Credit Party obtaining knowledge of any event or circumstance which has, or may, result in a material change to a Significant Exploitation Agreement, such Credit Party shall promptly give written notice thereof to the Administrative Agent specifying the nature of such material change.

 67

 

SECTION 5.2             Corporate Existence; Compliance with Laws. Do or cause to be done all things necessary (i) to preserve, renew and keep in full force and effect its legal existence, rights, licenses, permits and franchises except as otherwise permitted under Section 6.6, and (ii) to comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, any Governmental Authority, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect, and (iii) to maintain in effect and enforce policies and procedures designed to ensure compliance by it and its respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

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 from disposing of them, in each case in accordance with Section 6.6.

SECTION 5.4             Notice of Material Events.

(a)             Promptly upon any Authorized Officer of a Credit Party obtaining knowledge of (i) any Default or Event of Default, (ii) any action or event which could reasonably be expected to materially and adversely affect the performance of the Credit Parties’ obligations under this Credit Agreement or any other Fundamental Document, 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 collectability of accounts receivable of the Credit Parties or otherwise materially decrease the value of any Collateral or Pledged Collateral, or (v) 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 Sections 7.1(h) or 7.1(i), such Credit Party shall promptly give written notice thereof to the Administrative Agent specifying the nature and period of existence of any such claimed default, condition or event, or specifying the notice given or action taken and the nature of such claimed default, condition or event and what action such Credit Party has taken, is taking and proposes to take with respect thereto.

(b)            Promptly upon any Authorized Officer of a Credit Party obtaining knowledge of (i) the institution of, or threat of, any action, suit, proceeding, investigation or arbitration by any Governmental Authority or other Person against or affecting any Credit Party or any assets of a Credit Party which, if adversely determined could reasonably be expected to result in a Material Adverse Effect, or (ii) any material development in any such action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Administrative Agent or the Lenders), such Credit Party shall (x) promptly give written notice thereof to the Administrative Agent and provide such other information as may be available to it to enable the

 68

 

Administrative Agent and the Lenders to evaluate such matters and (y) upon request promptly give notice of the status of any action, suit, proceeding, investigation or arbitration covered by a notice delivered to the Administrative Agent pursuant to clause (x) above and provide such other information as may be reasonably requested and available to it 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 replacement value of the property insured or such lesser amounts, and with such self-insured retention or deductible levels, as are consistent with normal industry standards.

(b)            Maintain with financially sound and reputable insurers (i) 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, including Flood Insurance in connection with any Collateral that is real property (other than (x) real property not located in a Special Flood Hazard Area, or (y) real property located in a Special Flood Hazard Area in a community that does not participate in the National Flood Insurance Program) and (ii) the Key-Man Policy.

(c)             Maintain, or cause to be maintained, in effect during the period from the commencement of principal photography of each Item of Product produced by any Credit Party, or from the date of acquisition of each Item of Product acquired by any Credit Party (other than a Picture in which a Credit Party holds a Revenue Participation), through the third anniversary of the date on which such Item of Product is released and as otherwise required by applicable contracts, a so-called “Errors and Omissions” policy covering all such Items of Product, and cause such Errors and Omissions policy to provide coverage to the extent and in such manner as is customary for Items of Product of 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 Item of Product produced by any Credit Party, or from the date of acquisition of each Item of Product acquired by any Credit Party (other than a Picture in which a Credit Party holds a Revenue Participation) (i) until such time as the Administrative Agent shall have been provided with satisfactory evidence 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 Item of Product, insurance on the negatives and sound tracks or master tapes of such Item of Product in an amount not less than the cost of re-shooting the principal photography of such Item of Product and otherwise re-creating such Item of Product and (ii) until principal photography of such Item of Product has been concluded, a cast insurance policy with respect to such Item of Product, which provides coverage to the extent and in such manner as is customary for Items of Product 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.

 69

 

(e)             Cause all such above-described insurance (excluding worker’s compensation insurance) (i) to provide for the benefit of the Administrative Agent that at least 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) to 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 Event of Default shall have occurred and be continuing, production insurance recoveries received by a Credit Party prior to Completion or abandonment of an Item of Product may be utilized to finance the production of such Item of Product, and; provided, further, that so long as no Event of Default has occurred or is continuing, property insurance proceeds may be used to repair damage in respect of which such proceeds were received; (iii) to the extent that none of the Secured Parties shall be liable for premiums or calls, to name the Administrative Agent (for the benefit of the Secured Parties) as an additional insured, including, without limitation, under any “Errors and Omissions” insurance policy; and (iv) with respect to the Key-Man Policy, to name the Administrative Agent as an assignee of beneficial interest.

(f)             Render to the Administrative Agent upon the request of 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             Music. With respect to any Item of Product produced by a Credit Party, when such Item of Product has been scored, if requested by the Administrative Agent and if available to a Credit Party, deliver to the Administrative Agent within a reasonable period of time after such request (i) written evidence of the music synchronization rights, if any, obtained from the composer or the licensor of the music, and (ii) copies of all the most current cue sheets with respect to such Item of Product.

SECTION 5.7             Copyrights and Trademarks.

(a)             As soon as practicable but no later than sixty (60) days after (i) the (x) initial release of a Picture or (y) in the case of a Program or other Item of Product, the initial broadcast or streaming of the final episode of a “season” or production cycle for such Program or other Item of Product, to the extent any Credit Party is or becomes the copyright proprietor thereof or otherwise acquires a copyrightable interest therein, and (ii) any Credit Party acquires any trademark, trade name, service mark or service name, in each case of clauses (i) and (ii) above, take any and all actions necessary to register the copyright for, or such other copyrightable interest in, such Item of Product, or such trademark, service mark, trade name or service name, respectively, in the name of such Credit Party (subject to a Lien in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to the Copyright Security Agreement and a Trademark Security Agreement) in conformity with the laws of the United States of America and such other jurisdictions as the Administrative Agent may reasonably specify, and promptly deliver to the Administrative Agent, if not previously delivered, (x) written evidence of the submission for registration and subsequently of registration of any and all such copyrights, trademark, service mark, trade name or service name of the Credit Parties for inclusion in the Collateral, and (y) a Copyright Security Agreement Supplement relating to such copyright or

 70

 

such other copyrightable interest or a Trademark Security Agreement relating to such trademark, trade name, service mark or service name, in each case, executed by the relevant Credit Parties.

(b)            Obtain instruments of transfer or other documents evidencing the interest of any Credit Party with respect to the copyright relating to Items of Product in which such Credit Party owns a copyrightable interest and any trademark, trade name, service mark or service name which such Credit Party acquires, and promptly record, or cause to be recorded, if such interest may be recorded with the U.S. Copyright Office, the U.S. Patent and Trademark Office or such other jurisdictions, such instruments of transfer in the assignment records of the U.S. Copyright Office, the U.S. Patent and Trademark Office or such other jurisdictions as the Administrative Agent may reasonably specify.

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 (which shall be in accordance with GAAP) and provide the Administrative Agent and its representatives (and any time after an Event of Default shall have occurred and be continuing, the Lenders) access to such books and records and to any of its properties or assets upon reasonable notice (which may be delivered telephonically) and during regular business hours (in each case unless an Event of Default shall have occurred and be continuing, in which case no such limitations shall apply) in order that the Administrative Agent (and the Lenders, as applicable) may make such audits and examinations of, and make abstracts from, such books, accounts, records and other papers pertaining to the Collateral, and upon notification to the applicable Credit Party, permit the Administrative Agent and its representatives (and any time after an Event of Default shall have occurred and be continuing, the Lenders) to discuss the affairs, finances and accounts with, and be advised as to the same by, such Credit Party’s officers and independent accountants, all as the Administrative Agent may reasonably deem appropriate for the purpose of verifying the accuracy of each report delivered to the Administrative Agent and/or the Lenders pursuant to this Credit Agreement or for otherwise ascertaining compliance with the Fundamental Documents; provided, however, that (i) if no Event of Default shall have occurred and be continuing, no more than one such visit shall occur in any twelve (12) month period and (ii) any such visit conducted by the Lenders (as opposed to the Administrative Agent) shall be coordinated through the Administrative Agent.

(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 any or all receivables of any Credit Party, the Administrative Agent will so notify such Credit Party. 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, the Administrative Agent may proceed to make such confirmations directly with account debtors and other payors after prior written notice to the Borrower. 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             Third Party Audit Rights. Promptly notify the Administrative Agent of, and at all times allow the Administrative Agent or its designee access to the results of, all

 71

 

audits conducted by (i) any Credit Party of any third party licensee, partnership, or joint venture, or (ii) any contract counterparty of any Credit Party, in each case, pertaining to the Collateral. Upon the reasonable request of the Administrative Agent, to the extent that the Credit Parties shall have the right to conduct such audits, the Credit Parties will exercise their audit rights with respect to any such third party licensees, partnerships and joint ventures. If any Credit Party fails to initiate such audit within thirty (30) days following the Administrative Agent’s request or if an Event of Default shall have occurred and be continuing, the Administrative Agent shall have the right to exercise directly such Credit Party’s audit rights under any agreement with respect to any Item of Product included in the Collateral.SECTION 5.10          Observance of Agreements. Duly observe and perform all material terms and conditions of each Distribution Agreement, Co-Financing Agreement and Co-Financing Venture Agreement, all Revenue Participation Documentation and all other material agreements to which it is a party relating to the production, acquisition, distribution and other exploitation of each Item of Product and diligently protect and enforce (or cause to be protected and enforced) the rights of the Credit Parties under all such agreements in a manner consistent with prudent business judgment.SECTION 5.11          Laboratories; No Removal.

(a)             To the extent any Credit Party has control over, or rights to receive, any of the Physical Materials relating to any Item of Product, deliver or cause to be delivered to a Laboratory or Laboratories all negative and preprint material, master tapes and all sound track materials with respect to each such Item of Product 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 preprint material or master tapes 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 a Credit Party requesting any such Laboratory to deliver any such negative or other preprint or sound track material or master tapes 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. Each Credit Party hereby agrees not to deliver or remove or cause the delivery or removal of the original negative and film or sound materials or master tapes with respect to any Item of Product owned by any Credit Party or in which any Credit Party has an interest to a location outside the United States of America, Canada or the United Kingdom without the prior written consent of the Administrative Agent; 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. For the avoidance of doubt, no Credit Party shall be required to deliver a Pledgeholder Agreement or Laboratory Access Letter with respect to an Item of Product in which a Credit Party holds a Revenue Participation.

 72

 

(b)            During production of any Item of Product produced by a Credit Party, promptly deliver (or cause to be delivered) the daily rushes for such Item of Product to the appropriate Laboratory as soon as reasonably practicable and, in any event, no less frequently than weekly.

(c)             With respect to Items of Product that are Completed or acquired after the Closing Date, promptly after such Completion or acquisition, deliver to the Administrative Agent and the Laboratories that are signatories to Pledgeholder Agreements a revised schedule of the Physical Materials therefor on deposit with such Laboratories to the extent applicable.

SECTION 5.12          Taxes and Charges; Indebtedness in Ordinary Course of Business. Duly pay and discharge, or cause to be duly paid and discharged, (i) before the same shall become delinquent (after giving effect to applicable extensions), all Taxes imposed upon a Credit Party or its properties, sales and activities, or any part thereof, or upon the income or profits therefrom, (ii) all claims for labor, materials, or supplies which in the case of clause (i) or (ii) above, if unpaid might by law become a Lien (other than a Permitted Encumbrance) upon any property of any Credit Party; provided, however, that any such Tax or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and such Credit Party shall have set aside on its books reasonable reserves (the presentation of which is segregated to the extent required by GAAP) adequate with respect thereto or if the aggregate amount of such Taxes and claims does not exceed $50,000; and provided, further, that if such Credit Party will pay all such Taxes or charges forthwith upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor, or post a bond or other security therefor acceptable to the Administrative Agent. Each Credit Party will promptly pay when due, or in conformance with customary trade terms, all other Indebtedness incident to its operations.

SECTION 5.13          Liens. Defend the Collateral and the Pledged Collateral against any and all Liens howsoever arising (other than Permitted Encumbrances) and the status of the Lien in favor of the Administrative Agent (on behalf of the Secured Parties) therein (prior to all Liens other than Specified Permitted Encumbrances in the case of all Collateral other than certificated Pledged Securities, and prior to all Liens (other than the Liens granted to the Senior Facility Agent and Seer P&A Facility Agent, as applicable, under the Senior Loan Documents) in the case of certificated Pledged Securities), and in any event defend against any attempted foreclosure (other than a foreclosure by the Administrative Agent under the Fundamental Documents).

SECTION 5.14          Further Assurances; Security Interests.(a)             Upon the reasonable request of the Administrative Agent, duly execute and deliver, or cause to be duly executed and delivered, at the cost and expense of the Credit Parties, such further instruments as may be necessary or proper in the reasonable judgment of the Administrative Agent to carry out the provisions and purposes of this Credit Agreement and the other Fundamental Documents.

(b)            Upon the reasonable request of the Administrative Agent, (i) promptly execute and deliver or cause to be executed and delivered, at the cost and expense of the Credit Parties, such further instruments as may be necessary or proper in the reasonable judgment of the

 73

 

Administrative Agent, to provide the Administrative Agent (for the benefit of the Secured Parties) a perfected Lien in the Collateral and the Pledged Collateral with the priority contemplated by Section 3.18 and any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the UCC and the rules and regulations thereunder, or any other Applicable Law, and (ii) perform or cause to be performed such other acts which are reasonably necessary or advisable, from time to time, in order to grant and maintain in favor of the Administrative Agent (for the benefit of the Secured Parties) the Lien in the Collateral and the Pledged Collateral (with the priority contemplated by Section 3.18) contemplated hereunder and under the other Fundamental Documents. The Administrative Agent or Borrower will give at least forty-five (45) days prior written notice to the Secured Parties prior to any Credit Party being required to execute or deliver any real estate mortgage or other real estate specific security document in accordance with the Fundamental Documents and upon confirmation from all Secured Parties that flood insurance due diligence and flood insurance compliance has been completed, the Borrower may so execute such real estate security documentation.

(c)             Promptly undertake to deliver or cause to be delivered to the Administrative Agent from time to time such other documentation, consents, authorizations and approvals in form and substance reasonably satisfactory to the Administrative Agent, as the Administrative Agent shall deem reasonably necessary or advisable to perfect or maintain the Liens of the Administrative Agent (for the benefit of the Secured Parties).

(d)            Not create any Lien on any assets of any Credit Party securing any obligations under the Senior Loan Documents if these same assets are not subject to, and do not become subject to, a Lien securing the Obligations.

SECTION 5.15          Environmental Laws.

(a)             Promptly notify the Administrative Agent upon an Authorized Officer of any Credit Party becoming aware of any violation or potential violation or non-compliance with, or liability or potential liability under any Environmental Laws which, when taken together with all other pending violations, could reasonably be expected to have a Material Adverse Effect, and promptly furnish to the Administrative Agent all notices of any nature which any Credit Party may receive from any Governmental Authority or other Person with respect to any violation, or potential violation, or non-compliance with, or liability or potential liability under any Environmental Laws which, in any case or when taken together with all such other notices, could reasonably be expected to have a Material Adverse Effect.

(b)            Comply with and use reasonable efforts to ensure compliance by all tenants and subtenants of a Credit Party with all Environmental Laws, and obtain and comply in all respects with and maintain and use commercially reasonable efforts to ensure that all tenants and subtenants of a Credit Party obtain and comply in all respects with and maintain any and all licenses, approvals, registrations or permits required by Environmental Laws, except in each case where failure to do so could not reasonably be expected to have a Material Adverse Effect.

 74

 

(c)             Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under all Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities, except where failure to do so could not reasonably be expected to have a Material Adverse Effect. Any order or directive whose lawfulness is being contested in good faith by appropriate proceedings shall be considered a lawful order or directive when such proceedings, including any judicial review of such proceedings, have been finally concluded by the issuance of a final non-appealable order; provided, that the appropriate Credit Party shall have set aside on its books reasonable reserves (the presentation of which is segregated to the extent required by GAAP) adequate with respect thereto if reserves shall be deemed necessary.

(d)            Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to: (i) any act or omission of any Credit Party arising under or related to Environmental Laws or Hazardous Materials, (ii) the violation of or non-compliance by any Credit Party with any Environmental Laws, (iii) the presence, Release or threatened Release, of any Hazardous Materials or exposure of any Person to any Hazardous Materials relating in any manner to any Credit Party or any property currently or formerly owned, operated, occupied or leased by any Credit Party, (iv) any breach of any representation, or violation of any covenant, made hereunder relating to Environmental Laws or Hazardous Materials, or (v) any orders, requirements or demands of Governmental Authorities or any other Persons related thereto, including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses, but excluding therefrom all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses arising out of or resulting from (x) the gross negligence or willful acts or willful misconduct of any indemnified party, to the extent so found in a final judgment of a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required or (y) acts or omissions of any indemnified party in possession or control of any such assets.

SECTION 5.16          Use of Proceeds. Use the proceeds of the Facility to (a) finance the Credit Parties’ development, pre-production, production, and acquisition expenses of Items of Product, (b) as needed, fund premiums associated with the Key-Man Policy, (c) pay fees and expenses incurred in connection with this Credit Agreement and the transactions contemplated hereunder and (d) for general working capital purposes. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. The Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, to the extent such activities, business or transaction would be prohibited by Sanctions if conducted by a corporation incorporated in the United States, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

 75

 

SECTION 5.17          Distribution Agreements; Letters of Credit.

(a)             Promptly, and in any event within ten (10) Business Days of receipt thereof, deliver or make available to the Administrative Agent true and complete copies of (i) each Distribution Agreement, and (ii) all amendments and modifications to any existing Distribution Agreement.

(b)            From time to time (i) furnish to the Administrative Agent such information and reports in the possession of or available to a Credit Party regarding the Distribution Agreements as the Administrative Agent may reasonably request, and (ii) upon the occurrence and during the continuance of an Event of Default, at the request of the Administrative Agent, make such demands and requests to the other parties to such Distribution Agreements for information and reports or for action as the applicable Credit Party is entitled to make under each such Distribution Agreement.

(c)             Subject to the terms of the Subordination Agreement, promptly upon receipt thereof by a Credit Party, deliver to the Administrative Agent to be held as part of the Collateral, the original of all letters of credit (including any amendments thereto) under which a Credit Party is the beneficiary (whether pursuant to a Distribution Agreement or otherwise) after the Closing Date; provided, that, so long as no Event of Default shall have occurred and be continuing, the Administrative Agent shall, upon written request by a Credit Party, release any such letter of credit to the applicable Credit Party in order to permit such Credit Party to present such letter of credit at the time of a drawing.

(d)            Take all action on its part to be performed necessary to effect timely payments under all letters of credit under which a Credit Party is the beneficiary, including, without limitation, timely preparation, acquisition and presentation of all documents, drafts or other instruments required to effect payment thereunder.

SECTION 5.18          Subsidiaries. Deliver to the Administrative Agent:

(a)             Promptly after (a) the formation or acquisition of a wholly-owned Subsidiary (other than an Excluded Subsidiary) of the Borrower (but in any event prior to commencement of operations by such Subsidiary), (b) the production financing incurred by a Special Purpose Producer having been repaid in full (unless such Special Purpose Producer has already transferred all of its assets to a Credit Party and is thus an Immaterial Subsidiary), (c) any other Excluded Subsidiary ceases to be an Excluded Subsidiary, (d) any Subsidiary becomes a guarantor of the obligations under any Senior Loan Document (as applicable), or (e) the Borrower elects to join a CFC or its Subsidiaries as a Credit Party hereunder, (i) an Instrument of Assumption and Joinder duly executed by such Subsidiary, (ii) an appropriate UCC financing statement (or foreign equivalent) naming such Subsidiary as debtor and the Administrative Agent as secured party, (iii) organizational documents of the type described in Section 4.1(a), and (iv) the certificates (if any) representing 100% of the Equity Interests issued by such Subsidiary to a Credit Party together with an undated stock power (or any comparable document for non-corporate entities) duly endorsed or executed in blank by the appropriate Pledgor.

 76

 

(b)            Promptly following the creation or acquisition of an Excluded Subsidiary (but in any event prior to any Credit Party making any capital contribution or other Investment therein or loan thereto), the Credit Parties shall deliver or cause such Person to deliver to the Administrative Agent (unless expressly excluded from the definition of “Pledged Securities”): to the extent that the Equity Interests of such Person owned by a Credit Party have not previously been pledged to the Administrative Agent (for the benefit of the Secured Parties) and (in the case of Special Purpose Producers) are not required to be pledged to a production lender, an executed pledge agreement, and the certificates (if any) representing 100% of the Equity Interests owned by a Credit Party in such Person, together with an undated stock power (or any comparable document for non-corporate entities).

(c)             Promptly following the creation or acquisition of a Co-Financing Venture Entity (but in any event prior to any Credit Party making any capital contribution or other Investment therein or loan thereto), the Credit Parties shall deliver or cause such Person to deliver to the Administrative Agent an accommodation security agreement in accordance with paragraph 9 of Schedule 1.3.

(d)            Following the Closing Date, to the extent that the Administrative Agent has reasonably determined that the cost to a Credit Party is not disproportionate to the benefit to be realized by the Secured Parties, all non-U.S. Credit Parties (and the Credit Parties which hold Equity Interests therein) shall comply with any reasonable request of the Administrative Agent to provide local law security grants and stock pledges in order to provide perfected security interests to the Administrative Agent for the benefit of the Secured Parties, in form and substance reasonably satisfactory to the Administrative Agent, that are senior to all other Liens other than Specified Permitted Encumbrances.

SECTION 5.19          ERISA Compliance and Reports. Furnish to the Administrative Agent (a) as soon as possible, and in any event within thirty (30) days after any executive officer of a Credit Party has knowledge that (i) any Reportable Event with respect to any Plan has occurred, a statement of an executive officer of the Credit Party, setting forth on behalf of such Credit Party details as to such Reportable Event and the action which it proposes to take with respect thereto, together with a copy of the notice, if any, required to be filed of such Reportable Event given to the PBGC, or (ii) a failure to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred with respect to a Plan or an application has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard or an extension of any amortization period under Section 412 of the Code with respect to a Plan, a Plan subject to Title IV of ERISA or a Multiemployer Plan has been or is proposed to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA, proceedings have been instituted to terminate a Plan subject to Title IV of ERISA, or any such Credit Party or ERISA Affiliate has incurred any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan or Multiemployer Plan under Sections 4062, 4063, 4201 or 4204 of ERISA, a statement of an executive officer of the Credit Party, setting forth details as to such event and the action the applicable Credit Party proposes to take with respect thereto and (b) promptly after receipt thereof, a copy of any notice any Credit Party or ERISA Affiliate may receive from the PBGC relating to the PBGC’s intention to terminate any Plan subject to Title IV of ERISA or to appoint a trustee to administer any such Plan.

 77

 

SECTION 5.20          Location of Bank Accounts. Promptly upon the establishment thereof, inform the Administrative Agent of the location and purpose of each bank account of the Credit Parties.

SECTION 5.21          Licensing Intermediaries. To the extent a Credit Party retains a Licensing Intermediary in connection with the distribution or other exploitation of an Item of Product, cause such Licensing Intermediary to (i) execute and deliver security documentation (in form and substance acceptable to the Administrative Agent, which in any event shall provide that upon a Default or Event of Default the Administrative Agent may instruct the applicable Licensing Intermediary to remit all amounts owing to any Credit Party to a collection account) which grants the applicable Credit Party or the Administrative Agent a security interest in any such distribution or other exploitation rights, and in any proceeds thereof (including any letters of credit) that is senior to all other Liens other than Specified Permitted Encumbrances, and (ii) agree in writing to remit all gross receipts with respect to such Item of Product that are received by such Licensing Intermediary, net of its customary fees and expenses, to the applicable collection account (or, to the extent necessary to facilitate the transaction, a collection account in the name of such Credit Party at a bank located in the jurisdiction of such Licensing Intermediary; provided that, such Credit Party transfers such amounts immediately to a collection account) as soon as practicable after its receipt thereof.

SECTION 5.22          Items of Product. The ability of a Credit Party or Co-Financing Venture Entity (as applicable) to obtain Loans under the Senior Facility Credit Agreement or initial Borrowing Base credit (under and as defined in the Senior Facility Credit Agreement) in respect of an Item of Product (including, in the case of Programs, that the following provisions be satisfied with respect to each season, regardless of whether credit was extended on the basis of prior seasons) (other than a Revenue Participation) is subject to the satisfaction of the following conditions precedent; provided, that, notwithstanding anything to the contrary herein, if the Credit Parties have satisfied the conditions set forth in Sections 5.22(a) (“Item of Product Declaration”) and (e) (“Security Documents”) below for an Item of Product, and have not yet requested any Borrowing Base (as defined in the Senior Facility Credit Agreement) relating to such Item of Product or spent the proceeds of any Loans under the Senior Facility Credit Agreement towards such Item of Product, the Credit Parties may proceed with (as applicable) the commencement of principal photography of, or acquisition of rights in such Item of Product without having satisfied the balance of the following Section 5.22 requirements, so long as the Credit Parties achieve the balance of such Section 5.22 requirements within 15 Business Days (or such longer period as agreed to by the Senior Facility Agent in its sole discretion) after (as applicable) the commencement of principal photography of, or acquisition of rights in, such Item of Product; provided, that until the Senior Obligations Repayment Date (under and as defined in the Subordination Agreement), the Senior Facility Agent, and thereafter, the Administrative Agent, may, in its discretion, waive any of the following conditions precedent for digital Items of Product and Items of Product being produced under a Television Joint Venture structure:

(a)             Item of Product Declaration. The Administrative Agent shall have received the applicable Item of Product Declaration in respect of such Item of Product, duly executed by an Authorized Officer of the Borrower.

(b)            Item of Product Documents. The Administrative Agent shall have received:

 78

 

(i)              in the case of an Item of Product produced or co-financed (as opposed to acquired after Completion or, if acquired previously, for which the minimum guarantee payment is due on or after Completion) by a Credit Party or Co-Financing Venture Entity, copies of the budget (and, if different, the Bonded Budget), current shooting script, production schedule and cash flow schedule in respect of such Item of Product;

(ii)            in the case of an acquired Item of Product, the acquisition agreement and any other documents reasonably incidental thereto;

(iii)          a copy of the Distribution Agreement in respect of such Item of Product for the Domestic Territory if the existence of such Distribution Agreement is a requirement under any foreign Distribution Agreement giving rise to Eligible Receivables included in the Borrowing Base under and as defined in the Senior Facility Credit Agreement, and in any event if such Distribution Agreement in respect of such Item of Product has been executed (unless such Item of Product is being self-distributed in the Domestic Territory by the Borrower through the Significant Exploitation Agreements);

(iv)          copies of all other pre-sale Distribution Agreements in respect of such Item of Product, if any;

(v)            a copy of a fully-executed Notice of Assignment with respect to each pre-sale Distribution Agreement in respect of such Item of Product then in existence and included in the Borrowing Base (under and as defined in the Senior Facility Credit Agreement) (provided, that the Senior Facility Agent may waive the requirement that a domestic obligor countersign a Notice of Assignment);

(vi)          certificates or binders of insurance for such Item of Product as required by Section 5.5, together with endorsements naming the Administrative Agent as an “additional insured” or “loss payee”, as applicable;

(vii)        a list of all agreements executed in connection with such Item of Product that provide for deferments or participations, together with copies of such agreements as the Administrative Agent may reasonably request (in each case only to the extent available to the Borrower in the event that a Credit Party is responsible for making payments of such deferments or participations); and

(viii)      unless the Administrative Agent otherwise consents in the context of a negative pick up arrangement or other acquired Item of Product, copies of fully-executed intercreditor agreements with all guilds granted a Lien on such Item of Product, which Lien is filed prior to the filing of the Liens granted to the Administrative Agent on such Item of Product.

(c)             Chain of Title. The Administrative Agent shall have received (i) copies of all agreements, instruments of transfer or other instruments (including, without limitation, the rights agreements) (the “Chain of Title Documents”), or (ii) a “clean” representation and warranty by a Major Studio, in each case necessary to establish, to the reasonable satisfaction of the Senior

 79

 

Facility Agent, the applicable Credit Party’s or Co-Financing Venture Entity’s (as applicable) ownership or rights under license of sufficient rights in such Item of Product to enable such Credit Party or Co-Financing Venture Entity to produce and/or exploit the applicable rights to such Item of Product and to grant to the Administrative Agent (for the benefit of the Secured Parties) the security interests therein which are contemplated by this Credit Agreement; provided, that in the context of negative pickup arrangements which require delivery of Chain of Title Documents as a condition to payment, the Chain of Title Documents shall be promptly delivered to the Administrative Agent following receipt by the Credit Party or Co-Financing Venture Entity (as applicable) (in each case except as contemplated by clause (ii) above).

(d)            Completion Guaranty. Only in the case of Pictures, if such Picture is Uncompleted and a Credit Party is obligated to or otherwise will fund a portion of the Direct Negative Costs prior to Completion (or in the case of an acquired Picture, paying any portion of the purchase price prior to delivery to the Credit Party, other than deposits which do not exceed $750,000 in the aggregate for any Picture), the Administrative Agent shall have received an Approved Completion Bond from an Approved Completion Guarantor.

(e)             Security Documents. The Administrative Agent shall have received (it being understood that, with respect to any Co-Financed Item of Product (i) the availability of the following security documents shall be subject to the applicable Credit Party’s interest and right in and to such Co-Financed Item of Product and (ii) the security interest of the Administrative Agent under such security documents will be subject to the terms of the Co-Financing Intercreditor Agreement or Co-Financing Venture Interparty Agreement (as applicable)):

(i)              a Copyright Security Agreement Supplement for such Item of Product;

(ii)            Pledgeholder Agreements or Laboratory Access Letters, as applicable, for such Item of Product;

(iii)          an Account Control Agreement for each Production Account maintained by a Credit Party in relation to such Item of Product, if applicable; and

(iv)          any other security documents or filings necessary or reasonably requested by the Administrative Agent to provide to the Administrative Agent a Lien that is prior to all Liens other than Specified Permitted Encumbrances in the applicable Credit Party’s interest and right in and to such Item of Product.

(f)             Co-Financed Item of Product. If such Item of Product is a Co-Financed Item of Product, (a) (i) the Administrative Agent shall have received and approved (such approval not to be unreasonably withheld) fully executed copies of the Co-Financing Agreement, and of any other applicable documentation reasonably requested by the Administrative Agent to evidence satisfaction of the requirements set forth in Section 6.25, and (ii) if required by Section 6.2(h) or 6.25, the Administrative Agent shall have received a fully executed Co-Financing Intercreditor Agreement or (b) in the case of an Approved Co-Financing Venture Transaction, the Credit Parties shall have satisfied the requirements set forth on Schedule 1.3.

 80

 

(g)            Co-Financing Venture Entities. If such Item of Product is being produced pursuant to an Approved Co-Financing Venture Transaction, (i) the Administrative Agent shall have received fully executed copies of the Co-Financing Venture Agreement and any other applicable documentation reasonably requested and approved by the Administrative Agent (such approval not to be unreasonably withheld) to evidence satisfaction of the terms and conditions for qualification as an “Approved Co-Financing Venture Transaction” hereunder and (ii) if requested by the Administrative Agent, it shall have received a fully executed Co-Financing Venture Interparty Agreement.

(h)            Interparty Agreements. If requested by the Administrative Agent, the Administrative Agent shall have received a fully executed Interparty Agreement with respect to such Item of Product.

SECTION 5.23          Post-Closing Conditions. Within (i) ten (10) Business Days following the Closing Date (or such later date as may be agreed to by the Administrative Agent in its sole discretion), deliver to the Administrative Agent the fully executed U.K. Debenture and (ii) 30 days following the Closing Date (or such later date as may be agreed to by the Administrative Agent in its sole discretion), deliver to the Administrative Agent (a) to the extent mandated by Section 6.14, Account Control Agreements for each deposit account of a Credit Party held at the following financial institutions to the extent an Account Control Agreement is not already in place for such deposit account: City National Bank, JPMorgan Chase Bank, N.A., Royal Bank of Canada plc and First Republic Bank and (b) Laboratory Access Letters and Pledgeholder Agreements, as applicable, covering the following Items of Product: “Secret in Their Eyes”, “The Boy”, “Desierto” and “Edge of Seventeen”.

SECTION 5.24          Issuance of Agent Fee Shares. On the closing date of the Existing Subordinated Credit Agreement, Parent issued to Red Fish Blue Fish, LLC the Existing Agent Fee Shares, which when issued were duly authorized, validly issued, fully paid and nonassessable. On the Closing Date, Parent shall issue to Red Fish Blue Fish, LLC the Closing Date Agent Fee Shares, which when issued will be duly authorized, validly issued, fully paid and nonassessable.

SECTION 5.25          Revenue Participations. The ability of a Credit Party to acquire a Revenue Participation is subject to the satisfaction of the following conditions precedent:

(a)             Revenue Participation Documentation. The Administrative Agent shall have received fully executed copies of all Revenue Participation Documentation relating to such Revenue Participation which such documentation shall contain (i) commitments from the applicable Major Studio (x) to refund the applicable Credit Party’s investment plus a reasonable interest factor in the event such underlying Picture is not Completed and released by dates certain not to be outside the Maturity Date (or an Approved Completion Bond has been delivered to the applicable Credit Party and the Senior Facility Agent) and (y) to provide the applicable Credit Party or the Administrative Agent (A) Ultimates Reports with respect to such underlying Picture sufficient to determine the Remaining Ultimates, which shall be provided with the frequency required under the Senior Facility Credit Agreement, and (B) if applicable, the documentation, materials, and other evidence of compliance with the requirements set forth in

 81

 

the definition of “Tax Incentive Receivable”, or (ii) terms of the economic interests in a Picture to which a Credit Party is entitled that are acceptable to the Senior Facility Agent.

(b)            Lien in Participation. The Administrative Agent holds or has taken action to hold a security interest in the applicable Credit Party’s interest in such Revenue Participation.

(c)             No Third Party Claims. The Administrative Agent shall have received a certificate executed by an Authorized Officer of the applicable Credit Party certifying that such Credit Party is not aware of any third party claim against such Revenue Participation.

(d)            Approved Distributor. The Approved Domestic Distributor that is distributing the underlying Picture to which such Revenue Participation relates is a Major Studio.

(e)             Acknowledgement of Assignment; Direction of Proceeds. The Administrative Agent shall have received from the applicable Approved Domestic Distributor an acknowledgment of the assignment of such Revenue Participation to the Administrative Agent for security in form and substance satisfactory to the Administrative Agent.

(f)             Picture Declaration. The Administrative Agent shall have received a Picture Declaration (with the form to be modified as appropriate to reflect that the subject Picture is a Revenue Participation) in respect of such Revenue Participation, duly executed by an Authorized Officer of the Borrower.

(g)            Other Documents. The Administrative Agent shall have received such other documentation and information relating to such Revenue Participation as the Senior Facility Agent may reasonably request.

6.               NEGATIVE COVENANTS

 

From the Closing Date and for so long as the Commitments shall be in effect, any amount shall remain outstanding under any Loan or any other Obligation shall remain unpaid or unsatisfied, each of the Credit Parties agrees that it will not, and will not allow any other Credit Party to, and solely with respect to Sections 6.27 and 6.29, the Parent agrees that it will not:

SECTION 6.1             Limitations on Indebtedness. Incur, create, assume or suffer to exist any Indebtedness or Equity Interests with liquidation preferences or permit any partnership or joint venture in which a Credit Party is a general partner to incur, create, assume or suffer to exist any Indebtedness or Equity Interests with liquidation preferences other than:

(a)             Indebtedness represented by the Loans, the Notes and the other Obligations;

(b)            to the extent constituting Indebtedness, Guarantees permitted pursuant to Section 6.3;

(c)             subject to the limitations set forth herein, unsecured liabilities for acquisitions of underlying rights in Items of Product and trade payables incurred in the ordinary course of business and payable on normal trade terms and not otherwise prohibited hereunder;

 82

 

(d)            ordinary course liabilities relating to profit participations and other contingent compensation, including royalties, deferments, guild residuals and payments pursuant to Co-Financing Agreements or Co-Financing Venture Agreements (as applicable) with respect to the production, distribution, acquisition or other exploitation of Items of Product;

(e)             Indebtedness in respect of inter-company advances payable by one Credit Party to another Credit Party;

(f)             Indebtedness arising in connection with transactions permitted under Sections 6.7 and 6.8;

(g)            Indebtedness of a Credit Party to an Approved Co-Financier in relation to a Co-Financed Item of Product, subject to the relevant Co-Financing Intercreditor Agreement; provided that such Indebtedness is non-recourse to the Credit Parties other than with respect to such Item of Product;

(h)            to the extent constituting Indebtedness, amounts payable to an Approved Completion Guarantor from the proceeds of a Picture to recoup its contribution to the Direct Negative Costs of such Picture and other amounts recoupable by such Approved Completion Guarantor with regard to such Picture pursuant to the terms of the applicable Approved Completion Bond;

(i)              Indebtedness pursuant to Swap Agreements permitted under Section 6.18;

(j)              Indebtedness in respect of secured purchase money financing (including Capital Leases) to the extent permitted by Section 6.2(n), in an amount not to exceed $115,000 in the aggregate at any one time outstanding;

(k)            to the extent the same may constitute Indebtedness hereunder, liabilities incurred in respect of commitments to repay “prints and advertising” and other distribution expenses or residuals or other contingent compensation incurred by an Approved Co-Financier or Distributor;

(l)              Indebtedness outstanding on the Closing Date listed on Schedule 6.1(l) and any Indebtedness which represents an extension, refinancing or renewal (such Indebtedness being referred to herein as the “Refinancing Indebtedness”) of any such Indebtedness described on Schedule 6.1(l) (such Indebtedness being so extended, refinanced or renewed being referred to herein as the “Refinanced Indebtedness”); provided, that (i) such Refinancing Indebtedness does not increase the principal amount or interest rate of the Refinanced Indebtedness, (ii) any Liens securing such Refinanced Indebtedness are not extended to any additional property of any Credit Party, (iii) no Credit Party that is not originally obligated with respect to repayment of such Refinanced Indebtedness is required to become obligated with respect to such Refinancing Indebtedness, (iv) such Refinancing Indebtedness does not result in a shortening of the average weighted maturity of such Refinanced Indebtedness, (v) the terms of such Refinancing Indebtedness are not less favorable to the obligor thereunder than the original terms of such Refinanced Indebtedness and (iv) if such Refinanced Indebtedness was subordinated in right of payment to the Obligations, then the terms and conditions of such Refinancing Indebtedness must include subordination terms and conditions that are at least as favorable to the Administrative Agent and the Lenders as those that were applicable to such Refinanced Indebtedness;

 83

 

(m)           Indebtedness of the Credit Parties up to the amount of the Senior Principal Limit (under and as defined in the Subordination Agreement);

(n)            Indebtedness of the Credit Parties with respect to Subordinated Debt pursuant to subordination arrangements satisfactory to the Required Lenders;

(o)            Indebtedness provided by third party financiers in respect of tax incentive or tax rebate programs which may not be included in the Borrowing Base under and as defined in the Senior Facility Credit Agreement due to such tax incentive or rebate program not satisfying the requirements for a “Tax Incentive Receivable” (under and as defined in the Senior Facility Credit Agreement) due to the terms of such program (e.g. such program does not provide for payment until after one year following the Maturity Date, payment pursuant to such program is conditioned upon a content requirement, or the jurisdiction providing such program is not approved hereunder) or exceeding the Total Commitments (as defined in the Senior Facility Credit Agreement); provided, that (A) at the time of the incurrence of such Indebtedness, no Default or Event of Default has occurred and is continuing, (B) such Indebtedness shall be non-recourse to the Credit Parties or any of their assets, other than such Credit Party’s rights to the applicable tax incentive or tax rebate, or is otherwise incurred in accordance with Section 6.27, (C) any lien securing such Indebtedness shall satisfy the requirements under Section 6.2(q) hereof, and (D) the aggregate amount of such Indebtedness does not exceed the gross dollar amount of the anticipated tax incentive or tax rebate; and

(p)            other Indebtedness of the Credit Parties not to exceed $2,875,000 in the aggregate at any one time outstanding.

SECTION 6.2             Limitations on Liens. Incur, create, assume or suffer to exist any Lien on any of its revenue stream, property or assets, whether now owned or hereafter acquired, except:

(a)             Liens of the Administrative Agent (for the benefit of the Secured Parties) under this Credit Agreement, the other Fundamental Documents and any other document contemplated hereby or thereby;

(b)            Liens pursuant to written security agreements (on customary terms reasonably acceptable to the Administrative Agent) in favor of guilds that are required pursuant to collective bargaining agreements; provided, that, with respect to any such Lien which is filed after the Closing Date but prior to the filing of the Liens granted to the Administrative Agent on an Item of Product, the Administrative Agent receives an intercreditor agreement in form and substance reasonably satisfactory to it;

(c)             Liens customarily granted or incurred in the ordinary course of business with regard to goods provided or services rendered by laboratories and production houses, record warehouses, common carriers, landlords, warehousemen, mechanics and suppliers of materials and equipment; provided that such Liens are limited to the goods provided or to the goods relating to which services were rendered;

 84

 

(d)            Liens arising out of attachments, judgments or awards as to which an appeal or other appropriate proceedings for contest or review are timely commenced (and as to which foreclosure and other enforcement proceedings shall not have been commenced (unless fully bonded or otherwise effectively stayed)) and as to which appropriate reserves have been established in accordance with GAAP and that do not otherwise result in an Event of Default;

(e)             Liens for Taxes not yet due or the validity or amount of which is currently being contested in good faith by appropriate proceedings pursuant to the terms of Section 5.12 and as to which appropriate reserves have been established in accordance with GAAP;

(f)             Liens arising by virtue of any statutory or common law provision relating to banker’s liens, rights of setoff or similar rights with respect to deposit accounts;

(g)            Liens in favor of Distributors to secure their right to enjoy their licensed rights pursuant to Distribution Agreements entered into in the ordinary course of business on terms reasonably satisfactory to the Administrative Agent; provided, that each such Distributor has entered into an interparty or intercreditor agreement with the Administrative Agent reasonably satisfactory to the Administrative Agent in all respects;

(h)            Liens granted by a Credit Party in favor of an Approved Co-Financier in connection with a Co-Financed Item of Product, provided, that such Liens are subject to a Co-Financing Intercreditor Agreement;

(i)              Liens to secure transactions contemplated by Sections 6.7 and 6.8 to the extent permitted thereunder;

(j)              [Intentionally Omitted];

(k)            deposits (i) under worker’s compensation, unemployment insurance, old age pensions, and social security and similar laws or (ii) to secure statutory obligations, or surety, appeal, performance or other similar bonds (other than completion bonds) and other obligations of a like nature, in each case incurred in the ordinary course of business;

(l)              Liens in favor of an Approved Completion Guarantor in connection with an Item of Product to secure the rights of such Approved Completion Guarantor to recoup its contribution to the Direct Negative Cost of such Item of Product and other amounts recoupable by such Approved Completion Guarantor with regard to such Item of Product, subject to an Interparty Agreement;

(m)           any Lien on any property or asset of a Credit Party existing on the Closing Date and set forth in Schedule 6.2; provided that (i) such Lien shall not apply to any other property or asset of such Credit Party and (ii) such Lien shall secure only those obligations which it secures on the Closing Date;

(n)            Liens securing purchase money Indebtedness permitted under Section 6.1(j) hereof and granted to a vendor or other Person financing the acquisition of property, plant or equipment; provided, that (i) such Liens only cover the property so purchased and are acceptable

 85

 

to the Administrative Agent in its reasonable discretion, and (ii) the Indebtedness secured by the Lien does not exceed the acquisition cost of the particular assets acquired;

(o)            Liens arising in connection with transactions permitted under Section 6.1(l);

(p)            possessory Liens (other than those of Laboratories and production houses permitted under Section 6.2(c)) that (i) occur in the ordinary course of business, (ii) secure normal trade debt that is not yet due and payable and (iii) do not secure Indebtedness;

(q)            Liens securing Indebtedness relating to outside tax incentive financing described in Section 6.1(o) hereof; provided, that such Lien shall (i) only attach to the Credit Party’s rights in the applicable tax incentive or tax rebate being financed and (ii) be subject to an intercreditor agreement in form and substance satisfactory to the Administrative Agent;

(r)             [Intentionally Omitted];

(s)             Liens securing obligations under the Senior Facility Credit Agreement, subject to the Subordination Agreement;

(t)              Liens securing obligations under the Seer P&A Facility Credit Agreement, subject to the Subordination Agreement;

(u)            Liens in favor of a banking or other financial institution arising as a matter of law or in the ordinary course of business under customary general terms and conditions encumbering deposits or other funds maintained with a financial institution (including the right of set-off) and that are within the general parameters customary in the banking industry or arising pursuant to such banking institution’s general terms and conditions;

(v)            Liens on specific items of inventory or other goods and proceeds thereof of any Person securing such Person’s obligations in respect of bankers’ acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business;

(w)           Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes; and

(x)            other Liens securing obligations in an aggregate amount outstanding not to exceed (and so long as the fair market value of the assets subject thereto do not exceed) $2,875,000 at any one time.

SECTION 6.3             Limitation on Guarantees. Incur, create, assume or suffer to exist any Guaranty (including any obligation as a general partner of a partnership or as a joint venturer of a joint venture in respect of Indebtedness of such partnership or joint venture), either directly or indirectly, except:

(a)             performance guarantees in the ordinary course of business under guild agreements, or to suppliers, talent, licensees or laboratories which are providing services in connection with the production, acquisition, distribution or other exploitation of any Item of Product by or for any Credit Party;

 86

 

(b)            the endorsement of negotiable instruments for deposit or collection in the ordinary course of business;

(c)             the Guarantees made by the Guarantors pursuant to Article 9;

(d)            customary Guarantees in connection with participations and deferments relating to an Item of Product;

(e)             Guarantees of obligations under the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement; and

(f)             Guarantees of obligations of another Credit Party that the Credit Party could have incurred directly as a primary obligor without violating the terms of any Fundamental Document;

provided that in the case of any guaranty by any Credit Party of obligations of a Credit Party engaged in a Television Joint Venture or in Digital Product shall be subject to the TV/JV Investments Basket and the Other Investments Basket, as appropriate, such that the maximum recourse to the Credit Party guarantor shall while the guaranty is outstanding constitute utilization of such baskets and if a payment is made by such Credit Party guarantor then the amount so paid shall reduce the applicable basket by a corresponding amount.

SECTION 6.4             Limitations on Investments. Create, make or incur any Investment, except:

(a)             Investments in Cash Equivalents;

(b)            to the extent constituting Investments, Guarantees permitted under Section 6.3;

(c)             Investments in or to any other Credit Party; provided, that any such Investments made in Credit Parties engaging in Television Joint Ventures or Digital Product shall be subject to the TV JV/Digital Product Investments Basket and the Other Investments Basket referred to below;

(d)            to the extent constituting Investments, inter-company Indebtedness permitted under Section 6.1(e);

(e)             Investments in connection with the development, production, acquisition and exploitation of Items of Product, in each case subject to the limitations set forth in Section 6.24 of each of the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement and to the TV JV/Digital Product Investments Basket and the Other Investments Basket;

(f)             Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers, customers or other debtors, or in settlement of delinquent obligations arising in the ordinary course of business;

 87

 

(g)            other Investments (except for Investments permitted by clauses (j) or (k) below) in an amount not to exceed $1,150,000 in the aggregate at any one time outstanding;

(h)            Investments in a Co-Financing Venture Entity by contributing or otherwise transferring to such Co-Financing Venture Entity applicable rights with respect to an Item of Product to be produced, acquired or financed by such Co-Financing Venture Entity; and

(i)              Investments of cash in or to a Co-Financing Venture Entity in an amount not to exceed the sum of (i) the Credit Parties’ portion of the Budgeted Negative Cost for an Item of Product to be produced or acquired by such Co-Financing Venture Entity, or such greater amount as shall be required to Complete such Item of Product if any other applicable co-financier defaults on its payment obligations pursuant such Co-Financing Venture and as a result of such over-funding the Credit Parties will be entitled to a corresponding pro rata increased share of the proceeds of such Item of Product, in each case so long as the use of investment proceeds by such Co-Financing Venture Entity is covered by an Approved Completion Bond, if applicable, plus (ii) the Credit Parties’ share of (x) any nominal administrative costs to be incurred in connection with the formation and maintenance of such Co-Financing Venture Entity and (y) other permitted expenditures of such Co-Financing Venture Entity (other than production or acquisition costs);

(j)              Investments in Credit Parties engaged in any Television Joint Ventures or in Digital Product in an aggregate amount outstanding (net of returns) at any time not to exceed $17,250,000 (the “TV JV/Digital Product Investments Basket”); and

(k)            Investments (x) in Credit Parties engaged in Television Joint Ventures or Digital Product or (y) in non-Credit Party third parties or third party projects in Digital Product, Pictures, Programs or otherwise in an aggregate amount (for clauses (x) and (y)) not to exceed $5,750,000 at any time outstanding (net of returns) (the “Other Investments Basket”).

SECTION 6.5             Restricted Payments. Pay or declare or enter into any agreement to pay or otherwise become obligated to make any Restricted Payment, other than:

(a)             dividends or distributions either (i) payable solely in additional Equity Interests issued by a Credit Party; provided, that such Equity Interests (other than Equity Interest issued by Parent) are pledged to the Administrative Agent (for the benefit of the Secured Parties) as additional Pledged Securities, or (ii) payable to a Credit Party;

(b)            distributions to Parent in an amount equal to the lesser of (A) an amount necessary to pay any Tax burden or estimated Tax burden of Parent and (B) the excess of (1) the Tax burden that would have been borne by the Borrower had the Borrower been the parent of a consolidated federal Tax group, and consolidated, unitary or affiliates state or local Tax group with the Credit Parties and their Subsidiaries that are U.S. Persons over (2) the actual federal state and local Tax burden of the Credit Parties and their Subsidiaries that are U.S. Persons; provided, in each case, that (i) no Default or Event of Default shall have occurred and be continuing or would result from any such distribution unless the Administrative Agent otherwise consents, (ii) such distributions are computed after deduction of all losses, loss carry forwards and other deductions which may be claimed at such time in respect of such period or prior

 88

 

periods, and after giving effect to any foreign tax credits or other credits of which Parent or any Credit Party or any of its Subsidiaries may avail itself and (iii) the Borrower provides ten (10) days’ prior written notice of any such distribution to the Administrative Agent and, if requested by the Administrative Agent, the Borrower provides to the Administrative Agent a calculation, in sufficient detail as may be reasonably satisfactory to the Administrative Agent, of the amounts in (A) and (B) of this Section 6.5(b) with respect to such distribution and a copy of Parent’s income and franchise Tax returns for the relevant period;

(c)             any payments with respect to the Obligations;

(d)            [Intentionally Omitted];

(e)             payments to Odd Lot Entertainment, LLC, Shanghai Media Group or the Hony Investors or any of their respective Affiliates in connection with a Co-Financed Item of Product or other arms-length contractual arrangements permitted under Section 6.11;

(f)             to the extent constituting Restricted Payments, Investments permitted pursuant to Section 6.4(g); and

(g)            pay Allocated Overhead Costs (under and as defined in the Senior Facility Credit Agreement) to the extent within the overall limitations contained in Section 6.23 of the Senior Facility Credit Agreement.

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 any item of Collateral or agree to do or suffer any of the foregoing, except:

(a)             any Credit Party 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;

(b)            any Credit Party that is a production services company may dissolve so long as all of the assets owned by such production services company, if any, are transferred to another Credit Party;

(c)             any Guarantor that is a production services company may dissolve so long as all of the assets owned by such Guarantor, if any, are transferred to another Credit Party or sold for fair market value;

(d)            any sale, transfer, assignment or other disposition of used, obsolete, worn out or surplus equipment or property;

(e)             licenses and sales of Items of Product, or of rights therein, (b) dispositions of any non-material items of Collateral and (c) dispositions of development properties for fair market value or the actual development costs of the Credit Parties, in each case in the ordinary course of business;

 89

 

(f)             any sale, transfer or assignment to a Co-Financing Venture Entity pursuant to an Approved Co-Financing Venture Transaction;

(g)            as permitted under Section 6.7 or 6.8; and

(h)            Liens permitted by Section 6.2.

SECTION 6.7             Receivables. Sell, discount or otherwise dispose of notes, accounts receivable or other obligations owing to any Credit Party (including, without limitation, any right to receive payment under any Distribution Agreement) except for purposes of collection in the ordinary course of business as permitted pursuant to Section 6.6 above, or otherwise with the prior written consent of the Administrative Agent; provided, however, that the Credit Parties shall be entitled to sell, liquidate or otherwise transfer tax deductions, rebates, credits and/or refunds so long as the transactions relating thereto are on terms (including an acceptable present-valued rate of return on the assets being transferred) and pursuant to documentation satisfactory to the Administrative Agent.

SECTION 6.8             Sale and Leaseback; Soft Dollar Transactions.

(a)             Enter into any sale and leaseback transaction with any Person or Persons, whereby in contemporaneous transactions any Credit Party sells essentially all of its right, title and interest in an Item of Product and acquires or licenses the right to distribute or exploit such Item of Product in media and markets accounting for substantially all the value of such Item of Product, except such transactions as are evidenced by documentation acceptable to the Administrative Agent in its sole discretion; provided, however, that with the consent of the Administrative Agent, a Credit Party may enter into a sale and leaseback transaction and the Administrative Agent will release its Liens relating to the relevant Item of Product, subject to reattachment to all of the distribution rights, for equivalent periods as were held by such Credit Party immediately prior to such sale and leaseback transaction provided, that the transaction (i) would not decrease the amount of revenue to be received by such Credit Party by more than a nominal amount (or delay the anticipated timing of receipt of such revenue), (ii) would not result in the Administrative Agent (for the benefit of the Secured Parties) not having a perfected Lien in the portion of gross receipts to be applied in satisfaction of the Obligations or in the other items of Collateral that is senior to all other Liens other than Specified Permitted Encumbrances, and (iii) is subject to customary documentation reasonably acceptable to the Administrative Agent.

(b)            Enter into any Soft Dollar Transaction in violation of the terms hereof, except to the extent waived by the Administrative Agent pursuant to Section 12.1(b)(ix).

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 any material books and records with respect to the Collateral, or (iii) its name or jurisdiction of formation or organization without, in each case, (x) giving the Administrative Agent ten (10) days’ prior written notice of such change, and (y) filing (or authorizing the Administrative Agent to file) any additional Uniform Commercial Code financing statements (or foreign equivalent), and such other documents

 90

 

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 (for these purposes including any Capital Expenditures of the Parent) other than: (i) production or acquisition costs in respect of an Item of Product, which are properly includable in the Direct Negative Costs of Items of Product, (ii) development expenses for projects in development that are intended to become Items of Product and which would be properly includable in the Direct Negative Costs of Items of Product or (iii) other Capital Expenditures not to exceed (a) for the fiscal year ending September 30, 2016, $4,025,000, (b) for the fiscal year ending September 30, 2017, $5,175,000, and (c) for the fiscal year ending September 30, 2018, and each fiscal year thereafter, $2,012,500 (the “Capex Cap”); provided that, if for any fiscal year Capital Expenditures are less than such year’s Capex Cap (the difference being referred to herein as the “Capex Carry-Over Amount”), then the Capex Cap for the immediately succeeding year shall be increased by the Capex Carry-Over Amount; provided further, that the Capex Carry-Over Amount shall be deemed the last dollars spent toward Capital Expenditures in any fiscal year and, for the avoidance of doubt, the Capex Carry-Over Amount may not be carried over for more than one fiscal year; and provided, further, that Capital Expenditures shall be net of any allowances or rebates received from a landlord.

SECTION 6.11          Transactions with Affiliates. Enter into any transaction with any of its Affiliates unless such transaction (i) is approved by the Administrative Agent, (ii) is listed on Schedule 6.11, (iii) is solely between or among Credit Parties, (iv) is on terms no less favorable to the Credit Parties than could be obtained in an arm’s length third-party transaction or (v) is a co-financing arrangement that satisfies the requirements for a Co-Financed Item of Product with Odd Lot Entertainment, LLC, Shanghai Media Group, a Hony Investor or any other Approved Co-Financier.

SECTION 6.12          Business Activities. Engage in any business activities of any kind other than (i) the development, production, acquisition, financing, distribution or other exploitation of Pictures and Programs (to the extent permitted by Section 6.27), in each case subject to the limitations set forth in Section 6.24 of each of the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement and (ii) the development, production, acquisition and financing of Programs or Digital Product; provided that all Credit Party activity relating to Digital Product and Television Joint Ventures shall be conducted only by Credit Parties whose activities are limited to Digital Product and Television Joint Ventures and Investments which are subject to the TV JV/Digital Product Investments Basket and the Other Investments Basket.

SECTION 6.13          Fiscal Year End. Change its fiscal year end to other than September 30th.

SECTION 6.14          Bank Accounts. Unless permitted by the Administrative Agent, open or maintain any bank account other than (i) accounts maintained at the Senior Facility Agent or a lender under the Senior Facility Credit Agreement, and (ii) Production Accounts, in each case of clauses (i) and (ii) above, for which Account Control Agreements have been executed and delivered to the Administrative Agent (to the extent not waived by the Administrative Agent pursuant to Section 12.1(b)(ii)).

 91

 

SECTION 6.15          ERISA. Engage in a non-exempt “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 non-exempt “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 violation of any Environmental Law, in each case except where the same could not have a Material Adverse Effect.

SECTION 6.17          Use of Proceeds. (a) Use, or permit the use of, the proceeds of Loans other than for the purposes set forth in Section 5.16.

(b)            Request a Borrowing, or use (or procure that its Subsidiaries or its or their respective directors, officers, employees or agents use) the proceeds of any Borrowing, in each case (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

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 the negative costs of Items of Product and anticipated receipts from Distributors.

 92

 

SECTION 6.19          Amendments, Modifications and Terminations 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) or articles or certificate of incorporation, by-laws or other analogous organizational or governance document of any Credit Party or the Parent in any manner that is 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, without the prior written consent of the Administrative Agent, (iii) the Senior Facility Credit Agreement or the Seer P&A Facility Credit Agreement, except as permitted under the Subordination Agreement, (iv) [Intentionally Omitted], or (v) any of the Significant Exploitation Agreements, any Revenue Participation Documentation, any other Distribution Agreement (or license agreement or sales agency agreement with a Licensing Intermediary) (if the amount payable to a Credit Party or to a Co-Financing Venture Entity thereunder is in excess of $500,000 individually or $1,000,000 in the aggregate for all such other Distribution Agreements under this clause (v)) or Co-Financing Agreement or Co-Financing Venture Agreement or any other material agreement to which any Credit Party or Co-Financing Venture Entity is a party, in each case under this clause (v), in any manner that (A) would materially increase the conditions to, delay the timing of or decrease the amount of any payments, contributions or loans to be made to the Credit Parties thereunder, (B) would materially decrease the conditions to, shorten the timing of or increase the amount of any payments, contributions or loans to be made by the Credit Parties thereunder, or (C) is otherwise materially adverse to any Secured Party or its respective rights under the Fundamental Documents, in each case of clauses (A), (B) and (C), without the prior written consent of the Administrative Agent.

(b)            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 1.3 hereto.

(c)             [Intentionally Omitted.].

(d)            The applicable Credit Party shall provide the Administrative Agent with a substantially final form of any such amendment, alteration, modification, waiver or agreement referred to in clauses (a) above prior to the execution thereof, and promptly following the execution of any such document, the Borrower shall provide the Administrative Agent with an executed copy thereof.

SECTION 6.20          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, in each case, except for the Fundamental Documents.

 93

 

SECTION 6.21          Subsidiaries. Acquire or create any new direct or indirect Subsidiary except to the extent that the requirements of Section 5.18 have been met with respect to such Subsidiary.

SECTION 6.22          Anti-Layering. No Credit Party will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is contractually subordinate or junior in right of payment to the Senior Facilities and senior in right of payment to this Facility. No such Indebtedness will be considered to be contractually subordinated or junior in right of payment to any Senior Facility by virtue of being unsecured or by virtue of being secured on a junior priority basis.

SECTION 6.23          Production Exposures (Program). Permit the aggregate Production Exposures for all Programs in active production to exceed at any one time the lesser of (a) 20% of the gross Budgeted Negative Costs of all of such Programs and (b) $10,000,000.

SECTION 6.24          [Intentionally Omitted].

SECTION 6.25          [Intentionally Omitted].

SECTION 6.26          Co-Financed Items of Product. Engage in any co-production or co-financing arrangement with respect to an Item of Product unless (i) it is an Approved Co-Financing Venture Transaction, (ii) it is a Revenue Participation that satisfies the requirements set forth in Section 5.25, or (iii) the following conditions have been and remain satisfied:

(a)             if the production of such Item of Product is not controlled by a Credit Party, then a Credit Party shall have customary approval rights (or shared approval rights) with respect to script, selection of the key elements for such Item of Product, and material amendments to the cash budget therefor;

(b)            unless otherwise agreed by the Administrative Agent, a Credit Party has ownership in a portion of the underlying copyrights relating to such Item of Product (and the related scenario, screenplay or script upon which such Item of Product is based) which corresponds (at a minimum) to its economic interest in such co-production or co-financing arrangement or is granted any distribution rights to such Item of Product, and which is sufficient to enable such Credit Party to grant a perfected security interest to the Administrative Agent (for the benefit of the Secured Parties) in the Credit Party’s share of the receivables or ultimates relating to such Item of Product included in the Borrowing Base under and as defined in the Senior Facility Credit Agreement that is senior to all other Liens (subject to the Liens under the Senior Loan Documents, the Liens described in clause (c) below and the Subordination Agreement);

(c)             unless otherwise agreed by the Administrative Agent, any Lien retained by the Approved Co-Financier in any rights relating to such Item of Product may be senior to the Lien of the Administrative Agent (for the benefit of the Secured Parties) to the extent of such Approved Co-Financier ’s contribution to the Direct Negative Cost of such Item of Product;

(d)            unless otherwise agreed by the Administrative Agent, the Approved Co-Financier shall not have a right to enforce any claim against any portion of the copyright or otherwise in

 94

 

relation to such Item of Product or the receivables related thereto that, in either case, is retained by the applicable Credit Party and included in the Borrowing Base under and as defined in the Senior Facility Credit Agreement, independent of the remedies to be pursued by the Administrative Agent (on behalf of the Secured Parties) and the Approved Co-Financier (subject to the Subordination Agreement); provided that the Interparty Agreement or Co-Financing Intercreditor Agreement will, to the extent required by the Administrative Agent, (x) prohibit any action by the Approved Co-Financier (including the exercise of any Liens) which would interfere with the distribution of such Item of Product pursuant to the applicable Distribution Agreements entered into by a Credit Party and the collection of amounts payable thereunder, (y) to the extent the applicable Credit Party is in charge of the collection of receivables related to such Co-Financed Item of Product, provide the Administrative Agent with the control of remedies against licensees of such Item of Product and the right to deduct the costs of enforcement of such remedies from amounts realized before making a distribution to the Approved Co-Financier of its share of such amounts payable, and (z) allow the Approved Co-Financier to pursue remedies only against the applicable Credit Parties (and only for money damages);

(e)             upon the request of the Administrative Agent, the applicable Credit Party shall provide to the Administrative Agent copies of chain of title documentation, security documentation, Laboratory Access Letters or Pledgeholder Agreements (as applicable), Notices of Assignment, Account Control Agreements and any other documentation reasonably necessary in the Administrative Agent’s discretion to perfect its first priority (subject only to Specified Permitted Encumbrances) security interest in the applicable Credit Party’s interest and rights in and to such Item of Product;

(f)             such Item of Product meets the parameters of a Co-Financed Item of Product; and

(g)            the Administrative Agent shall have received a fully executed Interparty Agreement or Co-Financing Intercreditor Agreement (whichever is requested by the Administrative Agent) with respect to such Item of Product.

Notwithstanding the foregoing or anything to the contrary contained herein, (i) in the case of a Revenue Participation, the Credit Parties’ economic interest in the applicable Item of Product shall not be greater than the Major Studio’s retained economic interest in such Item of Product and (ii) in the case of any other co-financing between the Credit Parties and a Major Studio, the Major Studio shall retain at least a 25% interest in the economic performance of such Item of Product.

SECTION 6.27          Item of Product Requirements.

(a)             Commence principal photography on any Item of Product or acquire an interest in any Item of Product or make any expenditure in respect of P&A Expenses for a Picture, unless each of the conditions precedent in Section 5.22 have been satisfied or waived in accordance with this Credit Agreement and the Subordination Agreement.

(b)            With respect to any Picture, enter into any Distribution Agreement (or permit a Licensing Intermediary to enter into any Distribution Agreement) with an Approved Domestic Distributor pursuant to which such Approved Domestic Distributor is entitled to retain a

 95

 

distribution fee greater than 13% of the gross receipts received by such Approved Domestic Distributor from its exploitation of the applicable Picture, unless (i) otherwise approved by the Senior Facility Agent prior to any borrowing under the Senior Facility Credit Agreement and the Seer P&A Facility Agent prior to any borrowing under the Seer P&A Facility Credit Agreement, in each case to fund P&A Expenses using the P&A Credit for such Picture, or (ii) no borrowing under the Senior Facility Credit Agreement or the Seer P&A Facility Credit Agreement, as applicable, is made to fund P&A Expenses using the P&A Credit for such Picture.

SECTION 6.28          No Adverse Selection. Produce, acquire, distribute or finance (or permit any of its Affiliates (except as set forth in the succeeding paragraph) or Subsidiaries to produce, finance, distribute or acquire) any Item of Product or interest therein, except in accordance with the following: All Items of Product (or interest therein) to be produced, acquired, distributed or financed, directly or indirectly, by the Borrower or any of its Subsidiaries or Affiliates (except as set forth in the succeeding paragraph) will be produced, acquired and distributed (as applicable) through a Credit Party and will be financed under the Senior Facility Credit Agreement and/or in the case of Pictures under the Seer P&A Facility Credit Agreement or with balance sheet cash of the Credit Parties; provided, that if (i) no Default or Event of Default is continuing, (ii) there is insufficient capacity under the overall Borrowing Base (under and as defined in the Senior Facility Credit Agreement) or the motion picture is not a Qualifying Picture, and (iii) the lenders under the Senior Facility Credit Agreement have been offered (but have not accepted within fifteen (15) Business Days after receipt of such offer) the opportunity to finance such Items of Product hereunder on the same or more favorable terms to the “Credit Parties” under and as defined therein, then the Borrower shall be entitled either (A) solely in the case of insufficient capacity, to finance such Item of Product with Loans under (and as defined in) the Senior Facility Credit Agreement, or (B) to form a Special Purpose Producer to obtain limited recourse financing from third party lenders or non-Credit Party affiliates of the Borrower, subject to the conditions and requirements set forth in the definition of “Special Purpose Producer” (and if such a Special Purpose Producer is formed, the Borrower shall cause it to comply with such conditions and requirements); provided further, that the outside financing of tax incentives and rebates shall also be permitted in accordance with Sections 6.1(o) and 6.2(q), so long as (i) the lenders under the Senior Facility Credit Agreement have been offered (but have not accepted within fifteen (15) Business Days of such offer) the opportunity to finance such incentive or rebate under the Senior Facility Credit Agreement on the same or more favorable terms to such lenders and the “Credit Parties” under and as defined therein, and (ii) in the case of financing from a non-Credit Party affiliate, such financing shall be on terms at least as favorable to the Special Purpose Producer as could be obtained in an arm’s length transaction with a non-affiliate in respect of tax credits, and (iii) such financing shall be subject to an intercreditor agreement reasonably acceptable to the Administrative Agent.

Notwithstanding the foregoing, the outside entertainment businesses (i.e., independent of the Parent and its Subsidiaries) of the direct and indirect shareholders of the Parent, and the respective Affiliates of such shareholders (other than the Parent and its Subsidiaries), shall not be “Affiliates” subject to this Section 6.27 (other than in clause (ii) above with respect to financing provided by non-Credit Party Affiliates).

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

 96

 

law, or any successor provision thereto) to be treated as a corporation for U.S. federal, state or local income or franchise tax purposes (other than Subsidiaries (1) which are required to be “C Corporations” in order to facilitate Soft Dollar Transactions; provided that such Subsidiaries do not have any assets other than (i) assets having nominal value or (ii) cash which, promptly following receipt thereof, is applied towards such Soft Dollar Transactions or toward production costs or (2) for which the Borrower has otherwise determined that it is necessary or desirable to form such Subsidiary as a corporation to facilitate permitted business activities of the Credit Parties).

SECTION 6.30          Holding Company. With respect to Parent (but not the Credit Parties), carry on any business, own any assets or incur any liabilities except for: (i) (a) the participation in tax, accounting and other administrative activities as the parent of the consolidated group of companies (including the Credit Parties) and provision of administrative services (excluding treasury services) to its Subsidiaries of a type customarily provided by a holding company to its Subsidiaries; (b) ownership of (A) Equity Interests in the Borrower (but only if those Equity Interests are subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties), (B) Equity Interests in other Subsidiaries of Parent (including activities relating to the formation and capitalization of such subsidiaries), (C) cash and Cash Equivalents to be used for administrative purposes and (D) certain other nominal assets incidental to the business or activities described in this clause (b); (c) the maintenance of its corporate existence; (d) the execution and delivery of the Fundamental Documents and Senior Loan Documents to which it is a party and the performance of its obligations thereunder; (e) activities reasonably incidental to the businesses and activities described in the foregoing clauses (a) through (d), and (f) any other activities consented to by the Administrative Agent in writing in its sole discretion; and (ii) (a) any liabilities under the Fundamental Documents and Senior Loan Documents to which it is a party, (b) any non-recourse pledge of its Equity Interests in any other Subsidiary and (c) professional fees and administration costs incurred in the ordinary course of business as a holding company.

7.               EVENTS OF DEFAULT

 

SECTION 7.1             Events of Default. In the case of the happening and during the continuance of any of the following events (herein called “Events of Default”):

(a)             any representation or warranty made by a Credit Party in this Credit Agreement or any other Fundamental Document to which it is a party or any statement or representation made by a Credit Party in any report, financial statement, certificate or other document furnished to the Administrative Agent or any Lender pursuant to this Credit Agreement or any other Fundamental Document, shall prove to have been false or misleading in any material respect when made or delivered;

(b)            default shall be made in the payment of principal of the Loans as and when due and payable, whether by reason of maturity, mandatory prepayment, acceleration or otherwise;

(c)             default shall be made in the payment of interest on the Loans or other monetary Obligations, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise and such default shall continue unremedied for five (5) Business Days;

 97

 

(d)            default shall be made by a Credit Party in the due observance or performance of any covenant, condition or agreement contained in Sections 5.1(a), (b) or (g), 5.2, 5.4 or Article 6;

(e)             [Intentionally Omitted];

(f)             default shall be made by a Credit Party in the due observance or performance of any other covenant, condition or agreement to be observed or performed pursuant to the terms of this Credit Agreement or any other Fundamental Document, and such default shall continue unremedied for thirty (30) days after the earlier of (i) the applicable Credit Party receiving written notice thereof from the Administrative Agent or a Lender, and (ii) an Authorized Officer of the applicable Credit Party obtaining knowledge of such occurrence;

(g)            default shall be made with respect to any payment of any Senior Facility or any other Indebtedness of any Credit Party in excess of $1,150,000 in the aggregate at any one time outstanding when due, or in the performance of any other obligation incurred in connection with any Senior Facility or any such Indebtedness if the effect of such default is to accelerate the maturity of such Senior Facility or such Indebtedness, as applicable, or to permit the holder thereof to cause such Senior Facility or such Indebtedness, as applicable, to become due prior to its stated maturity, and such default shall not be remedied, cured, waived or consented to within the period of grace with respect thereto;

(h)            any Credit Party or Co-Financing Venture Entity shall generally not pay its debts as they become due or shall admit in writing its inability to pay its debts, or shall make a general assignment for the benefit of creditors; or any Credit Party or Co-Financing Venture Entity shall commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property or shall file an answer or other pleading in any such case, proceeding or other action admitting the material allegations of any petition, complaint or similar pleading filed against it or consenting to the relief sought therein; or any Credit Party or Co-Financing Venture Entity shall take any action to authorize, or in contemplation of, any of the foregoing;

(i)              any involuntary case, proceeding or other action against any Credit Party or Co-Financing Venture Entity shall be commenced seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, and such case, proceeding or other action (i) results in the entry of any order for relief against it, or (ii) shall remain undismissed for a period of sixty (60) days;

 98

 

(j)              final judgment(s) for the payment of money (to the extent not paid or fully covered by insurance) in excess of $575,000 in the aggregate shall be rendered against any Credit Party or Co-Financing Venture Entity, and within thirty (30) days from the entry of such judgment it shall not have been discharged or stayed pending appeal or which shall not have been discharged or bonded in full within thirty (30) days from the entry of a final order of affirmance on appeal;

(k)            this Credit Agreement, the Copyright Security Agreement, any Copyright Security Agreement Supplement, any Trademark Security Agreement, any Pledgeholder Agreement, any Laboratory Access Letter, any UCC financing statements (or foreign equivalent), any Account Control Agreement, any security documentation executed by a Licensing Intermediary in favor of a Credit Party or any other security agreement securing the Obligations (each a “Security Document”) shall, for any reason with respect to the Collateral or Pledged Collateral in excess of $575,000 in the aggregate, not be or shall cease to be in full force and effect or shall be declared null and void or any of the Security Documents shall not give or shall cease to give the Administrative Agent the Liens, or cease to give the Administrative Agent the rights, powers and privileges purported to be created thereby in favor of the Administrative Agent (for the benefit of the Secured Parties), superior to and prior to the Liens and other rights of all third Persons (subject to Specified Permitted Encumbrances except in the case of Pledged Securities) and subject to no other Liens (other than Permitted Encumbrances), or the validity or enforceability of the Guarantees under Article 9 or the Liens granted, to be granted, or purported to be granted, by any of the Security Documents shall be contested by any Credit Party or its Affiliates;

(l)              [Intentionally Omitted];

(m)           a Change in Management shall occur;

(n)            a material default shall be made by a Credit Party or Co-Financing Venture Entity under, or a material payment default shall be made by a Distributor or sales agent or co-financier under, a Distribution Agreement, Co-Financing Agreement or Co-Financing Venture Agreement, after giving effect to any applicable cure periods thereunder, in each case unless the removal of any Borrowing Base credit (under and as defined in the Senior Facility Credit Agreement) supported by the obligations of any such Distributor or Approved Co-Financier or Approved Co-Financing Venture Counterparty, or by any such Distribution Agreement, Co-Financing Agreement or Co-Financing Venture Agreement, did not or would not result in the sum of the Credit Exposure (as defined in the Senior Facility Credit Agreement) exceeding the Borrowing Base (as reduced) (as defined in Senior Facility Credit Agreement);

(o)            (i) failure by any Credit Party or ERISA Affiliate to make any contributions required to be made to a Plan subject to Title IV of ERISA or Multiemployer Plan, (ii) any failure to satisfy the minimum funding standard (within the meaning of section 412 of the Code or section 302 of ERISA) shall occur with respect to any Plan (whether or not waived), (iii) the present value of all benefits under all Plans subject to Title IV of ERISA (based on those assumptions used to fund such Plans) exceeds, in the aggregate, as of the last annual valuation date applicable thereto, the actuarial value of the assets of such Plans allocable to such benefits, (iv) any Credit Party or ERISA Affiliate shall have been notified by the sponsor of a

 99

 

Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan, or that a Multiemployer Plan is in “reorganization” (within the meaning of ERISA) or is being terminated, (v) a Reportable Event with respect to a Plan shall have occurred, (vi) the withdrawal by any Credit Party or ERISA Affiliate from a Plan during a plan year in which it was a substantial employer (within the meaning of section 4001(a)(2) or 4062(e) of ERISA), (vii) the termination of a Plan, or the filing of a notice of intent to terminate a Plan, under section 4041(c) of ERISA, (viii) the institution of proceedings to terminate, or the appointment of a trustee with respect to, a Plan by the PBGC, (ix) any other event or condition constituting grounds under section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (x) the imposition of a Lien pursuant to section 430(k) of the Code or section 303(k) of ERISA as to any Credit Party or ERISA Affiliate, in each case to the extent that any of the foregoing would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect;

(p)            any Approved Completion Guarantor for an Uncompleted Item of Product for which value is included in the Borrowing Base (under and as defined in the Senior Facility Credit Agreement) shall have disaffirmed its obligations under its respective Approved Completion Bond and either (i) a replacement Approved Completion Bond for that Uncompleted Item of Product containing substantially the same terms and conditions to payment shall not have been executed within thirty (30) Business Days, or (ii) the removal of any Borrowing Base credit (under and as defined in the Senior Facility Credit Agreement) supported by such Approved Completion Bond did not or would not result in the sum of the Credit Exposure (as defined in the Senior Facility Credit Agreement) exceeding the Borrowing Base (as reduced) (as defined in the Senior Facility Credit Agreement);

(q)            any Approved Completion Bond for an Uncompleted Item of Product for which value is included in the Borrowing Base (under and as defined in the Senior Facility Credit Agreement) is void or voidable unless either (i) a replacement Approved Completion Bond containing substantially the same terms and conditions to payment shall have been executed within twenty (20) Business Days, or (ii) the removal of any Borrowing Base credit (under and as defined in the Senior Facility Credit Agreement) supported by such Approved Completion Bond did not or would not result in the sum of the Credit Exposure (as defined in the Senior Facility Credit Agreement) exceeding the Borrowing Base (as reduced) (as defined in the Senior Facility Credit Agreement); or

(r)             a Co-Financing Venture Entity or a Co-Financing Venture Transaction fails to comply with the requirements set forth in Schedule 1.3 and, with respect to a failure to comply with an affirmative and negative covenant incorporated by reference into Schedule 1.3, such failure remains unremedied following the expiration of the cure period (if any) set forth in this Section 7.1 for such covenant’s application to a Credit Party;

then, in every such event (other than an event specified in clause (h) or (i) above) and at any time thereafter during the continuance of such event, the Administrative Agent may, or if directed by the Required Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and/or (ii) declare the principal of and the interest on the Loans and the Notes and all other amounts payable hereunder or thereunder to be forthwith due and payable, without presentment, demand,

 100

 

protest or other notice of any kind, all of which are hereby expressly waived, anything in this Credit Agreement or in the Notes to the contrary notwithstanding. If an Event of Default specified in clause (h) or (i) above shall have occurred, the Commitments shall automatically terminate and the principal of, and interest on, the Loans and the Notes and all other amounts payable hereunder and thereunder shall automatically become due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything in this Credit Agreement or the Notes to the contrary notwithstanding. Such remedies shall be in addition to any other remedy available to the Administrative Agent or the Lenders pursuant to Applicable Law or otherwise. Furthermore, upon the occurrence and during the continuation of an Event of Default, at the request of the Administrative Agent, (i) each Credit Party shall cause all of the assets of each wholly-owned CFC to be distributed to a Credit Party and (ii) each Credit Party shall pledge 100% of its Equity Interests in each non-wholly-owned CFC.

If any Event of Default shall have occurred and be continuing, the Administrative Agent, without demand or performance or any other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Credit Party or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may consent to the use by the Credit Party of any cash collateral arising in respect of the Collateral on terms as the Administrative Agent deems reasonable, or acquire by credit bid on behalf of the Lenders, the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Administrative Agent or any Lender or elsewhere, upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery, all without assignment of any credit risk.

8.               GRANT OF SECURITY INTEREST; REMEDIES

 

SECTION 8.1             Security Interests. The Borrower, as security for the due and punctual payment in full of the Obligations (including interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the Borrower whether or not post filing interest is allowed in such proceeding), and each Guarantor, as security for its obligations under Article 9, hereby grant, mortgage, pledge, assign, transfer, set over, convey and deliver to the Administrative Agent (for the benefit of the Secured Parties) a security interest in the Collateral.

SECTION 8.2             Use of Collateral. So long as no Event of Default shall have occurred and be continuing, and subject to the various provisions of this Credit Agreement and the other Fundamental Documents, a Credit Party may use its Collateral (including cash in each operating account and Production Account and proceeds of letters of credit in favor of the Credit Parties) in any lawful manner except as otherwise provided hereunder or thereunder;.

SECTION 8.3             Collection Accounts. The Credit Parties will maintain any collection and cash collateral accounts in each case as required under the Senior Loan Documents. Each Collection Account (under and as defined in the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement) and each Cash Collateral Account (under and as defined in the Senior Facility Credit Agreement and the Seer P&A Facility Credit Agreement) shall be under the control (within the meaning of Section 9-104 of the UCC) of the Administrative Agent

 101

 

(subject to the terms of the Subordination Agreement); provided that, unless an Event of Default has occurred and is continuing, the Borrower shall apply the proceeds in such Collection Accounts and such Cash Collateral Accounts in accordance with the Subordination Agreement and, if any proceeds remain and are available to the Credit Parties after such application pursuant the Subordination Agreement, such remaining proceeds may be withdrawn by the Borrower and used for any expenditure not prohibited hereunder, subject only to the Administrative Agent’s right to withdraw and use such proceeds to make payments in accordance with any contractual commitments made by the Administrative Agent to third parties (such as guilds, Approved Co-Financiers and Approved Completion Guarantors) pursuant to any interparty or intercreditor agreements with respect to such proceeds.

SECTION 8.4             Credit Parties to Hold in Trust. Subject to the provisions of the Subordination Agreement, upon the occurrence and during the continuance of an Event of Default, each of the Credit Parties will, upon receipt by it of any revenue, income, profits or other sums in which a security interest is granted by this Article 8, payable pursuant to any agreement or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the sum or instrument in trust for the Administrative Agent (for the benefit of the Secured Parties), segregate such sum or instrument from their own assets and forthwith, without any notice, demand or other action whatsoever (all notices, demands, or other actions on the part of the Secured Parties being expressly waived), endorse, transfer and deliver any such sums or instruments or both, to the Administrative Agent to be applied to the repayment of the Obligations in accordance with the provisions of Section 8.7.

SECTION 8.5             Collections, etc. Subject to the provisions of the Subordination Agreement, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, in its sole discretion, in its name (on behalf of the Secured Parties) or in the name of any Credit Party or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement deemed desirable with respect to, any of the Collateral, but shall be under no obligation to do so, or the Administrative Agent may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release, any of the Collateral, without thereby incurring responsibility to, or discharging or otherwise affecting any liability of, any Credit Party. The Administrative Agent will not be required to take any steps to preserve any rights against parties with prior claims on the Collateral. If any Credit Party fails to make any payment or take any action required hereunder, the Administrative Agent may make such payments and take all such actions as the Administrative Agent reasonably deems necessary to protect the Administrative Agent’s (on behalf of the Secured Parties) security interests in the Collateral and the value thereof, and, subject to the Subordination Agreement, the Administrative Agent is hereby authorized (without limiting the general nature of the authority hereinabove conferred) to pay, purchase, contest or compromise any Liens that in the judgment of the Administrative Agent appear to be equal to, prior to, or superior to, the security interest of the Administrative Agent (on behalf of the Secured Parties) in the Collateral (other than Specified Permitted Encumbrances) and any Liens not expressly permitted by this Credit Agreement.

SECTION 8.6             Possession, Sale of Collateral, etc. Subject to the provisions of the Subordination Agreement, upon the occurrence and during the continuance of an Event of

 102

 

Default, the Administrative Agent (on behalf of the Secured Parties) may enter upon the premises of any Credit Party or wherever the Collateral may be, and take possession of the Collateral, and may demand and receive such possession from any Person who has possession thereof, and the Administrative Agent may take such measures as it deems necessary or proper for the care or protection thereof, including the right to remove all or any portion of the Collateral, and with or without taking such possession may sell or cause to be sold, whenever the Administrative Agent shall decide, in one or more sales or parcels, at such prices as the Administrative Agent may deem appropriate, and for cash or on credit or for future delivery, without assumption of any credit risk, all or any portion of the Collateral, at any broker’s board or at a public or private sale, without demand of performance but with ten (10) days’ prior written notice to the Credit Parties of the time and place of any such public sale or sales (which notice the Credit Parties hereby agree is reasonable) and with such other notices as may be required by Applicable Law and cannot be waived, and none of the Administrative Agent or the Lenders shall have any liability should the proceeds resulting from a private sale be less than the proceeds realizable from a public sale, and the Administrative Agent (on behalf of the Secured Parties) or any other Person may be the purchaser of all or any portion of the Collateral so sold and thereafter hold the same absolutely, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of any Credit Party, any such demand, notice, claim, right or equity being hereby expressly waived and released. At any sale or sales made pursuant to this Article 8, the Administrative Agent (on behalf of the Secured Parties) may bid for or purchase, free (to the fullest extent permitted by Applicable Law) from any claim or right of whatever kind, including any equity of redemption, of any Credit Party, any such demand, notice, claim, right or equity being hereby expressly waived and released, any part of or all of the Collateral offered for sale, and may make any payment on account thereof by using any claim for moneys then due and payable to the Administrative Agent and the Lenders by any Credit Party hereunder as a credit against the purchase price. The Administrative Agent (on behalf of the Secured Parties) shall in any such sale make no representations or warranties with respect to the Collateral or any part thereof, and none of the Administrative Agent or the Lenders shall be chargeable with any of the obligations or liabilities of any Credit Party. Each Credit Party hereby agrees that (i) it will indemnify and hold the Administrative Agent and the Lenders harmless from and against any and all claims with respect to the Collateral asserted before the taking of actual possession or control of the relevant Collateral by the Administrative Agent pursuant to this Article 8, or arising out of any act of, or omission to act on the part of, any Person (other than the Administrative Agent or the Lenders) prior to such taking of actual possession or control by the Administrative Agent (whether asserted before or after such taking of possession or control), or arising out of any act on the part of any Credit Party or its Affiliates or agents before or after the commencement of such actual possession or control by the Administrative Agent, but excluding therefrom all claims with respect to the Collateral resulting from (x) the gross negligence or willful misconduct of any of the Administrative Agent or the Lenders, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required or (y) any claims with respect to the Collateral asserted against an indemnified party by a Credit Party in which such Credit Party is the prevailing party (i.e., the party in whose favor an award is issued); and (ii) none of the Administrative Agent or any Lender shall have any liability or obligation to any Credit Party arising out of any such claim except for acts of willful misconduct or gross negligence of such

 103

 

Person, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required. Subject only to the lawful rights of third parties, any Laboratory which has possession of any of the Collateral is hereby constituted and appointed by the Credit Parties as pledgeholder for the Administrative Agent (on behalf of the Secured Parties) and, upon the occurrence and during the continuation of an Event of Default, each such pledgeholder is hereby authorized (to the fullest extent permitted by Applicable Law) to sell all or any portion of the Collateral upon the order and direction of the Administrative Agent (subject to the Subordination Agreement), and each Credit Party hereby waives any and all claims, for damages or otherwise, for any action taken by such pledgeholder in accordance with the terms of the UCC not otherwise waived hereunder. In any action hereunder, the Administrative Agent shall be entitled, if permitted by Applicable Law and the Subordination Agreement, to the appointment of a receiver without notice, to take possession of all or any portion of the Collateral and to exercise such powers as a court shall confer upon the receiver. Notwithstanding the foregoing and subject to the Subordination Agreement, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent and the Lenders shall be entitled to apply, without prior notice to any of the Credit Parties, any cash or cash items constituting Collateral in the possession of the Administrative Agent and the Lenders in the manner set forth in Section 8.7.

SECTION 8.7             Application of Proceeds after Event of Default. Subject to the provisions of the Subordination Agreement, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, or if directed by the Required Lenders shall, apply all income on the Collateral and all proceeds from any sale of the Collateral pursuant hereto, first toward payment of all out-of-pocket costs and expenses paid or incurred by the Administrative Agent in enforcing this Credit Agreement and the other Fundamental Documents, in realizing on or protecting any Collateral and in enforcing or collecting any Obligations or any Guaranty thereof, including, without limitation, court costs and attorney’s fees and out-of-pocket expenses incurred by the Administrative Agent, and second to the payment in full of all other Obligations in accordance with Section 12.2; provided, however, that the Administrative Agent may in its discretion apply funds comprising the Collateral to pay the cost (i) of completing any Item of Product owned in whole or in part by any Credit Party in any stage of production, and (ii) of making delivery to the Distributors of such Item of Product. Any amounts remaining after such payment in full shall be remitted to the appropriate Credit Party or as a court of competent jurisdiction may otherwise direct.

SECTION 8.8             Power of Attorney. Each Credit Party does hereby irrevocably make, constitute and appoint the Administrative Agent or any of its officers or designees its true and lawful attorney-in-fact with full power in the name of the Administrative Agent, such other Person or such Credit Party, upon the occurrence and during the continuance of an Event of Default which is not waived in writing by the Required Lenders, to (in each case subject to the provisions of the Subordination Agreement) receive, open and dispose of all mail addressed to any Credit Party, and to endorse any notes, checks, drafts, money orders or other evidences of payment relating to the Collateral that may come into the possession of the Administrative Agent with full power and right to cause the mail of any such Credit Party to be transferred to the Administrative Agent’s own offices or otherwise, and to do any and all other acts necessary or proper to carry out the intent of this Credit Agreement and the grant of the security interests hereunder and under the Fundamental Documents, and each Credit Party hereby ratifies and

 104

 

confirms all that the Administrative Agent or such other Person shall properly do by virtue hereof. In addition, each Credit Party does hereby further irrevocably make, constitute and appoint the Administrative Agent or any of its officers or designees its true and lawful attorney-in-fact in the name of the Administrative Agent, such other Person or any Credit Party, upon the occurrence and during the continuance of an Event of Default which is not waived in writing by the Required Lenders (in each case subject to the provisions of the Subordination Agreement) (a) to enforce all of such Credit Party’s rights under and pursuant to all agreements with respect to the Collateral, all for the sole benefit of the Administrative Agent (for the benefit of the Secured Parties) as contemplated hereby and under the other Fundamental Documents and to enter into such other agreements as may be necessary or appropriate in the judgment of the Administrative Agent to complete the production, distribution or exploitation of any Item of Product which is included in the Collateral, (b) to enter into and perform such agreements as may be necessary in order to carry out the terms, covenants and conditions of the Fundamental Documents that are required to be observed or performed by any Credit Party, (c) to execute such other and further mortgages, pledges and assignments of the Collateral, and related instruments or agreements, as the Administrative Agent may reasonably require for the purpose of perfecting, protecting, maintaining or enforcing the security interests granted to the Administrative Agent (for the benefit of the Secured Parties) hereunder and under the other Fundamental Documents, and (d) to do any and all other acts necessary or proper to carry out the intention of this Credit Agreement and the grant of the security interests hereunder and under the other Fundamental Documents. Each of the Credit Parties hereby ratifies and confirms in advance all that the Administrative Agent or its officers or designees as such attorney-in-fact shall properly do by virtue of this power of attorney.SECTION 8.9             Financing Statements; Direct Payments. Each Credit Party hereby authorizes the Administrative Agent to file UCC financing statements (or foreign equivalent) and any amendments thereto or continuations thereof, any Copyright Security Agreement, any Copyright Security Agreement Supplement, any Trademark Security Agreement and any other appropriate security documents or instruments and to give any notices necessary or desirable as determined by the Administrative Agent to perfect the Lien of the Administrative Agent (for the benefit of the Secured Parties) in the Collateral, in all cases without the signature of any Credit Party, or to execute such items as attorney-in-fact for any Credit Party. In the event the Administrative Agent exercises such power of attorney, the Administrative Agent shall provide to the Borrower copies of any such documents or instruments executed by the Administrative Agent. Each Credit Party authorizes the Administrative Agent to use the description “all assets” or a similar description in any such UCC financing statement. Each Credit Party further authorizes the Administrative Agent, at the time that any Event of Default shall have occurred and be continuing, to notify any account debtor that all sums payable to such Credit Party relating to the Collateral shall be paid directly to the Administrative Agent.

SECTION 8.10          Termination and Release. The security interests granted under this Article 8 shall terminate (i) when all of the Obligations (other than Unasserted Contingent Obligations) shall have been fully and indefeasibly paid and performed and the Commitments shall have terminated and (ii) with respect to any Credit Party, if such Credit Party is designated as an Unrestricted Subsidiary in accordance with the terms of this Credit Agreement. Upon request by the Credit Parties (and at the sole cost and expense of the Credit Parties) after such termination, the Administrative Agent will promptly take all reasonable action and do all things

 105

 

reasonably necessary, including authorizing UCC termination statements and executing Pledgeholder Agreement and Laboratory Access Letter terminations, termination letters to account debtors, terminations of Account Control Agreements and copyright and trademark releases, to terminate the security interest (x) granted to the Administrative Agent (for the benefit of the Secured Parties) hereunder or (y) granted by any Credit Party that is designated as an Unrestricted Subsidiary in accordance with the terms of this Credit Agreement after the Closing Date; provided that the Administrative Agent shall only be required to deliver such documents to the Borrower and shall have no obligation to file or record any such document.

SECTION 8.11          Remedies Not Exclusive. The remedies conferred upon or reserved to the Administrative Agent in this Article 8 are intended to be in addition to, and not in limitation of, any other remedy or remedies available to the Administrative Agent. Without limiting the generality of the foregoing, the Administrative Agent and the Lenders shall have all rights and remedies of a secured creditor under Article 9 of the UCC and under any other Applicable Law.

SECTION 8.12          Quiet Enjoyment. The Administrative Agent and the Lenders acknowledge and agree that the security interest hereunder of the Administrative Agent (on behalf of the Secured Parties) is subject to the rights of Quiet Enjoyment (as defined below) of the Distributors under Distribution Agreements, whether existing on the Closing Date or thereafter executed. For the purpose hereof, “Quiet Enjoyment” shall mean, in connection with the rights of a Distributor under a Distribution Agreement, the Administrative Agent’s and each other Secured Party’s agreement that their respective rights under this Credit Agreement and the other Fundamental Documents and in the Collateral are subject to the rights of such Distributor to distribute, exhibit and/or exploit the Items of Product licensed to it under such Distribution Agreement, and to receive prints or tapes and other delivery items or have access to preprint material or master tapes and other items to which such Distributor is entitled in connection therewith, and that even if a Secured Party shall become the owner of the Collateral in case of an Event of Default, such Secured Party’s ownership rights shall be subject to the rights of such Distributor under such agreement, subject to a reservation by the Administrative Agent (for the benefit of the Secured Parties) of any rights available to the applicable Credit Party if such Distributor is in default under the applicable Distribution Agreement. Neither the Administrative Agent nor any other Secured Party shall be responsible for any liability or obligation of any Credit Party, such Distributor or any Licensing Intermediary under the applicable Distribution Agreement. The Administrative Agent agrees that, upon the reasonable request of a Credit Party, it will provide written confirmation (pursuant to an Interparty Agreement, a Notice of Assignment or such other agreement in form and substance reasonably acceptable to the Administrative Agent) of such rights of Quiet Enjoyment to Distributors under the Distribution Agreements.

SECTION 8.13          Continuation and Reinstatement. The security interest granted hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any Obligation or any part thereof is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of any Credit Party or otherwise.9.               GUARANTY OF GUARANTORS

 106

 

SECTION 9.1             Guaranty.(a)             Each Guarantor unconditionally and irrevocably guarantees to the Administrative Agent and the Lenders the due and punctual payment by, and performance of, the Obligations (including interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the obligor whether or not post filing interest is allowed in such proceeding). Each Guarantor further agrees that the Obligations may be increased, extended or renewed, in whole or in part, without notice or further assent from it (except as may be otherwise required herein), and it will remain bound upon this Guaranty notwithstanding any extension or renewal of any Obligation.

(b)            Each Guarantor waives presentment to, demand for payment from and protest to, as the case may be, any Credit Party or any other guarantor of any of the Obligations, and also waives notice of protest for nonpayment, notice of acceleration and notice of intent to accelerate. The obligations of each Guarantor hereunder shall not be affected by (i) the failure of the Administrative Agent or the Lenders to assert any claim or demand or to enforce any right or remedy against the Borrower or any Guarantor or any other guarantor under the provisions of this Credit Agreement or any other agreement or otherwise, (ii) any extension or renewal of any provision hereof or thereof, (iii) the failure of the Administrative Agent or the Lenders to obtain the consent of the Guarantor with respect to any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of this Credit Agreement, the Notes or any other agreement, (iv) the release, exchange, waiver or foreclosure of any security held by the Administrative Agent (on behalf of the Secured Parties) for the Obligations or any of them, (v) the failure of a Secured Party to exercise any right or remedy against any other Guarantor or any other guarantor of the Obligations, (vi) any bankruptcy, reorganization, liquidation, dissolution or receivership proceeding or case by or against any Credit Party, or any change in the corporate existence, structure, ownership or control of any Credit Party (including any of the foregoing arising from any merger, consolidation, amalgamation, reorganization or similar transaction), or (vii) the release or substitution of any Guarantor or any other guarantor of the Obligations. Without limiting the generality of the foregoing or any other provision hereof (including, without limitation, Section 13.6 and Section 13.12), to the extent permitted by Applicable Law, each Guarantor hereby expressly waives any and all benefits which might otherwise be available to it under California Civil Code Sections 2799, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 or similar applicable law.

(c)             Each Guarantor further agrees that this Guaranty is a continuing guaranty, shall secure the Obligations and any ultimate balance thereof, notwithstanding that the Borrower or any other Persons may from time to time satisfy the Obligations in whole or in part and thereafter incur further Obligations, and that this Guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of the Administrative Agent or any Lender in favor of the Borrower or any Guarantor, or to any other Person.

(d)            Each Guarantor hereby expressly assumes all responsibilities to remain informed of the financial condition of the Borrower, the other Guarantors and any other guarantors of the

 107

 

Obligations and any circumstances affecting the Collateral (including the Pledged Securities) or the ability of the Borrower to perform under this Credit Agreement.

(e)             Each Guarantor’s obligations under the Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations, the Notes or any other instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations which might otherwise constitute a defense to this Guaranty. The Administrative Agent and the Lenders make no representation or warranty with respect to any such circumstances and have no duty or responsibility whatsoever to any Guarantor with respect to the management and maintenance of the Obligations or any collateral security for the Obligations.

SECTION 9.2             No Impairment of Guaranty, etc. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (except payment and performance in full of the Obligations), including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under this Credit Agreement or any other agreement, by any waiver or modification of any provision hereof or thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law, unless and until the Obligations (other than any Unasserted Contingent Obligations) are indefeasibly paid and performed in full and the Commitments have terminated.

SECTION 9.3             Continuation and Reinstatement, etc.

(a)             Each Guarantor further agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any Obligation or any part thereof, is rescinded or must otherwise be restored by the Administrative Agent or the Lenders upon the bankruptcy or reorganization of the Borrower or a Guarantor, or otherwise. In furtherance of the provisions of this Article 9, and not in limitation of any other right which the Administrative Agent or the Lenders may have at law or in equity against the Borrower, a Guarantor or any other Person by virtue hereof, upon failure of the Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice or otherwise, each Guarantor hereby promises to and will, upon receipt of written demand by the Administrative Agent on behalf of itself and/or any of the other Secured Parties, forthwith pay or cause to be paid to the Administrative Agent (for the benefit of itself and/or the Secured Parties, as applicable), in cash an amount equal to the unpaid amount of such unpaid Obligations with interest thereon from the due date at a rate of interest equal to the rate specified in Section 2.7, and thereupon the Administrative Agent shall assign such Obligation, together with all security interests, if any, then held by the Administrative Agent in respect of such Obligation, to the Guarantor or Guarantors making such payment; such assignment to be subordinate and junior

 108

 

to the rights of the Administrative Agent (on behalf of the Secured Parties) with regard to amounts payable by the Borrower in connection with the remaining unpaid Obligations and to be pro tanto to the extent to which the Obligation in question was discharged by the Guarantor or Guarantors making such payments.

(b)            All rights of each Guarantor against the Borrower, arising as a result of the payment by such Guarantor of any sums to the Administrative Agent (for the benefit of the Secured Parties) or directly to the Lenders hereunder by way of right of subrogation or otherwise, shall in all respects be subordinated and junior in right of payment to, and shall not be exercised by such Guarantor until and unless, the indefeasible payment in full of all the Obligations (other than any Unasserted Contingent Obligations) and the termination of the Commitments. If any amount shall be paid to such Guarantor for the account of the Borrower, such amount shall be held in trust for the benefit of the Administrative Agent (on behalf of the Secured Parties), segregated from such Guarantor’s own assets, and shall forthwith be paid to the Administrative Agent to be credited and applied to the Obligations, whether matured or unmatured.

SECTION 9.4             Limitation on Guaranteed Amount, etc. Notwithstanding any other provision of this Article 9, the amount guaranteed by each Guarantor hereunder shall be limited to the extent, if any, required so that its obligations under this Article 9 shall not be subject to avoidance under Section 548 of the Bankruptcy Code or to being set aside or annulled under any Applicable Law relating to fraud on creditors. In determining the limitations, if any, on the amount of any Guarantor’s obligations hereunder pursuant to the preceding sentence, it is the intention of the parties hereto that any rights of subrogation or contribution which such Guarantor may have under this Article 9, any other agreement or Applicable Law shall be taken into account.

SECTION 9.5             Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Credit Party to honor all of its obligations under this Guaranty in respect of Swap Obligations; provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 9.5 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.5 or otherwise under this Guaranty voidable under Applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. The obligations of each Qualified ECP Guarantor under this Section 9.5 shall remain in full force and effect until a discharge of its Guaranty hereunder.  Each Qualified ECP Guarantor intends that this Section 9.5 constitute, and this Section 9.5 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

10.            PLEDGE

 

SECTION 10.1          Pledge. The Borrower, as security for the due and punctual payment in full of the Obligations (including interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the Borrower whether or not post filing interest is allowed in such proceeding), and each other Pledgor, as security for its obligations hereunder, hereby grant,

 109

 

pledge, hypothecate, assign, transfer, set over, convey and deliver unto the Administrative Agent (for the benefit of the Secured Parties), a security interest in all Pledged Collateral now owned or hereafter acquired by them that is prior to all Liens other than the Liens in favor of the Senior Facility Agent and Seer P&A Facility Agent, as applicable, pursuant to the Senior Loan Documents. For the avoidance of doubt, for purposes of continuity of any pledge previously made under the Existing Subordinated Credit Agreement, the “Administrative Agent” shall also be deemed to include the Administrative Agent under the Existing Subordinated Credit Agreement for purposes of each grant, mortgage, pledge, assignment, transfer, set over, conveyance or delivery in the preceding sentence to the extent made by any Credit Party that was previously a “Credit Party” as defined under the Existing Subordinated Credit Agreement. Subject to the provisions of the Subordination Agreement, on or prior to the Closing Date, the Pledgors delivered or shall deliver to the Administrative Agent the definitive instruments (if any) representing all Pledged Securities, accompanied by undated stock powers (or any comparable documents for non-corporate entities to the extent certificated), duly endorsed or executed in blank by the appropriate Pledgor, and such other instruments or documents relating thereto as the Administrative Agent or its counsel shall reasonably request. Schedule 10.1 sets forth all of the Pledged Securities as of the Closing Date.

SECTION 10.2          Covenant. Each Pledgor covenants that as the owner of Equity Interests in each of its respective Subsidiaries it will not take any action to allow any additional Equity Interests of any of such Subsidiaries or any securities convertible or exchangeable into Equity Interests of such Subsidiaries to be issued, or grant any options or warrants, unless all of such interests are pledged to the Administrative Agent (for the benefit of the Secured Parties) as security for the Obligations and, if applicable, such Pledgor’s obligations under Article 9.

SECTION 10.3          Registration in Nominee Name; Denominations. Subject to the provisions of the Subordination Agreement, the Administrative Agent shall have the right (in its sole and absolute discretion) to hold the certificates representing any Pledged Securities (i) in its own name (on behalf of the Secured Parties) or in the name of its nominee, or (ii) in the name of the appropriate Pledgor, endorsed or assigned in blank or in favor of the Administrative Agent. The Administrative Agent shall have the right to exchange the certificates representing any of the Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Credit Agreement.

SECTION 10.4          Voting Rights; Dividends; etc.

(a)             The appropriate Pledgor shall be entitled to exercise any and all voting and/or consensual rights and powers accruing to an owner of the Pledged Securities being pledged by it hereunder or any part thereof for any purpose not inconsistent with the terms hereof, at all times, except as expressly provided in Section 10.4(c).

(b)            All dividends or distributions of any kind whatsoever (other than cash dividends or cash distributions paid while no Event of Default is continuing) received by a Pledgor with respect to any Pledged Securities, whether declared on a regular periodic basis or resulting from a subdivision, combination, or reclassification of the outstanding capital stock or Equity Interests of the issuer or received in exchange for Pledged Securities or any part thereof or as a result of any merger, consolidation, acquisition, or other exchange of assets to which the issuer may be a

 110

 

party, or otherwise, shall be and become part of the Pledged Securities pledged hereunder and shall (subject to the provisions of the Subordination Agreement) immediately be delivered to the Administrative Agent to be held subject to the terms hereof. All dividends and distributions which are received by a Pledgor contrary to the provisions of this Section 10.4(b) shall be received in trust for the benefit of the Secured Parties, segregated from such Pledgor’s own assets, and shall be delivered to the Administrative Agent.

(c)             Subject to the provisions of the Subordination Agreement, upon the occurrence and during the continuance of an Event of Default and notice (which may be delivered telephonically followed by written notice) to the applicable Pledgor from the Administrative Agent of the transfer of such rights to the Administrative Agent, all rights of such Pledgor (i) to exercise the voting and/or consensual rights and powers which it is entitled to exercise pursuant to this Section 10.4, and (ii) to receive and retain cash dividends and cash distributions with respect to the Pledged Securities, shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to exercise such voting and/or consensual rights and receive such cash dividends and cash distributions, until such time as the Event of Default has been cured or waived.

(d)            So long as no Event of Default shall have occurred and be continuing, any dividends or cash distributions received by a Credit Party in accordance with the terms hereof and of the Subordination Agreement may be used for any purpose permitted hereunder.

SECTION 10.5          Remedies Upon Default. If an Event of Default shall have occurred and be continuing, subject to the provisions of the Subordination Agreement, the Administrative Agent (on behalf of the Secured Parties), may sell the Pledged Securities, or any part thereof, at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Administrative Agent shall deem appropriate subject to the terms hereof or as otherwise provided in the UCC. The Administrative Agent shall be authorized at any such sale (if the Administrative Agent deems it advisable to do so) to restrict to the fullest extent permitted by Applicable Law the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Pledged Securities for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale, the Administrative Agent shall have the right to assign, transfer, and deliver to the purchaser or purchasers thereof the Pledged Securities so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor. The Administrative Agent shall give the Pledgors ten (10) days’ prior written notice of any such public or private sale, or sale at any broker’s board or on any such securities exchange, or of any other disposition of the Pledged Securities. Such notice, in the case of public sale, shall state the time and place for such sale and, in the case of sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Pledged Securities, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix and shall state in the notice of such sale. At any such sale, the Pledged Securities, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Administrative Agent may (in its sole and absolute discretion) determine. The Administrative Agent shall not be obligated to make any sale of the Pledged Securities if it shall determine not to do so, regardless of the fact

 111

 

that notice of sale of the Pledged Securities may have been given. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case the sale of all or any part of the Pledged Securities is made on credit or for future delivery, the Pledged Securities so sold may be retained by the Administrative Agent until the sale price is paid by the purchaser or purchasers thereof, but the Administrative Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Securities so sold and, in case of any such failure, such Pledged Securities may be sold again upon like notice. At any sale or sales made pursuant to this Section 10.5, the Administrative Agent (on behalf of the Secured Parties) may bid for or purchase, free from any claim or right of whatever kind, including any equity of redemption, of the Pledgors, any such demand, notice, claim, right or equity being hereby expressly waived and released, any or all of the Pledged Securities offered for sale, and may make any payment on the account thereof by using any claim for moneys then due and payable to the Administrative Agent or any consenting Lender by any Credit Party as a credit against the purchase price; and the Administrative Agent, upon compliance with the terms of sale, may hold, retain and dispose of the Pledged Securities without further accountability therefor to any Pledgor or any third party (other than the Lenders). The Administrative Agent shall in any such sale make no representations or warranties with respect to the Pledged Securities or any part thereof, and shall not be chargeable with any of the obligations or liabilities of the Pledgors with respect thereto. Each Pledgor hereby agrees that (i) it will indemnify and hold the Administrative Agent and the Lenders harmless from and against any and all claims with respect to the Pledged Securities asserted before the taking of actual possession or control of the Pledged Securities by the Administrative Agent pursuant to this Credit Agreement, or arising out of any act of, or omission to act on the part of, any Person prior to such taking of actual possession or control by the Administrative Agent (whether asserted before or after such taking of possession or control), or arising out of any act on the part of any Pledgor or its Affiliates or agents before or after the commencement of such actual possession or control by the Administrative Agent, but excluding therefrom all claims with respect to the Pledged Securities resulting from (x) the gross negligence or willful misconduct of any of the Administrative Agent or the Lenders, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required or (y) any claims with respect to the Pledged Securities asserted against an indemnified party by a Pledgor in which such Pledgor is the prevailing party (i.e., the party in whose favor an award is issued); and (ii) none of the Administrative Agent or any Lender shall have any liability or obligation to any Pledgor arising out of any such claim except for acts of willful misconduct or gross negligence of such Person, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required. As an alternative to exercising the power of sale herein conferred upon it, the Administrative Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and Pledged Securities under this Credit Agreement and to sell the Pledged Securities, or any portion thereof, pursuant to a judgment or decree of a court or courts having competent jurisdiction.

SECTION 10.6          Application of Proceeds of Sale and Cash. The proceeds of sale of the Pledged Securities sold pursuant to Section 10.5, subject to the provisions of the Subordination

 112

 

Agreement, shall be applied by the Administrative Agent (on behalf of the Secured Parties) as follows:(i)              to the payment of all out-of-pocket costs and expenses paid or incurred by the Administrative Agent in connection with such sale, including, without limitation, all court costs and the fees and expenses of counsel for the Administrative Agent in connection therewith, and the payment of all out-of-pocket costs and expenses paid or incurred by the Administrative Agent in enforcing this Credit Agreement and the other Fundamental Documents, in realizing or protecting any Collateral and in enforcing or collecting any Obligations or any Guaranty thereof, including, without limitation, court costs and the attorney’s fees and expenses incurred by the Administrative Agent in connection therewith; and

(ii)            to the payment in full of the Obligations in accordance with Section 12.2;

provided, however, that the Administrative Agent may in its discretion apply funds comprising the proceeds of sale of the Pledged Securities to pay the cost (i) of completing any Item of Product owned in whole or in part by any Credit Party in any stage of production, if applicable and (ii) of making delivery to the Distributors of such Item of Product. Any amounts remaining after such payment in full shall be remitted to the appropriate Pledgor, or as a court of competent jurisdiction may otherwise direct.

SECTION 10.7          Securities Act, etc. In view of the position of each Pledgor in relation to the Pledged Securities pledged by it, or because of other present or future circumstances, a question may arise under the Securities Act of 1933, as amended, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being hereinafter called the “Federal Securities Laws”), with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws may very strictly limit the course of conduct of the Administrative Agent if the Administrative Agent were to attempt to dispose of all or any part of the Pledged Securities, and may also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities may dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Administrative Agent in any attempt to dispose of all or any part of the Pledged Securities under applicable Blue Sky or other state securities laws, or similar laws analogous in purpose or effect. Under Applicable Law, in the absence of an agreement to the contrary, the Administrative Agent may perhaps be held to have certain general duties and obligations to a Pledgor to make some effort towards obtaining a fair price even though the Obligations may be discharged or reduced by the proceeds of a sale at a lesser price. Each Pledgor waives to the fullest extent permitted by Applicable Law any such general duty or obligation to it, and the Pledgors and/or the Credit Parties will not attempt to hold the Administrative Agent responsible for selling all or any part of the Pledged Securities at an inadequate price, even if the Administrative Agent shall accept the first offer received or does not approach more than one possible purchaser. Without limiting the generality of the foregoing, the provisions of this Section 10.7 would apply if, for example, the Administrative Agent were to place all or any part of the Pledged Securities for private

 113

 

placement by an investment banking firm, or if such investment banking firm purchased all or any part of the Pledged Securities for its own account, or if the Administrative Agent placed all or any part of the Pledged Securities privately with a purchaser or purchasers.

SECTION 10.8          Continuation and Reinstatement. Each Pledgor further agrees that its pledge hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any Obligation or any part thereof, is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of any Pledgor or otherwise.

SECTION 10.9          Termination. The pledge referenced in this Article 10 shall terminate when all of the Obligations (other than Unasserted Contingent Obligations) shall have been fully and indefeasibly paid and performed and the Commitments shall have terminated. Upon request by the Pledgors (and at the sole cost and expense of the Pledgors) after such termination, the Administrative Agent will promptly reassign and deliver to the appropriate Pledgor, or to such Person or Persons as such Pledgor shall designate, against receipt, such of the Pledged Securities (if any) as shall not have been sold or otherwise applied by the Administrative Agent pursuant to the terms hereof and shall still be held by it hereunder, together with appropriate instruments of reassignment and release. Any such reassignment shall be free and clear of any Liens arising by, under or through the Administrative Agent (other than those created at the instruction of the applicable Pledgor) but shall otherwise be without recourse upon or warranty by the Administrative Agent.

11.            [INTENTIONALLY OMITTED]

 

12.            THE ADMINISTRATIVE AGENT

 

SECTION 12.1          Administration by the Administrative Agent.(a)             The general administration of the Fundamental Documents and any other documents contemplated by the Fundamental Documents shall be by the Administrative Agent or its designees. Except as otherwise expressly provided herein, each of the Lenders hereby irrevocably authorizes the Administrative Agent, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Fundamental Documents and any other documents contemplated by the Fundamental Documents as are expressly delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto. The Administrative Agent shall have no duties or responsibilities except as set forth in the Fundamental Documents.

(b)            The Lenders hereby authorize the Administrative Agent (in its sole discretion):

(i)              in connection with the sale or other disposition of any asset included in the Collateral or the Pledged Collateral or the sale or other disposition of any Guarantor, in each case to the extent undertaken in accordance with the terms of this Credit Agreement, to release a Lien granted to the Administrative Agent (for the benefit of the Secured Parties) on such asset or Pledged Collateral and/or to release such Guarantor from its obligations hereunder;

 114

 

(ii)            to determine that the cost to a Credit Party is disproportionate to the benefit to be realized by the Secured Parties by perfecting a Lien in a given asset or group of assets included in the Collateral (including any bank account) and that such Credit Party should not be required to perfect such Lien in favor of the Administrative Agent (for the benefit of the Secured Parties);

(iii)          to appoint subagents to be the holder of record of a Lien to be granted to the Administrative Agent (for the benefit of the Secured Parties);

(iv)          to confirm in writing the right of Quiet Enjoyment of Distributors pursuant to the terms of Section 8.12;

(v)            in connection with an Item of Product being produced by a Credit Party with respect to which (A) the principal photography is being done outside of the United States of America, and (B) the original Physical Materials will not be processed in a Laboratory, to approve arrangements with such Credit Party as shall be satisfactory to the Administrative Agent with respect to the temporary storage of the original negative film, the original sound track materials or other Physical Materials of such Item of Product in a production laboratory located in such other jurisdiction;

(vi)          to enter into and perform its obligations under the other Fundamental Documents;

(vii)        to enter into and perform its obligations under any Approved Completion Bond entered into in connection with a Picture, together with such additional documentation customarily entered into in connection therewith and in connection therewith, to approve the applicable Approved Completion Guarantor’s insurance support package and/or credit support to the extent contemplated by the definition of the term “Approved Completion Guarantor” herein;

(viii)      to enter into Interparty Agreements, Co-Financing Intercreditor Agreements, Co-Financing Venture Interparty Agreements, intercreditor agreements and/or subordination agreements on terms acceptable to the Administrative Agent with (A) unions and/or guilds with respect to the security interests in favor of such unions and/or guilds required pursuant to the terms of collective bargaining agreements, (B) any Distributor, licensor, Approved Co-Financier, Approved Co-Financing Venture Counterparty or Approved Completion Guarantor having any rights to any Item of Product, (C) Persons providing any services in connection with any Item of Product, (D) Persons providing tax benefit, production subsidies and/or similar arrangements for any Item of Product, (E) sales agents or third party Licensing Intermediaries which are permitted by the terms hereof to be involved in the distribution of any Item of Product or (F) the Senior Facility Agent, the Seer P&A Facility Agent; and

 115

 

(ix)          to approve the terms and conditions of (A) any transaction permitted under Section 6.7 or 6.8 and (B) any Soft Dollar Transaction that does not comply with the covenants contained in Article 6, to the extent the Administrative Agent reasonably determines that such Soft Dollar Transaction will provide a positive net benefit towards the negative cost of the applicable Item of Product and is otherwise consistent with the risk profile of the Credit Parties contemplated under the terms hereof relating to the production of Items of Product, and in each of the foregoing cases of sub-clauses (A) and (B) above to take any action it deems appropriate to facilitate the completion of such transaction.

SECTION 12.2          Payments. Subject to the provisions of the Subordination Agreement, as among the Administrative Agent and the Lenders, any amounts received by the Administrative Agent in connection with the Fundamental Documents, the application of which is not otherwise provided for herein, shall be applied first, to pay accrued but unpaid interest on the Loans ratably in accordance with the amount of outstanding Loans owed to each Lender, second, to pay the principal balance outstanding on the Loans (with amounts payable on the principal balance outstanding on any Loans in accordance with the amount of outstanding Loans owed to each Lender), third, to pay any other amounts then due to the Secured Parties under this Credit Agreement, and fourth, to pay any other outstanding Obligations. All amounts to be paid to any Lender by the Administrative Agent shall be credited to that Lender, after collection by the Administrative Agent, in immediately available funds either by wire transfer or deposit in such Lender’s correspondent account with the Administrative Agent, or as such Lender and the Administrative Agent shall from time to time agree. Notwithstanding the foregoing, amounts received from any Credit Party that is not a Qualified ECP Guarantor shall not be applied to any Excluded Swap Obligation of such Guarantor.

SECTION 12.3          Sharing of Setoffs and Cash Collateral. Each of the Lenders agrees that if it shall, through the exercise of a right of banker’s Lien, setoff or counterclaim against any Credit Party (including, but not limited to, a secured claim under Section 506 of the Bankruptcy Code or other security or interest arising from, or in lieu of, such secured claim and received by such Lender under any applicable bankruptcy, insolvency or other similar law) or otherwise, obtain payment in respect of its Loans as a result of which the unpaid portion of its Loans is proportionately less than the unpaid portion of Loans of any of the other Lenders (i) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Lenders a participation in the Loans of such other Lenders, so that the aggregate unpaid principal amount of each of the Lenders’ Loans shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to the obtaining of such payment was to the principal amount of all Loans outstanding prior to the obtaining of such payment, and (ii) such other adjustments shall be made from time to time as shall be equitable to ensure that the Lenders share such payment pro rata. If all or any portion of such excess payment is thereafter recovered from the Lender which originally received such excess payment, such purchase (or portion thereof) shall be canceled and the purchase price restored to the extent of such recovery. The Credit Parties expressly consent to the foregoing arrangements and agree that any Lender or Lenders holding (or deemed to be holding) a participation in a Loan may exercise any and all rights of banker’s Lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Lender or Lenders as fully as

 116

 

if such Lender or Lenders held a Loan and was the original obligee thereon, in the amount of such participation. SECTION 12.4          Notice to the Lenders.

(a)             Upon receipt by the Administrative Agent from any Credit Party of any communication calling for an action on the part of the Lenders, or upon receipt by the Administrative Agent from any Credit Party of written notice of any Event of Default, the Administrative Agent will in turn promptly inform the Lenders in writing (which shall include facsimile communications) of the nature of such communication or of the Event of Default, as the case may be.

(b)            At the request of any Lender, the Administrative Agent will make available to such Lender copies of any materials delivered to the Administrative Agent pursuant to Section 5.1.

SECTION 12.5          Liability of the Administrative Agent.

(a)             The Administrative Agent, when acting on behalf of any Secured Party, may execute any of its duties under this Credit Agreement or the other Fundamental Documents by or through its respective directors, officers, employees or agents and neither the Administrative Agent nor its directors, officers, employees or agents shall be liable to the other Secured Parties or any of them for any action taken or omitted to be taken in good faith, nor be responsible to the other Secured Parties or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required. The Administrative Agent and its directors, officers, employees and agents shall in no event be liable to the other Secured Parties or to any of them for any action taken or omitted to be taken by it pursuant to instructions received by it from the Required Lenders or in reliance upon the advice of counsel selected by it with reasonable care. Without limiting the foregoing, neither the Administrative Agent nor any of its directors, officers, employees or agents shall be responsible to any of the Secured Parties for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty, or representation in, or for the perfection of any security interest contemplated by, this Credit Agreement, any other Fundamental Document or any related agreement, document or order, or for freedom of any of the Collateral or any of the Pledged Collateral from prior Liens or security interests, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower, any other Credit Party of any of the terms, conditions, covenants, or agreements of this Credit Agreement, any other Fundamental Document, or any related agreement or document.

(b)            None of the Administrative Agent (in its capacity as agent for the Lenders) or any of its directors, officers, employees or agents shall have any responsibility to the Borrower, any other Credit Party on account of the failure or delay in performance or breach by any of the Lenders of any of such Lender’s obligations under this Credit Agreement, the other Fundamental Documents or any related agreement or document or in connection herewith or therewith. No

 117

 

Lender nor any of its directors, officers, employees or agents shall have any responsibility to the Borrower, any other Credit Party on account of the failure or delay in performance or breach by any other Lender of such other Lender’s obligations under this Credit Agreement, the other Fundamental Documents or any related agreement or document or in connection herewith or therewith.

(c)             The Administrative Agent (in its capacity as agent for the Lenders) shall be entitled to rely on any communication, instrument or document believed by it to be genuine or correct and to have been signed or sent by a Person or Persons believed by it to be the proper Person or Persons, and it shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by it.

SECTION 12.6          Reimbursement and Indemnification. (a) Each of the Lenders agrees (i) to reimburse the Administrative Agent for such Lender’s Pro Rata Share of any expenses and fees incurred for the benefit of the Lenders under the Fundamental Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, and any other expense incurred in connection with the operations or enforcement thereof to the extent not reimbursed by or on behalf of the Borrower or any other Credit Party, and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees and agents, on demand, ratably in accordance with such Lender’s Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, it or any of them in any way relating to or arising out of any of the Fundamental Documents or any related agreement or document, or any action taken or omitted by it or any of them under any of the Fundamental Documents or any related agreement or document, to the extent not reimbursed by or on behalf of the Borrower or any other Credit Party (except such as shall result from the gross negligence or willful misconduct of the Person to be reimbursed, indemnified or held harmless, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required). To the extent indemnification payments made by the Lenders pursuant to this Section 12.6 are subsequently recovered by the Administrative Agent from a Credit Party, the Administrative Agent shall promptly refund such previously paid indemnity payments to the Lenders that paid them.

(b)            The provisions of Section 12.6(a) above are agreements among the Administrative Agent and the Lenders and are not for the benefit of any of the Credit Parties and may not be asserted by any of the Credit Parties as a defense to, or a limitation of, their respective Obligations under this Credit Agreement.

SECTION 12.7          Rights of Administrative Agent. The Administrative Agent shall have the same duties, rights and powers as a Lender hereunder (including the right to give such instructions) as any of the other Lenders and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with any Credit Party or Affiliate thereof, as though it were not the Administrative Agent of the Lenders under this Credit Agreement and the other Fundamental Documents.

 118

 

SECTION 12.8          Independent Investigation by Lenders. Each of the Lenders acknowledges that it has decided to enter into this Credit Agreement and the other Fundamental Documents and to make the Loans hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Credit Parties and agrees that neither the Administrative Agent nor any Lender shall bear any responsibility therefor.SECTION 12.9          Agreement of Required Lenders. Except as set forth in Section 13.10, upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Lenders, action shall be taken by the Administrative Agent for and on behalf of, or for the benefit of, all Lenders upon the direction of the Required Lenders and any such action shall be binding on all Lenders. No amendment, modification, consent or waiver shall be effective except in accordance with the provisions of Section 13.10.

SECTION 12.10      Notice of Transfer. The Administrative Agent may deem and treat any Lender which is a party to this Credit Agreement as the owner of such Lender’s respective portions of the Loans for all purposes, unless and until a written notice of the assignment or transfer thereof executed by any such Lender shall have been received by the Administrative Agent and become effective in accordance with Section 13.3.

SECTION 12.11      Successor Administrative Agent. The Administrative Agent may resign at any time by giving fifteen (15) days’ prior written notice thereof to the Lenders and the Borrower, but, except as set forth below, such resignation shall not become effective until acceptance by a successor agent of its appointment pursuant hereto. Upon any such resignation, the retiring Administrative Agent shall consult with the Borrower and promptly appoint a successor agent from among the Lenders which successor agent shall be experienced and sophisticated in entertainment industry lending; provided, that such replacement is reasonably acceptable (as evidenced in writing) to the Required Lenders and the Borrower; provided, however, such approval by the Borrower shall not be required at any time when a Default or Event of Default shall have occurred and be continuing. If no successor agent shall have been so appointed by the retiring Administrative Agent and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent’s giving of notice of resignation, the Borrower may appoint a successor agent (which successor may be replaced by the Required Lenders; provided, that such replacement successor is an existing Lender or experienced and sophisticated in entertainment industry lending and, so long as no Default or Event of Default has occurred and is then continuing, reasonably acceptable to the Borrower (as evidenced in writing)), which shall be either a Lender or a commercial bank organized under the laws of the United States of America or of any State thereof and shall have a combined capital and surplus of at least $250,000,000 and shall be experienced and sophisticated in entertainment industry lending. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the date that is forty-five (45) days after the date of such notice. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor agent, such successor agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor agent or the effectiveness of any resignation notice without the appointment of a successor agent, the retiring Administrative Agent shall be discharged from its duties and obligations under this Credit Agreement, the other Fundamental Documents and any other credit documentation. After any

 119

 

retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article 12 and Article 13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement.

SECTION 12.12      [Intentionally Omitted].

SECTION 12.13      Other Agent Titles. Other than the title “Administrative Agent”, any title accorded to any Lender on the cover page hereof containing the word “Agent,” “Arranger” or “Bookrunner” is granted for recognition only and any such Lender granted such a title shall not have any right, power, obligation, liability, responsibility or duty under this Credit Agreement other than those applicable to all such Lenders as such. Without limiting the foregoing, by virtue of such titles, if any, no such Lender shall have or be deemed to have any fiduciary relationship with any other Lender or the Credit Parties. Each other Lender acknowledges that it has not relied, and will not rely, on any Lender having any such title in deciding to enter into this Credit Agreement or in taking or not taking action hereunder. In the event of any claim against any such Lender in any capacity or purported capacity inferred from any such title, such Lender shall have the benefit of Section 13.5 to the same extent as the Administrative Agent.

SECTION 12.14      Credit Bidding. Subject to the Subordination Agreement, the Secured Parties hereby irrevocably authorize the Administrative Agent, at the direction of the Required Lenders to credit bid all or any portion of the applicable Obligations (including by accepting some or all of the Collateral in satisfaction of some or all of the applicable Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code, including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any similar laws in any other jurisdictions to which a Credit Party is subject, or (b) at any other sale, foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable law. In connection with any such credit bid and purchase, the applicable Obligations owed to the applicable Secured Parties shall be entitled to be, and shall be, credit bid by the Administrative Agent at the direction of the Required Lenders on a ratable basis (with applicable Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that shall vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) for the asset or assets so purchased (or for the equity interests or debt instruments of the acquisition vehicle or vehicles that are issued in connection with such purchase). In connection with any such bid (i) the Administrative Agent shall be authorized to form one or more acquisition vehicles and to assign any successful credit bid to such acquisition vehicle or vehicles, (ii) each of the applicable Secured Parties’ ratable interests in the applicable Obligations which were credit bid shall be deemed without any further action under this Credit Agreement to be assigned to such vehicle or vehicles for the purpose of closing such sale, (iii) the Administrative Agent shall be authorized to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Administrative Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or equity interests thereof, shall be governed, directly or indirectly, by, and the governing documents shall provide for, control by the vote of the Required

 120

 

Lenders or their permitted assignees under the terms of this Credit Agreement or the governing documents of the applicable acquisition vehicle or vehicles, as the case may be, irrespective of the termination of this Credit Agreement and without giving effect to the limitations on actions by the Required Lenders contained in Section 13.10 of this Credit Agreement), (iv) the Administrative Agent on behalf of such acquisition vehicle or vehicles shall be authorized to issue to each of the applicable Secured Parties, ratably on account of the relevant applicable Obligations which were credit bid, interests, whether as equity, partnership, limited partnership interests or membership interests, in any such acquisition vehicle and/or debt instruments issued by such acquisition vehicle, all without the need for any Secured Party or acquisition vehicle to take any further action, and (v) to the extent that Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (including as a result of another bid being higher or better, because the amount of applicable Obligations assigned to the acquisition vehicle exceeds the amount of applicable Obligations credit bid by the acquisition vehicle or otherwise), such applicable Obligations shall automatically be reassigned to the applicable Secured Parties pro rata and the equity interests and/or debt instruments issued by any acquisition vehicle on account of such applicable Obligations shall automatically be cancelled, without the need for any applicable Secured Party or any acquisition vehicle to take any further action. Notwithstanding that the ratable portion of the applicable Obligations of each applicable Secured Party are deemed assigned to the acquisition vehicle or vehicles as set forth in clause (ii) above, each applicable Secured Party shall execute such documents and provide such information regarding the applicable Secured Party (and/or any designee of such Secured Party which will receive interests in or debt instruments issued by such acquisition vehicle) as the Administrative Agent may reasonably request in connection with the formation of any acquisition vehicle, the formulation or submission of any credit bid or the consummation of the transactions contemplated by such credit bid.

13.            MISCELLANEOUS

 

SECTION 13.1          Notices.

(a)             Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to clause (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, portable document format (“PDF”), tagged image file format (“TIFF”) or other electronic format sent by electronic transmission, as follows:

(i)              if to any Credit Party, to STX Financing, LLC, Attention: Noah Fogelson, 3900 W. Alameda Ave., 32nd Fl., Burbank, CA 91505 (Facsimile No. (310) 244-0348; email: nfogelson@stxentertainment.com), with a copy to Latham & Watkins LLP, 10250 Constellation Boulevard #1100, Los Angeles, CA 90067, Attention: Nancy A. Bruington (Facsimile No. (424) 653-5501; email: nancy.bruington@lw.com);

(ii)            (A) if to the Administrative Agent or to Red Fish Blue Fish, LLC, to Red Fish Blue Fish, LLC, 101 South Reid Street, Suite 307 (Office 313), Sioux Falls, South Dakota 57103 Attention: Derek Arend (Facsimile No. (605) 221-

 121

 

6232; email: darend@udqptc.com); (B) with copies to (x) 71 South Wacker Drive, Suite 4700, Chicago, Illinois 60606, Attention: Diversified Financial Management Corp. (Facsimile No. (312) 577-2619; email: entities@divfin.com); (y) Madison Wells Media, 2049 Century Park East, Suite 940, Los Angeles, California 90067, Attention: Clint Kisker (Facsimile No. (424) 777-0148; email: ckisker@madisonwellsmedia.com) and (z) Sidley Austin LLP, 1 South Dearborn Street, Chicago, Illinois 60603, Attention: Annie C. Wallis (Facsimile No. (312) 853-7036; email: awallis@sidley.com); and

(iii)          if to any other Lender, to it at its address, facsimile number or e-mail address set forth on the signature pages hereto.

(b)            Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided, that the foregoing shall not apply to notices pursuant to Article 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative Agent, the Lenders, and each Credit Party may, each in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided, that approval of such procedures may be limited to particular notices or communications.

(c)             Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to all of the other parties hereto. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

SECTION 13.2          Survival of Agreement, Representations and Warranties, etc. All warranties, representations and covenants made by any Credit Party, in any other Fundamental Document or in any certificate or other instrument delivered by it or on its behalf in connection with this Credit Agreement or any other Fundamental Document shall be considered to have been relied upon by the Administrative Agent and the Lenders and, except for any terminations, amendments, modifications or waivers thereof in accordance with the terms hereof, shall survive the making of the Loans herein contemplated and the execution and delivery to the Administrative Agent of the Notes (if any) regardless of any investigation made by the Administrative Agent or the Lenders or on their behalf and shall continue in full force and effect so long as any Obligation is outstanding and unpaid and so long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute representations and warranties by the applicable Credit Party hereunder.

 122

 

SECTION 13.3          Successors and Assigns; Syndications; Loan Sales; Participations.

(a)             Whenever in this Credit Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; provided, however, that no Credit Party may assign its rights or obligations hereunder without the prior written consent of the Administrative Agent and all of the Lenders, and all covenants, promises and agreements by or on behalf of any of the Credit Parties which are contained in this Credit Agreement shall inure to the benefit of the successors and assigns of the Administrative Agent and the Lenders; provided, further, that no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) and (c) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (g) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (k) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).

(b)            Each of the Lenders may (but only with (x) the prior written consent of the Administrative Agent and (y) so long as no Default or Event of Default shall have occurred and be continuing, the prior written consent of the Borrower (not to be unreasonably withheld, conditioned or delayed; provided, that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after the Borrower’s receipt of written notice thereof), assign all or a portion of its interests, rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Commitment and the same portion of all Loans at the time owing to it, the Notes held by it (if any) and its rights and obligations with regard to any Letters of Credit; provided, however, that (i) each assignment shall be of a constant, and not a varying, percentage of the assigning Lender’s interests, rights and obligations under this Credit Agreement, (ii) each assignment shall be in a minimum Commitment (or Loans, if applicable) amount equal to the lesser of $1,000,000 and the amount of such assigning Lender’s entire Commitment (or Loans, if applicable), (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Assumption, together with the assigning Lender’s original Note (if any) and a processing and recordation fee of $3,500 to be paid to the Administrative Agent by the assigning Lender or the assignee and (iv) no such assignment shall be effective until and unless recorded in the Register. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Assumption, which effective date shall not (unless otherwise agreed to by the Administrative Agent) be earlier than five (5) Business Days after the date of acceptance and recording by the Administrative Agent, (x) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Assumption, have the rights and obligations of a Lender hereunder and under the other Fundamental Documents and shall be bound by the provisions hereof and thereof, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Assumption, relinquish its rights and be released from its obligations under this Credit Agreement except that, notwithstanding such assignment, any rights and remedies available to the Borrower for any breaches by such assigning Lender of its obligations hereunder while a Lender shall be preserved after such assignment and such Lender shall not be relieved of any liability to the Borrower due to any such breach. In the case of an Assignment and Assumption covering all or the remaining portion of the assigning Lender’s rights and obligations under this Credit Agreement, such assigning Lender shall cease to be a party hereto except as provided in Sections 2.9(c), 2.10, 2.13, 13.4 and 13.5.

 123

 

(c)             Notwithstanding any provision herein otherwise requiring the consent of the Borrower, each Lender may at any time make an assignment of its interests, rights and obligations under this Credit Agreement without the consent of the Borrower, to (i) any Affiliate of such Lender, (ii) any Person, or Affiliate of a Person that manages such Lender (a “Related Fund”), (iii) any other Lender hereunder, (iv) any GPP Business Interest or (v) so long as the aggregate amount of Loans held by GPP Business Interests exceeds 50% of the outstanding principal amount of all Loans at such time and GPP Business Interests retains voting power in connection with its Loans (after giving effect to the assignment), BDT Capital Partners or any limited partner of its related investment funds. None of the foregoing assignments shall be subject to the requirement of Section 13.3(b) that the amount of the Commitment (or Loans, if applicable) of the assigning Lender subject to each assignment be in a minimum principal amount of the lesser of $1,000,000 and the amount of such assigning Lender’s entire Commitment (or Loans, if applicable), and any such assignment to any Affiliate of the assigning Lender shall not release the assigning Lender of its remaining obligations hereunder, if any. All assignments pursuant to this Section 13.3(c) shall be subject to all other requirements of this Section. Each of the Credit Parties and the Lenders, in each case on behalf of themselves and their affiliates, agree that the Administrative Agent (solely in its capacity as Administrative Agent, but not in its capacity as Lender) shall have no liability for any assignments made to an Ineligible Assignee.

(d)            By executing and delivering an Assignment and Assumption, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that (x) it is the legal and beneficial owner of the interest being assigned thereby, (y) such interest is free and clear of any Lien, encumbrance or other adverse claim, and (z) it has full power and authority, and has taken all action necessary, to execute and deliver such Assignment and Assumption and to consummate the transactions contemplated thereby, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or any other Fundamental Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Fundamental Documents or any other instrument or document furnished pursuant thereto or any collateral thereunder, (ii) such assignor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or Affiliates, or any other Person obligated in respect of any Fundamental Document, or the performance or observance by the Borrower, any of its Subsidiaries or Affiliates, or any other Person of any of their respective obligations under the Fundamental Documents or any other instrument or document furnished pursuant thereto, (iii) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Sections 5.1(a) and (b) (or, if no such financial statements shall have theretofore been delivered, then a copy of the financial statements referred to in Section 3.5) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption and to purchase the interest being assigned thereby on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or

 124

 

any Lender, (iv) such assignee agrees that it will, independently and without reliance upon the assigning Lender, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement or any other Fundamental Document, (v) such assignee appoints and authorizes the Administrative Agent to take such action as the agent on its behalf and to exercise such powers under this Credit Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will be bound by the provisions of this Credit Agreement and will perform in accordance with their terms all of the obligations which by the terms of this Credit Agreement are required to be performed by it as a Lender.

(e)             The Administrative Agent (acting for this purpose on behalf of the Borrower in a non-fiduciary capacity) shall maintain at its address at which notices are to be given to it pursuant to Section 13.1 a copy of each Assignment and Assumption and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount (and stated interest) of the Loans owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive, in the absence of manifest error, and the Credit Parties, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of the Fundamental Documents. The Register shall be available for inspection by any Credit Party or any Lender at any reasonable time and from time to time upon reasonable prior notice.

(f)             Subject to the foregoing, upon its receipt of an Assignment and Assumption executed by an assigning Lender and an assignee together with the assigning Lender’s original Note, if applicable, and the processing and recordation fee, the Administrative Agent shall, if such Assignment and Assumption has been completed, is in the form of Exhibit K, and has been consented to in writing by the Administrative Agent and, to the extent applicable, the Borrower, (i) accept such Assignment and Assumption, and (ii) record the information contained therein in the Register. Within five (5) Business Days after receipt of any such notice, the Borrower shall, at its own expense, and if the assignee has so requested, execute and deliver to the Administrative Agent, in exchange for the surrendered Note (if any), a new Note to the order of such assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Assumption and if the assigning Lender has retained a Commitment hereunder and so requests, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Any new Notes shall be in substantially the form of Exhibit A. In addition, the Credit Parties will promptly, at their own expense, execute such amendments to the Fundamental Documents to which each is a party and such additional documents, and take such other actions as the Administrative Agent or the assignee Lender may reasonably request in order to give such assignee Lender the full benefit of the Liens contemplated by the Fundamental Documents.

(g)            Each of the Lenders may, without the consent of any of the Credit Parties, the Administrative Agent or the other Lenders, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Commitment and the Loans owing to it and the Note (if any) held by it); provided, however, that (i) such Lender’s obligations under this Credit

 125

 

Agreement shall remain unchanged, (ii) such participant shall not be granted any voting rights or any right to control the vote of such Lender under this Credit Agreement, except with respect to proposed changes to interest rates, amount of Commitments, final maturity of any Loan, fees and releases of all or substantially all the Collateral (in each case, only as applicable to such participant), (iii) any such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) the participating banks or other entities shall be entitled to the cost protection provisions contained in Sections 2.9, 2.10 and 2.13 (subject to the limitations of this Section 13.3(g)) but a participant shall not be entitled to receive pursuant to such provisions an amount larger than its share of the amount to which the Lender granting such participation would have been entitled to receive, and (v) the Credit Parties, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s and its participants’ rights and obligations under this Credit Agreement. No holder of a participating interest shall be entitled to the benefits of Section 2.13 unless the Borrower is notified of the participation sold to such holder and such holder agrees, for the benefit of the Borrower, to be subject to and comply with Section 2.10(e) and Section 2.13(g) as though it were a Lender (it being understood that the documentation required under Section 2.13(g) shall be delivered to the participating Lender). Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 13.10(b) with respect to any participant. Each of the Credit Parties and the Lenders, in each case on behalf of themselves and their affiliates, agree that the Administrative Agent shall have no liability for any participations made to an Ineligible Assignee.

(h)            The applicable Lender, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain a register on which it enters the name and address of each participant to which such Lender has sold participating interests and the amount of each participant’s interest in such Lender’s rights and/or obligations under this Credit Agreement (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Credit Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(i)              A Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 13.3, disclose to the assignee or participant or proposed assignee or participant, any information relating to any Credit Party furnished to the Administrative Agent or such Lender by or on behalf of the Borrower or another Credit Party (provided that such proposed assignee or participant agrees to hold such information confidential in accordance with Section 13.18).

(j)              Any assignment pursuant to Section 13.3(b) or (c) shall constitute an amendment of the Schedule of Commitments as of the effective date of such assignment without any other further action required.

(k)            The Credit Parties consent that any Lender may at any time and from time to time pledge or otherwise grant a security interest in any Loan or in any Note evidencing the Loans (or

 126

 

any part thereof) to secure obligations of such Lender, including any pledge or collateral assignment to secure obligations to a Federal Reserve Bank and any pledge to a trustee as security for the benefit of the noteholders and other securityholders or creditors of a Lender; provided, that no such pledge or grant of a security interest shall release such Lender from any of its obligations hereunder or substitute any such pledgee or creditor for such Lender as a party hereto until the provisions of this Section 13.3 regarding assignment are satisfied with respect to such pledge or security interest grant.

(l)              Notwithstanding anything to the contrary set forth herein, no assignment may be made pursuant to this Section 13.3 to an Ineligible Assignee.

SECTION 13.4          Expenses; Documentary Taxes. Whether or not the transactions hereby contemplated shall be consummated, the Borrower agrees to pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent in connection with, or growing out of, the performance of due diligence, the syndication of the Facility, the negotiation, preparation, execution, delivery, waiver or modification and administration of this Credit Agreement and any other documentation contemplated hereby, the making of the Loans, the Collateral, the Pledged Securities or any Fundamental Document, including, but not limited to, the reasonable and documented out-of-pocket costs and charges of accountants and audit or field examinations of the Administrative Agent, in connection with the administration of this Credit Agreement, the verification of financial data and the transactions contemplated hereby, and the reasonable and documented fees and disbursements of Sidley Austin LLP, counsel for the Administrative Agent, Skadden, Arps, Slate, Meagher & Flom LLP, special tax counsel for the Administrative Agent, and one local counsel in each applicable jurisdiction that the Administrative Agent shall retain, and (ii) all out-of-pocket expenses incurred by the Administrative Agent in the enforcement or protection (as distinguished from administration) of the rights and remedies of the Lenders or any participant in connection with this Credit Agreement, the Notes or the other Fundamental Documents, or as a result of any transaction, action or non-action arising from any of the foregoing, including, but not limited to, the fees and disbursements of any counsel for the Administrative Agent. Such payments shall be made on the date this Credit Agreement is executed by the Borrower and thereafter on demand. The Borrower agrees that it shall indemnify the Administrative Agent and the Lenders from and hold them harmless against any documentary Taxes, assessments or charges made by any Governmental Authority by reason of the execution and delivery of this Credit Agreement or the Notes. The obligations of the Borrower under this Section 13.4 shall survive the termination of this Credit Agreement and the payment of the Loans.

SECTION 13.5          Indemnity. The Credit Parties agree to indemnify and hold harmless the Administrative Agent and the Lenders and their respective directors, officers, employees and agents (each an “Indemnified Party”) (to the full extent permitted by Applicable Law) from and against any and all claims, demands, losses, judgments, damages and liabilities (including liabilities for penalties) incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not any such Indemnified Party is a party thereto) related to the entering into and/or performance of any Fundamental Document or the use of the proceeds of any Loans hereunder or the consummation of the transactions contemplated in any Fundamental Document, including, without limitation, the fees and disbursements of counsel incurred in connection with any such investigation,

 127

 

litigation or other proceeding (but excluding (i) any such claims, demands, losses, judgments, damages or liabilities of an Indemnified Party to the extent they are found to have been incurred by reason solely of the gross negligence or willful misconduct of such Indemnified Party, as finally determined by a court of competent jurisdiction in a non-appealable decision or in an appealable decision that the party seeking indemnification does not appeal within the time required, (ii) litigation solely between a Credit Party or Credit Parties, on the one hand, and the Administrative Agent or the Lenders, on the other hand, in connection with this Credit Agreement or the other Fundamental Documents or in any way relating to the transactions contemplated hereby or thereby if, after final non-appealable judgment, such Credit Party or Credit Parties is/are the prevailing party or parties in such litigation and (iii) litigation among the Lenders, or between any of the Indemnified Parties in connection with this Credit Agreement, the Fundamental Documents, or in any way relating to the transactions contemplated hereby or thereby that is not based on action or inaction of a Credit Party or one of its Affiliates). If any proceeding, including any governmental investigation, shall be instituted involving any Indemnified Party, in respect of which indemnity may be sought against the Credit Parties, such Indemnified Party shall promptly notify the Borrower in writing. The foregoing indemnity agreement includes any out-of-pocket costs incurred by an Indemnified Party in connection with any action or proceeding in connection with which any officer or employee of the Administrative Agent or the Lenders is called as a witness or deponent, including, but not limited to, the reasonable fees and disbursements of Sidley Austin LLP, counsel to the Administrative Agent, and any reasonable out-of-pocket costs incurred by the Administrative Agent or the Lenders in appearing as a witness or deponent or in otherwise complying with legal process served upon them. The obligations of the Credit Parties under this Section 13.5 shall survive the termination of this Credit Agreement and the payment of the Loans, and shall inure to the benefit of any Person who was a Lender notwithstanding such Person’s assignment of all of its Loans and Commitment hereunder.

If a Credit Party shall fail to do any act or thing which it has covenanted to do hereunder or under any other Fundamental Document, or any representation or warranty of a Credit Party shall be breached, the Administrative Agent may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach and there shall be added to the Obligations hereunder the cost or expense incurred by the Administrative Agent in so doing, and any and all amounts expended by the Administrative Agent in taking any such action shall be repayable to it upon its demand therefor and shall bear interest at a rate per annum of 11.00% from the date advanced to the date of repayment.

This Section 13.5 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages or liabilities arising from any non-Tax claim.

SECTION 13.6          CHOICE OF LAW. THIS CREDIT AGREEMENT AND THE NOTES SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS RELATING TO INTEREST RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.

 128

 

SECTION 13.7          WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THE PROVISIONS OF THIS SECTION 13.7 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELY IN ENTERING INTO THIS CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 13.7 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY PARTY HERETO TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.SECTION 13.8          WAIVER WITH RESPECT TO DAMAGES. EACH CREDIT PARTY ACKNOWLEDGES THAT NONE OF THE ADMINISTRATIVE AGENT OR ANY LENDER HAS ANY FIDUCIARY RELATIONSHIP WITH, OR FIDUCIARY DUTY TO, ANY CREDIT PARTY ARISING OUT OF OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT AND THE RELATIONSHIP BETWEEN THE ADMINISTRATIVE AGENT AND THE LENDERS, ON THE ONE HAND, AND THE CREDIT PARTIES, ON THE OTHER HAND, IN CONNECTION THEREWITH IS SOLELY THAT OF CREDITOR AND DEBTOR. EACH CREDIT PARTY ACKNOWLEDGES THAT NONE OF THE ADMINISTRATIVE AGENT OR ANY LENDER HAS ANY LIABILITY FOR ANY DAMAGES ARISING FROM THE USE BY UNAUTHORIZED PERSONS OF INFORMATION OR OTHER MATERIALS SENT THROUGH ELECTRONIC TELECOMMUNICATIONS OR OTHER INFORMATION TRANSMISSION SYSTEMS THAT ARE INTERCEPTED BY SUCH PERSONS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO CREDIT PARTY SHALL ASSERT, AND EACH CREDIT PARTY HEREBY WAIVES, ANY CLAIMS AGAINST THE ADMINISTRATIVE AGENT AND THE LENDERS ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS CREDIT AGREEMENT, ANY OTHER FUNDAMENTAL DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

SECTION 13.9          No Waiver. No failure on the part of the Administrative Agent or any Lender to exercise, and no delay in exercising, any right, power or remedy hereunder, under the Notes or any other Fundamental Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

 129

 

SECTION 13.10      Amendments, etc.

(a)             Except as otherwise expressly provided herein (including, without limitation, in Section 13.3(j)), no modification, amendment or waiver of any provision of this Credit Agreement, and no consent to any departure by a Credit Party herefrom, shall in any event be effective unless the same shall be in writing and signed by either the Administrative Agent and the Required Lenders (or such other Lenders as required in the proviso below), or the Administrative Agent with the consent of the Required Lenders (or such other Lenders as required in the proviso below), and acknowledged and agreed to by the Borrower and the Guarantors, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (i) no such modification, amendment, waiver or consent shall, without the written consent of: (x) each affected Lender, (A) change the Commitment of such Lender or postpone the scheduled date of expiration thereof, (B) reduce the interest payable on such Lender’s Loans, (C) alter the principal amount of any Loan, (D) [Intentionally Omitted], or (E) delay the fixed scheduled maturity of any payment required to be made under this Credit Agreement or reduce the amount thereof; and (y) all Lenders, (A) amend or modify any provision of this Credit Agreement which provides for the unanimous consent or approval of the Lenders, (B) release any material amount of Collateral (except as contemplated herein) or any of the Pledged Securities (in each case, except as contemplated herein) or release any Guarantor or any Pledgor from its obligations hereunder (in each case, except as contemplated herein), (C) subordinate the Obligations hereunder to other Indebtedness or subordinate the Liens of the Administrative Agent in the Collateral except as expressly contemplated hereunder or as permitted by Section 12.1, (D) amend the definition of “Required Lenders” to decrease the percentage of Lenders referred to therein, (F) materially amend the definition of “Collateral” to delete assets therefrom, (G) change Sections 2.12, 12.2 or 12.3 in a manner that would alter the pro rata sharing of payments required thereby or (H) amend or modify this Section 13.10(a), and (ii) no such modification, amendment, waiver or consent shall amend Section 2.2 without the written consent of the Administrative Agent. No amendment, modification, waiver or consent may adversely affect the rights and obligations of the Administrative Agent hereunder without its prior written consent. No notice to or demand on any of the Credit Parties shall entitle such Credit Party to any other or further notice or demand in the same, similar or other circumstances. Each holder of a Note shall be bound by any amendment, modification, waiver or consent authorized as provided herein, whether or not such Note shall have been marked to indicate such amendment, modification, waiver or consent and any consent by any holder of such Note shall bind any Person subsequently acquiring such Note, whether or not such Note is so marked.

(b)            If any Lender (i) requests compensation under Sections 2.7(b), 2.10 or 2.13, or (ii) does not consent to any waiver, consent or modification requested by the Borrower (but only where the consent of all the Lenders or each affected Lender is required for such waiver, consent or modification and the Borrower obtains approval for the waiver, consent or modification from Lenders holding at least seventy-five percent (75%) of the Total Commitments (or, if the Commitments have terminated, the outstanding principal amount of the Loans), then the Borrower may, at its sole expense and effort and upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 13.3), all of its interests, rights and obligations under this Credit Agreement and the other Fundamental Documents to an

 130

 

assignee which shall assume such obligations and which accepts such assignment; provided, that (w) the Borrower shall have received the prior written consent of the Administrative Agent, in its sole discretion, (x) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees, and all other amounts then payable to it hereunder from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), (y) in the case of any such assignment resulting from a claim for compensation under Section 2.10 or payments required to be made pursuant to Sections 2.7(b) or 2.13, such assignment will result in a reduction in such compensation or payment on an ongoing basis and (z) in the case of any such assignment by a non-consenting Lender, the assignee consents to the proposed waiver, consent or modification. No Lender shall be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

SECTION 13.11      Severability. Any provision of this Credit Agreement or of the Notes which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof, and any such invalidity, illegality or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 13.12      SERVICE OF PROCESS; SUBMISSION TO JURISDICTION. EACH PARTY HERETO (EACH A “SUBMITTING PARTY”) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, ANY OTHER FUNDAMENTAL DOCUMENT AND THE SUBJECT MATTER THEREOF. EACH SUBMITTING PARTY TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS CREDIT AGREEMENT, THE SUBJECT MATTER HEREOF, THE OTHER FUNDAMENTAL DOCUMENTS OR THE SUBJECT MATTER THEREOF (AS APPLICABLE) MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE ADMINISTRATIVE AGENT OR A LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER. EACH SUBMITTING PARTY HEREBY CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE

 131

 

GIVEN TO IT PURSUANT TO SECTION 13.1. EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE OTHER PARTIES HERETO. FINAL JUDGMENT AGAINST ANY SUBMITTING PARTY IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF THE CREDIT PARTY THEREIN DESCRIBED, OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A LENDER MAY, AT ITS OPTION, BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST A SUBMITTING PARTY OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OF AMERICA OR OF ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.

SECTION 13.13      Headings. Section headings used herein and the Table of Contents are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Credit Agreement.SECTION 13.14      Execution in Counterparts. This Credit Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Credit Agreement by facsimile or by electronic transmission shall be equally effective as delivery of a manually executed counterpart of this Credit Agreement. Any party delivering an executed counterpart of this Credit Agreement by facsimile or by electronic transmission shall also deliver a manually executed counterpart of this Credit Agreement, but failure to do so shall not affect the validity, enforceability or binding effect of this Credit Agreement, and the parties hereby waive any right they may have to object to such treatment. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Credit Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Administrative Agent to accept electronic signatures in any form or format without its prior written consent. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Credit Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws

 132

 

based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Administrative Agent to accept electronic signatures in any form or format without its prior written consent.

SECTION 13.15      Subordination of Inter-company Indebtedness, Receivables and Advances.

(a)             Each Credit Party hereby agrees that any inter-company Indebtedness or other inter-company receivables or inter-company advances of any other Credit Party, directly or indirectly, in favor of such Credit Party of whatever nature at any time outstanding shall be completely subordinate in right of payment to the prior payment in full of the Obligations, and that no payment on any such Indebtedness, receivable or advance shall be made except (i) inter-company receivables and inter-company advances permitted pursuant to Article 6 may be repaid and inter-company Indebtedness permitted pursuant to Article 6 may be repaid, in each case so long as no Default or Event of Default shall have occurred and be continuing, and (ii) as specifically consented to by all the Lenders in writing, until the prior payment in full of all the Obligations (other than any Unasserted Contingent Obligations) and termination of the Commitments.

(b)            If any payment on any such Indebtedness shall be received by such Credit Party other than as permitted by Section 13.15(a) before payment in full of all Obligations (other than any Unasserted Contingent Obligations) and termination of the Commitments, such Credit Party shall receive such payments and hold the same in trust for, segregate the same from its own assets and shall immediately pay over to, the Administrative Agent (on behalf of the Secured Parties) all such sums to the extent necessary so that the Administrative Agent and the Lenders shall have been paid all Obligations owed or which may become owing.

SECTION 13.16      USA Patriot Act. Each Lender hereby notifies each of the Credit Parties that, pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies such Person, which information includes the name and address of each such Person and other information that will allow such Lender to identify such Person in accordance with the USA Patriot Act.

SECTION 13.17      Entire Agreement. This Credit Agreement (including the Schedules and Exhibits hereto) represents the entire agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between any of the parties hereto (other than any fee letter) prior to the execution of this Credit Agreement which relate to Loans to be made hereunder and the Letters of Credit to be issued hereunder shall be replaced by the terms of this Credit Agreement.

SECTION 13.18      Confidentiality. Each of the Administrative Agent and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority (including any self-regulatory authority), (c) to the extent required by

 133

 

Applicable Law or by any subpoena or similar legal process, (d) to any other party to this Credit Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Credit Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 13.18, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Credit Agreement, or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower, (h) any information pertaining to this Credit Agreement routinely provided by arrangers to data service providers, including league table providers, in each case, that customarily serve the lending industry, or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section 13.18, or (y) becomes available to the Administrative Agent or any Lender on a non-confidential basis from a source other than a Credit Party that is not actually known by the recipient to have breached a binding confidentiality agreement by having remitted such Information. For the purposes of this Section 13.18, “Information” means all information received from any Credit Party relating to any Credit Party or its business, other than any such information that is available to the Administrative Agent or any Lender on a non-confidential basis prior to disclosure by such Credit Party. Any Person required to maintain the confidentiality of Information as provided in this Section 13.18 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. The commitments under this Section 13.18 shall terminate two (2) years after the termination of the Facility or, if earlier, with respect to a particular Lender or other Secured Party, the date which is two (2) years from the date on which such Person ceases to be a party to this Credit Agreement or a swap provider to a Lender (including the Administrative Agent).

Each Lender is aware and acknowledges, and will advise its representatives that, the securities laws of certain jurisdictions, including the United States of America, prohibit any person who has received material, non-public information regarding the Parent, the Borrower or its Subsidiaries from purchasing or selling securities of the Parent, the Borrower or its Subsidiaries or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.

SECTION 13.19      [Intentionally Omitted].

SECTION 13.20      Subordination Agreement. This Credit Agreement and the Obligations hereunder are subordinate to the Senior Facilities and the Obligations as defined thereunder in the manner and to the extent set forth in, and the provisions of this Credit Agreement are subject to the terms of, the Subordination Agreement. To the extent that there is any conflict between the terms of this Credit Agreement and the terms of the Subordination Agreement, the Subordination Agreement shall govern.

SECTION 13.21      Effect of Amendment and Restatement of the Existing Subordinated Credit Agreement.

(a)             On the Second Amendment and Restatement Effective Date, the Existing Subordinated Credit Agreement shall be amended, restated and superseded in its entirety by this

 134

 

Credit Agreement. The parties hereto acknowledge and agree that (i) this Credit Agreement and the other documents entered into in connection herewith do not constitute a novation, payment and reborrowing, or termination of the “Obligations” (as defined in the Existing Subordinated Credit Agreement) under the Existing Subordinated Credit Agreement, as in effect prior to the Amendment and Restatement Effective Date and (ii) such “Obligations” are in all respects continuing (as amended and restated hereby) as indebtedness and obligations outstanding under this Credit Agreement.

(b)            [Reserved].

(c)             Each Fundamental Document (as defined in the Existing Subordinated Credit Agreement) shall continue to be in full force and effect and is hereby ratified and confirmed in all respects, except that, from and after the Second Amendment and Restatement Effective Date, each reference in any such Fundamental Document to the “Credit Agreement”, “thereunder”, “thereof” or words of like import shall be deemed to mean references to this amended and restated Credit Agreement. Each Credit Party hereby (i) reaffirms each of its commitments in any such Fundamental Document, (ii) reaffirms each guarantee, pledge and grant of a security interest made in favor of the Administrative Agent under or in connection with the Existing Subordinated Credit Agreement and any Fundamental Documents entered into in connection therewith and agrees that notwithstanding the amendment and restatement of the Credit Agreement such guarantees, pledges and grants in favor of the Administrative Agent shall continue in full force and effect.

 

 

[Signature Pages Follow]

 135

 

IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed as of the day and the year first above written.

BORROWER:

 

STX FINANCING, LLC

 

 

By: /s/ Noah Fogelson                                

Name:____________________________

Title:_____________________________

 

 

PARENT, FOR PURPOSES OF SECTIONS 5.24, 6.27 AND 6.29 AND ARTICLE 10 HEREOF ONLY:

 

STX FILMWORKS, INC.

 

 

By: /s/ Noah Fogelson                                

Name:____________________________

Title:_____________________________

 

 

Signature Page to Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

 

 

By: /s/ Noah Fogelson                                

Name:___________________________

Title:____________________________

 

STX ENTERTAINMENT UK, LTD.

 

 

By: /s/ Noah Fogelson                                

Name:____________________________

Title:_____________________________

Signature Page to Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement

 

 

LENDER:

 

RED FISH BLUE FISH, LLC, as Administrative Agent and Lender

 

 

By: /s/ Derek Arend_______________________

Name: Derek Arend

Title: President

 

 

 

Signature Page to Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement

 

SCHEDULE 1.1

 

Schedule of Commitments

 

 

Lender Commitment
Red Fish Blue Fish, LLC $35,210,000
Total: $35,210,000

 

 

 

Exhibit 10.13

 

AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

AMENDMENT NO. 1 dated as of March 2, 2018 (this “Amendment”) to the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) RED FISH BLUE FISH, LLC, as Administrative Agent.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower has requested, and the Administrative Agent and the requisite Lenders (as described in Section 3 of this Amendment) have agreed, that the Credit Agreement be amended on the terms set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Amendments to the Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as of the Effective Date (as defined below), as follows:

(a)             Section 1.2 of the Credit Agreement is hereby amended by inserting the following defined terms:

“Mile 22” shall mean that certain motion picture currently entitled Mile 22.

“Mile 22 Stretch Debt” shall mean Indebtedness from one or more Credit Parties to Aperture Media Partners, LLC (“Stretch Lender”), the incurrence of which shall be subject to the following requirements:

(a) (i) the aggregate principal amount thereof shall not exceed $5,500,000, (ii) the interest rate (excluding default interest) thereon shall not exceed LIBOR plus ten percent per annum, (iii) the borrowings thereunder shall be based solely on value attributable to the portion of foreign receivables and/or tax incentives for Mile 22 in excess of the Borrowing Base (under and as defined in the Senior Facility Credit Agreement) value available therefor under the Facility, (iv) the fees payable to Stretch Lender thereunder shall not exceed 3.00% of the total commitments provided by Stretch Lender, (iv) the obligors of such Indebtedness shall be limited to Mile 22, LLC or any other Credit Party involved solely in the production of Mile 22 (a “Permitted Obligor”) (and for the avoidance of doubt the

 

 

Borrower may not be an obligor or guarantor of such Indebtedness, other than an unsecured “good boy” guaranty (the enforcement of which shall be subject to the intercreditor agreement described below) from the Borrower in favor of Stretch Lender guaranteeing that the shooting locations of Mile 22 will not be moved from the currently anticipated locations) and such Indebtedness shall otherwise be recourse solely to the products and proceeds of Mile 22 and the tax incentives relating thereto, and not to the general credit of any other Credit Party; provided, that if the foreign (excluding UK) distribution rights are held by a Credit Party that otherwise distributes foreign rights in the Borrower’s Pictures, such foreign rights may be subject to Stretch Lenders’ Liens as permitted by clause (c) below;

(b) all interest and fees contemplated to be payable to Stretch Lender must be self-liquidating in that they must be reserved from the Mile 22 Stretch Debt borrowings or otherwise payable only pursuant to the terms of the intercreditor agreement referenced in clause (h) below;

(c) any Lien in favor of Stretch Lender securing such Indebtedness shall be limited to Liens in the tax incentives for Mile 22, foreign (excluding UK) rights for Mile 22, and the products and proceeds directly relating thereto, but shall not extend to any distribution rights in the Domestic Territory, the UK Territory or the products or proceeds thereof; provided, that solely to the extent necessary to enable Stretch Lender to, subject in all cases to the intercreditor agreement described below, exercise remedies on the collateral described before this proviso, Stretch Lender may also have (i) a Lien in the physical materials relating to Mile 22 and the copyright in Mile 22 and (ii) an equity pledge in the stock of a Permitted Obligor, but only so long as such Permitted Obligor holds no right or interest in or to: (x) any domestic or UK rights in Mile 22; (y) any physical materials or the copyright in Mile 22 or (z) any assets unrelated to Mile 22;

(d) the Lenders (under and as defined in the Senior Facility Credit Agreement) shall have recouped 100% of all loans extended under the Senior Facility Credit Agreement on the basis of any receivables or tax incentives for Mile 22, together with any interest, fees and expenses relating to Mile 22 with proceeds from foreign (excluding the UK Territory) revenues and tax incentives attributable to Mile 22 (the occurrence thereof, the “Senior Production Debt Recoupment”) before Stretch Lender may be repaid any of the Mile 22 Stretch Debt;

(e) Stretch Lender may have a claim against the proceeds of Mile 22 from the Domestic Territory and UK Territory (the “Self-Distribution Territories”) but only after any P&A Credit and any UK P&A Credit extended against Mile 22 have been recouped, and any loans extended under the Seer P&A Credit Agreement for Mile 22 have been recouped, solely via proceeds of Mile 22 from the Self-Distribution Territories (the occurrence thereof, the “Senior P&A Recoupment”);

2 

 

(f) Borrowing Base value (under and as defined in the Senior Facility Credit Agreement) with respect to Mile 22 will be assessed as set forth in clauses (f) and (g) of the definition of “Mile 22 Stretch Debt” in the Senior Facility Credit Agreement;

(g) prior to or substantially concurrent with providing the Mile 22 Stretch Debt, Stretch Lender must have executed an intercreditor agreement in form and substance satisfactory to the Administrative Agent with the Administrative Agent, Senior Facility Agent and Seer P&A Agent, which is consistent with the above and provides for, among other things, that:

(i)       Stretch Lender may take collection and enforcement actions only against Borrower’s foreign (non-UK) obligors and tax credit obligors for Mile 22 or enforcement actions against the equity interests of a Permitted Obligor and may in each case do so only after the occurrence of Senior Production Debt Recoupment and only then if an event of default is in existence under the documentation for the Mile 22 Stretch Debt; provided further that no such collection or enforcement action may be taken against any output partner of the Credit Parties or any sublicensee with multiple sub-license agreements with a Credit Party without prior consultation with the Senior Facility Agent;

(ii)       any exercise of remedies by the Stretch Lender involving either the copyright or physical materials relating to Mile 22 shall be exercised solely to the extent necessary for Stretch Lender to collect foreign value or tax credit value from Mile 22 or to re-license foreign rights in Mile 22 or to make delivery of copies of Mile 22 to sublicenses in connection with same, and shall in all cases remain subject to the Administrative Agent’s continuing lien therein;

(h) other standstill and intercreditor provisions satisfactory to the Administrative Agent.

(b)            Section 6.1 of the Credit Agreement is hereby amended by (i) deleting “and” at the end of subsection (o) thereof, (ii) replacing the period at the end of subsection (p) thereof with “; and” and (iii) adding a new subsection (q) as follows:

“(q) the Mile 22 Stretch Debt so long as all provisions of the definition thereof are satisfied”

(c)             Section 6.2 of the Credit Agreement is hereby amended by (i) deleting “and” at the end of subsection (w) thereof, (ii) replacing the period at the end of subsection (x) thereof with “; and” and (iii) adding a new subsection (y) as follows:

“(y) Liens on Mile 22 and assets relating thereto to the extent permitted by the definition of Mile 22 Stretch Debt.”

3 

 

3.               Conditions to Effectiveness. The effectiveness of this Amendment is subject to the satisfaction in full of each of the conditions precedent set forth in this Section 3 (the date upon which each of such conditions precedent has been satisfied, the “Effective Date”) as follows:

(a)             the Administrative Agent shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors and the Required Lenders;

(b)            the representations and warranties contained in Section 4 hereof are true and correct;

(c)             all costs and expenses due and owing pursuant to Section 10 hereof to the Administrative Agent by the Borrower shall have been paid in full;

(d)            all legal matters incident to this Amendment shall be satisfactory to Sidley Austin LLP, counsel for the Administrative Agent;

(e)             the Senior Facility Agent shall have executed an amendment to the Senior Facility Credit Agreement granting substantively identical amendments to those set forth in this Amendment to the extent applicable to the Senior Facility Credit Agreement, in form and substance satisfactory to the Administrative Agent; and

(f)             the Seer P&A Agent shall have executed an amendment to the Seer P&A Facility Credit Agreement granting substantively identical amendments to those set forth in this Amendment to the extent applicable to the Seer P&A Facility Credit Agreement, in form and substance satisfactory to the Administrative Agent.

4.               Representations and Warranties. Each of the Credit Parties represents and warrants that:

(a)             each of the Credit Parties has the power and authority to execute and deliver this Amendment and perform its obligations under this Amendment and the Credit Agreement as amended hereby;

(b)            the execution and delivery by the Credit Parties of this Amendment, and the performance by such Person of its obligations under this Amendment and the Credit Agreement as amended hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not

4 

 

result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents;

(c)             the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) with the same effect as if made on and as of the date hereof; and

(d)            immediately before and immediately after giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.

5.               Fundamental Document. This Amendment is designated a Fundamental Document by the Administrative Agent.

6.               Full Force and Effect. Except as expressly set forth herein, this Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly amended hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its obligations under the Credit Agreement and the other Fundamental Documents to which it is a party and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as amended by this Amendment.

7.               Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Amendment.

8.               APPLICABLE LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

5 

 

9.               Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

10.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

11.            Headings. The headings of this Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Amendment.

 

[Signature Pages to Follow]

 

6 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

BORROWER:

STX FINANCING, LLC

 

By: /s/ Noah Fogelson_______________________
Name:
Title:

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name:

Title:

Amendment No. 1 to Second Amended and Restated Credit Agreement

 

 

 

RED FISH BLUE FISH, LLC,
as Administrative Agent

 

By: /s/ Derek Arend_______________________
Name: Derek Arend
Title: President

 

Amendment No. 1 to Second Amended and Restated Credit Agreement

 

 

 

Exhibit 10.14

 

CONSENT AND AMENDMENT NO. 2
TO SECOND AMENDED AND RESTATED SUBORDINATED CREDIT AGREEMENT

CONSENT AND AMENDMENT NO. 2 dated as of February 11, 2019 (this “Amendment”) to the Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) RED FISH BLUE FISH, LLC, as Administrative Agent.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower has requested certain modifications to the “Maturity Date” as they relate to the Parent Preferred redemption date;

WHEREAS, while the Borrower has provided drafts of the financial statements for the fiscal year ended September 30, 2018, the Borrower has also requested that the Lenders consent to an extension of the required delivery date for the actual audited financial statements required under Section 5.1(a) of the Credit Agreement, and for the related Compliance Certificate, for the fiscal year ended September 30, 2018, and any reports or other documents required to be delivered concurrently therewith (including those required pursuant to Sections 5.1(c), (d) and (i) of the Credit Agreement) (collectively, the “FY 2018 Financials Materials”); and

WHEREAS, the Borrower, the Administrative Agent and the Lenders have agreed to certain other amendments to the Credit Agreement as more fully set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Consent. Subject to the occurrence of the First Option Effective Date (as defined below), the undersigned Lenders hereby consent to an extension of the delivery deadline for the FY 2018 Financials Materials from January 28, 2019 to February 18, 2019. Upon the achievement of the First Option Effective Date, the consent granted under this Section 2 shall be effective as of January 27, 2019.

3.               Amendments to the Credit Agreement. Subject to the occurrence of the First Option Effective Date, the Credit Agreement is hereby amended as follows:

(a)             Section 1.2 of the Credit Agreement is hereby amended by adding the following new defined terms in the appropriate alphabetical order:

 

 

“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.

“P&R Liabilities” shall mean any participation, deferment, residual and box office bonus obligations of the Credit Parties, whether owed to talent, producers, co-financiers or other third parties.

(b)            Section 1.2 of the Credit Agreement is hereby amended by replacing the following term in its entirety:

“Digital Product” shall mean any short-form digital content (other than a Picture or a Program) intended for initial exploitation through the internet (e.g., YouTube) or mobile applications and/or intended to be consumed via an interactive computer generated experience taking place within a simulated environment (i.e., “virtual reality”); provided that the term “Digital Product” shall not include short form or long form episodic Programs or motion pictures intended for initial exploitation on a SVOD platform like Netflix or Amazon.

(c)             Section 3.24 of the Credit Agreement is hereby amended by adding the following sentence at the end thereof: “As of the First Option Effective Date (as defined in Amendment No. 2 to this Credit Agreement), to the best knowledge of the Borrower, the information included in the Beneficial Ownership Certification provided on or prior to such date to any Lender in connection with this Credit Agreement is true and correct in all material respects.”

(d)            Article 3 of the Credit Agreement is hereby amended by adding the following new Section 3.29 at the end thereof:

“Section 3.29 Participation Payments. Each Credit Party has complied in all material respects with any of its payment obligations for P&R Liabilities as and when due on a timely basis; provided, that the Credit Parties may make interpretations in their reasonable judgment as to the appropriate dates of accrual and payment for any such P&R Liabilities, so long as the balance sheet reserves (or a P&R Reserve under and as defined in the Senior Facility Credit Agreement, which may be offset by cash in the Borrowing Base (as defined in the Senior Facility Credit Agreement)) shall be taken for any amounts accrued and payable but not yet paid.”

(e)             Section 5.1(g) of the Credit Agreement is hereby amended by adding the following language immediately after the reference to 6.22 in clause (v) therein: “and demonstrating the utilization of the Investment Baskets described in Section 6.4 hereof,”.

(f)             Section 5.1(i) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 2

 

“(i) Concurrently with the provision of such certificate to the Senior Facility Agent, a Liquidity Certificate (as defined in the Senior Facility Credit Agreement). Additionally, the Borrowers shall provide supporting details and back-up for any calculation contained within any Liquidity Certificate, including the underlying performance assumptions for unreleased Pictures reflected in the projected cash sources upon the request from the Administrative Agent or any Lender (any such request by a Lender to be coordinated through the Administrative Agent).”

(g)            Section 5.1(l) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(l) Promptly upon written request therefor, any information required by the Administrative Agent or any Lender under or in connection with the USA Patriot Act, the Beneficial Ownership Regulation and any other applicable “know your customer” or anti-money laundering rules and regulations.”

(h)            Section 5.1(m) of the Credit Agreement is hereby amended by deleting “Within sixty (60) days after the end of each calendar quarter” therein and replacing it with “Concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a))”

(i)              Section 5.1 of the Credit Agreement is hereby amended by adding the following new clauses (s) and (t) at the end thereof:

“(s) For each fiscal quarter, concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a)), detailed reports in form and substance satisfactory to the Senior Facility Agent (and with supporting details satisfactory to the Senior Facility Agent) with respect to any P&R Liabilities that constitute accrued liabilities on the balance sheet as of such quarter-end date, reflecting (i) an aging schedule, on a product-by-product basis, detailing the payment windows during which such balance sheet P&R Liabilities are anticipated to become due and payable (with the time windows to be satisfactory to the Senior Facility Agent), or, if applicable, the extent to which such P&R Liabilities already became due and payable prior to such quarter-end date, (ii) the extent to which any such P&R Liabilities were paid prior to the delivery of the reporting required by this clause (s), (iii) a break out aging schedule with respect to any balance sheet P&R Liabilities described in clause (i) above that are attributable to income or payments that were already received by or credited to the Credit Parties prior to such quarter end date; and (iv) reconciliations against prior P&R Liability reporting, in each case with supporting detail; and

(t)       for each fiscal quarter, concurrently with the delivery of the financial statements required under Sections 5.1(a) and 5.1(b) in connection with such fiscal quarter (or fiscal year, in the case of Section 5.1(a)), detailed reports in form

 3

 

and substance satisfactory to the Senior Facility Agent, (i) detailing the P&A Expenses and UK P&A Expenses (as defined in the Senior Facility Credit Agreement) of the Credit Parties that were incurred but not yet paid as of the last Business Day of the preceding fiscal quarter, on a Picture-by-Picture Basis (as defined in the Senior Facility Credit Agreement), (ii) an aging schedule detailing the payment terms on which such P&A Expenses and UK P&A Expenses are to become due and payable and (iii) the extent to which any such accrued but unpaid P&A Expenses and UK P&A Expenses were paid between the end of the preceding fiscal quarter and the date of the reporting required by this clause (t), in each case with supporting detail.”

(j)              Section 5.4 of the Credit Agreement is hereby amended by adding the following new clause (c) at the end thereof:

“(c) Promptly upon any Authorized Officer of a Credit Party obtaining knowledge of any change in the information provided in the Beneficial Ownership Certification delivered to any Lender that would result in a change to the list of beneficial owners identified in such certification, such Credit Party shall promptly give written notice thereof to the Administrative Agent and provide such other information as may be available to it to enable the Administrative Agent and the Lenders to evaluate such matters.”

(k)            Section 6.2 of the Credit Agreement is hereby amended by (i) deleting “and” at the end of subsection (x) thereof, (ii) replacing the period at the end of subsection (y) thereof with “; and” and (iii) inserting the following new clause (z) at the end thereof:

“(z) Liens held by third-party producers of Pictures in which STX is acquiring distribution rights, or in favor of production lenders or production financiers to such producers, in each case so long as the scope of such Liens and the obligations secured thereby are both (i) limited to the relevant Picture(s) in which STX is acquiring distribution rights and (ii) satisfactory to the Administrative Agent in its reasonable discretion, and so long as any holder of such Liens is the subject of an interparty agreement or an intercreditor agreement with the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent in all respects.”

(l)              Section 6.23 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Section 6.23 Production Exposures (Program).

(a)             Permit the Production Exposure for any Program to exceed 40% of such Program’s Budgeted Negative Cost.

(b)            Permit the aggregate Production Exposures for all Programs (which shall include any Programs and any pilots of Programs that have been both ordered by a domestic network or SVOD or AVOD platform such as Netflix, Amazon, Hulu or YouTube and that have been green-lit by the Borrower) in active production to exceed at any one time $20,000,000.

 4

 

(c)             Permit the aggregate at-risk capital for all non-virtual reality Digital Product (“at-risk capital” to mean for purposes of clauses (c) and (d) of this Section 6.23 the Credit Parties’ share of Budgeted Negative Cost for Digital Product net of any anticipated tax incentives and contracted receivables) in active production (including pilots in active production) to exceed at any one time $500,000.

(d)            Permit the aggregate at-risk capital for all virtual reality Digital Product in active production (including pilots in active production) to exceed at any one time $1,500,000.

For the avoidance of doubt, pure producer-for-hire Programs (and pilots for pure producer-for-hire Programs), in which all (or substantially all, but solely in the case of Programs for which the net production costs are cash flowed by an unaffiliated third party and for which the Borrower or any other Credit Party is cash flowing production costs solely with respect to the territorial production spend necessary to collect a Tax Incentive Receivable) production costs are being cash-flowed by third parties and with no intellectual property rights (or only de minimis intellectual property rights) to be held by Credit Parties, shall not be considered for purposes of Sections 6.23(a) or (b).”

4.               Additional Amendments to the Credit Agreement. Subject to the occurrence of the Second Option Effective Date (as defined below), the Credit Agreement is hereby amended as follows:

(a)             Section 1.2 of the Credit Agreement is hereby amended by adding the following defined terms in the proper alphabetical order:

“Amendment No. 2” shall mean that certain Consent and Amendment No. 2 to Second Amended and Restated Subordinated Credit Agreement dated as of February 11, 2019 among inter alios the Administrative Agent and the Credit Parties.

“Non-Extending Preferred Holder” shall mean any holder of Parent Preferred who did not execute the Parent Charter Amendment (as defined in Amendment No. 2).

“Parent Retained Equity” shall mean cash equity retained by the Parent in connection with Amendment No. 2, in an amount not to exceed $20,000,000.

(b)            Section 1.2 of the Credit Agreement is hereby amended by replacing the following terms in their entirety:

“Maturity Date” shall mean the earlier of (i) July 7, 2022, and (ii) such other date as the Loans shall become due and payable in accordance with Article 7 hereof.

 5

 

“Parent Preferred” shall mean, collectively, Parent’s Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock and any other class of preferred Equity Interests issued by the Parent.

(c)             Section 6.30 of the Credit Agreement is hereby amended and restated in its entirety as follows:

SECTION 6.30 Holding Company. With respect to Parent (but not the Credit Parties), carry on any business, own any assets or incur any liabilities except for: (i) (a) the participation in tax, accounting and other administrative activities as the parent of the consolidated group of companies (including the Credit Parties) and provision of administrative services (excluding treasury services) to its Subsidiaries of a type customarily provided by a holding company to its Subsidiaries; (b) ownership of (A) Equity Interests in the Borrower (but only if those Equity Interests are subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties), (B) Equity Interests in other Subsidiaries of Parent (including activities relating to the formation and capitalization of such subsidiaries), (C) cash and Cash Equivalents to be used for administrative purposes and (D) certain other nominal assets incidental to the business or activities described in this clause (b); (c) the maintenance of its corporate existence; (d) the execution and delivery of the Fundamental Documents and Senior Loan Documents to which it is a party and the performance of its obligations thereunder; (e) activities reasonably incidental to the businesses and activities described in the foregoing clauses (a) through (d), (f) holding the Parent Retained Equity until payment of the Parent Equity to Non-Extending Preferred Holders and/or payment of any applicable consent fee to consenting holders of the Parent Preferred, so long as the consent fee to any such consenting holder shall not exceed the amount of the liquidation value of the Parent Preferred held by such holder (the “Parent Preferred Consent Fees”); provided that (1) such Parent Retained Equity shall be subject to the security arrangements and the covenants and agreements required by Amendment No. 2 and (2) that such payment to the Non-Extending Preferred Holders or payments of Parent Preferred Consent Fees may not be made to the extent that any Default or Event of Default is continuing at such time or would result therefrom, and (g) any other activities consented to by the Administrative Agent in writing in its sole discretion; and (ii) (a) any liabilities under the Fundamental Documents and Senior Loan Documents to which it is a party, (b) any non-recourse pledge of its Equity Interests in any other Subsidiary and (c) professional fees and administration costs incurred in the ordinary course of business as a holding company.

 6

 

5.               Conditions to Effectiveness:

5A. The effectiveness of any of Section 2, Section 3 or Section 4 of this Amendment is subject to (in addition to the applicable conditions set forth in Sections 5B and 5C hereof) the satisfaction in full of each of the conditions precedent set forth in this Section 5A as follows (the following, the “Baseline Conditions”):

(i)              the Administrative Agent shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Parent, the Borrower, the Guarantors and the Lenders;

(ii)            the Administrative Agent shall have received satisfactory evidence that at least $100,000,000 of cash equity contributions have been received by the Parent, in each case since November 30, 2018 and with no put or redemption rights exercisable prior to one day after the scheduled Maturity Date and otherwise on terms and conditions satisfactory to the Administrative Agent and that Parent shall have contributed at least $80,000,000 of such proceeds to Borrower (the portion of such equity proceeds that are retained at the Parent, which may not exceed the lesser of (a) $20,000,000, and (b) the aggregate amount of the sum of all amounts required to redeem the Non-Extending Preferred Holders (including any accrued interest and/or accrued dividends to be owed to the Non-Extending Preferred Holders described below) on December 31, 2019 plus Parent Preferred Consent Fees owed to holders of the Parent Preferred in connection with the Parent Charter Amendment, is referred to herein as the “Parent Retained Equity”);

(iii)          the Administrative Agent shall have received the Third Amended and Restated Certificate of Incorporation of Parent approved by holders of at least two-thirds of each class of Parent Preferred in the form attached hereto as Exhibit A (the “Parent Charter Amendment”), which Parent Charter Amendment shall formally amend the date of the mandatory redemption rights with respect to all Parent Preferred owned by each holder that executes the Parent Charter Amendment such that they may not be exercised prior to one day after July 7, 2022 pursuant to documentation satisfactory to the Administrative Agent;

(iv)          the aggregate amount required to redeem the Parent Preferred (including any accrued interest and/or accrued dividends) for all holders of Parent Preferred that have not executed the Parent Charter Amendment (each such holder a “Non-Extending Preferred Holder”) may not exceed $20,000,000 in the aggregate;

(v)            the representations and warranties contained in Section 6 hereof are true and correct;

(vi)          all costs and expenses due and owing pursuant to Section 12 hereof to the Administrative Agent by the Borrower shall have been paid in full;

(vii)        all legal matters incident to this Amendment shall be satisfactory to Sidley Austin LLP, counsel for the Administrative Agent;

 7

 

(viii)      the Senior Facility Agent and the lenders under the Senior Facility Credit Agreement shall have executed an amendment to the Senior Facility Credit Agreement granting substantively identical amendments to those set forth in this Amendment to the extent applicable to the Senior Facility Credit Agreement, in form and substance satisfactory to the Administrative Agent; and

(ix)          the Seer P&A Facility Agent and the lenders under the Seer P&A Facility Credit Agreement shall have executed an amendment to the Seer P&A Facility Credit Agreement granting substantively identical amendments to those set forth in this Amendment to the extent applicable to the Seer P&A Facility Credit Agreement, in form and substance satisfactory to the Administrative Agent.

For the avoidance of doubt, in addition to the achievement of the Baseline Conditions, (i) the provisions of Sections 2 and 3 of this Amendment shall not be effective until the satisfaction of the conditions precedent in Section 5B and (ii) the provisions of Section 4 of this Amendment shall not be effective until the satisfaction of the conditions precedent in Section 5C.

5B. The effectiveness of Section 2 and Section 3 of this Amendment are also subject to the satisfaction in full of each of the conditions precedent set forth in this Section 5B (the date on which each of such conditions precedent has been satisfied, the “First Option Effective Date”):

(i)              the satisfaction of each of the Baseline Conditions;

(ii)            the First Option Effective Date (as defined in the Senior Facility Credit Agreement) shall have been met under the Senior Facility Credit Agreement;

(iii)          the First Option Effective Date (as defined in the Seer P&A Facility Credit Agreement) shall have been met under the Seer P&A Facility Credit Agreement;

(iv)          the Administrative Agent shall have received from the Borrower, for the benefit of each Lender, an amendment fee equal to 0.025% of the Loans held by each Lender immediately prior to the First Option Effective Date, which amendment fee shall be paid in kind by adding such amount to the principal balance of the Loans on and as of the First Option Effective Date hereunder;

(v)            immediately before and immediately after giving effect to the amendments and consents to occur on the First Option Effective Date, no Default or Event of Default shall have occurred and be continuing; and

(vi)          all legal matters incident to this Section 5B shall be satisfactory to Sidley Austin LLP, counsel for the Administrative Agent.

5C. The effectiveness of Section 4 of this Amendment is also subject to the satisfaction in full of each of the conditions precedent set forth in this Section 5C (the date upon which each of such conditions precedent has been satisfied, the “Second Option Effective Date”) as follows:

 8

 

(vii)        the satisfaction of each of the Baseline Conditions;

(viii)      the Second Option Effective Date (as defined in the Senior Facility Credit Agreement) shall have been met under the Senior Facility Credit Agreement;

(ix)          the Second Option Effective Date (as defined in the Seer P&A Facility Credit Agreement) shall have been met under the Seer P&A Facility Credit Agreement;

(x)            the Administrative Agent shall have received from the Borrower, for the benefit of each Lender, an amendment fee equal to 0.025% of the Loans held by each Lender immediately prior to the Second Option Effective Date, which amendment fee shall be paid in kind by adding such amount to the principal balance of the Loans on and as of the Second Option Effective Date hereunder;

(xi)          the Administrative Agent shall have received (i) from Parent, a security interest (for the benefit of the Secured Parties) in the Parent Retained Equity and all proceeds thereof (on a subordinated basis as set forth in the Subordination Agreement), and (ii) to the extent requested by the Senior Facility Agent, a deposit account control agreement granting the Administrative Agent (for the benefit of the Secured Parties, on a subordinated basis as set forth in the Subordination Agreement) springing cash dominion over any deposit account in which any proceeds of the Parent Equity Contribution are held, or other cash collateral arrangements acceptable to the Administrative Agent, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent;

(xii)        immediately before and immediately after giving effect to the amendments and waivers to occur on the Second Option Effective Date, no Default or Event of Default shall have occurred and be continuing; and

(xiii)      all legal matters related to the foregoing Section 5C shall be satisfactory to Sidley Austin LLP, counsel to the Administrative Agent.

5D. It is acknowledged and agreed that the First Option Effective Date may occur without the Second Option Effective Date occurring (i.e., if the Baseline Conditions and the conditions set forth in Section 5B but not those set forth in Section 5C are satisfied), and that the Second Option Effective Date may occur without the First Option Effective Date occurring (i.e., if the Baseline Conditions and the conditions set forth in Section 5C but not those set forth in Section 5B are satisfied).

6.               Representations and Warranties. Each of the Credit Parties represents and warrants that:

(a)             each of the Credit Parties has the power and authority to execute and deliver this Amendment and perform its obligations under this Amendment and the Credit Agreement as amended hereby;

(b)            the execution and delivery by each of the Credit Parties of this Amendment, and the performance by such Person of its obligations under this Amendment and the Credit Agreement as amended hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of

 9

 

Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents; and

(c)             the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date) with the same effect as if made on and as of the date hereof.

7.               Fundamental Document. This Amendment is designated a Fundamental Document by the Administrative Agent.

8.               Full Force and Effect. Except as expressly set forth herein, this Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly amended hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its obligations under the Credit Agreement and the other Fundamental Documents to which it is a party and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as amended by this Amendment.

9.               Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Amendment.

 10

 

10.            APPLICABLE LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

11.            Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

12.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

13.            Headings. The headings of this Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Amendment.

14.            Parent Agreement. By its execution hereof, Parent acknowledges and agrees that (a) it will not utilize or deploy any Parent Retained Equity for any purpose other than to either contribute such sums to the Borrower or to (subject to the terms hereof) redeem the Parent Preferred (as such term is defined in the Credit Agreement on the date hereof, i.e., before the changes that would be implemented upon the Second Option Effective Date) held by the Non-Extending Preferred Holders or pay any applicable Parent Preferred Consent Fees payable to holders of the Parent Preferred in connection with the Parent Charter Amendment; (b) it shall not make any such redemption payment if any Default or Event of Default shall have occurred and be continuing or would result therefrom; (c) it shall take any action reasonably requested by the Administrative Agent to perfect its security interest (on behalf of the Secured Parties) in the Parent Retained Equity and have dominion over any deposit account in which it is held; and (d) the Administrative Agent shall be fully entitled to exercise dominion over any and all Parent Retained Equity, and apply such Parent Retained Equity against the Obligations, upon the occurrence and during the continuance of any Event of Default.

 

 

[Signature pages follow]

 11

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

 

 

 

PARENT:

 

STX FILMWORKS, INC.

 

 

 

By:

-/s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP Corporate Strategy & General Counsel

 

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

 

By:

-/s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP Corporate Strategy & General Counsel

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

Signature Page to Consent and Amendment No. 2 to
Second Amended and Restated Subordinated Credit Agreement

 

 

 

 

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

SEVENTEEN BRIDGES, LLC

MINNETONKA DREAMS, LLC

UGLY INDUSTRIES, LLC

 

 

By:

-/s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: EVP Corporate Strategy & General Counsel

 

 

RED FISH BLUE FISH, LLC

as Administrative Agent and Lender

 

By: ______________________________

Name:

Title:

 

Signature Page to Consent and Amendment No. 2 to
Second Amended and Restated Subordinated Credit Agreement

 

 

 

 

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

SEVENTEEN BRIDGES, LLC

MINNETONKA DREAMS, LLC

UGLY INDUSTRIES, LLC

 

 

By:

________________________________

Name:

Title:

 

 

RED FISH BLUE FISH, LLC

as Administrative Agent and Lender

 

By: /s/ Derek Arend_______________________

Name: Derek Arend

Title: President

 

 

Signature Page to Consent and Amendment No. 2 to
Second Amended and Restated Subordinated Credit Agreement

 

Exhibit A

Third Amended and Restated Certificate of Incorporation of STX Filmworks, Inc.

[Exhibit omitted.]

 

 

 

 

 

Exhibit 10.15

 

CONSENT AND AMENDMENT NO. 3
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

CONSENT AND AMENDMENT NO. 3 dated as of April 17, 2020 (this “Consent and Amendment”) to the Second Amended and Restated Subordinated Credit, Security, Guaranty and Pledge Agreement dated as of October 7, 2016 (as the same has been and may be further amended, restated, supplemented or otherwise modified, renewed or replaced from time to time, the “Credit Agreement”) among (i) STX FINANCING, LLC, a Delaware limited liability company, as Borrower, (ii) STX FILMWORKS, INC., a Delaware corporation, as Parent, (iii) the GUARANTORS referred to therein, (iv) the LENDERS referred to therein, and (v) RED FISH BLUE FISH, LLC, as Administrative Agent for the Lenders.

INTRODUCTORY STATEMENT

WHEREAS, the Borrower desires for Parent and Eros International Plc, an Isle of Man company (“Eros Plc”) to enter into a merger transaction (whether consummated as described in clauses (a) through (c) below or otherwise, the “Proposed Eros Transaction”) pursuant to which, among other things, (a) certain stockholders of Parent are contemplated to invest: (i) $75,000,000 to purchase A ordinary shares, each of £0.30 par value (“A Ordinary Shares”), of Eros Plc and (ii) $750 to purchase Class E preferred stock, par value $0.01 per share (“Class E Preferred Stock”), of Parent, (b) a wholly owned indirect subsidiary of Eros Plc is contemplated to merge with and into Parent, with Parent surviving (the “Merger”), and (c) the holders of Parent preferred stock are contemplated to receive contingent value rights of Eros Plc to be settled at a later time for an aggregate number of A Ordinary Shares equal to the fully diluted outstanding shares of Eros Plc.

WHEREAS, in connection with the Proposed Eros Transaction, the Borrower has requested that the Credit Agreement be amended on the terms set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the parties hereto agree as follows:

1.               Defined Terms. Capitalized terms used but not otherwise defined herein (including any such terms used in the Introductory Statement hereto) shall have the meanings given to them in the Credit Agreement.

2.               Consents. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 hereof, the Administrative Agent and the Lenders party hereto (constituting Required Lenders) hereby:

(a)             consent to the consummation of the Proposed Eros Transaction, notwithstanding any provision to the contrary in the Credit Agreement; and

(b)            consent to a prepayment by the Borrower of $21,500,000 in full, in cash (the “Proposed Prepayment”), substantially simultaneously with the consummation of the Proposed Eros Transaction in partial satisfaction of the requirement in Section 2.9 of the Credit Agreement

  

 

for the Borrower to make a Change of Control Offer to repurchase all Loans outstanding under the Credit Agreement in an amount comprising all principal, interest and other outstanding amounts thereunder upon the occurrence of a Change in Control. The Company will use its commercially reasonable efforts to cause the remainder of all of the amounts outstanding under the Credit Agreement to be fully repaid in cash concurrently with any subsequent renewal, refinancing, repayment, forgiveness, replacement or termination of the Senior Facility Credit Agreement.

3.               Amendments to Credit Agreement. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended as follows:

(a)             The legend on the cover page of the Credit Agreement is hereby amended to delete the following language appearing therein:

“, and Seer Capital Partners Master Fund L.P., as administrative agent under the Second Amended and Restated Credit, Security, Guaranty and Pledge Agreement (P&A Facility) dated as of October 7, 2016”

(b)            Section 1.2 of the Credit Agreement is hereby amended by:

(i)              adding thereto the following definitions, which shall be inserted in proper alphabetical order:

“Amendment No. 3” shall mean that certain Consent and Amendment No. 3 dated as of April 17, 2020 to this Credit Agreement.

“CARES Act” shall mean Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act, as now and hereafter in effect.

“Eros Closing Date” shall mean the date of the consummation of the Proposed Eros Transaction, as defined in Amendment No. 3.

“Eros B Shareholders” shall mean each of the following persons: (i) Eros Ventures Limited; (ii) Beech Investments Limited; (iii) the trustees for the time being of the Ganges Trust; (iv) Kishore Lulla and his estate, guardian, or conservator; (v) Kishore Lulla’s descendants; (vi) any other descendants of Arjan Lulla and their respective estates, guardians or conservators; (vii) any Family Controlled Entity; (viii) the trustees, solely in their respective capacities as such, of any Family Trust; and (ix) any custodian or bare nominee for any person within (i) – (viii) inclusive.

“Eros Plc” shall mean Eros International Plc, an Isle of Man company.

“Family Controlled Entity” shall have the meaning set forth in the Articles of Association of Eros Plc.

“Family Trust” shall have the meaning set forth in the Articles of Association of Eros Plc.

2 

 

“PPP Loans” shall mean small business “Payroll Protection Loans” under Section 1102 of the CARES Act.

“PPP Regulations” shall mean any and all rules and regulations implemented by the United States Small Business Administration, the United States Department of Treasury or any other Governmental Authority with respect to PPP Loans.

(ii)            amending the definition of “Affiliate” appearing therein by adding the following text after the second sentence of the definition:

“For clarity, Eros Plc and its Subsidiaries shall be deemed Affiliates of the Borrower.”

(iii)          amending and restating the following definitions in their entireties as follows:

“Approved Co-Financier” shall mean (i) a Major Studio, (ii) Shanghai Media Group (including Great Mission International Limited and Marco Alliance Limited (each, a “Hony Investor”)) and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Senior Facility Agent, (iii) Odd Lot Entertainment, LLC and its Affiliates engaged principally in the entertainment industry and which Affiliates are acceptable to the Senior Facility Agent, (iv) Metro-Goldwyn-Mayer Inc. and its Affiliates, (v) Eros International Media Limited and its Affiliates, and (vi) any other Person acceptable (with respect to such Person’s identity and creditworthiness, with consideration to be given to any credit enhancement being offered by or on behalf of such Person) to the Senior Facility Agent.

“Change in Control” shall mean (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), other than the Permitted Holders and/or the Eros B Shareholders, of equity interests representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of Eros Plc, (ii) the acquisition of ownership, directly or indirectly, beneficially or of record, by the Eros B Shareholders of equity interests in the aggregate representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of Eros Plc, (iii) Eros Plc shall cease to directly or indirectly own 100% of the equity interests issued of Parent, or shall cease to have voting control of Parent, (iv) the Parent shall cease to directly own 100% of the Equity Interests issued by the Borrower or shall cease to have voting control of the Borrower, or (v) except as otherwise permitted pursuant to the terms hereof, the Borrower (or, if applicable, any Guarantor) shall cease to own directly or indirectly 100% of the Equity Interests issued by any Guarantor to the Borrower (or, if applicable, to any Guarantor) or shall cease to have voting control of any Guarantor or (v) occupation at any time of a majority of the seats (other than vacant seats) on the board of directors of Eros Plc by

3 

 

Persons who were not (x) directors of Eros Plc on the Eros Closing Date or (y) nominated by directors who were directors of Eros Plc on the Eros Closing Date (or nominated by directors so nominated).

“Change in Management” shall mean (i) any two of the following shall occur: (a) Robert Simonds shall cease to act as chief executive officer of Eros Plc, (b) Adam Fogelson shall cease to act as chairman of the motion picture group at Parent or (c) Noah Fogelson shall cease to act as Co-President of Eros Plc (in each case under clause (a)-(c), for any reason, including, without limitation, termination of employment, death or disability) and (ii) the Borrower shall have failed to appoint a replacement or replacements (as applicable) reasonably acceptable to the Administrative Agent and the Required Lenders within 90 days of such discontinuance.

(iv)          amending and restating clause (e) of the definition of “Mile 22 Stretch Debt” in its entirety as follows:

“(e) Stretch Lender may have a claim against the proceeds of Mile 22 from the Domestic Territory and UK Territory (the “Self-Distribution Territories”) but only after any P&A Credit and any UK P&A Credit extended against Mile 22 have been recouped;”

(v)            amending and restating clause (vi) of the definition of “Restricted Payment” in its entirety as follows:

“(vi) any other payment by a Credit Party to or for the benefit of any Affiliate of such Credit Party (other than a Credit Party) or any direct or indirect members or shareholders of such Credit Party (other than a Credit Party), including, without limitation, Eros Plc or its (non-Credit Party) Subsidiaries, including, without limitation, any payment to Eros Plc or its (non-Credit Party) Subsidiaries relating to Overhead,”

(vi)          amending and restating the definition of “Senior Facilities” in its entirety as follows:

“Senior Facilities” shall mean, the credit facility evidenced by the Senior Facility Credit Agreement.

(vii)        amending and restating the definition of “Senior Loan Documents” in its entirety as follows:

“Senior Loan Documents” shall mean the Senior Facility Credit Agreement and the other “Fundamental Documents” as defined in the Senior Facility Credit Agreement, as amended from time to time in accordance with the terms hereof and of the Subordination Agreement.

(c)             Section 3.28 of the Credit Agreement is hereby amended and restated in its entirety as follows:

4 

 

“SECTION 3.28.     Public Side Materials. The Borrower covenants that if any Lender has advised the Borrower that such Lender is a Public-Sider, the Borrower will not request that any other material be posted to Public-Siders without the Borrower first expressly representing and warranting to the Administrative Agent in writing that such materials do not constitute material non-public information within the meaning of the federal securities laws. Notwithstanding anything herein to the contrary, if any Lender has advised the Borrower that such Lender is a Public-Sider, in no event shall the Borrower request that the Administrative Agent make available to Public-Siders any budgets or any certificates, reports or calculations with respect to the Borrower’s compliance with the covenants contained herein.”

(d)            Section 6.1 of the Credit Agreement is hereby amended by inserting the following new clause (r) at the end thereof with appropriate punctuation adjustments to existing clauses (p) and (q):

“(r)    unsecured obligations in connection with PPP Loans, in an aggregate principal amount not to exceed the maximum loan amount permitted under the applicable payroll-based formula specified under the CARES Act or any PPP Regulations applicable to the Credit Parties; provided that (i) nothing in this clause (r) shall be construed to give rise to any obligation on the part of the Administrative Agent or any Lender to extend any PPP Loans, (ii) the interest rate on such PPP Loans does not exceed 1% and (iii) the Credit Parties covenant and agree that (A) they shall submit to the lender of the PPP Loans as soon as permitted under Section 1106(e) of the CARES Act or any PPP Regulations any and all documentation necessary or appropriate to obtain forgiveness of all principal on the PPL Loans, (B) the proceeds of each PPP Loan shall be applied solely towards permitted uses under the PPP Regulations and the CARES Act and shall be so applied within three (3) months of receipt thereof, and shall in no case be utilized for any purpose other than forgivable purposes under the PPP Regulations and the CARES Act and (C) they shall neither take nor omit to take any action that would cause or permit any portion of the principal amount of any PPP Loans to be deemed ineligible for forgiveness under Section 1106 of the CARES Act (including without limitation any reduction in headcount or salary(ies) that would have such an effect), nor otherwise allow any such principal to no longer be eligible for such forgiveness (provided, that solely with respect to the covenants in this clause (iii)(A)-(C), if a failure to comply is a direct result of a Change in Law that occurs after the date on which a PPP Loan is issued, the Credit Parties shall have fifteen (15) days following such Change in Law to cure such non-compliance); provided further that if there is a Change in Law between April 17, 2020 and the date on which the Credit Parties intend to request a PPP Loan, such changes must be satisfactory to the Administrative Agent in its reasonable discretion in order for the Indebtedness thereunder to be incurred.”

(e)             Section 6.2(t) is hereby amended and restated in its entirety as follows:

“(t) [Reserved].”

5 

 

(f)             Section 6.5(e) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(e) payments to Odd Lot Entertainment, LLC, Shanghai Media Group, the Hony Investors, Eros Plc or any of their respective Affiliates in connection with a Co-Financed Item of Product or other arms-length contractual arrangements permitted under Section 6.11.”

(g)            Section 6.5(g) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(g)    either (i) pay Allocated Overhead Costs (under and as defined in the Senior Facility Credit Agreement) for services which the Senior Facility Agent has approved (in reimbursement for payments attributable to the Credit Parties that were directly paid by the Parent or Eros Plc) or (ii) so long as no Default or Event of Default is in existence or would result therefrom, dividends or distributions to Parent for further distribution to Eros Plc for payment of c-suite level Overhead expenses of Eros Plc to the extent directly attributable to the Credit Parties (but not to any non-Credit Party subsidiaries of Eros Plc), subject in either case to Section 6.23 of the Senior Facility Credit Agreement; and”

(h)            Section 6.11(v) of the Credit Agreement is hereby amended and restated as follows:

“(v) is a co-financing arrangement that satisfies the requirements for a Co-Financed Item of Product with Odd Lot Entertainment, LLC, Shanghai Media Group, a Hony Investor, Eros Plc or any other Approved Co-Financier”

(i)              Section 6.27(b) is hereby amended and restated in its entirety as follows:

“(b) With respect to any Picture, enter into any Distribution Agreement (or permit a Licensing Intermediary to enter into any Distribution Agreement) with an Approved Domestic Distributor pursuant to which such Approved Domestic Distributor is entitled to retain a distribution fee greater than 13% of the gross receipts received by such Approved Domestic Distributor from its exploitation of the applicable Picture, unless (i) otherwise approved by the Senior Facility Agent prior to any borrowing under the Senior Facility Credit Agreement to fund P&A Expenses using the P&A Credit for such Picture, or (ii) no borrowing under the Senior Facility Credit Agreement is made to fund P&A Expenses using the P&A Credit for such Picture.”

 

(j)              The second paragraph of Section 6.28 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Notwithstanding the foregoing, nothing in this Section 6.28 shall in any way limit the ability of Eros Plc and its non-Credit Party Subsidiaries to operate their businesses as historically conducted.”

6 

 

(k)            The following text is hereby inserted as Section 6.31 of the Credit Agreement:

“SECTION 6.31. Eros Holding Company. The Credit Parties shall not permit Eros Plc to carry on any business, own any assets or incur any liabilities except for: (i) (a) the participation in tax, accounting and other administrative activities as a publicly listed holding company and provision of administrative services to its Subsidiaries of a type customarily provided by a holding company to its Subsidiaries; (b) activities necessary or reasonably advisable for or incidental to the registration and listing of Eros Plc’s (or its direct or indirect parent’s) common stock and the continued existence of Eros Plc as a public company, (c) engaging in any activities incidental to compliance with the provisions of the Securities Act and the Exchange Act and similar laws and regulations of other jurisdictions and the rules of securities exchanges, in each case, as applicable to companies with listed equity or debt securities, as well as activities incidental to investor relations, shareholder meetings and reports to shareholders or debt-holders, (d) engaging in activities required to comply with applicable laws or maintain its corporate existence, (e) establishing, creating, developing, registering, enforcing, prosecuting and maintaining, as applicable, bank accounts, (f) entering into employment agreements and other arrangements with officers and directors, (g) providing indemnification to officers, managers and directors, (h) ownership of (A) Equity Interests in other Subsidiaries of Eros Plc (including activities relating to the formation and capitalization of such subsidiaries), (B) cash and Cash Equivalents to be used for administrative purposes described above including not less than $50,000,000 in proceeds from new equity remaining as of the Eros Closing Date at Eros Plc pro forma after consummation of the Proposed Eros Transaction as described in Amendment No. 3 as well as proceeds from equity issuances from time to time; and (C) certain other nominal assets incidental to the business or activities described above, (i) activities reasonably incidental to the businesses and activities described in the foregoing clauses (a) through (h), and (j) any other activities consented to by the Administrative Agent in writing in its sole discretion; and (ii) professional fees and administration costs incurred in the ordinary course of business as a holding company.”

 

(l)              Section 7.1(g) through Section 7.1(j) of the Credit Agreement are hereby amended and restated in their entireties as follows:

“(g)    default shall be made with respect to any payment of any Senior Facility or any other Indebtedness (i) of any Credit Party in excess of $1,150,000 in the aggregate at any one time outstanding when due or (ii) of Eros Plc or any Subsidiary of Eros Plc (other than the Credit Parties) in excess of $8,625,000 in the aggregate at any one time outstanding when due, or, in each case, in the performance of any other obligation incurred in connection with any Senior Facility or any such Indebtedness if the effect of such default is to accelerate the maturity of such Senior Facility or such Indebtedness, as applicable, or to permit the holder thereof to cause such Senior Facility or such Indebtedness, as

7 

 

applicable, to become due prior to its stated maturity, and such default shall not be remedied, cured, waived or consented to within the period of grace with respect thereto;

(h)       any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall generally not pay its debts as they become due or shall admit in writing its inability to pay its debts, or shall make a general assignment for the benefit of creditors; or any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property or shall file an answer or other pleading in any such case, proceeding or other action admitting the material allegations of any petition, complaint or similar pleading filed against it or consenting to the relief sought therein; or any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall take any action to authorize, or in contemplation of, any of the foregoing;

(i)       any involuntary case, proceeding or other action against any Credit Party, Co-Financing Venture Entity, Eros Plc or any Subsidiary of Eros Plc shall be commenced seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, and such case, proceeding or other action (i) results in the entry of any order for relief against it, or (ii) shall remain undismissed for a period of sixty (60) days;

(j)       final judgment(s) for the payment of money (to the extent not paid or fully covered by insurance) in excess of $1,150,000 in the aggregate shall be rendered against any Credit Party, Eros Plc, any Subsidiary of Eros Plc or any Co-Financing Venture Entity, and within thirty (30) days from the entry of such judgment it shall not have been discharged or stayed pending appeal or which shall not have been discharged or bonded in full within thirty (30) days from the entry of a final order of affirmance on appeal;”

(h)       The second sentence of Section 12.11 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Upon any such resignation, the retiring Administrative Agent shall promptly appoint a successor agent from among the Lenders (including any assignee pursuant to Section 13.3) which successor agent shall be experienced and sophisticated in entertainment industry lending (provided that any Person who

8 

 

holds or acquires all or substantially all of the Loans shall be deemed so experienced and sophisticated); provided, that such replacement is reasonably acceptable (as evidenced in writing) to the Required Lenders.”

(m)           The first sentence of Section 13.3 (b) is hereby amended and restated in its entirety as follows:

“Each of the Lenders may (but only with the prior written consent of the Administrative Agent) assign all or a portion of its interests, rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Commitment and the same portion of all Loans at the time owing to it, the Notes held by it (if any) and its rights and obligations with regard to any Letters of Credit; provided, however, that (i) each assignment shall be of a constant, and not a varying, percentage of the assigning Lender’s interests, rights and obligations under this Credit Agreement, (ii) each assignment shall be in a minimum Commitment (or Loans, if applicable) amount equal to the lesser of $1,000,000 and the amount of such assigning Lender’s entire Commitment (or Loans, if applicable), (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Assumption, together with the assigning Lender’s original Note (if any) and a processing and recordation fee of $3,500 to be paid to the Administrative Agent by the assigning Lender or the assignee and (iv) no such assignment shall be effective until and unless recorded in the Register.”

(j)       Each and every reference to “Seer P&A Facility Agent”, “Seer P&A Facility Credit Agreement”, “Seer Capital Partners Master Fund L.P.” and “Senior Intercreditor Agreement” is hereby deleted.

4.               Conditions to Effectiveness.

The effectiveness of the consents set forth in Section 2 and the amendments set forth under Section 3 of this Consent and Amendment is subject to the satisfaction in full (or waiver by the Required Lenders) of each of the conditions precedent set forth in this Section 4 (the date upon which each of such conditions precedent in this Section 4 have been satisfied or waived, the “Consent and Amendment Effective Date”):

(i)              the Administrative Agent shall have received counterparts of this Consent and Amendment that, when taken together, bear the signatures of the Borrower, the Guarantors, the Parent and the Required Lenders;

(ii)            all costs and expenses due and owing pursuant to Section 13 hereof to the Administrative Agent by the Borrower shall have been paid in full and the Borrower shall have paid any other fees or invoiced expenses of the Administrative Agent;

(iii)          the Senior Facility Agent shall have executed a consent and amendment under the Senior Facility Credit Agreement granting substantively identical consents and amendments to those set forth in this Consent and Amendment to the extent applicable to the Senior Facility Credit Agreement, in form and substance satisfactory to the Administrative Agent;

9 

 

(iv)          the Proposed Eros Transaction shall have been consummated, or shall be consummated, substantially concurrently with the Consent and Amendment Effective Date, in accordance with the terms set forth in that certain Agreement and Plan of Merger, dated as of even date herewith, by and among Eros Plc, England Holdings 2, Inc., England Merger Corp., and Parent (the “Merger Agreement”), a copy of which has been previously provided to the Administrative Agent, without giving effect to any modifications, amendments, consents or waivers thereto that in the aggregate are material and adverse to the Lenders without the prior consent of the Required Lenders; provided that the final terms of the Proposed Eros Transaction include: (A) Parent being the indirect wholly-owned subsidiary of Eros Plc, and Parent existing as an indirect “sister” subsidiary of Eros International Media Limited; (B) Parent surviving the Merger and continuing to have no business activities other than as permitted pursuant to Section 6.30 of the Credit Agreement and continuing to directly hold 100% of the Equity Interests in the Borrower; and (C) each of the Borrower and the other Credit Parties surviving the Merger; and (D) any changes to the certificate of incorporation (or equivalent) or bylaws (or equivalent) of Parent or any Credit Party shall be satisfactory to the Administrative Agent;

(v)            not less than $110,000,000 of new equity investment shall have been contributed to Parent or Eros Plc, of which not less than $25,000,000 (which amount is in excess of any amounts being used to repay the outstanding principal and accrued interest owed under the Credit Agreement substantially simultaneously with the consummation of the Proposed Eros Transaction) shall have been contributed to Borrower and not less than $50,000,000 shall remain at Eros Plc pro forma after consummation of the Proposed Eros Transaction;

(vi)          the Proposed Prepayment shall have occurred, or shall occur, substantially concurrently with the Consent and Amendment Effective Date and the Proposed Eros Transaction;

(vii)        the representations and warranties contained in Section 5 hereof, in the Credit Agreement and in the other Fundamental Documents are true and correct in all material respects on and as of the date of the Consent and Amendment Effective Date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date and/or (b) cannot be made as of the Consent and Amendment Effective Date solely due to the existence of a Default that is not material);

(viii)      upon the reasonable request of any Lender, the Borrower shall have provided to such Lender, and such Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act, in each case at least five (5) days prior to the Consent and Amendment Effective Date;

(ix)          at least three (3) days prior to the Consent and Amendment Effective Date, to the extent that the Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, Borrower shall deliver, to each Lender that so requests the same at least seven (7) days prior to the Consent and Amendment Effective Date, a Beneficial Ownership Certification; and

10 

 

(x)            the Administrative Agent shall have received a certificate of the Secretary, Assistant Secretary or other appropriate officer (or member or manager, as the case may be, in the case of limited liability companies), acceptable to the Administrative Agent, of the Parent and the Borrower, attesting that the conditions precedent set forth in this Section 4 have been satisfied.

5.               Representations and Warranties. As of the date hereof, each of the Credit Parties represents and warrants that:

(a)             each of the Credit Parties has the power and authority to execute and deliver this Consent and Amendment and perform its obligations under this Consent and Amendment and the Credit Agreement as modified hereby;

(b)            the execution and delivery by each of the Credit Parties of this Consent and Amendment, and the performance by such Person of its obligations under this Consent and Amendment and the Credit Agreement as modified hereby (i) have been duly authorized by all necessary company action (or similar action) on the part of such Person, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Person or any of its properties or assets, (iii) will not violate any provision of the certificate of formation or organization, by-laws, operating agreement, partnership agreement or any other organizational document of such Person, (iv) will not violate any provision of, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or create any right to terminate any indenture, agreement, bond, note or other similar instrument to which such Person is a party or by which such Person or any of its properties or assets are bound, other than where any such violation, conflict, breach, default or termination could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (v) will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of such Person other than pursuant to the Fundamental Documents;

(c)             the representations and warranties contained in the Credit Agreement and the other Fundamental Documents are true and correct in all material respects on and as of the date hereof (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date); and

(d)            no Default or Event of Default shall have occurred and be continuing.

6.               Conditions Subsequent. Borrower agrees to use commercially reasonable efforts to deliver to the Administrative Agent within 30 days after the date hereof (or such later date as permitted by the Administrative Agent in its reasonable discretion) (i) that certain payoff confirmation letter executed by Seer Capital Partners Master Fund L.P. and (ii) counterparts of that certain Second Amended and Restated Subordination Agreement Consent and Amendment that, when taken together, bear the signatures of the Borrower, the other Credit Parties, the Senior Facility Agent and the Administrative Agent.

11 

 

7.               CARES Act. Notwithstanding anything to the contrary contained herein, the amendments described in Section 3 hereof that relate solely to the CARES Act, PPP Loans and PPP Regulations shall become effective upon satisfaction of the condition precedent set forth in Section 4(i) hereof.

8.               Fundamental Document. This Consent and Amendment is designated a Fundamental Document by the Administrative Agent.

9.               Full Force and Effect. Except as expressly set forth herein, this Consent and Amendment does not constitute an amendment, waiver or modification of any other provision of the Credit Agreement, does not constitute a waiver of timely compliance with the provisions of the Credit Agreement or any provision of any other Fundamental Document, does not constitute a waiver of any Default or Event of Default whether or not known to the Administrative Agent or the Lenders, and does not entitle any Credit Party to any amendment, waiver or modification of any provision of the Credit Agreement or any other Fundamental Document, or to a consent to any transaction, in the future in similar or dissimilar circumstances. Except as expressly modified hereby, the Credit Agreement and the other Fundamental Documents shall continue in full force and effect in accordance with the provisions thereof on the date hereof and are hereby ratified and confirmed. Without limiting the foregoing, each Credit Party hereby (i) reaffirms its obligations under the Credit Agreement and the other Fundamental Documents to which it is a party, including on a pro forma basis after giving effect to the Proposed Eros Transaction, and (ii) reaffirms all Liens on the Collateral which have been granted by it in favor of the Administrative Agent (for the benefit of the Secured Parties) pursuant to any of the Fundamental Documents. As used in the Credit Agreement, the terms “Agreement,” “this Agreement,” “this Credit Agreement,” “herein,” “hereafter,” “hereto,” “hereof” and words of similar import, shall, unless the context otherwise requires, mean the Credit Agreement as modified by this Consent and Amendment.

10.            Further Assurances. At any time and from time to time, upon the Administrative Agent’s reasonable request and at the expense of the Credit Parties in accordance with Section 13.4 of the Credit Agreement, each Credit Party will promptly and duly execute and deliver any and all further instruments and documents and take such further action as the Administrative Agent reasonably deems necessary to effect the purposes of this Consent and Amendment.

11.            APPLICABLE LAW. THIS CONSENT AND AMENDMENT SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

12.            Counterparts. This Consent and Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Consent and Amendment by facsimile transmission or electronic photocopy (i.e., “.pdf”) shall be effective as delivery of a manually executed counterpart hereof.

12 

 

13.            Expenses. The Borrower agrees to pay pursuant to Section 13.4 of the Credit Agreement, all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Consent and Amendment, including, but not limited to, the reasonable and documented fees and disbursements of counsel for the Administrative Agent.

14.            Release.    Each Credit Party acknowledges that the Administrative Agent and the Lenders would not enter into this Consent and Amendment without each Credit Party’s assurance that such Credit Party has no claim against the Administrative Agent or any Lender, their respective direct and indirect equity holders, beneficiaries, Subsidiaries, Affiliates, officers, directors, employees, attorneys, agents, professionals and servants, or any of their respective predecessors, successors, heirs and assigns (collectively, the “Releasees” and each, a “Releasee”). Each Credit Party, for itself and on behalf of its Affiliates, and its and their respective officers, directors, managers, employees, agents, representatives, direct and indirect equity holders, and their respective predecessors, successors and assigns (collectively, the “Releasors”) releases each Releasee from any known or unknown claims which such Credit Party now has against any Releasee of any nature, including, without limitation, any claims that any Releasor, or any Releasor’s successors, counsel and advisors may in the future discover they would have had now if they had known facts not now known to them, whether founded in contract, in tort or pursuant to any other theory of liability. The Credit Parties waive all rights and benefits which they now have or may in the future have under the terms of Section 1542 of the Civil Code of the State of California or under the statute or common law of any jurisdiction applicable hereto which has the same or similar effect as the provisions of said Section 1542, which reads in full as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH, IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

The provisions, waivers and releases set forth in this Section 14 are binding upon each Releasor. The provisions, waivers and releases of this Section 14 shall inure to the benefit of each Releasee. The provisions of this Section 14 shall survive payment in full of the Obligations, full performance of all of the terms of this Consent Amendment, the Credit Agreement and the other Fundamental Documents and/or any action by the Administrative Agent or any Lender or any other Releasee to exercise any remedy available under the Fundamental Documents, applicable Laws or otherwise.

15.            Headings. The headings of this Consent and Amendment are for the purposes of reference only and shall not affect the construction of or be taken into consideration in interpreting this Consent and Amendment.

[Signature pages follow]

13 

 

IN WITNESS WHEREOF, the parties hereto have caused this Consent and Amendment No. 3 to be duly executed as of the date first written above.

 

 

 

BORROWER:

 

STX FINANCING, LLC

 

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: Executive Vice President, General Counsel

and Secretary

Consent and Amendment No. 3 to
Second Amended and Restated Subordinated Credit Agreement

 

 

 

 

 

PARENT:

 

STX FILMWORKS, INC.

 

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: Executive Vice President, General Counsel

and Secrettary

 

 

By its execution of the above, the Parent hereby acknowledges and agrees that its obligations under the Credit Agreement as a Pledgor or otherwise under the Credit Agreement shall remain unaffected by the Proposed Eros Transaction referred to in this Consent and Amendment No. 3, and covenants and agrees that it shall in connection with the Proposed Eros Transaction execute a reaffirmation agreement or other documentation in form and substance satisfactory to the Administrative Agent evidencing its agreement to continue be bound by such obligations.

Consent and Amendment No. 3 to
Second Amended and Restated Subordinated Credit Agreement

 

 

 

 

 

GUARANTORS:

 

STX FILMDEV, LLC

STX FILMDEV II, LLC

STX PLAN F, LLC

STX PRODUCTIONS, LLC

STX TV, INC.

STX LOUISIANA, LLC

FSO JONES, LLC

STX NY, INC.

FSO JONES NY, LLC

STX MUSIC, LLC

STX MUSIC PUBLISHING, LLC

STX RECORDINGS, LLC

MARS BOYS, LLC

WE ARE BESTIES, LLC

BAD MOMS LOUISIANA, LLC

BADDER MOMS, LLC

STX INTERNATIONAL, INC.

STX TRUE LIFE, LLC

SURREAL, INC.

STX ENTERTAINMENT UK, LTD.

ADRIFT PRODUCTIONS UK LTD.

VATN VATN ALLS STADAR, LLC

ADRIFT PRODUCTIONS NZ LIMITED

PUPPET MURDERS, LLC

MILE 22, LLC

SECOND ACT PRODUCTIONS, LLC

SEVENTEEN BRIDGES, LLC

MINNETONKA DREAMS, LLC

UGLY INDUSTRIES, LLC

TIME OF DEATH, LLC

POLE SISTERS, LLC

STX ANIMATION, LLC

 

 

By: /s/ Noah Fogelson_______________________

Name: Noah Fogelson

Title: Executive Vice President, General Counsel

and Secretary

Consent and Amendment No. 3 to
Second Amended and Restated Subordinated Credit Agreement

 

 

 

RED FISH BLUE FISH, LLC,

as Administrative Agent and as a Lender

 

By: /s/ Derek Arend_______________________

Name: Derek Arend

Title: President

 

Consent and Amendment No. 3 to
Second Amended and Restated Subordinated Credit Agreement

 

 

Exhibit 99.1

 

 

Eros International Plc and STX Entertainment Complete
Merger to Form Eros STX Global Corporation

 

Combination Creates a Global Entertainment Content,
Digital Media Streaming & OTT Powerhouse

 

ErosSTX to Trade on the NYSE Under New
ESXI Ticker in September

 

Key Highlights:

 

· Combined company creates a financially robust global studio leader across 3 continents with strategic content and distribution partnerships for an unprecedented global footprint
· Capitalized with $125 million of new equity funding and a revamped $350 million JP Morgan-led credit facility
· Amplified financial scale of $600 million+ in proforma revenue for calendar 2019 and $300 million+ of highly-predicable aggregated future revenue from the STX film library
· Estimated Net debt of $254 million with total cash of approx. $144 million at closing
· Reiterates forecast of 50 million Eros Now monthly paying subscribers and approximately $1 billion in revenue for calendar 2022 (assuming a normalization of the global economy and media landscape by the end of 2020); $50 million in annual run-rate operating synergies and long-term EBITDA margins of approximately 20% - 25%
· Accelerated with digital growth through partnerships with Amazon, Apple, Netflix, YouTube, Microsoft, NBC Universal, Visa and Global Telcos
· Counterbalancing of theatrical releases through deals with Netflix and Amazon
· Supported by a newly constituted and experienced Board of Directors

 

The company is planning a global Eros STX brand and website launch in September 2020, accompanied by a bell-ringing event at the NYSE to launch a new ticker symbol. The company is also planning to host a virtual Investor Day later this year to provide a strategic and investment thesis framework, as well as more detailed projected financial forecasts for fiscal 2022 - 2024 along with KPIs and critical operating metrics

 

Douglas, ISLE OF MAN and Burbank, CALIFORNIA – July 30th, 2020

Eros International PLC (NYSE:EROS) (“Eros International”) and STX Filmworks, Inc. (“STX Entertainment”) have announced today the completion of their merger-of-equals transaction. The newly-combined company will migrate in the coming weeks to trade on the NYSE under the symbol ESXI and will operate under the name Eros STX Global Corporation (“Eros STX”, or “the Company”). The company will continue to be domiciled in the Isle of Man, and headquartered in both Burbank, California, USA and Mumbai, Maharashtra, India.

1 

 

 

 

Pursuant to the merger agreement, Eros International issued contingent value rights (“CVRs”) to the former stockholders of STX Entertainment in the merger. The CVRs will be settled in A ordinary shares of Eros STX on a date between 75 days and six months after the effective time of the merger.

 

Combination Rationale, Strategic Positioning and Financial Profile

 

· Combination will drive long-term growth in diversified markets and provide a more consistent and stable revenue profile: Eros STX will benefit from diversified underlying sources of revenue and consumers with a truly global media and consumer entertainment play, building a powerhouse between East and West. Eros STX has a unique capability to present film and episodic libraries and pipeline of original content to a broad and growing global audience through multi-year output deals, strategic alliances and the market leading Eros Now streaming platform. Eros STX is well positioned to create long-term value for shareholders, partners and employees.

 

· Well-established positions in the fastest growing and largest global markets: In India, Eros STX will continue to have a leading box office presence and one of the largest and most valuable libraries of Indian language films. In China, the Company will benefit from and expand upon some of the most comprehensive business and creative relationships in the industry. In the United States and the rest of the world, it will utilize its revolutionary, industry-disrupting and cost effective, data-driven production, marketing and distribution system innovations to create the studio system of the future: visionary, nimble, efficient and sustainable.

 

· Strong capital structure and significant synergy opportunity enables long term stability and drives growth investment: Eros STX capital structure includes $110 million of incremental equity, with an additional $15 million to be completed within the next 90 days, from new and existing global investors including TPG, Tencent, Hony Capital and Liberty Global. The combined company is expected to generate approximately $50 million in annual run-rate operating synergies.

 

· Unique multi-channel distribution model: Multi-channel distribution across pay-TV via Showtime, digital distribution via Netflix, Hulu, Amazon and Eros Now, India’s premier Subscription Video on Demand (“SVOD”) platform for Indian content. Eros Now’s strategic and distribution partnerships with Amazon, Apple, Netflix, Microsoft, Virgin Media, Roku, Etisalat, NBCUniversal and Google/YouTube combined with STX’s global output and distribution agreements covering 150+ territories ensure that the combined company is well positioned to benefit from strong and growing demand for premium content.

 

 

2 

 

 

 

Eros STX’s strong digital footprint, through Eros Now and output deals with Netflix and Amazon, hedges theatrical monetization and further strengthens the company’s positioning as the COVID19 pandemic accelerates the shift in consumer spend towards digital entertainment platforms globally.

 

Capitalization and Financial Outlook

Eros STX benefits from $110 million of incremental equity, with an additional $15 million to be completed within the next 90 days, from new and existing global investors including TPG, Tencent, Hony Capital and Liberty Global. All of these investors come with a strong track record in media and technology investments, and will partner with Eros STX over the long-term to pursue strategic investments in key growth areas including global distribution and OTT content. In addition to the $125 million equity investment, the company’s liquidity position and balance sheet are further strengthened by a revamped $350 million JP Morgan-led credit facility and a strong credit profile.

 

On a pro forma basis, as of July 28, 2020, Eros STX had net debt of approximately $254 million with total cash on hand of approximately $144 million. Given the more than $300 million of highly-predictable aggregated future revenue projected to be generated by STX Entertainment alone, combined with an expected $50 million of combination synergies, Eros STX is well positioned to continue to invest in content and pursue growth opportunities around the world while maintaining a healthy capital structure.

 

Should the global economy and media and entertainment landscape return to a level of normalcy by late 2020, Eros STX expects to achieve global revenue of approximately $1 billion in calendar year 2022, increasing significantly from the approximately $600 million of pro forma revenue in calendar year 2019.

 

As of closing, Eros STX will have approximately 424 million total A and B ordinary shares outstanding on a fully-diluted basis.

 

Eros STX will keep its current fiscal year end of March 31st going forwards, and will also be adopting US GAAP accounting standards.

3 

 

 

 

Newly Constituted Board of Directors and Senior Executive Leadership

 

The Board of Directors of Eros STX will initially comprise of eight members who are highly regarded media, private equity and public company executives. The board members bring a long and outstanding history of leadership and industry expertise and will help guide the company’s long-term growth. The newly constituted Board of Directors will include:

 

· Kishore Lulla, Executive Co-Chairman
· Robert Simonds, Co-Chairman and CEO
· Rishika Singh, Co-President
· Shailesh Rao, Independent Director
· Dhirendra Swarup, Independent Director
· Nick Stone, Independent Director
· Dilip Thakkar, Independent Director
· John Zhao, Hony Capital

 

Drawing talent from both companies, Eros STX will have a team of industry-leading creative, operational and financial experts, with deep knowledge of key global growth markets and U.S. public company governance experience. In addition to Mr. Lulla and Mr. Simonds, Andrew Warren, formerly STX Entertainment’s Chief Financial Officer, will serve as CFO; Rishika Lulla Singh, currently Chairman of Eros Digital, and Noah Fogelson, formerly STX Entertainment’s EVP of Corporate Strategy and General Counsel, will each serve as Co-Presidents; and Prem Parameswaran, formerly Chief Financial Officer of Eros, will serve as Head of Corporate Strategy. Adam Fogelson will continue to serve as Chairman of STX Motion Pictures Group, while Pradeep Dwivedi will continue to serve as CEO-India.

 

Strong Digital Growth Opportunity from Eros Now Platform

 

The Eros Now platform continues to ramp up and grow its paid user base worldwide, supported by one of the largest libraries of Indian movies, along with its un-paralleled market position and brand name. As of March 30, 2020 Eros Now reached 29.3 million paid monthly subscribers and 196.8 million registered users, increases of 56% and 27%, respectively, over the same period last year. Eros Now has a strong slate of films and original series scheduled for release over the coming quarters, and the Company expects this to help drive continued growth in the paying subscriber base in India and around the world.

 

Favourable structural and demographic tailwinds across India as well as watch-at-home consumption patterns underpin the Eros Now growth trajectory and support the target of reaching over 50 million monthly paying subscribers by 2022. To maximize its reach, Eros Now has established collaborations and partnerships in India and globally with market-leading

4 

 

 

 

telecommunications operators, OEMs and digital distribution entities to make available our digital service to global audiences. Our partners include, among others, Apple +, Sony TV, Airtel, Etisalat, Amazon Channels, FlipKart, Visa and many more. Additionally, Eros STX’s future output will further enhance our 12,000+ film library, multiyear strategic deal with NBCU and soon to be launched premium service targeting the English language content consumer. Our ability to adapt to changing tastes and trends, focus on growth in rural India and provide best-in-class payment and optimized content delivery options to our consumers are all central to our business strategy.

 

Robust Pipeline of Film and Episodic Content

 

ErosSTX has a robust pipeline of feature length films and episodic content with powerful, well-

established positions in the world’s fastest-growth global markets. Select upcoming slate of films

and TV shows includes:

 

Premiering in the US

o Greenland with Gerard Butler
o Run Rabbit Run with Elisabeth Moss
o Godmother with Jennifer Lopez
o Nightwolf with Kevin Hart
o Muscle with Vin Diesel

 

Premiering In India

o Flesh An Eros Now Original Series by Siddharth Anand
o Metro Park (Season 2) and Smoke (Season 2) Eros Now original series
o +745 An Eros Now original Series by Sachin Mohite
o Avataar An Eros Now original Series
o The Show Must Go On An Eros Now original Series
o Halahal by Zeishan Qadr
o Bhumi An Eros Now original Series by Pavan Kripalani
o Date Gone Wrong 3, Women of Mettle, My Journey and The Investigation (Season 2) as Eros Now Quickies
o Haseen Dilruba with Taapsee Pannu, Vikrant Massey and Harshvardhan Rane
o Atrangi Re with Akshay Kumar, Sara Ali Khan and Danush via our Colour Yellow Joint Venture
o Haathi with Rana Daggubati, Pulkit Samrat and Zoya Hussain
o Aankhen 2 with Amitabh Bachchan

5 

 

 

 

The Entertainment Media Consumer Shift

 

Due to unprecedented factors we have seen the industry landscape alter and adapt as consumer and creator habits are shifting. ErosSTX’s combined foresight ensures we are well positioned for this shift as measured by five important criteria:

 

· Brand: Eros as a brand is dominant across the South Asian diaspora worldwide with a 40+ year history. Furthermore, the Eros brand is traditionally synonymous with hit films in multiple Indian languages as demonstrated by our 10 year average box-office market share of approx. 32%. The STX brand is synonymous with star driven hit entertainment features as well as a premium original series producer with success’ such as MySpy which is Amazon’s no.1 performing title.
· Breadth (Distribution) : The Eros Now platform is one of the most widely distributed apps across Asia with a platform agnostic approach. Eros Now is the only south Asian app launched on Apple +, and has several high profile exclusive marketing bundles with YouTube and Walmart’s FlipKart to name a few. Additionally, partnerships with Netflix and Amazon provide a home for future output ensuring the brand’s content leaves no screen unturned.
· Build (Production) : STX and Eros have unparalled global production capabilities augmented by innovative and rich partnerships with leading producers and platforms. Eros’s recent partnership with Epic Games (producers of Fortnite) to accelerate production efficiencies, and with Microsoft to further develop and create video technology, are prime examples. STX develops and produces content at scale with Amazon, HBO, Netflix, Quibi, etc.
· Backlist (Library) : A digital library of over 12,000 films, Indian library of over 5,000 films and STX library of recent hits offer multiple monetization opportunities as digital and television consumption increase. The library is primarily used to fuel Eros Now growth as well as form a base for strategic partnerships with Amazon, Apple and Netflix
· Balance Sheet : Well capitalized with a healthy debt profile with no near-term debt maturities that cannot be addressed

 

ErosStx is a powerful combination that helps fuel the global ambitions of the combined company. These five pillars, and depth within each, form an integral part of our future strategy to create a strong consumer brand with recurring revenue cycles through our Eros Now platform and multiyear strategic output deals with platforms such as Netflix and Amazon.

 

6 

 

 

 

COVID-19 Impact

Like nearly every other media and entertainment business, Eros STX has been impacted by the COVID-19 pandemic. Stay-at-home orders and the closure of cinemas has resulted in delays for the release of feature films and the halting of new production. Unlike many other media and entertainment businesses, the Company’s efficient overhead structure and ability to dynamically respond to changing circumstances means that it is better positioned to weather the impacts than many competitors. Despite the business challenges arising from the pandemic, Eros STX has seen a substantial increase in both new subscriptions and consumer engagement on the Eros Now platform driven by increased time spent at home as well as fewer out-of-home entertainment options available. Consumers are watching more content on the platform than ever before, an acceleration of growth that will provide strong tailwinds to the combined business for the coming quarters. Further, given Eros STX’s scale and multi-channel distribution model, the Company can continue to strategically diversify content premiere streams including PVOD, digital premiere exclusives while continuing to provide audiences theatrical first star driven cinematic entertainment. This diversity of media platforms will ultimately benefit the long-term group revenue profile and increase profitability given reduced dependence on lower margin theatrical releases with increased exposure to higher margin digital revenues.

 

About Eros STX Global Corporation

 

Eros STX Global Corporation, (“Eros STX” or “The Company”) (NYSE:EROS) is a global entertainment company that acquires, co-produces and distributes films, digital content & music across multiple formats such as theatrical, television and OTT digital media streaming to consumers around the world. The company was formed in July 2020 through the merger of two international media and entertainment groups, Eros International Plc and STX Entertainment. Merging the largest Indian OTT player and premiere studio with one of Hollywood’s fastest-growing independent media companies has created an entertainment powerhouse with a presence in over 150 countries. Eros STX delivers star-driven premium feature film and episodic content across a multitude of platforms at the intersection of the world's most dynamic and fastest growing global markets, including US, India, Middle East Asia and China. The Company also owns the rapidly growing OTT platform Eros Now which has rights to over 12,000 films across Hindi and regional languages, and had 196.8 million registered users and 29.3 million paying subscribers as of March 30th, 2020. For further information, please visit Erosplc.com or STXentertainment.com until the company launches its new ErosSTX.com site and logo in September

 

Contact Information

Mark Carbeck

Chief Corporate and Strategy Officer

Eros STX Global Corporation

mark.carbeck@erosintl.com

7 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information provided in this communication includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are subject to the safe harbors created thereby. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “approximately,” “anticipate,” “believe,” “estimate,” “continue,” “could,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will” and similar expressions. Those statements include, among other things, the discussions of the Company’s business strategy and expectations concerning its and the Company’s market position, future operations, margins, profitability, liquidity and capital resources, tax assessment orders and future capital expenditures. All such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that the Company is expecting, including, without limitation: the Company’s ability to successfully and cost-effectively source film content; the Company’s ability to achieve the desired growth rate of Eros Now, its digital over-the-top (“OTT”) entertainment service; the Company’s ability to maintain or raise sufficient capital; delays, cost overruns, cancellation or abandonment of the completion or release of the Company’s films; the Company’s ability to predict the popularity of its films, or changing consumer tastes; the Company’s ability to maintain existing rights, and to acquire new rights, to film content; the Company’s ability to successfully defend any future class action lawsuits it is a party to in the U.S.; anonymous letters to regulators or business associates or anonymous allegations on social media regarding the Company’s business practices, accounting practices and/or officers and directors; the Company’s dependence on the Indian box office success of its Hindi and high budget Tamil and Telugu films; the Company’s ability to recoup the full amount of box office revenues to which it is entitled due to underreporting of box office receipts by theater operators; the Company’s dependence on its relationships with theater operators and other industry participants to exploit the Company’s film content; the Company’s ability to mitigate risks relating to distribution and collection in international markets; fluctuation in the value of the Indian rupee against foreign currencies; the Company’s ability to compete in the Indian film industry; the Company’s ability to compete with other forms of entertainment; the Company’s ability to combat piracy and to protect its intellectual property; the Company’s ability to maintain an effective system of internal control over financial reporting; contingent liabilities that may materialize, the Company’s exposure to liabilities on account of unfavorable judgments/decisions in relation to legal proceedings involving the Company or its subsidiaries and certain of its directors and officers; the Company’s ability to successfully respond to technological changes; regulatory changes in the Indian film industry and the Company’s ability to respond to them; the Company’s ability to satisfy debt obligations, fund working capital and pay dividends; the monetary and fiscal policies of India and other countries around the world, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices; the Company’s ability to address the risks associated with acquisition opportunities; risks that the ongoing novel coronavirus pandemic and spread of

8 

 

 

 

COVID-19, and related public health measures in India and elsewhere, may have material adverse effects on the Company’s business, financial position, results of operations and/or cash flows; challenges, disruptions and costs of closing the Merger and related transactions, integrating the Eros and STX businesses and achieving anticipated synergies, and the risk that such synergies will take longer to realize than expected or may not be realized in whole or in part; the amount of any costs, fees, expenses, impairments and charges related to the Merger and related transactions; uncertainty as to the effects of the consummation of the Merger and related transactions on the market price of the Company’s A ordinary shares and/or the Company’s financial performance; and uncertainty as to the long-term value of the Company’s ordinary shares.

 

The forward-looking statements contained in this communication are based on historical performance and management’s current plans, estimates and expectations in light of information currently available and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond the Company’s control. Should one or more of these risks or uncertainties materialize or should any of the Company’s assumptions prove to be incorrect, the Company’s actual results may vary in material respects from what the Company may have expressed or implied by these forward-looking statements. The Company cautions that you should not place undue reliance on any of its forward-looking statements. Any forward-looking statement made by the Company in this communication speaks only as of the date on which the Company makes it. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

 

9