Starz Entertainment Corp 10-K/A, filed Jul 20, 2023
Starz Entertainment Corp (STRZ)
About this 10-K/A
Starz Entertainment Corp filed this 10-K/A on July 20, 2023, covering the fiscal year ended March 31, 2023.
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
British Columbia (877) 848-3866 |
(310) 449-9200 |
Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on Which Registered | ||
Non-Voting Common Shares, no par value per share |
| ☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| ☐ | Emerging growth company | |||||
Auditor Firm Id: |
Auditor Name: |
Auditor Location: |
| • | amend Part III, Items 10, 11, 12, 13 and 14 of the Original Filing to include the information required by and not included in such Items; |
| • | delete the reference on the cover of the Original Filing to the incorporation by reference of certain information from our proxy statement into Part III of the Original Filing; and |
| • | file new certifications of our principal executive officer and principal financial officer as exhibits to this Form 10/K-A under Item 15 of Part IV hereof pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, and to Section 302 of the Sarbanes-Oxley Act of 2002. |
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FORWARD-LOOKING STATEMENTS
This Form 10-K/A includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “potential,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “may,” “will,” “could,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those discussed under Part I, Item 1A. Risk Factors, in the Original Filing These risk factors should not be construed as exhaustive and should be read with the other cautionary statements and information in this report.
We caution you that forward-looking statements made in this report or anywhere else are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially and adversely from those made in or suggested by the forward-looking statements contained in this report as a result of various important factors, including, but not limited to: changes in our business strategy including the plan to potentially spin-off our studio business; the substantial investment of capital required to produce and market films and television series; budget overruns; limitations imposed by our credit facilities and notes; unpredictability of the commercial success of our motion pictures and television programming; risks related to acquisition and integration of acquired businesses; the effects of dispositions of businesses or assets, including individual films or libraries; the cost of defending our intellectual property; technological changes and other trends affecting the entertainment industry; potential adverse reactions or changes to business or employee relationships; the impact of global pandemics, such as COVID-19 on the Company’s business; weakness in the global economy and financial markets, including a recession and bank failures; wars, such as Russia’s invasion of Ukraine, terrorism, labor disruptions or strikes, such as the impact of the ongoing Writers Guild strike and/or potential strikes from the Directors Guild or Screen Actors Guild, and international conflicts that could cause significant economic disruption and political and social instability; and the other risks and uncertainties discussed under Part I, Item 1A. Risk Factors, in the Original Filing.
Any forward-looking statements which we make in this report speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
This report contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.
Unless otherwise indicated or the context requires, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” refer to Lions Gate Entertainment Corp., a corporation organized under the laws of the province of British Columbia, Canada, and its direct and indirect subsidiaries.
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TABLE OF CONTENTS
| PART III | ||||||
| Item 10. |
5 | |||||
| Item 11. |
18 | |||||
| Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
71 | ||||
| Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
78 | ||||
| Item 14. |
82 | |||||
| PART IV | ||||||
| Item 15. |
83 | |||||
| 84 | ||||||
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PART III
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Directors
The following persons currently serve as members of the Board of Directors (the “Board”) of Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” “we,” “us” or “our”). There are no family relationships among the directors or executive officers of the Company. Ages are as of July 14, 2023.
Michael Burns
Age: 64
Director Since: August 1999
Position with Lionsgate: Vice Chair since March 2000
Residence: Los Angeles, California
Business Experience: Mr. Burns served as Managing Director and Head of the Office at Prudential Securities Inc.’s Los Angeles Investment Banking Office from 1991 to March 2000.
Other Directorships: Mr. Burns has been a director and member of the Finance and Capital Allocation Committee, and the Nominating, Governance & Social Responsibility Committees of Hasbro, Inc. (NASDAQ: HAS) since 2014.
Qualifications: Mr. Burns has worked with Chief Executive Officer Jon Feltheimer in building Lionsgate into a multibillion dollar media and entertainment leader with world-class film and television studio operations. With an accomplished investment banking career prior to Lionsgate, in which he specialized in raising equity within the media and entertainment industry, Mr. Burns brings to the Board important business and financial expertise in its deliberations on complex transactions and other financial matters. Additionally, Mr. Burns’ extensive knowledge of and history with Lionsgate, financial background, in-depth understanding of the media and entertainment industry, connections within the business community and relationships with Lionsgate shareholders, make him an invaluable member of the Board.
Mignon Clyburn
Age: 61
Independent Director Since: September 2020
Committee Membership: Nominating and Corporate Governance Committee
Business Experience: Ms. Clyburn is President of MLC Strategies, LLC, a Washington, D.C. based consulting firm, a position she has held since January 2019. Previously, Ms. Clyburn served as a Commissioner of the U.S. Federal Communications Commission (the “FCC”) from 2009 to 2018, including as acting chair. While at the FCC, she was committed to closing the digital divide and championed the modernization of the agency’s Lifeline Program, which assists low-income consumers with voice and broadband service. In addition, Ms. Clyburn promoted diversity in media ownership, initiated Inmate Calling Services reforms, supported inclusion in STEM opportunities and fought for an open internet. Prior to her federal appointment, Ms. Clyburn served 11 years on the Public Service Commission of South Carolina and worked for nearly 15 years as publisher of the Coastal Times, a Charleston weekly newspaper focused on the African American community.
Other Directorships: Ms. Clyburn has been the Chair of the Compensation Committee and a member of the Nominating and Corporate Governance Committee of Charah Solutions, Inc. (NYSE: CHRA) since March 2019 and a director of RingCentral, Inc. (NYSE: RNG) since November 2020.
Qualifications: Ms. Clyburn has extensive experience as a state regulator of investor-owned utilities and as a federal commissioner in the technology and telecommunications fields. Such expertise and additional background as a successful business executive, makes Ms. Clyburn invaluable and well qualified to serve on the Board.
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Gordon Crawford
Age: 76
Independent Director Since: February 2013
Committee Membership: Strategic Advisory Committee (Co-Chair)
Residence: Dana Point, California
Business Experience: For over 40 years, Mr. Crawford served in various positions at Capital Research and Management, a privately held global investment management company. In December 2012, Mr. Crawford retired as its Senior Vice President.
Other Directorships: Currently, Mr. Crawford serves as Director Emeritus of the Board of Trustees of the U.S. Olympic and Paralympic Foundation (which he Chaired for nine years from its inception in 2013), and as a Life Trustee on the Board of Trustees of Southern California Public Radio (which he Chaired from 2005 to 2012). Mr. Crawford formerly served as Vice Chairman at The Nature Conservancy and is currently a member of the Emeritus Board of the Nature Conservancy. Mr. Crawford is a past Vice Chairman of the Paley Center for Media and a member of the Board of Trustees of Berkshire School. Mr. Crawford also served on the Board of the U.S. Olympic and Paralympic Committee, and as a member of the Board of the LA24 Olympic and Paralympic Bid Committee.
Qualifications: Mr. Crawford has been one of the most influential and successful investors in the media and entertainment industry for over 40 years. Mr. Crawford’s professional experience and deep understanding of the media and entertainment sector makes Mr. Crawford a valuable member of the Board.
Jon Feltheimer
Age: 71
Director Since: January 2000
Position with Lionsgate: Chief Executive Officer since March 2000
Residence: Los Angeles, California
Business Experience: During his 30-year entertainment industry career, Mr. Feltheimer has held leadership positions at Lionsgate, Sony Pictures Entertainment and New World Entertainment, and has been responsible for tens of thousands of hours of television programming and hundreds of films. Prior to joining Lionsgate, he served as President of TriStar Television from 1991 to 1993, President of Columbia TriStar Television from 1993 to 1995, and President of Columbia TriStar Television Group and Executive Vice President of Sony Pictures Entertainment from 1995 to 1999, where he oversaw the launch of dozens of successful branded channels around the world.
Other Directorships: Mr. Feltheimer is a director of Grupo Televisa, S.A.B. (NYSE: TV; BMV: TLEVISA CPO).
Qualifications: During Mr. Feltheimer’s tenure, Lionsgate has grown from its independent studio roots into a global media and entertainment leader encompassing world-class film and television operations backed by an 18,000-title library. As Lionsgate’s Chief Executive Officer since 2000, Mr. Feltheimer provides a critical link to management’s perspective in Board discussions regarding the business and strategic direction of Lionsgate. With extensive experience at three different studios in the entertainment industry, Mr. Feltheimer brings an unparalleled level of strategic and operational experience to the Board, as well as an in-depth understanding of Lionsgate’s industry and invaluable relationships within the business and entertainment community.
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Emily Fine
Age: 49
Independent Director Since: November 2015
Committee Membership: Nominating and Corporate Governance Committee
Residence: New York, New York
Business Experience: Ms. Fine is a principal of MHR Fund Management, a New York based private equity firm that manages approximately $5 billion of capital and has holdings in public and private companies in a variety of industries. Ms. Fine joined MHR Fund Management in 2002 and is a member of the firm’s investment committee. Prior to joining MHR Fund Management, Ms. Fine served as Senior Vice President at Cerberus Capital Management, L.P. and also worked at Merrill Lynch in the Telecom, Media & Technology Investment Banking Group, where she focused primarily on media merger and acquisition transactions.
Other Directorships: Ms. Fine serves on the Board of Directors of Rumie Initiative, a non-profit organization dedicated to providing access to free educational content through digital microlearning.
Qualifications: Ms. Fine brings to the Board a unique perspective of Lionsgate’s business operations and valuable insight regarding financial matters. Ms. Fine has over 20 years of investing experience and experience working with various companies in the media industry, including, as a principal of MHR Fund Management, working closely with Lionsgate over the past ten years.
Investor Rights Agreement: Ms. Fine serves as a designee of MHR Fund Management under the Investor Rights Agreement (discussed below).
Michael T. Fries
Age: 60
Independent Director Since: November 2015
Committee Membership: Compensation Committee, Strategic Advisory Committee
Residence: Denver, Colorado
Business Experience: Mr. Fries has served as the Chief Executive Officer, President and Vice Chairman of the Board of Directors of Liberty Global, plc (“Liberty Global”) (NASDAQ: LBTYA, LBTYB, LBTYK) since June 2005.
Mr. Fries was Chief Executive Officer of UnitedGlobalCom LLC (“UGC”) from January 2004 until the businesses of UGC and Liberty Media International, Inc. were combined to form Liberty Global.
Other Directorships: Mr. Fries is Executive Chairman of Liberty Latin America Ltd. (since December 2017) (NASDAQ: LILA) and a director of Grupo Televisa S.A.B. (since April 2015) (NYSE: TV; BMV: TLEVISA CPO). Mr. Fries serves as board member of CableLabs® and as a Digital Communications Governor and Steering Committee member of the World Economic Forum. Mr. Fries serves as trustee and finance committee member for The Paley Center for Media.
Qualifications: Mr. Fries has over 30 years of experience in the cable and media industry. As an executive officer of Liberty Global and co-founder of its predecessor, Mr. Fries has overseen its growth into a world leader in converged broadband, video and mobile communications. Liberty Global delivers next-generation products through advanced fiber and 5G networks, and currently provides over 86 million connections across Europe and the U.K. Liberty Global’s joint ventures in the U.K. and the Netherlands generate combined annual revenue of over $17 billion, while remaining operations generate consolidated revenue of more than $7 billion. Through its substantial scale and commitment to innovation, Liberty Global is building Tomorrow’s Connections Today, investing in the infrastructure and platforms that empower customers and deploying the advanced technologies that nations and economies need to thrive. Additionally, Liberty Global’s investment arm includes a portfolio of more than 75 companies across content, technology and infrastructure. Mr. Fries’ significant executive experience in building and managing international distribution and programming businesses, in-depth knowledge of all aspects of a global telecommunications business and responsibility for setting the strategic, financial and operational direction for Liberty Global contribute to the Board’s consideration of the strategic, operational and financial challenges and opportunities of Lionsgate’s business, and strengthen the Board’s collective qualifications, skills and attributes.
Investor Rights Agreement: Mr. Fries serves as the designee of Liberty under the Investor Rights Agreement (discussed below).
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John D. Harkey, Jr.
Age: 62
Independent Director Since: June 2023
Committee Membership: Audit & Risk Committee
Residence: Dallas, Texas
Business Experience: Mr. Harkey has served as the principal and founder of JDH Investment Management, LLC, an investment advisory firm, since 2007, and as chairman and chief executive officer of Consolidated Restaurant Operations, Inc., a full-service and franchise restaurants company, since 1998. Mr. Harkey is also a co-founder, and has served on the board of directors, of Cessation Therapeutics, a developer of vaccines for addictions to fentanyl, heroin and nicotine, since June 2018. In addition, he was a co-founder of AveXis, Inc., a biotechnology company, from 2010 until it was acquired in 2018 by Novartis AG, and served as executive chairman from 2010 to 2015. Mr. Harkey holds a B.B.A. in Business Honors from the University of Texas at Austin, a J.D. from the University of Texas School of Law, and an M.B.A. from Stanford Graduate School of Business.
Other Directorships: Mr. Harkey serves on the board of directors of several privately-held companies and non-profit organizations, and previously served on the board of directors of Sumo Logic, Inc. until its acquisition by Francisco Partners in May 2023, Loral Space & Communications Inc., until its merger with Telesat Canada in November 2021, and Emisphere Technologies, Inc., until its acquisition by Novo Nordisk in December 2020.
Qualifications: Mr. Harkey has extensive operational experience as a private investor and chief executive, in both public and private companies, across a wide range of industries. Mr. Harkey qualifications and experiences, including executive leadership, global leadership, growth and operational scale, business development and strategy, finance and accounting, legal, regulatory, and compliance, and public company board membership, are invaluable to the Board.
Investor Rights Agreement: Mr. Harkey serves as a designee of MHR Fund Management under the Investor Rights Agreement (discussed below).
Susan McCaw
Age: 61
Independent Director Since: September 2018
Committee Membership: Audit & Risk Committee, Compensation Committee
Residence: North Palm Beach, Florida
Business Experience: Ms. McCaw is currently the President of SRM Capital Investments, a private investment firm. Before this, Ms. McCaw served as President of COM Investments, a position she held from April 2004 to June 2019 except while serving as U.S. Ambassador to the Republic of Austria from November 2005 to December 2007. Prior to April 2004, Ms. McCaw was the Managing Partner of Eagle Creek Capital, a private investment firm investing in private technology companies, a Principal with Robertson, Stephens & Company, a San Francisco-based technology investment bank, and an Associate in the Robertson Stephens Venture Capital Group. Earlier in her career, Ms. McCaw was a management consultant with McKinsey & Company.
Other Directorships: Ms. McCaw is a Director and member of the Leadership Development and Compensation Committee of Air Lease Corporation (NYSE: AL). Ms. McCaw is the Vice Chair of the Hoover Institution and a board member of the Ronald Reagan Presidential Foundation & Institute, Teach for America, and the Stanford Institute for Economic Policy Research. She is also a founding board member of the Malala Fund and serves as the Chair of the Knight-Hennessy Scholars Global Advisory Board. Ms. McCaw is also Trustee Emerita of Stanford University.
Qualifications: Ms. McCaw brings deep experience and relationships in global business and capital markets to the Board through her private sector experience in investment banking and investment management, and through her public service as a former U.S. Ambassador. Ms. McCaw holds a Bachelor’s Degree in Economics from Stanford University and a Masters of Business Administration from Harvard Business School. Ms. McCaw’s experience both as an investor and diplomat brings broad and meaningful insight to the Board’s oversight of Lionsgate’s business.
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Yvette Ostolaza
Age: 58
Independent Director Since: December 2019
Committee Membership: Nominating and Corporate Governance Committee (Chair)
Residence: Dallas, Texas
Business Experience: Since October 2013, Ms. Ostolaza has been a partner at Sidley Austin LLP, an international law firm with 21 offices and nearly $3 billion in revenue. She currently serves as Sidley’s Management Committee Chair and as a member of the firm’s Executive Committee. Ms. Ostolaza has also served on a number of nonprofit organizations as a board member or trustee. Ms. Ostolaza has received various legal and leadership awards, including being recognized by the Hispanic National Bar as Law Firm Leader of 2022, as a “Thought Leader” at Corporate Counsel’s 2019 Women, Influence & Power in Law Awards. Ms. Ostolaza has been selected as one of 20 “Women of Excellence” nationally by Hispanic Business magazine. In 2018, she received the Anti-Defamation League’s prestigious Schoenbrun Jurisprudence Award for her outstanding leadership and exemplary contributions to the community. Ostolaza also received the Texas Lawyer’s Lifetime Achievement Award and named by that publication as one of ten “Winning Women” and as a “Woman to Watch.” She also has been recognized by the Texas Diversity Counsel as one of its “Most Powerful and Influential Women,” and by Latino Leaders Magazine as one of its “Most Powerful Latino Lawyers.” Ms. Ostolaza is also a past recipient of Girls, Inc.’s annual “Woman of Achievement” award.
Qualifications: Ms. Ostolaza has spent her career developing a global practice representing public and private companies, board committees, and directors and officers in high-profile litigation, investigations, shareholder activism, regulatory, governance, and crisis management matters across a wide variety of industries. This breadth of experience provides important insight and counsel to the Board’s oversight of Lionsgate’s business.
Mark H. Rachesky, M.D.
Age: 64
Independent Director Since: September 2009
Committee Membership: Chair of the Board, Compensation Committee, Strategic Advisory Committee (Co-Chair)
Residence: New York, New York
Business Experience: Dr. Rachesky is Founder and Chief Investment Officer of MHR Fund Management LLC, a New York-based private equity firm that manages approximately $5 billion of capital and has holdings in public and private companies across a variety of industries.
Other Directorships: Dr. Rachesky is the Non-Executive Chairman of the Board of Directors, member of the Nominating Committee and the Human Resources and Compensation Committee of Telesat Corporation (NASDAQ: TSAT), and a director and member of the Nominating Committee, the Corporate Governance Committee and the Compensation Committee of Titan International, Inc. (NYSE: TWI). Dr. Rachesky formerly served on the Board of Directors of Loral Space & Communications Inc. until its merger with Telesat Canada in November 2021, on the Board of Directors of Navistar International Corporation (NYSE: NAV) until its merger with Traton SE in July 2021, and on the Board of Directors of Emisphere Technologies Inc. until it was acquired by Novo Nordisk in December 2020. Dr. Rachesky also serves on the Board of Directors of Mt. Sinai Hospital Children’s Center Foundation, the Board of Advisors of Columbia University Medical Center, as well as the Board of Overseers of the University of Pennsylvania.
Qualifications: Dr. Rachesky has demonstrated leadership skills as well as extensive financial expertise and broad-based business knowledge and relationships. In addition, as the Chief Investment Officer of MHR Fund Management LLC, with a demonstrated investment record in companies engaged in a wide range of businesses over the last 20 plus years, together with his experience as chair and director of other public and private companies, Dr. Rachesky brings broad and insightful perspectives to the Board relating to economic, financial and business conditions affecting Lionsgate and its strategic direction.
Investor Rights Agreement: Dr. Rachesky serves as a designee of MHR Fund Management under the Investor Rights Agreement (discussed below).
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Daryl Simm
Age: 62
Independent Director Since: September 2004
Committee Memberships: Compensation Committee (Chair)
Residence: Naples, Florida
Business Experience: Since November 2021, Mr. Simm has been the President and Chief Executive Officer of Omnicom Group, Inc. (NYSE: OMC). From February 1998 to November 2021, Mr. Simm was Chairman and Chief Executive Officer of Omnicom Media Group, a division of Omnicom Group, Inc.
Qualifications: Mr. Simm leads one of the industry’s largest media planning and buying groups representing blue-chip global advertisers that connect their brands to consumers through entertainment content. The agencies he leads routinely receive accolades as the most effective and creative in their field and he has been recognized as one of the “100 most influential leaders in marketing, media and tech.” Earlier in his career, Mr. Simm ran P&G Productions, a prolific producer of television programming, where he was involved in large co-production ventures and international content distribution. Mr. Simm was also the top media executive at Procter & Gamble, the world’s largest advertiser and a pioneer in the use of branded entertainment content. Mr. Simm’s broad experience across the media and content space makes him well qualified to serve on Board.
Hardwick Simmons
Age: 83
Independent Director Since: June 2005
Committee Membership: Audit & Risk Committee (Chair), Strategic Advisory Committee
Residence: Marion, Massachusetts
Business Experience: Mr. Simmons currently serves as a director of several privately held companies. From February 2001 to June 2003, Mr. Simmons served first as Chief Executive Officer and then as Chairman and Chief Executive Officer at The NASDAQ Stock Market Inc. From May 1991 to December 2000, Mr. Simmons served as President and Chief Executive Officer of Prudential Securities Incorporated.
Other Directorships: From 2003 to 2016, Mr. Simmons was the Lead Director and Chairman of the Audit and Risk Committee of Raymond James Financial (NYSE: RJF).
Qualifications: Mr. Simmons, through an accomplished career overseeing one of the largest equity securities trading markets in the world and other large complex financial institutions, brings important business and financial expertise to the Board in its deliberations on complex transactions and other financial matters. In addition, his broad business knowledge, connections in the business community and valuable insight regarding investment banking and regulation are relevant to the Board’s oversight of Lionsgate’s business.
Harry E. Sloan
Age: 73
Independent Director Since: December 2021
Committee Membership: Compensation Committee, Strategic Advisory Committee
Residence: Los Angeles, California
Business Experience: Mr. Sloan is a founder, public company chief executive officer and a leading investor in the media, entertainment and technology industries. Mr. Sloan is the Chairman and CEO of Eagle Equity Partners II, LLC (“Eagle Equity”). Under Mr. Sloan’s leadership, Eagle Equity has acquired and taken public, through special purpose acquisition companies, several digital media companies including, during 2020, DraftKings, Inc. (Nasdaq: DKNG) (“DraftKings”) and Skillz Inc. (NYSE: SKLZ). Mr. Sloan has been at the forefront and evolution of the video gaming industry as one of the founding investors and a Board Member of Zenimax/Bethesda Game Studios, the awarding winning studio acquired by Microsoft in March 2021. Mr. Sloan co-founded Soaring Eagle Acquisition Corp., which raised $1.725 billion in its initial public offering in February 2021, and in September 2021, completed its initial business combination with Ginkgo Bioworks Holdings, Inc.
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(NYSE: DNA) (“Ginkgo”). In January 2022, Mr. Sloan and his partners launched Screaming Eagle Acquisition Corp. (NASDAQ: SCRM). Earlier in his career, Mr. Sloan was Chairman and Chief Executive Officer of MGM Studios and founded and led two public companies in the entertainment media arena, New World Entertainment and SBS Broadcasting, S.A. Mr. Sloan was also one of the founding investors of Lionsgate and served as Lionsgate’s Non-Executive Chairman from 2004 to 2005.
Other Directorships: Mr. Sloan is a member of the Board of Directors and a member of the Audit Committee of Ginkgo, and Vice Chairman of the Board of Directors and Chair of the Nominating and Corporate Governance Committee of DraftKings.
Qualifications: Mr. Sloan’s extensive experience as an international media investor, entrepreneur and studio executive makes him well qualified to serve on the Board.
Investor Rights Agreement: Mr. Sloan serves as a designee of Discovery Lightning under the Investor Rights Agreement (discussed below).
Investor Rights Agreement
On November 10, 2015, (i) Liberty, a limited company organized under the laws of the United Kingdom and a wholly-owned subsidiary of Liberty Global, agreed to purchase 5,000,000 of Lionsgate’s then outstanding common shares from funds affiliated with MHR Fund Management, and (ii) Discovery Lightning, a limited company organized under the laws of the United Kingdom and a wholly-owned subsidiary of Warner Bros. Discovery, Inc. (“Discovery”) agreed to purchase 5,000,000 of Lionsgate’s then outstanding common shares from funds affiliated with MHR Fund Management (collectively, the “Purchases”).
In connection with the Purchases, on November 10, 2015, Lionsgate entered into an investor rights agreement with Liberty Global, Discovery, Liberty, Discovery Lightning and certain affiliates of MHR Fund Management (as amended from time to time, the “Investor Rights Agreement”). The Investor Rights Agreement provides that, among other things, (i) for so long as funds affiliated with MHR Fund Management beneficially own at least 10,000,000 of Lionsgate’s then outstanding common shares in the aggregate, Lionsgate will include three (3) designees of MHR Fund Management (at least one of whom will be an independent director and will be subject to Board approval) on its slate of director nominees for election at each future annual general and special meeting of Lionsgate’s shareholders and (ii) for so long as funds affiliated with MHR Fund Management beneficially own at least 5,000,000, but less than 10,000,000 of Lionsgate’s then outstanding common shares in the aggregate, Lionsgate will include one designee of MHR Fund Management on its slate of director nominees for election at each future annual general and special meeting of Lionsgate’s shareholders. Dr. Rachesky, Ms. Fine and a former director were appointed as initial designees of MHR Fund Management pursuant to the Investor Rights Agreement. Mr. Harkey serves as the current third designee under the Investor Rights Agreement.
In addition, the Investor Rights Agreement provides that (i) for so long as Liberty and Discovery Lightning (together with certain of their affiliates) beneficially own at least 10,000,000 of Lionsgate’s then outstanding common shares in the aggregate, Lionsgate’s will include one designee of Liberty and one designee of Discovery Lightning on its slate of director nominees for election at each future annual general and special meeting of Lionsgate’s shareholders and (ii) for so long as Liberty and Discovery Lightning (together with certain of their affiliates) beneficially own at least 5,000,000, but less than 10,000,000 of Lionsgate’s then outstanding common shares in the aggregate, Lionsgate will include one designee of Liberty and Discovery Lightning, collectively, on its slate of director nominees for election at each future annual general and special meeting of Lionsgate’s shareholders, selected by (a) Liberty, if Liberty individually exceeds such 5,000,000 common share threshold but Discovery Lightning does not, (b) Discovery Lightning, if Discovery Lightning individually exceeds such 5,000,000 common share threshold but Liberty does not and (c) Liberty and Discovery Lightning, jointly, if neither Liberty nor Discovery Lightning individually exceeds such 5,000,000 common share threshold. Mr. Fries was appointed as a designee of Liberty and a former director was appointed as a designee of Discovery Lightning, and both were appointed as directors of Lionsgate effective on November 12, 2015. Currently, Mr. Sloan serves as the designee of Discovery Lightning under the Investor Rights Agreement.
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In addition, under the Investor Rights Agreement, Lionsgate has also agreed to provide Liberty, Discovery Lightning and MHR Fund Management with certain pre-emptive rights on shares that Lionsgate may issue in the future for cash consideration.
Under the Investor Rights Agreement, Liberty and Discovery Lightning (together with certain of their affiliates) have agreed that if they sell or transfer any of their shares of Lionsgate common stock to a shareholder or group of shareholders that beneficially own 5% or more of Lionsgate’s then outstanding common shares, or that would result in a person or group of persons beneficially owning 5% or more of Lionsgate’s then outstanding common shares, any such transferee would have to agree to the restrictions and obligations set forth in the Investor Rights Agreement, including transfer restrictions, subject to certain exceptions set forth in the Investor Rights Agreement.
Executive Officers
The following is a list of our executive officers followed by their biographical information (other than for Messrs. Feltheimer and Burns, whose biographical information appears above). Ages are as of July 14, 2023.
| Name |
Age | Position | ||||
| Jon Feltheimer |
71 | Chief Executive Officer | ||||
| Michael Burns |
64 | Vice Chair | ||||
| James W. Barge |
67 | Chief Financial Officer | ||||
| Brian Goldsmith |
51 | Chief Operating Officer | ||||
| Bruce Tobey |
64 | Executive Vice President and General Counsel | ||||
James W. Barge has been Lionsgate’s Chief Financial Officer since October 2013. From October 2010 to November 2012, Mr. Barge served as the Executive Vice President, Chief Financial Officer of Viacom, Inc. (having served as its Executive Vice President, Controller, Tax and Treasury since January 2008), where he was responsible for overseeing all aspects of the company’s global finances and capital structure, as well as information technology, risk management and internal audit activities. Prior to joining Viacom, Mr. Barge served as Senior Vice President, Controller and Chief Accounting Officer (from October 2002 to December 2007) and Vice President and Controller (from February 2000 to October 2002) of Time Warner Inc., where he was responsible for the company’s overall financial planning, reporting and analysis, including budgeting and long range planning, and led several shared service and global process improvement initiatives. Mr. Barge joined Time Warner in March 1995 as Assistant Controller. Prior to joining Time Warner, Mr. Barge held several positions at Ernst & Young, including Area Industry Leader of the Consumer Products Group and National Office Partner, where he was responsible for the resolution of SEC accounting and reporting issues. Mr. Barge is the Chair of the Audit Committee and a member of the Nominating and Governance Committee of Scholastic Corporation (NASDAQ: SCHL).
Brian Goldsmith has been Lionsgate’s Chief Operating Officer since October 2012, and served as Lionsgate’s Executive Vice President, Corporate Development and Strategy, from September 2008 to October 2012. Prior to that, Mr. Goldsmith served as the Chief Operating Officer and Chief Financial Officer of Mandate Pictures, LLC, a wholly-owned subsidiary of Lionsgate since September 2007.
Bruce Tobey has been Lionsgate’s Executive Vice President and General Counsel since March 2023. Prior to that, Mr. Tobey was a partner at O’Melveny & Myers LLP, where he worked from August 2012 to March 2023. Prior to joining O’Melveny & Myers LLP, Mr. Tobey also served as Chief Operating Officer at CBS Films from March 2007 to December 2010, as Executive Vice President at Paramount Pictures Corporation from February 2001 to August 2005, and as a partner at Troop Steuber Pasich Reddick & Tobey, LLP (and its predecessor firm), where he worked from May 1986 to March 2000.
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Appointment of Executive Officers
Lionsgate’s officers are appointed and serve at the discretion of the Board. The employment agreements for the Named Executive Officers (as defined under Item 11, Executive Compensation below) are described in “— Executive Compensation Information of Lionsgate — Description of Employment Agreements” below.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Lionsgate’s executive officers and directors and persons who own more than 10% of a registered class of Lionsgate’s equity securities to file reports of ownership and changes in ownership with the SEC. As an administrative matter, Lionsgate assists its executive officers and directors by monitoring transactions and filing Section 16 reports on their behalf. Based solely on a review of the copies of such forms we received, or representations from certain reporting persons that no forms were required for those persons, we believe that during fiscal 2023, our executive officers, directors and greater than 10% beneficial owners complied with all applicable Section 16(a) filing requirements.
Code of Conduct and Ethics
Lionsgate has a Code of Business Conduct and Ethics that applies to all its directors, officers and employees (and, where applicable, to its suppliers, vendors, contractors and agents) and is available on its website at https://investors.lionsgate.com/governance/governance-documents, and can be obtained in print, without charge, by any shareholder upon request to Lionsgate’s Corporate Secretary. Lionsgate will disclose on its website any waivers of, or amendments to, the code that applies to Lionsgate’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or persons performing similar functions.
Role of the Board and Corporate Governance Guidelines
Lionsgate’s corporate governance practices are embodied in its Corporate Governance Guidelines established by the Board. These guidelines, which provide a framework for the conduct of the Board’s business, provide that:
| • | the Board review and regularly monitor the effectiveness of Lionsgate’s fundamental operating, financial and other business plans, policies and decisions, including the execution of its strategies and objectives; |
| • | the Board act in the best interest of Lionsgate to enhance long-term shareholder value; |
| • | a majority of the members of the Board be independent directors; |
| • | the independent directors meet at least quarterly in executive session, or otherwise as needed; |
| • | directors have unimpeded access to management and, as necessary and appropriate, independent advisors; and |
| • | the Board and its committees conduct annual self-evaluations to determine whether they are functioning effectively. |
The full text of the key practices and procedures of the Board are outlined the Corporate Governance Guidelines available on Lionsgate’s website at http://investors.lionsgate.com/governance/governance-documents, or may be obtained in print, without charge, by any shareholder upon request to Lionsgate’s Corporate Secretary, at either of its principal executive offices.
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Board Committees and Responsibilities
The Board has a standing Audit & Risk Committee, Compensation Committee, Nominating and Corporate Governance Committee and Strategic Advisory Committee. The table below provides current membership information for its standing committees, as well as meeting information for such committees.
| Audit & Risk Committee |
Compensation Committee |
Nominating & Corporate Governance Committee |
Strategic Advisory Committee | |||||
| Michael Burns |
||||||||
| Mignon Clyburn* |
|
|||||||
| Gordon Crawford* |
| |||||||
| Jon Feltheimer |
||||||||
| Emily Fine* |
|
|||||||
| Michael T. Fries* |
|
| ||||||
| John D. Harkey, Jr.* |
|
|||||||
| Susan McCaw* |
|
|
||||||
| Yvette Ostolaza* |
|
|||||||
| Mark H. Rachesky, M.D.* |
|
| ||||||
| Daryl Simm* |
|
|||||||
| Hardwick Simmons* |
|
| ||||||
| Harry E. Sloan* |
|
| ||||||
| *Independent Director |
|
Chairperson |
|
Member |
Audit & Risk Committee
Messrs. Simmons (Chair) and Harkey and Ms. McCaw are the current members of the Audit & Risk Committee.
The Audit & Risk Committee is governed by a written charter adopted by the Board, which is available on Lionsgate’s website at http://investors.lionsgate.com/governance/governance-documents, or may be obtained in print, without charge, by any shareholder upon request to Lionsgate’s Corporate Secretary.
Pursuant to its charter, the duties and responsibilities of the Audit & Risk Committee include, among other things, the following:
| • | overseeing the integrity of Lionsgate’s financial statements, accounting and financial reporting processes; |
| • | overseeing Lionsgate’s exposure to risk and compliance with legal and regulatory requirements; |
| • | overseeing the independent auditor’s qualifications and independence; |
| • | overseeing the performance of Lionsgate’s internal audit function and independent auditor; |
| • | overseeing the development, application and execution of all Lionsgate’s risk management and risk assessment policies and programs; |
| • | preparing the reports required by applicable SEC and Canadian securities commissions’ disclosure rules; and |
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| • | reviewing and providing oversight over Lionsgate’s information technology and cybersecurity risk, policies and procedures. |
The Board has determined that each member of the Audit & Risk Committee qualifies as an “independent” director under the New York Stock Exchange listing standards and the enhanced independence standards applicable to audit committee members pursuant to Rule 10A-3(b)(1) under the Exchange Act, and that each member of the Audit & Risk Committee is “independent” and “financially literate” as prescribed by Canadian securities laws, regulations, policies and instruments. Additionally, the Board has determined that Mr. Simmons is an “audit committee financial expert” under applicable SEC rules and has “accounting or related financial management expertise” under the New York Stock Exchange listing standards.
Compensation Committee
Messrs. Simm (Chair), Fries, Rachesky, Sloan and Ms. McCaw are the current members of the Compensation Committee.
The Compensation Committee is governed by a written charter adopted by the Board, which is available on Lionsgate’s website at http://investors.lionsgate.com/governance/governance-documents, or may be obtained in print, without charge, by any shareholder upon request to Lionsgate’s Corporate Secretary.
Pursuant to its charter, the duties and responsibilities of the Compensation Committee include, among other things, the following:
| • | reviewing, evaluating and making recommendations to the Board with respect to management’s proposals regarding Lionsgate’s overall compensation policies and practices and overseeing the development and implementation of such policies and practices; |
| • | evaluating the performance of and reviewing and approving the level of compensation for Lionsgate’s Chief Executive Officer and Vice Chair; |
| • | in consultation with Lionsgate’s Chief Executive Officer, considering and approving the selection, retention and remuneration arrangements for other executive officers and employees of Lionsgate with compensation arrangements that meet the requirements for Compensation Committee review, and establishing, reviewing and approving compensation plans in which such executive officers and employees are eligible to participate; |
| • | reviewing and recommending for adoption or amendment by the Board and, when required, Lionsgate’s shareholders, incentive compensation plans and equity compensation plans and administering such plans and approving award grants thereunder to eligible persons; and |
| • | reviewing and recommending to the Board compensation for the Board and committee members. |
The Compensation Committee is also authorized, after considering such independence factors as may be required by the New York Stock Exchange rules or applicable SEC rules, to retain independent compensation consultants and other outside experts or advisors as it believes to be necessary or appropriate to carry out its duties. See “— Compensation Discussion and Analysis of Lionsgate” for additional discussion of the Compensation Committee’s role and responsibilities, including a discussion on the role of Lionsgate’s compensation consultant in fiscal 2023.
Lionsgate’s executive officers, including the Named Executive Officers, do not have any role in determining the form or amount of compensation paid to the Named Executive Officers and Lionsgate’s other senior executive officers (other than Lionsgate’s Chief Executive Officer, who makes recommendations to the Compensation Committee with respect to compensation paid to the other Named Executive Officers (other than Lionsgate’s Vice Chair)). The Board has determined that each member of the Compensation Committee qualifies
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as an “independent” director under the New York Stock Exchange listing standards and the enhanced independence standards applicable to compensation committee members under the New York Stock Exchange listing standards. In making its independence determination for each member of the Compensation Committee, the Board considered whether the director has a relationship with Lionsgate that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member.
Nominating and Corporate Governance Committee
Mmes. Ostolaza (Chair), Clyburn and Fine are the current members of the Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee is governed by a written charter adopted by the Board which is available on Lionsgate’s website at http://investors.lionsgate.com/governance/governance-documents, or may be obtained in print, without charge, by any shareholder upon request to Lionsgate’s Corporate Secretary.
Pursuant to its charter, the duties and responsibilities of the Nominating and Corporate Governance Committee include, among other things, the following:
| • | identifying, evaluating and recommending individuals qualified to become members of the Board, consistent with criteria approved by the Board; |
| • | considering and recommending to the Board the director nominees for each annual meeting of shareholders, the Board committees and the Chairpersons thereof; |
| • | periodically reviewing Lionsgate’s activities and practices regarding corporate responsibility and environmental, social and related governance (“ESG”) matters that are significant to Lionsgate, oversee Lionsgate’s public reporting on these topics and receive updates from Lionsgate’s management committee responsible for significant ESG activities; |
| • | reviewing Lionsgate’s human capital management policies, programs and initiatives focused on Lionsgate’s culture, talent development, retention, and diversity and inclusion; |
| • | developing and recommending to the Board a set of corporate governance guidelines applicable to Lionsgate and assisting in the oversight of such guidelines; and |
| • | overseeing the evaluation of the Board and management. |
The Board has determined that each member of the Nominating and Corporate Governance Committee qualifies as an “independent” director under the New York Stock Exchange listing standards.
Strategic Advisory Committee
Messrs. Crawford (Co-Chair), Rachesky (Co-Chair), Fries, Simmons and Sloan are the current members of the Strategic Advisory Committee.
The Strategic Advisory Committee is responsible for reviewing Lionsgate’s strategic plan, meeting with management on a periodic basis to review operations against the plan, as well as overseeing preliminary negotiations regarding strategic transactions and, when applicable, acting as a pricing and approval committee on certain transactions.
Each member of the Strategic Advisory Committee qualifies as an “independent” director under the New York Stock Exchange listing standards.
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Shareholder Communications
The Board recognizes the importance of providing Lionsgate shareholders and interested parties with a means of direct communication with the members of the Board. Shareholders and interested parties who would like to communicate with the Chair of the Board or its non-employee directors may do so by writing to the Board or its non-employee directors, care of Lionsgate’s Corporate Secretary, at either of its principal executive offices. Additionally, shareholder recommendations for director nominees are welcome and should be sent to Lionsgate at 2700 Colorado Avenue, Santa Monica, California 90404, who will forward such recommendations to the Chair of the Nominating and Corporate Governance Committee. The full text of Lionsgate’s Policy on Shareholder Communications is available on Lionsgate’s website at http://investors.lionsgate.com/governance/governance-documents.
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| ITEM 11. | EXECUTIVE COMPENSATION |
Compensation Discussion and Analysis
This Compensation Discussion and provides a detailed description of our executive compensation philosophy and program, the compensation decisions made by Lionsgate and the matters considered in making such decisions, in each case in respect of fiscal 2023.
Named Executive Officers
This “Compensation Discussion and Analysis” is designed to provide shareholders with an understanding of Lionsgate’s historical executive compensation philosophy, objectives, and practices. In doing so, it describes the material elements of compensation at Lionsgate awarded to, earned by, or paid to the individuals who served as Lionsgate’s principal executive officer, Lionsgate’s principal financial officer, and Lionsgate’s three other most highly compensated executive officers for fiscal 2023 (the “Named Executive Officers”). The Named Executive Officers that served for fiscal 2023 are set forth below.
| Named Executive |
Officer Position | |
| Jon Feltheimer |
Chief Executive Officer | |
| Michael Burns |
Vice Chair | |
| James W. Barge |
Chief Financial Officer | |
| Brian Goldsmith |
Chief Operating Officer | |
| Corii D. Berg* |
Former Executive Vice President and General Counsel | |
| Bruce Tobey** |
Executive Vice President and General Counsel |
| * | Mr. Berg resigned as Lionsgate’s Executive Vice President and General Counsel effective December 20, 2022. |
| ** | Mr. Tobey was appointed as Lionsgate’s Executive Vice President and General Counsel effective March 27, 2023. |
Executive Summary
|
WHO LIONSGATE IS | |||
| Business Segments | ||||
| Studio Business |
Starz Business | |||
| Motion Picture Television Production |
Media Networks
| |||
| • Diversified motion picture business with 10-12 wide theatrical releases and slate of 40-50 multiplatform and direct-to-streaming titles a year.
• Television business encompassing more than 100 shows spanning dozens of platforms from its scripted operations, 3 Arts Entertainment, Pilgrim Media Group and Debmar-Mercury. |
• Leading global premium subscription platform with content strategy focused on two valuable and scalable core demographics.
• Majority of subscribers from streaming. | |||
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| World Class Franchises and Series | ||||||||||||
|
• 4 films • $3.0 billion+ global box office • The Ballad of Songbirds and Snakes (November 2023) |
|
• 5 films • $3.4 billion+ global box office |
|
• 4 films • Over $1 billion global box office • The Continental (September 2023) • Ballerina (June 2024) | |||||||
|
• 7 seasons • 4 consecutive Best Drama Emmy’s (116 nominations) |
|
• 7 seasons • 4 consecutive Best Drama Emmy’s (116 nominations) |
|
• 3 spinoffs (Power Book II: Ghost, Power Book III: Raising Kanan, Power Book IV: Force) | |||||||
|
• 3 films • $700 million box office • Expendables 4 (September 2023) |
|
• $450 million box office • 14 nominations and 6 Oscar wins • Broadway musical in development |
|
• 10 films • $1 billion+ global box office • Saw 10 (October 2023) | |||||||
|
• 2 seasons (renewed for season 3) • Season 2: over • 10 million multi-platform views per episode. |
|
• 2 seasons (renewed for season 3) • Neilsen’s top 10 of top 100 shows of 2022-2023 based on total viewers |
|
• 8 seasons • 2 Emmy awards (14 nominations) • Reboot in development | |||||||
|
• Best-selling library title • 35th anniversary in 2022 • Re-imagining in development for 2025 |
|
• 2 films • $600 million+ global box office • Now You See Me 3 in development |
|
• 7 films • $700 million box office • STARZ television series | |||||||
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|
WHAT MANAGEMENT ACCOMPLISHED IN FISCAL 2023
|
|||||||||
| Over $1 Billion
John Wick films at global box office; John Wick: Chapter 4 over $425 million at global box office (franchise best) |
$884 Million
Film and television library revenue for the trailing 12-months |
29.7 Million
STARZ global subscribers* (14% year-over-year growth)
* Including STARZPLAY Arabia, a non-consolidated equity method investee and excluding subscribers in exited territories
| ||||||||
| $200 Million of 5.500% Senior Notes
Repurchased for $135.0 million; additional $85.0 million repurchased for $61.4 million in May 2023 |
New Starz Bundling Agreements
With Amazon/MGM+ and AMC+ domestically, Hayu on Amazon in the U.K. and Disney+ in Latin America |
Treasury Management
Undrawn revolving credit facility of $1.25 billion and $272 million in cash and cash equivalents at quarter ended March 31, 2023
| ||||||||
|
85% and 89% Q4 2023 Increase
Motion Picture segment revenue and segment profit, respectively, compared to prior year quarter |
1.3 Million and 700,000 Q4 2023 Increase
Total STARZ global over-the-top subscribers* (sequential quarter, excluding subscribers in exited territories) and domestic over-the top subscribers, respectively
* Including STARZPLAY Arabia, a non-consolidated equity method investee
|
$1.5 Billion
Studio backlog* at March 31, 2023 from Motion Picture and Television Production segments
* The backlog portion of remaining performance obligations (excluding deferred revenue) | ||||||||
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|
STOCK PERFORMANCE RETURNS RELATIVE TO PEERS (SEPTEMBER 20, 2022* – MARCH 31, 2023) | |||||
|
| ||||||
|
* Reflects the restructuring of LIONSGATE+ by exiting seven international territories, commencing the three months ended September 30, 2022. | ||||||
|
Goals of the Lionsgate Compensation Program | |
| • Attract, motivate and retain top executive talent in an intensely competitive industry • Align executive pay with operating and financial performance • Align executive pay with execution of long-term performance • Align executive interests with those of shareholders • Incentivize shareholder value creation | ||
|
Basic Lionsgate Compensation Program Principles | |
| • Balance components of compensation • Be competitive within Lionsgate’s industry • Maintain appropriate level of “at-risk” compensation • Balance metric-driven and qualitative decision-making • Maintain “clawback” policy to recover unjustified payments • No tax gross-ups • No repricing or buyouts of stock options/SARs without shareholder approval • No single-trigger change-of-control provisions | ||
|
How the Compensation Committee Works | |
| • Maintain proactive, ongoing, and transparent dialogue with investors • Use multiple operational, financial, and intangible metrics • Review cost and dilutive impact of stock compensation • Use performance metrics for all employees, including Named Executive Officers • Use updated peer group and industry survey data for compensation context • Take counsel from Pay Governance, its independent outside consultant | ||
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|
|
The Components of Executive Compensation
| |||||||
| Item |
Nature |
Purpose |
Basis | |||||
| Base Salary | Fixed; Short-term | Provide degree of financial stability; Retention | Competitive within peer and industry context | |||||
| Annual Incentive Bonus | At-risk; Short-term | Reward near-term performance; Promotion and contribution of business strategy; Ensure competitive compensation | Competitive within peer and industry context; Performance-based, with defined target opportunity | |||||
| Long-Term Incentive Awards | At-risk; Long-term | Retention; Reward long- term performance; Alignment with shareholder interests | Competitive within peer and industry context; Time and performance- based equity, vesting in tranches over multiple years | |||||
|
Determination of Annual Bonus for Fiscal 2023 | |||||
|
|
1/3 Corporate Performance | |||||
| Overall Lionsgate financial and operating performance – the Compensation Committee determined to award 96% for corporate performance. | ||||||
| 1/3 Divisional Performance | ||||||
| Overall financial and operational performance of each operating division – the Compensation Committee determined to award 120%, 100% and 70% for Motion Picture, Television Production, and Media Networks segment performance, respectively. | ||||||
| 1/3 Individual Performance | ||||||
| Individual achievements and contributions of each executive – individual performance percentages for fiscal 2023 noted below. | ||||||
For more information on the compensation of the Named Executive Officers, see the Summary Compensation Table below.
Shareholder Engagement
Lionsgate proactively engages with shareholders and other stakeholders throughout the year to discuss significant issues, including company performance and strategy, corporate governance, executive compensation, and environmental, social, and governance topics. Lionsgate takes feedback and insights from its engagement with shareholders and other stakeholders into consideration as it reviews and evolves its practices and disclosures, and further shares them with the Board, as appropriate.
In fiscal 2023, Lionsgate engaged with 30 of its top 50 shareholders and actively-managed institutional investors owning approximately 75% of existing common stock (not including shares held by officers and
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directors). Participating in this outreach were Messrs. Feltheimer, Burns, Barge, Goldsmith, Jeff Hirsch, the President and Chief Executive Officer of Starz, Lionsgate’s wholly-owned subsidiary, and other senior executives from all of Lionsgate’s businesses with support from Lionsgate’s Investor Relations Department.
Lionsgate presented at 9 major investor conferences, including: The Morgan Stanley 2023 Tech, Media, & Telecom Conference and The Bank of America 2022 Media, Communications and Entertainment Conference. Lionsgate also hosted media investor “bus tour” meetings through MoffettNathanson, Cowen, JP Morgan, Credit Suisse and Wells Fargo, that included interactions with over 50 analysts/investors in Lionsgate’s Santa Monica office, and held more than 100 virtual and in-person investor meetings, representing virtually all of Lionsgate’s analysts and top 25 shareholders.
At Lionsgate’s annual general and special meeting of shareholder held in September 2022, 96.3% of votes cast at that meeting voted in favor of Lionsgate’s executive compensation program (referred to as a “say-on-pay proposal”). Lionsgate believes the results of last year’s “say-on-pay” vote and input from its shareholder engagement affirmed its shareholders’ support of the Lionsgate compensation program. This informed Lionsgate’s decision to maintain a consistent overall approach in setting executive compensation for fiscal 2023.
Key Actions in Response to Shareholder Engagement
| • | No grants of special equity awards in fiscal 2023 outside of Lionsgate’s regular compensation program. |
| • | Annual equity awards to Named Executive Officers in fiscal 2023 (other than to Mr. Burns, who is not eligible for such awards) were granted at 85% of respective equity target amounts, as set forth in the applicable employment agreements, reflecting financial performance in fiscal 2022. |
| • | 50% of such awards consisted of performance-based restricted share units, vesting over three years only if the volume-weighted average of the closing price of Class B non-voting shares over a period of twenty consecutive trading days ending on or before such three-year period is equal to or greater than $14.61. |
| • | Continued to utilize Adjusted OIBDA and segment profit as the performance metrics to determine fiscal 2023 annual incentive bonuses (see “Compensation Components – Fiscal 2023 Company Financial Performance” below). |
| • | Based on analysis by Pay Governance, capped individual performance measure for annual incentive bonuses at 300%. |
| • | Continued disclosure with respect to environment, social and governance matters. |
Key Features of the Lionsgate Executive Compensation Program
The Compensation Committee believes that the Lionsgate executive compensation program aligns the interests of the Named Executive Officers with Lionsgate’s long-term strategic direction and the interests of Lionsgate’s shareholders. The Lionsgate program’s key features include:
| • | Competitive pay using updated peer group and industry survey data for compensation decisions. |
| • | Significant “at risk” pay: |
| • | Lionsgate provides annual incentive opportunities and other long-term equity awards, which constitute a significant portion of each executive’s total compensation opportunity. |
| • | The Compensation Committee retains discretion in assessing performance and awarding payouts under the annual incentive plan and performance-based equity awards. |
| • | Compensation is balanced – the compensation program provides a mix of fixed compensation and short-term and long-term variable compensation. |
| • | Limited benefits and perquisites are provided. |
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Lionsgate has entered into employment agreements with each of its Named Executive Officers and believes these agreements have helped create stability for the management team. These agreements have been structured to incorporate a number of features that Lionsgate believes represent best practices in executive compensation and are generally favored by shareholders. In particular, these agreements do not provide for any accelerated vesting of equity awards or other payments or benefits that are triggered solely by a change in control (i.e., there are no “single-trigger” benefits) or any rights for the executive to be grossed up for any taxes imposed on excess parachute payments in connection with a change in control. These agreements also do not include any right for the executive to voluntarily terminate employment in connection with a change in control and receive severance (other than certain “good reason” terminations that Lionsgate believes would constitute a constructive termination of the executive’s employment).
As noted below, equity award grants to Named Executive Officers at Lionsgate are generally determined in connection with a new or amended employment agreement with Lionsgate (which includes specifying grants to be made annually over its term). Lionsgate typically does not consider equity-based awards to its executive officers at any other time, but may pay annual bonuses in cash and/or equity awards, and retains discretion to grant equity awards to executives at other times as the Compensation Committee may determine appropriate.
Program Objectives
The goal of the Lionsgate executive compensation program is to facilitate the creation of long-term value for shareholders by attracting, motivating, and retaining qualified senior executive talent. To this end, the Compensation Committee has designed and administered the Lionsgate compensation program to reward executives for sustained financial and operating performance, to align their interests with those of shareholders, and to encourage them to remain with Lionsgate for long and productive careers. A significant portion of Lionsgate’s senior executives’ compensation is “at risk” in the form of annual and long-term incentive awards that are paid, if at all, based upon performance.
Compensation Practices
| What Lionsgate Does |
What Lionsgate Does Not Do | |
| ✓ Pay for Performance: A significant portion of Named Executive Officers compensation is “at risk” in the form of annual and long-term incentive awards that are tied to Lionsgate financial results or the performance of Lionsgate’s stock price, or both. |
× No Excise Tax Gross-ups: Employment agreements and other compensation arrangements with the Named Executive Officers do not provide for any gross-up payments to cover excise taxes incurred by the executive. | |
| ✓ Use Multiple Performance Metrics: Lionsgate’s annual bonus and long-term incentive programs rely on diversified performance metrics, including individual and group contributions, and Lionsgate’s financial and operating performance. |
× No Tax Gross-ups for Personal Benefits: No Named Executive Officer is entitled to receive gross-ups for taxes on personal benefits. | |
| ✓ Risk Mitigation: Lionsgate’s compensation program has provisions to mitigate undue risk, including caps on the maximum level of payouts, clawback provisions, multiple performance metrics, and board and management processes to identify risk. |
× No Single-Trigger Change-in-Control Agreements: No employment agreements or arrangements for the Named Executive Officers provide benefits triggered solely by a change in control of Lionsgate. | |
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| What Lionsgate Does |
What Lionsgate Does Not Do | |
| ✓ Review of Share Utilization: The Compensation Committee evaluates share utilization levels by reviewing the cost and dilutive impact of stock compensation. |
× No Hedging/Pledging: Lionsgate prohibits all directors and employees, including the Named Executive Officers, from collateral pledging and margin practices involving Lionsgate’s common shares. | |
| ✓ Competitive Peer Group: Lionsgate’s peer group generally consists of companies with which Lionsgate directly competes for executive talent and are generally similar to Lionsgate in terms of revenues, market-capitalization, and focus of its business. |
× No Repricing of Stock Options or SARs: Repricing of stock options or SARs is not allowed without the approval of Lionsgate’s shareholders. | |
| ✓ Independent Compensation Consultant: The Compensation Committee retains Pay Governance, an independent compensation consultant, to provide advice on matters concerning executive and non-employee director pay. |
× No Buyout of Underwater Stock Options or SARs: Lionsgate may not provide for cash buyouts of underwater option or SARs without shareholder approval. | |
Process for Determining Executive Compensation
Set forth below is a description of Lionsgate’s process for determining executive compensation in fiscal 2023.
Role of the Compensation Committee
Lionsgate’s executive compensation program is administered by the Compensation Committee, which operates pursuant to a written charter. The Compensation Committee, working with management, determines and implements Lionsgate’s executive compensation philosophy, structure, policies and programs, and administers Lionsgate’s compensation and benefit plans. The Compensation Committee is ultimately responsible for determining the compensation arrangements for Lionsgate’s executive officers and reports to the Board on all compensation matters regarding Lionsgate’s executives and other key salaried employees.
Role of Management
The Compensation Committee reviews information provided by management in order to help align the design and operation of the executive compensation program with Lionsgate’s business strategies and objectives. At various times during fiscal 2023, Lionsgate’s Chief Executive Officer and other executives attended relevant portions of Compensation Committee meetings in order to provide information and answer questions regarding Lionsgate’s strategic objectives and financial performance that may be relevant to the Compensation Committee’s decisions. Generally, Lionsgate’s Chief Executive Officer makes recommendations to the Compensation Committee with respect to terms of employment for other executive officers (other than himself and the vice chair), taking into account competitive market information, Lionsgate’s compensation strategy, his qualitative assessment of the particular executive’s individual performance, and the experience level of the particular executive. The Compensation Committee discusses these recommendations with Lionsgate’s Chief Executive Officer and either approves or modifies them in its discretion. The Compensation Committee is solely responsible for determining the compensation of Lionsgate’s chief Executive Officer and Lionsgate’s Vice Chair. None of the Named Executive Officers are members of the Compensation Committee or otherwise have any role in determining their own compensation.
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Role of Compensation Consultant
The Compensation Committee retains the services of an outside compensation consultant to assist in its review and determination of Lionsgate’s executive compensation program. For fiscal 2023, the Compensation Committee engaged Pay Governance as its independent compensation consultant. Pay Governance assists the committee in the development and evaluation of Lionsgate’s executive compensation program, policies, and practices, and its determination of executive compensation, and provides advice to the Compensation Committee, on other matters related to its responsibilities. Pay Governance reports directly to the Compensation Committee and the Compensation Committee has the sole authority to retain and terminate the consultant and to review and approve the consultant’s fees and other retention terms. In fiscal 2023, Lionsgate paid Pay Governance $196,148 for various engagement services for the Compensation Committee.
Consultant Independence
During fiscal 2023, Pay Governance did not perform work for Lionsgate other than pursuant to its engagement by the Compensation Committee. The Compensation Committee has assessed the independence of Pay Governance and concluded that its engagement of Pay Governance does not raise any conflict of interest with Lionsgate or any of its directors or executive officers.
Peer Group Analysis
The Compensation Committee utilizes a peer group to make comparisons of its executives’ compensation with that of similarly situated executives with other companies in order to help ensure that Lionsgate’s compensation packages are competitive with the broader market and aligned with shareholder interests. The peer group is generally comprised of companies focused on film production, television programming, digital content creation and live entertainment, which the Compensation Committee considers to be similar to Lionsgate in terms of revenue, market capitalization, and business focus.
In fiscal 2023, the Compensation Committee retained Pay Governance to update its peer group. Pay Governance noted that Lionsgate competes in a talent market where traditional scope markers such as revenue size and market capitalization are not as relevant as they might be in a typical industrial or general industry company. For instance, many traditional film and television production companies have gradually consolidated over the past decade into a small group of major diversified public entertainment companies, smaller independent studios are private or divisions of non-U.S. based companies, new streaming or digital competitors have experienced rapid growth or are also divisions of much larger public companies, and compensation data for executives running larger studios at competitors are typically not publicly disclosed. Accordingly, Pay Governance developed a broader universe of potential peers by reviewing companies within a specified range of Lionsgate’s revenue (e.g., $850 million to $13.5 billion, or approximately 0.25 to 4 times revenue at such time) and market capitalization (e.g., $700 million to $15 billion, or approximately 0.25 to 5 times market capitalization at such time), considering peers in adjacent or similar entertainment content creation/distribution industries, reviewing companies utilized by certain shareholder service firms in their reports on Lionsgate from the previous fiscal year, identifying “peer to peer” companies (i.e., those used by multiple Lionsgate peers but not currently used by Lionsgate), and noting “reverse peer” companies (i.e., those disclosing Lionsgate as a peer).
Based on its review, Pay Governance recommended, and the Compensation Committee selected, the following peer group for fiscal 2023:
| General Peer Group | ||
| AMC Networks Inc. |
Madison Square Garden Entertainment Corp. | |
| Electronic Arts Inc. |
Nexstar Media Group, Inc. | |
| Fox Corporation |
Sirius XM Holdings Inc. | |
| Hasbro, Inc. |
Take-Two Interactive Software, Inc. | |
| Live Nation Entertainment, Inc. |
World Wrestling Entertainment, Inc. | |
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Pay Governance also recommended that Lionsgate continue to utilize industry survey data (such as the Willis Towers Watson Entertainment Industry Survey) to provide compensation data for entertainment-industry specific roles that may not be reflected within the peer group. The participants in this survey include the following:
| Entertainment Industry Group | ||
| ABC |
Showtime | |
| Amazon Studios |
Sony Pictures Entertainment | |
| AMC Networks |
The CW | |
| CBS |
Viacom Media Networks | |
| NBCUniversal |
Walt Disney Studios | |
| Netflix |
Warner Bros. Discovery | |
| Paramount |
||
The Compensation Committee determined that it would be appropriate to consider this survey data for executive positions, in addition to the peer group data, as companies in these surveys reflect critical competitors for talent. In using this survey data, the Compensation Committee does not focus on any particular companies in the survey (other than the peer companies listed above). In this Compensation Discussion and Analysis, the term “market” as used for comparison purposes generally refers to the peer companies and the survey data described above.
Use of Market Data
Utilizing this market data, the Compensation Committee evaluates the amount and proportions of base salary, annual incentive pay, and long-term compensation, as well as the target total direct compensation (defined as base salary, target annual bonus, and the grant date fair value of equity awards granted to the executive during the fiscal year) for a select number of Lionsgate’s executive officers, including each of the Named Executive Officers, relative to the compensation of similarly situated executives with these companies. In general, the Compensation Committee uses this data as background information for its compensation decisions and does not “benchmark” compensation at any particular level relative to the peer companies. Except as otherwise noted in this Compensation Discussion and Analysis, decisions by the Compensation Committee are qualitative and the result of the Compensation Committee’s business judgment, which is informed by the analysis of the members of the Compensation Committee as well as input from, and peer group and survey data provided by, Pay Governance. The Compensation Committee believes that the compensation opportunities provided to the Named Executive Officers are appropriate in light of competitive considerations. The Compensation Committee continues to monitor current trends and issues in Lionsgate’s competitive landscape and will modify its programs as it determines appropriate.
Employment Agreements
Lionsgate has entered into employment agreements with each of the Named Executive Officers. The terms of each employment agreement (including the amendments during fiscal 2023 discussed below) are described below under “Description of Employment Agreements.” Lionsgate believes that it is in the best interests of Lionsgate to enter into multiyear employment agreements with the Named Executive Officers as such multiyear agreements are typical in Lionsgate’s industry and assist in retention and recruiting efforts, foster long-term retention, and promote stability among the management team, while still allowing the Compensation Committee to exercise considerable discretion in designing incentive compensation programs and rewarding performance.
In fiscal 2023, Lionsgate exercised an option to extend the term of Mr. Feltheimer’s employment and amended his employment agreement, exercised an option to extend the term of Mr. Burns’ employment (with all other terms and conditions remaining the same) and entered into a new employment agreement with Messrs. Goldsmith and Tobey.
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Jon Feltheimer
In fiscal 2023, the Compensation Committee engaged Pay Governance to assist the committee in structuring and analyzing the terms of an option to extend the term of Mr. Feltheimer’s employment. The Committee proposed to exercise the option for two additional years, approve a new target annual bonus and approve the grants of annual long-term equity awards, as described below (with no increase to base salary). Pay Governance provided an analysis of the proposed compensation structure for Mr. Feltheimer utilizing compensation levels for Chief Executive Officers in Lionsgate’s peer group. Based on its assessment, Pay Governance concluded that the proposed level for Mr. Feltheimer’s annualized target total direct compensation approximated the median of chief executive officers in Lionsgate’s peer group.
Accordingly, in August 2022, Lionsgate exercised its option under its employment agreement with Mr. Feltheimer to extend the term of the agreement through August 21, 2025, and amended the agreement to approve a target annual bonus and the grants of annual long-term equity awards. The target annual bonus and equity awards (including the grant date value, types of awards and vesting provisions) provided in the amendment were established by the Compensation Committee based on its qualitative assessment of Mr. Feltheimer’s performance, negotiations with Mr. Feltheimer, and taking into account market data provided by Pay Governance. The Compensation Committee determined that Mr. Feltheimer’s long-term incentive awards under his amended agreement (consisting of three annual equity awards to be granted in respect of each fiscal year during a three-year period) would be granted in the form of restricted share units (one-half of which would be subject to time-based vesting and one-half of which would be subject to performance-based vesting) and time-based stock options or SARs (with an exercise price equal to the fair market value on the date of grant). Each of the performance-based awards would vest as to one-third of the shares subject to such award on each of the first, second and third anniversaries of the applicable grant date, subject to the achievement of performance criteria approved by the Compensation Committee for the 12-month period ending on each applicable vesting date. Additionally, the incentive awards provide a long-term retention incentive by vesting equally over the first three anniversaries of the grant date.
Michael Burns
In February 2023, Lionsgate exercised its option under its employment agreement with Mr. Burns to extend the term of the agreement through October 30, 2024. All other terms of the agreement remain the same.
Brian Goldsmith
In fiscal 2023, the Compensation Committee engaged Pay Governance to assist the committee in structuring and analyzing terms for a new employment agreement with Mr. Goldsmith. Lionsgate proposed an increase to his base salary, target bonus and the grant of annual long-term equity awards, as described below. Pay Governance provided an analysis of the proposed compensation structure for Mr. Goldsmith utilizing compensation levels for (i) top strategy/business development executives (that generally report to a company’s chief financial officer) and (ii) entertainment chief operating officers (that generally report to a company’s chief executive officer) of companies in both Lionsgate’s peer group and certain companies in its entertainment industry group, as applicable. Pay Governance concluded that Mr. Goldsmith’s proposed annualized target total direct compensation was above the 75th percentile of strategy/business development executives and at approximately the 55th percentile of entertainment chief operating officers (who have broader roles overseeing a variety of corporate staff functions).
Accordingly, in March 2023, Lionsgate entered into a new employment agreement with Mr. Goldsmith to continue to serve as Lionsgate’s Chief Operating Officer for a term ending September 30, 2025. The base salary increase, target bonus increase and annual equity awards (including the grant date value, types of awards and vesting provisions) provided in the agreement were established by the Compensation Committee based on its qualitative assessment of Mr. Goldsmith’s performance, negotiations with Mr. Goldsmith, and taking into
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account market data provided by Pay Governance. The Compensation Committee determined that Mr. Goldsmith’s long-term incentive awards under his new agreement (consisting of three annual equity awards to be granted in respect of each fiscal year during a three-year period) would be granted in the form of restricted share units (one-half of which would be subject to time-based vesting and one-half of which would be subject to performance-based vesting) and time-based stock options (with an exercise price equal to the fair market value on the date of grant). Each of the performance-based awards would vest as to one-third of the shares subject to such award on each of the first, second and third anniversaries of the applicable grant date, subject to the achievement of performance criteria approved by the Compensation Committee in consultation with Mr. Feltheimer for the 12-month period ending on the applicable vesting date. Additionally, the incentive awards provide a long-term retention incentive by vesting equally over the first three anniversaries of the grant date.
Bruce Tobey
In fiscal 2023, the Compensation Committee engaged Pay Governance to assist the committee in structuring and analyzing terms for an employment agreement with Mr. Tobey. Lionsgate proposed a base salary, target bonus and the grant of annual long-term equity awards, as described below. Pay Governance provided an analysis of the proposed compensation structure for Mr. Tobey utilizing compensation levels for general counsel in Lionsgate’s peer group. Pay Governance concluded that Mr. Tobey’s proposed annualized target total direct compensation is positioned at approximately the 28th percentile of such general counsels.
Accordingly, in March 2023, Lionsgate entered into an employment agreement with Mr. Tobey to serve as Lionsgate’s Executive Vice President and General Counsel for a term ending March 26, 2026. The base salary, target bonus and annual equity awards (including the grant date value, types of awards and vesting provisions) provided in the agreement were established by the Compensation Committee based on Lionsgate’s recommendations, negotiations with Mr. Tobey, and taking into account market data provided by Pay Governance. The Compensation Committee determined that Mr. Tobey’s long-term incentive awards under his new agreement (consisting of a signing award granted in March 2023 and three annual equity awards to be granted in respect of each fiscal year during a three-year period) would be granted in the form of restricted share units (one-half of which would be subject to time-based vesting and one-half of which would be subject to performance-based vesting) and time-based stock options (with an exercise price equal to the fair market value on the date of grant). Each of the performance-based awards would vest as to one-third of the shares subject to such award on each of the first, second and third anniversaries of the applicable grant date, subject to the achievement of performance criteria approved by the Compensation Committee in consultation with Mr. Feltheimer for the 12-month period ending on the applicable vesting date. Additionally, the incentive awards provide a long-term retention incentive by vesting equally over the first three anniversaries of the grant date.
Compensation Components
Lionsgate’s executive compensation program is generally based on three principal-components:
| (1) | Base salary; |
| (2) | Annual incentive bonuses; and |
| (3) | Long-term incentive awards that are subject to time-based and/or performance-based vesting. |
Lionsgate also provides certain perquisites and personal benefits to the Named Executive Officers pursuant to their employment agreements, and severance benefits if the Named Executive Officer’s employment terminates under certain circumstances. In structuring executive compensation packages, the Compensation Committee considers how each component of compensation promotes retention and/or motivates performance by the executive.
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Base Salary
Lionsgate’s executive officers and other employees receive an annual base salary as a component of compensation that is fixed. Lionsgate believes that in order to attract and retain highly qualified executives, Lionsgate needs to provide them with certain predictable compensation levels that reward their continued service. Annual base salaries are established when Lionsgate hires or otherwise enters into an employment agreement with executives. In determining base salary, the Compensation Committee primarily considers market data and compensation levels of executive officers of companies in Lionsgate’s peer group and entertainment industry group, an internal review of the executive’s compensation (both individually and relative to other executive officers), and the executive’s individual performance. Lionsgate’s practice has been to establish base salaries that are generally lower than the salaries of comparable positions at Lionsgate’s peer companies, with the significant majority of the executive’s compensation being performance-based and/or tied to the value of Lionsgate’s shares.
The Named Executive Officers’ current base salaries are set forth below under “Description of Employment Agreements.” The Compensation Committee believes that the base salary levels of each of the Named Executive Officers are reasonable in view of the Compensation Committee’s assessment of peer group data for similar positions and the committee’s assessment of Lionsgate’s overall performance and contribution of those officers to that performance.
Annual Incentive Bonuses
Annual incentive bonuses are primarily intended to motivate Lionsgate’s executive officers to achieve annual financial, operational and individual performance objectives and focus on promotion of and contribution to achievement of Lionsgate’s business strategy. Lionsgate has entered into employment agreements with each of the Named Executive Officers that generally provide for a target annual incentive bonus amount, with the bonus awarded each year to be determined in the discretion of the Compensation Committee, taking into account the recommendation of Lionsgate’s Chief Executive Officer (other than for himself and the vice chair), based on performance criteria established by the Compensation Committee.
Payouts for annual incentive awards are determined by using three equally weighted measures: corporate performance (1/3), divisional performance (1/3) and individual performance (1/3). The corporate performance measure reflects the overall financial and operational performance of the company as a whole, and includes key performance indicators that are closely tied to the company’s strategic objectives and long-term success. The divisional performance measure evaluates the performance of each division within the company, and assesses the division’s financial performance, operational efficiency, and achievement of division-specific goals and targets that are aligned with the company’s overall strategic direction. The individual performance measure assesses the performance of each employee at an individual level, and includes various factors such as job responsibilities, individual goals and targets, leadership skills, and contributions to the team and the company as a whole.
The performance scores for the three measures are then averaged to obtain an overall performance score for each executive. The annual incentive bonus amount is then calculated by multiplying the average performance score by each executive’s target annual incentive bonus amount. Because of the scope of the Named Executive Officers’ roles, the Compensation Committee evaluates overall company performance for their divisional performance rating rather than focusing on any particular division.
Annual incentive bonus target amounts for each of the Named Executive Officers are set as a dollar amount or percentage of base salary, as set forth in their employment agreements. For Messrs. Burns and Barge, the Compensation Committee determined to set the 2023 annual incentive bonus target at 100% of Mr. Burns’ annual bonus amount awarded for fiscal 2022, and at $3 million for Mr. Barge, instead of the amounts set in their respective employment agreements. Additionally, as Mr. Berg resigned in December 2022 and Mr. Tobey
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commenced employment in March 2023, they were not eligible and did not receive an annual incentive bonus in respect of fiscal 2023.
| Name |
Fiscal 2023 Target Bonus |
|||
| Jon Feltheimer |
$ | 7,000,000 | ||
| Michael Burns |
$ | 5,500,000 | ||
| James W. Barge |
$ | 3,000,000 | ||
| Brian Goldsmith |
$ | 1,250,000 | ||
Retaining Certain Discretion in Awarding Annual Incentive Bonuses
The Compensation Committee uses certain discretion when determining payouts for annual incentive bonuses, including, specifically, for the individual performance measure, and does not apply fixed ratios or formulas, or rely solely on market data or quantitative measures. The Compensation Committee may consider market data, company performance and budget, the impact of the executive’s position in Lionsgate, past performance, expectations for future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, retention incentives for succession planning, and other factors the Compensation Committee deems appropriate.
The Compensation Committee believes that it is important to retain this discretion for the following reasons:
| • | Strategic, accretive transactions and other content acquisitions that are expected to positively affect future financial results may not be reflected in near-term corporate performance. |
| • | Investments in new businesses or increased investment in current lines of business will further generate significant long-term shareholder value, but may not be reflected in near-term corporate performance. |
| • | Discretion allows the Compensation Committee to exclude or mitigate the impact of events over which management has little or no influence, or items that were not considered at the beginning of the fiscal year may be excluded, such as unplanned acquisitions and divestitures, unplanned programming or new business investment, corporate transactions, and legal expenses or other events. |
Additionally, the Compensation Committee believes that this approach promotes a balanced and holistic evaluation of Lionsgate employees’ performance, and encourages them to contribute to the overall success of the company while also recognizing their individual achievements. It fosters a performance-driven culture and reinforces Lionsgate’s commitment to performance-based compensation practices.
In October 2022, the Compensation Committee retained Pay Governance to review its annual incentive bonus process and the discretion utilized therewith. Pay Governance noted that the corporate and divisional performance measures are tied to financial performance (and so, have little upside or downside leverage), while the individual performance measure is tied to personal performance (and so, is more discretionary). Accordingly, based on its recommendation, the Compensation Committee determined to retain its formulaic, pay-performance outcome for the corporate performance measure and the divisional performance measure, and cap the individual performance measure at 300%.
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Fiscal 2023 Financial Performance
| Year Ended March 31, | ||||||||||||
| 2022 Actual |
2023 Plan |
2023 Actual |
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| (amounts in millions) | ||||||||||||
| Segment Profit |
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| Studio Business |
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| Motion Picture |
$ | 262.9 | $ | 228.0 | $ | 276.5 | ||||||
| Television Production |
$ | 83.9 | $ | 140.5 | $ | 133.4 | ||||||
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| Total Studio Business |
$ | 346.8 | $ | 368.5 | $ | 409.9 | ||||||
| Media Networks |
$ | 155.2 | $ | 198.8 | $ | 106.8 | ||||||
| Intersegment Eliminations |
$ | (2.7 | ) | $ | (69.7 | ) | $ | (35.7 | ) | |||
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| Total Segment Profit. |
$ | 499.3 | $ | 497.6 | $ | 481.0 | ||||||
| Corporate general and administrative expenses |
$ | (97.1 | ) | $ | (117.5 | ) | $ | (122.9 | ) | |||
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| Adjusted OIBDA |
$ | 402.2 | $ | 380.1 | $ | 358.1 | ||||||
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| * | See Exhibit 99.1 for definitions, adjustments, and related reconciliations for non-GAAP measures. |
Fiscal 2023 Operating Performance
| ✓ Stock Price Increased in the First Three Months of Calendar 2023 | • Class A voting shares (LGF.A) increased nearly 95% (January 1, 2023 to March 31, 2023). • Class B non-voting shares (LGF.B) increased over 90% (January 1, 2023 to March 31, 2023). | |
| ✓ Continued to Strengthen Balance Sheet | • Generated positive adjusted free cash flow in fiscal 2023 while continuing to finance over $2.9 billion of investment in films and television programs and program rights. • Repurchased $200.0 million principal amount of Lionsgate’s 5.500% senior notes due April 2029 for $135.0 million, resulting in a $65 million reduction of net debt in fiscal 2023. • Executed the sale of a portion of ownership interest in STARZPLAY Arabia, recording a gain of $43.4 million. • Executed termination of certain interest rate swaps and received $56.4 million. • Improved leverage (i.e., net debt/adjusted OIBDA, excluding restructured LIONSGATE+ territories from trailing 12-month adjusted OIBDA) to 4.5 times at March 31, 2023. • Ended fiscal 2023 with unused $1.25 billion revolving credit facility and $272 million in cash and cash equivalents. | |
| ✓ John Wick: Chapter Four Led A Strong and Diversified Film Slate | • Assembled a balanced theatrical film slate in fiscal 2023 (which included drama, comedy, horror-comedy, horror, action and action/ adventure titles). • Theatrical revenue increased in fiscal 2023, driven, in particular, by the performances of John Wick: Chapter 4, Jesus Revolution and Plane. • As of May 2023, Lionsgate ranked third among studios with domestic box office market share of approximately 10%. • Extended John Wick franchise. • John Wick: Chapter Four achieved a franchise-best $425 million in global box office. • Action spin-off Ballerina theatrical release slated for June 2024. |
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| • Prequel event television series, The Continental, launches on Peacock and Amazon in September 2023. • John Wick: Chapter Five in development. • John Wick AAA game in development. | ||
| ✓ Television Series Renewals and Global Licensing of Key Intellectual Property Drove Value | • 19 new shows picked up to series since in the past 18 months and 10 current series renewed through at least their third seasons. • Ghosts achieved Neilsen’s top 10 of top 100 shows of 2022-2023 (based on total viewers). • The Continental launches on Peacock and Amazon in September 2023. • New series in development include Seth Rogen comedy for Apple TV+ and reboots of Weeds with Mary-Louise Parker and Nurse Jackie with Edie Falco for Showtime. • 3 Arts Entertainment partnership in production on next seasons of Serpent Queen for STARZ, Mythic Quest and its spin-off, Mere Mortals, for Apple TV+, and Julia for HBO’s Max. • Debmar-Mercury talk show Sherri! launched in syndication and renewed for two seasons. • Revenue driven by the licensing of Ghosts and Schitt’s Creek. | |
| ✓ Record Library Performance | • Film and television library achieved a record $884 million in trailing 12-month revenue in fiscal 2023. | |
| ✓ Focused Content Strategy, New Bundling Opportunities and International Restructuring | • STARZ returned to domestic over-the-top subscriber growth with gains in the fourth quarter of fiscal 2023. • Launched season 3 of Power Book II: Ghost, season 2 of BMF – Black Mafia Family, and the reboot of Party Down. • Power Book II: Ghost and P-Valley experienced record network premieres for their respective seasons. • STARZ launched domestic bundling agreements with Amazon/MGM+ and AMC+. • LIONSGATE+ launched bundle agreement with Hayu in the U.K. and available on Disney+ in Latin America. • STARZ continued its successful transition to the digital streaming world, with 67% of worldwide subscribers (including STARZPLAY Arabia and excluding subscribers in exited territories) in fiscal 2023. • Restructured LIONSGATE+ by exiting seven international territories. | |
| ✓ Continued to Expand Studio Production Footprint | • Announced new studio facilities in Newark, New Jersey and metro Atlanta to complement Lionsgate Studios Yonkers. | |
| ✓ Continued to Strengthen Entrepreneurial and Collaborative Culture | • Returned employees to office for four days per week, fostering an environment conducive to collaboration and productivity. • Bolstered inclusive hiring practices resulting in 56% female hires and nearly 30% hires from historically unrepresented groups (from January 2022 to March 31, 2023). • Continued efforts to foster gender equality at leadership levels, resulting in a nearly 50% growth in the presence of women at the Senior Vice President level or beyond (January 1, 2022 to March 31, 2023). • Since fiscal 2021, more than doubled the number of, and increased spend fourfold with, diverse suppliers. |
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| • Named to Bloomberg Gender Equality Index of publicly traded companies for fourth year in a row, ranked among Human Rights Campaign’s “Best Places to Work” for LGBTQ+ employees with perfect score of 100 for third consecutive year. • Ongoing commitment to inclusive content and diverse talent reflected in film and television slates including The 1619 Project, Blindspotting, P-Valley, The Blackening and Joy Ride. • Shows earned nine NAACP Image Award nominations and five wins. |
Fiscal 2023 Annual Incentive Bonuses
Corporate Performance
In determining Lionsgate’s corporate performance measure for fiscal 2023, the Compensation Committee selected adjusted OIBDA, the key performance indicator closely tied to the company’s strategic objectives and long-term success and used internally to manage financial performance. Fiscal 2023 actual adjusted OIBDA was then compared to fiscal 2023 plan adjusted OIBDA to determine Lionsgate’s corporate performance measure for fiscal 2023.
| Fiscal 2023 Plan |
Fiscal 2023 Actual |
Percent of Plan vs. Actual |
||||||||||
| Adjusted OIBDA |
$ | 380.1 | $ | 358.1 | ~94 | % | ||||||
Accordingly, the Compensation Committee determined to award 96% to each executive for the corporate performance measure of the fiscal 2023 bonus plan (adjusted up from 94% to reflect, in part, such strong operational performance for the last two quarters of fiscal 2023).
Divisional Performance
In determining Lionsgate’s divisional performance measures for each of its operating segments for fiscal 2023, the Compensation Committee first reviewed each division’s fiscal 2023 financial performance, using segment profit as its key financial measure. Fiscal 2023 actual segment profit was then compared to fiscal 2023 plan segment profit for each of Lionsgate’s operating segments.
| Year Ended March 31, | ||||||||||||
| Fiscal 2023 Actual Segment Profit |
Fiscal 2023 Plan Segment Profit |
Percent of Actual vs. Plan |
||||||||||
| Segment Profit |
||||||||||||
| Studio Business |
||||||||||||
| Motion Picture |
$ | 276.5 | $ | 228.0 | ~121 | % | ||||||
| Television Production |
$ | 133.4 | $ | 140.5 | ~95 | % | ||||||
| Media Networks (Domestic) |
$ | 218.3 | $ | 304.0 | ~72 | % | ||||||
Accordingly, the Compensation Committee determined to award the following divisional performance measures for fiscal 2023:
| • | 120% as the divisional performance measure for the Motion Picture segment; |
| • | 100% as the divisional performance measure for the Television Production segment (adjusted up from 95% to reflect, in part, over a 165% increase (as compared to fiscal 2022) in home entertainment revenue due to digital media revenue from licensing of certain shows to streaming platforms); and |
| • | 70% as the divisional performance measure for the Media Networks segment. |
In reviewing divisional performance for the Named Executive Officers, the Compensation Committee evaluated overall company performance rather than focusing on any particular division. The Compensation
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Committee acknowledged that the company ended fiscal 2023 on a strong note, with financial results (including earnings per share, revenue and earnings before interest, taxes, depreciation and amortization) that exceeded consensus “street” estimates for fiscal 2023. Further, Lionsgate continued to strengthen its balance sheet, repurchasing $200.0 million principal amount of Lionsgate’s 5.500% senior notes due April 2029 for $135.0 million, resulting in a $65 million reduction of net debt, ended fiscal 2023 with unused $1.25 billion revolving credit facility and $272 million in cash and cash equivalents, and ultimately, improving leverage to 4.5 times at March 31, 2023. Accordingly, the Compensation Committee determined that each Named Executive Officer would be awarded 110% for divisional performance.
Individual Performance
In determining individual performance measures for each Named Executive Officer (not to exceed 300%), the Compensation Committee reviewed the executive’s performance achievements, contributions, leadership, and execution with respect to Lionsgate’s key strategic objectives (against goals set by the Compensation Committee for each such executive for fiscal 2023). Within this context, the individual performance measures for each Named Executive officer determined by the Compensation Committee are set forth under “Fiscal 2023 Annual Incentive Bonuses for Named Executive Officers” below.
Fiscal 2023 Annual Incentive Bonuses for Named Executive Officers
Jon Feltheimer
| Name |
Corporate Performance |
Divisional Performance |
Individual Performance |
Fiscal 2023 Target Bonus |
Fiscal 2023 Bonus |
|||||||||||||||
| Jon Feltheimer |
96 | % | 110 | % | 223 | % | $ | 7,000,000 | $ | 10,000,000 | ||||||||||
In evaluating Mr. Feltheimer’s individual performance measure, the Compensation Committee, with the assistance of Pay Governance, assessed Mr. Feltheimer’s performance against fiscal 2023 individual performance goals established at the beginning of the fiscal year, as described below.
| Fiscal 2023 Goal |
Fiscal 2023 Achievements | |
| Manage business prudently |
✓ Managed Lionsgate to strong results in fiscal 2023 with Adjusted OIBDA of $358.1 million, exceeded anticipated outlook of $275 million to $325 million. ✓ Guided achievement of film and television library revenue of $884 million in the trailing 12-month period in fiscal 2023. ✓ Effectively managed overhead costs, surpassing Lionsgate’s fiscal 2023 plan despite inflationary pressures. ✓ Guided work-streams for proposed spin-off of the Studio Business, including exploring alternative structures and developing capital frameworks. | |
| Increase value of STARZ |
✓ Supervised restructuring of LIONSGATE+ in exiting seven international territories. ✓ Supervised STARZ’s continued transition to digital streaming. | |
| Continue to grow library/ execute content strategy |
✓ Diversified theatrical release slate included mix of wide theatrical tentpoles, multiplatform and direct-to-streaming releases; multiplatform business generated record contribution in the fiscal year. ✓ Managed growth of theatrical business, as Lionsgate ranked third among studios with domestic box office market share of approximately 10% (as of May 2023). | |
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| Fiscal 2023 Goal |
Fiscal 2023 Achievements | |
| ✓ Continued to support pursuit of accretive agreements to add content to library. ✓ Managed strong growth in profit contribution from Television Production segment as key series renewals drove increased value and profitability (10 television series renewed through at least their third seasons). | ||
| Diversity, equity, and inclusion |
✓ Embraced ongoing commitment to diversity, equity, and inclusion in all aspects of operations, including hiring practices and continued gender parity initiatives. | |
| Succession Planning |
✓ Worked with Lionsgate’s Chief Human Resources Officer and Lionsgate’s Corporate Nominating and Governance Committee to maintain company operating group successor lists for short-term and long-term scenarios, including “black swan” events, reporting to the Board. | |
The Compensation Committee engaged Pay Governance to assist it in assessing the fiscal 2023 bonus amount for Mr. Feltheimer. Pay Governance reviewed, among other things, the goals and achievements noted above, other highlights of Lionsgate’s business and strategic performance achieved during fiscal 2023, and the competitive position of Mr. Feltheimer’s total direct compensation (defined as base salary, actual annual bonus, and the grant date fair value of equity awards granted to the executive during the fiscal year) relative to similar positions within Lionsgate’s peer group (calculated, with the bonus amount above, to be at 43rd percentile).
Accordingly, in May 2023, after consideration of Pay Governance’s analysis and in light of all of the performance factors described above (noting that Mr. Feltheimer had achieved or exceeded most of his fiscal 2023 individual goals), the Compensation Committee approved for Mr. Feltheimer for fiscal 2023 a cash bonus of $10,000,000.
Michael Burns
| Name |
Corporate Performance |
Divisional Performance |
Individual Performance |
Fiscal 2023 Target Bonus |
Fiscal 2023 Bonus |
|||||||||||||||
| Michael Burns |
96 | % | 110 | % | 94 | % | $ | 5,500,000 | $ | 5,500,000 | ||||||||||
In evaluating Mr. Burns’ individual performance measure, the Compensation Committee, with the assistance of Pay Governance, assessed Mr. Burns’ performance against fiscal 2023 individual performance goals established at the beginning of the fiscal year, as described below.
| Fiscal 2023 Goal |
Fiscal 2023 Achievements | |
| Manage business prudently |
✓ Financial results exceeded consensus “street” estimates for fiscal 2023. ✓ In collaboration with Lionsgate’s Chief Financial Officer, improved leverage to 4.5 times at March 31, 2023. ✓ In collaboration with Lionsgate’s Chief Financial Officer, executed repurchases of $200.0 million principal amount of Lionsgate’s 5.500% senior notes due April 2029 for $135.0 million, resulting in a $65 million reduction of net debt in fiscal 2023. ✓ Executed termination of certain interest rate swaps and received $56.4 million. ✓ Supervised all capital market transactions. |
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| Fiscal 2023 Goal |
Fiscal 2023 Achievements | |
| Increase value of STARZ |
✓ Leveraged relationship with a consumer electronics company to add the STARZ app to smart TVs. ✓ Leveraged relationship for STARZ offering with a wireless network operator. | |
| Continue strategic initiatives |
✓ Led engagement with bankers and a number of potential strategic and other financial partners in contemplation of a spin-off of the Studio Business. ✓ Maintained and cultivated relationships with producers, talent and other relevant parties resulting in successful execution of television motion picture and television development and acquisition arrangements. ✓ Oversaw launch of Lionsgate’s “Shareholder Red Carpet Rewards” program available at www.TiiCKER.com/LGF. | |
| Manage external stakeholders |
✓ Presented at all significant media banking and research conferences and participated in investor calls. ✓ Worked on maintaining productive investment bank and commercial banking relationships to continue to achieve low cost of capital. | |
| Diversity, equity, and inclusion |
✓ Spearheaded Lionsgate’s philanthropic endeavors while fostering alignment with the organization’s core values and objectives. | |
| Succession Planning |
✓ Maintained and continued development of Lionsgate’s succession plan, ensuring a seamless transition of key leadership positions within the organization. | |
The Compensation Committee engaged Pay Governance to assist it in assessing the fiscal 2023 bonus amount for Mr. Burns. Pay Governance reviewed, among other things, the goals and achievements noted above, other highlights of Lionsgate’s business and strategic performance achieved during fiscal 2023, and the competitive position of Mr. Burns’ total direct compensation relative to similar positions within Lionsgate’s peer group (calculated, with the bonus amount above, to be at 39th percentile).
Accordingly, in May 2023, after consideration of Pay Governance’s analysis and in light of all the performance factors described above (noting that Mr. Burns had achieved or exceeded most of his fiscal 2023 individual goals), the Compensation Committee approved for Mr. Burns for fiscal 2023 a cash bonus of $5,500,000.
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James W. Barge
| Name |
Corporate Performance |
Divisional Performance |
Individual Performance |
Fiscal 2023 Target Bonus |
Fiscal 2023 Bonus |
|||||||||||||||
| James W. Barge |
96 | % | 110 | % | 94 | % | $ | 3,000,000 | $ | 3,000,000 | ||||||||||
In evaluating Mr. Barge’s individual performance measure, the Compensation Committee, with the assistance of Pay Governance, assessed Mr. Barge’s performance against fiscal 2023 individual performance goals established at the beginning of the fiscal year, as described below.
| Fiscal 2023 Goal |
Fiscal 2023 Achievements | |
| Manage business prudently |
✓ Worked with all business units to drive revenue and manage costs. ✓ Financial results exceeded consensus “street” estimates for fiscal 2023. ✓ Generated positive adjusted free cash flow in fiscal 2023 while continuing to finance over $2.9 billion of investment in films and television programs and program rights. ✓ Helped to effectively manage overhead costs surpassing Lionsgate’s fiscal 2023 plan despite inflationary pressures. ✓ Assisted in the restructuring of LIONSGATE+ in exiting seven international territories. ✓ Executed the sale of a portion of ownership interest in STARZPLAY Arabia, recording a gain of $43.4 million. ✓ Led work-stream for proposed spin-off of the Studio Business, including exploring alternative structures, developing capital frameworks and coordinating tax and regulatory reviews. ✓ Supported new studio facilities in Newark, New Jersey and metro Atlanta to complement Lionsgate Studios Yonkers. | |
| Manage treasury |
✓ In collaboration with Lionsgate’s Vice Chair, improved leverage to 4.5 times at March 31, 2023. ✓ In collaboration with Lionsgate’s Vice Chair, executed repurchases of $200.0 million principal amount of Lionsgate’s 5.500% senior notes due April 2029 for $135.0 million, resulting in a $65 million reduction of net debt in fiscal 2023. ✓ Executed termination of certain interest rate swaps and received $56.4 million. ✓ Managed Lionsgate’s accounts receivable monetization programs, production loans, programming notes, production tax credit facility, intellectual property credit facility and backlog facility. | |
| Manage information technology and procurement |
✓ Successfully facilitated the transition of multiple information technology and finance functions to a cost-effective environment. ✓ Continuously advanced cost-saving initiatives through strategic procurement, achieving annual run-rate savings targets. | |
The Compensation Committee engaged Pay Governance to assist it in assessing the fiscal 2023 bonus amount for Mr. Barge. Pay Governance reviewed, among other things, the goals and achievements noted above, other highlights of Lionsgate’s business and strategic performance achieved during fiscal 2023, and the competitive position of Mr. Barge’s total direct compensation relative to similar positions within Lionsgate’s peer group (calculated, with the bonus amount above, to be at the 75% percentile).
Accordingly, in May 2023, after consideration of Pay Governance’s analysis and in light of all the performance factors described above (noting that Mr. Barge had achieved or exceeded most of his fiscal 2023 individual goals), the Compensation Committee approved for Mr. Barge for fiscal 2023 a cash bonus of $3,000,000.
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Brian Goldsmith
| Name |
Corporate Performance |
Divisional Performance |
Individual Performance |
Fiscal 2023 Target Bonus |
Fiscal 2023 Bonus |
|||||||||||||||
| Brian Goldsmith |
96 | % | 110 | % | 184 | % | $ | 1,250,000 | $ | 1,625,000 | ||||||||||
In evaluating Mr. Goldsmith’s individual performance measure, the Compensation Committee, with the assistance of Pay Governance, assessed Mr. Goldsmith’s performance against fiscal 2023 individual performance goals established at the beginning of the fiscal year, as described below.
| Fiscal 2023 Goal |
Fiscal 2023 Achievements | |
| Manage business prudently |
✓ Maintained a strong emphasis on controlling general and administrative costs, delivering lower expenses than the Company’s fiscal 2023 plan. ✓ Worked closely with Lionsgate’s Chief Financial Officer to evaluate capital allocation for corporate activity and content acquisition. ✓ Managed library renewal process with internal, cross divisional teams to ensure that high value titles are retained, rights expanded, and buyout opportunities maximized. ✓ Managed Lionsgate’s international real properties, minimizing space requirements and reducing rental costs whenever feasible. ✓ Managed Lionsgate’s legal department from November 2022 through March 2023. ✓ Led an interdepartmental team to implement proposed shared service and intercompany work streams pre and post a proposed spin-off of the Studio Business. | |
| Increase value of STARZ |
✓ Helped to launch LIONSGATE+ current streaming footprint in South and Southeast Asia. ✓ Assisted in the restructuring of LIONSGATE+ in exiting seven international territories. ✓ Executed sale of a portion of Lionsgate’s interest in STARZPLAY Arabia (gain on investment of $43.4 million). | |
| Monetize assets |
✓ Sold Lionsgate’s interest in U.K. producer Kindle Entertainment. ✓ Managed and completed transition services relating to Lionsgate’s previous sale of its interest in Pantaya. | |
| Manage and oversee the production of content/growth of talent management business |
✓ Closed an investment in 42, a U.K. management and production company. ✓ Closed several accretive library acquisitions. ✓ Successfully negotiated certain outstanding audit claims. | |
| Manage M&A strategy |
✓ Negotiated, extended and modified put and call rights associated with Pilgrim Media Group. ✓ Managed investment in Spyglass Media | |
| Diversity, equity, and inclusion |
✓ Ensured execution and extension of diverse hiring practices and supplier diversity initiatives. | |
The Compensation Committee engaged Pay Governance to assist it in assessing the fiscal 2023 bonus amount for Mr. Goldsmith. Pay Governance reviewed, among other things, the goals and achievements noted above, other highlights of Lionsgate’s business and strategic performance achieved during fiscal 2023, and the
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competitive position of Mr. Goldsmith’s total direct compensation relative to (i) top strategy/business development executives (that generally report to a company’s chief financial officer) and (ii) entertainment chief operating officers (that generally report to a company’s chief executive officer) of companies in both Lionsgate’s peer group and certain companies in its entertainment industry group, as applicable (calculated, with the bonus amount above, to be slightly above the 50% percentile).
Accordingly, in May 2023, after consideration of Pay Governance’s analysis and in light of all the performance factors described above (noting that Mr. Goldsmith had achieved or exceeded most of his fiscal 2023 individual goals), the Compensation Committee approved for Mr. Goldsmith for fiscal 2023 a cash bonus of $1,625,000.
Long-term Incentive Awards
Lionsgate believes that providing a meaningful equity stake in Lionsgate’s business is essential to create compensation opportunities that are competitive relative to market levels. In addition, Lionsgate believes that by providing compensation in the form of equity awards, it aligns the executive’s incentives with Lionsgate shareholders’ interests in a manner that drives superior performance over time. Therefore, Lionsgate has historically made grants of stock options, restricted share units, and SARs to provide further incentives to Lionsgate’s executives to increase shareholder value. The Compensation Committee bases its award grants to executives on a number of factors, including:
| • | The executive’s position with Lionsgate and total compensation package; |
| • | The executive’s performance of his or her individual responsibilities; |
| • | The equity participation levels of comparable executives at peer group companies; and |
| • | The executive’s contribution to the success of Lionsgate’s financial performance. |
Equity award grants to the Named Executive Officers are generally made by the Compensation Committee in connection with the executive’s entering into a new employment agreement with Lionsgate (including specifying in the agreement the grants to be made annually over its term). As noted above, the equity grants provided in each executive’s employment agreement are intended to provide incentives for the entire term of the agreement. Lionsgate also has granted equity-based awards in recent years to certain executive officers as part of their annual bonus and retains discretion to grant equity awards to its executives from time to time as the Compensation Committee may determine.
Lionsgate’s equity incentive awards as described below are generally made with respect to Lionsgate’s Class B non-voting shares, without par value (the “Class B non-voting shares”). However, the Compensation Committee has discretion to provide that awards granted under Lionsgate’s stock incentive plans may be made with respect to Lionsgate’s Class A voting shares, without par value (the “Class A voting shares”) shares rather than Class B voting shares.
Restricted Share Units
Lionsgate grants long-term incentive awards to the Named Executive Officers in the form of restricted share units that may be subject to time-based and performance- based vesting requirements. Awards generally relate to Class B non-voting shares, with each unit that vests being payable in Class B non-voting shares (although awards may also be structured to be payable in cash based on the value of the underlying shares). Awards of time-based restricted share units vest over a period of several years following the date of grant. Thus, the units are designed both to link executives’ interests with those of Lionsgate’s shareholders (as the units’ value is based on the value of Class B non-voting shares) and to provide a long-term retention incentive for the vesting period, as they generally have value regardless of share price volatility.
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Awards of performance-based restricted share units also cover multiple years, with a percentage of the units subject to the award becoming eligible to vest each year based on Lionsgate’s and the individual’s performance during that year relative to performance goals reviewed by the Compensation Committee. Before any performance-based restricted share unit is paid, the Compensation Committee must certify that the performance target(s) have been satisfied. The Compensation Committee has discretion to determine the performance target(s) and any other restrictions or other limitations of performance-based restricted share units and may reserve discretion to reduce payments below maximum award limits. Thus, the performance units are designed both to motivate executives to maximize Lionsgate’s performance each year and to provide a long-term retention incentive for the entire period covered by the award.
Stock Options
A stock option is the right to purchase shares at a future date at a specified price per share. Lionsgate grants stock options to the Named Executive Officers with an exercise price that is equal to (i) the closing price of a Class B non-voting share on the date of grant, and (ii) in certain cases, as a percentage premium to the closing price of a Class B non-voting share on the date of grant. Thus, the Named Executive Officers will realize value on their stock options only if Lionsgate’s shareholders realize value on their shares and, for that reason, the Compensation Committee considers all options to be performance-based awards. The stock options function as a retention incentive for Lionsgate’s executives as the executive generally must remain employed through the vesting period. The maximum term of a stock option is 10 years from the date of grant.
Share Appreciation Rights
A share appreciation right (“SAR”) is the right to receive payment of an amount equal to the excess of the fair market value of a Class B non-voting share on the date of exercise of the SAR over the base price of the SAR. Lionsgate has made a portion of its long- term incentive awards to the Named Executive Officers in the form of SARs. Upon exercise of a SAR, the holder receives a payment in cash or shares with a value equal to the excess, if any, of the fair market value of a Class B non-voting share on the date of exercise of the SAR over the base price of the SAR. Because the base price of the SAR is not less than the closing price of a Class B non-voting share on the grant date, SARs provide the same incentives as stock options because the holder will realize value on their SARs only if Lionsgate’s share price increases after the date of grant. Thus, similar to stock options, SARs are considered by the Compensation Committee to be performance-based awards. The SARs function as a retention incentive for Lionsgate’s executives as the executive generally must remain employed through the vesting period. The maximum term of a SAR is 10 years from the date of grant.
Granting of Equity Awards in Fiscal 2023
The following equity awards were granted to the Named Executive Officers in fiscal 2023.
These awards consist of (i) equity grants made to Messrs. Feltheimer, Burns, Barge, Berg and Goldsmith as part of their fiscal 2022 annual bonuses (awarded in June 2022), (ii) annual grants made to Messrs. Feltheimer, Barge, Berg and Goldsmith pursuant to their employment agreements and (iii) an equity grant made to Mr. Tobey pursuant to his new employment agreement. In addition, these awards consist of a portion of certain performance- based awards approved by the Compensation Committee prior to fiscal 2023 that became eligible to vest during fiscal 2023 and equity awards accelerated pursuant to a Waiver and General Release Agreement with Mr. Berg. In the case of these performance-based awards, the award (or a portion thereof) is treated as granted for accounting purposes on the date on which the Compensation Committee determines whether the applicable performance requirements have been met, and the discussion below relates to the vesting tranches of these awards allocated to fiscal 2023 (including the number of shares awarded by the Compensation Committee based on performance during fiscal 2023) that were allocated to a performance period that ended during fiscal
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2023. For more information on these awards, please see the executive compensation tables and narratives that follow this Compensation Discussion and Analysis.
| • | In May 2022, the Compensation Committee determined the vesting of a tranche of an award of performance-based SARs granted to Mr. Barge in September 2019 that was eligible to vest during fiscal 2022. This tranche covered 211,842 SARs with respect to Class B non-voting shares that were eligible to vest based on the Compensation Committee’s assessment of Lionsgate’s and Mr. Barge’s performance during the 12-month period covered by that tranche. For these purposes, the Compensation Committee reviewed Lionsgate’s corporate performance discussed above and in Lionsgate’s 2022 proxy statement, and reflected in Lionsgate’s Quarterly Reports on Form 10-Q, and also acknowledged the contributions of Mr. Barge cited above under the heading Annual Incentive Bonuses and in Lionsgate’s 2022 proxy statement. Accordingly, based on its review, the Compensation Committee approved the vesting of 100% of the performance-based SARs that were subject to this vesting tranche. |
| • | In May 2022, the Compensation Committee determined the vesting of a tranche of an award of performance-based restricted share units granted to Mr. Berg in May 2020 that was eligible to vest during fiscal 2023. This tranche covered 3,939 restricted share units with respect to Class B non-voting shares that were eligible to vest based on the Compensation Committee’s assessment of Lionsgate’s and Mr. Berg’s performance during the 12-month period covered by that tranche. For these purposes, the Compensation Committee reviewed Lionsgate’s corporate performance discussed above and in Lionsgate’s 2022 proxy statement, and reflected in Lionsgate’s Quarterly Reports on Form 10-Q, and also acknowledged the contributions of Mr. Berg cited above under the heading Annual Incentive Bonuses and in Lionsgate’s 2022 proxy statement. Accordingly, based on its review, the Compensation Committee approved the vesting of 100% of the performance- based restricted share units and the performance-based stock options that were subject to this vesting tranche. |
| • | In June 2022, in connection with fiscal 2022 annual incentive bonuses, the Compensation Committee approved a grant of restricted share units with respect to Class B non-voting shares (to vest on the first anniversary of grant) to each of Messrs. Feltheimer, Burns, Barge, Berg and Goldsmith, as described in the proxy statement for Lionsgate’s 2022 Annual General and Special Meeting of Shareholders. |
| • | In July 2022, the Compensation Committee approved the grants of restricted share units of 85% of respective equity target awards amounts set forth in the applicable employment agreements (one-half of which would be subject to time-based vesting and one-half of which would be subject to performance-based vesting) to Messrs. Barge, Goldsmith, and Berg, respectively. Each of these grants is scheduled to vest over a three-year period. Additionally, none of the performance-based restricted share units will vest unless a VWAP Goal (as defined below) is achieved on or before the earlier of (i) the third anniversary of the award date or (ii) the date of termination of the executive’s employment or service with Lionsgate or any of its subsidiaries for any reason. The “VWAP Goal” shall be considered achieved on the date on which the volume weighted average of the closing prices of Class B non-voting shares over a period of twenty (20) consecutive trading days ending on such date is equal to or greater than $14.61, in each case in regular trading on the New York Stock Exchange. The VWAP Goal terminates upon any change in control of Lionsgate. |
| • | In July 2022, the Compensation Committee approved the grant of restricted share units (one-half of which would be subject to time-based vesting and one-half of which would be subject to performance-based vesting) to Mr. Feltheimer. The grant is scheduled to vest over a three-year period. Additionally, none of the performance-based restricted share units will vest unless a VWAP Goal, as discussed above, is achieved. |
| • | In July 2022, the Compensation Committee determined the vesting of (i) a tranche of an award of performance-based restricted share units granted to Mr. Barge in July 2020 and (ii) a tranche of an award of performance-based restricted share units granted to Mr. Barge in July 2021, that were eligible to vest during fiscal 2023. The tranches covered (i) 90,703 restricted share units with respect to Class B |
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| non-voting shares and (ii) 42,779 restricted share units with respect to Class B non-voting shares, that were eligible to vest based on the Compensation Committee’s assessment of Lionsgate’s and Mr. Barge’s performance during the 12-month period covered by that tranche. For these purposes, the Compensation Committee reviewed Lionsgate’s corporate performance reflected in Lionsgate’s Annual Report on Form 10-K for the year ended March 31, 2022 and the contributions of Mr. Barge cited in Lionsgate’s 2022 proxy statement. Accordingly, based on its review, the Compensation Committee approved the vesting of 100% of the performance- based restricted share units that were subject to these vesting tranches. |
| • | In July 2022, the Compensation Committee determined the vesting of (i) a tranche of an award of performance-based restricted share units and performance-based stock options granted to Mr. Goldsmith in July 2019, (ii) a tranche of an award of performance-based restricted share units granted to Mr. Goldsmith in July 2020, and (iii) a tranche of an award of performance-based restricted share units granted to Mr. Goldsmith in July 2021, that were eligible to vest during fiscal 2023. The tranches covered (i) 24,326 restricted share units and 67,422 stock options with respect to Class B non-voting shares, (ii) 79,365 restricted share units with respect to Class B non-voting shares, and (iii) 39,927 restricted share units with respect to Class B non-voting shares, that were eligible to vest based on the Compensation Committee’s assessment of Lionsgate’s and Mr. Goldsmith’s performance during the 12-month period covered by that tranche. For these purposes, the Compensation Committee reviewed Lionsgate’s corporate performance reflected in Lionsgate’s Annual Report on Form 10-K for the year ended March 31, 2022, and the contributions of Mr. Goldsmith cited in Lionsgate’s 2022 proxy statement. Accordingly, based on its review, the Compensation Committee approved the vesting of 100% of the performance-based restricted share units and the performance-based stock options that were subject to these vesting tranches. |
| • | In July 2022, the Compensation Committee determined the vesting of (i) a tranche of an award of performance-based restricted share units and performance-based stock options granted to Mr. Berg in July 2019, (ii) a tranche of an award of performance-based restricted share units granted to Mr. Berg in July 2020, and (iii) a tranche of an award of performance-based restricted share units granted to Mr. Berg in July 2021, in each case that were eligible to vest during fiscal 2023. The tranches covered (i) 2,867 restricted share units and 7,946 stock options with respect to Class B non-voting shares, (ii) 22,675 restricted share units with respect to Class B non-voting shares, and (iii) 11,408 restricted share units with respect to Class B non-voting shares, that were eligible to vest based on the Compensation Committee’s assessment of Lionsgate’s and Mr. Berg’s performance during the 12-month period covered by that tranche. For these purposes, the Compensation Committee reviewed Lionsgate’s corporate performance reflected in Lionsgate’s Annual Report on Form 10-K for the year ended March 31, 2022, and the contributions of Mr. Berg cited in Lionsgate’s 2022 proxy statement. Accordingly, based on its review, the Compensation Committee approved the vesting of 100% of the performance-based restricted share units and the performance-based stock options that were subject to these vesting tranches. |
| • | Effective December 20, 2022, as per the terms of a Waiver and General Release Agreement with Mr. Berg dated February 15, 2023, Mr. Berg was entitled to accelerated vesting of installments of his outstanding equity awards granted by Lionsgate that were scheduled to vest on or before July 11, 2024 (with all performance-vesting requirements being deemed met at the target level). The awards included (i) an award of 85,595 time-based restricted share units granted to Mr. Berg in June 2022, (ii) tranches of an award of 3,940 time-based restricted share units and 3,940 performance-based restricted share units granted to Mr. Berg in May 2020, (iii) tranches of an award of 22,676 time-based restricted share units and 22,676 performance-based restricted share units granted to Mr. Berg in July 2020, (iv) tranches of awards of 11,407 time-based restricted share units and 11,407 performance-based restricted share units granted to Mr. Berg in July 2021, and (v) tranches of awards of 16,135 time-based restricted share units and 16,135 performance-based restricted share units granted to Mr. Berg in July 2022. |
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| • | In March 2023, the Compensation Committee approved the grant of 26,511 time-based restricted share units to Mr. Tobey. The grant is scheduled to vest over a three-year period. |
Severance and Other Benefits upon Termination of Employment
Lionsgate provides severance protections for the Named Executive Officers under their respective employment agreements. The Compensation Committee determines the level of severance benefits on a case-by-case basis and, in general, considers them an important part of an executive’s compensation, consistent with competitive practices and, particularly in the context of a change-in-control transaction, playing a valuable role in attracting and retaining key executive officers.
As described in more detail under Potential Payments upon Termination or Change in Control below, the Named Executive Officers would be entitled to severance benefits under their employment agreements in the event of a termination of employment by Lionsgate “without cause” or, in certain cases, for “good reason,” as such terms are defined in the executive’s employment agreement. Lionsgate has determined that it is appropriate to provide these executives with severance benefits under these circumstances in light of their positions with Lionsgate and as part of their overall compensation package. The cash severance benefits for these executives are generally determined, in the case of Messrs. Feltheimer and Burns, based on their base salary through the remainder of the term covered by their employment agreement and, in the case of the other Named Executive Officers, the greater of 50% of their base salary through the remainder of the term covered by their employment agreement or their base salary for a specified number of months following termination.
Lionsgate also believes that the occurrence, or potential occurrence, of a change-in-control transaction will create uncertainty regarding the continued employment of Lionsgate’s executive officers. This uncertainty results from the fact that many change-in-control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage Lionsgate’s executive officers to remain employed with Lionsgate during an important time when their prospects for continued employment following the transaction are often uncertain, Lionsgate provides certain Named Executive Officers with enhanced severance benefits if their employment is terminated by Lionsgate “without cause” or, in certain cases, by the executive for “good reason” in connection with a change in control. Lionsgate believes that such enhanced severance benefits Lionsgate and its shareholders by incentivizing the executives to be receptive to potential transactions that are in the best interest of shareholders even if the executives face great personal uncertainty in the change-in-control context. The cash severance benefits for these executives are generally determined based on their base salary through the remainder of the term covered by their employment agreement (or, if greater, a specified amount in the case of Messrs. Feltheimer and Burns or a specified number of months of base salary following termination in the case of the other Named Executive Officers). In addition, Lionsgate believes it is appropriate to provide these benefits to certain Named Executive Officers (other than Messrs. Feltheimer and Burns) if their employment is terminated in circumstances described above following a change in the senior management of Lionsgate as specified in their respective employment agreements.
As noted above, Lionsgate does not provide any benefits to the Named Executive Officers that would be payable solely because a change in control occurs or any right to receive a gross-up payment for any parachute payment taxes that may be imposed in connection with a change in control.
See Potential Payments upon Termination or Change in Control below for more information on the severance benefits provided under the Named Executive Officers’ employment agreements.
Separation Agreement with Mr. Berg
Effective December 2022, Mr. Berg resigned as the General Counsel of Lionsgate. In connection with his resignation, in February 2023, Mr. Berg entered into a waiver and general release agreement with Lionsgate that provided for him to receive severance benefits consisting of a cash payment equal to $1,641,096, and payment of
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health insurance premiums for 24 months following his termination date. In addition, Mr. Berg was entitled to accelerated vesting of installments of his outstanding equity awards granted by Lionsgate that were scheduled to vest on or before July 11, 2024 (with all performance-vesting requirements being deemed met at the target level). The terms of this agreement were negotiated with Mr. Berg and approved by the Compensation Committee.
Perquisites and Other Benefits
Lionsgate provides certain Named Executive Officers with limited perquisites and other personal benefits, such as life insurance policy contributions and club membership dues that the Compensation Committee believes are reasonable and consistent with Lionsgate’s overall compensation program, to better enable Lionsgate to attract and retain superior employees for key positions. Additionally, Lionsgate owns an interest in an aircraft through a fractional ownership program for use related to film promotion and other corporate purposes. This enables Lionsgate’s executive officers and other service providers to fly more efficiently and to conduct business in privacy while traveling. As Lionsgate owns an interest in and maintains this aircraft for business purposes, Lionsgate believes it is reasonable to afford limited personal use of the aircraft consistent with regulations of the Internal Revenue Service, the SEC and the Federal Aviation Administration. Messrs. Feltheimer and Burns reimburse Lionsgate for a portion of the costs incurred for their limited personal use of the aircraft. All of these perquisites are reflected in the All Other Compensation column of the Summary Compensation table and the accompanying footnotes above.
Lionsgate has also adopted a nonqualified deferred compensation plan to allow the Named Executive Officers and certain other key employees the opportunity to defer a portion of their compensation without regard to the tax code limitations applicable to tax-qualified plans. The deferred compensation plan is intended to promote retention by providing participants with an opportunity to save for retirement in a tax-efficient manner. Please see the Nonqualified Deferred Compensation section below for a description of the plan.
Policy with Respect to Section 162(m)
U.S. federal income tax law generally prohibits a publicly held company from deducting compensation paid to a current or former named executive officer that exceeds $1 million during the tax year. Certain awards granted before November 2, 2017, that were based upon attaining pre-established performance measures set by the Compensation Committee under a plan approved by Lionsgate’s shareholders, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. As one of the factors in its consideration of compensation matters, the Compensation Committee notes this deductibility limitation. However, the Compensation Committee has the flexibility to take any compensation-related actions that it determines are in the best interests of Lionsgate and its shareholders, including awarding compensation that may not be deductible for tax purposes. There can be no assurance that any compensation will in fact be deductible.
Compensation Committee Report on Executive Compensation
The following Report of the Compensation Committee does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any of Lionsgate’s other filings under the Securities Act or the Exchange Act, except to the extent the report is specifically incorporated by reference in that filing.
The Compensation Committee has certain duties and powers as described in its charter. The Compensation Committee is currently composed of the five non-employee directors named below, each of whom the Board has determined is independent as defined by the New York Stock Exchange listing standards. The Compensation Committee has reviewed and discussed with Lionsgate’s management the disclosures contained in the Compensation Discussion and Analysis section of this report. Based upon this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis section be included in this information statement to be filed with the SEC.
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Compensation Committee of the Board of Directors
Daryl Simm (Chair)
Michael T. Fries
Susan McCaw
Mark H. Rachesky, M.D.
Harry E. Sloan
Lionsgate’s Compensation Policies and Risk Management
The Compensation Committee has reviewed the design and operation of Lionsgate’s current compensation structures and policies as they pertain to risk and has determined that Lionsgate’s compensation programs do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on Lionsgate.
Compensation Committee Interlocks and Insider Participation
During fiscal 2023, the Compensation Committee consisted of Messrs. Simm (Chair), Fries and Sloan, Dr. Rachesky, Sloan and Ms. McCaw. No member who served on the Compensation Committee at any time during fiscal 2023 is or has been a former or current executive officer of the Company, or had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee during fiscal 2023.
Executive Compensation Information of Lionsgate
Summary Compensation Table
The Summary Compensation table below quantifies the value of the different forms of compensation earned by or awarded to the Named Executive Officers for fiscals 2023, 2022, and 2021. The primary elements of each Named Executive Officer’s total compensation reported in the table are base salary, an annual bonus, and long- term equity incentives. The Named Executive Officers also received the other benefits listed in column (i) of the Summary Compensation table, as further described in footnote 3 to the table.
The Summary Compensation table should be read in conjunction with the tables and narrative descriptions that follow. The Grants of Plan-Based Awards table and the accompanying description of the material terms of equity awards granted in fiscal 2023 provide information regarding the long-term equity incentives awarded to the Named Executive Officers in fiscal 2023. The Outstanding Equity Awards at Fiscal 2023 Year-End and Option Exercises and Stock Vested tables provide further information on the Named Executive Officers’ potential realizable value and actual value realized with respect to their equity awards. The Pay Versus Performance table reflects certain information regarding compensation actually paid to the Named Executive Officers, as defined by Item 402(v) of the SEC’s Regulation S-K, and certain measures of our financial performance for fiscals 2023, 2022, and 2021.
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Summary Compensation — Fiscals 2023, 2022, and 2021
| Name and Principal Position(a) |
Fiscal Year (b) |
Salary ($) (c) |
Bonus ($)(1) (d) |
Stock Awards ($)(2) (e) |
Option Awards ($)(2) (f) |
Non-Equity Incentive Plan Compensation ($)(1) (g) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (h) |
All Other Compensation ($)(3) (i) |
Total ($) (j) |
|||||||||||||||||||||||||||
| Jon Feltheimer Chief Executive Officer |
2023 | $ | 1,500,000 | $ | 10,000,000 | $ | 9,750,004 | * | $ | 0 | $ | 0 | $ | 0 | $ | 278,405 | $ | 21,528,409 | ||||||||||||||||||
| 2022 | $ | 1,500,000 | $ | 2,800,000 | $ | 1,000,003 | $ | 0 | $ | 0 | $ | 0 | $ | 285,409 | $ | 5,585,412 | ||||||||||||||||||||
| 2021 | $ | 1,500,000 | $ | 10,000,000 | $ | 700,002 | $ | 6,746,929 | $ | 0 | $ | 0 | $ | 229,944 | $ | 19,176,875 | ||||||||||||||||||||
| Michael Burns Vice Chair |
2023 | $ | 1,000,000 | $ | 5,500,000 | $ | 3,500,005 | * | $ | 0 | $ | 0 | $ | 0 | $ | 98,975 | $ | 10,098,980 | ||||||||||||||||||
| 2022 | $ | 1,000,000 | $ | 2,000,000 | $ | 1,344,000 | $ | 0 | $ | 0 | $ | 0 | $ | 62,289 | $ | 4,406,289 | ||||||||||||||||||||
| 2021 | $ | 1,000,000 | $ | 4,000,000 | $ | 350,001 | $ | 3,080,000 | $ | 0 | $ | 0 | $ | 71,912 | $ | 8,501,913 | ||||||||||||||||||||
| James W. Barge Chief Financial Officer |
2023 | $ | 1,000,000 | $ | 3,000,000 | $ | 5,965,724 | * | $ | 891,066 | $ | 0 | $ | 0 | $ | 14,285 | $ | 10,871,075 | ||||||||||||||||||
| 2022 | $ | 1,000,000 | $ | 800,000 | $ | 3,200,174 | $ | 1,437,120 | $ | 0 | $ | 0 | $ | 13,486 | $ | 6,450,780 | ||||||||||||||||||||
| 2021 | $ | 1,000,000 | $ | 3,000,000 | $ | 2,300,001 | $ | 20,385 | $ | 0 | $ | 0 | $ | 11,690 | $ | 6,332,076 | ||||||||||||||||||||
| Brian Goldsmith Chief Operating Officer |
2023 | $ | 1,125,000 | $ | 1,625,000 | $ | 3,648,468 | * | $ | 184,629 | $ | 0 | $ | 0 | $ | 18,802 | $ | 6,601,899 | ||||||||||||||||||
| 2022 | $ | 1,000,000 | $ | 375,000 | $ | 3,483,617 | $ | 568,463 | $ | 0 | $ | 0 | $ | 14,034 | $ | 5,441,114 | ||||||||||||||||||||
| 2021 | $ | 1,000,000 | $ | 1,200,000 | $ | 2,609,407 | $ | 149,942 | $ | 0 | $ | 0 | $ | 12,241 | $ | 4,971,590 | ||||||||||||||||||||
| Corii D. Berg Former Executive Vice President and General Counsel |
2023 | $ | 742,308 | $ | 0 | $ | 1,899,360 | * | $ | 21,759 | $ | 0 | $ | 0 | $ | 1,645,089 | ** | $ | 4,308,516 | |||||||||||||||||
| 2022 | $ | 1,000,000 | $ | 280,000 | $ | 947,460 | $ | 58,815 | $ | 0 | $ | 0 | $ | 13,203 | $ | 2,299,478 | ||||||||||||||||||||
|
|
2021
|
|
$ | 1,000,000 | $ | 1,000,000 | $ | 814,332 | $ | 143,741 | $ | 0 | $ | 0 | $ | 12,879 | $ | 2,970,952 | ||||||||||||||||||
| Bruce Tobey Executive Vice President and General Counsel |
2023 | $ | 19,231 | $ | 0 | $ | 249,999 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 269,230 | *** | ||||||||||||||||||
| * | As explained in note (1) below, these amounts include the value of equity awards granted early in fiscal 2023 as a portion of the executive’s fiscal 2022 annual incentive bonus as follows: for Mr. Feltheimer, $7,200,002 in stock awards; for Mr. Burns, $3,500,005 in stock awards; for Mr. Barge, $3,199,998 in stock awards; for Mr. Goldsmith, $900,003 in stock awards; and for Mr. Berg, $820,000 in stock awards. Accordingly, the total amount in column (j) for fiscal 2023 is much greater than the total amount for fiscal 2022 as fiscal 2023 reflects a substantial portion of the value of executive’s fiscal 2022 annual incentive bonus granted in equity in fiscal 2023 and the executive’s entire fiscal 2023 annual incentive bonus paid in cash in fiscal 2024. |
| ** | Includes severance benefits consisting of a cash payment equal to $1,641,096 received pursuant to the terms of a Waiver and General Release Agreement dated February 15, 2023. Mr. Berg resigned as Lionsgate’s Executive Vice President and General Counsel effective December 20, 2022. |
| *** | Mr. Tobey was appointed as Lionsgate’s Executive Vice President and General Counsel effective March 27, 2023. |
| (1) | In accordance with SEC rules, any portion of a Named Executive Officer’s annual bonus that the Compensation Committee determined would be paid in the form of an equity award is reported in the Summary Compensation table as compensation for the fiscal year in which the award was approved by the Compensation Committee (i.e., the year after the year in which the bonus was earned). For fiscal 2020, each Named Executive’s Officer’s bonus was awarded partly in cash and partly in the form of equity-based awards with a one-year vesting schedule. In accordance with SEC rules, the cash portion of such bonus is reported in the Bonus column for fiscal 2020 for such executive, and the grant date fair value of the equity portion of the 2020 bonus for such executive is reported as compensation for fiscal 2021. For fiscal 2021, the bonus for Messrs. Feltheimer and Burns was awarded partly in cash and partly in the form of an equity award, and the bonus for each of the other Named Executive Officers was awarded entirely in cash. Accordingly, the cash amount of each bonus is reported in the Bonus column for 2021, and the grant date fair value of the equity portion of the 2021 bonus for Messrs. Feltheimer and Burns is reported as |
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| compensation for fiscal 2022. For fiscal 2022 each Named Executive’s Officer’s bonus was awarded partly in cash and partly in the form of equity-based awards with a one-year vesting schedule. Accordingly, the cash portion of each bonus is reported in the Bonus column for fiscal 2022, and the grant date fair value of the equity awards granted to each executive as part of their fiscal 2022 bonus is reported as compensation for fiscal 2023. For fiscal 2023 each Named Executive’s Officer’s bonus was awarded in cash. |
| (2) | The amounts reported in columns (e) and (f) reflect the fair value of these awards on the grant date as determined under the principles used to calculate the value of equity awards for purposes of Lionsgate’s financial statements. Under SEC rules, the entire grant date value of these awards is reported as compensation for the Named Executive Officer for the fiscal year in which the award was granted. Accordingly, these columns include amounts for awards that have not yet vested and for which the executive may not have realized any financial benefit. For a discussion of the assumptions and methodologies used to calculate the amounts referred to above, see the discussion of stock awards and option awards contained in Note 13 to Lionsgate’s Audited Consolidated Financial Statements, included as part of Lionsgate’s 2023 Annual Report filed on Form 10-K filed with the SEC on May 25, 2023. As described in the Compensation Discussion and Analysis above under Long-Term Incentive Awards, the Compensation Committee approved certain grants of stock options, SARs, and/or restricted share units to Messrs. Barge, Goldsmith and Berg that would vest based on such company and/or individual performance criteria determined by the Compensation Committee in consultation with Mr. Feltheimer for each of the 12-month performance periods covered by these awards (with a tranche of each award being allocated to each of the performance periods for that award). The grant date for accounting purposes for each portion of the award occurs at the end of the applicable performance period when it is determined whether the performance criteria applicable to that portion of the award have been met. Under SEC rules, the value of equity awards is reported as compensation for the fiscal year in which the grant date (as determined for accounting purposes) occurs. Accordingly, to the extent the Compensation Committee determined during a particular fiscal year the performance level achieved for a particular performance period under the award, the portion of the award that relates to that performance period is reported as compensation for the fiscal year in which the determination was made. |
| (3) | The following table outlines the amounts included in All Other Compensation in column (i) of the Summary Compensation table for the Named Executive Officers in fiscal 2023: |
| Name |
401(k) Contribution |
Term Life Insurance Premiums (a) |
Severance/ Retirement |
Automobile Allowance |
Miscellaneous (b) |
Disability Benefits |
Total | |||||||||||||||||||||
| Jon Feltheimer |
$ | 12,200 | $ | 835 | $ | 0 | $ | 0 | $ | 264,303 | $ | 1,067 | $ | 278,405 | ||||||||||||||
| Michael Burns |
$ | 12,200 | $ | 1,566 | $ | 0 | $ | 13,332 | $ | 70,810 | $ | 1,067 | $ | 98,975 | ||||||||||||||
| James W. Barge |
$ | 12,200 | $ | 1,108 | $ | 0 | $ | 0 | $ | 0 | $ | 1,067 | $ | 14,285 | ||||||||||||||
| Brian Goldsmith |
$ | 16,169 | $ | 1,566 | $ | 0 | $ | 0 | $ | 0 | $ | 1,067 | $ | 18,802 | ||||||||||||||
| Corii D. Berg |
$ | 1,615 | $ | 1,566 | $ | 1,641,096 | $ | 0 | $ | 0 | $ | 812 | $ | 1,645,089 | ||||||||||||||
| (a) | Lionsgate is not the beneficiary of the life insurance policies, and the premiums that Lionsgate pays are taxable as income to the applicable officer. This insurance is not split-dollar life insurance. |
| (b) | For Mr. Feltheimer, the amount in this column for fiscal 2023 includes $15,953 in club membership dues, $29,650 in security service costs, and $218,700 in incremental costs for the personal use of the company-leased aircraft (net of approximately $56,850 reimbursed to Lionsgate by Mr. Feltheimer). For Mr. Burns, the amount in this column for fiscal 2023 includes $70,810 in incremental costs for the personal use of the company-leased aircraft (net of approximately $22,350 reimbursed to Lionsgate by Mr. Burns). Personal use of the aircraft is valued using an incremental cost method that takes into account variable cost per flight hour, as well as other direct operating costs to Lionsgate, including fuel costs, crew fees and travel expenses, trip-related repairs and maintenance, landing fees, and other direct operating costs. Incremental costs do not include certain fixed costs that do not change based on usage (e.g., maintenance not related to personal trips, flight crew salaries, and depreciation). |
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Description of Employment Agreements
Lionsgate has entered into employment agreements with each of the Named Executive Officers. Key terms of these employment agreements are briefly described below. Provisions of these agreements relating to post- termination of employment benefits are discussed below under “Potential Payments upon Termination or Change in Control.”
Jon Feltheimer
Employment Agreement: August 12, 2022
Title: Chief Executive Officer
Term Ending: August 21, 2025
Base Salary: $1,500,000
Bonus: Eligible for an annual incentive bonus to be determined at the full discretion of the Compensation Committee, with a target of $7,000,000; any portion that exceeds $1,500,000 for a particular year may be paid in the form of fully vested existing common stock.
Other Benefits: Eligible to participate in Lionsgate’s usual benefit programs for executives at the same level, as well as company-provided life and disability insurance coverage, reasonable club membership dues, and limited use of Lionsgate’s private aircraft.
Annual Equity Award (Fiscal 2024-2026): Eligible to receive annual grants as to Class B non-voting shares each year from fiscal 2024 through fiscal 2026 with a grant date value of $6,000,000, each with a three-year vesting period and to consist of restricted share units and/or stock options (or SARs) as determined by the Compensation Committee.
Fiscal 2023 Equity Award: Received grants in July 2022 as to Class B non-voting shares of 290,433 time-vesting restricted share units and 290,433 performance-vesting restricted share units, each with a three-year vesting period.
Michael Burns
Employment Agreement: December 18, 2020
Title: Vice Chair
Term Ending: October 30, 2024
Base Salary: $1,000,000
Bonus: Eligible for an annual incentive bonus to be determined at the full discretion of the Compensation Committee, with a target of 75% of base salary. Any portion that exceeds $1,500,000 for a particular year will be paid in the form of either an award of existing common stock or an option to purchase existing common stock, as determined by the Compensation Committee (any such award to be fully vested on grant and the number of shares subject to such award to be determined based on Lionsgate’s then-current share price and, in the case of an option, the assumptions then used to value stock options for purposes of Lionsgate’s financial reporting).
Other Benefits: Eligible to participate in Lionsgate’s usual benefit programs for executives at the same level, as well as company-provided life and disability insurance coverage, and limited use of Lionsgate’s private aircraft.
Equity Award: Received an award in December 2020 of performance-based SARs with respect to 1,500,000 of Class B non-voting shares at a per-share exercise price of $8.51, two-thirds of which vested on December 18, 2021, December 18, 2022, and one-third of which will vest on December 18, 2023; provided, however, that no portion of the SARs would have vested or been exercisable prior to the date on which the volume-weighted average of the closing prices of Class B non-voting shares over a period of 30 consecutive trading days ending on or before December 18, 2023, was greater than or equal to $17.02 (the “VWAP Performance Goal”). The VWAP Performance Goal was met on June 25, 2021.
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James W. Barge
Employment Agreement: September 26, 2019
Title: Chief Financial Officer
Term Ending: July 31, 2023
Base Salary: $1,000,000
Bonus: Eligible for an annual incentive bonus to be determined at the full discretion of the Compensation Committee, in consultation with Lionsgate’s Chief Executive Officer, with a target of 125% of base salary.
Other Benefits: Eligible to participate in Lionsgate’s usual benefit programs for executives at the same level.
Annual Equity Awards: Eligible to receive annual grants as to Class B non-voting shares each year from fiscal 2021 through fiscal 2024 with a grant date value of $4,000,000 for the fiscal 2021 grant, $3,750,000 for each of the fiscal 2022 and 2023 grants and $3,250,000 for the fiscal 2024 grant, each with a three-year vesting period and to consist of restricted stock units and/or options (or SARs) as determined by the Compensation Committee, provided that no more than 33% of the annual grant may be subject to performance-based vesting unless otherwise agreed by the executive.
Brian Goldsmith
Employment Agreement: October 1, 2022
Title: Chief Operating Officer
Term Ending: September 30, 2025
Base Salary: $1,250,000
Bonus: Eligible for an annual incentive bonus to be determined at the full discretion of the Compensation Committee in consultation with Lionsgate’s Chief Executive Officer, with a target of 100% of base salary.
Other Benefits: Eligible to participate in Lionsgate’s usual benefit programs for executives at the same level.
Annual Equity Awards: Eligible to receive annual grants as to Class B non-voting shares each year from fiscal 2024 through fiscal 2026 with a grant date value of $3,500,000, each with a three-year vesting period and to consist of restricted share units and/ or stock options (or SARs) as determined by the Compensation Committee.
Bruce Tobey
Employment Agreement: March 27, 2023
Title: Executive Vice President and General Counsel
Term Ending: March 26, 2026
Base Salary: $1,000,000
Bonus: Eligible for an annual incentive bonus to be determined at the full discretion of the Compensation Committee in consultation with Lionsgate’s Chief Executive Officer, with a target of 75% of base salary.
Other Benefits: Eligible to participate in Lionsgate’s usual benefit programs for executives at the same level.
Annual Equity Awards: Eligible to receive annual grants as to Class B non-voting shares each year for fiscal 2024 through fiscal 2026 with a grant date value of $1,000,000, each with a three-year vesting period and to consist of restricted share units and/or stock options (or SARs) as determined by the Compensation Committee.
Equity Award: Received grant in March 2023 as to Class B non-voting shares of 26,511 time-vesting restricted share units, with a three-year vesting period.
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Grants of Plan-Based Awards
The following table presents information regarding the incentive awards granted to the Named Executive Officers during fiscal 2023. Each of the equity-based awards was granted under the Lions Gate Entertainment Corp. 2019 Performance Incentive Plan (the “2019 Plan”), which has been approved by Lionsgate’s shareholders. Detailed information on each equity award is presented in the narrative that follows the table.
Grants of Plan-Based Awards — Fiscal 2023
| Name (a) |
Date (b)* |
Threshold ($) (c) |
Target ($) (d) |
Maximum ($) (e) |
Threshold (#) (f) |
Target (#) (g) |
Maximum (#) (h) |
All Other Stock Awards: Numbers of Shares of Stock or Units (#) (i) |
All Other Options Awards: Number of Securities Underlying Options (#) (j) |
Exercise or Base Price of Option Awards ($/sh) (k) |
Grant Date Fair Value of Stock and Option Awards ($)(1) (l) |
|||||||||||||||||||||||||||||||||
| Jon Feltheimer |
6/1/2022 | — | — | — | — | — | — | 751,566 | (2) | — | — | $ | 7,200,002 | |||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | — | — | 290,433 | — | — | $ | 2,550,002 | |||||||||||||||||||||||||||||||||
| Michael Burns |
6/1/2022 | — | — | — | — | — | — | 365,345 | (2) | — | — | $ | 3,500,005 | |||||||||||||||||||||||||||||||
| James W. Barge |
5/30/2022 | — | — | — | — | 211,842 | — | — | — | $ | 8.66 | $ | 891,066 | |||||||||||||||||||||||||||||||
| 6/1/2022 | — | — | — | — | — | — | 334,029 | (2) | — | — | $ | 3,199,998 | ||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | — | — | 181,521 | — | — | $ | 1,593,754 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 90,703 | — | — | — | — | $ | 796,372 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 42,779 | — | — | — | — | $ | 375,600 | |||||||||||||||||||||||||||||||||
| Brian Goldsmith |
6/1/2022 | — | — | — | — | — | — | 93,946 | (2) | — | — | $ | 900,003 | |||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | — | — | 169,419 | — | — | $ | 1,487,499 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 24,326 | — | — | — | — | $ | 213,582 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 79,365 | — | — | — | — | $ | 696,825 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 39,927 | — | — | — | — | $ | 350,559 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 67,422 | — | — | — | $ | 11.99 | $ | 184,629 | ||||||||||||||||||||||||||||||||
| Corii D. Berg |
5/30/2022 | — | — | — | — | 3,939 | — | — | — | — | $ | 36,948 | ||||||||||||||||||||||||||||||||
| 6/1/2022 | — | — | — | — | — | — | 85,595 | — | — | $ | 820,000 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | — | — | 48,405 | — | — | $ | 424,996 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 2,867 | — | — | — | — | $ | 25,172 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 22,675 | — | — | — | — | $ | 199,087 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 11,408 | — | — | — | — | $ | 100,162 | |||||||||||||||||||||||||||||||||
| 7/27/2022 | — | — | — | — | 7,946 | — | — | — | $ | 11.99 | $ | 21,759 | ||||||||||||||||||||||||||||||||
| 12/20/2022 | — | — | — | — | 3,940 | — | — | — | — | $ | 21,315 | |||||||||||||||||||||||||||||||||
| 12/20/2022 | — | — | — | — | 22,676 | — | — | — | $ | 122,677 | ||||||||||||||||||||||||||||||||||
| 12/20/2022 | — | — | — | — | 11,407 | — | — | — | $ | 61,712 | ||||||||||||||||||||||||||||||||||
| 12/20/2022 | — | — | — | — | 16,135 | — | — | — | $ | 87,290 | ||||||||||||||||||||||||||||||||||
| Bruce Tobey |
3/27/2023 | — | — | — | — | — | — | 26,511 | — | — | $ | 249,999 | ||||||||||||||||||||||||||||||||
| * | These awards were granted with respect to Class B non-voting shares. |
| (1) | The amounts reported in column (l) reflect the fair value of these awards on the grant date as determined under the principles used to calculate the value of equity awards for purposes of Lionsgate’s financial statements. For a discussion of the assumptions and methodologies used to value the awards reported in column (l), see footnote (2) to the Summary Compensation table. |
| (2) | This award was granted as a portion of the fiscal 2022 annual incentive bonus and vests on the first anniversary of grant. |
Each of the equity-based awards reported in the Grants of Plan-Based Awards table was granted under, and is subject to, the terms of the 2019 Plan. The 2019 Plan is administered by the Compensation Committee, which has authority to interpret the plan provisions and make all required determinations under the plan. This authority includes, subject to the provisions of the 2019 Plan, selecting participants and determining the type(s) of award(s) that they are to receive, determining the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or the award, accelerating or extending
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the vesting or exercisability or extending the term of any or all outstanding awards, making certain adjustments to an outstanding award and authorizing the conversion, succession or substitution of an award, determining the manner in which the purchase price of an award or Lionsgate’s common shares may be paid, making required proportionate adjustments to outstanding awards upon the occurrence of certain corporate events such as reorganizations, mergers and stock splits, and making provisions to ensure that any tax withholding obligations incurred in respect of awards are satisfied. Awards granted under the plan are generally only transferable to a beneficiary of a Named Executive Officer upon his or her death or, in certain cases, to family members for tax or estate planning purposes.
Under the terms of the 2019 Plan, a change in control of Lionsgate does not automatically trigger vesting of the awards then outstanding under the plan. If there is a change in control, each participant’s outstanding awards granted under the plan will generally be assumed by the successor company, unless the Compensation Committee provides that the award will not be assumed and will become fully vested and, in the case of stock options, exercisable. Any stock options that become vested in connection with a change in control will generally terminate to the extent they are not exercised prior to the change in control.
As described below under “Potential Payments upon Termination or Change in Control,” certain equity awards granted to the Named Executive Officers are subject to accelerated vesting under the terms of their respective employment agreements in the event of a termination of their employment under certain circumstances.
Restricted Share Units
Columns (g) and (i) in the table above report awards of restricted share units that are treated as granted to the Named Executive Officers during fiscal 2023 under applicable accounting rules. Each restricted share unit represents a contractual right to receive, upon vesting of the unit, payment equal to the value of Class B non-voting shares (typically in an equal number of Class B non-voting shares, but the Compensation Committee has the discretion to settle the units in cash or shares of Class A voting shares). The Named Executive Officer does not have the right to vote or dispose of the restricted share units, but will be credited with additional share units under the award as dividend equivalents based on the amount of dividends (if any) paid by Lionsgate during the term of the award on a number of Class B non-voting shares equal to the number of outstanding and unpaid restricted share units then subject to the award. Such dividend equivalents will be paid only if and when vesting requirements applicable to the underlying share units are met.
Time-Based Units. For Messrs. Feltheimer, Burns, Barge, Goldsmith and Berg, the awards of 751,566, 365,345, 334,029, 93,946 and 85,595 Class B non-voting shares, respectively, made in June 2022, and reported in column (i) in the table above, represent a portion of their fiscal 2022 annual bonuses paid in the form of restricted share units that vest on the first anniversary of grant.
For Messrs. Feltheimer, Barge, Goldsmith and Berg, the awards of 290,433, 181,521, 169,419 and 48,405 Class B non-voting shares, respectively, made in July 2022, and reported in column (i) in the table above, represent annual grants of time-based restricted share units. These awards are subject to a three-year vesting schedule, subject to the executive’s continued employment through the vesting dates.
For Mr. Tobey, the award of 26,511 Class B non-voting shares made in March 2023, and reported in column (i) in the table above, represents a grant of time-based restricted share units. These awards are subject to a three-year vesting schedule, subject to the executive’s continued employment through the vesting dates.
Performance-Based Units. Column (g) in the table above report awards of performance share units that are treated as granted to the Named Executive Officers during fiscal 2023 under applicable accounting rules. Performance share units are similar to the restricted share units described above, except that they are subject to performance based vesting conditions as well as time-based vesting.
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For Mr. Barge, the award of 90,703 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Barge’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2020 and covers a three-year period ending in July 2023, with one-third of the total award being eligible to vest based on Mr. Barge’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Barge’s and Lionsgate’s performance are reflected in the table above.
For Mr. Barge, the award of 42,779 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Barge’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2021 and covers a three-year period ending in July 2024, with one-third of the total award being eligible to vest based on Mr. Barge’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Barge’s and Lionsgate’s performance are reflected in the table above.
For Mr. Goldsmith, the award of 24,326 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2019 and covers a three-year period ending in July 2022, with one-third of the total award being eligible to vest based on Mr. Goldsmith’s and Lionsgate’s performance over a specified 12 month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance are reflected in the table above.
For Mr. Goldsmith, the award of 79,365 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2020 and covers a three-year period ending in July 2023, with one-third of the total award being eligible to vest based on Mr. Goldsmith’s and Lionsgate’s performance over a specified 12 month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance are reflected in the table above.
For Mr. Goldsmith, the award of 39,927 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2021 and covers a three-year period ending in July 2024, with one-third of the total award being eligible to vest based on Mr. Goldsmith’s and Lionsgate’s performance over a specified 12 month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance are reflected in the table above.
For Mr. Berg, the award of 3,939 Class B non-voting shares made in May 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023
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based on Mr. Berg’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in May 2020 and covers a three-year period ending in May 2023, with one-third of the total award being eligible to vest based on Mr. Berg’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance are reflected in the table above.
For Mr. Berg, the award of 2,867 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2019 and covers a three-year period ending in July 2022, with one-third of the total award being eligible to vest based on Mr. Berg’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance are reflected in the table above.
For Mr. Berg, the award of 22,675 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2020 and covers a three-year period ending in July 2023, with one-third of the total award being eligible to vest based on Mr. Berg’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance are reflected in the table above.
For Mr. Berg, the award of 11,408 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2021 and covers a three-year period ending in July 2024, with one-third of the total award being eligible to vest based on Mr. Berg’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance are reflected in the table above.
Stock Options
Column (g) in the table above report awards of stock options treated as granted to the Named Executive Officers during fiscal 2023 under applicable accounting rules. Once vested, each option will generally remain exercisable until its normal expiration date. Stock options granted to the Named Executive Officers generally have a term of 10 years. However, vested stock options may terminate earlier in connection with a change-in-control transaction or a termination of the Named Executive Officer’s employment. Subject to any accelerated vesting that may apply in the circumstances, the unvested portion of the option will immediately terminate upon a termination of the Named Executive Officer’s employment. The Named Executive Officer will generally have six months to exercise the vested portion of the option following a termination of employment. However, stock options held by Lionsgate’s employees (including the Named Executive Officers) generally provide an extended period for the employee to exercise his or her vested stock options if the employee meets certain age and service requirements upon his or her retirement from employment with Lionsgate. If the Named Executive Officer is terminated by Lionsgate for cause, the option (whether or not vested) will immediately
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terminate. Stock options granted to Lionsgate’s employees (including the Named Executive Officers) do not include any dividend rights.
For Mr. Goldsmith, the stock options to purchase 67,422 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of stock options that vested during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance. This grant was originally approved by the Compensation Committee in July 2019 and covers a three-year period ending July 2022, with one-third of the total award being eligible to vest based on Mr. Goldsmith’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the stock options eligible to vest during fiscal 2023 based on Mr. Goldsmith’s and Lionsgate’s performance are reflected in the table above.
For Mr. Berg, the stock options to purchase 7,946 Class B non-voting shares made in July 2022, and reported in column (g) in the table above, represents the portion of an award of restricted share units that vested during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance. This award was originally approved by the Compensation Committee in July 2019 and covers a three-year period ending fiscal 2022, with one-third of the total award being eligible to vest based on Mr. Berg’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the units eligible to vest during fiscal 2023 based on Mr. Berg’s and Lionsgate’s performance is reflected in the table above.
Share Appreciation Rights
Column (g) in the table above also report awards of SARs treated as granted to the Named Executive Officers during fiscal 2023 under applicable accounting rules. Once vested, each SAR will generally remain exercisable until its normal expiration date. SARs granted to the Named Executive Officers generally have a term of 10 years. However, vested SARs may terminate earlier in connection with a change-in-control transaction or a termination of the Named Executive Officer’s employment. Subject to any accelerated vesting that may apply in the circumstances, the unvested portion of the SARs will immediately terminate upon a termination of the Named Executive Officer’s employment. The Named Executive Officer will generally have six months to exercise the vested portion of the SARs following a termination of employment. However, SARs held by Lionsgate’s employees (including the Named Executive Officers) generally provide an extended period for the employee to exercise his or her vested SARs if the employee meets certain age and service requirements upon his or her retirement from employment with Lionsgate. If the Named Executive Officer is terminated by Lionsgate for cause, the SAR (whether or not vested) will immediately terminate. The SARs granted to Lionsgate’s employees (including the Named Executive Officers) do not include any dividend rights.
For Mr. Barge, the grant of 211,842 SARs with respect to Class B non-voting shares made in May 2022, and reported in column (g) in the table above, represents the portion of an award of SARs that vested during fiscal 2023 based on Mr. Barge’s and Lionsgate’s performance. This grant was originally approved by the Compensation Committee in September 2019 and covers a three-year period, with one-third of the total award being eligible to vest based on Mr. Barge’s and Lionsgate’s performance over a specified 12-month period. This grant is treated as three separate annual awards for accounting purposes and, in each case, is treated as granted for accounting purposes on the date the Compensation Committee determines the level of performance achieved for the particular performance period. Accordingly, only the SARs eligible to vest during fiscal 2023 based on Mr. Barge’s and Lionsgate’s performance are reflected in the table above.
Accelerated Awards
For Mr. Berg, the awards of 3,940, 22,676, 11,407 and 16,135 Class B non-voting shares made in December 2022, and reported in column (g) in the table above, represents the portion of awards of restricted share units that
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were scheduled to vest on or before July 11, 2024 and were accelerated as per the terms of a Waiver and General Release Agreement with Mr. Berg dated February 15, 2023 (with all performance-vesting requirements being deemed met at the target level).
Outstanding Equity Awards
The following table presents information regarding the outstanding equity awards held by each of the Named Executive Officers as of March 31, 2023, including the vesting dates for the portions of these awards that had not vested as of that date.
Outstanding Equity Awards at Fiscal 2023 Year-End
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
| Name (a) |
Securities Covered By Award |
Number of Securities Underlying Unexercised Options (#) Exercisable (b) |
Numbers of Securities Underlying Unexercised Options (#) Unexercisable (c) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) |
Option Exercise Price ($) (e) |
Option Expiration Date (f) |
Number of Shares or Units of Stock That Have Not Vested (#) (g) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(1) (h) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(i) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) (i) |
||||||||||||||||||||||||||||||
| Jon Feltheimer |
LGF.A | 982,674 | * | — | — | $ | 27.48 | 5/23/2023 | — | — | — | — | ||||||||||||||||||||||||||||
| LGF.B | 982,674 | * | — | — | $ | 26.57 | 5/23/2023 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.A | 614,171 | * | — | — | $ | 32.83 | 5/23/2023 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 614,171 | * | — | — | $ | 31.74 | 5/23/2023 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.A | 452,030 | 113,007 | (2) | — | $ | 20.37 | 10/11/2026 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 452,030 | 113,007 | (2) | — | $ | 19.69 | 10/11/2026 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.A | 452,030 | 113,007 | (2) | — | $ | 25.46 | 10/11/2026 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 452,030 | 113,007 | (2) | — | $ | 24.61 | 10/11/2026 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 125,000 | — | — | $ | 23.02 | 6/7/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 125,000 | — | — | $ | 28.78 | 6/7/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 418,245 | — | — | $ | 14.60 | 6/4/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | — | 2,000,000 | (3) | — | $ | 8.17 | 8/21/2030 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 751,566 | (4) | $ | 7,801,255 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 290,433 | (5) | $ | 3,014,695 | — | — | |||||||||||||||||||||||||||||
| Michael Burns |
LGF.A | 439,133 | — | — | $ | 24.59 | 11/3/2026 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 439,133 | — | — | $ | 23.77 | 11/3/2026 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.A | 439,133 | — | — | $ | 19.68 | 11/3/2026 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 439,133 | — | — | $ | 19.02 | 11/3/2026 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 114,297 | — | — | $ | 23.02 | 6/7/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 114,297 | — | — | $ | 28.78 | 6/7/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 276,256 | — | — | $ | 14.60 | 6/4/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 885,000 | 500,000 | (7) | — | $ | 8.51 | 12/18/2030 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 66,666 | (8) | $ | 691,993 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 365,345 | (4) | $ | 3,792,281 | — | — | |||||||||||||||||||||||||||||
| James W. Barge |
LGF.A | 169,814 | — | — | $ | 38.76 | 9/16/2023 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 169,814 | — | — | $ | 37.47 | 9/16/2023 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 850,000 | — | — | $ | 25.22 | 12/28/2026 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 95,000 | — | — | $ | 23.02 | 6/7/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 74,405 | — | — | $ | 14.60 | 6/4/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 1,059,210 | — | — | $ | 8.66 | 9/26/2029 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 90,703 | (9) | $ | 941,497 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 85,558 | 10) | $ | 888,092 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 334,029 | (4) | $ | 3,467,221 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 181,521 | (5) | $ | 1,884,188 | — | — | |||||||||||||||||||||||||||||
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| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
| Name (a) |
Securities Covered By Award |
Number of Securities Underlying Unexercised Options (#) Exercisable (b) |
Numbers of Securities Underlying Unexercised Options (#) Unexercisable (c) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) |
Option Exercise Price ($) (e) |
Option Expiration Date (f) |
Number of Shares or Units of Stock That Have Not Vested (#) (g) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(1) (h) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(i) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) (i) |
||||||||||||||||||||||||||||||
| Brian Goldsmith |
LGF.A | 132,657 | — | — | $ | 39.16 | 11/13/2025 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 132,657 | — | — | $ | 37.86 | 11/13/2025 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 95,000 | — | — | $ | 23.02 | 6/7/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 315,372 | — | — | $ | 18.11 | 11/12/2028 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 404,530 | — | — | $ | 11.99 | 7/1/2029 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 74,405 | — | — | $ | 14.60 | 6/4/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 79,365 | (9) | $ | 823,809 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 79,854 | (10) | $ | 828,885 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 93,946 | (4) | $ | 975,159 | — | — | |||||||||||||||||||||||||||||
| LGF.B | — | — | — | — | — | 169,419 | (5) | $ | 1,758,569 | — | — | |||||||||||||||||||||||||||||
| Corii D. Berg |
LGF.B | 27,700 | — | — | $ | 23.46 | 6/20/2023 | — | — | — | — | |||||||||||||||||||||||||||||
| LGF.B | 47,676 | — | — | $ | 11.99 | 6/20/2023 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 30,438 | — | — | $ | 14.60 | 6/4/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
| LGF.B | 31,776 | — | — | $ | 6.98 | 6/20/2030 | — | — | — | — | ||||||||||||||||||||||||||||||
| Bruce Tobey |
LGF.B | — | — | — | — | — | 26,511 | (11) | $ | 275,184 | — | — | ||||||||||||||||||||||||||||
| * | Represents options that expired during fiscal 2024. |
| (1) | The dollar amounts shown in columns (h) and (j) are determined by multiplying either the number of Class A voting shares or units (LGF.A) or Class B non-voting shares or units (LGF.B) reported in columns (g) and (i), respectively, by $11.07 and $10.38, respectively, the closing price of LGF.A and LGF.B on March 31, 2023 (the last trading day of fiscal 2023). |
| (2) | The unvested portion of this award is scheduled to vest on May 22, 2023. |
| (3) | The unvested portion of this award is scheduled to vest on August 21, 2023. |
| (4) | The unvested portion of this award is scheduled to vest on June 1, 2023. |
| (5) | The unvested portion of this award is scheduled to vest in three equal annual installments on July 27, 2023, July 27, 2024 and July 27, 2025. |
| (7) | The unvested portion of this award is scheduled to vest on December 18, 2023; provided, however, that no portion of the SARs would have vested or been exercisable prior to the date on which the VWAP Performance Goal described above under Description of Employment Agreements was satisfied. The VWAP Performance Goal was met on June 25, 2021. |
| (8) | The unvested portion of this award is scheduled to vest in two equal annual installments on May 14, 2023 and May 14, 2024. |
| (9) | The unvested portion of this award is scheduled to vest on July 23, 2023. |
| (10) | The unvested portion of this award is scheduled to vest in two equal annual installments on, July 19, 2023 and July 19, 2024. |
| (11) | The unvested portion of this award is scheduled to vest in three equal annual installments on March 27, 2024, March 27, 2025 and March 27, 2026. |
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Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options by the Named Executive Officers during fiscal 2023 and the vesting during fiscal 2023 of other stock awards previously granted to the Named Executive Officers.
Option Exercises and Stock Vested — Fiscal 2023
| Option Awards | Stock Awards | |||||||||||||||||||
| Name (a) |
Securities Covered by Award |
Number of Shares Acquired on Exercise (#) (b) |
Value Realized on Exercise ($)(2) (c) |
Number of Shares Acquired on Vesting (#) (d) |
Value Realized on Vesting ($)(1) (e) |
|||||||||||||||
| Jon Feltheimer |
— | — | $ | — | — | $ | — | |||||||||||||
| Michael Burns |
LGF.B | — | $ | — | 33,334 | $ | 364,674 | |||||||||||||
| James W. Barge |
LGF.B | — | $ | — | 266,964 | $ | 2,338,588 | |||||||||||||
| Brian Goldsmith |
LGF.B | — | $ | — | 287,236 | $ | 2,517,938 | |||||||||||||
| Corii D. Berg |
LGF.B | — | $ | — | 275,689 | $ | 1,784,981 | |||||||||||||
| Bruce Tobey |
— | — | $ | — | — | $ | — | |||||||||||||
| (1) | The dollar amounts shown in column (c) above for option awards are determined by multiplying (i) the number of shares of existing common stock to which the exercise of the option related by (ii) the difference between the per-share closing price of the applicable class of shares of existing common stock to on the date of exercise and the exercise price of the stock options. The dollar amounts shown in column (e) above for stock awards are determined by multiplying the number of shares or units, as applicable, that vested by the per-share closing price of the applicable class of shares of existing common stock on the vesting date. |
Nonqualified Deferred Compensation
Lionsgate permits its Named Executive Officers and certain other key employees to elect to receive a portion of their compensation reported in the Summary Compensation table above on a deferred basis under Lionsgate’s deferred compensation plan. Under the plan, Lionsgate is also permitted to make additional discretionary contributions with respect to amounts deferred under the plan.
For cash amounts deferred under the plan, the participant may elect one or more measurement funds to be used to determine investment gains or losses to be credited to his or her account balance, including certain mutual funds. Amounts may be deferred until a specified date, retirement or other termination of service, disability, or death. At the participant’s election, compensation deferred until a specified date or termination of service may be paid as a lump sum or in annual installments as specified in the plan document. If the participant’s employment terminates due to death or disability, the participant’s deferred compensation balance will be paid in a single lump sum. Emergency hardship withdrawals are also permitted under the plan.
As of the March 31, 2023, none of the Named Executive Officers had deferred any amount under the plan, and Lionsgate had not made any contributions with respect to any Named Executive Officer under the plan.
Potential Payments Upon Termination or Change in Control
The following section describes the benefits that may become payable to the Named Executive Officers in connection with a termination of their employment with Lionsgate pursuant to the terms of their respective employment agreements with Lionsgate. In addition to the benefits described below, outstanding equity based awards held by the Named Executive Officers may also be subject to accelerated vesting in connection with a change in control of Lionsgate under the terms of Lionsgate’s equity incentive plans if the awards are not assumed or otherwise continued upon the transaction, as noted under Grants of Plan-Based Awards above. None of the Named Executive Officers are entitled to any reimbursement or gross-up payment for any excise taxes
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imposed under Section 280G of the U.S. Internal Revenue Code of 1986. The Named Executive Officers also do not have a right to voluntarily terminate employment (other than for “good reason” in certain cases) following a change in control and receive severance and are not entitled to any “single-trigger” vesting of equity awards or other benefits upon a change in control unless the executive’s employment terminates in the circumstances described below. In each case, the Named Executive Officer’s right to receive the severance benefits described below in connection with a termination of the executive’s employment (other than as a result of death or disability) is subject to his execution of a release of claims in favor of Lionsgate.
Jon Feltheimer
Severance Benefits — Termination of Employment. In the event Mr. Feltheimer’s employment is terminated by Lionsgate “without cause” or by him for “good reason” (as such terms are defined in Mr. Feltheimer’s employment agreement), Mr. Feltheimer would be entitled to a cash severance payment equal to the present value of his base salary through August 21, 2025, as well as payment of his premiums for continued health coverage for up to six months following his termination and his premiums for continued life and disability insurance through August 21, 2025. In addition, Mr. Feltheimer would be entitled to payment of the target amount of his annual bonus for the fiscal year in which his termination occurs. Mr. Feltheimer’s equity awards granted by Lionsgate prior to his termination, to the extent then outstanding and unvested, would become fully vested upon his termination (and if an annual grant for the fiscal year in which his termination occurs has not previously been granted, that annual grant would be made and would fully vest upon his termination).
Severance Benefits — Termination of Employment in Connection with Change in Control. If Mr. Feltheimer’s employment is terminated by Lionsgate “without cause” or by him for “good reason” and such termination occurs on or within 12 months following a change in control of Lionsgate (as such terms are defined in Mr. Feltheimer’s employment agreement), Mr. Feltheimer would be entitled to the severance benefits described above, except that his cash severance would be the greater of the present value of his base salary through August 21, 2025 and $6,000,000.
Severance Benefits — Death or Disability. In the event Mr. Feltheimer’s employment with Lionsgate terminates due to his death or “disability” (as such term is defined in Mr. Feltheimer’s employment agreement), the equity awards granted by Lionsgate pursuant to Mr. Feltheimer’s employment agreement, to the extent then outstanding and unvested, would become fully vested as of the date of such termination. In addition, in the event Mr. Feltheimer’s employment with Lionsgate terminates due to his disability, Lionsgate will continue to pay the premiums for his continued life and disability insurance through August 21, 2025.
Michael Burns
Severance Benefits — Termination of Employment. In the event Mr. Burns’ employment is terminated by Lionsgate “without cause” or by him for “good reason” (as such terms are defined in Mr. Burns’ employment agreement), Mr. Burns would be entitled to a lump sum cash severance payment equal to the present value of his remaining base salary through October 23, 2024, a prorated amount of the annual bonus that Mr. Burns would have received for the fiscal year in which his termination occurs, as well as payment of his premiums for continued health coverage for up to six months following his termination and payment for continued life and disability insurance through October 30, 2024. In addition, Mr. Burns’ equity awards granted by Lionsgate pursuant to his employment agreement, to the extent then outstanding and unvested, would become fully vested upon his termination.
Severance Benefits — Termination of Employment in Connection with Change in Control. If Mr. Burns’ employment is terminated by Lionsgate “without cause” or by him for “good reason” and such termination occurs on or within 12 months following a change in control of Lionsgate (as such terms are defined in Mr. Burns’ employment agreement), Mr. Burns would be entitled to the severance benefits described above, except that his lump sum cash severance would be the greater of the present value of his remaining base salary through October 23, 2024 or $3.5 million.
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Severance Benefits — Death or Disability. In the event Mr. Burns’ employment with Lionsgate terminates due to his death or “disability” (as such term is defined in Mr. Burns’ employment agreement), his equity awards granted by Lionsgate pursuant to Mr. Burns’ employment agreement, to the extent then outstanding and unvested, would become fully vested as of the date of such termination.
James W. Barge
Severance Benefits — Termination of Employment. In the event that Mr. Barge’s employment is terminated by Lionsgate “without cause” (as such term is defined in Mr. Barge’s employment agreement), Mr. Barge will be entitled to a lump sum cash severance payment equal to the greater of (i) 50% of his base salary for the remainder of the term of the agreement or (ii) 18 months of his base salary, a prorated amount of the annual bonus that Mr. Barge would have received for the fiscal year in which his termination occurs, and payment of his COBRA premiums for up to 18 months. Additionally, in the event Mr. Barge’s employment is terminated by Lionsgate “without cause” or if Mr. Barge resigns for “good reason” within 12 months following a change in control or “change in management” (as such terms are defined in Mr. Barge’s employment agreement), (1) any portion of the equity awards granted under Mr. Barge’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest within 12 months following his termination date will accelerate and be fully vested on his termination date, and (2) 50% of any portion of the equity awards granted under Mr. Barge’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest more than 12 months and less than 24 months following his termination date will accelerate and be fully vested on his termination date. Moreover, if Mr. Barge’s employment is terminated at the end of the term of the agreement because Lionsgate does not offer to extend the term or offers to extend the term on terms that would constitute “good reason” under the agreement, Mr. Barge would be entitled to a severance payment equal to 12 months of his base salary, in addition to the pro-rated bonus and payment of COBRA premiums noted above. In addition, any portion of equity granted under Mr. Barge’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that is scheduled to vest within 12 months following his termination date will accelerate and be fully vested on his termination date.
Severance Benefits — Termination of Employment in Connection with Change in Control. In the event that Mr. Barge’s employment is terminated by Lionsgate “without cause” or by him for “good reason” and such termination occurs on or within 12 months following a change in control or a “change in management” of Lionsgate (as such terms are defined in Mr. Barge’s employment agreement), Mr. Barge would be entitled to the severance benefits described above, except that his lump sum cash severance payment would be equal to the greater of 100% of his base salary for the remainder of the term and 18 months of his base salary. Additionally, in the event Mr. Barge’s employment is terminated by Lionsgate “without cause” on or within 12 months following a change in control, (a) any portion of the equity awards granted under Mr. Barge’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) will accelerate and be fully vested on his termination date and (b) Mr. Barge will be entitled to receive a payment equal to 50% of the value of each portion of the annual equity award grants provided in his employment agreement (as referred to above under “Description of Employment Agreements”) that has not previously been granted and is otherwise scheduled to be granted after his termination date under the terms of his agreement, with the value of each annual grant for these purposes to be based on the grant date value of the award and such payment to be made in cash or, at Lionsgate’s election, Class B non-voting shares.
Severance Benefits — Death or Disability. In the event Mr. Barge’s employment is terminated due to his death or “disability” (as such term is defined in Mr. Barge’s employment agreement), Mr. Barge will be entitled to receive a prorated bonus for the fiscal year in which his termination occurs and payment of his COBRA premiums for up to 18 months. In addition, Mr. Barge’s equity awards granted by Lionsgate pursuant to his employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest within 24 months following his termination date will accelerate and be fully vested on his termination.
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Brian Goldsmith
Severance Benefits — Termination of Employment. In the event Mr. Goldsmith’s employment is terminated by Lionsgate “without cause” (as such term is defined in Mr. Goldsmith’s employment agreement), Mr. Goldsmith will be entitled to a lump sum severance payment equal to the greater of (i) 50% of his salary for the remainder of the term of the agreement or (ii) 18 months of his base salary, a prorated discretionary bonus for the fiscal year in which his termination occurs, and payment of COBRA premiums for up to 18 months. Additionally, in the event Mr. Goldsmith’s employment is terminated by Lionsgate “without cause” or if Mr. Goldsmith resigns for “good reason” within 12 months following a change in control or “change in management” (as such terms are defined in Mr. Goldsmith’s employment agreement), (i) any portion of equity awards granted under Mr. Goldsmith’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest within 12 months following his termination date will accelerate and become fully vested, and (ii) 50% percent of any portion of equity awards granted under Mr. Goldsmith’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest more than 12 months and less than 24 months following his termination date will accelerate and become fully vested. Moreover, if Mr. Goldsmith’s employment is terminated at the end of the term of the agreement because Lionsgate does not offer to extend the term or offers to extend the term on terms that would constitute “good reason” under the agreement, Mr. Goldsmith would be entitled to a severance payment equal to 12 months of his base salary, in addition to the pro-rated discretionary bonus and payment of COBRA premiums noted above. In addition, any portion of equity granted under Mr. Goldsmith’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that is scheduled to vest within 12 months following his termination date will accelerate and be fully vested on his termination date.
Severance Benefits — Termination of Employment in Connection with Change in Control. In the event Mr. Goldsmith’s employment is terminated by Lionsgate “without cause” or by him for “good reason” within twelve (12) months following the date of a change in control or a “change in management” (as such terms are defined in Mr. Goldsmith’s employment agreement), Mr. Goldsmith would be entitled to the severance benefits described above, except that his lump sum cash severance payment would be equal to the greater of 100% of his base salary for the remainder of the term and 18 months of his base salary. Additionally, in the event Mr. Goldsmith’s employment is terminated by Lionsgate “without cause” on or within 12 months following a change in control, (a) any portion of the equity awards granted under Mr. Goldsmith’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) will accelerate and be fully vested on his termination date and (b) Mr. Goldsmith will be entitled to receive a payment equal to 50% of the value of each portion of the annual equity award grants provided in his employment agreement (as referred to above under “Description of Employment Agreements”) that has not previously been granted and is otherwise scheduled to be granted after his termination date under the terms of his agreement, with the value of each annual grant for these purposes to be based on the grant date value of the award and such payment to be made in cash or, at Lionsgate’s election, in Class B non-voting shares.
Severance Benefits — Death or Disability. In the event Mr. Goldsmith’s employment is terminated due to his death or “disability” (as such term is defined in Mr. Goldsmith’s employment agreement), Mr. Goldsmith will be entitled to receive a prorated discretionary bonus for the fiscal year in which his termination occurs and payment of his COBRA premiums for up to 18 months. In addition, Mr. Goldsmith’s equity awards granted by Lionsgate pursuant to his employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest within 24 months following his termination date will accelerate and be fully vested on his termination.
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Bruce Tobey
Severance Benefits — Termination of Employment. In the event that Mr. Tobey’s employment is terminated by Lionsgate “without cause” (as such term is defined in Mr. Tobey’s employment agreement), Mr. Tobey will be entitled to a lump sum severance payment equal to the greater of (i) 50% of his base salary for the remainder of the term of the agreement or (ii) 18 months of his base salary, a prorated amount of the bonus that Mr. Tobey would have received for the fiscal year in which his termination occurs, and payment of his COBRA premiums for up to 18 months. Additionally, in the event Mr. Tobey’s employment is terminated by Lionsgate “without cause” or if Mr. Tobey resigns for “good reason” within 12 months following a change in control or “change in management” (as such terms are defined in Mr. Tobey’s employment agreement), (1) any portion of the equity awards granted under Mr. Tobey’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest within 12 months following his termination date will accelerate and be fully vested on his termination date, and (2) 50% of any portion of the equity awards granted under Mr. Tobey’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest more than 12 months and less than 24 months following his termination date will accelerate and be fully vested on his termination date. Moreover, if Mr. Tobey’s employment is terminated at the end of the term of the agreement because Lionsgate does not offer to extend the term or offers to extend the term on terms that would constitute “good reason” under the agreement, Mr. Tobey would be entitled to a severance payment equal to 12 months of his base salary, in addition to the pro-rated bonus and payment of COBRA premiums noted above.
Severance Benefits — Termination of Employment in Connection with Change in Control. In the event that Mr. Tobey’s employment is terminated by Lionsgate “without cause” or by him for “good reason” and such termination occurs on or within 12 months following a change in control or a “change in management” of Lionsgate (as such terms are defined in Mr. Tobey’s employment agreement), Mr. Tobey would be entitled to the severance benefits described above, except that his lump sum cash severance payment would be equal to the greater of 100% of his base salary for the remainder of the term and 18 months of his base salary. Additionally, in the event Mr. Tobey’s employment is terminated by Lionsgate “without cause” on or within 12 months following a change in control, (a) any portion of the equity awards granted under Mr. Tobey’s employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) will accelerate and be fully vested on his termination date and (b) Mr. Tobey will be entitled to receive a payment equal to 50% of the value of each portion of the annual equity award grants provided in his employment agreement (as referred to above under “Description of Employment Agreements”) that has not previously been granted and is otherwise scheduled to be granted after his termination date under the terms of his agreement, with the value of each annual grant for these purposes to be based on the grant date value of the award and such payment to be made in cash or, at Lionsgate’s election, in Class B non-voting shares.
Severance Benefits — Death or Disability. In the event Mr. Tobey’s employment is terminated due to his death or “disability” (as such term is defined in Mr. Tobey’s employment agreement), Mr. Tobey’s equity awards granted by Lionsgate pursuant to his employment agreement (to the extent such awards have been granted prior to his termination and are then outstanding) that are scheduled to vest within 24 months following his termination date will accelerate and be fully vested on his termination.
Estimated Severance and Change-in-Control Benefits
Severance Benefits. The following chart presents Lionsgate’s estimate of the dollar value of the benefits each of the Named Executive Officers would have been entitled to receive, had his employment terminated under the circumstances described above (other than in connection with a change in control of Lionsgate) on March 31, 2023 (with the value of equity awards calculated based on the $11.07 and $10.38 closing prices of LGF.A and LGF.B, respectively, on March 31, 2023, the last trading day of fiscal 2023). Since this hypothetical termination
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would have occurred on the last day of the fiscal year, no pro rata bonus was included in the cash severance amounts in the charts below.
| Termination by Lionsgate Without Cause(1) | ||||||||||||||||
| Name |
Cash Severance |
Equity Acceleration(2) |
Insurance Premiums |
Total | ||||||||||||
| Jon Feltheimer |
$ | 3,234,866 | $ | 24,250,644 | $ | 248,813 | (3) | $ | 27,734,323 | |||||||
| Michael Burns |
$ | 1,467,879 | $ | 5,419,274 | $ | 46,498 | (4) | $ | 6,933,651 | |||||||
| James W. Barge |
$ | 1,500,000 | $ | 8,930,910 | $ | 50,220 | (5) | $ | 10,481,130 | |||||||
| Brian Goldsmith |
$ | 1,875,000 | $ | 5,624,673 | $ | 50,220 | (5) | $ | 7,549,893 | |||||||
| Bruce Tobey |
$ | 1,500,000 | $ | 137,592 | $ | 50,220 | (5) | $ | 1,687,812 | |||||||
| (1) | As described above, Messrs. Feltheimer and Burns would also be entitled to these benefits pursuant to their respective employment agreements if their employment is terminated by the executive for good reason. |
| (2) | These columns report the intrinsic value of the unvested portions of each executive’s awards that would accelerate in the circumstances. For stock options and SARs, this value is calculated by multiplying the amount (if any) by which the closing price of the applicable class of Lionsgate common shares on the last trading day of the fiscal year exceeds the exercise price or base price of the award by the number of shares subject to the accelerated portion of the award. No value is included in the table for stock options and SARs with a per-share exercise price that is greater than or equal to the closing price of the applicable class of Lionsgate’s shares on the last trading day of the fiscal year. For restricted share unit awards, this value is calculated by multiplying the closing price of the applicable class of Lionsgate common shares on the last trading day of the fiscal year by the number of units subject to the accelerated portion of the award. |
| (3) | Includes $16,740 for payment of COBRA premiums and $232,073 for payment of continued life and disability insurance premiums. |
| (4) | Includes $16,740 for payment of COBRA premiums and $29,758 for payment of continued life and disability insurance premiums. |
| (5) | Includes COBRA premium. |
| Termination Due to Executive’s Death or Disability |
||||||||||||
| Name |
Equity Acceleration(2) |
Insurance Premiums |
Total | |||||||||
| Jon Feltheimer |
$ | 18,250,644 | $ | 248,813 | (2) | $ | 18,499,457 | |||||
| Michael Burns |
$ | 5,419,274 | $ | 46,498 | (3) | $ | 5,465,772 | |||||
| James W. Barge |
$ | 10,003,018 | $ | 50,220 | (4) | $ | 10,053,238 | |||||
| Brian Goldsmith |
$ | 6,625,305 | $ | 50,220 | (4) | $ | 6,675,525 | |||||
| Bruce Tobey |
$ | 183,456 | $ | 50,220 | (4) | $ | 233,676 | |||||
| (1) | See note (2) to the table above for the valuation of these benefits. |
| (2) | Includes $16,740 for payment of COBRA premiums for a termination due to executive’s death or disability, and $232,073 for payment of continued life and disability insurance premiums for a termination due to executive’s disability. |
| (3) | Includes $16,740 for payment of COBRA premiums for a termination due to executive’s death or disability, and $29,758 for payment of continued life and disability insurance premiums for a termination due to executive’s disability. |
| (3) | Includes COBRA premium. |
Change-in-Control Severance Benefits. The following chart presents Lionsgate’s estimate of the dollar value of the benefits each of the Named Executive Officers would have been entitled to receive had a change in control of Lionsgate, or, in the case of Messrs. Barge, Goldsmith and Tobey, a change in management of Lionsgate,
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occurred on March 31, 2023 and the executive’s employment with Lionsgate had been terminated by Lionsgate without cause or by the executive for good reason as described above on such date.
| Name |
Cash Severance |
Equity Acceleration(2) |
Insurance Premiums |
Total | ||||||||||||
| Jon Feltheimer |
$ | 6,000,000 | $ | 24,250,644 | $ | 248,813 | (2) | $ | 30,499,457 | |||||||
| Michael Burns |
$ | 3,500,000 | $ | 5,419,274 | $ | 46,498 | (3) | $ | 8,965,772 | |||||||
| James W. Barge |
$ | 3,125,000 | $ | 11,259,144 | (4) | $ | 50,220 | $ | 14,434,364 | |||||||
| Brian Goldsmith |
$ | 8,380,137 | $ | 7,797,684 | (4) | $ | 50,220 | $ | 16,228,041 | |||||||
| Bruce Tobey |
$ | 4,489,041 | $ | 275,184 | (4) | $ | 50,200 | $ | 4,814,445 | |||||||
| (1) | For Messrs. Barge, Goldsmith and Tobey, this amount includes 50% of the grant date value of the annual equity awards from the executive’s employment agreement as described above that had not been granted as of March 31, 2023. |
| (2) | Includes $16,740 for payment of COBRA premiums and $232,073 for payment of continued life and disability insurance premiums. |
| (3) | Includes $16,740 for payment of COBRA premiums and $29,758 for payment of continued life and disability insurance premiums. |
| (4) | For Messrs. Barge, Goldsmith, and Tobey, equity acceleration only applies to a termination without cause. If such executives’ employment had been terminated for good reason on or within 12 months following a change in control or a “change in management,” the equity acceleration value would be the same as described above for a termination without cause not in connection with a change in control. A change in management in these Named Executive Officers’ employment agreements would generally occur when both Messrs. Feltheimer and Burns are no longer employed by Lionsgate. |
Separation Agreement with Mr. Berg
Effective December 2022, Mr. Berg resigned as the General Counsel of Lionsgate. In connection with his resignation, in February 2023, Mr. Berg entered into a waiver and general release agreement with Lionsgate that provided for him to receive severance benefits consisting of a cash payment equal to $1,641,096, and payment of health insurance premiums for 24 months following his termination date. In addition, Mr. Berg was entitled to accelerated vesting of installments of his outstanding equity awards granted by Lionsgate that were scheduled to vest on or before July 11, 2024 (with all performance vesting requirements being deemed met at the target level).
Pay Ratio Disclosure
Pursuant to the Securities Exchange Act of 1934, as amended, we are required to disclose in this proxy statement the ratio of the total annual compensation of our Chief Executive Officer to the median of the total annual compensation of all of our employees (excluding our Chief Executive Officer). Based on SEC rules for this disclosure and applying the methodology described below, we have determined that our Chief Executive Officer’s total compensation for fiscal 2023 was $21,528,409, and the median of the total compensation of all of our employees (excluding our Chief Executive Officer) for fiscal 2032 was $94,627. Accordingly, we estimate the ratio of our Chief Executive Officer’s total compensation for fiscal 2023 to the median of the total compensation of all of our employees (excluding our Chief Executive Officer) for fiscal 2023 to be 227.5 to 1.
We selected March 31, 2023, which is a date within the last three months of fiscal 2023, as the date we would use to identify our median employee. To find the median of the annual total compensation of all our employees (excluding our Chief Executive Officer), we used the amount of each employee’s total cash compensation (i.e., base salary, wages, overtime and bonus) from our payroll records. In making this determination, we did not annualize compensation for those employees who did not work for Lionsgate for the entire fiscal year. We also did not make any cost-of-living adjustments in identifying the median employee. We believe total cash compensation for all employees is an appropriate measure because total cash compensation data is readily available and Lionsgate considers this a reasonable measure of employees’ overall compensation.
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As of March 31, 2023, we had a total of 1,510 employees, of whom 1,374 were based in the U.S. and 136 were based outside of the U.S. In making the determination of the median employee, we did not include one employee based in Australia, five employees based in Canada, three employees based in China, 44 employees based in India, three employees based in Indonesia and two employees based in Luxembourg, in accordance with SEC rules permitting exclusion of a de minimis number of non U.S. employees (so that all U.S.-based employees and 78 employees based outside of the U.S. were included in this determination).
This pay ratio is an estimate calculated in a manner consistent with SEC rules based on the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pay Versus Performance
This section summarizes the relationship between the total compensation paid for Lionsgate’s Chief Executive Officer and the other Named Executive Officers and Lionsgate’s financial performance for the fiscal years shown in the table (in this discussion, Lionsgate’s Chief Executive Officer is also referred to as the principal executive officer or “PEO”, and the Named Executive Officers other than Lionsgate’s Chief Executive Officer are referred to as the “Non-PEO NEOs”):
| Value of Initial Fixed $100 Investment Based On: |
||||||||||||||||||||||||||||||||||||
| Fiscal |
Summary Compensation Table Total for PEO ($)(1)(2) |
Compensation Actually Paid to PEO ($)(3) |
Average Summary Compensation Table Total for Non-PEO NEOs ($)(1)(2) |
Average Compensation Actually Paid to Non-PEO NEOs ($)(3) |
Lionsgate TSR ($)(4) |
Dow Jones U.S. Media Sector TSR ($)(4) |
S&P Movies & Entertainment Index TSR ($)(4) |
Lionsgate Net Income (Loss) ($Millions)(5) |
Lionsgate Adjusted OIBDA ($Millions)(6) |
|||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||||||
| 2023 |
$ | 21,528,409 | $ | 13,153,336 | $ | 6,429,940 | $ | 4,169,033 | $ | 182 | $ | 108 | $ | 96 | $ | (2,010.2 | ) | $ | 358.1 | |||||||||||||||||
| 2022 |
$ | 5,585,412 | $ | 10,753,069 | $ | 4,649,415 | $ | 6,185,148 | $ | 267 | $ | 144 | $ | 124 | $ | (188.2 | ) | $ | 402.2 | |||||||||||||||||
| 2021 |
$ | 19,176,875 | $ | 30,384,695 | $ | 5,694,133 | $ | 10,065,318 | $ | 246 | $ | 176 | $ | 166 | $ | (18.9 | ) | $ | 540.9 | |||||||||||||||||
| (1) | Mr. Feltheimer was Lionsgate’s Chief Executive Officer for each of the three fiscal years included in the table above. For each of fiscal years 2021 and 2022, Lionsgate’s Non-PEO NEOs were Messrs. Burns, Barge, Goldsmith and Berg. For fiscal year 2023, Lionsgate’s Non-PEO NEOs were Messrs. Burns, Barge, Goldsmith, Tobey and Berg. |
| (2) | See the Summary Compensation Table above for detail on the total compensation for Lionsgate’s Chief Executive Officer for each fiscal year covered in the table. The average compensation for the Non-PEO NEOs for fiscal year 2023 was calculated from the Summary Compensation Table above. The average compensation for the Non-PEO NEOs for each of fiscal years 2022 and 2021 was calculated from the Summary Compensation Table as disclosed in Lionsgate’s proxy statement filed with the Securities and Exchange Commission in calendar year 2022 or 2021, respectively. |
| (3) | For purposes of this table, the compensation actually paid (also referred to as “CAP”) to each of Lionsgate’s NEOs (including, for purposes of this table, former Named Executive Officers who are included in the Summary Compensation Table for the applicable fiscal year and adjusted for the following with respect to each NEO: |
Summary Compensation Table for the applicable fiscal year and adjusted for the following with respect to each NEO:
| • | Less the amounts reported in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table for the applicable fiscal year, |
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| • | Plus the fiscal year-end value of Lionsgate option and stock awards granted in the covered fiscal year which were outstanding and unvested at the end of the covered fiscal year, |
| • | Plus/(less) the change in value as of the end of the covered fiscal year as compared to the value at the end of the prior fiscal year for Lionsgate option and stock awards which were granted in prior fiscal years and were outstanding and unvested at the end of the covered fiscal year, |
| • | Plus the vesting date value of Lionsgate option and stock awards which were granted and vested during the same covered fiscal year, |
| • | Plus/(less) the change in value as of the vesting date as compared to the value at the end of the prior fiscal year for Lionsgate option and stock awards which were granted in prior fiscal years and vested in the covered fiscal year, |
| • | Less, as to any Lionsgate option and stock awards which were granted in prior fiscal years and were forfeited during the covered fiscal year, the value of such awards as of the end of the prior fiscal year, |
| • | Plus the dollar value of any dividends or other earnings paid during the covered fiscal year on outstanding and unvested Lionsgate stock awards not otherwise included, |
| • | Plus, as to a Lionsgate option or stock award that was materially modified during the covered fiscal year, the amount by which the value of the award as of the date of the modification exceeds the value of the original award on the modification date. |
In making each of these adjustments, the “value” of an option or stock award is the fair value of the award on the applicable date determined in accordance with FASB ASC Topic 718 using the valuation assumptions Lionsgate then used to calculate the fair value of its equity awards. For more information on the valuation of Lionsgate’s equity awards, please see the notes to Lionsgate’s financial statements that appear in its Annual Report on Form 10-K for each fiscal year and the footnotes to the Summary Compensation Table that appears in Lionsgate’s annual proxy statement.
The table above reflects the CAP (determined as noted above) for Lionsgate’s Chief Executive Officer and, for Lionsgate’s Non-PEO NEOs, the average of the CAPs determined for the Non-PEO NEOs for each of the fiscal years shown in the table.
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The following table provides a reconciliation of the Summary Compensation Table Total to Compensation Actually Paid for Lionsgate’s Chief Executive Officer.
| Reconciliation of Summary Compensation Table Total to Compensation |
Fiscal Year 2023 ($) |
Fiscal Year 2022 ($) |
Fiscal Year 2021 ($) |
|||||||||
| Summary Compensation Table Total |
21,528,409 | 5,585,412 | 19,176,875 | |||||||||
|
|
|
|
|
|
|
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| Grant Date Fair Value of Option and Stock Awards Granted in Fiscal Year |
(9,750,004 | ) | (1,000,003 | ) | (7,446,931 | ) | ||||||
| Fair Value at Fiscal Year-End of Outstanding and Unvested Option and Stock Awards Granted in Fiscal Year |
10,815,950 | — | 15,610,964 | |||||||||
| Change in Fair Value of Outstanding and Unvested Option and Stock Awards Granted in Prior Fiscal Years |
(8,868,143 | ) | 3,994,288 | 2,420,353 | ||||||||
| Fair Value at Vesting of Option and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year |
— | 1,000,003 | — | |||||||||
| Change in Fair Value as of Vesting Date of Option and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year |
(572,876 | ) | 1,173,369 | 623,434 | ||||||||
| Fair Value as of Prior Fiscal Year-End of Option and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Compensation Actually Paid |
$ | 13,153,336 | $ | 10,753,069 | $ | 30,384,695 | ||||||
|
|
|
|
|
|
|
|||||||
The following table provides a reconciliation of the average of the Summary Compensation Table Total for the Non-PEO NEOs for a fiscal year to the average of the Compensation Actually Paid for the Non-PEO NEOs for that fiscal year.
| Reconciliation of Average Summary Compensation Table Total to Average |
Fiscal Year 2023 ($) |
Fiscal Year 2022 ($) |
Fiscal Year 2021 ($) |
|||||||||
| Summary Compensation Table Total |
6,429,940 | 4,649,415 | 5,694,133 | |||||||||
|
|
|
|
|
|
|
|||||||
| Grant Date Fair Value of Option and Stock Awards Granted in Fiscal Year |
(3,272,202 | ) | (2,759,912 | ) | (2,366,952 | ) | ||||||
| Fair Value at Fiscal Year-End of Outstanding and Unvested Option and Stock Awards Granted in Fiscal Year |
2,430,521 | 1,022,759 | 4,803,958 | |||||||||
| Change in Fair Value of Outstanding and Unvested Option and Stock Awards Granted in Prior Fiscal Years |
(761,350 | ) | 1,155,466 | 1,236,985 | ||||||||
| Fair Value at Vesting of Option and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year |
948,244 | 1,392,662 | 158,084 | |||||||||
| Change in Fair Value as of Vesting Date of Option and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year |
(1,571,828 | ) | 724,758 | 539,110 | ||||||||
| Fair Value as of Prior Fiscal Year-End of Option and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year |
(34,292 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Compensation Actually Paid |
$ | 4,169,033 | $ | 6,185,148 | $ | 10,065,318 | ||||||
|
|
|
|
|
|
|
|||||||
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| (4) | Lionsgate TSR represents cumulative total shareholder return on a fixed investment of $100 in existing common stock for the period beginning on the last trading day of fiscal year 2020 through the end of the applicable fiscal year, and is calculated assuming the reinvestment of dividends. The Dow Jones U.S. Media Sector Index TSR and the S&P Movies & Entertainment Index (which Lionsgate also utilizes in the stock performance graph required by Item 201(e) of Regulation S-K included in its Annual Reports for each covered fiscal year) represent cumulative total shareholder return on a fixed investment of $100 in the Dow Jones U.S. Media Sector Index and the S&P Movies & Entertainment Index, respectively, for the period beginning on the last trading day of fiscal year 2020 through the end of the applicable fiscal year, and are calculated assuming the reinvestment of dividends. The following chart illustrates the CAP for Lionsgate’s Chief Executive Officer and the average CAP for Lionsgate’s Non-PEO NEOs for each of the last three fiscal years against Lionsgate’s total shareholder return and the total shareholder return for each of the Dow Jones U.S. Media Sector and the S&P Movies & Entertainment Index (each calculated as described above) over that period of time. |
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| (5) | This column shows Lionsgate’s net income (loss) for each fiscal year covered by the table. The following chart illustrates the CAP for Lionsgate’s Chief Executive Officer and the average CAP for Lionsgate’s Non-PEO NEOs for each of the last three fiscal years against Lionsgate’s net income for each of those years. |
| (6) | This column shows Lionsgate’s adjusted OIBDA for each fiscal year covered by the table. Lionsgate considers adjusted OIBDA to be a key metric in its executive compensation program, used in determining corporate performance under fiscal year 2023 annual incentive plan. See the “Compensation Discussion and Analysis” section of this report for more information regarding the use of this performance measure in Lionsgate’s executive compensation program and Exhibit 99.1 for the definition, adjustments and related reconciliation for this non-GAAP measure. The following chart illustrates the CAP for Lionsgate’s Chief Executive Officer and the average CAP for Lionsgate’s Non-PEO NEOs for each of the last three fiscal years against Lionsgate’s adjusted OIBDA for each of those years. |
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Following is an unranked list of Lionsgate’s financial performance measures it considers most important in linking the compensation actually paid to Lionsgate’s NEOs for fiscal 2023 with Lionsgate’s performance.
| • | Adjusted OIBDA (used in determining corporate performance for purposes of the annual incentive plan) |
| • | Volume-Weighted Average Stock Price (used in determining vesting of certain stock units granted to Named Executive Officers during the fiscal year) |
| • | Certain Discretionary Assessment of Achievement of Operational and Strategic Goals (used in determining individual performance for purposes of the annual incentive plan and the vesting of performance-based equity awards) |
See the “Compensation Discussion and Analysis” section of this Form 10-K/A for more information regarding the use of these performance measures in Lionsgate’s executive compensation program.
In general, Lionsgate also views its stock price, upon which the value of all of the equity awards granted by Lionsgate is dependent, as a key performance-based component of its executive compensation program in order to further align the interests of Lionsgate’s senior management with the interests of Lionsgate’s shareholders.
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| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Securities Owned by Certain Beneficial Owners
The following table presents certain information about beneficial ownership of Class A voting shares and Class B non-voting shares as of July 14, 2023 (unless otherwise indicated) by each person (or group of affiliated persons) who is known by Lionsgate to own beneficially more than 5% of the outstanding shares of any class of common stock. All of such information is based on publicly available filings. The security ownership information is given as of July 14, 2023 and, in the case of percentage ownership information, is based upon 83,505,571 Class A voting shares and 148,100,809 Class B non-voting shares, in each case, outstanding on that date. Except as indicated in the footnotes to this table, the persons named in the table have sole voting and dispositive power with respect to all shares shown as beneficially owned by them, subject to community property laws, where applicable. In general, “beneficial ownership” includes those shares that a person has the sole or shared power to vote or dispose of, including shares that the person has the right to acquire within 60 days.
| Class A Voting Shares | Class B Non-Voting Shares | |||||||||||||||
| Beneficial Owner(1) | Number of Shares |
% of Class(2) | Number of Shares |
% of Class(2) | ||||||||||||
| Mark H. Rachesky, M.D.(3) |
20,199,803 | 24.2 | % | 15,180,602 | 10.3 | % | ||||||||||
| Shapiro Capital Management LLC(4) |
372,639 | * | 21,109,379 | 14.3 | % | |||||||||||
| Capital Research Global Investors(5) |
0 | 0 | % | 21,376,347 | 14.4 | % | ||||||||||
| Vanguard Group, Inc.(6) |
6,675,680 | 8.0 | % | 11,950,344 | 8.1 | % | ||||||||||
| BlackRock, Inc.(7) |
6,826,809 | 8.2 | % | 8,131,739 | 5.5 | % | ||||||||||
| Invesco, Ltd.(8) |
6,327,911 | 7.6 | % | 101,868 | * | |||||||||||
| * | Less than 1% |
| (1) | The addresses for the listed beneficial owners are as follows: Mark H. Rachesky, M.D., c/o MHR Fund Management LLC, 1345 Avenue of the Americas, 42nd Floor, New York, NY 10105; Shapiro Capital Management LLC, 3060 Peachtree Road NW, Suite 1555, Atlanta, GA 30305; Capital Research Global Investors, 333 South Hope Street, 55th Floor, Los Angeles, CA 90071; Vanguard Group, Inc., PO Box 2600 V26, Valley Forge, PA 19482-2600; BlackRock, Inc., 50 Hudson Yards, New York, NY 10001; and Invesco, Ltd., 1331 Spring Street NW, Suite 2500, Atlanta, GA 30309. |
| (2) | The percentage of total common shares beneficially owned by each person (or group of affiliated persons) is calculated by dividing: (1) the number of common shares deemed to be beneficially held by such person (or group of affiliated persons) as of July 14, 2023 (unless otherwise indicated), as determined in accordance with Rule 13d-3 under the Exchange Act by (2) the sum of (A) 83,505,571 or 148,100,809, which are the number of Class A voting shares and Class B non-voting shares outstanding as of July 15, 2023, respectively; plus (B) the number of common shares issuable upon the exercise of stock options and other derivative securities, if any, exercisable as of July 14, 2023 or within 60 days thereafter, held by such person (or group of affiliated persons) (i.e., September 12, 2023). |
| (3) | The information is based solely on a Form 4 filed with the SEC on April 5, 2023 by Mark H. Rachesky, M.D. |
| (4) | The information is based solely on a Schedule 13F-HR filed with the SEC on May 11, 2023. According to the information in the Schedule 13F-HR, Shapiro Capital Management has sole voting and dispositive power with respect to all of its Class A voting shares and 20,060,541 shares of its Class B non-voting shares. |
| (5) | The information is based solely on a Schedule 13F-HR filed with the SEC on May 15, 2023. |
| (6) | The information is based solely on a Schedule 13F-HR filed with the SEC on May 15, 2023. According to the information in the Schedule 13F-HR, Vanguard Group, Inc. does not have sole voting and dispositive power with respect to the Class A voting shares and Class B non-voting shares it beneficially owns. |
| (7) | The information is based solely on a Schedule 13F-HR filed with the SEC on May 12, 2023. According to the information in the Schedule 13F-HR, BlackRock, Inc. has sole voting and dispositive power with respect to 6,662,074 shares of its Class A voting shares and 7,894,589 shares of its Class B non-voting shares. |
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| (8) | The information is based solely on a Schedule 13F-HR filed with the SEC on May 12, 2023. According to the information in the Schedule 13F-HR, Invesco, Ltd. does not have sole voting and dispositive power with respect to the Class A voting shares and Class B non-voting shares it beneficially owns. |
Stock Ownership of Management
The table below presents certain information about beneficial ownership of Class A voting shares and Class B non-voting shares stock as of July 14, 2023 (unless otherwise indicated) by (i) each current director, nominee for director and current Named Executive Officer of Lionsgate and (ii) all current directors and executive officers of Lionsgate as a group. Except as indicated in the footnotes to this table, the persons named in the table have sole voting and dispositive power with respect to all shares shown as beneficially owned by them, subject to community property laws, where applicable. In general, “beneficial ownership” includes those shares that a person has the sole or shared power to vote or dispose of, including shares that the person has the right to acquire within 60 days.
| Class A Voting Shares | Class B Non-Voting Shares | |||||||||||||||
| Number of Shares(1) |
% of Class(2) |
Number of Shares(1) |
% of Class(2) |
|||||||||||||
| James W. Barge(3) |
261,096 | * | 3,180,839 | 2.1 | % | |||||||||||
| Michael Burns(4) |
1,879,327 | 2.2 | % | 3,663,417 | 2.4 | % | ||||||||||
| Mignon Clyburn |
8,597 | * | 9,306 | * | ||||||||||||
| Gordon Crawford |
269,307 | * | 1,838,359 | 1.2 | % | |||||||||||
| Jon Feltheimer (5) |
1,509,431 | 1.8 | % | 5,044,918 | 3.3 | % | ||||||||||
| Emily Fine |
25,890 | * | 27,597 | * | ||||||||||||
| Michael T. Fries |
0 | * | 0 | * | ||||||||||||
| Brian Goldsmith(6) |
215,669 | * | 1,674,987 | 1.1 | % | |||||||||||
| John D. Harkey, Jr. |
0 | * | 0 | * | ||||||||||||
| Susan McCaw |
17,256 | * | 13,103 | * | ||||||||||||
| Yvette Ostolaza |
23,220 | * | 15,566 | * | ||||||||||||
| Mark H. Rachesky, M.D.(7) |
20,199,803 | 24.2 | % | 15,180,602 | 10.3 | % | ||||||||||
| Daryl Simm |
53,482 | * | 54,681 | * | ||||||||||||
| Hardwick Simmons |
62,276 | * | 63,528 | * | ||||||||||||
| Harry E. Sloan |
56,394 | * | 256,800 | * | ||||||||||||
| Bruce Tobey(8) |
0 | * | 0 | * | ||||||||||||
| Corii D. Berg(9) |
0 | * | 244,078 | * | ||||||||||||
| All former and current executive officers and directors and director nominees, as a group (17 persons) |
24,581,748 | 28.6 | % | 31,267,781 | 19.8 | % | ||||||||||
| * | Less than 1% |
| (1) | Pursuant to Rule 13d-3(d)(1) of the Exchange Act, amount includes vested restricted share units, and restricted share units vesting and stock options and share appreciation rights exercisable, within 60 days of July 14, 2023 (i.e., September 12, 2023). |
| (2) | The percentage of total common shares beneficially owned by each person (or group of affiliated persons) is calculated by dividing: (1) the number of common shares deemed to be beneficially held by such person (or group of affiliated persons) as of July 14, 2023 (unless otherwise indicated), as determined in accordance with Rule 13d-3 under the Exchange Act by (2) the sum of (A) 83,505,571 or 148,100,809 which are the number of Class A voting shares and Class B non-voting shares outstanding as of July 14, 2023, respectively; plus (B) the number of common shares issuable upon the exercise of stock options and other derivative securities, if any, exercisable as of July 14, 2023 or within 60 days thereafter, held by such person (or group of affiliated persons) (i.e., September 12, 2023). |
| (3) | Includes 169,814 Class A voting shares and 2,460,271 Class B non-voting shares subject to stock options/ SARs that are currently exercisable. |
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| (4) | Includes 878,266 Class A voting shares and 2,268,116 Class B non-voting shares subject to stock options/ SARs that are currently exercisable. |
| (5) | Includes 1,130,074 Class A voting shares and 3,798,319 Class B non-voting shares subject to stock options/ SARs that are currently exercisable. |
| (6) | Includes 132,657 Class A voting shares and 1,021,964 Class B non-voting shares subject to stock options/ SARs that are currently exercisable. |
| (7) | The information is based solely on a Form 4 filed with the SEC on April 5, 2023 by Mark H. Rachesky, M.D. |
| (8) | Mr. Tobey was appointed as Lionsgate’s Executive Vice President and General Counsel effective March 27, 2023. |
| (9) | Mr. Berg resigned as Lionsgate’s Executive Vice President and General Counsel effective December 20, 2022. Includes 30,438 Class B non-voting shares subject to options/SARs that are currently exercisable. |
Equity Compensation Plan Information
Lionsgate currently maintains four equity compensation plans: the 2019 Plan, the Lions Gate Entertainment Corp. 2017 Performance Incentive Plan (the “2017 Plan”), the Lions Gate Entertainment Corp. 2012 Performance Incentive Plan (the “2012 Plan”) and the Starz 2016 Omnibus Incentive Plan, each of which have each been approved by Lionsgate’s shareholders. The Starz 2016 Omnibus Incentive Plan (the “Assumed Plan”) was assumed by Lionsgate in connection with Lionsgate’s acquisition of Starz in December 2016. No new awards may be granted under the 2017 Plan, the 2012 Plan or the Assumed Plan.
The following table sets forth, for each of Lionsgate’s equity compensation plans, the number of shares of common stock subject to outstanding awards, the weighted-average exercise price of outstanding stock options and SARs, and the number of shares remaining available for future award grants as of March 31, 2023.
| Plan category |
Number of shares of existing common stock to be issued upon exercise of outstanding stock options, warrants and rights |
Weighted-average exercise price of outstanding stock options, warrants and rights |
Number of shares of existing common stock remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column) |
|||||||||
| Equity compensation plans approved by shareholders |
40,363,656 | (1) | $ | 17.20 | 11,365,097 | (2) | ||||||
| Equity compensation plans not approved by shareholders |
— | $ | — | — | ||||||||
| Total(3) |
40,363,656 | $ | 17.20 | 11,365,097 | ||||||||
| (1) | Of these shares, 8,112,517 shares were subject to stock options and SARs then outstanding under the 2019 Plan, 6,689,023 shares were subject to stock options and SARs then outstanding under the 2017 Plan, 9,470,223 shares were subject to stock options and SARs then outstanding under the 2012 Plan. In addition, this number includes 16,080,562 shares that were subject to outstanding stock unit awards granted under the 2019 Plan, 1,599 shares that were subject to outstanding stock unit awards granted under the 2017 Plan, and 9,732 shares that were subject to outstanding stock unit awards granted under the 2012 Plan. These amounts include, for the 2019 Plan that have been approved by Lionsgate, but for which the performance goals had not yet been established as of March 31, 2023. Such awards are considered by Lionsgate to be outstanding but will not be treated as “granted” for accounting purposes until the relevant performance goals have been set; accordingly, they were not included in the awards reported as outstanding in the notes to the financial statements in Lionsgate’s Annual Report on Form 10-K for the year ended March 31, 2023, as the relevant performance goals had not been set at that time. This amount does not include shares subject to awards assumed by Lionsgate in connection with acquisitions of other companies as described in footnote 3 below. |
Effective May 7, 2020, Lionsgate accepted for exchange outstanding stock options and SARs with respect to 5,319,468 shares of existing common stock (4,660,184 of which shares were subject to stock options and
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SARs that were granted under the 2017 Plan or the 2012 Plan) and granted stock options and SARs with respect to 902,203 shares of existing common stock under the 2019 Plan in exchange for those stock options and SARs.
| (2) | All of these shares were available for award grant purposes under the 2019 Plan. The shares available under the 2019 Plan are, subject to certain other limits under that plan, generally available for any type of award authorized under the 2019 Plan including stock options, share appreciation rights, restricted stock, restricted share units, stock bonuses and performance shares. |
| (3) | In accordance with applicable SEC rules, the table does not include information with respect to equity awards that were assumed by Lionsgate in connection with the acquisitions of the companies that originally established those plans or agreements and under which Lionsgate may not make new award grants. As of March 31, 2023, 62,587 shares were issuable upon exercise of outstanding stock options granted under the Assumed Plan (excluding stock options granted by Lionsgate under the Starz 2016 Plan after the closing of Lionsgate’s acquisition of Starz in December 2016). The weighted average exercise price of these assumed outstanding stock options to acquire shares of existing common stock was $24.71 per share. |
Director Compensation
Compensation Program
For fiscal 2023, Lionsgate’s non-employee directors were compensated as follows:
| Type of Compensation |
Amount | |
| Annual Equity Retainer |
$50,000 | |
| Annual Cash Retainer |
$50,000 | |
| Annual Board Chair Retainer |
$52,000 | |
| Annual Audit & Risk Committee Chair Retainer |
$15,000 | |
| Annual Compensation Committee Chair Retainer |
$10,000 | |
| Annual Nominating and Corporate Governance Committee Chair Retainer |
$10,000 | |
| Annual Strategic Advisory Committee Chair Retainer. |
$10,000 | |
| Committee Meeting Retainer |
$1,400 per meeting |
The annual equity retainer consisted of an award of restricted share units with a grant date value of $50,000 granted on September 13, 2022, the date of Lionsgate’s 2022 Annual General and Special Meeting of Shareholders (with $25,000 of the value based on the closing price Class A voting shares and $25,000 of the value based on the closing price of Class B non-voting shares on the last trading day prior to the grant date, and the number of units rounded to the nearest whole unit). The restricted share units vest in annual installments over three years following the date of grant, and vested units were paid in an equivalent number of Class A voting shares and Class B non-voting shares, as applicable. For Mr. Fries, the award was instead granted by the Board as a fixed amount of cash vesting in annual installments over three years following the date of grant.
The annual cash retainer and other retainers set forth in the table above were paid, at the director’s election, in all cash, 50% in cash and 50% in the form of shares of common stock (with the 50% portion to be paid in shares to be paid 50% in Class A voting shares and 50% in Class B non-voting shares), or 100% in the form of shares of existing common stock (with 50% to be paid in Class A voting shares and 50% in Class B non-voting shares). The Board retained discretion to provide for retainers for one or more directors to be paid in a different mix of cash and shares of common stock (whether in Class A voting shares, Class B non-voting shares, or a combination thereof) as it determined appropriate. Retainers were paid in two installments, with the number of shares of common stock delivered in payment of any retainer determined by dividing the dollar amount of the retainer paid in the form of shares of common stock by the average closing price of common stock (either Class A voting shares or Class B non-voting shares, as applicable) for the previous five business days prior to payment, and are fully vested at the time of payment.
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Pursuant to Lionsgate’s policies, non-employee directors were also reimbursed for reasonable expenses incurred in the performance of their duties.
In January 2023, the Compensation Committee engaged Pay Governance to review Lionsgate’s non-employee director compensation program. Pay Governance concluded that non-employee director compensation under the program, last updated in May 2012, measured as the lowest compensation level among Lionsgate’s peer group and was in the 4th percentile of Lionsgate’s revenue-comparable general industry samples. Consequently, in February 2023, the Board, upon the recommendation of the Compensation Committee, and based on a proposal from Pay Governance, approved an update to Lionsgate non-employee director’s compensation program.
Accordingly, effective April 1, 2023, Lionsgate’s non-employee directors will receive (i) an annual equity retainer of $150,000, (ii) an annual cash retainer of $100,000 and (iii) the other retainers set forth in the table below. Meeting fees have been eliminated from the program.
| Type of Compensation |
Amount | |||
| Annual Equity Retainer |
$ | 150,000 | ||
| Annual Cash Retainer |
$ | 100,000 | ||
| Annual Board Chair Retainer |
$ | 52,000 | ||
| Annual Audit & Risk Committee Chair Retainer |
$ | 30,000 | ||
| Annual Compensation Committee Chair Retainer. |
$ | 30,000 | ||
| Annual Nominating and Corporate Governance Committee Chair Retainer |
$ | 20,000 | ||
| Annual Strategic Advisory Committee Chair Retainer |
$ | 20,000 | ||
The annual equity retainer consists of an award of restricted share units granted under Lionsgate’s equity incentive plan then in effect with a grant date value of $150,000 granted annually on the date of date of Lionsgate’s annual general meeting of shareholders (with $75,000 of the value based on the closing price Class A voting shares and $75,000 of the value based on the closing price of Class B non-voting shares on the date of grant, and the number of units rounded to the nearest whole unit). The restricted share units vest after one year following the date of grant (or, if earlier, the date of the annual general meeting of shareholders in the year after the year of grant) and will be paid in an equivalent number of Class A voting shares and Class B non-voting shares, as applicable. The Board retains discretion to provide for the award to instead be granted as a fixed amount of cash subject to the same vesting terms. The Board may also provide non-employee directors an election to defer payment of their vested awards in accordance with applicable tax law.
The annual cash retainer and other retainers set for in the table above will be paid, at the director’s election, in all cash, 50% in cash and 50% in the form of shares of common stock (with the 50% portion to be paid in shares to be paid 50% in Class A voting shares and 50% in Class B non-voting shares), or 100% in the form of shares of common stock (with 50% to be paid in Class A voting shares and 50% in Class B non-voting shares). The Board retains discretion to provide for retainers for one or more directors to be paid in a different mix of cash and shares of common stock (whether in Class A voting shares, Class B non-voting shares, or a combination thereof) as it determined appropriate. Retainers are paid in two installments, with the number of shares of common stock delivered in payment of any retainer determined by dividing the dollar amount of the retainer paid in the form of shares of common stock by the closing price of common stock (either Class A voting shares or Class B non-voting shares, as applicable) on the date of payment, and are fully vested at the time of payment.
Pursuant to Lionsgate’s policies, non-employee directors will also be reimbursed for reasonable expenses incurred in the performance of their duties.
The Board (or any committee of the Board within the authority delegated to it) has the right to amend this policy from time to time.
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Director Onboarding and Education
When a new director joins the Board, management and existing Board members provide an orientation to allow new directors to become familiar with Lionsgate’s business and strategic plans, significant financial matters, core values, including ethics, compliance programs and corporate governance practices, and other key policies and practices. This orientation typically includes meetings between the new director and senior management to review Lionsgate’s strategy, business plan, and risk profile, as well as providing the new director with background material on Lionsgate.
Lionsgate encourages the participation of all Board members in continuing education programs, at the expense of Lionsgate, that are relevant to the business and affairs of Lionsgate and the fulfillment of the directors’ responsibilities as members of the Board and its committees.
Fiscal 2023 Director Compensation
The following table presents information regarding compensation earned or paid to each of Lionsgate’s non-employee directors for services rendered during fiscal 2023. Messrs. Feltheimer and Burns, who are employed by Lionsgate, do not receive any compensation for their services on the Board.
| Name (a) |
Fees Earned or Paid in Cash ($)(1) (b) |
Stock Awards ($)(2)(3) (c) |
Option Awards ($)(3) (d) |
Non-Equity Incentive Plan Compensation ($) (e) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (f) |
All Other Compensation ($) (g) |
Total ($) (h) |
|||||||||||||||||||||
| Mignon Clyburn |
$ | 54,200 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 104,201 | ||||||||||||||
| Gordon Crawford |
$ | 62,800 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 112,801 | ||||||||||||||
| Emily Fine |
$ | 57,000 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 107,001 | ||||||||||||||
| Michael T. Fries |
$ | 109,800 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 109,800 | ||||||||||||||
| Susan McCaw |
$ | 65,400 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 115,401 | ||||||||||||||
| Yvette Ostolaza |
$ | 64,200 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 114,201 | ||||||||||||||
| Mark H. Rachesky, M.D. |
$ | 124,600 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 174,601 | ||||||||||||||
| Daryl Simm |
$ | 69,800 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 119,801 | ||||||||||||||
| Hardwick Simmons |
$ | 73,400 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 123,401 | ||||||||||||||
| Harry E. Sloan |
$ | 65,400 | $ | 50,001 | $ | — | $ | — | $ | — | $ | — | $ | 115,401 | ||||||||||||||
| (1) | The amounts reported in column (b) represent director annual retainer, chair fees, and meeting fees, for fiscal 2023, paid, at the director’s election, either 50% in cash and 50% in the form of existing common stock, 100% in the form of existing common stock, or 100% in cash, as described above. The value of the common shares is calculated using the average closing price of shares of common stock for the last five business days prior to payment. Retainers and fees are paid twice a year in April and October of each year. During fiscal 2023, Lionsgate’s Non-Employee Directors who elected to receive 50% of their retainers and fees in the form of common shares received the following number of shares: Ms. McCaw, 3,133 shares, Mr. Simm, 3,349 shares and Mr. Simmons, 3,454 shares. During fiscal 2023, Lionsgate’s Non-Employee Directors who elected to receive 100% of their retainers and fees in the form of common shares received the following number of shares: Ms. Clyburn, 5,350 shares, Mr. Crawford, 5,872 shares, Ms. Fine, 5,898 shares, Ms. Ostolaza, 6,329 shares and Dr. Rachesky, 10,030 shares. For fiscal 2023, the Board determined that Mr. Fries would receive 100% of his retainer and fees in the form of cash (so that the amount reported in this column for Mr. Fries includes cash received in lieu of any equity award). |
| (2) | Each Non-Employee Director then in office received a grant of 2,434 restricted share units with respect to Class A voting shares and 2,583 restricted share units with respect to Class B non-voting shares units on September 13, 2022 at Lionsgate’s 2022 Annual General and Special Meeting of Shareholders (other than |
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| Mr. Fries, who receives cash in lieu of equity grants). The amounts reported in column (c) reflect the fair value of these awards on the grant date as determined under the principles used to calculate the value of equity awards for purposes of Lionsgate’s financial statements. For a discussion of the assumptions and methodologies used to calculate the amounts referred to above, see the discussion of stock awards contained in Note 13 to Lionsgate’s Audited Consolidated Financial Statements, included as part of Lionsgate’s 2023 Annual Report filed on Form 10-K filed with the SEC on May 25, 2023. |
| (3) | The following table presents the number of unvested stock awards held by each of Lionsgate’s Non-Employee Directors as of March 31, 2023. No Non-Employee Directors held any outstanding option awards as of that date. |
| Number of Unvested Restricted Share Units as of March 31, 2023 |
||||||||
| Director |
LGF.A | LGF.B | ||||||
| Mignon Clyburn |
4,564 | 4,898 | ||||||
| Gordon Crawford |
4,564 | 4,898 | ||||||
| Emily Fine |
4,564 | 4,898 | ||||||
| Michael T. Fries |
— | — | ||||||
| Susan McCaw |
4,564 | 4,898 | ||||||
| Yvette Ostolaza |
4,564 | 4,898 | ||||||
| Mark H. Rachesky, M.D. |
4,564 | 4,898 | ||||||
| Daryl Simm |
4,564 | 4,898 | ||||||
| Hardwick Simmons |
4,564 | 4,898 | ||||||
| Harry E. Sloan |
2,434 | 2,583 | ||||||
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| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE |
Certain Relationships and Related Party Transactions
Lionsgate recognizes that transactions it may conduct with any of its directors, director nominees or executive officers may present potential or actual conflicts of interest and create the appearance that decisions are based on considerations other than Lionsgate’s best interests and those of its shareholders. Lionsgate has established, and the Board has adopted, a written Related Person Transactions Policy to monitor transactions, arrangements or relationships, including any indebtedness or guarantee of indebtedness, in which Lionsgate and any of the following have an interest: (i) any person who is or was an executive officer, director, or director nominee of Lionsgate at any time since the beginning of Lionsgate’s last fiscal year; (ii) a person who is or was an immediate family member (as defined in the policy) of an executive officer, director, or director nominee at any time since the beginning of Lionsgate’s last fiscal year; (iii) any person who, at the time of the occurrence or existence of the transaction, is greater than 5% beneficial owner of Lionsgate’s common shares; (iv) any person who, at the time of the occurrence or existence of the transaction, is an immediate family member (as defined in the policy) of the greater than 5% beneficial owner of Lionsgate’s common shares; or (v) any firm, corporation or other entity in which any of the foregoing persons is employed or is a partner or principal or in which such person has a 10% or greater beneficial ownership interest (which we refer to in this report as a “related person”). The policy covers any transaction where the aggregate amount is expected to exceed $120,000 in which a related person has a direct or indirect material interest.
The full text of the Related Person Transaction Policy is available on Lionsgate’s website at http://investors.lionsgate.com/governance/governance-documents or may be obtained in print, without charge, by any shareholder upon request to Lionsgate’s Corporate Secretary.
Certain Other Agreements
Letter Agreement. On July 9, 2009, Lionsgate entered into a letter agreement (as amended from time to time, the “MHR Letter Agreement”) with Mark H. Rachesky. M.D., pursuant to which Dr. Rachesky was nominated to the Board for the 2009 annual meeting of shareholders. The MHR Letter Agreement also provides, subject to certain terms and conditions, including that Dr. Rachesky and certain of his affiliates hold at least 8,192,246 common shares of Lionsgate, subject to equitable adjustment (which amount represented approximately 7% of Lionsgate’s common stock outstanding as of May 22, 2009), that in the event Lionsgate enters into an agreement with any other person, or invites or receives a proposal, in either case which relates to the matters addressed by the MHR Letter Agreement, and that has terms or conditions that are more favorable to such other person or more restrictive to Lionsgate than the terms or conditions set forth in the MHR Letter Agreement or the Registration Rights Agreement with MHR Fund Management (as described below), then Lionsgate will offer Dr. Rachesky and certain of his affiliates the opportunity to enter into an agreement on the same terms and conditions or, as the case may be, make a competing proposal which shall be considered by Lionsgate in good faith before deciding whether to execute any such other agreement.
Investor Rights Agreement. See “Directors, Executive Officer and Corporate Governance — Investor Rights Agreement” above.
Voting and Standstill Agreement. Also in connection with the Purchases, on November 10, 2015, Lionsgate entered into a voting and standstill agreement with Liberty Global, Liberty, Discovery Lightning, Discovery, Dr. John C. Malone, MHR Fund Management and certain affiliates of MHR Fund Management (as amended from time to time, the “Voting and Standstill Agreement”). Under the Voting and Standstill Agreement, Liberty and Discovery have agreed to vote, in any vote of Lionsgate’s shareholders on a merger, amalgamation, plan of arrangement, consolidation, business combination, third party tender offer, asset sale or other similar transaction involving Lionsgate or any of its subsidiaries (and any proposal relating to the issuance of capital, increase in the authorized capital or amendment to any constitutional documents in connection with any of the foregoing), all of
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the common shares beneficially owned by them (together with certain of their affiliates) in excess of 18.5% of Lionsgate’s outstanding voting power in the aggregate in the same proportion as the votes cast by other shareholders.
In addition, each of Liberty, Discovery and MHR Fund Management (together with certain of their affiliates) has agreed that as long as any of them have the right to nominate at least one representative to the Board, each of them will vote all of Lionsgate’s common shares owned by them (together with certain of their affiliates) in favor of each of the other’s respective director nominees, subject to certain exceptions set forth in the Voting and Standstill Agreement.
Under the Voting and Standstill Agreement, Liberty and Discovery (together with certain of their affiliates) have also agreed that if they sell or transfer any of their common shares to a shareholder or group of shareholders that beneficially own 5% or more of Lionsgate’s common shares, or that would result in a person or group of persons beneficially owning 5% or more of Lionsgate’s common shares, any such transferee would have to agree to the Voting and Standstill Agreement, subject to certain exceptions set forth in the Voting and Standstill Agreement.
Registration Rights Agreements. On October 22, 2009, Lionsgate entered into a registration rights agreement with certain affiliates of MHR Fund Management, which was later amended on February 3, 2016. In addition, on November 10, 2015, Lionsgate entered into separate registration rights agreements with each of Liberty and Discovery (together with certain of their affiliates). The three registration rights agreements described in the foregoing are referred to herein as the “Registration Rights Agreements.”
Each Registration Rights Agreement provides that the applicable investor is entitled to two demand registration rights to request that Lionsgate register all or a portion of their common shares. In addition, in the event that Lionsgate proposes to register any of Lionsgate’s equity securities or securities convertible into or exchangeable for Lionsgate’s equity securities, either for its own account or for the account of other security holders, the applicable investor will be entitled to certain “piggyback” registration rights allowing them to include their shares in such registration, subject to customary limitations. As a result, whenever Lionsgate proposes to file a registration statement under the Securities Act, other than with respect to a registration statement on Forms S-4 or S-8 or certain other exceptions, the applicable investor will be entitled to notice of the registration and have the right, subject to certain limitations, to include their shares in the registration.
The registration rights described above of Liberty and Discovery will terminate on the first anniversary of the date that the applicable investor (together with certain of its affiliates) both (i) beneficially owns less than 2,971,601 common shares, subject to equitable adjustment (which amount represented approximately 2% of Lionsgate’s common stock outstanding as of November 2, 2015), and (ii) ceases to have a designated representative on the Board. The registration rights described above of the applicable affiliates of MHR Fund Management will terminate on the first anniversary of the date that they both (i) beneficially owns less than 11,703,209 common shares, subject to equitable adjustment (which amount represented approximately 10% of Lionsgate’s common stock outstanding as disclosed in Lionsgate’s Form 10-K for the fiscal year ended March 31, 2009), and (ii) ceases to have a designated representative on the Board.
The foregoing descriptions of the MHR Letter Agreement, the Investor Rights Agreement, the Voting and Standstill Agreement and the Registration Rights Agreements is not meant to be complete and is qualified by reference to the full text of each of the MHR Letter Agreement, the Investor Rights Agreement, the Voting and Standstill Agreement and the Registration Rights Agreements, respectively, which are filed as exhibits to the Original Filing.
Transactions with Equity Method Investees
In the ordinary course of business, Lionsgate is involved in related party transactions with equity method investees. These related party transactions primarily relate to the licensing and distribution of Lionsgate’s films
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and television programs and the lease of a studio facility owned by an equity-method investee, for which the impact on Lionsgate’s consolidated balance sheets and consolidated statements of operations is as shown in the tables below. For additional information about related party transactions, see the Original Filing.
| March 31, 2023 | ||||
| (Amounts in millions) |
||||
| Consolidated Balance Sheets |
||||
| Accounts receivable |
$ | 14.8 | ||
| Investment in films and television programs(1) |
7.9 | |||
| Other assets, noncurrent(1) |
45.8 | |||
|
|
|
|||
| Total due from related |
$ | 68.5 | ||
|
|
|
|||
| Accounts payable(2) |
$ | 16.8 | ||
| Other accrued liabilities(1) |
6.7 | |||
| Participations and residuals, current |
7.5 | |||
| Participations and residuals, noncurrent |
2.0 | |||
| Other liabilities(1) |
41.4 | |||
|
|
|
|||
| Total due to related parties |
$ | 74.4 | ||
|
|
|
|||
| Year Ended March 31, 2023 |
||||
| (Amounts in millions) |
||||
| Consolidated Statements of Operations |
||||
| Revenues |
$ | 6.1 | ||
| Direct operating expense |
$ | 8.3 | ||
| Distribution and marketing expense |
$ | 0.4 | ||
| Interest and other income |
$ | 1.7 | ||
| (1) | During the year ended March 31, 2022, Lionsgate entered into certain operating leases related to a studio facility owned by an equity-method investee. Amounts related to these leases are included in investment in films and television programs, other assets - noncurrent, other accrued liabilities and other liabilities in the consolidated balance sheet at March 31, 2023. |
| (2) | Amounts primarily represent production related advances due to certain of its equity method investees. |
In April 2004, a wholly-owned subsidiary of the Company entered into agreements (as amended) with Ignite, LLC (“Ignite”) for distribution rights to certain films. Michael Burns, the Vice Chair and a director of the Company, owns a 65.45% interest in Ignite, and Hardwick Simmons, a director of the Company, owns a 24.24% interest in Ignite. During the year ended March 31, 2023, $0.4 million was paid to Ignite under these agreements.
In the year ended March 31, 2021, the Company paid less than $0.1 million to MLC Strategies, LLC (“MLC Strategies”) for certain consulting services. No amounts were paid in the years ended March 31, 2023 and 2022. Mignon Clyburn, a director of the Company, is the President of MLC Strategies.
In addition, as of March 31, 2023, Lionsgate has entered into certain leases that have not yet commenced primarily related to studio facilities owned by an equity-method investee, for which construction has not yet been completed.
Director Independence
It is the policy of the Board that, as required by the requirements of the New York Stock Exchange listing standards, a majority of directors be “independent” of Lionsgate and its management. For a director to be deemed
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“independent,” the Board will affirmatively determine that the director has no material relationship with Lionsgate or its affiliates or any member of the senior management of Lionsgate or his/her affiliates.
Pursuant to Lionsgate’s Corporate Governance Guidelines, the Board undertook its annual review of director independence in June 2023. During the annual review, the Board considered transactions and relationships between each director or any member of his/her immediate family and Lionsgate and its subsidiaries and affiliates, including those reported under the heading “Certain Relationships and Related Party Transactions” above. The Board also examined transactions and relationships with Lionsgate between directors or their affiliates and members of Lionsgate’s senior management or their affiliates. As provided in Lionsgate’s Corporate Governance Guidelines, the purpose of this review was to determine whether any such relationships or transactions were inconsistent with a determination that the director is “independent.” The Nominating and Corporate Governance Committee, with assistance from counsel, regularly reviews Lionsgate’s Corporate Governance Guidelines to ensure their compliance with Canadian law, SEC and New York Stock Exchange regulations. The full text of Lionsgate’s Corporate Governance Guidelines is available on its website at http://investors.lionsgate.com/governance/governance-documents, or may be obtained in print, without charge, by any shareholder upon request to Lionsgate’s Corporate Secretary, at either of its principal executive offices.
As a result of this review, the Board affirmatively determined that 11 of its directors, including each of Messrs. Crawford, Fries, Harkey, Rachesky, Simm, Simmons, Sloan and Mmes. Clyburn, Fine, McCaw and Ostolaza, are “independent” under Lionsgate’s Standards for Director Independence, which is available on its website at http://investors.lionsgate.com/governance/governance-documents, Canadian standards, SEC rules and regulations (for Audit & Risk Committee members) and the New York Stock Exchange listing standards (including the enhanced independence requirements for compensation committee members).
A number of Lionsgate’s independent board members are currently serving or have served as directors or as members of senior management of other public companies. All of the committees of the Board are comprised solely of independent directors, each with a different independent director serving as chair of the committee. Lionsgate believes that the number of independent experienced directors that make up the Board, along with the independent oversight of the Board by the non-executive Chair, benefits Lionsgate and its shareholders.
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| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
Accountants’ Fees
During fiscal 2022 and fiscal 2023, Lionsgate retained its independent registered public accounting firm, Ernst & Young LLP, to provide services in the categories listed below. The following are the aggregate fees billed for each of the last two fiscal years for such services:
| Year Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Audit Fees |
$ | 8,470,290 | $ | 5,273,070 | ||||
| Audit-Related Fees |
$ | 192,500 | $ | 467,840 | ||||
| Tax Compliance Fees |
$ | 1,729,835 | $ | 1,446,798 | ||||
| Tax Planning and Advisory Fees |
$ | 2,227,582 | $ | 904,356 | ||||
Audit Fees includes fees associated with the annual audit of Lionsgate’s financial statements, the audit of the effectiveness of internal control over financial reporting, reviews of Lionsgate’s Quarterly Reports on Form 10-Q, statutory audits, and services that only the independent auditors can reasonably provide, such as services associated with SEC registration statements or other documents issued in connection with securities offerings (including consents and comfort letters). For the year ended March 31, 2023, Audit Fees also includes fees associated with carve-out audits of the Studio Business and the Starz Business in connection with Lionsgate’s proposed separation of such businesses. Audit-Related Fees includes fees associated with accounting consultations, due diligence services related to acquisitions, and attestation services not required by statute or regulation. Tax Fees consist of $1,729,835 and $1,446,798 for professional services related to tax compliance, including foreign tax return preparation and transfer pricing studies and consultations, for the years ended March 31, 2023 and 2022, respectively, as well as $2,227,582 and $904,356 for professional services related to tax planning and tax advisory services for the years ended March 31, 2023 and 2022, respectively.
Pursuant to the Audit & Risk Committee’s policy to pre-approve all permitted audit and non-audit services, the Audit & Risk Committee pre-approved all professional services provided by Ernst & Young LLP during fiscal 2023 and fiscal 2022 and determined that the provision of non-audit services in fiscal 2023 and fiscal 2022 was compatible with maintaining Ernst & Young LLP’s independence.
The Audit & Risk Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report any pre-approval decisions to the full Audit & Risk Committee at its next scheduled meeting.
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PART IV
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
| (1) | Financial Statements and Schedules |
No financial statement or supplemental data are filed with this report on Form 10-K/A. See Index to Financial Statements and Supplemental Data of the Original Form 10-K.
| (2) | Exhibits |
The documents set forth below are filed herewith.
INDEX TO EXHIBITS
| Exhibit |
Exhibit Description |
Location | ||
| 10.12.5 | Amendment No. 5, dated as of June 14, 2023, to the Credit and Guarantee Agreement dated as of December 8, 2016, among Lions Gate Entertainment Corp., as borrower, each guarantor party thereto, each lender party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto. | Filed herewith | ||
| 31.3 | Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 31.4 | Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 99.1 | Use of Non-GAAP Financial Measures | Filed herewith | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | Filed herewith | ||
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on July 20, 2023.
| LIONS GATE ENTERTAINMENT CORP. | ||
| By: | /s/ James W. Barge | |
| James W. Barge | ||
| Chief Financial Officer | ||
Date: July 20, 2023
84
Exhibit 10.12.5
Execution Version
AMENDMENT NO. 5
AMENDMENT NO. 5, dated as of June 14, 2023 (this “Amendment”), to the Credit and Guarantee Agreement dated as of December 8, 2016 (as amended and restated by that certain Amendment No. 2 to the Credit and Guarantee Agreement, dated as of March 22, 2018, and as amended by that certain Amendment No. 3 to the Credit and Guarantee Agreement, dated as of March 11, 2019 and that certain Amendment No. 4 to the Credit and Guarantee Agreement, dated as of April 6, 2021, the “Credit Agreement”; the Credit Agreement, as amended by this Amendment and as further amended, supplemented, amended and restated or otherwise modified from time to time, the “Amended Credit Agreement”) among LIONS GATE ENTERTAINMENT CORP., a corporation organized under the laws of the province of British Columbia, Canada, LIONS GATE CAPITAL HOLDINGS LLC (the “Borrower”), each other Guarantor party thereto, each lender from time to time party thereto (collectively, the “Lenders” and individually, a “Lender”), JPMORGAN CHASE BANK, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and the other parties thereto.
RECITALS
WHEREAS, certain loans, commitments and/or other extensions of credit (the “Loans”) under the Credit Agreement denominated in Dollars (the “Affected Currency”) incur or are permitted to incur interest, fees or other amounts based on the London Interbank Offered Rate as administered by the ICE Benchmark Administration (“LIBOR”) in accordance with the terms of the Credit Agreement;
WHEREAS, pursuant to Section 3.1(c) of the Credit Agreement, the Administrative Agent and the Borrower have determined in accordance with the Credit Agreement that LIBOR for the Affected Currency should be replaced with the applicable Benchmark for all purposes under the Credit Agreement and any Fundamental Document and that the Credit Agreement shall be amended to reflect such applicable Benchmark and such other related changes as may be applicable (the “Benchmark Amendment”) and that such Benchmark Amendment shall become effective at and after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Amendment is provided to the Lenders (such time, the “Objection Deadline”), so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Amendment from Lenders comprising the Required Lenders.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided to such terms in the Amended Credit Agreement.
2. Agreement.
(a) The Credit Agreement is hereby amended to (i) delete the stricken text (indicated textually in the same manner as the following
example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the
following example: double-underlined text) as set forth in
the pages attached as Annex A hereto, (ii) replace Exhibit A (Form Notice of Borrowing) with Exhibit A (Form Notice of Borrowing) attached as Annex B hereto and (iii) replace Exhibit B (Form Notice of Continuation/Conversion) with Exhibit
B (Form Notice of Continuation/Conversion) attached as Annex C hereto.
(b) Existing Loans outstanding immediately prior to the Amendment Effective Date denominated in Dollars and bearing interest at the Eurodollar Rate (as defined in the Credit Agreement immediately prior to the Amendment Effective Date) (“Existing LIBOR Loans”) shall continue as Loans bearing interest at the Eurodollar Rate (as defined in the Credit Agreement immediately prior to the Amendment Effective Date) until the end of the Interest Period currently in effect and applicable to such Existing LIBOR Loans; provided, that prior to the end of the Interest Period currently in effect and applicable to such Existing LIBOR Loans, the Borrower shall deliver to the Administrative Agent a Notice of Borrowing pursuant to Section 2.5 of the Credit Agreement (as amended hereby) requesting a conversion of such Existing LIBOR Loans to Term Benchmark Loans (bearing interest at Adjusted Term SOFR) or Base Rate Loans, and failing delivery of such timely notice of such conversion shall be deemed to have selected a conversion of such Existing LIBOR Loans into Term Benchmark Loans bearing interest at the Adjusted Term SOFR Rate with an Interest Period of one month.
3. Payment of Expenses. The Borrower agrees to reimburse the Administrative Agent for all reasonable and documented fees, charges and disbursements of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including all reasonable and documented fees, charges and disbursements of counsel to the Administrative Agent.
4. Conditions Precedent. This effectiveness of this Amendment is subject to the satisfaction of each of the following conditions (the date of the satisfaction of all such conditions, the “Amendment Effective Date”):
(a) The Administrative Agent (or its counsel) shall have received from the Borrower either (x) a counterpart of this Amendment signed on behalf of such party or (y) written evidence reasonably satisfactory to the Administrative Agent (which may include delivery of a signed signature page of this Amendment by facsimile or other means of electronic transmission (e.g., “pdf”)) that such party has signed a counterpart of this Amendment.
(b) The Administrative Agent has not received, by the Objection Deadline, written notice of objection to the Benchmark Amendment from Lenders comprising the Required Lenders.
(c) The representations and warranties of each Credit Party set forth in the Fundamental Documents shall be true and correct in all material respects, in each case on and as of the Amendment Effective Date (or true and correct in all material respects as of a specified date, if earlier).
(d) At the time of and immediately after effectiveness of this Amendment, no Default or Event of Default shall have occurred and be continuing.
5. Representations and Warranties. The Borrower represents and warrants to the Administrative Agent that, as of the date hereof:
(a) The execution, delivery and performance of this Amendment by the Borrower (i) have been duly authorized by all necessary corporate or company (as applicable) action on the part of the Borrower, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to the Borrower, or any of its properties or assets, (iii) will not violate any provision of the certificate of formation, limited liability company agreement or any other organizational document of the Borrower, (iv) will not violate any provision of any Distribution Agreement, indenture, agreement, bond, note or other similar instrument to which the Borrower is a party or by which the Borrower or any of its properties or assets are bound, and (v) will not 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 such Distribution Agreement, indenture, agreement, bond, note or other instrument, except, in the case of clauses (ii), (iv) and (v) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, have a Material Adverse Effect.
2
6. Reaffirmation; Reference to and Effect on the Fundamental Documents.
(a) From and after the Amendment Effective Date, each reference in the Credit Agreement to “hereunder,” “hereof,” “this Credit Agreement” or words of like import and each reference in the other Fundamental Documents to “Credit Agreement,” “thereunder,” “thereof” or words of like import shall, unless the context otherwise requires, mean and be a reference to the Credit Agreement as amended by this Amendment. This Amendment is a Fundamental Document.
(b) The Fundamental Documents, and the obligations of the Borrower under the Fundamental Documents, are hereby ratified and confirmed and shall remain in full force and effect according to their terms.
(c) The Borrower (i) acknowledges and consents to all of the terms and conditions of this Amendment, (ii) affirms all of its obligations under the Fundamental Documents, (iii) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Fundamental Documents, (iv) agrees that the Collateral Documents continue to be in full force and effect and are not impaired or adversely affected in any manner whatsoever, (v) confirms its grant of security interests pursuant to the Collateral Documents to which it is a party as Collateral for the Obligations, and (vi) acknowledges that all Liens granted (or purported to be granted) pursuant to the Collateral Documents remain and continue in full force and effect in respect of, and to secure, the Obligations.
(d) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Fundamental Documents, nor constitute a waiver of any provision of any of the Fundamental Documents.
(e) In the event of any conflict between the terms of this Amendment and the terms of the Credit Agreement or the other Fundamental Documents, the terms hereof shall control.
7. Governing Law; Jurisdiction; Consent to Service of Process; Waiver of Jury Trial, Etc.
(a) This Amendment shall be construed in accordance with and governed by the law of the State of New York.
(b) EACH PARTY HERETO HEREBY AGREES AS SET FORTH IN SECTIONS 11.8 AND 11.9 OF THE CREDIT AGREEMENT AS IF SUCH SECTIONS WERE SET FORTH IN FULL HEREIN.
8. Amendments; Headings; Severability. This Amendment may not be amended nor may any provision hereof be waived except pursuant to a writing signed by the Borrower and the Administrative Agent. The Section headings used herein are for convenience of reference only, are not part of this Amendment and are not to affect the construction of, or to be taken into consideration in interpreting this Amendment. Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof, and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
3
9. Execution in Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by telecopy, emailed pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Amendment. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Amendment 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.
10. Notices. All notices hereunder shall be given in accordance with the provisions of Section 11.1 of the Credit Agreement.
[remainder of page intentionally left blank]
4
Each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.
| BORROWER: | LIONS GATE CAPITAL HOLDINGS LLC, | |||||
| as the Borrower | ||||||
| By: | /s/ James W. Barge | |||||
| Name: | James W. Barge | |||||
| Title: | Chief Financial Officer and Treasurer | |||||
[Signature Page to Amendment No. 5]
| ADMINISTRATIVE AGENT: | JPMORGAN CHASE BANK, N.A., | |||||
| as Administrative Agent | ||||||
| By: | /s/ Peter Christensen | |||||
| Name: | Peter Christensen | |||||
| Title: | Executive Director | |||||
[Signature Page to Amendment No. 5]
Annex A
(Attached hereto)
ANNEX A to
FourthFifth Amendment
(Redline vs. Conformed Copy including ThirdFourth Amendment)
CREDIT AND GUARANTEE AGREEMENT
Dated as of December 8, 2016
as Amended and Restated as of March 22, 2018
among
LIONS GATE CAPITAL HOLDINGS LLC
as New Borrower
LIONS GATE ENTERTAINMENT CORP.
as Existing Borrower
THE GUARANTORS REFERRED TO HEREIN
THE LENDERS REFERRED TO HEREIN
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
and
JPMORGAN CHASE BANK, N.A.
(solely with respect to the Term B Facility),
as Sole Lead Arranger and Sole Bookrunner
JPMORGAN CHASE BANK, N.A.
(solely with respect to the Term A Facility and the Revolving Facility),
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
(solely with respect to the Term A Facility and the Revolving Facility),
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.
(solely with respect to the Term A Facility and the Revolving Facility),
RBC CAPITAL MARKETS*
(solely with respect to the Term A Facility and the Revolving Facility),
WELLS FARGO SECURITIES, LLC
(solely with respect to the Term A Facility and the Revolving Facility),
as Joint Lead Arrangers, Joint Bookrunners and Co-Syndication Agents
SUNTRUST ROBINSON HUMPHREY, INC.
(solely with respect to the Term A Facility and the Revolving Facility),
BNP PARIBAS
(solely with respect to the Term A Facility and the Revolving Facility),
SOCIETE GENERALE
(solely with respect to the Term A Facility and the Revolving Facility),
as Joint Lead Arrangers and Joint Bookrunners
SUNTRUST BANK
(solely with respect to the Term A Facility and the Revolving Facility),
as Co-Syndication Agent
| * | RBC Capital Markets is a brand name for the capital markets businesses of Royal Bank of Canada and its affiliates. |
and
BNP PARIBAS,
(solely with respect to the Term A Facility and the Revolving Facility)
SOCIETE GENERALE
(solely with respect to the Term A Facility and the Revolving Facility),
FIFTH THIRD BANK
(solely with respect to the Term A Facility and the Revolving Facility),
as Co-Documentation Agents
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE 1 |
DEFINITIONS | 1 | ||||
| ARTICLE 2 |
THE LOANS | |||||
| SECTION 2.1. |
The Term Loans | |||||
| SECTION 2.2. |
Revolving Credit Commitments | |||||
| SECTION 2.3. |
Letters of Credit | |||||
| SECTION 2.4. |
Applicable Interest Rates | |||||
| SECTION 2.5. |
Manner of Borrowing Loans and Designating Applicable Interest Rates | |||||
| SECTION 2.6. |
Minimum Borrowing Amounts; Maximum |
|||||
| SECTION 2.7. |
Maturity of Loans | |||||
| SECTION 2.8. |
Prepayments | |||||
| SECTION 2.9. |
Place and Application of Payments | |||||
| SECTION 2.10. |
Commitment Terminations | |||||
| SECTION 2.11. |
Evidence of Indebtedness | |||||
| SECTION 2.12. |
Fees | |||||
| SECTION 2.13. |
Incremental Credit Extensions | |||||
| SECTION 2.14. |
Extensions of Term Loans and Revolving Credit Commitments | |||||
| SECTION 2.15. |
Refinancing Facilities | |||||
| SECTION 2.16. |
Defaulting Lenders | |||||
| ARTICLE 3 |
CHANGES IN CIRCUMSTANCES, TAXES, INDEMNITY | |||||
| SECTION 3.1. |
||||||
| SECTION 3.2. |
Change in Legality | |||||
| SECTION 3.3. |
Change in Circumstances | |||||
| SECTION 3.4. |
Withholding Taxes | |||||
| SECTION 3.5. |
Foreign Currency Conversion; Withholding | |||||
| SECTION 3.6. |
Indemnity | |||||
| SECTION 3.7. |
Replacement of Lenders | |||||
| SECTION 3.8. |
Interest Adjustments | |||||
| ARTICLE 4 |
REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES | |||||
| SECTION 4.1. |
Existence and Power | |||||
| SECTION 4.2. |
Authority and No Violation | |||||
| SECTION 4.3. |
Governmental Approval | |||||
| SECTION 4.4. |
Binding Agreements | |||||
| SECTION 4.5. |
Financial Statements | |||||
| SECTION 4.6. |
No Material Adverse Change; No Default; Solvency | |||||
| SECTION 4.7. |
Ownership of Subsidiaries, etc | |||||
| SECTION 4.8. |
Title to Properties | |||||
| SECTION 4.9. |
Litigation | |||||
i
TABLE OF CONTENTS
(continued)
| Page | ||||||
| SECTION 4.10. |
Federal Reserve Regulations | |||||
| SECTION 4.11. |
Investment Company Act | |||||
| SECTION 4.12. |
Taxes | |||||
| SECTION 4.13. |
Compliance with ERISA; Labor Disputes | |||||
| SECTION 4.14. |
Non-U.S. Plan Compliance | |||||
| SECTION 4.15. |
Agreements | |||||
| SECTION 4.16. |
Creation, Validity and Perfection of Security Interest | |||||
| SECTION 4.17. |
Disclosure | |||||
| SECTION 4.18. |
Distribution Rights | |||||
| SECTION 4.19. |
Environmental Liabilities | |||||
| SECTION 4.20. |
Compliance with Laws | |||||
| SECTION 4.21. |
Real Property | |||||
| SECTION 4.22. |
OFAC, FCPA, etc | |||||
| SECTION 4.23. |
Use of Proceeds | |||||
| ARTICLE 5 |
CONDITIONS PRECEDENT | |||||
| SECTION 5.1. |
Conditions to Initial Credit Extension | |||||
| SECTION 5.2. |
Conditions to Each Subsequent Credit Extension | |||||
| ARTICLE 6 |
AFFIRMATIVE COVENANTS | |||||
| SECTION 6.1. |
Financial Statements and Other Information | |||||
| SECTION 6.2. |
Compliance Certificate and Other Information | |||||
| SECTION 6.3. |
Taxes | |||||
| SECTION 6.4. |
Corporate Existence | |||||
| SECTION 6.5. |
Maintenance of Properties and Insurance | |||||
| SECTION 6.6. |
Books and Records | |||||
| SECTION 6.7. |
Inspection Rights | |||||
| SECTION 6.8. |
Compliance with Laws | |||||
| SECTION 6.9. |
Compliance with Agreements | |||||
| SECTION 6.10. |
ERISA Event Notice | |||||
| SECTION 6.11. |
Non-U.S. Plan Compliance and Reports | |||||
| SECTION 6.12. |
Environmental Laws | |||||
| SECTION 6.13. |
Additional Guarantors | |||||
| SECTION 6.14. |
Further Assurances | |||||
| SECTION 6.15. |
OFAC, FCPA | |||||
| SECTION 6.16. |
Maintenance of Ratings | |||||
| SECTION 6.17. |
Post-Closing Actions | |||||
| SECTION 6.18. |
ERISA Matters | |||||
| ARTICLE 7 |
NEGATIVE COVENANTS | |||||
| SECTION 7.1. |
Limitations on Indebtedness | |||||
| SECTION 7.2. |
Limitations on Restricted Payments | |||||
| SECTION 7.3. |
Limitation on Liens | |||||
| SECTION 7.4. |
Limitation on Restrictions on Distribution from Restricted Subsidiaries | |||||
ii
TABLE OF CONTENTS
(continued)
| Page | ||||||
| SECTION 7.5. |
Limitation on Affiliate Transactions | |||||
| SECTION 7.6. |
Limitation on Mergers and Consolidations | |||||
| SECTION 7.7. |
Limitation on Lines of Business | |||||
| SECTION 7.8. |
Limitation on Sales of Assets | |||||
| SECTION 7.9. |
Financial Covenant | |||||
| ARTICLE 8 |
EVENTS OF DEFAULT | |||||
| SECTION 8.1. |
Events of Default | |||||
| SECTION 8.2. |
Non-Bankruptcy Defaults | |||||
| SECTION 8.3. |
Bankruptcy Defaults | |||||
| SECTION 8.4. |
Collateral for Undrawn Letters of Credit | |||||
| SECTION 8.5. |
Right to Realize on Collateral and Enforce Guarantees | |||||
| SECTION 8.6. |
LGEC’s Right to Cure | |||||
| ARTICLE 9 |
GUARANTEE | |||||
| SECTION 9.1. |
Guarantee | |||||
| SECTION 9.2. |
No Impairment of Guarantee, etc | |||||
| SECTION 9.3. |
Continuation and Reinstatement, etc | |||||
| SECTION 9.4. |
Limitation on Guaranteed Amount, etc | |||||
| SECTION 9.5. |
Voluntary Arrangements | |||||
| SECTION 9.6. |
Release of Guarantees | |||||
| SECTION 9.7. |
Indemnity and Subrogation | |||||
| SECTION 9.8. |
Contribution and Subrogation | |||||
| SECTION 9.9. |
Subordination | |||||
| SECTION 9.10. |
Luxembourg Guarantors | |||||
| ARTICLE 10 |
THE ADMINISTRATIVE AGENT AND THE ISSUING BANKS | |||||
| SECTION 10.1. |
Administration by the Administrative Agent | |||||
| SECTION 10.2. |
Sharing of Setoffs | |||||
| SECTION 10.3. |
Notice to the Lenders | |||||
| SECTION 10.4. |
Liability of the Administrative Agent, Issuing Banks | |||||
| SECTION 10.5. |
Reimbursement and Indemnification | |||||
| SECTION 10.6. |
Rights of Administrative Agent | |||||
| SECTION 10.7. |
Independent Investigation by Lenders | |||||
| SECTION 10.8. |
Agreement of Required Lenders | |||||
| SECTION 10.9. |
Notice of Transfer | |||||
| SECTION 10.10. |
Successor Administrative Agent | |||||
| SECTION 10.11. |
Administrative Agent May File Proofs of Claim | |||||
| SECTION 10.12. |
Québec Security | |||||
| SECTION 10.13. |
Other Agent Titles | |||||
|
SECTION 10.14. |
Certain ERISA Matters | 156 | ||||
iii
TABLE OF CONTENTS
(continued)
| Page | ||||||
| ARTICLE 11 |
MISCELLANEOUS | |||||
| SECTION 11.1. |
Notices | |||||
| SECTION 11.2. |
Termination, Survival of Agreement, Representations and Warranties, etc | |||||
| SECTION 11.3. |
Successors and Assigns; Syndications; Loan Sales; Participations | |||||
| SECTION 11.4. |
Expenses; Documentary Taxes | |||||
| SECTION 11.5. |
Indemnification of the Administrative Agent, the Issuing Banks and the Lenders | |||||
| SECTION 11.6. |
Set-Off | |||||
| SECTION 11.7. |
CHOICE OF LAW | |||||
| SECTION 11.8. |
WAIVER OF JURY TRIAL | |||||
| SECTION 11.9. |
WAIVER WITH RESPECT TO DAMAGES | |||||
| SECTION 11.10. |
No Waiver | |||||
| SECTION 11.11. |
Extension of Payment Date | |||||
| SECTION 11.12. |
Amendments, etc | |||||
| SECTION 11.13. |
Severability | |||||
| SECTION 11.14. |
SERVICE OF PROCESS; SUBMISSION TO JURISDICTION | |||||
| SECTION 11.15. |
Headings | |||||
| SECTION 11.16. |
Execution in Counterparts | |||||
| SECTION 11.17. |
USA Patriot Act | |||||
| SECTION 11.18. |
Entire Agreement | |||||
| SECTION 11.19. |
Confidentiality | |||||
| SECTION 11.20. |
Judgment Currency | |||||
| SECTION 11.21. |
Lender Obligations Several | |||||
| SECTION 11.22. |
Acknowledgement and Consent to Bail-In of Affected Financial Institutions | |||||
| SECTION 11.23. |
Amendment and Restatement | |||||
| SECTION 11.24. |
Acknowledgement Regarding Any Supported QFCs | |||||
iv
Schedules
| Schedule of Commitments | ||
| 1.2 | Certain Excluded Assets | |
| 1.3 | Initial LUX/UK Guarantors | |
| 1.4 | Existing Investment Commitments | |
| 2.3 | Existing Letters of Credit | |
| 4.7(b) | Unrestricted Subsidiaries | |
| 4.21 | Real Property | |
| 6.17 | Post-Closing Actions |
Exhibits
| A | Notice of Borrowing | |
| B | Notice of Continuation/Conversion | |
| C-1 | Term A Note | |
| C-2 | Term B Note | |
| C-3 | Revolving Note | |
| D | Form of Compliance Certificate | |
| E | Form of Solvency Certificate | |
| F | Form of Assignment and Assumption | |
| G | Form of Joinder Agreement |
v
CREDIT AND GUARANTEE AGREEMENT, dated as of December 8, 2016, as amended and restated as of March 22, 2018 (as it may be further amended, supplemented or otherwise modified, amended and restated, renewed or replaced from time to time, the “Credit Agreement”), among (i) LIONS GATE CAPITAL HOLDINGS LLC, a limited liability company organized under the laws of Delaware (the “New Borrower”), (ii) LIONS GATE ENTERTAINMENT CORP., a corporation organized under the laws of the province of British Columbia, Canada (the “Existing Borrower” or “LGEC”); (iii) the Guarantors referred to herein; (iv) the Lenders referred to herein; and (v) JPMorgan Chase Bank, N.A., as agent for the Lenders.
PRELIMINARY STATEMENTS
The Existing Borrower, the guarantors party thereto, the Existing Lenders party thereto, and the Administrative Agent previously entered into that certain Credit and Guarantee Agreement dated as of December 8, 2016, as amended by that certain Amendment No. 1 dated December 11, 2017 (as amended, restated, supplemented, or otherwise modified from time to time prior to the date hereof, the “Existing Credit Agreement”).
The New Borrower, the Existing Borrower, the Guarantors referred to herein, the Lenders and Administrative Agent wish to amend and restate the Existing Credit Agreement as provided in this Credit Agreement to give effect to the transactions set forth in the Amendment No. 2 (as defined below) which, among other things, provide that (i) the Term A Lenders shall extend the Term A Loans to the Borrower on the Restatement Date in an aggregate principal amount of $750,000,000, having the terms set forth in this Credit Agreement, (ii) the Term B Lenders shall extend the Term B Loans to the Borrower on the Restatement Date in an aggregate principal amount of $1,250,000,000, having the terms set forth in this Credit Agreement, (iii) the Revolving Lenders shall provide the Revolving Facility on the Restatement Date in an aggregate principal amount of $1,500,000,000, having the terms set forth in this Credit Agreement, (iv) all term loans and revolving commitments outstanding under the Existing Credit Agreement shall be refinanced, repaid or terminated, as applicable, on the Restatement Date pursuant to Section 2.13 and Section 2.15 of the Existing Credit Agreement, and (v) the Existing Borrower shall, automatically on the Borrower Assignment Effectiveness Date (as defined below), assign all of its rights and all Obligations as Borrower under the Existing Credit Agreement and all Fundamental Documents to the New Borrower and become a Guarantor.
The Lenders have indicated their willingness to lend on the terms and give effect to the transactions set forth in Amendment No. 2 and subject to the conditions set forth herein.
NOW THEREFORE, effective as of the Restatement Date, the Existing Credit Agreement shall be amended and restated in its entirety to read as follows:
ARTICLE 1 DEFINITIONS
(a) Definitions. The following terms when used herein shall have the following meanings (unless the context otherwise requires, any of the following terms may be used in the singular or the plural, depending on the reference):
“2023 Revolving Credit Commitment” shall mean, as to any 2023 Revolving Lender, the obligation of such 2023 Revolving Lender to make 2023 Revolving Loans and to participate in Letters of Credit issued for the account of the Borrower hereunder in an aggregate principal or face amount at any one time outstanding not to exceed the amount set forth opposite such 2023 Revolving Lender’s name on Annex B of Amendment No. 4, as the same may be reduced, increased or otherwise modified at any time or from time to time pursuant to the terms hereof. The Borrower and the 2023 Revolving Lenders acknowledge and agree that the 2023 Revolving Credit Commitments of the 2023 Revolving Lenders aggregate $250,000,000 on the Amendment No. 4 Effective Date.
“2023 Revolving Credit Termination Date” shall mean the earlier to occur of (a) March 22, 2023 (or, if such date is not a Business Day, the next preceding Business Day) or (b) the date on which the 2023 Revolving Credit Commitments are terminated in accordance with the terms hereof.
“2023 Revolving Exposure” shall mean, with respect to any 2023 Revolving Lender as of any date of determination, (i) prior to the termination of the 2023 Revolving Credit Commitments, that 2023 Revolving Lender’s 2023 Revolving Credit Commitment; and (ii) after the termination of the 2023 Revolving Credit Commitments, the sum of (a) the aggregate outstanding principal amount of the 2023 Revolving Loans of that 2023 Revolving Lender, (b) in the case of a 2023 Revolving Lender that is an Issuing Bank, the aggregate L/C Exposure in respect of all Letters of Credit issued by that 2023 Revolving Lender (net of any participations by Lenders in such Letters of Credit) and (c) the aggregate amount of all participations by that 2023 Revolving Lender in any outstanding Letters of Credit or any unreimbursed drawing under any Letter of Credit.
“2023 Revolving Facility” shall mean the credit facility represented by the 2023 Revolving Loans and/or 2023 Revolving Credit Commitments.
“2023 Revolving Lender” shall mean each Lender that has a 2023 Revolving Credit Commitment or that holds 2023 Revolving Loans.
“2023 Revolving Loans” shall mean, with respect to a 2023 Revolving Lender, such Lender’s Revolving Loans made pursuant to Section 2.2.
“2023 Term A Loans” shall mean Term A Loans maturing on the 2023 Term A Termination Date.
“2023 Term A Termination Date” shall mean March 22, 2023.
“2026 Revolving Credit Commitment” shall mean, as to any 2026 Revolving Lender, the obligation of such 2026 Revolving Lender to make 2026 Revolving Loans and to participate in Letters of Credit issued for the account of the Borrower hereunder in an aggregate principal or face amount at any one time outstanding not to exceed the amount set forth opposite such 2026 Revolving Lender’s name on Annex B of Amendment No. 4, as the same may be reduced, increased or otherwise modified at any time or from time to time pursuant to the terms hereof. The Borrower and the 2026 Revolving Lenders acknowledge and agree that the 2026 Revolving Credit Commitments of the 2026 Revolving Lenders aggregate $1,250,000,000 on the Amendment No. 4 Effective Date.
“2026 Revolving Credit Termination Date” shall mean the earlier to occur of (a) April 6, 2026 (or, if such date is not a Business Day, the next preceding Business Day) or (b) the date on which the 2026 Revolving Credit Commitments are terminated in accordance with the terms hereof; provided, that in the event Term B Loans in aggregate principal amount in excess of $250 million (such Term B Loans in such excess, the “Threshold Term B Loans”) are outstanding as of the 91st day prior to March 24, 2025 (such 91st day, the “Springing Maturity Date”) and such Threshold Term B Loans have not been repaid, refinanced or extended to have a maturity date that is no earlier than 91 days after April 6, 2026, the 2026 Revolving Credit Termination Date with respect to the 2026 Revolving Credit Commitments and the 2026 Revolving Loans will instead be the Springing Maturity Date.
2
“2026 Revolving Exposure” shall mean, with respect to any 2026 Revolving Lender as of any date of determination, (i) prior to the termination of the 2026 Revolving Credit Commitments, that 2026 Revolving Lender’s 2026 Revolving Credit Commitment; and (ii) after the termination of the 2026 Revolving Credit Commitments, the sum of (a) the aggregate outstanding principal amount of the 2026 Revolving Loans of that 2026 Revolving Lender, (b) in the case of a 2026 Revolving Lender that is an Issuing Bank, the aggregate L/C Exposure in respect of all Letters of Credit issued by that 2026 Revolving Lender (net of any participations by Lenders in such Letters of Credit) and (c) the aggregate amount of all participations by that 2026 Revolving Lender in any outstanding Letters of Credit or any unreimbursed drawing under any Letter of Credit.
“2026 Revolving Facility” shall mean the credit facility represented by the 2026 Revolving Loans and/or 2026 Revolving Credit Commitments.
“2026 Revolving Lender” shall mean each Lender that has a 2026 Revolving Credit Commitment or that holds 2026 Revolving Loans.
“2026 Revolving Loans” shall mean, with respect to a 2026 Revolving Lender, such Lender’s Revolving Loans made pursuant to Section 2.2.
“2026 Term A Loans” shall mean Term A Loans maturing on the 2026 Term A Termination Date.
“2026 Term A Termination Date” shall mean April 6, 2026; provided, that in the event Threshold Term B Loans are outstanding as of the Springing Maturity Date and such Threshold Term B Loans have not been repaid, refinanced or extended to have a maturity date that is no earlier than 91 days after April 6, 2026, the 2026 Term A Termination Date with respect to the 2026 Term A Loans will instead be the Springing Maturity Date.
“Acquisition” shall mean the merger of Merger Sub with and into the Target, with the Target surviving such merger as a wholly-owned subsidiary of LGEC, on the terms and subject to the conditions set forth in the Merger Agreement.
“Additional Assets” shall mean:
(1) any property, plant, equipment or other assets (excluding working capital or current assets for the avoidance of doubt) to be used by LGEC or a Restricted Subsidiary in a Related Business; or
(2) an investment in any one or more businesses or capital expenditures (which for purposes of this definition, shall include the acquisition of any item of Product) and any Permitted Investment, in each case used or useful to a Related Business.
“Additional Lender” shall mean any Additional Revolving Lender or any Additional Term Lender, as applicable.
“Additional Revolving Lender” shall mean, at any time, any bank or other financial institution that agrees to provide any portion of any Revolving Credit Commitment Increase or Incremental Revolving Credit Facility pursuant to an Incremental Amendment in accordance with Section 2.13; provided that the relevant Persons under Section 11.3 (including those specified in the definition of “Eligible Assignee”) shall have consented to such Additional Revolving Lender’s providing such Commitment Increases, if such consent would be required under Section 11.3 for an assignment of Revolving Credit Commitments to such Additional Revolving Lender.
3
“Additional Term Lender” shall mean, at any time, any bank or other financial institution that agrees to provide any portion of any Term Commitment Increase or Incremental Term Loan pursuant to an Incremental Amendment in accordance with Section 2.13; provided that the relevant Persons under Section 11.3 (including those specified in the definition of “Eligible Assignee”) shall have consented to such Additional Term Lender’s making such Incremental Term Loans, if such consent would be required under Section 11.3 for an assignment of Loans to such Additional Term Lender.
“Adjusted Term SOFR” means, for any Interest Period, an interest rate per annum equal to (a) Term SOFR for such Interest Period, plus (b) 0.10%; provided that if Adjusted Term SOFR as so determined would be less than zero, such rate shall be deemed to be equal to zero for the purposes of this Credit Agreement.
“Adjusted EBITDA” shall mean, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, without duplication, to the extent the same was deducted in calculating Consolidated Net Income, in each case as to such Person and its Restricted Subsidiaries on a consolidated basis:
(1) Consolidated Taxes; plus
(2) Consolidated Interest Expense; plus
(3) Consolidated Adjusted Charges; plus
(4) restructuring charges, reserves or expenses and one-time charges (which, for the avoidance of doubt, shall include, without limitation, retention, severance, systems establishment costs, contract termination costs, integration costs and future lease commitments); plus
(5) business optimization expenses; provided that any such business optimization expenses added back pursuant to this clause (5), together with the Non-S-X Adjustment Amount for such period, shall not exceed 25% of Adjusted EBITDA for such period; plus
(6) non-operating expenses (minus non-operating income); plus
(7) charges, costs and expenses relating to any issuance or incurrence of Capital Stock, any incurrence or repayment of Indebtedness or the consummation of any Investment, acquisition or disposition, in each case permitted by this Credit Agreement and whether or not successful, including fees, charges and expenses relating to the Transactions; plus
(8) start-up costs relating to the Comic Con business; plus
(9) other start-up costs in an aggregate amount not to exceed $25,000,000 for the relevant four-quarter reference period; plus
(10) the amount of loss or discount on sale of assets and any commissions, yield and other fees and charges, in each case in connection with a Qualified Receivables Financing;
less, without duplication,
4
(11) non-cash items increasing Consolidated Net Income for such period (excluding the recognition of deferred revenue or any items which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges in any prior period and any items for which cash was received in a prior period);
provided that effects of purchase accounting adjustments (including the effects of such adjustments pushed down to such Person and such Subsidiaries and including, without limitation, the effects of adjustments to (A) Finance Lease Obligations or (B) any other deferrals of income) in amounts required or permitted by GAAP, resulting from the application of purchase accounting or the amortization or write-off of any amounts thereof shall be excluded from the calculation of Adjusted EBITDA.
“Adjustment Date” shall have the meaning given to such term in the Applicable Pricing Grid.
“Administrative Agent” shall mean JPMorgan Chase Bank, N.A., in its capacity as agent for the Lenders hereunder or such successor Administrative Agent as may be appointed pursuant to Section 10.10.
“Administrative Agent Fee Letter” shall mean the Fee Letter dated as of June 27, 2016 among the Administrative Agent and the Borrower, as amended, supplemented or amended and restated from time to time.
“Affected Financial Institution” shall mean (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” of any specified Person shall mean any other Person, directly or indirectly, controlling or controlled by or under direct or indirect 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”) when used with respect to any Person means possession, directly or indirectly, of the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Affiliate Transaction” shall have the meaning given to such term in Section 7.5(a).
“Affiliated Persons” mean, with respect to any specified Person, (a) such specified Person’s parents, spouse, siblings, descendants, step children, step grandchildren, nieces and nephews and their respective spouses, (b) the estate, legatees and devisees of such specified Person and each of the Persons referred to in clause (a), and (c) any company, partnership, trust or other entity or investment vehicle controlled by any of the Persons referred to in clause (a) or (b) or the holdings of which are for the primary benefit of any of such Persons.
“Amendment No. 1” shall mean Amendment No. 1 to the Existing Credit Agreement dated as of the Amendment No. 1 Effective Date.
“Amendment No. 1 Effective Date” shall mean December 11, 2017.
“Amendment No. 1 Joinder” shall mean the Joinder Agreement dated as of the Amendment No. 1 Effective Date among the Existing Borrower, the Administrative Agent and each Existing Lender party thereto.
5
“Amendment No. 2” shall mean Amendment No. 2 to the Existing Credit Agreement dated as of the Restatement Date.
“Amendment No. 3” shall mean Amendment No. 3 to the Credit Agreement dated as of March 11, 2019.
“Amendment No. 4” shall mean Amendment No. 4 to the Credit Agreement, dated as of the Amendment No. 4 Effective Date.
“Amendment No. 4 Effective Date” shall mean April 6, 2021.
“Amendment No. 5” shall mean Amendment No. 5 to the Credit Agreement, dated as of the Amendment No. 5 Effective Date.
“Amendment No. 5 Effective Date” shall mean June 14, 2023.
“Ancillary Document” shall have the meaning given to such term in Section 11.16.
“Applicable Law” shall mean all provisions of statutes, rules, regulations and orders of the United States, England and Wales, the Grand Duchy of Luxembourg or Canada, any state or province thereof or municipality therein or of any foreign governmental body or of any regulatory agency applicable to the Person in question, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party.
“Applicable Margin” shall mean:
(a) with respect to the Term B Loans, (i) 2.25% per annum, in the case of a EurodollarTerm
Benchmark Loan, or (ii) 1.25% per annum, in the case of a Base Rate Loan;
(b) with respect to the Term A Loans and the Revolving Loans, (i) 1.75% per annum, in the case of a EurodollarTerm
Benchmark Loan, and (ii) 0.75% per annum, in the case of a Base Rate Loan; provided, that on and after the first Adjustment Date occurring after the completion of the first
full fiscal quarter of LGEC after the Restatement Date, the Applicable Margin with respect to the Term A Loans and the Revolving Loans will be determined pursuant to the Applicable Pricing Grid.
“Applicable Pricing Grid” shall mean, with respect to the Term A Loans and the Revolving Loans, the table set forth below:
| Net First Lien Leverage Ratio |
Term A Loans and Revolving Loans Applicable Margin per annum for Term Benchmark Loans |
Term A Loans and Revolving Loans Applicable Margin per annum for Base Rate Loans |
||||||
| Category 1 Equal or Less than 3.75 to 1.00 |
1.75 | % | 0.75 | % | ||||
| Category 2 Equal or less than 4.50 to 1.00 but greater than 3.75 to 1.00 |
2.00 | % | 1.00 | % | ||||
| Category 3 Greater than 4.50 to 1.00 |
2.25 | % | 1.25 | % | ||||
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For the purposes of the Applicable Pricing Grid, changes in the Applicable Margin resulting from changes in the Net First Lien Leverage Ratio shall become effective on the date (the “Adjustment Date”) that is three Business Days after the date on which financial statements and the related Compliance Certificate are delivered to the Lenders pursuant to Section 6.1(a) and Section 6.1(b) and shall remain in effect until the next change to be effected pursuant to this paragraph. If any financial statements or Compliance Certificate referred to above are not delivered within the time periods specified in Section 6.1(a) and Section 6.1(b), then, until the date that is three Business Days after the date on which such financial statements and Compliance Certificate are delivered, the highest rate set forth in each column of the Applicable Pricing Grid shall apply. In addition, at all times while an Event of Default shall have occurred and be continuing under Section 8.1(a), (f) or (g), the highest rate set forth in each column of the Applicable Pricing Grid shall apply.
In the event that any financial statements under Section 6.1(a) and Section 6.1(b) or the related Compliance Certificate is shown to be inaccurate at any time and such inaccuracy, if corrected, would have led to a higher Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin applied for such Applicable Period, then (i) LGEC shall promptly (and in no event later than five (5) Business Days thereafter) deliver to the Administrative Agent a correct Compliance Certificate for such Applicable Period, (ii) the Applicable Margin shall be determined by reference to the corrected Compliance Certificate, and (iii) the Borrower shall pay to the Administrative Agent promptly upon written demand (and in no event later than five (5) Business Days after written demand) any additional interest owing as a result of such increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by the Administrative Agent in accordance with the terms hereof.
“Application” shall have the meaning given to such term in Section 2.3(b).
“Approved Fund” shall mean any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Approved Jurisdiction” shall mean (1) the United States or Canada or any state (but not any territory) or province thereof, (2) if elected by LGEC, England or Luxembourg or (3) any other jurisdiction approved by the Administrative Agent.
“Arranger” shall mean, collectively, the Sole Lead Arranger, Joint Lead Arrangers, Sole Bookrunner and Joint Bookrunners identified on the cover page of this Credit Agreement.
“Arranger Fee Letter” shall mean each Fee Letter among the Existing Borrower and/or the New Borrower and the Arrangers party thereto and the other financial institutions party thereto entered in connection with the Existing Credit Agreement or Amendment No. 2, as amended, supplemented or amended and restated from time to time.
“Asset Sale” shall mean any direct or indirect sale, lease , transfer, issuance or other disposition, or a series of related sales, leases, transfers, issuances or dispositions that are part of a common plan, including any Sale/Leaseback Transaction, of (x) shares of Capital Stock of a Subsidiary (other than directors’ qualifying shares) or (y) other than in the ordinary course of business, other property or other assets (each referred to for the purposes of this definition as a “disposition”) by LGEC or any of the Restricted Subsidiaries, including any disposition by means of a merger, amalgamation, consolidation or similar transaction; provided, that transfers of assets of the type specified in the definition of “Receivables Financing” (or a fractional undivided interest therein), including by a
7
Receivables Subsidiary in a Qualified Receivables Financing, shall not constitute Asset Sales; provided, further, that “Asset Sale” shall be deemed to include a “division” of or by a limited liability company that (a) results in assets that had formerly been held by a Restricted Subsidiary ceasing to be held by a Restricted Subsidiary, and (b) would have constituted an “Asset Sale” had such assets been sold to a third party, rather than transferred by way of a division.
Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales:
(1) a disposition of assets by a Restricted Subsidiary to LGEC or by LGEC or a Restricted Subsidiary to a Restricted Subsidiary; provided that in the case of a sale by a Restricted Subsidiary to another Restricted Subsidiary, LGEC directly and/or indirectly owns an equal or greater percentage of the Common Stock of the transferee than of the transferor; provided, that in the case of a disposition of Collateral, the transferee, if a Guarantor subject to the Collateral Documents, shall cause such amendments, supplements or other instruments to be executed, filed, and recorded in such jurisdictions as may be required by Applicable Law to preserve and protect the Lien on the Collateral owned by or transferred to the transferee, together with such financing statements or comparable documents as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement or a similar document under the UCC, the applicable PPSA, the CCQ, or other similar statute or regulation of the relevant provinces, states or jurisdictions;
(2) the sale of Cash Equivalents or tax credits;
(3) a disposition of inventory, including without limitation, Product (not constituting the sale of a Product that in the aggregate would be considered a “library”), in the ordinary course of business;
(4) a disposition of obsolete or worn out equipment or equipment that is no longer useful in the conduct of the business of LGEC and the Restricted Subsidiaries and that is disposed of in each case in the ordinary course of business (including the abandonment of any intellectual property or surrender or transfer for no consideration) or otherwise as may be required pursuant to the terms of any lease, sublease, license or sublicense;
(5) the disposition of all or substantially all of the assets of LGEC in a manner permitted under Section 7.6 or any disposition that constitutes a Change of Control;
(6) an issuance of Capital Stock by a Restricted Subsidiary to LGEC or to a Wholly-Owned Subsidiary;
(7) any Permitted Investment and any Restricted Payment that is permitted to be made, and is made, under Section 7.2;
(8) dispositions of assets or issuance or sale of Capital Stock of a Restricted Subsidiary in a single transaction or series of related transactions with an aggregate Fair Market Value of less than $20,000,000;
(9) the creation of a Permitted Lien and dispositions in connection with Permitted Liens;
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(10) dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or insolvency or similar proceedings and exclusive of factoring or similar arrangements;
(11) the issuance by a Restricted Subsidiary of Preferred Stock that is permitted under Section 7.1;
(12) the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property in the ordinary course of business which do not materially interfere with the business of LGEC and the Restricted Subsidiaries;
(13) foreclosure on assets;
(14) any sale of Capital Stock in, Indebtedness or other securities of or Investments in, an Unrestricted Subsidiary;
(15) any exchange of assets (including Capital Stock) (including a combination of assets and Cash Equivalents) for assets (including Capital Stock) related to a Related Business of comparable or greater market value or usefulness to the business of LGEC and its Restricted Subsidiaries as a whole, as determined in good faith by LGEC;
(16) sales of Product outside of the ordinary course of business (including the sale of Product that in the aggregate would be considered a “library”) if sold for not less than Fair Market Value and not in excess of $45,000,000 in the aggregate from the Original Closing Date;
(17) sales of all or a portion of an interest in a Foreign Subsidiary that is not a Credit Party, provided that the consideration received is not less than Fair Market Value;
(18) (A) the sale or transfer of Product or intellectual property Product to any ProdCo as part of any Permitted Slate Transaction or (B) any Permitted Slate Financing, including the sale or transfer of any interests in copyrights, distribution rights and/or financial proceeds as contemplated by the definition thereof; and
(19) the creation of revenue participations of the type described in Section 7.1(c)(xvi).
“Assignment and Assumption” shall mean an agreement substantially in the form of Exhibit F hereto or such other form as is acceptable to the Administrative Agent, executed by the assignor, assignee and other parties as contemplated thereby.
“Average Life” shall mean, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (2) the sum of all such payments.
“Bail-In Action” shall mean the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” shall mean (a) 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, regulation rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the
9
United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, as codified at 11 U.S.C. § 101 et seq.
“Bankruptcy Law” shall mean the Bankruptcy Code, the Companies’ Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada), the Winding-Up and Restructuring Act (Canada) or other U.S. federal or state law, Canadian federal or provincial law or the law of any other applicable jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors or plans of arrangement.
“Base
Rate” shall mean, for any day, a rate per annum equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus 1⁄2 of 1% and (c) the Eurodollar Rate
onAdjusted Term SOFR for a one month Interest
Period as published two (2) U.S. Government Securities Business Days prior to such day (or, if such day is not a U.S. Government Securities Business Day, the next preceding U.S. Government Securities Business Day) for a deposit in Dollars with a maturity of one
month plus 1.0%; provided that for purposes of this definition, the Eurodollar
RateAdjusted Term SOFR for any day shall be based
on the Screen Rate (or if the Screen Rate is not available for
such one month Interest Period, the Interpolated
Rate)Term SOFR Reference Rate at approximately
11:005:00
a.m.
LondonChicago
time on such day (or any amended publication time for the Term
SOFR Reference Rate, as specified by the CME Term SOFR Administrator in the Term SOFR Reference Rate methodology). Any change in the Base Rate due to a change in the Prime Rate, the NYFRB Rate or
such Eurodollar
RateAdjusted Term SOFR shall be effective as of
the opening of business on the day of such change in the Prime Rate, the NYFRB Rate or such Eurodollar RateAdjusted Term SOFR, respectively. If the Base Rate is being used as an
alternate rate of interest pursuant to Section 3.1 hereof, then the Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the
Base Rate as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Credit Agreement.
“Base Rate Loans” shall mean Loans the rate of interest applicable to which is based upon the Base Rate.
“Benchmark” means, initially, with respect to any Term Benchmark Loan, Term SOFR; as such Benchmark may be replaced pursuant to Section 3.1.
“Benefit Plan” shall mean any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America.
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“Board of Directors” shall mean, as to any Person, the board of directors or managers, as applicable, of such Person (or, if such Person is a partnership, the board of directors or other governing body of the general partner of such Person) or any duly authorized committee thereof.
“Borrower” shall mean, prior to the Borrower Assignment Effectiveness Date, the Existing Borrower, and on and after the Borrower Assignment Effectiveness Date, the New Borrower.
“Borrower Assignment Effectiveness Date” shall mean the Restatement Date but immediately after giving effect to the Term A Loans, Term B Loans and the Revolving Credit Commitments pursuant to Amendment No. 2.
“Borrowing” shall mean the total of Loans of a single type advanced, continued for an additional Interest Period, or
converted from a different type into such type by the Lenders under the applicable Facility on a single date and, in the case of EurodollarTerm Benchmark Loans, for a single Interest Period. Borrowings of Loans
are made and maintained ratably from each of the Lenders under the applicable Facility according to their Percentages of such Facility. A Borrowing of Loans is “advanced” on the day Lenders advance funds comprising such Borrowing to the
Borrower, is “continued” on the date a new Interest Period for the same type of Loans commences for such Borrowing, and is “converted” when such Borrowing is changed from one type of Loan to the other, all as requested by the
Borrower pursuant to Section 2.5(a) hereof. Base Rate Loans and EurodollarTerm Benchmark Loans are each a “type” of Loan.
“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, the State of California, the Province of British Columbia or the Province of Ontario; provided that, in addition to the foregoing, a Business Day shall be, in relation to Loans referencing Adjusted Term SOFR and any interest rate settings, fundings, disbursements, settlements or payments of any such Loans referencing Adjusted Term SOFR or any other dealings of such Loans referencing Adjusted Term SOFR, any such day that is only a U.S. Government Securities Business Day.
“Capital Expenditures” shall mean, for any period, the aggregate of all expenditures by LGEC and the Restricted Subsidiaries for the acquisition or leasing (pursuant to a capital lease) of Product, fixed or capital assets, additions to equipment (including replacements, capitalized repairs and improvements during such period) or other assets that should be capitalized under GAAP on a consolidated balance sheet of LGEC and the Restricted Subsidiaries.
“Capital Stock” of any Person shall mean any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock and limited liability or partnership interests (whether general or limited), but excluding any Indebtedness convertible into such equity.
“Cash Equivalents” shall mean:
(1) Dollars, Canadian dollars, pound sterling, euros, the national currency of any member state of the European Union or, in the case of any Foreign Subsidiary, such other local currencies held by it from time to time in the ordinary course of business;
(2) securities issued or directly and fully Guaranteed or insured by the United States, Canada, Switzerland, the United Kingdom or any country that is a member of the European Union, or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof), having maturities of not more than two years from the date of acquisition;
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(3) marketable general obligations issued by any State of the United States of America or any political subdivision thereof or any Canadian province or any public instrumentality thereof maturing within two years from the date of acquisition and, at the time of acquisition, having a credit rating of “A” or better from either S&P or Moody’s, or carrying an equivalent rating by a nationally recognized Rating Agency, if both of the two named Rating Agencies cease publishing ratings of investments;
(4) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers’ acceptances having maturities of not more than two years from the date of acquisition thereof issued by any commercial bank having a short term deposit rating at the time of acquisition thereof at least “A-2” or the equivalent thereof by S&P, or “P-2” or the equivalent thereof by Moody’s, or carrying an equivalent rating by a nationally recognized Rating Agency, if both of the two named Rating Agencies cease publishing ratings of investments;
(5) repurchase obligations for underlying securities of the types described in clauses (2), (3) and (4) entered into with any bank meeting the qualifications specified in clause (4) above;
(6) commercial paper rated at the time of acquisition thereof at least “A-2” or the equivalent thereof by S&P or “P-2” or the equivalent thereof by Moody’s, or carrying an equivalent rating by a nationally recognized Rating Agency, if both of the two named Rating Agencies cease publishing ratings of investments and in any case maturing within one year after the date of acquisition thereof;
(7) Indebtedness issued by Persons with a rating of “A” or higher from S&P or “A2” or higher from Moody’s (or reasonably equivalent ratings of another internationally recognized ratings agency) in each case with maturities not exceeding two years from the date of acquisition;
(8) interests in any investment company or money market fund which invests 95% or more of its assets in instruments of the type specified in clauses (1) through (7) above; and
(9) instruments equivalent to those referred to in clauses (1) through (8) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and commonly used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction.
“CCQ” shall mean the Civil Code of Québec as in effect in the province of Québec on the Original Closing Date (as amended from time to time).
“Change in Law” shall mean the occurrence, after the Restatement Date, of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (iii) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority, in each case not publicly announced before the Restatement Date; provided that notwithstanding anything herein to the contrary, (a) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith, and (b) all requests, rules,
12
guidelines 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 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 or issued.
“Change of Control” shall mean:
(i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than any Permitted Holder, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person or group shall be deemed to have “beneficial ownership” of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of LGEC (or its successor by merger, amalgamation, consolidation, plan of arrangement or purchase of all or substantially all of its assets) (for the purposes of this clause, such person or group shall be deemed to beneficially own any Voting Stock of LGEC held by a parent entity, if such person or group “beneficially owns” (as defined above), directly or indirectly, more than 50% of the voting power of the Voting Stock of such parent entity);
(ii) the first day on which Continuing Directors cease to constitute a majority of the members of the Board of Directors of LGEC or any Permitted Parent Holdco;
(iii) the sale, assignment, lease, transfer, conveyance or other disposition (other than by way of merger, amalgamation, consolidation or plan of arrangement), in one or a series of related transactions, of all or substantially all of the assets of LGEC and the Restricted Subsidiaries taken as a whole, to any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than any Permitted Holder or a Restricted Subsidiary;
(iv) LGEC (or its successor by merger, amalgamation, consolidation, plan of arrangement or purchase of all or substantially all of its assets) ceases to own, directly or indirectly, more than 50.0% of the voting power of the Voting Stock of the Borrower; or
(v) any change of control as defined in the Senior Notes Indenture.
“Claiming Guarantor” shall have the meaning given to such term in Section 9.8.
“Class” means (a) with respect to Lenders, each of the following classes of Lenders: (i) Lenders having outstanding 2023 Term A Loans, (ii) Lenders having outstanding 2026 Term A Loans, (iii) Lenders having Term B Loan Commitments or outstanding Term B Loans, (iv) Lenders having 2023 Revolving Exposure and (v) Lenders having 2026 Revolving Exposure and (b) with respect to Loans, each of the following classes of Loans: (i) 2023 Term A Loans, (ii) 2026 Term A Loans, (iii) Term B Loans, (iv) 2023 Revolving Loans and (v) 2026 Revolving Loans.
“CME Term SOFR Administrator” means CME Group Benchmark Administration Limited as administrator of the forward-looking term Secured Overnight Financing Rate (SOFR) (or a successor administrator).
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Collateral” shall mean all property and assets, whether now owned or hereafter acquired, in which Liens are, from time to time, purported to be granted to secure the Obligations pursuant to the Collateral Documents, provided, that notwithstanding anything to the contrary herein or in any Fundamental Document, in no case shall the Collateral include any Excluded Assets.
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“Collateral Account” shall have the meaning given to such term in Section 8.4(b).
“Collateral Documents” shall mean the Pledge and Security Agreement, the Copyright Security Agreement, the Copyright Security Agreement Supplements, the Patent Security Agreement, the Patent Security Agreement Supplements, the Trademark Security Agreement, the Trademark Security Agreement Supplements, the Hypothec, and any other instruments and documents executed and delivered pursuant to this Credit Agreement or any of the foregoing, as the same may be amended, supplemented, reaffirmed (including, without limitation, pursuant to the terms of Amendment No. 2) or otherwise modified from time to time and pursuant to which Collateral is pledged, assigned or granted to or on behalf of the Administrative Agent for the ratable benefit of the Lenders.
“Comic Con” shall mean that certain subscription video on demand service (as such service may continue to organically evolve) or other related service operated by LGEC, its Subsidiaries or its designees under the name “Comic Con HQ” or other derivation of the word “Comic Con”.
“Commitment Fee” shall have the meaning given to such term in Section 2.12(a).
“Commitment Fee Rate” shall mean 0.250% per annum; provided, that on and after the first Adjustment Date occurring after the completion of the first full fiscal quarter of LGEC after the Restatement Date, the Commitment Fee Rate will be determined pursuant to the following grid:
| Net First Lien Leverage Ratio |
Commitment Fee Rate per annum |
|||
| Category 1 Equal or Less than 3.75 to 1.00 |
0.250 | % | ||
| Category 2 Greater than 3.75 to 1.00 |
0.375 | % | ||
If any financial statements are not delivered within the time periods specified in Section 6.1(a) and Section 6.1(b), then, until the date that is three Business Days after the date on which such financial statements are delivered, the highest rate set forth in the grid shall apply. In addition, at all times while an Event of Default shall have occurred and be continuing under Section 8.1(a), (f) or (g), the highest rate set forth in the grid shall apply.
“Commitment Increase” shall have the meaning given to such term in Section 2.13(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.
“Common Stock” shall mean with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or nonvoting) of such Person’s common stock whether or not outstanding on the Restatement Date, and includes, without limitation, all series and classes of such common stock.
“Complete” or “Completed” or “Completion” shall mean with respect to any item of Product, that (1) either (a) sufficient elements have been delivered by LGEC or applicable Restricted Subsidiary to, and accepted, deemed or determined to be accepted and/or exploited by, a Person (other than LGEC or applicable Restricted Subsidiary or Affiliates thereof) to permit such Person to exhibit the
14
item of Product in the theatrical or other medium for which the item of Product is intended for initial exploitation or (b) an independent laboratory has in its possession a complete final 35 mm or 70 mm (or other size which has become standard in the industry) composite positive print, video master or other equivalent master copy of the item of Product as finally cut, main and end titled, edited, scored and assembled with sound track printed thereon in perfect synchronization with the photographic action and fit and ready for exhibition and distribution in the theatrical or other medium for which the item of Product is intended for initial exploitation, and (2) if such item of Product was acquired by LGEC or a Restricted Subsidiary from an unaffiliated third party, the entire acquisition price or minimum advance shall have been paid to the extent then due and there is no condition or event (including, without limitation, the payment of money not yet due) the occurrence of which might result in LGEC or such Restricted Subsidiary losing any of its rights in such item of Product.
“Completion Guarantee” shall mean, with respect to any item of Product, a completion guarantee, in customary form consistent with LGEC’s past practice or otherwise reasonable and customary for transactions of such nature, which (1) names the production financier to the extent such item of Product is financed in accordance with Sections 7.1(a), Section 7.1(b) or Section 7.1(c)(xii) as a beneficiary thereof to the extent of LGEC’s or applicable Restricted Subsidiary’s financial interest in such item of Product and (2) guarantees that such item of Product will be Completed in a timely manner, or else payment may be made to such production financier of an amount of up to the aggregate amount expended on the production of such item of Product by, or for the account of, LGEC or applicable Restricted Subsidiary plus interest on, and other bank charges with respect to, such amount.
“Compliance Certificate” shall mean the Compliance Certificate to be delivered pursuant to Section 6.2, substantially in the form of Exhibit D.
“Consolidated Adjusted Charges” shall mean, with respect to any Person for any period, the sum, without duplication, of:
(a) depreciation; plus
(b) amortization other than direct operating expenses, as calculated on the Original Closing Date; plus
(c) other non-cash expenses (including, without limitation, stock based compensation expenses including for stock appreciation rights or write-off of deferred financing charges, and non-cash reductions of Consolidated Net Income attributable to consideration paid to any Person in Capital Stock) of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person for such period on a consolidated basis and otherwise determined in accordance with GAAP,
(but for each of clauses (a)-(c) excluding any such charge which consists of or requires an accrual of, or cash reserve for, anticipated cash charges for any future period (other than accruals for stock appreciation rights));
plus
(d) print and advertising expenses (irrespective of whether such Person has actually made a cash payment in respect thereof during such period) for which such Person has an off-setting right of payment and/or guarantee (including, for the avoidance of doubt, any partial guarantee which such Person believes in good faith to be sufficient in size to cover any reasonably anticipated loses from these expenses) from a third-party producer (less the amortization of participation charges that would have been expensed had the print and advertising expense not been expensed in the GAAP financial statements, such amortization to be calculated in accordance with accounting based on the film forecasting method); plus
15
(e) any non-cash accelerated amortization of content or programming costs and other intangibles.
For the avoidance of doubt, the amortization of the allocation of the purchase price of a business to increase or decrease the carrying value of the assets and liabilities in accordance with GAAP is considered a non-cash expense.
“Consolidated Applicable Interest Charge” shall mean, with respect to any Person for any period, the sum, without duplication, of:
(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income (including the interest component of Finance Lease Obligations, and net payments and receipts (if any) pursuant to interest rate Hedging Obligations and excluding amortization of original issue discount and deferred financing fees and expensing of any bridge or other financing fees, but excluding commissions, discounts, yield and other fees and charges related to any Qualified Receivables Financing); plus
(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, other than capitalized interest included in the cost of any item of Product; minus
(3) interest income for such period (other than interest income attributable to the discounting of accounts receivable); minus
(4) interest expense accrued as a result of Financial Accounting Standards Board Staff Position No. APB 14-1, to the extent such interest expense was included in clause (1) of this definition.
“Consolidated Current Assets” shall mean, at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of LGEC and the Restricted Subsidiaries at such date.
“Consolidated Current Liabilities” shall mean, at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of LGEC and the Restricted Subsidiaries at such date, but excluding (a) the current portion of any Indebtedness of LGEC and its Restricted Subsidiaries and (b) without duplication of clause (a) above, all Indebtedness consisting of Revolving Loans to the extent otherwise included therein.
“Consolidated Debt” shall mean, as of any date of determination, the sum of (without duplication) the principal amount of all Indebtedness of the type set forth in clauses (1), (2), (3) (other than to the extent undrawn), (5), (6), (7) (to the extent related to any Indebtedness that would otherwise constitute Consolidated Debt) and (8) (to the extent related to any Indebtedness that would otherwise constitute Consolidated Debt) of the definition of “Indebtedness” of LGEC and the Subsidiaries
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determined on a consolidated basis on such date; provided, that the amount of any Indebtedness with respect to which the applicable obligors have entered into currency hedging arrangements shall be calculated giving effect to such currency hedging arrangements and provided further, that neither (i) unfunded commitments for Indebtedness nor (ii) Other Permitted Priority Indebtedness shall be included in the calculation of Consolidated Debt.
“Consolidated Interest Expense” shall mean, with respect to any Person for any period, the sum, without duplication, of:
(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted in computing Consolidated Net Income (including the interest component of Finance Lease Obligations and net payments and receipts (if any) pursuant to interest rate Hedging Obligations and including amortization of deferred financing fees, debt issuance costs and expensing of any bridge or other financing fees); plus
(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, other than capitalized interest included in the cost of any item of Product; minus
(3) interest income for such period (other than interest income attributable to the discounting of accounts receivables).
“Consolidated Net Income” shall mean, for any period, the net income (loss) of LGEC and its consolidated Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP; provided, however, that there will not be included in such Consolidated Net Income:
(1) any net income (loss) of any Person if such Person is not a Restricted Subsidiary or that is accounted for by the equity method of accounting, except that, subject to the limitations contained in clauses (3) through (6) below, equity of LGEC or any Restricted Subsidiary in the net income of any such Person for such period will be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to LGEC or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (2) below);
(2) any net income (but not loss) of any Restricted Subsidiary (other than (i) a Guarantor, (ii) Pilgrim JV, (iii) any other Restricted Subsidiary to the extent any such restriction relates to a Joint Venture, charter or other agreement or instrument entered into by LGEC or a Restricted Subsidiary with a minority shareholder to the extent LGEC has a call option on such minority shareholder’s Capital Stock and (iv) other than for purposes of any calculation under Section 7.2(a)(C), any other Restricted Subsidiary of which more than 80.0% of the Capital Stock having voting control is owned or controlled, directly or indirectly, by LGEC or any other Restricted Subsidiary) if such Subsidiary is subject to prior government approval or other restrictions due to the operation of its charter or any agreement, instrument, judgment, decree, order statute, rule or government regulation (which have not been waived), directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to LGEC, except that, subject to the limitations contained in clauses (3) through (6) below, LGEC’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to LGEC or another Restricted Subsidiary as a dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause);
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(3) any gain or loss (less all fees and expenses relating thereto) realized upon sales or other dispositions of any assets of LGEC or such Restricted Subsidiary, other than in the ordinary course of business, as determined in good faith by LGEC;
(4) any after-tax effect of income (loss) from the early extinguishment of Indebtedness or Hedging Obligations or other derivative instruments;
(5) any extraordinary, nonrecurring or unusual gain or loss; and
(6) the cumulative effect of a change in accounting principles;
provided that notwithstanding any classification of any Person, business, assets or operations as discontinued operations because a definitive agreement for the sale, transfer or other disposition in respect thereof has been entered into, the Borrower may elect to include for any purposes under this Credit Agreement any such net after-tax income or loss or any such net after-tax gains or losses attributable to such Person until such sale, transfer or other disposition has been consummated.
“Consolidated Taxes” shall mean provision for taxes based on income, profits or capital, including, without limitation, state, franchise and similar taxes taken into account in calculating Consolidated Net Income.
“Consolidated Working Capital” shall mean, at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date.
“Continuing Directors” shall mean, as of any date of determination, any member of the Board of Directors of LGEC or Permitted Parent Holdco, as the case may be, who: (1) was a member of such Board of Directors on the Restatement Date (or, in the case of a Permitted Parent Holdco, the date such Permitted Parent Holdco acquired 100% of the Voting Stock of LGEC if the members of the Board of Directors of such Permitted Parent Holdco were approved for the purpose of this definition, on or prior to such date, by a majority of the Continuing Directors of LGEC); or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of the relevant Board of Directors at the time of such nomination or election.
“Contributing Guarantor” shall have the meaning given to such term in Section 9.8 hereof.
“Controlled Foreign Corporation” means any Subsidiary that is a “controlled foreign corporation” as defined in Section 957(a) of the Code.
“Copyright Security Agreement” shall have the meaning given to such term in the Pledge and Security Agreement.
“Copyright Security Agreement Supplement” shall have the meaning given to such term in the Pledge and Security Agreement.
“Covered Entity” shall mean any of the following:
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| (i) | a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); |
| (ii) | a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or |
| (iii) | a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). |
“Covered Party” shall have the meaning given to such term in Section 11.24.
“Credit Agreement” shall have the meaning given to such term in the introductory paragraph of this Credit Agreement.
“Credit Extension” shall mean the advancing of any Loan or the issuance or extension of, or increase in the amount of, any Letter of Credit.
“Credit Parties” shall mean the Borrower and the Guarantors and “Credit Party” shall mean any one of them.
“Currency Agreement” shall mean in respect of a Person any foreign exchange contract, currency swap agreement, futures contract, option contract or other similar agreement as to which such Person is a party or a beneficiary.
“Default” shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.
“Default Excess” shall have the meaning given to such term in Section 2.8(d) hereof.
“Default Right” shall have the meaning given to such term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” shall mean any Lender, as reasonably determined by the Administrative Agent, that has (a) failed to fund any portion of its Loans within three (3) Business Days of the date required to be funded by it hereunder, unless determined by the Administrative Agent to be the subject of a good faith dispute, (b) 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 Required Lenders determine there to be a good faith dispute, (c) 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, (d) 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 of the date when due, unless determined by the Administrative Agent to be the subject of a good faith dispute, (e) (1) on or after the Restatement Date, becomes or is insolvent or has a parent company that becomes or is insolvent, or (2) on or after the Restatement Date, becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian 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 or has a parent company that has
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become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian 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; provided that a Lender shall not become a Defaulting Lender pursuant to this clause (e) 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, or (f) on or after the Restatement Date, has, or has a direct or indirect parent company that has, become the subject of a Bail-In Action.
“Designated Non-cash Consideration” means the Fair Market Value of non-cash consideration received by LGEC or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officers’ Certificate, setting forth such valuation, less the amount of Cash Equivalents received in connection with a subsequent sale of such Designated Non-cash Consideration.
“Disqualified Lender” shall mean (a) banks, financial institutions and other institutional lenders separately identified in writing by the Borrower to the Administrative Agent and made available to the Lenders prior to the Restatement Date and otherwise specified in writing by the Borrower to the Administrative Agent and made available to the Lenders from time to time (it being understood that any update shall not apply retroactively to disqualify any Person that has previously acquired an assignment or participation interest in the Loans), (b) any competitors of LGEC, the Target or their respective Subsidiaries that were separately identified in writing by the Borrower to the Administrative Agent made available to the Lenders (it being understood that any update shall not apply retroactively to disqualify any Person that has previously acquired an assignment or participation interest in the Loans), and (c) in the case of each of the entities covered by clauses (a) and (b), any of their Affiliates (other than bona fide debt funds) that are either (i) identified in writing by the Borrower to the Administrative Agent and made available to the Lenders from time to time or (ii) clearly identifiable solely on the basis of the similarity of such Affiliate’s name to an entity so identified pursuant to clause (a) or (b). In no event shall the Administrative Agent be obligated to ascertain, monitor or inquire as to whether any prospective assignee, participant or other transferee is a Disqualified Lender or have any liability with respect to any assignment or participation made to a Disqualified Lender. The Administrative Agent shall have the right, and the Borrower hereby expressly authorizes the Administrative Agent, to provide a list of Disqualified Lenders to each Lender requesting the same.
“Disqualified Stock” shall mean, with respect to any Person, any Capital Stock of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise;
(2) is convertible into or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock which is convertible or exchangeable solely at the option of LGEC or a Restricted Subsidiary (it being understood that upon such conversion or exchange it shall be an Incurrence of such Indebtedness or Disqualified Stock)); or
(3) is redeemable at the option of the holder of the Capital Stock in whole or in part, in each case on or prior to the date that is 91 days after the earlier of (a) the Final Maturity Date or (b) the date on which there are no Loans and no Revolving Credit Commitments outstanding, provided, however, that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder
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thereof prior to such date will be deemed to be Disqualified Stock; provided, further, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require LGEC or its Subsidiaries to repurchase such Capital Stock upon the occurrence of a change of control or asset sale (each defined in a substantially identical manner to the corresponding definitions in this Credit Agreement) shall not constitute Disqualified Stock if the terms of such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) provide that LGEC or its Subsidiaries, as applicable, may not repurchase or redeem any such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) pursuant to such provision prior to the termination of the Facilities.
“Distribution Agreements” shall mean (i) any and all agreements entered into by a Credit Party pursuant to which such Credit Party has sold, leased, licensed or assigned distribution rights or other exploitation rights to any item of Product to a Person that is not an Affiliate of such Credit Party and (ii) any and all agreements hereafter entered into by a Credit Party pursuant to which such Credit Party sells, leases, licenses or assigns distribution rights or other exploitation rights to any item of Product to a Person that is not an Affiliate of such Credit Party.
“Dollars” and “$” shall mean dollars in lawful currency of the United States of America.
“ECF Payment” shall have the meaning given to such term in Section 2.8(c)(iii).
“EEA Financial Institution” shall mean (a) any credit institution or investment firm 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 financial 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” shall mean any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” shall mean 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” shall mean 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.
“Eligible Assignee” shall mean:
(a) a Lender,
(b) an Affiliate of a Lender,
(c) an Approved Fund, and
(d) any other Person (other than a natural person or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person) approved in writing by (i) the Administrative Agent, (ii) in the case of any assignment of a Revolving Credit Commitment, the Issuing Banks, and (iii) unless an Event of Default described in Section 8.1(a), (f) or (g) has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed);
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provided that, in the case of assignments of Term B Loans, 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 having received written notice from the Administrative Agent of such request for its consent;
provided further that, notwithstanding the foregoing, (A) “Eligible Assignee” shall not include (x) any Disqualified Lenders, (y) any natural person or any holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or (z) except as provided in Section 11.3, LGEC or any Subsidiary of LGEC, (B) in the case of assignments of Revolving Credit Commitments or Revolving Exposure, no Person shall be an Eligible Assignee pursuant to clause (a), (b) or (c) above unless such Person is, or is an Affiliate or an Approved Fund of, an existing Lender under the Revolving Facility and (C) in the case of assignments of 2026 Term A Loans, no Person shall be an Eligible Assignee pursuant to (a), (b) or (c) above unless such Person is, or is an Affiliate or an Approved Fund of, an existing Lender under the Revolving Facility or an existing Lender of 2026 Term A Loans.
“Environmental Laws” shall mean any and all federal, state, provincial, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any Governmental Authority regulating, relating to, or imposing liability or standards of conduct concerning, any Hazardous Material or environmental protection or health and safety, 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, the Waste Management Act, R.S.B.C. 1996, c. 481, the Transportation of Dangerous Goods Act, R.S.B.C. 1996, c. 458 and other such laws relating to the storage, transportation, treatment and disposal of Hazardous Materials into the air, surface water, ground water, land surface, subsurface strata or any building or structure and, together, in each case, with any amendment thereto, and the regulations adopted pursuant thereto.
“Equity Cure Period” shall have the meaning given to such term in Section 8.6.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as heretofore and hereafter amended, as codified at 29 U.S.C. § 1001 et seq. and the regulations promulgated thereunder.
“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) which is under common control with any Credit Party under Section 4001 of ERISA or which is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.
“ERISA Event” shall mean:
(a) the failure of any Plan to be maintained and operated in all respects in accordance with all Applicable Laws, including ERISA;
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(b) the present value of all benefits under a Title IV Plan exceed the actuarial value of the assets of such Title IV Plan allocable to such benefits (based on those assumptions used to fund such Title IV Plan) as of the last valuation date applicable thereto;
(c) any event described in Section 4043(c) of ERISA and the regulations promulgated thereunder with respect to a Title IV Plan (other than an event for which the thirty (30) day notice period is waived);
(d) the imposition of any liability, or the existence of any circumstances pursuant to which any liability could be imposed, upon any Credit Party or any of their respective ERISA Affiliates under Chapter 43 of the Code with respect to any Title IV Plan or Multiemployer Plan, or with respect to any Plan that provides post retirement welfare coverage (other than as required pursuant to Section 4980B of the Code);
(e) the withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(f) the complete or partial withdrawal of any Credit Party or any ERISA Affiliate from any Multiemployer Plan;
(g) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA;
(h) the termination of a Title IV Plan or Multiemployer Plan by the PBGC pursuant to Section 4042 of ERISA;
(i) the failure by any Credit Party or ERISA Affiliate to make when due required contributions to a Multiemployer Plan or Title IV Plan;
(j) the termination of a Multiemployer Plan under Section 4041A of ERISA or the insolvency of a Multiemployer Plan under Section 4245 of ERISA or a determination that a Multiemployer Plan is in “endangered”, “critical” or “critical and declining” status under the meaning of Section 432 of the Code or Section 304 or 305 of ERISA;
(k) the termination of a Plan described in Section 4064 of ERISA;
(l) the failure to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA), whether or not waived, with respect to any Title IV Plan;
(m) a determination that any Title IV Plan is or is expected to be in “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA);
(n) the incurrence by any Credit Party or any of its ERISA Affiliates of any liability under Title IV of ERISA (other than non-delinquent premiums payable to the PBGC under Sections 4006 and 4007 of ERISA);
(o) the imposition of liability on any Credit Party or any ERISA Affiliate due to the cessation of operations at a facility under the circumstances described in Section 4062(e) of ERISA,
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(p) the occurrence of a non-exempt “prohibited transaction” with respect to which any Credit Party or any of the Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of the Code) or a “party in interest” (within the meaning of Section 406 of ERISA) or with respect to which any Credit Party or any such Subsidiary could otherwise be liable.
“ERISA Lien” shall mean any Liens under ERISA or Section 412 of the Code.
“EU Bail-In Legislation Schedule” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Eurocurrency Reserve Requirements” shall mean for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect
on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D) maintained by a member bank of the Federal Reserve System.
“Eurodollar Base Rate”
shall mean with respect to any Eurodollar Loan for any Interest Period, a rate per annum equal to the London interbank offered rate as administered by
the ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for 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 either of such Reuters pages, 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; in each case, the “ Screen Rate”) as of the Specified Time on the Quotation Day for such Interest Period; provided
that if the Screen Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Credit Agreement; provided, further, that if the Screen Rate shall not
be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to Dollars, then the Eurodollar Base Rate shall be the Interpolated Rate at such time (provided that if the
Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Credit Agreement).
“ Eurodollar Loans” shall
mean Loans the rate of interest applicable to which is based upon the Eurodollar Rate.
“ Eurodollar Rate” shall
mean with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula:
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“Event of Default” shall have the meaning given to such term in Section 8.1.
“Event of Loss” shall mean, with respect to any property or other assets, any of the following: (a) any loss, destruction or damage of such property or other assets or (b) any condemnation, seizure, or taking, by exercise of the power of eminent domain or otherwise, of such property or other assets, or confiscation of such property or other assets, provided that to the extent that any property or assets subject to any such event would not have, if sold or disposed of immediately prior to such event, constituted an “Asset Sale” hereunder, such event will not constitute an “Event of Loss” for all purposes hereunder.
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“Excess Cash Flow” shall mean, for any fiscal year of LGEC, the excess, if any, of:
(a) the sum, without duplication, of:
(i) Consolidated Net Income for such fiscal year;
(ii) the amount of all non-cash charges (including depreciation and amortization, including but not limited to amortization of film and television programs and programming rights, deferred financing costs or other non-cash interest, non-cash stock based compensation, or deferred tax provision) deducted in arriving at such Consolidated Net Income;
(iii) decreases in Consolidated Working Capital for such fiscal year (provided that, for purposes of this clause (a)(iii) and clause (b)(iv) below, Consolidated Working Capital shall exclude the current portion of programming costs and tax credits receivable on film production);
(iv) the aggregate net amount of non-cash loss on Asset Sales by LGEC and its Restricted Subsidiaries during such fiscal year, to the extent deducted in arriving at such Consolidated Net Income; and
(v) amounts received by LGEC and its Restricted Subsidiaries during such fiscal year and included in deferred revenue which are not expected to be recognized within a year and thus are excluded from Consolidated Working Capital;
over
(b) the sum, without duplication, of:
(i) the amount of all non-cash credits included in arriving at such Consolidated Net Income;
(ii) the aggregate amount actually paid by LGEC and its Restricted Subsidiaries in cash during such fiscal year on account of Capital Expenditures (excluding the principal amount of Indebtedness incurred to finance such Capital Expenditures and any such Capital Expenditures financed with the proceeds of any Reinvested Deferred Amount);
(iii) the aggregate amount of voluntary or mandatory payments or repurchases made or otherwise paid by LGEC and its Restricted Subsidiaries during such period in respect of all principal on all Indebtedness, which payments are not prohibited under this Credit Agreement at the time made (whether such payment is made at maturity, as a result of mandatory or voluntary prepayment, acceleration or otherwise, but excluding (i) the principal amount of Indebtedness incurred to finance such payments or repurchases, (ii) the voluntary prepayments deducted pursuant to Section 2.8(c)(iii)(B) and (iii) payments of revolving loans or swingline loans to the extent not accompanied with a permanent reduction of commitments thereunder);
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(iv) increases in Consolidated Working Capital for such fiscal year;
(v) the aggregate amount of spending by LGEC and its Restricted Subsidiaries on investment in film and television programs or programing rights net of (A) borrowings and repayments on production loans and (B) tax credits received, in each case by LGEC and its Restricted Subsidiaries in such fiscal year;
(vi) any amounts utilized by LGEC and its Restricted Subsidiaries subsequent to the applicable fiscal year and prior to the calculation of Excess Cash Flow to make payments on production loans relating to Product released before the end of such fiscal year;
(vii) the aggregate net amount of non-cash gain on Asset Sales by LGEC and its Restricted Subsidiaries during such fiscal year, to the extent included in arriving at such Consolidated Net Income;
(viii) Revenue amounts included in Consolidated Net Income for such fiscal year which are not expected to be paid within a year and thus are excluded from Consolidated Working Capital;
(ix) Payments made by LGEC and its Restricted Subsidiaries during such fiscal year to pay tax liabilities incurred by current or former officers, directors and employees of LGEC and its Subsidiaries upon the vesting of equity interests of any kind held thereby, including restricted stock units; and
(x) any amounts included in the Consolidated Net Income attributable to the net income of any Subsidiary which is not a Wholly-Owned Subsidiary pursuant to clause (2) of the definition of Consolidated Net Income to the extent (and only for so long as) the distribution or dividend of such amounts to the Borrower or a Guarantor is subject to prior government approval or other restrictions due to the operation of such Subsidiary’s charter or any agreement, instrument, judgment, decree, order statute, rule or government regulation, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to LGEC.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
“Excluded Assets” shall mean:
(1) the Fractional Aircraft Interest;
(2) interests in the Headquarters JV;
(3) any Capital Stock or other equity interests (including, for the avoidance of doubt, Capital Stock or equity interests of any Unrestricted Subsidiary) owned by the Borrower or any Guarantor to the extent that, and for so long as, a pledge of such Capital Stock or other equity interests would violate Applicable Law or an enforceable contractual obligation binding on or relating to such Capital Stock or other equity interests;
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(4) rights of any of the Borrower or any Guarantor under any license, contract or agreement or any property subject to a purchase money security interest or similar arrangement to the extent that pursuant to the terms of such license, contract, agreement, purchase money arrangement or similar arrangement the granting of a security interest in such rights would result in a termination or right of termination of, or is otherwise prohibited under, such agreement by the other party thereto, but only to the extent such prohibition on assignment is enforceable; provided, however, that upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and such Person shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect;
(5) any other assets to the extent that, and for so long as, taking a security interest in such assets would violate any Applicable Law or regulation or an enforceable contractual obligation binding on the assets that existed at the time of the acquisition thereof and was not created or made binding on the assets in contemplation of or in connection with the acquisition of such assets;
(6) any leasehold interest in real property;
(7) any fee interest in real property with a Fair Market Value of $15,000,000 or less individually;
(8) motor vehicles and other assets subject to certificates of title;
(9) assets to the extent a security interest in such assets would result in a material adverse tax consequence (including as a result of the operation of Section 956 of the Code or any similar law or regulation in any applicable jurisdiction) as reasonably determined by LGEC;
(10) those assets as to which the Administrative Agent and LGEC reasonably agree that the cost of obtaining such a security interest or perfection thereof are excessive in relation to the benefit to the Secured Parties of the security to be afforded thereby, including those assets set forth on Schedule 1.2 hereto;
(11) any of the Capital Stock of Subsidiaries not owned directly by a Credit Party;
(12) any governmental licenses or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby after giving effect to the applicable anti-assignment provisions of the UCC;
(13) “intent-to-use” trademark applications;
(14) letter of credit rights (except to the extent a security interest therein can be perfected by the filing of UCC financing statements);
(15) any commercial tort claim with a value not in excess of $15,000,000 individually;
(16) voting equity interests (and any other interests constituting “stock entitled to vote” within the meaning of U.S. Treasury Regulations Section 1.956-2(c)(2)) in excess of 65% of all such voting equity interests (and “stock entitled to vote”) in (i) any Controlled Foreign Corporation, (ii) any FSHCO and (iii) any subsidiary that is a disregarded entity for U.S. federal income tax purposes and owns any equity interests (or any other interests constituting “stock entitled to vote” within the meaning of U.S. Treasury Regulations Section 1.956-2(c)(2)) in a Controlled Foreign Corporation or FSHCO;
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(17) any demand deposit account established by a Credit Party at a commercial bank for the sole purpose of paying the production costs of a particular item of Product (or, in connection with any Permitted Slate Financing, the audio visual works (including motion pictures) to which such Permitted Slate Financing relates) in the ordinary course of business (each, a “Production Account”); and
(18) rights or interests of the Borrower or any Guarantor in any tax credit owned by an Unrestricted Subsidiary or Special Purpose Producer (including the proceeds of such tax credit and any refund or similar receipt attributable to such tax credit).
“Excluded Contributions” shall mean Net Cash Proceeds received by LGEC from:
(1) contributions to its common equity capital; or
(2) the sale (other than to a Subsidiary of LGEC or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of LGEC or any Subsidiary) of Capital Stock (other than Disqualified Stock) of LGEC;
in each case designated as Excluded Contributions pursuant to an Officers’ Certificate executed by the principal financial officer of LGEC on the date such capital contributions are made or the date such equity interests are sold, as the case may be.
“Excluded Subsidiary” shall mean any of the following:
(a) each Immaterial Subsidiary;
(b) each Subsidiary that is not a Wholly-Owned Subsidiary;
(c) each Subsidiary that is prohibited from guaranteeing or granting Liens to secure the Obligations by any Applicable Law or that would require consent, approval, license or authorization of a Governmental Authority to guarantee or grant Liens to secure the Obligations (unless such consent, approval, license or authorization has been received);
(d) each Subsidiary that is prohibited by any applicable contractual requirement (not created in contemplation of the acquisition by LGEC of such Subsidiary) from Guaranteeing or granting Liens to secure the Obligations on the Original Closing Date or at the time such Subsidiary becomes a Subsidiary not in violation of Section 7.4 (and for so long as such restriction or any replacement or renewal thereof is in effect);
(e) (i) any Subsidiary which engages in no activities other than in connection with the financing of accounts receivable, and (ii) each Receivables Subsidiary;
(f) any Foreign Subsidiary in which any Subsidiary organized in the United States, any state thereof, or the District of Columbia owns (within the meaning of Section 958(a) of the Code) any equity interest or Capital Stock;
(g) any U.S. Subsidiary (i) that is an FSHCO or (ii) that is a Subsidiary of a Controlled Foreign Corporation;
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(h) any Foreign Subsidiary other than a Subsidiary which is organized in Canada or any province thereof other than Lions Gate International Motion Pictures S.A.R.L.;
(i) any other Subsidiary with respect to which the Administrative Agent and LGEC reasonably agree that the cost or other consequences (including, without limitation, tax consequences (including as a result of the operation of Section 956 of the Code or any similar Applicable Law in any applicable jurisdiction)) of providing a guarantee of or granting Liens to secure the Obligations are likely to be excessive in relation to the value to be afforded thereby;
(j) any other Subsidiary if in the reasonable good faith determination of LGEC in consultation with the Administrative Agent, a guarantee by such Subsidiary would result in materially adverse tax consequences to LGEC or any of its Subsidiaries;
(k) each Unrestricted Subsidiary;
(l) any Subsidiary that is a “captive” insurance company;
(m) not-for-profit Subsidiaries;
(n) Subsidiaries which are Special Purpose Producers to the extent that (i) such Special Purpose Producer (A) has incurred (or is reasonably expected in connection with the financing plan for such Special Purpose Producer to incur) production loans, tax credit loans or any Other Permitted Priority Indebtedness and/or (B)(I) was formed for the purpose of incurring a tax credit loan or holding or collecting tax credits in connection with the applicable production and (II) has guaranteed or granted liens on any of its assets to secure, or is reasonably expected to guarantee or grant liens on its assets to secure, the applicable production loan, tax credit loan or any Other Permitted Priority Indebtedness and (ii) all distribution and other exploitation rights in the relevant Product or the audio-visual product or live or location-based entertainment produced by such Special Purpose Producer are licensed to a Credit Party; and
(o) any ProdCo.
“Excluded Swap Obligation” shall mean, with respect to any Credit Party, any obligation to pay or perform under any Hedging Obligation if, and to the extent that, and only for so long as, all or a portion of the guarantee of such Credit Party of, or the grant by such Credit Party of a security interest to secure, as applicable, such Hedging Obligations (or any guarantee 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) by virtue of (a) such Credit Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder or (b) in the case of a Hedging Obligation subject to a clearing requirement pursuant to Section 2(h) of the Commodity Exchange Act (or any successor provision thereto), because such Guarantor is a “financial entity,” as defined in Section 2(h)(7)(C)(i) of the Commodity Exchange Act (or any successor provision thereto), in each case the time the guarantee given by such Credit Party or the grant of such security interest, as applicable, becomes effective with respect to such Hedging Obligation. If a Hedging Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Hedging Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.
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“Excluded Taxes” shall mean taxes imposed on or with respect to a Person or required to be withheld or deducted from a payment to a Person pursuant to this Credit Agreement or any other Fundamental Document: (1) where such Person is subject to such taxes by reason of its carrying on business (other than any taxes arising solely from such Lender having entered into this Credit Agreement) in the jurisdiction imposing such tax (the “Relevant Taxing Jurisdiction”), having a permanent establishment in the Relevant Taxing Jurisdiction, being organized under the laws of the Relevant Taxing Jurisdiction or a subdivision thereof, or being an actual or deemed resident in the Relevant Taxing Jurisdiction; (2) by reason of such Person not dealing at arm’s length with the Borrower or any Guarantor for any purpose, including pursuant to the Income Tax Act (Canada) or any applicable income tax treaty; (3) by reason of the failure of such Person to complete, execute and deliver to the Borrower or the applicable Guarantor any form or document to the extent applicable to such Person that may be required by law or by reason of administration of such law or which is reasonably requested in writing to be delivered to the Borrower or such Guarantor in order to enable the Borrower or such Guarantor to make any payments hereunder or under any other Fundamental Document without deduction or withholding for taxes, or with deduction or withholding of a lesser amount, which form or document shall be delivered prior to the date on which the relevant payment is made; or (4) in respect of any taxes imposed under FATCA.
“Existing Borrower” shall have the meaning given to such term in the introductory paragraph of this Credit Agreement.
“Existing Credit Agreement” shall have the meaning given to such term in the preliminary statements of this Credit Agreement.
“Existing Lenders” shall mean the several banks and other financial institutions and other lenders from time to time party to the Existing Credit Agreement.
“Existing Revolving Loans” shall have the meaning given to such term in Amendment No. 2.
“Existing Term A Loan Commitment” shall mean, as to any Lender, the obligation of such Lender to make Existing Term A Loans on the Restatement Date pursuant to Section 2.1(a) hereof, in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on Schedule 1.1 attached hereto and made a part hereof, as the same may be reduced pursuant to Section 2.10. The Borrower and the Term A Lenders acknowledge and agree that the Existing Term A Loan Commitments of the Term A Lenders aggregate $750,000,000 as of the Restatement Date.
“Existing Term A Loans” shall have the meaning assigned to such term in Section 2.1(a).
“Existing Term Loans” shall have the meaning given to such term in Amendment No. 2.
“Extended Revolving Credit Commitment” shall have the meaning given to such term in Section 2.14(a)(ii).
“Extended Revolving Loans” shall have the meaning given to such term in Section 2.14(a)(ii).
“Extended Term Loans” shall have the meaning given to such term in Section 2.14(a)(ii).
“Extension” shall have the meaning given to such term in Section 2.14(a).
“Extension Offer” shall have the meaning given to such term in Section 2.14(a).
“Facility” shall mean any of the Revolving Facility and any Term Facility.
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“Fair Market Value” shall mean, with respect to any asset or liability, the fair market value of such asset or liability as determined by LGEC in good faith.
“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the Restatement Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof any agreements entered into pursuant to Section 1471(b)(1) of the Code and any intergovernmental agreements between the United States and any other jurisdiction entered into in connection with the foregoing (including any treaty, law, regulation or other official guidance adopted pursuant to any such intergovernmental agreement).
“Federal Funds Rate” shall mean, 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 shall be set forth on the NYFRB’s 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 Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Credit Agreement.
“Fee Letters” shall mean the Arranger Fee Letter, the Administrative Agent Fee Letter and the Arranger Fee Letters.
“Fee Payment Date” shall mean (a) the third Business Day following the last day of each March, June, September and December and (b) the final maturity date for the Revolving Facility.
“Final Maturity Date” shall mean, as at any date, the latest to occur of (a) the Term A Termination Date, (b) the Term B Termination Date, (c) the latest maturity date in respect of any outstanding Extended Term Loans and (d) the latest maturity date in respect of any Incremental Term Loans.
“Final Revolving Credit Termination Date” shall mean, as at any date, the latest to occur of (a) the Revolving Credit Termination Date, (b) the latest termination date in respect of any outstanding Extended Revolving Credit Commitments and (c) the latest termination date in respect of any Incremental Revolving Credit Facility.
“Finance Lease Obligations” shall mean an obligation that is required to be classified and accounted for as a finance lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation will be the capitalized amount of such obligation at the time any determination thereof is to be made as determined in accordance with GAAP, and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the first date such lease may be terminated without penalty; provided that obligations of LGEC or the Restricted Subsidiaries, or of a special purpose or other entity not consolidated with LGEC and the Restricted Subsidiaries, either existing on the Original Closing Date or created thereafter that (a) initially were not included on the consolidated balance sheet of LGEC as finance leases and were subsequently characterized as finance leases or, in the case of such a special purpose or other entity becoming consolidated with LGEC and the Restricted Subsidiaries were required to be characterized as finance leases upon such consideration, in either case, due to a change in accounting treatment or otherwise, or (b) did not exist on the Original Closing Date and were required to be characterized as finance leases but would not have been required to be treated as finance leases on the Original Closing Date had they existed at that time, shall for all purposes not be treated as Finance Lease Obligations or Indebtedness.
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“FinanceCo” means LG FinanceCo Corp., a British Columbia corporation and a direct Wholly-Owned Subsidiary of LGEC.
“Fitch” means Fitch Group, Inc., a jointly-owned subsidiary of Hearst Corporation and Fimalac, S.A., and any successor to its rating agency business.
“Fixed Amounts” shall have the meaning given to such term in Section 1(e).
“Fixed Dollar Incremental Amount” shall have the meaning given to such term in Section 2.14(b).
“Flood Insurance Laws” shall mean, collectively, (i) National Flood Insurance Reform Act of 1994 (which comprehensively revised the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973) as now or hereafter in effect or any successor statute thereto, (ii) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute there-to and (iii) the Biggert-Waters Flood Insurance Reform Act of 2012 as now or hereafter in effect or any successor statute thereto.
“Foreign Subsidiary” shall mean any Restricted Subsidiary that is not organized under the laws of the United States of America or any state thereof or the District of Columbia and any Subsidiary of such Restricted Subsidiary.
“Fractional Aircraft Interest” shall mean a fractional interest in an executive jet aircraft and/or a single purpose trust formed solely to hold such interest, with an acquisition cost for such interest or such trust which may not exceed $10,000,000.
“FSHCO” shall mean any Subsidiary that owns no material assets (directly or through subsidiaries) other than equity interests (and any other interests constituting “stock entitled to vote” within the meaning of U.S. Treasury Regulations Section 1.956-2(c)(2)) of one or more Controlled Foreign Corporations.
“Fundamental Documents” shall mean this Credit Agreement, the Notes, the Collateral Documents, each Refinancing Amendment,
each Incremental Amendment, Amendment No. 1, Amendment No. 1 Joinder, Amendment No. 2, Amendment
No. 3, Amendment No. 4 and Amendment No. 45.
“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, subject in all cases to paragraph (c) below of this Article 1. All ratios and computations based on GAAP contained in this Credit Agreement will be computed in conformity with GAAP, except that in the event LGEC is acquired in a transaction that is accounted for using purchase accounting, the effects of the application of purchase accounting shall be disregarded in the calculation of such ratios and other computations contained in this Credit Agreement.
“Governmental Authority” shall mean any federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality, or any court, in each case whether of the United States, Canada, Luxembourg or any foreign jurisdiction.
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“Guarantee” shall mean any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or
(2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term “Guarantee” will not include endorsements for collection or deposit or for indemnification in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
“Guarantors” shall mean LGEC (on and after the Borrower Assignment Effectiveness Date) and each Restricted Subsidiary which is a signatory of this Credit Agreement (including as signatory to Amendment No. 2, and including the Initial LUX/UK Guarantors) as a Guarantor and any other direct or indirect Restricted Subsidiary acquired or created after the date hereof which becomes a signatory to this Credit Agreement as a Guarantor pursuant to Section 6.13.
“Hazardous Materials” shall mean any flammable materials, explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, or similar materials defined in any Environmental Law.
“Headquarters JV” shall mean either (i) LGJW Colorado Partners, LLC or (ii) any other entity which is directly or indirectly owned in whole or in part by LGEC and which is formed for the sole purpose of constructing, maintaining and owning an office building to be used as a headquarters of LGEC and/or Subsidiaries thereof.
“Hedging Obligations” of any Person shall mean the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.
“Hypothec” shall have the meaning given to such term in the Pledge and Security Agreement.
“Immaterial Subsidiary” shall mean any Subsidiary that (a) did not, as of the last day of the fiscal quarter of LGEC most recently ended for which financial statements have been (or were required to be) delivered pursuant to Section 6.1(a) or 6.1(b), have assets with a value in excess of 2.5% of the Total Assets or revenues representing in excess of 2.5% of total revenues of LGEC and the Subsidiaries on a consolidated basis as of such date, and (b) taken together with all such Subsidiaries as of such date, did not have assets with a value in excess of 5.0% of Total Assets or revenues representing in excess of 5.0% of total revenues of LGEC and the Subsidiaries on a consolidated basis as of such date.
“Impacted Interest Period” shall have the meaning given to such term in the definition of “Eurodollar Base Rate”.
“Incurrence Based Amounts” shall have the meaning given to such term in Section 1(e).
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“Incremental Amendment” shall have the meaning given to such term in Section 2.13(a).
“Incremental Cap” shall have the meaning given to such term in Section 2.13(b).
“Incremental Equivalent Debt” shall mean secured or unsecured loans or notes issued in lieu of Incremental Facilities; provided that such loans or notes, if secured (i) are secured only by the Collateral and on a pari passu or junior basis with the liens securing the Obligations and (ii) are subject to a customary Intercreditor Agreement reasonably satisfactory to the Administrative Agent and provided, further that any such Incremental Equivalent Debt (x) otherwise satisfies clauses (A)(i), (B), (E), (F), (H) (solely with respect to such additional secured Indebtedness in the form of term loans that are secured on a pari passu basis with the Obligations), (I), (J) and (K) of Section 2.13(a) as if such Incremental Equivalent Debt were an Incremental Facility and (y) together with any Incremental Facility, does not exceed the Incremental Cap.
“Incremental Facility” shall mean, without duplication, (a) any Incremental Term Facility, (b) any Incremental Revolving Credit Facility, (c) the commitments (if any) of Additional Revolving Lenders to make Incremental Revolving Loans in respect of any Revolving Credit Commitment Increase and the Incremental Revolving Loans in respect thereof and/or (d) the commitments (if any) of Additional Term Lenders to make Incremental Term Loans in respect of any Term Commitment Increase and the Incremental Term Loans in respect thereof.
“Incremental Revolving Credit Facility” shall have the meaning given to such term in Section 2.13(a).
“Incremental Revolving Loans” shall mean any revolving loans made under any Incremental Revolving Credit Facility or in respect of any Revolving Credit Commitment Increase.
“Incremental Term A Facility” shall mean the commitments (if any) of Additional Term Lenders to make Incremental Term A Loans in accordance with Section 2.13 and the Incremental Term A Loans in respect thereof.
“Incremental Term A Loans” shall mean any term A loans (i.e., having no more than a 5 year maturity and no less than 2.5% average annual amortization per annum (except during any grace period or initial period)) made pursuant to Section 2.13.
“Incremental Term B Facility” shall mean the commitments (if any) of Additional Term Lenders to make Incremental Term B Loans in accordance with Section 2.13 and the Incremental Term B Loans in respect thereof.
“Incremental Term B Loans” shall mean any term B loans made pursuant to Section 2.13.
“Incremental Term Facility” shall mean the commitments (if any) of Additional Term Lenders to make Incremental Term Loans in accordance with Section 2.13 and the Incremental Term Loans in respect thereof.
“Incremental Term Loans” means any term loans made pursuant to Section 2.13.
“Incur” shall mean issue, create, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, amalgamation, consolidation, acquisition or otherwise) will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary; and the terms “Incurred”, “Incurring” and “Incurrence” have meanings correlative to the foregoing.
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“Indebtedness” shall mean, with respect to any Person on any date of determination (without duplication):
(1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money;
(2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(3) the principal component of all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation relates to a trade payable and such obligation is satisfied within 90 days of Incurrence);
(4) the principal component of all obligations of such Person to pay the deferred and unpaid purchase price of property, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto, except (a) any such balance that constitutes a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business and (b) any earn-out obligation until the amount of such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP;
(5) Finance Lease Obligations of such Person (whether or not such items would appear on the balance sheet of the guarantor or obligor);
(6) the principal component or liquidation preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of LGEC that is not a Guarantor, any Preferred Stock;
(7) the principal component of all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Persons;
(8) the principal component of Indebtedness of other Persons to the extent Guaranteed by such Person (whether or not such items would appear on the balance sheet of the guarantor or obligor); and
(9) to the extent not otherwise included in this definition, net obligations of such Person under Hedging Obligations (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such Hedging Obligation that would be payable by such Person at such time).
Notwithstanding anything in this Credit Agreement to the contrary, (x) Indebtedness shall not include, and shall be calculated without giving effect to, the effects of Financial Accounting Standards Board Accounting Standards Codification 825 and related interpretations to the extent such effects would otherwise increase or decrease an amount of Indebtedness for any purpose under this Credit Agreement as
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a result of accounting for any embedded derivatives created by the terms of such Indebtedness and any such amounts that would have constituted Indebtedness under this Credit Agreement but for the application of this sentence shall not be deemed an incurrence of Indebtedness under this Credit Agreement and (y) Indebtedness shall not include obligations under or in respect of any Qualified Receivables Financing.
“Indemnified Party” shall have the meaning given to such term in Section 10.4.
“Initial LUX/UK Guarantors” shall mean the Subsidiaries listed on Schedule 1.3.
“Initial Unrestricted Subsidiaries” shall mean each Subsidiary of LGEC set forth in Schedule 4.7(b) to this Credit Agreement.
“Intercreditor Agreement” shall mean such intercreditor or subordination agreements reasonably acceptable to the Administrative Agent to be entered into from time to time with respect to Other Permitted Priority Indebtedness, Incremental Equivalent Debt, Permitted Slate Financing, Permitted Slate Transaction, Refinancing Notes, Refinancing Term Loans, Replacement Revolving Facilities, and Indebtedness secured by Liens permitted by clauses (1), (16), (17), (18), (20), (24), (33), (38) or (39) of the definition of “Permitted Liens”, or other secured Indebtedness permitted hereunder.
“Interest Coverage Ratio” shall mean, as of any date of determination, the ratio of:
(1) Adjusted EBITDA of LGEC, calculated on a Pro Forma Basis, for the most recently ended Test Period; to
(2) Consolidated Applicable Interest Charge of LGEC, calculated on a Pro Forma Basis, for such Test Period.
“Interest Deficit” shall have the meaning given to such term in Section 3.8.
“Interest Payment Date” shall mean (a) as to any Base Rate Loan, the last day of each March, June, September and
December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any EurodollarTerm Benchmark Loan having an Interest Period of three months or less,
the last day of such Interest Period, (c) as to any
EurodollarTerm
Benchmark Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such
Interest Period, and (d) as to any Loan (other than any Revolving Loan that is a Base Rate Loan), the date of any repayment or prepayment made in respect thereof.
“Interest Period” shall mean, as to any
EurodollarTerm
Benchmark Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such EurodollarTerm
Benchmark Loan and ending one, three or six (or, if agreed to by all Lenders under the relevant Facility twelve) months thereafter, as selected by the Borrower in its notice of borrowing or notice
of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such EurodollarTerm
Benchmark Loan and ending one, three or six (or, if agreed to by all Lenders under the relevant Facility twelve) months thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not later than 11:00 A.M., New York City time, on the date that is three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
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(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period under a particular Facility that would extend beyond the applicable Maturity Date of such Facility; and
(iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
“Interest Rate Agreement” shall mean with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary.
“Interpolated
Rate” shall mean, at any time, the rate per
annum (rounded to the same number of decimal places as the 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 Screen Rate (for the longest period for which that Screen Rate is available in Dollars) that is shorter than the Impacted Interest Period and (b) the Screen Rate (for the shortest period for which that Screen
Rate is available for Dollars) that exceeds the Impacted Interest Period, in each case, as of the Specified Time on the Quotation Day for such Interest Period. When determining the rate for a period which is less than the shortest period for which
the Screen Rate is available, the Screen Rate for purposes of clause (a) above shall be deemed to be the overnight rate for Dollars determined by the Administrative Agent from such service as the Administrative Agent may select.
“Intra Group Liabilities” shall have the meaning given to such term in Section 9.10.
“Investment” shall mean, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of any direct or indirect advance, loan (other than advances or extensions of credit to customers in the ordinary course of business) or other extensions of credit (including by way of Guarantee or similar arrangement, but excluding any debt or extension of credit represented by a bank deposit other than a time deposit or indemnity provision) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such other Person and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided that none of the following will be deemed to be an Investment:
(1) Hedging Obligations entered into in compliance with this Credit Agreement;
(2) endorsements of negotiable instruments and documents in the ordinary course of business;
(3) an acquisition of assets, Capital Stock or other securities by LGEC or a Subsidiary for consideration to the extent such consideration consists of Common Stock of LGEC;
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(4) accounts receivable, trade credit and advances to customers in the ordinary course of business;
(5) commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business; and
(6) any assets or securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business.
For purposes of Section 7.2 of this Credit Agreement,
(a) “Investment” will include the portion (proportionate to LGEC’s equity interest in a Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the Fair Market Value of the net assets of such Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, LGEC will be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to (i) LGEC’s aggregate “Investment” in such Subsidiary as of the time of such redesignation less (ii) the portion (proportionate to LGEC’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time that such Subsidiary is so re-designated a Restricted Subsidiary;
(b) any property transferred to or from an Unrestricted Subsidiary will be valued at its Fair Market Value at the time of such transfer; and
(c) if LGEC or any Restricted Subsidiary sells or otherwise disposes of any Voting Stock of any Restricted Subsidiary such that, after giving effect to any such sale or disposition, such entity is no longer a Subsidiary of LGEC, LGEC shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Capital Stock of such Subsidiary not sold or disposed of.
“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).
“Issuing Bank” shall mean each of (i)(a) JPMorgan Chase Bank, N.A., with respect to up to $100,000,000 of Letters of Credit, (b) Bank of America, N.A., with respect to up to $16,000,000 of Letters of Credit, (c) The Bank of Tokyo-Mitsubishi UFJ, Ltd. with respect to up to $16,000,000 of Letters of Credit, (d) Royal Bank of Canada with respect to up to $16,000,000 of Letters of Credit, (e) Truist Bank with respect to up to $16,000,000 of Letters of Credit, (f) Wells Fargo Bank, N.A. with respect to up to $16,000,000 of Letters of Credit, (g) BNP Paribas with respect to up to $10,000,000 of Letters of Credit and (h) Societe Generale with respect to up to $10,000,000 of Letters of Credit, in each case, acting through any of its affiliates or branches, and (ii) any other Issuing Bank designated pursuant to Section 2.3(j) in each case in its capacity as an Issuing Bank, and its successors in such capacity as provided in Section 2.3(i); provided that in no event shall Royal Bank of Canada (or any of its respective affiliates or branches) be required to issue trade and commercial letters of credit. An Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by affiliates of such Issuing Bank, in which case the term Issuing Bank shall include any such affiliates with respect to Letters of Credit issued by such Affiliate. Each reference herein to “the Issuing Bank” shall be deemed to be a reference to the relevant Issuing Bank.
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“Joinder Agreement” shall mean the “Instrument of Assumption and Joinder”, substantially in the form attached hereto as Exhibit G.
“Joint Venture” shall mean a joint venture or similar venture with one or more unrelated parties (whether structured as a corporation, partnership, limited liability company or other entity) in which LGEC or any of its Restricted Subsidiaries own Capital Stock and which is formed and operated to conduct a Related Business.
“Judgment Conversion Date” shall have the meaning given to such term in Section 11.10.
“L/C Backstop” shall mean, in respect of any Letter of Credit, (a) a letter of credit delivered to the Issuing Bank which may be drawn by the Issuing Bank to satisfy any obligations of the Borrower in respect of such Letter of Credit or (b) cash or Cash Equivalents deposited with the Issuing Bank to satisfy any obligation of the Borrower in respect of such Letter of Credit, in each case, in an amount not to exceed 102.00% of the undrawn face amount and any unpaid Reimbursement Obligations with respect to such Letter of Credit and on terms and pursuant to arrangements (including, if applicable, any appropriate reimbursement agreement) reasonably satisfactory to the respective Issuing Bank.
“L/C Disbursement” shall mean a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit.
“L/C Exposure” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all L/C Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The L/C Exposure of any Lender at any time shall be its Revolver Percentage of the total L/C Exposure at such time. For all purposes of this Credit Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.13 or 3.14 of the ISP or Article 36 of the UCP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided that with respect to any Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
“L/C Obligations” shall mean the aggregate undrawn face amounts of all outstanding Letters of Credit and all unpaid Reimbursement Obligations.
“L/C Sublimit” shall mean $200,000,000, as reduced pursuant to the terms hereof.
“LCT Election” shall have the meaning given to such term in Section 1(d).
“LCT Test Date” shall have the meaning given to such term in Section 1(d).
“Lender” and “Lenders” shall mean the several banks and other financial institutions and other lenders from time to time party to this Credit Agreement (including by providing a Lender Addendum to Amendment No. 2, but excluding Disqualified Lenders), including each assignee Lender pursuant to Section 11.3.
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“Lending Office” shall mean, with respect to any of the Lenders, the branch or branches (or affiliate or affiliates) 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.
“Letter of Credit” shall have the meaning given to such term in Section 2.3(a).
“Letter of Credit Commitment” shall have the meaning given to such term in Section 2.3(a).
“LGEC” shall have the meaning given to such term in the introductory paragraph of this Credit Agreement.
“LGEI” shall mean Lions Gate Entertainment Inc., a Delaware corporation, and its successors.
“LGF” shall mean Lions Gate Films Inc. and its successors.
“LGT” shall mean Lions Gate Television Inc. and its successors.
“Lien” shall mean, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under Applicable Law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any other agreement to give a security interest in and any filing of or agreement to give any financing statement under the applicable PPSA, the CCQ, or UCC (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.
“Limited Condition Transaction” means (x) any acquisition or investment (including by way of merger, amalgamation, consolidation or other business combination or the acquisition of Capital Stock or otherwise), by one or more of the Borrower and its Restricted Subsidiaries of or in any assets, business or Person, in each case, whose consummation is not conditioned on the availability of, or on obtaining, third-party financing or (y) any redemption, purchase, repurchase, defeasance, satisfaction and discharge or repayment of Indebtedness, Disqualified Stock or Preferred Stock by one or more of the Borrower and its Subsidiaries requiring irrevocable notice in advance of such redemption, purchase, repurchase, defeasance, satisfaction and discharge or prepayment.
“Loan” or “Loans” shall mean any Revolving Loan, Term Loan, any loan issued under any Incremental Facility, any Extended Revolving Loan or Extended Term Loan, any loan issued pursuant to the final paragraph of Section 11.12(a) hereof or any Refinancing Term Loans or Loans under any Replacement Revolving Facility.
“Luxembourg Guarantor” shall have the meaning assigned to such term in Section 9.10.
“Majority Facility Lenders” shall mean, with respect to any Term Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans under such Term Facility, and with respect to the Revolving Facility, the holders of Revolving Exposures and Unused Revolving Credit Commitments representing more than 50% of the sum of the total Revolving Exposures and Unused Revolving Credit Commitments at such time.
“Material Adverse Effect” shall mean any change or effect that has a materially adverse effect on (a) the business, assets, properties, operations or financial condition of LGEC and its Restricted Subsidiaries, taken as a whole, (b) the legal right, power or authority of any material Credit Party to perform its respective payment obligations under the Fundamental Documents to which it is a party or (c) the validity or enforceability of, or the rights, remedies or benefits available to the Lenders under, the Fundamental Documents, taken as a whole.
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“Material Indebtedness” shall mean Consolidated Debt of the Borrower and the Guarantors in an aggregate principal amount equal to or greater than $75,000,000.
“Maturity Date” shall mean the Final Maturity Date or the Final Revolving Credit Termination Date, as applicable.
“Merger Agreement” shall mean that certain Agreement and Plan of Merger, dated as of June 30, 2016 (as amended, supplemented or modified and in effect from time to time, and including all schedules and exhibits thereto, the “Merger Agreement”), by and among LGEC, Merger Sub, and the Target.
“Merger Sub” shall mean Orion Arm Acquisition Inc., a Delaware corporation.
“Minimum Extension Condition” shall have the meaning given to such term in Section 2.14(b).
“Moody’s” shall mean Moody’s Investors Service, Inc., and any successor-in-interest thereto.
“MQP” shall mean MQP, LLC and its successors.
“Multiemployer Plan” shall mean a plan described in Section 4001(a)(3) of ERISA to which any Credit Party or ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the seven preceding plan years made or accrued an obligation to make contributions.
“Negative Pick-up Obligation” shall mean a commitment to pay a certain sum of money or other Investment made by LGEC or any Restricted Subsidiary in order to obtain ownership, distribution rights or sales agency rights in any item of Product, including, for the avoidance of doubt, any item of Product produced by LGEC or any Restricted Subsidiary. Negative Pick-up Obligation includes both “traditional” negative pickup arrangements and indirect structures.
“Net Available Cash” from an Asset Sale shall mean cash payments actually received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable, but only as and when actually received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Sale or received in any other non-cash form) therefrom, in each case net of:
(1) all legal, accounting, investment banking, title and recording taxes, fees, expenses, commissions and other fees and expenses Incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP or otherwise payable (in the good faith determination of LGEC) in connection with such Asset Sale (including any repatriation of the proceeds of such Asset Sale);
(2) all payments made on any Indebtedness that is secured by any assets subject to such Asset Sale, in accordance with the terms of such Indebtedness, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by Applicable Law be repaid out of the proceeds from such Asset Sale;
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(3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or Joint Ventures as a result of such Asset Sale;
(4) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by LGEC or any Restricted Subsidiary after such Asset Sale; and
(5) in the case of any Asset Sale by a Subsidiary which is not a Wholly-Owned Subsidiary, a portion of the cash payments received by such Subsidiary equal to the portion of the economic interests in such Subsidiary which are not directly or indirectly owned by LGEC.
“Net Cash Proceeds,” with respect to any issuance or sale of Capital Stock or any Incurrence of Indebtedness, shall mean the cash proceeds of such issuance or sale or such Incurrence net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees, expenses and charges actually Incurred in connection with such issuance or sale or such Incurrence and net of taxes paid or payable (in the good faith determination of LGEC) in connection with such issuance or sale or such Incurrence (including any repatriation of the proceeds of such sale or Incurrence).
“Net First Lien Leverage Ratio” shall mean, as of any date of determination, the ratio of:
(1) (A) the total principal amount of Secured Funded Indebtedness that would appear on a balance sheet of LGEC and its Restricted Subsidiaries as of such determination date, minus (B) Unrestricted Cash as of such determination date in an amount not to exceed $300,000,000, to
(2) Adjusted EBITDA of LGEC, calculated on a Pro Forma Basis, for the most recent Test Period.
“Net Total Leverage Ratio” shall mean, as of any date of determination, the ratio of:
(1) (A) the total principal amount of Consolidated Debt that would appear on a balance sheet of LGEC and its Restricted Subsidiaries as of such determination date, minus (B) Unrestricted Cash as of such determination date in an amount not to exceed $300,000,000, to
(2) Adjusted EBITDA of LGEC, calculated on a Pro Forma Basis, for the most recent Test Period.
“New Borrower” shall have the meaning given to such term in the introductory paragraph of this Credit Agreement.
“Non-Guarantor Subsidiary” shall mean any Restricted Subsidiary (other than the New Borrower) that is not a Guarantor.
“Non-S-X Adjustment Amount” shall have the meaning given to such term in the definition of “Pro Forma Basis”.
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“Non-U.S. Plan” shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established, contributed to (regardless of whether through direct contributions or through employee withholding) or maintained outside the United States by a Credit Party or one or more Subsidiaries of a Credit Party primarily for the benefit of employees of the Credit Party or such Subsidiaries residing outside the United States, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code; provided, however, that “Non-U.S. Plan” shall not include any such plan, fund or program sponsored or maintained by a Governmental Authority.
“Note” or “Notes” shall have the meaning given to such term in Section 2.11(d).
“NYFRB” shall mean the Federal Reserve Bank of New York.
“NYFRB’s Website” shall mean the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“NYFRB Rate” shall mean, for any day, the greater of (a) the Federal Funds 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 by the 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 (a) the obligation of the Borrower to make due and punctual payment of principal and interest on the Loans, the face amount of the Commitment Fees, any reimbursement obligations in respect of Letters of Credit, costs and attorneys’ fees and all other monetary obligations of the Borrower and the Guarantors to the Administrative Agent, the Issuing Banks or any Lender under this Credit Agreement, the Notes, any other Fundamental Document or the Fee Letters (including interest accruing after the maturity of the Loans and reimbursement obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Credit Party, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and (b) all amounts payable under any Specified Swap Agreement or any Specified Cash Management Agreement, provided that (i) the Obligations of the Credit Parties under any Specified Swap Agreement and Specified Cash Management Agreements shall be secured and guaranteed pursuant to the Collateral Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (ii) any release of Collateral or Guarantors effected in the manner permitted by this Credit Agreement or any Collateral Document shall not require the consent of any counterparty under such agreement pursuant to any Fundamental Document; and, provided, further, that notwithstanding anything to the contrary, for all purposes of the Fundamental Documents, the Obligations of any Guarantor shall exclude any Excluded Swap Obligation of such Guarantor.
“OFAC” shall have the meaning given to such term in Section 4.22.
“Officer” shall mean the Manager, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer, Chief Strategic Officer, any President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Borrower. “Officer” of any Guarantor has a correlative meaning and, in the case of any Luxembourg Guarantor, means any director, manager or authorized signatory.
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“Officers’ Certificate” shall mean a certificate signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Borrower or LGEC.
“Original Closing Date” shall mean December 8, 2016
“Other Applicable Indebtedness” shall have the meaning given to such term in Section 2.8(c)(ii).
“Other Permitted Priority Indebtedness” shall mean any Indebtedness which is (a) permitted to be Incurred after the Restatement Date by Section 7.1(c)(xii), Section 7.1(c)(xiii), 7.1(c)(xiv), 7.1(c)(xvii) or 7.1(c)(xviii) hereof or (b) incurred prior to the Restatement Date but of any type described in the foregoing clause (a).
“Overnight Bank Funding Rate” shall mean, for any day, the rate comprised of both overnight
federal funds and overnight Eurodollar
borrowingseurodollar transactions denominated in Dollars by U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the NYFRB as set forth on the NYFRB’s 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).
“Participant” shall have the meaning given to such term in Section 11.3(d)
“Participant Register” shall have the meaning given to such term in Section 11.3(d).
“Participating Interest” shall have the meaning given to such term in Section 2.3(d).
“Participating Lender” shall have the meaning given to such term in Section 2.3(d).
“Payment” shall have the meaning given to such term in Section 10.5(c).
“payment default” shall have the meaning given to such term in Section 8.1(e).
“Payment Notice” shall have the meaning given to such term in Section 10.5(c).
“Patent Security Agreement” shall have the meaning given to such term in the Pledge and Security Agreement.
“Patent Security Agreement Supplement” shall have the meaning given to such term in the Pledge and Security Agreement.
“PBGC” shall mean the Pension Benefit Guaranty Corporation and its successors.
“Pension Plan” means a Plan described in Section 3(2) of ERISA.
“Percentage” shall mean for any Lender its Revolver Percentage or Term Loan Percentage, as applicable; and where the term “Percentage” is applied on an aggregate basis, such aggregate percentage shall be calculated by aggregating the separate components of the Revolver Percentage and Term Loan Percentage, and expressing such components on a single percentage basis.
“Permitted Holder” shall mean, at any time, each of:
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(a)(i) Mark H. Rachesky, M.D., (ii) John C. Malone and (iii) any Affiliate of such Persons, or any Affiliated Persons of such Persons;
(b) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) of which any Person described in clause (a) hereof is a member, provided that Persons described in clause (a) hereof beneficially own a majority of the Voting Stock of LGEC beneficially owned by all members of such group; and
(c) any Person (including LGEC upon a sale of all or substantially all of its assets to a Subsidiary thereof in a transaction permitted under Section 7.6) (x) that acquires (or otherwise holds), directly or indirectly, 100% of the voting power of the Voting Stock of LGEC and, immediately after giving effect to such acquisition and any related transactions, has no material assets other than Capital Stock of LGEC and (y) of which no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) other than any of the Permitted Holders specified in clauses (a) and (b) above, holds more than 50% of the total voting power of the Voting Stock thereof (any Person described in clause (c) hereof, a “Permitted Parent Holdco”).
“Permitted Investment” shall mean:
(1) an Investment by LGEC or any Restricted Subsidiary in LGEC or a Restricted Subsidiary;
(2) an Investment by LGEC or any Restricted Subsidiary in a Person that is engaged in a Related Business if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person, in one transaction or a series of related transactions, is merged, amalgamated, or consolidated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into LGEC or a Restricted Subsidiary,
and, in each case, any Investment held by such Person; provided that such Investment was not acquired by such Person in contemplation of such acquisition, merger, amalgamation, consolidation or transfer;
(3) cash and Cash Equivalents;
(4) receivables owing to LGEC or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as LGEC or any such Restricted Subsidiary deems reasonable under the circumstances;
(5) payroll, travel, services (e.g., shared services arrangements) to the extent permitted by Section 7.5(b)(vii) and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;
(6) loans or advances to employees, officers or directors of LGEC or any Restricted Subsidiary not in excess of $10,000,000 at any time outstanding;
(7) any Investment acquired by LGEC or any of its Restricted Subsidiaries:
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(a) in exchange for any other Investment or accounts receivable held by LGEC or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, insolvency, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable; or
(b) as a result of a foreclosure (or similar remedy) by LGEC or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(8) Investments made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 7.8 or any other disposition of assets not constituting an Asset Sale;
(9) Investments in existence on the Restatement Date (including, for the avoidance of doubt, Investments of Target and its Subsidiaries) and all exchanges, extensions, refinancings and renewals thereof;
(10) Currency Agreements, Interest Rate Agreements and related Hedging Obligations, which transactions or obligations are Incurred in compliance with Section 7.1;
(11) Guarantees and other Investments issued in accordance with Section 7.1 relating to Negative Pick-up Obligations, Program Acquisition Guarantees, minimum guarantees to acquire items of Product or interests therein, or similar activities, in each case in the ordinary course of business;
(12) Investments made in connection with the funding of contributions under any non-qualified retirement plan or similar employee compensation plan in an amount not to exceed the amount of compensation expense recognized by LGEC and its Restricted Subsidiaries in connection with such plans;
(13) Investments made pursuant to investment commitments existing on the Restatement Date in (i) Playco Holdings Limited and (ii) other Joint Ventures in existence on the Restatement Date;
(14) with respect to the purchase price and/or construction costs expended by the Borrower and Guarantors for LGEC’s headquarters or any other real property of the Borrower and Guarantors, the portion of such purchase prices in excess of any mortgage related to such purchase price;
(15) Investments in the Headquarters JV, at any time outstanding, not to exceed $40,000,000 (exclusive of any permitted guarantee);
(16) Investments in Joint Ventures and Unrestricted Subsidiaries, in an amount, at any time outstanding, not to exceed the greater of $315,000,000 and 2.25% of Total Assets when made;
(17) Investments (including debt obligations) received in connection with the bankruptcy, insolvency or reorganization of suppliers, customers or other debtors or in settlement of delinquent obligations arising in the ordinary course of business;
(18) nominal Investments in Special Purpose Producers;
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(19) Investments in and Guarantees of obligations of LGEC, any Restricted Subsidiary, or any of their respective direct or indirect Subsidiaries or Joint Ventures (which Subsidiaries or Joint Ventures may engage in business unrelated to such Investment to the extent otherwise permissible under this Credit Agreement) in connection with co-productions, co-ventures or co-financing arrangements related to the production, distribution and/or acquisition of Product or an interest therein, in each case in the ordinary course of business consistent with past practice;
(20) Investments in an aggregate amount at any time outstanding not to exceed the greater of (a) $345,000,000 and (b) 3.0% of Total Assets when made; provided that at the time of and after giving effect to such Investment, no Default shall have occurred and be continuing or would occur as a consequence thereof;
(21) the Transactions;
(22) any acquisition or production of Product in the ordinary course of business, to the extent such action would be considered an Investment;
(23) Letters of credit as to which LGEC or a Restricted Subsidiary is the beneficiary and which are issued for the account of third party investors in Product of LGEC or a Restricted Subsidiary;
(24) Investments consisting of the contribution or transfer of the (A) Comic Con business or (B) Spanish-language OTT to an Unrestricted Subsidiary or Joint Venture (or the transfer of Capital Stock in a Subsidiary that owns the Comic Con business or Spanish-language OTT, as the case may be, such that such Subsidiary becomes a Joint Venture), provided that at the time of and after giving effect to such Investment, (x) no Default shall have occurred and be continuing or would occur as a consequence thereof and (y) LGEC shall be in compliance with the financial ratios set forth in Section 7.9(a) and (b) for the relevant fiscal quarter on a Pro Forma Basis;
(25) Investments in any ProdCo in accordance with the definition of “Permitted Slate Transaction”;
(26) Guarantees made in accordance with Section 7.1 or Section 6.13; and
(27) (a) any Investment in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Financing, including Investments of funds held in accounts permitted or required by the arrangements governing such Qualified Receivables Financing or any related Indebtedness, and (b) any Investment in an entity which is not a Restricted Subsidiary to which LGEC or a Restricted Subsidiary sells Receivables Financing Assets pursuant to a Receivables Financing.
“Permitted Liens” shall mean, with respect to any Person:
(1) Liens, which Liens may be pari passu with or junior to the Liens securing the Obligations pursuant to the Collateral Documents, securing (i) the Obligations, including without limitation the Loans and the Guarantees under Article 9 and any obligations owing to the Administrative Agent, Issuing Banks or Lenders under this Credit Agreement and the Collateral Documents (including Liens securing any Indebtedness pursuant to Section 2.13, Section 2.14, and Section 2.15), (ii) any Incremental Equivalent Debt or (iii) any Refinancing Notes;
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(2) pledges or deposits by such Person under workers’ compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import or customs duties or for the payment of rent, in each case Incurred in the ordinary course of business;
(3) Liens imposed by law, including carriers’, warehousemen’s, mechanics’, materialmen’s and repairmen’s Liens;
(4) Liens for taxes, assessments or other governmental charges not yet subject to penalties for non-payment or that are being contested in good faith by appropriate proceedings, provided that any appropriate reserves required pursuant to GAAP have been made in respect thereof;
(5) Liens in favor of issuers of surety or performance bonds or letters of credit or bankers’ acceptances or similar obligations issued pursuant to the request of and for the account of such Person in the ordinary course of its business;
(6) encumbrances, ground leases, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning, building codes or other restrictions or agreements (including, without limitation, minor defects or irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties that do not in the aggregate materially impair their use in the operation of the business of such Person;
(7) Liens securing Hedging Obligations so long as the related Indebtedness is permitted under this Credit Agreement;
(8) leases, licenses, subleases and sublicenses of assets (including, without limitation, real property and intellectual property rights) that do not materially interfere with the ordinary conduct of the business of LGEC or any of the Restricted Subsidiaries;
(9) Liens arising out of attachments, judgments (to the extent not resulting in an Event of Default) 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 any appropriate reserves have been established in accordance with GAAP;
(10) Liens for the purpose of securing the payment of all or a part of the purchase price of, or Finance Lease Obligations, mortgage financings, purchase money obligations or other payments Incurred to finance assets or property (other than Capital Stock or other Investments) acquired, constructed or improved; provided that:
(a) the aggregate principal amount of Indebtedness secured by such Liens is otherwise permitted to be Incurred under this Credit Agreement and does not exceed the cost of the assets or property so acquired, constructed or improved; and
(b) such Liens are created within 180 days of construction, acquisition or improvement of such assets or property and do not encumber any other assets or property of LGEC or any Restricted Subsidiary other than such assets or property and assets affixed or appurtenant thereto;
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(11) Liens arising solely by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depositary institution;
(12) Liens arising from any applicable UCC, CCQ or PPSA financing statement filings or other similar filings regarding operating leases entered into by LGEC and the Restricted Subsidiaries;
(13) Liens existing on the Restatement Date (other than Liens permitted under clauses (1), (16) or (20) of this definition) including, for the avoidance of doubt, Liens on assets of Target and its Subsidiaries;
(14) Liens on property or shares of stock of a Person at the time such Person becomes a Restricted Subsidiary; provided, however, that such Liens are not created in connection with, or in contemplation of, such other Person becoming a Restricted Subsidiary; provided further, however, that any such Lien may not extend to any other property owned by LGEC or any Restricted Subsidiary;
(15) Liens on property at the time LGEC or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger, amalgamation or consolidation with or into, or plan of arrangement with, LGEC or any Restricted Subsidiary; provided, however, that such Liens are not created in connection with, or in contemplation of, such acquisition; provided further, however, that such Liens may not extend to any other property owned by LGEC or any Restricted Subsidiary;
(16) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to LGEC or a Wholly-Owned Subsidiary, which are junior in priority to the Liens securing the Loans and the Guarantees under Article 9 pursuant to an Intercreditor Agreement;
(17) (a) Liens on assets of the type specified in the definition of “Receivables Financing” Incurred in connection with a Qualified Receivables Financing, and (b) Liens securing obligations under or in respect of any Qualified Receivables Financing;
(18) Liens securing Refinancing Indebtedness Incurred to refinance, refund, replace, amend, extend or modify, as a whole or in part, Indebtedness that was previously so secured pursuant to clauses (1) (only with respect to Incremental Equivalent Debt and Refinancing Notes), (10), (13), (14), (15), (18) and (25) of this definition, provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced or is in respect of property that is the security for a Permitted Lien hereunder;
(19) any interest or title of a lessor under any Finance Lease Obligation or operating lease;
(20) Liens in favor of LGEC or any Restricted Subsidiary, which are junior in priority to the Liens securing the Loans and the Guarantees under Article 9 pursuant to an Intercreditor Agreement;
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(21) Liens to secure payment and performance obligations of the Borrower and Guarantors in connection with a revenue participation purchase agreement or similar arrangement for third-party investments in Product produced, acquired or distributed by the Borrower and such Guarantors in the ordinary course of business consistent with past practice;
(22) Liens under industrial revenue, municipal or similar bonds;
(23) Liens to secure Negative Pick-up Obligations, Program Acquisition Guarantees and other direct or indirect guarantees (including minimum guarantees) related to the acquisition, production or distribution of items of Product in the ordinary course of business to the extent such Lien is limited solely to such item of Product related to such Negative Pick-up Obligation, Program Acquisition Guarantee or other guarantee;
(24) Liens to secure Other Permitted Priority Indebtedness to the extent such Lien is limited solely to the item or items of Product or related Production Accounts relating to such Other Permitted Priority Indebtedness, which Liens may be prior to the Liens securing the Obligations pursuant to the Collateral Documents;
(25) Liens securing Indebtedness in an aggregate principal amount outstanding at any one time not to exceed at the time of Incurrence thereof, together with all other outstanding (x) Indebtedness secured by Liens pursuant to this clause (25) and (y) Refinancing Indebtedness secured by Liens incurred under clause (18) above in respect of Indebtedness previously secured by Liens under this clause (25), the greater of (a) $125,000,000 and (b) 1.25% of Total Assets;
(26) Liens on assets of a Subsidiary that is not a Guarantor securing Indebtedness of a Subsidiary that is not a Guarantor permitted to be Incurred pursuant to Section 7.1;
(27) Liens in favor of guilds or unions (whether pursuant to written security agreements, any producer’s or distributor’s assumption agreements, or otherwise), in each case which are required in the ordinary course of business pursuant to collective bargaining agreements;
(28) Liens to secure distribution, exhibition and/or exploitation rights of licensees pursuant to Distribution Agreements or of licensors from whom any of LGEC or the Restricted Subsidiaries has (directly or indirectly) obtained any distribution rights or other exploitation rights to any item of Product (or of Persons providing financing to obtain such rights) or Liens to secure production advances on an item of Product, provided that such Liens are limited to such distribution, exhibition and/or exploitation rights and the applicable revenue therefrom;
(29) Liens customarily granted or incurred in the ordinary course of business with regard to services rendered by laboratories and post-production houses, record warehouses and suppliers of materials and equipment which secure outstanding trade payables;
(30) possessory Liens (other than those of laboratories and production houses) which (a) occur in the ordinary course of business, (b) secure normal trade debt which is not yet due and payable and (c) do not secure Indebtedness;
(31) customary Liens in favor of completion guarantors granted in connection with Completion Guarantees;
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(32) Liens granted by LGEC or any Restricted Subsidiary that is a Special Purpose Producer to secure outside production financing otherwise permitted under this Credit Agreement;
(33) Liens granted in connection with any Permitted Slate Financing in accordance with the definition thereof;
(34) Liens to secure Replication Advances permitted by Section 7.1(c)(xiv);
(35) (A) Liens on tax credits to secure Indebtedness which is otherwise non-recourse to LGEC or any Restricted Subsidiary, other than customary representations and warranties and (B) Liens on LGEC’s or any Restricted Subsidiary’s rights and interests in any tax credit and any refund or similar receipt attributable to such tax credit to the extent such tax credit is owned by an Unrestricted Subsidiary or Special Purpose Producer and such Lien secures the obligation of LGEC or such Restricted Subsidiary, in its capacity as agent for such Unrestricted Subsidiary or Special Purpose Producer, to remit such refund or similar receipt attributable to such tax credit to such Unrestricted Subsidiary or Special Purpose Producer, as applicable;
(36) Liens granted by either MQP, any Services Company that is LGEC or any Restricted Subsidiary, LGF or LGT to secure MQP’s obligations to SGF pursuant to the SGF Co-Financing Arrangement;
(37) Liens in connection with reversion or turnaround rights with respect to a project in development;
(38) Liens granted by one or more of LGEC and its Restricted Subsidiaries to secure Secured Funded Indebtedness permitted to be Incurred under Section 7.1(a) or any refinancing of such Indebtedness permitted pursuant to Section 7.1(c)(xi), in each case, which Liens are pari passu in priority with the liens securing the Obligations pursuant to the Collateral Documents pursuant to an Intercreditor Agreement;
(39) Liens granted by one or more of LGEC and its Restricted Subsidiaries to secure Indebtedness permitted to be Incurred under Section 7.1(b) or any refinancing of such Indebtedness permitted pursuant to Section 7.1(c)(xi), in each case, which Liens are junior in priority to the with the liens securing the Obligations pursuant to the Collateral Documents Obligations pursuant to an Intercreditor Agreement;
(40) rights or other interests granted under the Co-Publishing Agreement, dated April 5, 2013 and effective as of January 1, 2012, among Lions Gate Music Publishing LLC and Lions Gate Records, Inc. and Warner/Chappell and its affiliated entities (as the same may be amended, restated, supplemented, or otherwise modified from time to time);
(41) Liens securing the Senior Notes in connection with the escrow of the proceeds thereof; and
(42) Liens granted by LGEC or any Restricted Subsidiary on Capital Stock or other equity interests of any Unrestricted Subsidiary to secure Indebtedness whose incurrence is not prohibited hereunder.
“Permitted Parent Holdco” shall have the meaning given to such term in the definition of “Permitted Holder”.
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“Permitted Slate Financing” shall mean a financing arrangement in which two or more of the Borrower’s and/or Guarantor’s (as applicable) audio visual works (including motion pictures) are partially financed through an arrangement with a third party (“Permitted Financier”) who may be granted an interest in or share of the copyright, distribution rights, and/or certain financial proceeds from the subject audio visual works (collectively, “Permitted Financier Rights”) in connection with such financing arrangement, provided that (i) the only recourse of the Permitted Financier in connection with such arrangement against the Borrower or such Guarantor shall be limited to the Permitted Financier Rights, interests in related Production Accounts (if any), and customary representations and warranties given by the Borrower and/or Guarantor in connection with such arrangement and (ii) any such interest granted to the Permitted Financier in the Permitted Financier Rights and the other terms of such arrangement shall be reasonable and on an arm’s length basis and consistent with customary practice for transactions of such nature (as determined in good faith by LGEC). The Borrower and/or Guarantors shall be entitled to grant any of the Permitted Financier Rights to a Permitted Financier and if a Lien is granted to the Permitted Financier in connection with such financing arrangement, such Lien shall be subject to an Intercreditor Agreement entered into by the Administrative Agent (a) setting forth that: (x) the Permitted Financier shall maintain a first priority security interest over any of the Permitted Financier Rights and/or any related Production Account, and (y) the Administrative Agent’s rights, claims and security interests in any such Permitted Financier Rights and/or related Production Accounts with the Permitted Financier shall be subordinated to the rights, claims and security interests of the applicable Permitted Financier with respect to such Permitted Financier Rights and/or any related Production Accounts and (b) otherwise on terms that are no less favorable, taken as a whole, to the Lenders than the terms of similar intercreditor arrangements entered into by LGEC and its Subsidiaries consistent with past and customary practice.
“Permitted Slate Transaction” shall mean a transaction which the Borrower and/or the Guarantors may at their option consummate and which satisfies all of the following criteria:
(i) the borrower or the issuer in such transaction (each, a “ProdCo”) will be a new corporation, limited liability company or limited partnership formed solely for the purpose of a Permitted Slate Transaction;
(ii) each ProdCo will not engage in any business other than producing, acquiring or funding the print and advertising expenses of items of Product to be distributed by the Borrower or one or more Guarantors;
(iii) the Borrower or any Guarantor and the other third party investors or financiers in such transaction will acquire (1) shares, membership interests, limited partnership interests, or other Capital Stock in the applicable ProdCo and/or (2) revenue participations in the items of Product to be produced by such ProdCo;
(iv) the shares, membership interests, limited partnership interests, other Capital Stocks and/or revenue participations, in any ProdCo owned by the Borrower or one or more Guarantors will be Collateral but such ProdCo will not be a Guarantor;
(v) each ProdCo will acquire from the Borrower or the Guarantors ownership of items of Product;
(vi) each ProdCo will grant to the Borrower or any Guarantor distribution and exploitation rights in those items of Product acquired by such ProdCo;
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(vii) nothing in the documentation and/or structure for a Permitted Slate Transaction shall permit ProdCo to distribute the contractually mandated revenue generated thereby except on a pro rata or a basis which is greater than pro rata in favor of the Borrower or a Guarantor, other than a customary production fee or interest return on the amount invested (provided, however, that if this condition is not satisfied, such transaction will qualify as a Permitted Slate Transaction, but the Investment in such transaction will be included in and subject to the Slate Cap); and
(viii) ProdCo may not incur Indebtedness other than Subordinated Obligations (provided, however, that if this condition is not satisfied, such transaction will qualify as a Permitted Slate Transaction, but the Investment in such transaction will be included in and subject to the Slate Cap).
“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.
“Pilgrim JV” means Pilgrim Media Group, LLC.
“Plan” means at any time, an “employee benefit plan”, as defined in Section 3(3) of ERISA (other than a Multiemployer Plan), that any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to or has maintained, contributed to or had an obligation to contribute to at any time within the past seven (7) years and in respect of which any Credit Party or ERISA Affiliate is (or, if such Plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in section 3(5) of ERISA.
“Plan Asset Regulations” shall mean 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Pledge and Security Agreement” shall mean the Pledge and Security Agreement, dated as of December 8, 2016 (as amended, supplement, modified or amended and restated from time to time, including, without limitation, as amended pursuant to the Amendment No. 2), among the Credit Parties party thereto and the Administrative Agent.
“PPSA” shall mean unless otherwise provided in this Credit Agreement, the Personal Property Security Act B.C. 1996 chapter 359 as heretofore and hereafter amended and in effect in the Province of British Columbia, or, where the context requires, the legislation of the other provinces or territories of Canada (other than Québec) relating to security in personal property generally, including accounts receivable, as adopted by and in effect from time to time in such provinces or territories of Canada, as applicable.
“Preferred Stock,” as applied to the Capital Stock of any corporation, shall mean Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends upon liquidation, dissolution or winding up.
“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 to quote such rate, the highest per annum interest rate published by the Federal Reserve 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 Federal Reserve 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.
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“Pro Forma Basis” shall mean, as to any Person, for any events as described below that occur subsequent to the commencement of a period, such calculation as will give pro forma effect to such events as if such events occurred on the first day of such period (the “Reference Period”):
| (a) | the Transactions, any Asset Sale, any asset acquisition or Investment (or series of related Investments) permitted under this Credit Agreement, in each case, in excess of $25,000,000, any merger, amalgamation, consolidation (or any similar transaction or transactions) and any dividend, distribution or other similar payment, |
| (b) | any operational changes or restructurings of the business of LGEC or any of its Restricted Subsidiaries that LGEC or any of its Restricted Subsidiaries has determined to make and/or made during or subsequent to the Reference Period (including in connection with an Asset Sale or asset acquisition described in clause (a) above) and which are expected to have a continuing impact and are factually supportable, which would include cost savings resulting from head count reduction, closure of facilities and other operational changes and other cost savings in connection therewith, |
| (c) | the designation of any Subsidiary as an Unrestricted Subsidiary or of any Unrestricted Subsidiary as a Subsidiary, |
| (d) | any incurrence, repayment, repurchase or redemption of Indebtedness (or any issuance, repurchase or redemption of Disqualified Stock or preferred stock), other than fluctuations in revolving borrowings in the ordinary course of business (and not resulting from a transaction as described in clause (a) above); and |
| (e) | any other event, in each case that by the terms of the Fundamental Documents requires a test, financial ratio or covenant to be calculated on a “Pro Forma Basis”. |
Pro forma calculations made pursuant to this definition shall be determined in good faith by LGEC, and shall be made without duplication of amounts already included pursuant to the definition of “Adjusted EBITDA”. Any such pro forma calculation may include adjustments appropriate, in the reasonable good faith determination of LGEC to reflect operating expense reductions, other operating improvements, synergies or such operational changes or restructurings described in clause (b) of the immediately preceding paragraph reasonably expected to result from the applicable pro forma event in the 24 month period following the consummation of such pro forma event; provided that the aggregate amount of such adjustments described in clause (b) of the immediately preceding paragraph that do not either (X) comply with Article 11 of Regulation S-X for any Reference Period or (Y) relate to or arise from the Transactions (the “Non-S-X Adjustment Amount”) shall not, when aggregated with the amount of any increase to Adjusted EBITDA pursuant to clause (5) thereof for such Reference Period, exceed 25% of Adjusted EBITDA for such Reference Period.
If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date on which the relevant calculation is being made had been the applicable rate for the entire period (taking into account any hedging obligations applicable to such Indebtedness if such hedging obligation has a remaining term in excess of 12 months). Interest on a Finance Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by LGEC to be the rate of interest implicit in such Finance Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any
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Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period, except to the extent the outstanding borrowings thereunder are reasonably expected to increase as a result of any transactions described in clause (a) of the first paragraph of this definition of “Pro Forma Basis” which occurred during the respective period or thereafter and on or prior to the date of determination. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such applicable optional rate as LGEC may designate.
In the event that any financial ratio is being calculated for purposes of determining whether Indebtedness or any Lien relating thereto may be incurred, LGEC may elect, pursuant to an Officers’ Certificate thereof delivered to the Administrative Agent, to treat all or any portion of the commitment relating thereto as being incurred at the time of such commitment (such election to be consistently applied for all purposes under this Credit Agreement), in which case Indebtedness in an amount equal to such commitment shall be deemed to be outstanding for all financial calculations until such commitment is terminated, but any subsequent incurrence of Indebtedness under such commitment shall not be deemed, for purposes of this calculation, to be an incurrence at such subsequent time.
“ProdCo” shall have the meaning given to such term in the definition of “Permitted Slate Transaction”.
“Product” shall mean any motion picture, live event, film, music or video tape or other audio-visual work or episode thereof produced for theatrical, non-theatrical or television release or for exploitation in any other medium (including, without limitation, interactive media, multi-channel and digital platforms, stage plays, museum tours, theme parks or other location-based entertainment), in each 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 devised, with respect to which LGEC or any of its Restricted Subsidiaries (1) is the copyright owner or (2) acquires an equity interest or distribution or sales agency rights. The term “item of Product” shall include, without limitation, the scenario, screenplay or script upon which such item of Product 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 LGEC and the Restricted Subsidiaries, and all rights therein and thereto, of every kind and character.
“Production Account” shall have the meaning given to such term in the definition of “Excluded Assets”.
“Program Acquisition Guarantees” shall mean any commitment of LGEC or any Restricted Subsidiary to a producer or owner (including, for the avoidance of doubt, any Restricted Subsidiary, Unrestricted Subsidiary or third party) of Product in conjunction with the acquisition of Product, distribution rights or sales agency rights in Product by LGEC or such Restricted Subsidiary to the effect that (1) the gross revenues to be generated in the future from the exploitation of such Product or the net revenues to be received by such producer or owner from the exploitation of such Product are reasonably anticipated by LGEC to equal or exceed an amount specified in the acquisition agreement related to such Product or (2) otherwise requires payment by LGEC or such Restricted Subsidiary of a minimum amount specified in the acquisition agreement related to such Product regardless of actual performance of such Product.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
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“QFC” shall have the meaning given to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” shall have the meaning given to such term in Section 11.24.
“Qualified Plan” means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the Code.
“Qualified Receivables Financing” shall mean any Receivables Financing that meets the following conditions:
(1) LGEC shall have determined in good faith that such Qualified Receivables Financing (including financing terms, covenants, termination events and other provisions) is in the aggregate economically fair and reasonable to LGEC or the applicable Subsidiary, as the case may be;
(2) all sales of Receivables Financing Assets and related assets by LGEC or the applicable Subsidiary (other than a Receivables Subsidiary) either to the applicable Receivables Subsidiary or directly to the applicable third-party financing providers (as the case may be) are made at Fair Market Value (as determined in good faith by LGEC); and
(3) the financing terms, covenants, termination events and other provisions thereof shall be market terms (as determined in good faith by LGEC) and may include Standard Undertakings.
“Quotation Day” shall mean, with respect to any Eurodollar Loan for any Interest Period, two Business Days prior to the commencement of such Interest Period.
“Rating Agencies” shall mean each of S&P and Moody’s or if S&P or Moody’s or both of them shall not make a rating on the Loans publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Borrower which shall be substituted for S&P or Moody’s as the case may be.
“Ratio-Based Incremental Amount” shall have the meaning given to such term in Section 2.13(b).
“Receivables Financing” shall mean any transaction or series of transactions that may be entered into by LGEC or any of its Subsidiaries pursuant to which LGEC or any of its Subsidiaries may sell, assign, convey or otherwise transfer to any other Person, or may grant a security interest in, any Receivables Financing Assets (whether now existing or arising in the future) of LGEC or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such Receivables Financing Assets, all contracts and all guarantees or other obligations in respect of such Receivables Financing Assets, proceeds of such Receivables Financing Assets and other assets which are customarily sold, assigned, conveyed, or transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions or factoring transactions involving Receivables Financing Assets and any Hedging Obligations entered into by LGEC or any such Subsidiary in connection with such Receivables Financing Assets.
“Receivables Financing Assets” shall mean any of the following assets (or interests therein) from time to time originated, acquired or otherwise owned by LGEC or any Restricted Subsidiary or in which LGEC or any Restricted Subsidiary has any rights or interests, in each case, without regard to where such assets or interest are located: (1) receivables, payment obligations, installment contracts, and similar rights, whether currently existing or arising or estimated to arise in the future, and whether in the
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form of accounts, chattel paper, general intangibles, instruments or otherwise (including any drafts, bills of exchange or similar notes and instruments), (2) royalty and other similar payments made related to the use of trade names and other intellectual property, business support, training and other services, including without limitation licensing fees, lease payments and similar revenue streams relating to Product, (3) revenues related to distribution and merchandising of the products of LGEC and its Restricted Subsidiaries, (4) intellectual property rights relating to the generation of any of the foregoing types of assets, and (5) any other assets and property to the extent customarily included in securitization transactions or factoring transactions of the relevant type in the applicable jurisdictions (as determined by LGEC in good faith).
“Receivables Financing Fees” shall mean distributions or payments made directly or by means of discounts with respect to any participation interests issued or sold in connection with, and all other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Financing.
“Receivables Financing Repurchase Obligation” shall mean any obligation of a seller of Receivables Financing Assets in a Qualified Receivables financing to repurchase Receivables Financing Assets arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a Receivables Financing Asset or portion thereof becoming subject to any asserted defense, dispute, dilution, off-set or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller.
“Receivables Subsidiary” shall mean a Restricted Subsidiary that is a Wholly-Owned Subsidiary (or another Person formed for the purposes of engaging in Qualified Receivables Financing with LGEC or any of its Subsidiaries in which LGEC or any of its Subsidiaries makes an Investment and to which LGEC or any of its Subsidiaries transfers Receivables Financing Assets and related assets) which engages in no activities other than in connection with the financing of Receivables Financing Assets of LGEC and its Subsidiaries, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to such business and:
(1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (A) is guaranteed by LGEC or any other Restricted Subsidiary (excluding guarantees of obligations (other than the principal of and interest on, Indebtedness) pursuant to Standard Undertakings), (B) is recourse to or obligates LGEC or any other Restricted Subsidiary in any way other than pursuant to Standard Undertakings, or (C) subjects any property or asset of LGEC or any other Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Undertakings;
(2) with which neither LGEC nor any Restricted Subsidiary has any material contract, agreement, arrangement or understanding other than on terms which LGEC reasonably believes to be no less favorable to LGEC or such Restricted Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of LGEC (other than pursuant to Standard Undertakings); and
(3) to which neither LGEC nor any Restricted Subsidiary has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results (other than pursuant to Standard Undertakings).
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such Benchmark is Eurodollar Base RateTerm
SOFR,
11:005:00
a.m.
(LondonChicago
time) on the day that is two London banking daysU.S. Government Securities Business Days preceding the date of such
setting, and
or (2) if such Benchmark is not Eurodollar Base RateTerm SOFR, the time determined by the Administrative Agent in its
reasonable discretion.
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“Refinancing Amendment” shall have the meaning given to such term in Section 2.15.
“Refinancing Effective Date” shall have the meaning given to such term in Section 2.15(a).
“Refinancing Indebtedness” shall mean Indebtedness that is Incurred in exchange for, or to refund, refinance, replace, exchange, renew, repay or extend (including pursuant to any defeasance or discharge mechanism) (collectively, to “refinance,” “refinances” and “refinanced” each having a correlative meaning) any Indebtedness being refinanced (or previous refinancing thereof), provided, however, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier than the earlier of (a) the Stated Maturity of the Indebtedness being refinanced or (b) 91 days later than the latest Maturity Date;
(2) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the lesser of (a) the remaining Average Life of the Indebtedness being refinanced or (b) 91 days after the remaining Average Life of the class of Term Loans then outstanding with the greatest remaining Average Life;
(3) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced (plus, without duplication, interest or premiums required by the instruments governing such existing Indebtedness, any tender premiums with respect thereto, and fees and expenses Incurred in connection therewith);
(4) if the Indebtedness being refinanced is subordinated in right of payment to the Loans or the Guarantees under Article 9, such Refinancing Indebtedness is subordinated in right of payment to the Loans or the Guarantees under Article 9 on terms in the aggregate not materially less favorable to the Lenders than those contained in the documentation governing the Indebtedness being refinanced (as determined by LGEC in good faith); and
(5) Refinancing Indebtedness shall not include Indebtedness of a Non-Guarantor Subsidiary that refinances Indebtedness of the Borrower or a Guarantor.
“Refinancing Notes” shall mean one or more series of secured or unsecured notes issued by a Credit Party (which, if secured, are secured (x) on a pari passu basis with the Facilities or (y) on a junior basis to the Facilities) in each case issued to refinance outstanding Indebtedness of the Borrower under any one or more Classes of Term Loans; provided that:
(a) if such Refinancing Notes shall be secured by a security interest in the Collateral, then such Refinancing Notes shall be issued subject to an Intercreditor Agreement;
(b) no Refinancing Notes shall mature prior to the Final Maturity Date, or have an Average Life that is less than the Average Life of the Class of Term Loans being refinanced;
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(c) no Refinancing Notes shall be subject to any amortization prior to the final maturity thereof, or be subject to any mandatory redemption or prepayment provisions or rights (except customary assets sale or change of control provisions);
(d) such Refinancing Notes shall have pricing (including interest, fees and premiums), optional prepayment and redemption terms as may be agreed to by the Borrower and the lenders party thereto;
(e) the other terms and conditions (excluding those referenced in clauses (b) and (d) above) of such Refinancing Notes shall be substantially identical to, or (taken as a whole) no less favorable (as reasonably determined by the Borrower) to the Borrower than, those applicable to the Term Loans being refinanced or replaced (except for covenants or other provisions applicable only to periods after the latest Maturity Date of the relevant Term Loans existing at the time of such refinancing or replacement);
(f) the Refinancing Notes may not have guarantors, obligors or security in any case more extensive than that which applied to the applicable Term Loans being so refinanced and the borrower of the Refinancing Notes shall be the Borrower with respect to the Indebtedness being refinanced; and
(g) the Net Cash Proceeds of such Refinancing Notes shall be applied, substantially concurrently with the incurrence thereof, to the pro rata prepayment of outstanding Term Loans under the applicable Class of Term Loans being so refinanced in accordance with Section 2.8(c).
“Refinancing Term Loans” shall have the meaning given to such term in Section 2.15(a).
“Register” shall have the meaning given such term in Section 11.3(c).
“Regulation D” shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
“Regulation S-X” shall mean Regulation S-X (and the interpretations of the SEC) under the Securities Act.
“Regulations T, U and X” shall mean such regulation of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
“Reimbursement Obligations” shall have the meaning given to such term in Section 2.3(c).
“Reinvested Deferred Amount” shall have the meaning given to such term in Section 2.8(c).
“Rejecting Lender” shall have the meaning given to such term in Section 2.8(c).
“Related Business” shall mean the (1) development, production, distribution, acquisition or disposition of intellectual properties including films, live event, television, interactive media, music and video product or any other audio-visual work and/or rights therein or thereto, (2) operation of physical production facilities, (3) acquisition and operation of television channels and internet or digital distribution platforms and (4) any business which is related, ancillary or complementary to any of the foregoing activities, including, without limitation, the acquisition and operation of theme parks, museum tours, stage plays, or other live or location-based entertainment.
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“Related Parties” shall mean, with respect to any Person, such Person’s affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s affiliates.
“Relevant Existing Facility” shall have the meaning given to such term in Section 2.13(a).
“Relevant Taxing Jurisdiction” shall have the meaning given to such term in the definition of “Excluded Taxes”.
“Replacement Revolving Credit Commitments” shall have the meaning given to such term in Section 2.15(c).
“Replacement Revolving Credit Facility Effective Date” shall have the meaning given to such term in Section 2.15(c).
“Replacement Revolving Facility” shall have the meaning given to such term in Section 2.15(c).
“Replication Advances” shall mean advances incurred pursuant to DVD replication, tape duplication or film processing transactions which require repayment if certain volume commitments are not fulfilled, provided that repayment of such advances (1) may not be accelerated or be required to be paid on demand unless such repayment obligation is completely unsecured, (2) do not require cash payments of interest and (3) are on terms at least as favorable as LGEC’s or Restricted Subsidiary’s current replication deals; provided that, the granting of a Lien in respect of the related assets, which is junior in right to the Lien on such assets which secures the Loans, to secure any such Replication Advances will not be considered to be less favorable to LGEC.
“Repricing Transaction” means each of (a) the prepayment, repayment, refinancing, substitution or replacement of all or a portion of the Term B Loans with the proceeds of any term loans incurred or guaranteed by the Borrower or any Guarantor incurred for the primary purpose of reducing the effective yield (with the comparative determinations to be made by the Administrative Agent in a manner consistent with generally accepted financial practices, and in any event consistent with Section 2.13(a)) to less than the effective yield (as determined by the Administrative Agent on the same basis) applicable to such Term B Loans so prepaid, repaid, refinanced, substituted or replaced and (b) any amendment, waiver or other modification to, or consent under, this Credit Agreement incurred for the primary purpose of reducing the effective yield (to be determined by the Administrative Agent on the same basis as set forth in preceding clause (a)) of the Term B Loans; provided that in no event shall any such prepayment, repayment, refinancing, substitution, replacement, amendment, waiver, modification or consent in connection with a Change of Control or with any acquisition or investment which is not permitted by the terms of the Credit Agreement, constitute a Repricing Transaction. Any determination by the Administrative Agent of any effective interest rate as contemplated by preceding clauses (a) and (b) shall be conclusive and binding on all Lenders, and the Administrative Agent shall have no liability to any Person with respect to such determination.
“Required Lenders” shall mean, as of the date of determination thereof, Lenders whose outstanding Loans and interests in Letters of Credit and Unused Revolving Credit Commitments constitute more than 50% of the sum of the total outstanding Loans, interests in Letters of Credit and Unused Revolving Credit Commitments; provided that the Revolving Credit Commitment of, and the portion of the outstanding Loans, interests in Letters of Credit and Unused Revolving Credit Commitments held or deemed held by, any Defaulting Lender (so long as such Lender is a Defaulting Lender) or LGEC or any of LGEC’s Affiliates shall be excluded for purposes of making a determination of Required Lenders.
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“Required RC Lenders” means, at any time, Lenders having Revolving Exposures and Unused Revolving Credit Commitments representing more than 50% of the sum of the total Revolving Exposures and Unused Revolving Credit Commitments at such time; provided that the Revolving Exposures and Unused Revolving Credit Commitments held or deemed held by any Defaulting Lender (so long as such Lender is a Defaulting Lender) or LGEC or any of LGEC’s Affiliates shall be excluded for purposes of making a determination of Required RC Lenders.
“Required RC/TLA Lenders” means, at any time, Lenders having Revolving Exposures, Term A Loans and unused Revolving Credit Commitments in respect of the foregoing representing more than 50% of the sum of the total Revolving Exposures, outstanding Term A Loans and unused Revolving Credit Commitments in respect of the foregoing at such time; provided that the Revolving Exposures, Term A Loans and unused Revolving Credit Commitments in respect of the foregoing held or deemed held by any Defaulting Lender (so long as such Lender is a Defaulting Lender) or LGEC or any of LGEC’s Affiliates shall be excluded for purposes of making a determination of Required RC/TLA Lenders.
“Resignation Effective Date” shall have the meaning given to such term in Section 10.10.
“Resolution Authority” shall mean an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” shall mean, when used with respect to the Administrative Agent, any officer within the corporate trust department of the Administrative Agent having direct responsibility for the administration of this Credit Agreement, or any other officer to whom any corporate trust matter is referred because of such officer’s knowledge of and familiarity with the particular subject.
“Restatement Date” shall mean the date on which the conditions precedent set forth in Section 5.1(a) hereof have been satisfied or waived, which date is March 22, 2018.
“Restricted Asset Sale Amount” shall have the meaning given to such term in Section 2.8(a).
“Restricted ECF Amount” shall have the meaning given to such term in Section 2.8(c).
“Restricted Investment” shall mean any Investment other than a Permitted Investment.
“Restricted Payment” shall have the meaning given to such term in Section 7.2(a).
“Restricted Subsidiary” shall mean any Subsidiary of LGEC other than an Unrestricted Subsidiary, but shall include the New Borrower.
“Revolver Percentage” means, for each Revolving Lender, the percentage of the aggregate Revolving Credit Commitments represented by such Revolving Lender’s Revolving Credit Commitment or, if the Revolving Credit Commitments have been terminated, the percentage held by such Revolving Lender (including through participation interests in Reimbursement Obligations) of the aggregate principal amount of all Revolving Loans and L/C Obligations then outstanding.
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“Revolving Credit Commitment” shall mean, as to any Lender, the obligation of such Lender to make Revolving Loans and to participate in Letters of Credit issued for the account of the Borrower hereunder in an aggregate principal or face amount at any one time outstanding not to exceed (a) with respect to each Lender that is a Revolving Lender prior to the Amendment No. 4 Effective Date, such Lender’s “Revolving Credit Commitment” as defined in the Credit Agreement as in effect from time to time prior to such date and (b) with respect to each Lender that is a Revolving Lender on and after the Amendment No. 4 Effective Date, the sum of such Lender’s 2023 Revolving Credit Commitments and 2026 Revolving Credit Commitments, as the same may be reduced, increased or otherwise modified at any time or from time to time pursuant to the terms hereof. The Borrower and the Revolving Lenders acknowledge and agree that the Revolving Credit Commitments of the Revolving Lenders aggregate $1,500,000,000 on the Amendment No. 4 Effective Date.
“Revolving Credit Commitment Increase” shall have the meaning given to such term in Section 2.13(a).
“Revolving Credit Termination Date” shall mean the earliest of (a) (x) with respect to the 2023 Revolving Facility, the 2023 Revolving Credit Termination Date and (y) with respect to the 2026 Revolving Facility, the 2026 Revolving Credit Termination Date, (b) such earlier date on which the Revolving Credit Commitments are terminated in whole pursuant to Section 2.10, Section 8.2 or Section 8.3 hereof and (c) with respect to any Revolving Lender that has extended its Revolving Credit Commitment pursuant to an Extension consummated under Section 2.14 and with respect to any Issuing Bank that has consented to such extension, the extended maturity date of such Revolving Lender’s Revolving Credit Commitment.
“Revolving Exposure” shall mean 2023 Revolving Exposure and 2026 Revolving Exposure.
“Revolving Facility” shall mean the 2023 Revolving Facility and the 2026 Revolving Facility.
“Revolving Lender” shall mean each Lender that has a Revolving Credit Commitment or that holds Revolving Loans.
“Revolving Loans” shall mean 2023 Revolving Loans and 2026 Revolving Loans.
“Revolving Note” shall have the meaning given to such term in Section 2.11(d).
“S&P” shall mean Standard & Poor’s Financial Services, LLC and any successor-in-interest thereto.
“Sale/Leaseback Transaction” shall mean an arrangement relating to property now owned or hereafter acquired whereby LGEC or a Restricted Subsidiary transfers such property to a Person (other than LGEC or any of its Restricted Subsidiaries) and LGEC or a Restricted Subsidiary leases it from such Person.
“Screen Rate” shall have the meaning given to such term in the definition of “Eurodollar Base Rate”.
“SEC” shall mean the U.S. Securities and Exchange Commission.
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“Secured Funded Indebtedness” shall mean Consolidated Debt of LGEC and its Restricted Subsidiaries that is secured by a Lien on any asset of LGEC or any Restricted Subsidiary (excluding (i) Liens that are junior in priority to the Liens securing the Loans and the Guarantees under Article 9 and (ii) Permitted Liens other than (a) Permitted Liens incurred pursuant to clauses (1), (10), (13), (15), (25) or (38) of the definition thereof (to the extent any such Lien is not, pursuant to an Intercreditor Agreement, subordinated to the Liens securing the Obligations) and (b) Permitted Liens with respect to any permitted Refinancing Indebtedness or Refinancing Notes with respect to Indebtedness secured by Liens described in clause (a) (to the extent any such Lien is not, pursuant to an Intercreditor Agreement, subordinated in right of payment to the Obligations)).
“Secured Parties” shall have the meaning given to such term in the Pledge and Security Agreement.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
“Senior Notes” means the 5.500% Senior Notes due 2029 of LGEC (as successor issuer) initially issued in an aggregate principal amount of $1,000,000,000 pursuant to the Senior Notes Indenture.
“Senior Notes Indenture” means the Indenture, dated as of April 1, 2021, between Lions Gate Capital Holdings LLC, as issuer, Deutsche Bank Trust Company Americas, as trustee, and the other parties thereto, under which the Senior Notes were issued.
“Services Company” shall mean a corporation (which may or may not be a subsidiary of LGEC) having a permanent establishment in Québec which provides production services pursuant to a production services agreement between MQP and such Services Company.
“SGF” shall mean SGF Entertainment Inc., a subsidiary of the Société Générale Financement du Québec and its successors.
“SGF Co-Financing Arrangement” shall mean the co-financing arrangement by and among MQP, LGEC and SGF pursuant to which, among other things, (i) MQP agreed to sell revenue participation interests in certain motion pictures and television productions to SGF pursuant to that certain Revenue Participation Purchase Agreement among MQP, SGF, LGF and LGT dated as of July 25, 2007, (ii) MQP licensed certain motion pictures to LGF pursuant to that certain Master Distribution Agreement (Film Productions) between MQP and LGF, dated as of July 25, 2007 and (iii) MQP agreed to license certain television productions to LGT pursuant to that certain Master Distribution Agreement (Television Productions) between MQP and LGT, dated as of July 25, 2007.
“Significant Subsidiary” shall mean any Restricted Subsidiary that would be a “Significant Subsidiary” of LGEC within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.
“Slate Cap” shall mean, at any time, the greater of (a) $300,000,000 (plus any returns of capital actually received by the Borrower and the Guarantors in respect of Investments made after the Original Closing Date by them in all Permitted Slate Transactions) or (b) 3.5% of Total Assets at such time.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
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“SOFR Administrator” means the NYFRB (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the NYFRB’s website, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“Solvency Certificate” means the Solvency Certificate delivered pursuant to Amendment No. 2, substantially in the form of Exhibit E to this Credit Agreement.
“Spanish-language OTT” means LGEC’s current Spanish-language subscription video on demand service (as such service may continue to organically evolve) or other related service operated by LGEC, its Subsidiaries or its designees.
“Special Purpose Producer” shall mean a special purpose corporation or limited liability company formed solely for the purpose of producing Product or any audio-visual product or live or location-based entertainment which, in each case, will be purchased or distributed in whole or in part by LGEC or any of its Restricted Subsidiaries.
“Specified Acquisition” shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any line of business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person (other than a Person that is a Restricted Subsidiary), but, at LGEC’s option, including acquisitions of Capital Stock increasing the ownership of LGEC or a Subsidiary in an existing Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Restricted Subsidiary); provided that LGEC or a Restricted Subsidiary is the surviving entity or the surviving entity becomes a Restricted Subsidiary.
“Specified Cash Management Agreement” shall mean any agreement providing for treasury, depositary, purchasing card or cash management services, including in connection with any automated clearing house transfers of funds or any similar transactions owing by any Credit Party to any entity that was a Lender, the Administrative Agent or an Affiliate of a Lender or the Administrative Agent at the time such relevant agreement was entered into or, if later, as of the Restatement Date (or, if later, who becomes a Lender or an Affiliate of a Lender within 30 days after the Restatement Date), provided that LGEC may in its sole discretion designate, by delivering a written designation by LGEC and such counterparty to the Administrative Agent, any agreement by a Restricted Subsidiary which is not a Credit Party which would constitute a “Specified Cash Management Agreement” if such Subsidiary were a Credit Party as (a) constituting a Specified Cash Management Agreement or (b) only partially constituting a Specified Cash Management Agreement.
“Specified Equity Contribution” shall have the meaning given to such term in Section 8.6.
“Specified Swap Agreement” shall mean any Interest Rate Agreement or Currency Agreement owing by any Credit Party to any entity that was a Lender, the Administrative Agent or an Affiliate of a Lender or the Administrative Agent at the time such relevant agreement was entered into or, if later, as of the Restatement Date (or, if later, who becomes a Lender or an Affiliate of a Lender within 30 days after the Restatement Date), provided that LGEC may in its sole discretion designate, by delivering a written designation by LGEC and such counterparty to the Administrative Agent, any agreement by a Restricted Subsidiary which is not a Credit Party which would constitute a “Specified
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Swap Agreement” if such Subsidiary were a Credit Party as (a) constituting a Specified Swap Agreement or (b) only partially constituting a Specified Swap Agreement. Notwithstanding the foregoing, for all purposes of the Fundamental Documents, any Guarantee of, or grant of any Lien to secure, any obligations in respect of a Specified Swap Agreement by a Guarantor shall not include any Excluded Swap Obligations with respect to such Guarantors.
“ Specified
Time” shall mean 11:00 a.m., London time.
“Springing Maturity Date” shall have the meaning given to such term in the definition of 2026 Revolving Credit Termination Date.
“Standard Undertakings” shall mean representations, warranties, covenants, indemnities, reimbursement obligations, performance undertakings, guarantees of performance, and similar customary payment obligations entered into by LGEC or any of its Subsidiaries, whether joint and several or otherwise, which LGEC has determined in good faith to be customary in a Receivables Financing including, without limitation, those relating to the servicing of the assets of a Receivables Subsidiary, it being understood that any Receivables Financing Repurchase Obligation shall be deemed to be a Standard Undertaking.
“Stated Maturity” shall mean, with respect to any security, the date specified in the agreement governing or certificate relating to such Indebtedness as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision, but shall not include any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof.
“Submitting Party” shall have the meaning given to such term in Section 11.12.
“Subordinated Obligation” shall mean any Indebtedness of the Borrower or any Guarantor (whether outstanding on the Original Closing Date or thereafter Incurred) that is subordinated or junior in right of payment to the Loans and the Guarantees under Article 9 pursuant to a written agreement. For the avoidance of doubt, such determination will be made without reference to the presence or absence of security in respect of any such Indebtedness.
“Subsidiary” of any Person shall mean (x) (1) any corporation, association or other business entity (other than a partnership, joint venture, limited liability company, unlimited liability company or similar entity) of which more than 50% of the total ordinary voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof (or Persons performing similar functions) or (2) any partnership, joint venture, limited liability company, unlimited liability company or similar entity of which more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, is, in the case of clauses (1) and (2), at the time owned or controlled, directly or indirectly, by (a) such Person, (b) such Person and one or more Subsidiaries of such Person or (c) one or more Subsidiaries of such Person, and (y) any corporation, association or other business entity (including any partnership, joint venture, limited liability company, unlimited liability company or similar entity) (1) as to which such Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies thereof, whether through the ownership of voting securities, by contract or otherwise and (2) which is consolidated with such Person pursuant to GAAP. Unless otherwise specified herein, each reference to a Subsidiary will refer to a Subsidiary of LGEC.
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“Successor Guarantor” shall have the meaning given to such term in Section 7.6(c).
“Successor Person” shall have the meaning given to such term in Section 7.6(a).
“Supported QFC” shall have the meaning given to such term in Section 11.24.
“Target” shall mean Starz, a Delaware corporation.
“Term A Facility” shall mean the credit facility for the Term A Loans described in Section 2.1(a).
“Term A Lender” shall mean each Lender that holds all or a portion of the Term A Facility.
“Term A Loan” shall have the meaning given to such term in Section 2.1(a).
“Term A Loan Commitment” shall mean Existing Term A Loan Commitments.
“Term A Loan Percentage” shall mean, for any Term A Lender, the percentage held by such Term A Lender of the aggregate principal amount of all Term A Loans then outstanding.
“Term A Note” shall have the meaning given to such term in Section 2.11(d).
“Term A Termination Date” shall mean, (a) with respect to the 2023 Term A Loans, the 2023 Term A Termination Date, and (b) with respect to the 2026 Term A Loans, the 2026 Term A Termination Date.
“Term B Facility” shall mean the credit facility for the Term B Loans described in Section 2.1(b).
“Term B Lender” means any Lender holding all or a portion of the Term B Facility.
“Term B Loan” shall have the meaning given to such term in Section 2.1(b).
“Term B Loan Commitment” shall mean, as to any Lender, the obligation of such Lender to make Term B Loans hereunder in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on Schedule 1.1 attached hereto and made a part hereof, as the same may be reduced pursuant to Section 2.10. The Borrower and the Term B Lenders acknowledge and agree that the Term B Loan Commitments of the Term B Lenders aggregate $1,250,000,000 as of the Restatement Date.
“Term B Loan Percentage” shall mean, for any Term B Lender, the percentage held by such Term B Lender of the aggregate principal amount of all Term B Loans then outstanding.
“Term B Note” shall have the meaning given to such term in Section 2.11(d).
“Term B Termination Date” shall have the meaning given to such term in Section 2.7(b).
“Term Benchmark” 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 Adjusted Term SOFR.
“Term Commitment Increase” shall have the meaning given to such term in Section 2.13(a).
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“Term Facilities” shall mean, collectively, the Term A Facility and the Term B Facility.
“Term Loans” shall mean, collectively, the Term A Loans and the Term B Loans.
“Term Loan Percentage” means any or all of the Term A Loan Percentage or the Term B Loan Percentage, as the context requires.
“Term SOFR” means, with respect to any Term Benchmark Borrowing and for any tenor comparable to the applicable Interest Period, the Term SOFR Reference Rate at approximately 5:00 a.m., Chicago time, two U.S. Government Securities Business Days prior to the commencement of such tenor comparable to the applicable Interest Period, as such rate is published by the CME Term SOFR Administrator.
“Term SOFR Determination Day” has the meaning assigned to it under the definition of Term SOFR Reference Rate.
“Term SOFR Reference Rate” means, for any day and time (such day, the “Term SOFR Determination Day”), with respect to any Term Benchmark Borrowing denominated in Dollars and for any tenor comparable to the applicable Interest Period, the rate per annum published by the CME Term SOFR Administrator and identified by the Administrative Agent as the forward-looking term rate based on SOFR. If by 5:00 pm (New York City time) on such Term SOFR Determination Day, the “Term SOFR Reference Rate” for the applicable tenor has not been published by the CME Term SOFR Administrator and the circumstances set forth in Section 3.1 with respect to Term SOFR has not occurred, then, so long as such day is otherwise a U.S. Government Securities Business Day, the Term SOFR Reference Rate for such Term SOFR Determination Day will be the Term SOFR Reference Rate as published in respect of the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate was published by the CME Term SOFR Administrator, so long as such first preceding U.S. Government Securities Business Day is not more than five (5) U.S. Government Securities Business Days prior to such Term SOFR Determination Day.
“Termination Date” shall mean the date on which (a) all Revolving Credit Commitments shall have been terminated, (b) the principal of and interest on each Loan, all fees and all other expenses or amounts payable under any Fundamental Document shall have been paid in full in cash (other than in respect of contingent indemnification and expense reimbursement claims not then due), and (c) all Letters of Credit (other than those subject to an L/C Backstop) have been cancelled or have expired and all amounts drawn or paid thereunder have been reimbursed in full in cash.
“Test Period” means, on any date of determination, the period of four consecutive fiscal quarters of LGEC most recently ended for which financial statements of LGEC have been (or were required to be) delivered by Section 6.1(a) or 6.1(b) of this Credit Agreement.
“Title IV Plan” shall mean a Pension Plan (other than a Multiemployer Plan) that is covered by Title IV of ERISA or Section 412 of the Code that is maintained or contributed to by any Credit Party, or any ERISA Affiliate, or with respect to which any Credit Party could otherwise have any liability.
“Total Assets” shall mean the total assets of LGEC and its Restricted Subsidiaries on a consolidated basis, as shown on the most recent balance sheet of LGEC.
“Trademark Security Agreement” shall have the meaning given to such term in the Pledge and Security Agreement.
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“Trademark Security Agreement Supplement” shall have the meaning given to such term in the Pledge and Security Agreement.
“tranche” shall have the meaning given to such term in Section 2.14(a).
“Transaction Expenses” shall mean any fees, costs or expenses incurred or paid by LGEC or its Restricted Subsidiaries in connection with the Transactions.
“Transactions” shall mean, collectively, (a) the
transactions contemplated by this Credit Agreement and the other Fundamental Documents and the borrowing of Loans hereunder (including, for the avoidance of doubt, the transactions contemplated by Amendment No. 2, Amendment No. 3, Amendment No. 4 and Amendment No. 45), (b) the Acquisition and the transactions to occur pursuant to or in connection with the Merger Agreement, (c) the issue and sale of the Senior Notes pursuant to the Senior Notes Indenture, and
(d) the payment of Transaction Expenses.
“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.
“UK Financial Institutions” shall mean any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” shall mean the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unrestricted Cash” means, as of any date, all cash and Cash Equivalents owned by LGEC or any Restricted Subsidiary which would not appear as “restricted” on a consolidated balance sheet of LGEC as of such date. For purposes of determining the ability under this Credit Agreement to Incur any Incremental Facility, Incremental Equivalent Debt and any other Indebtedness permitted to be incurred under Section 7.1, the proceeds of any such Incurred Indebtedness shall be disregarded in determining Unrestricted Cash when calculating the Net First Lien Leverage Ratio and/or the Net Total Leverage Ratio as of such date.
“Unrestricted Subsidiary” shall mean:
(1) any Subsidiary of LGEC that at the time of determination shall be designated an Unrestricted Subsidiary by the Borrower or LGEC in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Borrower or LGEC may designate any Subsidiary of LGEC (other than the Borrower, but including any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger, amalgamation or consolidation or Investment therein) to be an Unrestricted Subsidiary only if:
(1) such Subsidiary (or any of its Subsidiaries) does not own any Capital Stock of any Subsidiary which, following such designation, will remain a Restricted Subsidiary, or hold any Lien on any property of LGEC or any Subsidiary which, following such designation, will remain a Restricted Subsidiary of LGEC;
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(2) any Guarantee by LGEC or any Restricted Subsidiary of any Indebtedness of such Subsidiary (or any of its Subsidiaries) shall be deemed an “Incurrence” of such Indebtedness and an “Investment” by LGEC or such Restricted Subsidiary and complies with Section 7.1;
(3) such designation and the Investment of LGEC in such Subsidiary complies with Section 7.2; and
(4) such Subsidiary, either alone or in the aggregate with all other Unrestricted Subsidiaries, does not operate, directly or indirectly, all or substantially all of the business of LGEC and its Subsidiaries.
Any such designation by the Borrower or LGEC shall be evidenced to the Administrative Agent by filing with the Administrative Agent an Officers’ Certificate giving effect to such designation and certifying that such designation complies with the foregoing conditions.
An Officer of the Borrower or LGEC may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that immediately after giving effect to such designation, (X) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and (Y) LGEC shall be in compliance with the financial ratios set forth in Section 7.9(a) and (b) for the relevant fiscal quarter on a Pro Forma Basis.
For the avoidance of doubt, LGEC shall be permitted to designate any Subsidiary a Restricted Subsidiary or Unrestricted Subsidiary, in each case, in accordance with the terms of this Credit Agreement, notwithstanding the designation of such Subsidiary under any other agreement, provided, that no Subsidiary may be designated as an Unrestricted Subsidiary or subsequently re-designated as a Restricted Subsidiary unless it is simultaneously so designated or re-designated, as applicable, under the Senior Notes (to the extent outstanding).
Notwithstanding the foregoing, as of the Restatement Date, the Initial Unrestricted Subsidiaries and each of their Subsidiaries shall be Unrestricted Subsidiaries, as will any other Unrestricted Subsidiary which was designated as an Unrestricted Subsidiary by LGEC pursuant to the Credit Agreement prior to the Restatement Date.
“Unused Revolving Credit Commitments” means, at any time, the difference between the Revolving Credit Commitments then in effect and the aggregate outstanding principal amount of Revolving Loans and L/C Obligations.
“USA Patriot Act” shall mean the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) as amended, and the rules and regulations thereunder and any successors thereto.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Subsidiary” shall mean any Subsidiary organized under the laws of the United States of America or any state thereof or the District of Columbia.
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“U.S. Special Resolution Regime” shall have the meaning given to such term in Section 11.24.
“Voting Stock” of a Person shall mean all classes of Capital Stock of such Person then outstanding and normally entitled to vote in the election of directors, managers or trustees, as applicable, of such Person.
“Wholly-Owned Subsidiary” shall mean a Restricted Subsidiary, all of the Capital Stock of which (other than directors’ qualifying shares) is owned by LGEC or another Wholly-Owned Subsidiary and including, for purposes of Section 6.13(b) and clause (b) of the definition of “Excluded Subsidiary”, a Restricted Subsidiary all of the Capital Stock of which (other than directors’ qualifying shares) is owned, directly or indirectly, by the Borrower.
“Withdrawal Liability” shall mean any liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are used in sections 4203 and 4205, respectively, of ERISA.
“Write-Down and Conversion Powers” shall mean, (a) 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, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
(b) Interpretation. For the purposes hereof unless the context otherwise requires, all Section references herein shall be deemed to correspond with Sections herein, the above terms shall have the meanings indicated, all accounting terms not otherwise defined herein shall have the respective meanings accorded to them under GAAP and all terms defined in the UCC and not otherwise defined herein shall have the respective meanings accorded to them therein. For purposes hereof, all references herein to “the date hereof” shall mean December 8, 2016. Wherever herein any determination may be made for all purposes of this Credit Agreement by the Borrower or an Officer thereof, such determination may also be made, for purposes of this Credit Agreement, by LGEC or an Officer thereof; and wherever any determination may be made for purposes of this Credit Agreement by LGEC or an Officer thereof, such determination may also be made, for all purposes of this Credit Agreement, by the Borrower or an Officer thereof.
(c) GAAP; Change in Accounting Principles. Except as otherwise expressly provided herein (including, for the avoidance of doubt, the proviso in the definition of “Finance Lease Obligations”), all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, that if at any time, any change in GAAP would affect the computation of any financial ratio or requirement in the Fundamental Documents and LGEC notifies the Administrative Agent that LGEC requests an amendment (or if the Administrative Agent notifies LGEC that the Required Lenders request an amendment), the Administrative Agent, the Lenders and LGEC shall, at no cost to LGEC, negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such financial ratio or requirement shall be interpreted on the basis of GAAP as in effect and
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applied immediately before such change shall have become effective until such provision is amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of LGEC or any Subsidiary at “fair value”, as defined therein, (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof and (iii) for the avoidance of doubt, except as provided in the definition of “Consolidated Net Income”, without giving effect to the financial condition, results and performance of the Unrestricted Subsidiaries.
(d) Limited Condition Transactions.
(i) In connection with any action being taken in connection with a Limited Condition Transaction, for purposes of determining compliance with any provision of this Credit Agreement which requires that no Default or Event of Default, as applicable, has occurred, is continuing or would result from any such action, as applicable, such condition shall, at the option of the Borrower, be deemed satisfied, so long as no Default or Event of Default, as applicable, exists on the date (I) the definitive agreement for such Limited Condition Transaction is entered into, (II) irrevocable notice of redemption, purchase, repurchase, defeasance, satisfaction and discharge or repayment of Indebtedness, Disqualified Stock or Preferred Stock is given or (III) solely in connection with an acquisition to which the United Kingdom City Code on Takeovers and Mergers applies, the date on which a “Rule 2.7 announcement” of a firm intention to make an offer is published on a regulatory information service in respect of a target of a Limited Condition Transaction. For the avoidance of doubt, if the Borrower has exercised its option under the immediately preceding sentence, and any Default or Event of Default, as applicable, occurs following the date the (x) definitive agreement for the applicable Limited Condition Transaction is entered into, (y) irrevocable notice of redemption, purchase, repurchase, defeasance, satisfaction and discharge or repayment of Indebtedness, Disqualified Stock or Preferred Stock is given or (z) solely in connection with an acquisition to which the United Kingdom City Code on Takeovers and Mergers applies, the date on which a “Rule 2.7 announcement” of a firm intention to make an offer is published on a regulatory information service in respect of a target of a Limited Condition Transaction, and, in each case, prior to the consummation of such Limited Condition Transaction, any such Default or Event of Default, as applicable, shall be deemed to not have occurred or be continuing for purposes of determining whether any action being taken in connection with such Limited Condition Transaction is permitted hereunder.
(ii) In connection with any action being taken in connection with a Limited Condition Transaction, for purposes of (I) determining compliance with any provision of this Credit Agreement which requires the calculation of the Net First Lien Leverage Ratio, the Net Total Leverage Ratio or the Interest Coverage Ratio or (II) testing baskets set forth herein (including baskets measured as a percentage of Total Assets or Adjusted EBITDA), in each case, at the option of the Borrower (the Borrower’s election to exercise such option in connection with any Limited Condition Transaction, an “LCT Election”), the date of determination of whether any such action is permitted hereunder, shall be deemed to be the date (x) the definitive agreement for such Limited Condition Transaction is entered into, (y) irrevocable notice of redemption, purchase, repurchase, defeasance, satisfaction and discharge or repayment of Indebtedness, Disqualified Stock or Preferred Stock is given or (z) solely in connection with an acquisition to which the United Kingdom City Code on Takeovers and Mergers applies, the date on which a “Rule 2.7 announcement” of a firm intention to make an offer is published on a regulatory
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information service in respect of a target of a Limited Condition Transaction, as applicable (the “LCT Test Date”), and if, after giving pro forma effect to the Limited Condition Transaction and the other transactions to be entered into in connection therewith (including any incurrence or discharge of Indebtedness and the use of proceeds of such incurrence) as if they had occurred at the beginning of the most recent four consecutive fiscal quarters ending prior to the LCT Test Date for which consolidated financial statements of the Borrower are available, the Borrower could have taken such action on the relevant LCT Test Date in compliance with such ratio, basket or amount, such ratio, basket or amount shall be deemed to have been complied with; provided that (a) if financial statements for one or more subsequent fiscal quarters shall have become available, the Borrower may elect, in its sole discretion, to redetermine all such ratios, baskets or amounts (including as to the absence of any continuing Default or Event of Default) on the basis of such financial statements, in which case, such date of redetermination shall thereafter be deemed to be the applicable LCT Test Date for purposes of such ratios, baskets or amounts and (b) except as contemplated in the foregoing clause (a), compliance with such ratios, baskets or amounts (and any related requirements and conditions) (including as to the absence of any continuing Default or Event of Default) shall not be determined or tested at any time after the applicable LCT Test Date for such Limited Condition Transaction and any actions or transactions being taken in connection therewith (including any incurrence or discharge of Indebtedness and the use of proceeds of such incurrence). For the avoidance of doubt, if the Borrower has made an LCT Election and any of the ratios, baskets or amounts for which compliance was determined or tested as of the LCT Test Date is exceeded as a result of fluctuations in any such ratio, basket or amount, including due to fluctuations in Adjusted EBITDA or Total Assets of the Borrower or the Person subject to such Limited Condition Transaction or any applicable currency exchange rate, at or prior to the consummation of the relevant transaction or action, such baskets, ratios or amounts will not be deemed to have been exceeded as a result of such fluctuations. If the Borrower has made an LCT Election for any Limited Condition Transaction, then in connection with any subsequent calculation of any ratio, basket or amount (other than the testing of any ratio for purposes of Section 2.8(c), Section 7.2(a)(C), Section 7.9, and the definitions of “Applicable Pricing Grid” and “Commitment Fee Rate”) on or following the relevant LCT Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the definitive agreement for such Limited Condition Transaction is terminated or expires without consummation of such Limited Condition Transaction, any such ratio, basket or amount shall be calculated on a pro forma basis assuming such Limited Condition Transaction and other transactions in connection therewith (including any incurrence or discharge of Indebtedness and the use of proceeds thereof) have been consummated.
(e) Certain Determinations. Notwithstanding anything to the contrary herein, with respect to any amounts incurred or transactions entered into (or consummated) in reliance on a provision of any covenant herein that does not require compliance with a financial ratio or test (including the Net First Lien Leverage Ratio or Net Total Leverage Ratio) (any such amounts, the “Fixed Amounts”) substantially concurrently or in a series of related transactions with any amounts incurred or transactions entered into (or consummated) in reliance on a provision in such covenant that requires compliance with any such financial ratio or test (any such amounts, the “Incurrence Based Amounts”), it is understood and agreed that the Fixed Amounts (and any cash proceeds thereof) in such covenant shall be disregarded in the calculation of the financial ratio or test applicable to the Incurrence Based Amounts in such covenant in connection with such incurrence, but full pro forma effect shall be given to all applicable and related transactions (including the use of proceeds of all Indebtedness to be incurred and any repayments, repurchases and redemptions of Indebtedness) and all other permitted pro forma adjustments.
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(f) Interest Rates; LIBORRegulators have signaled the need to use alternative benchmark reference rates for some of these interest rate benchmarks and, as a result,
such interest rate benchmarks may cease to comply with applicable laws and regulations, may be permanently discontinued, and/or the basis on which they
are calculated may change. The interest rate on Eurodollar Loans is determined by reference to the Eurodollar Rate, which is derived from the London interbank offered rate (“Upon the occurrence of any circumstance in which Term SOFR is no longer available or in certain other circumstances as set forth in Section 3.1 of this Agreement, such Section 3.1 provides a mechanism for determining an alternative rate of interest. TheLIBOR”). LIBOR is intended to represent
the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. On March 5, 2021, the U.K. Financial Conduct Authority (“FCA”) publicly announced that:
(a) immediately after December 31, 2021, publication of the 1-week and 2-month U.S. Dollar LIBOR settings will permanently cease; immediately after June 30, 2023, publication of the overnight and 12-month U.S. Dollar LIBOR
settings will permanently cease; and immediately after June 30, 2023, the 1-month, 3-month and 6-month U.S. Dollar LIBOR settings will cease to be provided or, subject to the FCA’s consideration of the case, be provided on a synthetic
basis and no longer be representative of the underlying market and economic reality they are intended to measure and that representativeness will not be restored. There is no assurance that dates announced by the FCA will not change or that the
administrator of LIBOR and/or regulators will not take further action that could impact the availability, composition, or characteristics of LIBOR or the currencies and/or tenors for which LIBOR is published. Each party to this agreement should
consult its own advisors to stay informed of any such developments. Public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of LIBOR. In the event that the London
interbank offered rate Administrative Agent will notify the Borrower, pursuant to Section 3.1, 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, performance or any other matter related to LIBOR or other rates in the definition of “Eurodollar
Rate”any interest rate used in this
Agreement, or with respect to any alternative or successor rate thereto, or replacement rate thereof
(including, without limitation, any such alternative, successor or replacement rate implemented pursuant to Section 3.1, including without limitation, whether the composition or
characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the
Eurodollar
Rateexisting interest rate being replaced or have
the same volume or liquidity as did the London interbank
offeredany existing interest rate prior to its
discontinuance or unavailability. The Administrative Agent and its affiliates and/or other related entities may
engage in transactions that affect the calculation of any interest rate used in this Agreement or any
alternative, successor or alternative rate and/or any relevant adjustments thereto, in each case, in a
manner adverse to the Borrower. The Administrative Agent may select information sources or
services in its reasonable discretion to ascertain any interest rate used in this Agreement, any component thereof, or rates referenced in the definition thereof,
in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential
damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
ARTICLE 2 THE LOANS
SECTION 2.1. The Term Loans.
(a) Subject to the terms and conditions set forth herein, each Term A Lender made a term loan (each individually, an “Existing Term A Loan” and, collectively, the “Existing Term A Loans”) in Dollars to the Borrower on the Restatement Date in a principal amount equal to such Term A Lender’s Existing Term A Loan Commitment. The Existing Term A Loans which remain outstanding as of the
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Amendment No. 4 Effective Date, subject to the terms and conditions set forth in Amendment No. 4, shall be re-evidenced as 2023 Term A Loans or 2026 Term A Loans under this Credit
Agreement (the Existing Term A Loans evidenced as 2023 Term A Loans or 2026 Term A Loans collectively, the “Term A Loans”). As provided in Section 2.5(a) and subject to the terms hereof, the Borrower may elect that the Term A
Loans comprising the Borrowing hereunder of Term A Loans be either Base Rate Loans and/or EurodollarTerm
Benchmark Loans.
(b) Subject to the terms and conditions set forth herein,
each Term B Lender made a term loan (each individually, a “Term B Loan” and, collectively, the “Term B Loans”) in Dollars to the Borrower on the Restatement Date in a principal amount equal to such Term B
Lender’s Term B Loan Commitment. As provided in Section 2.5(a) and subject to the terms hereof, the Borrower may elect that the Term B Loans comprising the Borrowing hereunder of Term B Loans be either Base Rate Loans or EurodollarTerm
Benchmark Loans.
(c) Amounts repaid or prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.2. Revolving Credit Commitments. Subject to the terms and conditions hereof, (a) each 2023
Revolving Lender severally and not jointly agrees to make 2023 Revolving Loans in Dollars to the Borrower from time to time during the period from the Amendment No. 4 Effective Date to the 2023 Revolving Credit Termination Date up to the amount
of such Lender’s 2023 Revolving Credit Commitment in effect at such time; provided, however, that the sum of the aggregate principal amount of 2023 Revolving Loans and L/C Obligations issued by 2023 Revolving Lenders at any time
outstanding shall not exceed the sum of the total 2023 Revolving Credit Commitments in effect at such time and (b) each 2026 Revolving Lender severally and not jointly agrees to make 2026 Revolving Loans in Dollars to the Borrower from time to
time during the period from the Amendment No. 4 Effective Date to the 2026 Revolving Credit Termination Date up to the amount of such Lender’s 2026 Revolving Credit Commitment in effect at such time; provided, however, that
the sum of the aggregate principal amount of 2026 Revolving Loans and L/C Obligations issued by 2026 Revolving Lenders at any time outstanding shall not exceed the sum of the total 2026 Revolving Credit Commitments in effect at such time. Each
Borrowing of Revolving Loans shall be made ratably by the Revolving Lenders in proportion to their respective Revolver Percentages. As provided in Section 2.5(a), and subject to the terms hereof, the Borrower may elect that each Borrowing of
Revolving Loans be either Base Rate Loans or
EurodollarTerm
Benchmark Loans. Revolving Loans may be repaid and reborrowed before the Revolving Credit Termination Date, subject to the terms and conditions hereof.
With respect to 2023 Revolving Lenders, on the 2023 Revolving Credit Termination Date, all outstanding 2023 Revolving Loans shall be repaid in full. With respect to 2026 Revolving Lenders, on the 2026 Revolving Credit Termination Date, all outstanding 2026 Revolving Loans shall be repaid in full. For the avoidance of doubt, from the Amendment No. 4 Effective Date and until the 2023 Revolving Credit Termination Date, all borrowings of Revolving Loans under this Section 2.2 shall be made on a pro rata basis between the 2023 Revolving Facility and the 2026 Revolving Facility in proportion to the respective Revolving Credit Commitments under each such Revolving Facility. Any existing Revolving Loans outstanding immediately prior to the Amendment No. 4 Effective Date shall be continued as Revolving Loans hereunder, it being understood that on the Amendment No. 4 Effective Date, such existing Revolving Loans were reallocated as 2023 Revolving Loans or 2026 Revolving Loans based upon the applicable Revolving Lender’s 2023 Revolving Credit Commitments or 2026 Revolving Credit Commitments, respectively.
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SECTION 2.3. Letters of Credit.
(a) General Terms. Subject to the terms and conditions hereof, as part of the Revolving Facility, commencing with the Restatement Date, the Issuing Banks shall issue standby and documentary letters of credit (each, a “Letter of Credit”) for the Borrower’s account and/or LGEC’s and its Subsidiaries’ account (provided that each shall be jointly and severally liable) in an aggregate undrawn face amount up to the L/C Sublimit; provided, however, that the sum of the Revolving Loans and L/C Obligations at any time outstanding shall not exceed the sum of all Revolving Credit Commitments in effect at such time; and provided further that no Issuing Bank shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, the aggregate L/C Obligations in respect of Letters of Credit issued by such Issuing Bank would exceed the amount stipulated for it in the definition of “Issuing Bank” (such amount, such Issuing Bank’s “Letter of Credit Commitment”). Each Revolving Lender shall be obligated to reimburse the Issuing Banks for such Revolving Lender’s Revolver Percentage of the amount of each drawing under a Letter of Credit and, accordingly, each Letter of Credit shall constitute usage of the Revolving Credit Commitment of each Revolving Lender pro rata in an amount equal to its Revolver Percentage of the L/C Obligations then outstanding. The Borrower may, at any time and from time to time, reduce the Letter of Credit Commitment of any Issuing Bank with the consent of such Issuing Bank; provided that the Borrower shall not reduce the Letter of Credit Commitment of any Issuing Bank if, after giving effect of such reduction, the condition set forth in the last proviso in the first sentence of this Section 2.3(a) shall not be satisfied.
(b) Applications. At any time after the Restatement Date and before the Revolving Credit Termination Date, the Issuing Banks shall, at the request of the Borrower, issue one or more Letters of Credit in Dollars, in form and substance acceptable to the applicable Issuing Bank, with expiration dates no later than the earlier of (i) 12 months from the date of issuance (or which are cancelable not later than 12 months from the date of issuance and each renewal) or (ii) five (5) Business Days prior to the Revolving Credit Termination Date, in an aggregate face amount as requested by the Borrower subject to the limitations set forth in clause (a) of this Section 2.3, upon the receipt of a duly executed application for the relevant Letter of Credit in the form then customarily prescribed by the applicable Issuing Bank for the Letter of Credit requested (each an “Application”); provided that any Letter of Credit with a 12-month tenor may provide for the renewal thereof for additional 12-month periods (which shall in no event extend beyond the date referred to in clause (ii) above, unless an L/C Backstop has been provided to the Issuing Bank thereof (it being understood that the Participating Interests of the Participating Lenders shall terminate on the Revolving Credit Termination Date). Notwithstanding anything contained in any Application to the contrary: (i) the Borrower shall pay fees in connection with each Letter of Credit as set forth in Section 2.12(b) hereof, and (ii) if the applicable Issuing Bank is not timely reimbursed for the amount of any drawing under a Letter of Credit as required pursuant to clause (c) of this Section 2.3, the Borrower’s obligation to reimburse such Issuing Bank for the amount of such drawing shall bear interest (which the Borrower hereby promises to pay) from and after the date such drawing is paid to but excluding the date of reimbursement by the Borrower at the rate applicable to Base Rate Revolving Loans (including, if then applicable, Section 2.4(c)).
(c) The Reimbursement Obligations. Subject to Section 2.3(b) hereof, the Borrower shall reimburse the applicable Issuing Bank for all drawings under a Letter of Credit (a “Reimbursement Obligation”) by no later than (x) 4:00 p.m. (New York time) on the Business Day after the date of such payment by such Issuing Bank under a Letter of Credit, if the Borrower has been informed of such drawing by the applicable Issuing Bank on or before 10:00 a.m. (New York time) on the date of the payment of such drawing, or (y) if notice of such drawing is given to the Borrower after 10:00 a.m. (New York time) on the date of the payment of such drawing, reimbursement shall be made within two Business Days following the date of the payment of such drawing, by the end of such day, in all instances in immediately available funds at the Administrative Agent’s principal office in New York, New York or such other office as the Administrative Agent may designate in writing to the Borrower, and the Administrative Agent shall thereafter cause to be distributed to the applicable Issuing Bank such
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amount(s) in like funds; provided, that the Borrower may, subject to the conditions to borrowing set forth herein, request that such payment be financed with a Base Rate Revolving Loan and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Borrowing (and with interest owing thereon from the date of the respective disbursement). If the Borrower does not make any such reimbursement payment on the date due and the Participating Lenders fund their participations in the manner set forth in Section 2.3(d) below, then all payments thereafter received by the Administrative Agent in discharge of any of the relevant Reimbursement Obligations shall be distributed in accordance with Section 2.3(d) below. In addition, for the benefit of the Administrative Agent, the Issuing Banks and each Lender, the Borrower agrees that, notwithstanding any provision of any Application, its obligations under this Section 2.3(c) and each Application shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Credit Agreement and the Applications, under all circumstances whatsoever, and irrespective of any claim or defense that the Borrower may otherwise have against the Administrative Agent, the Issuing Banks or any Lender, including without limitation (i) any lack of validity or enforceability of any Fundamental Document; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Fundamental Document; (iii) the existence of any claim of set-off the Borrower may have at any time against a beneficiary of a Letter of Credit (or any Person for whom a beneficiary may be acting), the Administrative Agent, the Issuing Banks, any Lender or any other Person, whether in connection with this Credit Agreement, another Fundamental Document, the transaction related to the Fundamental Document or any unrelated transaction; (iv) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the Administrative Agent or an Issuing Bank under a Letter of Credit against presentation to the Administrative Agent or an Issuing Bank of a draft or certificate that does not comply with the terms of the Letter of Credit; provided that the Administrative Agent’s or an Issuing Bank’s determination that documents presented under the Letter of Credit complied with the terms thereof did not constitute gross negligence, bad faith or willful misconduct of the Administrative Agent or an Issuing Bank (as determined by the final, non-appealable judgment of a court of competent jurisdiction); or (vi) any other act or omission to act or delay of any kind by the Administrative Agent or an Issuing Bank, any Lender or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this Section 2.3(c), constitute a legal or equitable discharge of the Borrower’s obligations hereunder or under an Application.
(d) The Participating Interests. Each Revolving Lender (other than the Lender acting as Issuing Bank) severally and not jointly agrees to purchase from the Issuing Banks, and each Issuing Bank hereby agrees to sell to each such Revolving Lender (a “Participating Lender”), an undivided participating interest (a “Participating Interest”) to the extent of its Revolver Percentage in each Letter of Credit issued by, and each Reimbursement Obligation owed to, the Issuing Banks. Upon the Borrower’s failure to pay any Reimbursement Obligation on the date and at the time required, or if an Issuing Bank is required at any time to return to the Borrower or to a trustee, receiver, liquidator, custodian or other Person any portion of any payment of any Reimbursement Obligation, each Participating Lender shall, not later than the Business Day it receives written notice from such Issuing Bank (with a copy to the Administrative Agent) to such effect, if such notice is received before 12:00 noon, or not later than 12:00 noon the following Business Day, if such notice is received after such time, pay to the Administrative Agent for the account of such Issuing Bank an amount equal to such Participating Lender’s Revolver Percentage of such unpaid Reimbursement Obligation together with interest on such amount accrued from the date such Issuing Bank made the related payment to the date of such payment by such Participating Lender at a rate per annum equal to: (i) from the date such Issuing Bank made the related payment to the date two (2) Business Days after payment by such Participating Lender is due hereunder, the Federal Funds Rate for each such day and (ii) from the date two (2) Business Days after the date such payment is due from such Participating Lender to the date such payment is made by such Participating Lender, the Base Rate in effect for each such day. Each such Participating Lender shall, after making its appropriate payment, be entitled to receive its Revolver Percentage of each payment received in respect of the relevant Reimbursement Obligation and of interest paid thereon, with each Issuing Bank retaining its Revolver Percentage thereof as a Revolving Lender hereunder.
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The several obligations of the Participating Lenders to the Issuing Banks under this Section 2.3 shall be absolute, irrevocable and unconditional under any and all circumstances and shall not be subject to any set-off, counterclaim or defense to payment which any Participating Lender may have or has had against the Borrower, the Issuing Banks, the Administrative Agent, any Lender or any other Person. Without limiting the generality of the foregoing, such obligations shall not be affected by any Default or Event of Default or by any reduction or termination of the Revolving Credit Commitment of any Revolving Lender, and each payment by a Participating Lender under this Section 2.3 shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Indemnification. The Participating Lenders shall, to the extent of their respective Revolver Percentages, indemnify the Issuing Banks (to the extent not reimbursed by the Borrower and without relieving the Borrower of its obligation to do so) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except as a result from any Issuing Bank’s gross negligence or willful misconduct as determined by the final, non-appealable judgment of a court of competent jurisdiction) that such Issuing Bank may suffer or incur in connection with any Letter of Credit issued by it. The obligations of the Participating Lenders under this Section 2.3(e) and all other parts of this Section 2.3 shall survive termination of this Credit Agreement and of all Applications, Letters of Credit, and all drafts and other documents presented in connection with drawings thereunder.
(f) Manner of Requesting a Letter of Credit. The Borrower shall provide at least three (3) Business Days’ advance written notice to the Administrative Agent and the applicable Issuing Bank (or such lesser notice as the Administrative Agent and the Issuing Banks may agree in their sole discretion) of each request for the issuance of a Letter of Credit, each such notice to be accompanied by a properly completed and executed Application for the requested Letter of Credit and, in the case of an extension or amendment or an increase in the amount of a Letter of Credit, a written request therefor, in a form acceptable to the Administrative Agent and the applicable Issuing Bank, in each case, together with the fees called for by this Credit Agreement. The Issuing Banks shall promptly notify the Administrative Agent and the Lenders of the issuance, extension or amendment of a Letter of Credit.
(g) Conflict with Application. In the event of any conflict or inconsistency between this Credit Agreement and the terms of any Application, the terms of this Credit Agreement shall control.
(h) Existing Letters of Credit. Letters of Credit of LGEC and its Subsidiaries outstanding on the Restatement Date under the Existing Credit Agreement, if any, and set forth on Schedule 2.3 shall be deemed issued under the Revolving Facility to the extent the applicable letter of credit issuer under such facility is an Issuing Bank under the Revolving Facility.
(i) Replacement of Issuing Bank. An Issuing Bank may be replaced by another Lender 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 an Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced 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
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previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of such Issuing Bank under this Credit 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.
(j) Additional Issuing Banks. From time to time, the Borrower may by notice to the Administrative Agent designate one or more additional Lenders as an Issuing Bank, each of which agrees (in its sole discretion) to act in such capacity and is reasonably satisfactory to the Administrative Agent. Each such additional Issuing Bank shall execute a counterpart of this Credit Agreement upon the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and shall thereafter be an Issuing Bank hereunder for all purposes.
(k) Provisions Related to Extended Revolving Credit Commitments. If the maturity date in respect of any tranche of Revolving Credit Commitments occurs prior to the expiration of any Letter of Credit issued under such tranche, then (i) if one or more other tranches of Revolving Credit Commitments in respect of which the maturity date shall not have occurred are then in effect, (x) the outstanding Revolving Loans shall be repaid pursuant to Section 2.7(c) on such maturity date to the extent and in an amount sufficient to permit the reallocation of the L/C Exposure relating to the outstanding Letters of Credit contemplated by clause (y) below and (y) such Letters of Credit shall automatically be deemed to have been issued (including for purposes of the obligations of the Revolving Lenders to purchase participations therein and to make payments in respect thereof pursuant to Section 2.3(d)) under (and ratably participated in by Revolving Lenders pursuant to) the Revolving Credit Commitments in respect of such non-terminating tranches up to an aggregate amount not to exceed the aggregate principal amount of the Revolving Credit Commitments in respect of such non-terminating tranches at such time (it being understood that (1) the participations therein of Revolving Lenders under the maturing tranche shall be correspondingly released and (2) no partial face amount of any Letter of Credit may be so reallocated) and (ii) to the extent not reallocated pursuant to the immediately preceding clause (i), but without limiting the obligations with respect thereto, the Borrower shall provide an L/C Backstop with respect to any such Letter of Credit in a manner reasonably satisfactory to the applicable Issuing Bank. If, for any reason, such L/C Backstop is not provided or the reallocation does not occur, the Revolving Lenders under the maturing tranche shall continue to be responsible for their participating interests in the Letters of Credit; provided that, notwithstanding anything to the contrary contained herein, upon any subsequent repayment of the Revolving Loans, the reallocation set forth in clause (i) shall automatically and concurrently occur to the extent of such repayment (it being understood that no partial face amount of any Letter of Credit may be so reallocated). Except to the extent of reallocations of participations pursuant to clause (i) of the second preceding sentence, the occurrence of a maturity date with respect to a given tranche of Revolving Credit Commitments shall have no effect upon (and shall not diminish) the percentage participations of the Revolving Lenders in any Letter of Credit issued before such maturity date. Commencing with the maturity date of any tranche of Revolving Credit Commitments, the L/C Sublimit under any tranche of Revolving Credit Commitments that has not so then matured shall be as agreed by the Borrower with such Revolving Lenders; provided that in no event shall such sublimit be less than the sum of (x) the L/C Exposure with respect to the Revolving Lenders under such extended tranche immediately prior to such maturity date and (y) the face amount of the Letters of Credit reallocated to such tranche of Revolving Credit Commitments pursuant to clause (i) of the first sentence of this clause (k) (assuming Revolving Loans are repaid in accordance with clause (i)(x)). On the 2023 Revolving Credit Termination Date, the L/C Exposure (if any) will be reallocated pursuant to the terms of this Section 2.3(k).
(l) Applicability of ISP. Unless otherwise expressly agreed by the applicable Issuing Bank and the Borrower when a Letter of Credit is issued, the rules of the ISP shall apply to each standby Letter of Credit.
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SECTION 2.4. Applicable Interest Rates.
(a) Base Rate Loans. Each Loan that is a Base Rate Loan made or maintained by a Lender shall bear interest (computed on the basis of a year of 360 days (or, at times when the Base Rate is based on the Prime Rate, 365 or 366 days, as the case may be) and the actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced or created by conversion from a Term Benchmark Loan until, but excluding, the date of repayment thereof at a rate per annum equal to the sum of the Applicable Margin plus the Base Rate from time to time in effect for Loans of the applicable Class, payable in arrears on each Interest Payment Date.
(b)
(a) Term Benchmark Loans. Each
Loan that is a Base
RateBase
RateTerm Benchmark Loan made or maintained by a
Lender shall bear interest during each Interest Period it is outstanding (computed on the basis of a year of 360 days (or, at times when the Base Rate is based on the Prime Rate, 365 or 366 days,
as the case may be) and the actual days
elapsed) on the unpaid principal amount thereof from the date such Loan is advanced, continued or created by conversion from a EurodollarBase Rate Loan until, but excluding, the date of repayment thereof at a
rate per annum equal to the sum of the Applicable Margin plus the Base Rate from time to time in effect for Loans of the applicable Class, payable in
arrears on each Interest Payment Date.
(b) Eurodollar Loans. Each Loan that is a
Eurodollar Loan made or maintained by a Lender shall bear interest during each Interest Period it is outstanding (computed on the basis of a year of
360 days and actual days elapsed) on the unpaid
principal amount thereof from the date such Loan is advanced, continued or created by conversion from a Base Rate Loan until, but excluding, the date of repayment thereof at a rate per annum equal to the sum of the Applicable Margin
plus the Eurodollar
RateAdjusted Term SOFR applicable for such
Interest Period for Loans of the applicable Class, payable in arrears on each Interest Payment Date.
(c) Default Rate. If the Borrower shall default in the payment of any principal of or interest or fees on any Loan or any other amount due hereunder, by acceleration or otherwise, or under any other Fundamental Document, then, until such defaulted amount shall have been paid in full, the Borrower shall on demand from time to time pay interest, to the extent permitted by Applicable Law, on any such overdue amount at a rate per annum at (i) in the case of Loans, 2% in excess of the rate then in effect for each such Loan of the applicable Class and (ii) otherwise, 2% in excess of the rate applicable to Revolving Loans that are Base Rate Loans.
(d) Applicable Law. 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.
(e) Notwithstanding any provision herein to the contrary and without limiting Section 2.4(d), if Canadian law applies to this Credit Agreement or any Fundamental Document or to any payment made hereunder or thereunder, then in no event will the aggregate “interest” (as defined in Section 347 of the Criminal Code (Canada)) payable by any Credit Party under this Credit Agreement or any Fundamental Document exceed the maximum effective annual rate of interest on the “credit advanced” (as defined in that Section 347) permitted under that Section and, if any payment, collection or demand pursuant to this Credit Agreement or any such Fundamental Document in respect of “interest” (as defined in that Section 347) is determined to be contrary to the provisions of such Section 347, such payment, collection or demand will be deemed to have been made by mutual mistake of such Credit Party, the Administrative Agent and the applicable Lender or Lenders and the amount of such payment or collection will be refunded to such Credit Party only to the extent of the amount which is greater than the maximum effective annual rate permitted by such laws.
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(f) For the purposes of this Credit Agreement, whenever interest is to be calculated on the basis of a period of time other than a calendar year, the annual rate of interest to which each rate of interest determined pursuant to such calculation is equivalent for the purposes of the Interest Act (Canada) is such rate as so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by the number of days used in the basis of such determination.
(g) EACH OF THE CREDIT PARTIES CONFIRMS THAT IT FULLY UNDERSTANDS AND IS ABLE TO CALCULATE THE RATE OF INTEREST APPLICABLE TO EACH OF THE FACILITIES BASED ON THE METHODOLOGY FOR CALCULATING PER ANNUM RATES PROVIDED FOR IN SECTION 2.4(F) OF THIS CREDIT AGREEMENT. The Administrative Agent agrees that if requested in writing by the Borrower it shall calculate the nominal and effective per annum rate of interest on any Loan outstanding at any time and provide such information to the Borrower promptly following such request; provided that any error in any such calculation, or any failure to provide such information on request, shall not relieve the Borrower or any other Credit Party of any of its obligations under this Credit Agreement or any other Fundamental Document, nor result in any liability to the Administrative Agent or any Lender. EACH CREDIT PARTY HEREBY IRREVOCABLY AGREES NOT TO PLEAD OR ASSERT, WHETHER BY WAY OF DEFENCE OR OTHERWISE, IN ANY PROCEEDING RELATING TO THE FUNDAMENTAL DOCUMENTS, THAT THE INTEREST PAYABLE UNDER THE FUNDAMENTAL DOCUMENTS AND THE CALCULATION THEREOF HAS NOT BEEN ADEQUATELY DISCLOSED TO THE OBLIGORS, WHETHER PURSUANT TO SECTION 4 OF THE INTEREST ACT (CANADA) OR ANY OTHER APPLICABLE LAW OR LEGAL PRINCIPLE.
SECTION 2.5. Manner of Borrowing Loans and Designating Applicable Interest Rates.
(a) Notice to the Administrative Agent. The Borrower shall give notice to the Administrative Agent by no later than: (i) 1:0012:00 p.m. (New York time) at least three (3) U.S. Government Securities
Business Days before the date on which the Borrower requests the Lenders to advance a Borrowing of Loans that are
EurodollarTerm
Benchmark Loans denominated in Dollars or, for a request that Lenders advance a Borrowing of Loans that are
EurodollarTerm
Benchmark Loans on the Restatement Date, at least two (2) Business Days before the Restatement Date and (ii) noon (New York time) on the date the Borrower requests the Lenders to advance
a Borrowing of Loans that are Base Rate Loans. The Loans included in each Borrowing of Loans shall bear interest initially at the type of rate specified in such notice for Loans of such Class. Thereafter, with respect to Base Rate Loans and EurodollarTerm
Benchmark Loans that are denominated in Dollars, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Borrowing of Loans or, subject to
Section 2.6 hereof, a portion thereof, as follows: (i) if such Borrowing of Loans is of EurodollarTerm Benchmark Loans, on the last day of the Interest Period applicable
thereto, the Borrower may continue part or all of such Borrowing as EurodollarTerm Benchmark Loans or convert part or all of such Borrowing into Base
Rate Loans or (ii) if such Borrowing of Loans is of Base Rate Loans, on any Business Day, the Borrower may convert all or part of such Borrowing into
EurodollarTerm
Benchmark Loans for an Interest Period or Interest Periods specified by the Borrower. The Borrower shall give all such notices requesting the advance, continuation or conversion of a Borrowing of
Loans to the Administrative Agent by telephone or telecopy (which notice shall be irrevocable once given and, if by telephone, shall be promptly confirmed in writing), substantially in the form attached hereto as Exhibit A (Notice of
Borrowing) or Exhibit B (Notice of Continuation/Conversion), as applicable, or in such other form acceptable to the Administrative Agent. Notice of the continuation of a Borrowing of Loans that are EurodollarTerm
Benchmark Loans for an additional Interest Period or of the conversion of part or all of a Borrowing of Loans that are Base Rate Loans into EurodollarTerm
Benchmark Loans must be given by
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no later than
1:0012:00 p.m. (New York time) at least three U.S. Government Securities Business Days before the date of the requested continuation or conversion of a Borrowing of Loans that are denominated in Dollars. All notices concerning the advance, continuation or conversion of a Borrowing of
Loans shall specify the Class of Loans as to which the notice relates, the date of the requested advance, continuation or conversion of a Borrowing of Loans (which shall be a Business Day), the amount of the requested Borrowing to be advanced,
continued or converted, the type of Loans (Base Rate Loans or
EurodollarTerm
Benchmark Loans) to comprise such new, continued or converted Borrowing and, if such Borrowing is to be comprised of
EurodollarTerm
Benchmark Loans, the Interest Period applicable thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Borrowing of EurodollarTerm
Benchmark Loans, the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
(b) Notice to the Lenders. The Administrative Agent shall give prompt telephonic or telecopy notice to each Lender of any notice from
the Borrower received pursuant to Section 2.5(a) above and, if such notice requests the Lenders to make EurodollarTerm Benchmark Loans, the Administrative Agent shall give notice to the
Borrower and each Lender of the interest rate applicable thereto promptly after the Administrative Agent has made such determination.
(c) Borrower’s Failure to Notify; Automatic Continuations and Conversions. If the Borrower fails to give proper notice of the
continuation or conversion of any outstanding Borrowing of Loans that are EurodollarTerm Benchmark Loans before the last day of its then current Interest
Period within the period required by Section 2.5(a) and such Borrowing is not prepaid in accordance with Section 2.8(a) or (b), such Borrowing shall, at the end of the Interest Period applicable thereto, automatically be converted into a
Borrowing of Base Rate Loans (unless such Borrowing is a Borrowing of Term B Loans, in which case such Term B Loans shall be continued as a
EurodollarTerm
Benchmark Loan with an Interest Period of one month). In the event the Borrower fails to give notice pursuant to Section 2.5(a) of a Borrowing of Loans equal to the amount of a Reimbursement
Obligation and has not notified the Administrative Agent by 1:00 p.m. (New York time) on the day such Reimbursement Obligation becomes due that it intends to repay such Reimbursement Obligation through funds not borrowed under this Credit Agreement,
the Borrower shall be deemed to have requested a Borrowing of Loans that are Base Rate Loans on such day in the amount of the Reimbursement Obligation then due, which Borrowing, if otherwise available hereunder, shall be applied to pay the
Reimbursement Obligation then due.
(d) Disbursement of Loans. Not later than 2:00 p.m., New York City time, on the date of any requested advance of a new Borrowing of Loans, subject to Article 5 hereof, each Lender shall make available its Loan comprising part of such Borrowing in funds immediately available at the principal office of the Administrative Agent in New York, New York. The Administrative Agent shall promptly credit or wire transfer the proceeds of each new Borrowing of Loans to an account designated by the Borrower in the applicable notice of borrowing; provided, that Borrowings made to finance the reimbursement of a Reimbursement Obligation shall be remitted by the Administrative Agent to the applicable Issuing Bank.
(e) Administrative Agent Reliance on Lender Funding. Unless the Administrative Agent shall have been notified by a Lender prior to the date (or, in the case of a Borrowing of Base Rate Loans, by 1:00 p.m. on such date) on which such Lender is scheduled to make payment to the Administrative Agent of the proceeds of a Loan (which notice shall be effective upon receipt) that such Lender does not intend to make such payment, the Administrative Agent may assume that such Lender has made such payment when due and the Administrative Agent, in reliance upon such assumption may (but shall not be required to) make available to the Borrower the proceeds of the Loan to be made by such Lender and, if any Lender has not in fact made such payment to the Administrative Agent, such Lender
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shall, on demand, pay to the Administrative Agent the amount made available to the Borrower attributable to such Lender together with interest thereon in respect of each day during the period commencing on the date such amount was made available to the Borrower and ending on (but excluding) the date such Lender pays such amount to the Administrative Agent at a rate per annum equal to: (i) from the date the related advance was made by the Administrative Agent to the date two (2) Business Days after payment by such Lender is due hereunder, the greater of, for each such day, (x) the Federal Funds Rate and (y) the Overnight Bank Funding Rate, plus any standard administrative or processing fees charged by the Administrative Agent in connection with such Lender’s non-payment and (ii) from the date two (2) Business Days after the date such payment is due from such Lender to the date such payment is made by such Lender, the Base Rate in effect for each such day. If such amount is not received from such Lender by the Administrative Agent immediately upon demand, the Borrower will, on demand, repay to the Administrative Agent the proceeds of the Loan attributable to such Lender with interest thereon at a rate per annum equal to the interest rate applicable to the relevant Loan, but without such payment being considered a payment or prepayment of a Loan under Section 3.6 hereof so that the Borrower will have no liability under such Section with respect to such payment.
SECTION 2.6. Minimum
Borrowing Amounts; Maximum
Eurodollar
Each Borrowing of Base Rate Loans advanced under the
applicable Facility shall be in an amount not less than $1,000,000 or such greater amount that is an integral multiple of $500,000. Each Borrowing of
EurodollarTerm
Benchmark Loans advanced, continued or converted under the applicable Facility shall be in an amount equal to $1,000,000 or such greater amount that is an integral multiple of $250,000. Without
the Administrative Agent’s consent, there shall not be more than twenty (20) Borrowings of EurodollarTerm Benchmark Loans outstanding at any one time.
SECTION 2.7. Maturity of Loans.
(a) Scheduled Payments of Term A Loans.
Subject to Section 2.14, the Borrower shall make principal payments on the 2023 Term A Loans in installments on the last Business Day of each March, June, September and December of each year, commencing on the last Business Day of such month following the Amendment No. 4 Effective Date, in an aggregate amount equal to 2.50% of the product of (x) the aggregate principal amount of the Existing Term A Loans that were made on the Restatement Date minus (y) the aggregate principal amount of the Existing Term A Loans that were made on the Restatement Date that are reclassified as 2026 Term A Loans on the Amendment No. 4 Effective Date (which payments in each case shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.8(a), Section 2.8(c) and Section 2.8(e), as applicable); it being further agreed that a final payment comprised of all principal and interest not sooner paid on the 2023 Term A Loans, shall be due and payable on the 2023 Term A Termination Date.
Subject to Section 2.14, the Borrower shall make principal payments on the 2026 Term A Loans in installments on the last Business Day of each March, June, September and December of each year, commencing on the last Business Day of such month falling on or after the last Business Day of the first full fiscal quarter of LGEC following the Amendment No. 4 Effective Date, in an aggregate amount equal to the following percentages of the aggregate principal amount of the 2026 Term A Loans made on the Amendment No. 4 Effective Date: (i) for the first four (4) quarterly installments, 0%; (ii) for the fifth (5th) through eighth (8th) quarterly installments, 1.25%; (iii) for the ninth (9th) through twelfth (12th) quarterly installments, 1.75%; (iv) for the thirteenth (13th) through sixteenth (16th) quarterly installments, 2.50%, and (v) for each quarterly installment after such sixteenth (16th) quarterly installment, 2.50%, (which payments in each case shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.8(a), Section 2.8(c) and Section 2.8(e), as applicable); it being further agreed that a final payment comprised of all principal and interest not sooner paid on the 2026 Term A Loans, shall be due and payable on the 2026 Term A Termination Date.
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(b) Scheduled Payments of Term B Loans. Subject to Section 2.15, the Borrower shall make principal payments on the Term B Loans in installments on the last Business Day of each March, June, September and December of each year, commencing on the last Business Day of such month falling on or after the last Business Day of the first full fiscal quarter of LGEC following the Restatement Date, in an aggregate amount equal to 0.25% of the aggregate principal amount of the Term B Loans made on the Restatement Date (which payments in each case shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.8(a), Section 2.8(c) and Section 2.8(e), as applicable); it being further agreed that a final payment comprised of all principal and interest not sooner paid on the Term B Loans, shall be due and payable on March 24, 2025 (the “Term B Termination Date”).
(c) Revolving Loans. Each 2023 Revolving Loan, both for principal and interest, shall mature and become due and payable by the Borrower on the 2023 Revolving Credit Termination Date, and each 2026 Revolving Loan, both for principal and interest, shall mature and become due and payable by the Borrower on the 2026 Revolving Credit Termination Date.
SECTION 2.8. Prepayments
(a) Voluntary Prepayments of Term Loans.
(i) The Borrower may, at its option, upon notice as herein provided, prepay without premium or penalty (subject to the requirements of
Section 2.8(a)(ii) below and except as set forth in Section 3.6) at any time all, or from time to time any part of, the Term Loans, in each case, in a minimum aggregate amount of $5,000,000 or such greater amount that is an integral
multiple of $1,000,000 or, if less, the entire principal amount thereof then outstanding. The Borrower will give the Administrative Agent written notice (or telephone notice promptly confirmed by written notice) of each prepayment under this
Section 2.8 prior to
1:00(x)
12:00 p.m. (New York time) at least one Business Dayon the date of such prepayment in the case of Base Rate Loans andor (y) 12:00 p.m.
(New York time) three (3) U.S. Government Securities
Business Days in the case of EurodollarTerm Benchmark Loans prior to the date fixed for such prepayment. Each
such notice shall specify the date of such prepayment (which shall be a Business Day), the principal amount of such Term Loans to be prepaid and the interest to be paid on the prepayment date with respect to such principal amount being repaid. Such
notice of prepayment may state that such notice is conditioned upon the effectiveness of other credit facilities, indentures or similar agreements or other transactions, in which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any prepayments made pursuant to this Section 2.8(a) shall be applied against the Class of Term Loans and the remaining scheduled installments
of principal due in respect of such Term Loans in the manner specified by the Borrower or, if not so specified on or prior to the date of such optional prepayment, on a pro rata basis to all Classes of Term Loans in direct order of maturity and may
not be reborrowed; provided, that (i) in no event shall such prepayments be applied in a manner that results in the 2026 Term A Loans being reduced on a greater than pro rata basis than the 2023 Term A Loans and (ii) for the
avoidance of doubt and notwithstanding anything herein to the contrary, the Borrower may, at its option, make such prepayments in a manner that results in 2023 Term A Loans being reduced on a greater than pro rata basis than the 2026 Term A
Loans.
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(ii) In the event that, on or prior to the date that is six (6) months after the Amendment No. 1 Effective Date, the Borrower (x) prepays, repays, refinances, substitutes or replaces any Term B Loans in connection with a Repricing Transaction (including, for the avoidance of doubt, any prepayment made pursuant to Section 2.8(c)(i) that constitutes a Repricing Transaction), or (y) effects any amendment, waiver or other modification of, or consent under, this Credit Agreement resulting in a Repricing Transaction (including in connection with the replacement of any Term B Lender which is replaced pursuant to Section 3.7 as a result of its refusal to consent to an amendment giving rise to such Repricing Transaction), the Borrower shall pay to the Administrative Agent, for the ratable account of each of the applicable Term B Lenders, (A) in the case of clause (x), a premium of 1.00% of the aggregate principal amount of the Term B Loans so prepaid, repaid, refinanced, substituted or replaced and (B) in the case of clause (y), a fee equal to 1.00% of the aggregate principal amount of the Term B Loans outstanding immediately prior to such amendment, waiver, modification or consent that are the subject of such Repricing Transaction. All such amounts shall be due and payable on the date of effectiveness of such Repricing Transaction.
(b) Voluntary Prepayments of Revolving Loans. The Borrower may
prepay without premium or penalty (except as set forth in Section 3.6) and in whole or in part any Borrowing of (i) Revolving Loans that are
EurodollarTerm
Benchmark Loans at any time upon at least three (3) Business Days’ prior notice by the Borrower to the Administrative Agent or (ii) Revolving Loans that are Base Rate Loans at any
time upon at least one Business Day’s prior notice by the Borrower to the Administrative Agent (in the case of each of clauses (i) and (ii), such notice must be in writing (or telephone notice promptly confirmed by written notice) and
received by the Administrative Agent prior to 2:00 p.m. (New York time) on such date), in each case, such prepayment to be made by the payment of the principal amount to be prepaid and, in the case of any EurodollarTerm
Benchmark Loans, accrued interest thereon to the date fixed for prepayment plus any amounts due the Lenders under Section 3.6; provided, however, that the Borrower may
not partially repay a Borrowing (i) if such Borrowing is of Base Rate Loans, in a principal amount less than $250,000, and (ii) if such Borrowing is of
EurodollarTerm
Benchmark Loans, in a principal amount less than $500,000, except, in each case, in such lesser amount of the entire principal amount thereof then outstanding; provided, further,
that from the Amendment No. 4 Effective Date and until the 2023 Revolving Credit Termination Date, (i) all prepayments of Revolving Loans under this Section 2.8(b) other than prepayments in connection with a 2023 Revolving Credit
Commitment Reduction shall be made on a pro rata basis between the 2023 Revolving Facility and the 2026 Revolving Facility in proportion to the respective Revolving Credit Commitments under each such Revolving Credit Facility and (ii) in
connection with a 2023 Revolving Credit Commitment Reduction, the Borrower may, at its option, make prepayments of Revolving Loans under this Section 2.8(b) in proportion to the amount of such 2023 Revolving Credit Commitment Reduction in a
manner that results in the 2023 Revolving Loans being reduced on a greater than pro rata basis than the 2026 Revolving Loans. Any such notice of prepayment may state that such notice is conditioned upon the effectiveness of other credit
facilities, indentures or similar agreements or other transactions, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.
(c) Mandatory Prepayments.
(i) From and after the Restatement Date, if LGEC or any Restricted Subsidiary shall at any time or from time to time incur any Indebtedness (other than with respect to any Indebtedness permitted to be incurred pursuant to Section 7.1 (other than Refinancing Indebtedness, Refinancing Notes and Refinancing Term Loans and Replacement Revolving Credit Commitments to the extent the proceeds are used to finance Term Loans)), then promptly and in any event within five (5) Business Days of receipt by LGEC or the Restricted Subsidiary of the Net Cash Proceeds from the incurrence of such Indebtedness, the Borrower shall prepay the Term Loans in an aggregate amount equal to 100% of the amount of all such Net Cash Proceeds. The amount of each such prepayment shall be applied to the outstanding Term Loans of each Class, pro rata, until paid in full.
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(ii) From and after the Restatement Date, if LGEC or any Restricted Subsidiary shall at any time or from time to time make any Asset Sale or shall suffer an Event of Loss resulting in Net Available Cash in excess of $60,000,000 in the aggregate for all such Asset Sales or Events of Loss in any fiscal year of LGEC, then promptly and in any event within five (5) Business Days of receipt by LGEC or the Restricted Subsidiary of the Net Available Cash of such Asset Sale or such Event of Loss, the Borrower shall prepay the Term Loans in an aggregate amount equal to 100% of the amount of all such Net Available Cash in excess of the amount specified above; provided that, in the case of each Asset Sale and Event of Loss, if LGEC or the applicable Restricted Subsidiary intends to invest or reinvest, as applicable, within twelve (12) months of the later of the date of the applicable Asset Sale or receipt of Net Available Cash from an Event of Loss, the Net Available Cash thereof in Additional Assets, or make capital expenditures that are used or useful in a Related Business or that replace the businesses, properties and/or assets that are the subject of such Asset Sale or Event of Loss (the “Reinvested Deferred Amount”), then the Borrower shall not be required to make a mandatory prepayment under this Section in respect of such Reinvested Deferred Amount to the extent such Reinvested Deferred Amount is actually invested or reinvested within such twelve-month period, or LGEC or a Restricted Subsidiary has committed to so invest or reinvest such Reinvested Deferred Amount during such twelve-month period and such Reinvested Deferred Amount is so reinvested within 180 days after the expiration of such twelve-month period; provided, however, that if any Reinvested Deferred Amount has not been so invested or reinvested prior to the expiration of the applicable period, the Borrower shall promptly prepay the Term Loans in the amount of such Reinvested Deferred Amount in excess of the amount specified above not so invested or reinvested; provided, further, that if, at the time that any such prepayment would be required hereunder, the Borrower is required to prepay or offer to repurchase any other Indebtedness secured on a pari passu basis (or any Refinancing Indebtedness in respect thereof that is secured on a pari passu basis) with the Obligations pursuant to the terms of the documentation governing such Indebtedness with such Net Available Cash (such Indebtedness (or Refinancing Indebtedness in respect thereof) required to be prepaid or offered to be so repurchased, the “Other Applicable Indebtedness”), then the Borrower may apply such Net Available Cash on a pro rata basis to the prepayment of the Term Loans and to the repurchase or prepayment of the Other Applicable Indebtedness (determined on the basis of the aggregate outstanding principal amount of the Term Loans and Other Applicable Indebtedness (or accreted amount if such Other Applicable Indebtedness is issued with original issue discount)) at such time; provided that the portion of such Net Available Cash allocated to the Other Applicable Indebtedness shall not exceed the amount of such Net Available Cash required to be allocated to the Other Applicable Indebtedness pursuant to the terms thereof, and the remaining amount, if any, of such Net Available Cash shall be allocated to the Term Loans in accordance with the terms hereof, and the amount of the prepayment of the Term Loans that would have otherwise been required pursuant to this Section 2.8(c)(ii) shall be reduced accordingly. The amount of each such prepayment shall be applied to the outstanding Term Loans of each Class pro rata, until paid in full.
(iii) No later than the fifth (5th) Business Day after the date on which financial statements with respect to each fiscal year of LGEC are required to be delivered pursuant to Section 6.1(b) (beginning with the first full fiscal year ended after the Restatement Date), the Borrower shall prepay the then outstanding Term B Loans by an amount equal to (A) 50% of Excess Cash Flow of LGEC and its Restricted Subsidiaries for the most recently completed fiscal year of LGEC; provided that the foregoing percentage shall be reduced to 25% when the Net First Lien Leverage Ratio calculated on a Pro Forma Basis as of the last day of the relevant fiscal year is equal to or less than 4.50 to 1.00, and 0% when the Net First Lien Leverage Ratio calculated on a Pro Forma Basis as of the last day of the relevant fiscal year is equal to or less than 4.00 to 1.00 minus (B) the principal amount of (1) any Term Loans and, to the extent pari passu with the Term Loans in right of payment and with respect to security, Incremental Term Loans, Incremental Equivalent Debt, Refinancing Term Loans and Refinancing Notes and (2) any Revolving Loans and Incremental Revolving Loans (in each case, to the extent accompanied by a permanent reduction of the relevant revolving commitment) voluntarily prepaid pursuant to paragraphs
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(a) and (b) of this Section 2.8 or purchased by LGEC or any of its Subsidiaries in cash pursuant to Section 11.3 (with the amount of the deduction pursuant to this subclause (B) for Loans purchased pursuant to Section 11.3 being limited to the amount of cash paid by LGEC or any of its Subsidiaries in connection therewith) or voluntarily prepaid or purchased during such fiscal year; provided that no such voluntary prepayments or purchases shall reduce the payments required to be made under this Section 2.8(c)(iii) to the extent financed with long-term Indebtedness. The amount of each such prepayment shall be applied to the outstanding Term B Loans pro rata until paid in full. Any payment under this clause (iii) shall be an “ECF Payment.”
(iv) The Borrower shall, on each date the Revolving Credit Commitments are reduced pursuant to Section 2.10, prepay the Revolving Loans and, if necessary after such Revolving Loans have been repaid in full, replace or cause to be cancelled (or provide an L/C Backstop or make other arrangements reasonably satisfactory to the Issuing Banks) outstanding Letters of Credit by the amount, if any, necessary to reduce the sum of the aggregate principal amount of Revolving Loans and L/C Obligations then outstanding to the amount to which the Revolving Credit Commitments have been so reduced.
(v) Notwithstanding any provision under this Section 2.8(c) to the contrary, (A) any amounts that would otherwise be required to be paid by the Borrower pursuant to Section 2.8(c)(ii) above shall not be required to be so prepaid to the extent any such Asset Sale is consummated by a Subsidiary of LGEC or such Net Available Cash in respect of any Event of Loss are received by a Subsidiary of LGEC, for so long as the repatriation to the United States, Canada or other relevant jurisdiction of any such amounts would be prohibited under any Applicable Law (including any such laws with respect to financial assistance, corporate benefit, thin capitalization, capital maintenance, liquidity maintenance and similar legal principles, restrictions on upstreaming of cash intra group and the fiduciary and statutory duties of the directors of the relevant Subsidiaries) and (B) if LGEC determines in good faith that the repatriating of any amounts required to mandatorily prepay the Loans pursuant to Section 2.8(c)(ii) above would result in a tax liability that is material to the amount of funds otherwise required to be repatriated (including any withholding tax) (such amount in clauses (A) and (B), a “Restricted Asset Sale Amount”), the amount the Borrower shall be required to mandatorily prepay pursuant to Section 2.8(c)(ii) shall be reduced by the Restricted Asset Sale Amount until such time as it may repatriate such Restricted Asset Sale Amount without incurring such tax liability.
(vi) Notwithstanding any provision under this Section 2.8(c) to the contrary, for purposes of calculating the amount of the ECF Payment in Section 2.8(c)(iii), “Excess Cash Flow” will be deemed to be reduced by the amount of Excess Cash Flow generated by a Subsidiary of LGEC (A) that would be prohibited under any Applicable Law (including any such laws with respect to financial assistance, corporate benefit, thin capitalization, capital maintenance, liquidity maintenance and similar legal principles, restrictions on upstreaming of cash intra group and the fiduciary and statutory duties of directors of the relevant Subsidiaries) from being repatriated to the United States, Canada or other relevant jurisdiction or (B) that LGEC determines in good faith would result in a tax liability that is material to the amount of funds otherwise required to be repatriated (including any withholding tax) if repatriated to the United States, Canada or other relevant jurisdiction (the amount of such Foreign Subsidiary Excess Cash Flow in clauses (A) and (B) without duplication, the “Restricted ECF Amount”); provided that such amounts in clause (A) shall only constitute a Restricted ECF Amount for so long as such repatriation to the United States, Canada or other relevant jurisdiction is prohibited under Applicable Laws, and in clause (B) shall only constitute Restricted ECF Amount for so long as such repatriation would result in such tax liability.
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(vii) Notwithstanding the foregoing, each Term B Lender shall have the right to reject its applicable Term Loan Percentage of any mandatory prepayment of the Term Loans pursuant to Section 2.8(c)(i) (other than Refinancing Indebtedness in respect of the Term Loans), (ii) and (iii) above (each such Lender, a “Rejecting Lender”); provided that any amount rejected by a Rejecting Lender shall be offered on a pro rata basis to the Term A Lenders, which they may elect to decline such prepayment, and thereafter any amounts so rejected may be retained by the Borrower.
(viii) Unless the Borrower otherwise directs, prepayments of Revolving Loans under this
Section 2.8(c) shall be applied first to Borrowings of Base Rate Loans until payment in full thereof with any balance applied to Borrowings of
EurodollarTerm
Benchmark Loans in the order in which their Interest Periods expire. Each prepayment of Loans under this Section 2.8(c) shall be made by the payment of the principal amount to be prepaid and,
in the case of any Term Loans or
EurodollarTerm
Benchmark Loans, accrued interest thereon to the date of prepayment together with any amounts due the Lenders under Section 3.6. Except as otherwise provided in Section 2.8(c)(i),
Section 2.8(c)(ii) or Section 2.8(c)(iii), mandatory prepayments of the Term Loans shall be applied to each Class of Term Loans on a pro rata basis. All mandatory prepayments shall be applied to the installments of the Term Loans
being repaid in the direct order of maturity other than with respect to that portion of any installment held by a Rejecting Lender.
(d) Defaulting Lenders. Until such time as the Default Excess (as defined below) with respect to any Defaulting Lender has been reduced to zero, (i) any voluntary prepayment of the Revolving Loans pursuant to Section 2.8(b) shall, if the Borrower so directs at the time of making such voluntary prepayment, be applied to the Revolving Loans of other Lenders as if such Defaulting Lender had no loans outstanding and the Revolving Credit Commitments of such Defaulting Lender were zero and (ii) any mandatory prepayment of the Loans pursuant to Section 2.8(c) shall, if the Borrower so directs at the time of making such mandatory prepayment, be applied to the Loans of other Lenders (but not to the Loans of such Defaulting Lender) as if such Defaulting Lender has funded all defaulted Loans of such Defaulting Lender, it being understood and agreed that the Borrower shall be entitled to retain any portion of any mandatory prepayment of the Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (d). “Default Excess” means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender’s Percentage of the aggregate outstanding principal amount of the applicable Loans of all the applicable Lenders (calculated as if all Defaulting Lenders (including such Defaulting Lender) had funded all of their respective defaulted Loans) over the aggregate outstanding principal amount of the applicable Loans of such Defaulting Lender.
(e) The Administrative Agent will promptly advise each Lender of any notice of prepayment it receives from the Borrower, and in the case of any partial prepayment under Section 2.8(a) hereof, such prepayment shall be applied to the Class of Term Loans and the remaining amortization payments on such Term Loans in the manner specified by the Borrower or, if not so specified on or prior to the date of such optional prepayment, on a pro rata basis to all Classes of Term Loans in the direct order of maturity.
SECTION 2.9. Place and Application of Payments.
(a) Each borrowing of a Class of Loans from the Lenders thereunder shall be made pro rata according to the Percentages of the applicable Lenders of such Class in effect on the date of such borrowing. Except as otherwise provided in this Credit Agreement, each payment on account of any Commitment Fee shall be allocated by the Administrative Agent among the Lenders under the applicable Class in accordance with their respective Percentages. Except as otherwise provided in this Credit Agreement, any reduction of a Class of Revolving Credit Commitments of the Lenders shall be allocated by the Administrative Agent among the Revolving Lenders pro rata according to the Percentages of the Revolving Lenders with respect thereto. Except as otherwise provided in this Credit Agreement, each payment (including each prepayment) by the Borrower hereunder on account of principal, interest or commitment fees on a Class of its Loans shall be allocated by the Administrative Agent pro rata to the Lenders of such Class according to the respective outstanding principal amounts thereof.
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(b) All payments of principal of and interest on the Loans and the Reimbursement Obligations, and of all other fees and amounts payable by the Borrower under this Credit Agreement and the other Fundamental Documents, shall be made by the Borrower to the Administrative Agent by no later than 2:00 p.m. on the due date thereof at the office of the Administrative Agent in New York, New York (or such other location as the Administrative Agent may designate to the Borrower in writing) for the benefit of the Lender or Lenders entitled thereto. Any payments received after such time shall be deemed to have been received by the Administrative Agent on the next Business Day. All such payments shall be made in Dollars, in immediately available funds at the place of payment, in each case without set-off or counterclaim, except as provided in Section 10.2. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest on Loans and on Reimbursement Obligations in which the Lenders have purchased Participating Interests ratably to the Lenders and like funds relating to the payment of any other amount payable to any Lender to such Lender, in each case to be applied in accordance with the terms of this Credit Agreement.
(c) Anything contained herein to the contrary notwithstanding, (x) pursuant to the exercise of remedies under Section 8.2 and Section 8.3 hereof or (y) after written instruction by the Required Lenders or Required RC/TLA Lenders, as applicable, after the occurrence and during the continuation of an Event of Default, all payments and collections received in respect of the Obligations and all proceeds of the Collateral received, in each instance, by the Administrative Agent or any of the Lenders, shall be remitted to the Administrative Agent and distributed as follows:
(i) first, to the payment of any outstanding costs and expenses incurred by the Administrative Agent, and any security trustee therefor, in monitoring, verifying, protecting, preserving or enforcing the Liens on the Collateral, in protecting, preserving or enforcing rights under the Fundamental Documents, and in any event all costs and expenses of a character which the Borrower has agreed to pay the Administrative Agent under Section 11.4 hereof (such funds to be retained by the Administrative Agent for its own account unless it has previously been reimbursed for such costs and expenses by the Lenders, in which event such amounts shall be remitted to the Lenders to reimburse them for payments theretofore made to the Administrative Agent);
(ii) second, to the payment of any outstanding interest and fees due under the Fundamental Documents to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof;
(iii) third, to the payment of principal on the Term Loans, Revolving Loans, unpaid Reimbursement Obligations (together with amounts to be held by the Administrative Agent as collateral security for any outstanding L/C Obligations pursuant to Section 8.4 hereof (until the Administrative Agent is holding an amount of cash equal to the then outstanding amount of all Letters of Credit), to the extent the same have not been replaced or cancelled or otherwise provided for to the reasonable satisfaction of the Issuing Bank), any unpaid amounts in respect of Specified Swap Agreements and Specified Cash Management Agreements, the aggregate amount paid to (or held as collateral security for) the Lenders and, in the case of Specified Swap Agreements and Specified Cash Management Agreements, their Affiliates, to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof;
(iv) fourth, to the payment of all other unpaid Obligations and all other indebtedness, obligations, and liabilities of LGEC and its Subsidiaries secured by the Collateral Documents to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof; and
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(v) fifth, to the Borrower or whoever else may be lawfully entitled thereto.
Notwithstanding the foregoing, no amounts received from any Guarantor shall be applied to any Excluded Swap Obligations of such Guarantor.
SECTION 2.10. Commitment Terminations.
(a) The Existing Term A Loan Commitments and the Term B Loan Commitments automatically terminated upon the making of the Existing Term A Loans and the Term B Loans on the Restatement Date.
(b) The Borrower shall have the right at any time and from time to time, upon three Business Days’ prior written notice to the Administrative Agent (which notice may conditioned upon the effectiveness of other credit facilities, indentures or similar agreements or other transactions, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied), to terminate the Revolving Credit Commitments in whole or in part, any partial termination to be (i) in an amount not less than $500,000 or any greater amount that is an integral multiple of $100,000 and (ii) allocated ratably among the Lenders in proportion to their respective Revolver Percentages, provided that any such partial termination may, at the election of the Borrower, be applied to the 2023 Revolving Credit Commitments prior to the 2026 Revolving Credit Commitments (any such partial termination of the 2023 Revolving Credit Commitments, a “2023 Revolving Credit Commitment Reduction”); provided that the Revolving Credit Commitments may not be reduced to an amount less than the sum of the aggregate principal amount of Revolving Loans and of L/C Obligations then outstanding; provided further that (i) all 2023 Revolving Credit Commitments shall terminate automatically on the 2023 Revolving Credit Termination Date and (ii) all 2026 Revolving Credit Commitments shall terminate automatically on the 2026 Revolving Credit Termination Date. Any termination of the Revolving Credit Commitments below the L/C Sublimit then in effect shall reduce the L/C Sublimit by a like amount. The Administrative Agent shall give prompt notice to each Lender of any such termination (in whole or in part) of the Revolving Credit Commitments. Any termination of the Revolving Credit Commitments pursuant to this Section 2.10 may not be reinstated.
SECTION 2.11. Evidence of Indebtedness.
(a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(b) The Administrative Agent shall also maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Class
thereof, the type thereof and, with respect to
EurodollarTerm
Benchmark Loans, the Interest Period with respect thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof.
(c) The entries maintained in the accounts maintained pursuant to clauses (a) and (b) above shall be prima facie evidence of the existence and amounts of the Loans and interest therein recorded; provided, however, that the failure of the Administrative Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay such Loans in accordance with their terms.
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(d) Any Lender may request that its Loans be evidenced by a promissory note or notes in the forms of Exhibit C-1 (in the case of its Term A Loan and referred to herein as a “Term A Note”), Exhibit C-2 (in the case of its Term B Loan and referred to herein as a “Term B Note”), Exhibit C-3 (in the case of its Revolving Loans and referred to herein as a “Revolving Note”), as applicable (the Term A Notes, Term B Notes and Revolving Notes being hereinafter referred to collectively as the “Notes” and individually as a “Note”). In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to such Lender in the amount of such Lender’s Percentage of the applicable Term Loan or Revolving Credit Commitment, as applicable. Thereafter, the Loans evidenced by such Note or Notes and interest thereon shall at all times (including after any assignment pursuant to Section 11.3) be represented by one or more Notes, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in subsections (a) and (b) above.
SECTION 2.12. Fees.
(a) Revolving Credit Commitment Fee. The Borrower shall pay to the Administrative Agent for the ratable account of the Lenders according to their Revolver Percentages a commitment fee at a rate per annum equal to the applicable Commitment Fee Rate (computed on the basis of a year of 360 days and the actual number of days elapsed) on the average daily Unused Revolving Credit Commitments (the “Commitment Fee”); provided, however, that no Commitment Fee shall accrue to the Unused Revolving Credit Commitment of a Defaulting Lender, or be payable for the benefit of such Lender, so long as such Lender shall be a Defaulting Lender. Such Commitment Fee shall be payable quarterly in arrears on each Fee Payment Date (commencing on the first such date occurring after the Restatement Date).
(b) Letter of Credit Fees. Quarterly in arrears, on each Fee Payment Date, commencing on the first such date occurring after the
Restatement Date, the Borrower shall pay to the Issuing Banks for their own account a fronting fee equal to 0.125% of the face amount of (or of the increase in the face amount of) each outstanding Letter of Credit. Quarterly in arrears, on each Fee
Payment Date, commencing on the first such date occurring after the Restatement Date, the Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders according to their Revolver Percentages, a letter of credit fee at a
rate per annum equal to the Applicable Margin then in effect with respect to EurodollarTerm Benchmark Loans under the Revolving Facility (computed on the basis
of a year of 360 days and the actual number of days elapsed) during each day of such quarter applied to the daily average face amount of Letters of Credit outstanding during such quarter; provided that no letter of credit fee shall accrue to
the Revolver Percentage of a Defaulting Lender, or be payable for the benefit of such Lender, so long as such Lender shall be a Defaulting Lender. In addition, the Borrower shall pay to the Issuing Banks for their own account the Issuing Banks’
standard drawing, negotiation, amendment, transfer and other administrative fees for each Letter of Credit. Such standard fees referred to in the preceding sentence may be established by the Issuing Banks from time to time.
(c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent pursuant to the Administrative Agent Fee Letter or otherwise.
(d) Fees Generally. All fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the applicable Lenders, except that the Borrower shall pay the fronting fees directly to the applicable Issuing Bank. Once paid when due and payable, none of the fees shall be refundable under any circumstances.
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SECTION 2.13. Incremental Credit Extensions.
(a) At any time and from time to time after the Restatement Date, subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly make such notice available to each of the Lenders), pursuant to an Incremental Amendment (“Incremental Amendment”) request to effect (i) one or more additional term loan facilities hereunder or increases in the aggregate amount of any Term Facility (each such increase, a “Term Commitment Increase”) from one or more Additional Term Lenders or (ii) one or more additional revolving credit facilities (each such additional facility, an “Incremental Revolving Credit Facility”) or increases in the aggregate amount of the Revolving Credit Commitments (each such increase, a “Revolving Credit Commitment Increase” and together with any Term Commitment Increase, any Incremental Term Facility and any Incremental Revolving Credit Facility, a “Commitment Increase”) from Additional Revolving Lenders; provided that, unless otherwise provided below, upon the effectiveness of each Incremental Amendment:
(A) except as otherwise agreed by the Additional Term Lenders providing an Incremental Facility to finance a Specified Acquisition permitted under this Credit Agreement, (i) no Default or Event of Default shall have occurred and be continuing or would exist after giving effect thereto, and (ii) the representations and warranties made by the Credit Parties pursuant to the Fundamental Documents shall be true and correct in all material respects (or in all respects, if qualified by materiality); provided that representations and warranties that are expressly stated to be as of an earlier date shall be accurate in all material respects as of such earlier date (or in all respects, if qualified by materiality) immediately prior to, and after giving effect to, the incurrence of such Incremental Facility,
(B) so long as any Revolving Credit Commitments or Term A Loans are outstanding on such date, on the date of the incurrence or effectiveness of such Incremental Facility (in the case of the incurrence or effectiveness of an Incremental Revolving Credit Facility, assuming such Incremental Revolving Credit Facility has been drawn in full), LGEC shall be in compliance, on a Pro Forma Basis, with the financial ratios set forth in Section 7.9(a) and (b) for the relevant fiscal quarter;
(C) each Incremental Term A Facility shall have a final maturity date no earlier than the Term A Termination Date then in effect,
(D) each Incremental Term B Facility and each other Incremental Term Facility (other than an Incremental Term A Facility) shall have a final maturity date no earlier than the Term B Termination Date then in effect,
(E) the Average Life of any Incremental Term A Loans shall not be shorter than the Average Life of the Term A Loans then outstanding,
(F) the Average Life of any Incremental Term B Loans and any other Incremental Term Loans (other than Incremental Term A Loans) shall not be shorter than the Average Life of the Term B Loans then outstanding,
(G) any Incremental Revolving Loans will mature no earlier than, and will require no scheduled amortization or mandatory reduction of the commitments related thereto prior to, the Revolving Credit Termination Date then in effect and all other terms of any such Incremental Revolving Credit Facility shall be substantially identical to the Revolving Facility,
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(H) the interest rate applicable to any Incremental Term Facility or Incremental Term Loans will be determined by the Borrower and the Additional Lenders providing such Incremental Term Facility or Incremental Term Loans; provided that, in the case of Incremental Term Loans (other than Incremental Term A Loans) or Incremental Term Facilities (other than Incremental Term A Facilities) that are secured pari passu in right of payment and with respect to security with any then existing Term B Loans (the “Relevant Existing Facility”), such interest rate will not be more than 0.50% higher than the corresponding interest rate applicable to the Relevant Existing Facility unless the interest rate with respect to the Relevant Existing Facility is adjusted to be equal to the interest rate with respect to the relevant Incremental Term Loans or Incremental Term Facility, minus 0.50%; provided, further, that in determining the applicable interest rate under this clause (H): (w) original issue discount or upfront fees paid in connection with the Relevant Existing Facility or such Incremental Term Facility or Incremental Term Loans (based on a four-year average life to maturity), shall be included assuming a four year life to maturity, (x) any amendments to or changes in the Applicable Margin with respect to the Relevant Existing Facility that became effective subsequent to the Restatement Date but prior to the time of (or concurrently with) the addition of such Incremental Term Facility or Incremental Term Loans shall be included, (y) arrangement, commitment, structuring and underwriting fees and any amendment fees paid or payable to the Arrangers (or their affiliates) in their respective capacities as such in connection with the Relevant Existing Facility or to one or more arrangers (or their affiliates) in their capacities as such applicable to such Incremental Term Facility or Incremental Term Loans shall be excluded and (z) if such Incremental Term Facility or Incremental Term Loans include any interest rate floor which is less or greater than that applicable to the Relevant Existing Facility, and a floor is applicable to the Relevant Existing Facility on the date of determination, such lesser or greater amount shall correspondingly reduce or increase interest margin for determining the increase,
(I) all Incremental Term Facilities shall rank pari passu or junior in right of payment and right of security in respect of the Collateral with the Term Loans or may be unsecured; provided that to the extent any such Incremental Term Facilities are subordinated in right of payment or right of security, or pari passu in right of security and subject to separate documentation, they shall be subject to an Intercreditor Agreement,
(J) no Incremental Facility shall be guaranteed by any Person which is not a Credit Party,
(K) any mandatory prepayment (other than scheduled amortization payments) of Incremental Term Loans that are pari passu in right of payment with any then-existing Term Loans shall be made on a pro rata basis with such then-existing Term Loans (and all other then-existing Incremental Term Loans requiring ratable prepayment), except that the Borrower and the Additional Lenders in respect of such Incremental Term Loans shall be permitted, in their sole discretion, to elect to prepay or receive, as applicable, any prepayments on a less than pro rata basis (but not on a greater than pro rata basis), notwithstanding anything in this Credit Agreement or any other Fundamental Document to the contrary,
(L) LGEC shall have delivered to the Administrative Agent a certificate of a financial officer certifying to the effect set forth in subclauses (A) and (B), if applicable, above, together with, if applicable, reasonably detailed calculations demonstrating compliance with subclause (B) above, and
(M) to the extent the terms of any Incremental Term Loans are not substantially identical to the terms applicable to the relevant Term Facility (except with respect to pricing and fees and to the extent permitted by the foregoing clauses above and other than any terms which are applicable only after the then-existing maturity date with respect to the relevant Term Facility), such terms shall be reasonably satisfactory to the Administrative Agent.
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(b) Notwithstanding anything to contrary herein, the aggregate principal amount of all Commitment Increases after the Restatement Date shall not exceed (i) $500,000,000 (less the aggregate principal amount of Incremental Equivalent Debt incurred pursuant to Section 7.1(c)(i)(B) in reliance on this clause (i) of the Incremental Cap) (the “Fixed Dollar Incremental Amount”), plus (ii) an unlimited amount so long as in the case of this clause (ii), the Net First Lien Leverage Ratio does not exceed 4.50 to 1.00, determined on a Pro Forma Basis after giving effect to such Commitment Increase and the application of the proceeds thereof and any related transaction, assuming (x) that all such Indebtedness incurred pursuant to such Commitment Increase (including the Incremental Equivalent Debt) is secured on a first lien basis even if not so secured, and (y) in the case of an Incremental Revolving Credit Facility, such Incremental Revolving Credit Facility has been drawn in full as of the last day of the most recently ended period of four consecutive fiscal quarters for which financial statements have been or were required to be delivered pursuant to Section 6.1(a) and Section 6.1(b) (such amount under this clause (ii), the “Ratio-Based Incremental Amount”); provided, that any Incremental Facility may be incurred under either clause (i) or clause (ii) as selected by the Borrower in its sole discretion, including by designating any portion of any Incremental Facility in excess of an amount permitted to be incurred under clause (ii) at the time of such incurrence as incurred under clause (i), and unless the Borrower otherwise elects, any portion of any Commitment Increase that could be established in reliance on this clause (ii) at the time of incurrence shall be deemed to have been incurred in reliance on the Ratio-Based Incremental Amount without reducing the Fixed Dollar Incremental Amount (the total aggregate amount described under clauses (i) and (ii) hereof, the “Incremental Cap”). Each Commitment Increase shall be in a minimum principal amount of $10,000,000 and integral multiples of $1,000,000 million in excess thereof; provided that such amount may be less than $10,000,000 if such amount represents all the remaining availability under the aggregate principal amount of Commitment Increases set forth above. No Lender shall be obligated to provide any Commitment Increase unless it so agrees.
(c) Each notice from the Borrower pursuant to this Section 2.13 shall set forth the requested amount of the relevant Commitment Increase.
(d) Upon the implementation of any Incremental Revolving Credit Facility or Revolving Credit Commitment Increase pursuant to this Section 2.13, (A) each Revolving Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each relevant Additional Revolving Lender, and each relevant Additional Revolving Lender will automatically and without further act be deemed to have assumed a portion of such Revolving Lender’s Participating Interests such that, after giving effect to each deemed assignment and assumption of participations, all of the Revolving Lenders’ (including each Additional Revolving Lender’s) Participating Interests shall be held on a pro rata basis on the basis of their Revolver Percentage (after giving effect to any Revolving Credit Commitment Increase) and (B) the existing Revolving Lenders of the applicable Class shall assign Revolving Loans to certain other Revolving Lenders of such Class (including the Additional Revolving Lenders providing the relevant Revolving Credit Commitment Increase), and such other Revolving Lenders (including the Additional Revolving Lenders providing the relevant Revolving Credit Commitment Increase) shall purchase such Revolving Loans, in each case to the extent necessary so that all of the Revolving Lenders of such Class participate in each outstanding Borrowing of Revolving Loans of such Class pro rata on the basis of their Revolver Percentage (after giving effect to any Revolving Credit Commitment Increase); it being understood and agreed that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Credit Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.
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(e) Effective on the date of each Incremental Revolving Credit Facility the maximum amount of L/C Exposure permitted hereunder shall increase by an amount, if any, agreed upon by the Administrative Agent, the Issuing Banks and the Borrower; provided that the L/C Exposure shall not exceed the Revolving Credit Commitment after giving effect to the Incremental Revolving Credit Facility.
(f) An Incremental Amendment may, subject to Section 2.13(a), without the consent of any other Lenders, effect such amendments to this Credit Agreement and the other Fundamental Documents as may be necessary, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.13 (including, in connection with a Revolving Credit Commitment Increase, to reallocate Revolving Exposure on a pro rata basis among the relevant Revolving Lenders).
SECTION 2.14. Extensions of Term Loans and Revolving Credit Commitments.
(a) Notwithstanding anything to the contrary in this Credit Agreement, pursuant to one or more offers (each, an “Extension Offer”) made from time to time by the Borrower after the Restatement Date to all Lenders holding Term A Loans or Term B Loans, with a like maturity date or Revolving Credit Commitments with a like maturity date, in each case on a pro rata basis (based on the aggregate outstanding principal amount of the respective Term Loans or Revolving Credit Commitments with a like maturity date, as the case may be) and on the same terms to each such Lender, the Borrower is hereby permitted to consummate from time to time transactions with individual Lenders that accept the terms contained in such Extension Offers to extend the maturity date of all or a portion of each such Lender’s Term Loans and/or Revolving Credit Commitments and otherwise modify the terms of such Term Loans and/or Revolving Credit Commitments pursuant to the terms of the relevant Extension Offer (including by increasing the interest rate or fees payable in respect of such Term Loans and/or Revolving Credit Commitments (and related outstandings) and/or modifying the amortization schedule in respect of such Term Loans) (each, an “Extension,” and each group of Term Loans or Revolving Credit Commitments, as applicable, in each case as so extended, as well as the original Term Loans and the original Revolving Credit Commitments (in each case not so extended), being a “tranche”; any Extended Term Loans shall constitute a separate tranche of Term Loans from the tranche of Term Loans from which they were converted and any Extended Revolving Credit Commitments shall constitute a separate tranche of Revolving Credit Commitments from the tranche of Revolving Credit Commitments from which they were converted), so long as the following terms are satisfied:
(i) no Default or Event of Default shall have occurred and be continuing at the time the offering document in respect of an Extension Offer is delivered to the Lenders;
(ii) except as to interest rates, fees and final maturity (which shall be determined by the Borrower and set forth in the relevant Extension Offer), the Revolving Credit Commitment of any Lender that agrees to an extension with respect to such Revolving Credit Commitment extended pursuant to an Extension (an “Extended Revolving Credit Commitment”; and the Loans thereunder, “Extended Revolving Loans”), and the related outstandings, shall be a Revolving Credit Commitment (or related outstandings, as the case may be) with the same terms (or terms not less favorable to existing Lenders) as the original Revolving Credit Commitments (and related outstandings); provided that (x) subject to the provisions of Section 2.3(k) to the extent dealing with Letters of Credit which mature or expire after a maturity date when there exist Extended Revolving Credit Commitments with a longer maturity date, all Letters of Credit shall be participated in on a pro rata basis by all Lenders with Extended Revolving Credit Commitments in accordance with their Revolver Percentages (and except as provided in Section 2.3(k), without giving effect to changes thereto on an earlier maturity date with respect to Letters of Credit theretofore incurred or issued), (y) all borrowings and repayments
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(except for (A) payments of interest and fees at different rates on Extended Revolving Credit Commitments (and related outstandings), (B) repayments required upon the maturity date of the non-extending Revolving Credit Commitments and (C) repayments made in connection with a permanent repayment and reduction or termination of commitments) of Extended Revolving Loans after the applicable Extension date shall be made on a pro rata basis with all other Revolving Credit Commitments and (z) at no time shall there be Revolving Credit Commitments hereunder (including Extended Revolving Credit Commitments, any commitments with respect to any Incremental Revolving Credit Facility and any original Revolving Credit Commitments) that have more than three (3) different maturity dates;
(iii) except as to interest rates, fees, amortization, final maturity date, premium, required prepayment dates and participation in prepayments (which shall, subject to immediately succeeding clauses (iv), (v) and (vi), be determined by the Borrower and set forth in the relevant Extension Offer), the Term Loans of any Lender that agrees to an extension with respect to such Term Loans extended pursuant to any Extension (any such extended Term Loans, “Extended Term Loans”) shall have the same terms as the tranche of Term Loans subject to such Extension Offer until the maturity of such Term Loans;
(iv) (A) the final maturity date of any Extended Term Loans consisting of Term A Loans shall be no earlier than the Term A Termination Date and (B) the final maturity date of any Extended Term Loans consisting of Term B Loans shall be no earlier than the Term B Termination Date;
(v) (A) the Average Life of any Extended Term Loans consisting of Term A Loans shall be no shorter than the remaining Average Life of the Term A Loans extended thereby and (B) the Average Life of any Extended Term Loans consisting of Term B Loans shall be no shorter than the remaining Average Life of the Term B Loans extended thereby;
(vi) any Extended Term Loans may participate on a pro rata basis or a less than pro rata basis (but not greater than a pro rata basis) in any voluntary or mandatory repayments or prepayments in respect of the applicable Term Facility, in each case as specified in the respective Extension Offer, notwithstanding anything in this Credit Agreement or any other Fundamental Document to the contrary;
(vii) if the aggregate principal amount of Term Loans (calculated on the face amount thereof) or Revolving Credit Commitments, as the case may be, in respect of which Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate principal amount of Term Loans or Revolving Credit Commitments, as the case may be, offered to be extended by the Borrower pursuant to such Extension Offer, then the Term Loans or Revolving Loans, as the case may be, of such Lenders shall be extended ratably up to such maximum amount based on the respective principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Extension Offer;
(viii) the Extensions shall be in a minimum amount of $50,000,000;
(ix) any applicable Minimum Extension Condition shall be satisfied or waived by the Borrower; and
(x) all documentation in respect of such Extension shall be consistent with the foregoing.
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(b) With respect to all Extensions consummated by the Borrower pursuant to this Section 2.14, (i) such Extensions shall not constitute voluntary or mandatory payments or prepayments or commitment reductions for purposes of Section 2.8, 2.9, 2.10 or Section 2.11, (ii) the amortization schedules (insofar as such schedule affects payments due to Lenders participating in the relevant Facility) set forth in Section 2.7 shall be adjusted to give effect to the Extension of the relevant Facility and (iii) except as required by clause (a)(viii) above, no Extension Offer is required to be in any minimum amount or any minimum increment; provided that the Borrower may at its election specify as a condition (a “Minimum Extension Condition”) to consummating any such Extension that a minimum amount (to be determined and specified in the relevant Extension Offer in the Borrower’s sole discretion and which may be waived by the Borrower) of Term Loans or Revolving Credit Commitments (as applicable) of any or all applicable tranches to be tendered. The Administrative Agent and the Lenders hereby consent to the transactions contemplated by this Section 2.14 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended Term Loans and/or Extended Revolving Credit Commitments on such terms as may be set forth in the relevant Extension Offer) and hereby waive the requirements of any provision of this Credit Agreement (including Section 2.8, 2.9, 2.10 or Section 2.11) or any other Fundamental Document that may otherwise prohibit any such Extension or any other transaction contemplated by this Section 2.14.
(c) No consent of any Lender or the Administrative Agent shall be required to effectuate any Extension, other than (A) the consent of each Lender agreeing to such Extension with respect to one or more of its Term Loans and/or Revolving Credit Commitments (or a portion thereof) and (B) with respect to any Extension of the Revolving Credit Commitments (or a portion thereof), the consent of the Issuing Banks, which consent shall not be unreasonably withheld or delayed. All Extended Term Loans and Extended Revolving Credit Commitments and all obligations in respect thereof shall be Obligations under this Credit Agreement and the other Fundamental Documents that are secured by the Collateral and guaranteed on a pari passu basis with all other applicable Obligations under this Credit Agreement and the other Fundamental Documents. The Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments to this Credit Agreement and the other Fundamental Documents with the Borrower as may be necessary in order to establish new tranches or sub-tranches in respect of Revolving Credit Commitments or Term Loans so extended and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranches or sub-tranches, in each case on terms consistent with this Section 2.14. In addition, if so provided in such amendment and with the consent of the Issuing Banks, participants in Letters of Credit expiring on or after the latest maturity date (but in no event later than the date that is five (5) Business Days prior to the Revolving Credit Termination Date) in respect of the Revolving Credit Commitments shall be re-allocated from Lenders holding non-extended Revolving Credit Commitments to Lenders holding Extended Revolving Credit Commitments in accordance with the terms of such amendment; provided, however, that such participation interests shall, upon receipt thereof by the relevant Lenders holding Revolving Credit Commitments, be deemed to be participation interests in respect of such Revolving Credit Commitments and the terms of such participation interests (including, without limitation, the commission applicable thereto) shall be adjusted accordingly. Without limiting the foregoing, in connection with any Extensions the respective Credit Parties shall (at their expense) amend (and the Administrative Agent is hereby directed to amend) any mortgage entered into in accordance with Section 6.14 that has a maturity date prior to the later of the Final Maturity Date and the Final Revolving Credit Termination Date so that such maturity date is extended to the later of the Final Maturity Date and the Final Revolving Credit Termination Date (or such later date as may be advised by local counsel to the Administrative Agent).
(d) In connection with any Extension, the Borrower shall provide the Administrative Agent at least five (5) Business Days’ (or such shorter period as may be agreed by the Administrative Agent) prior written notice thereof, and shall agree to such procedures (including regarding timing, rounding and other adjustments and to ensure reasonable administrative management of the credit facilities hereunder after such Extension), if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably to accomplish the purposes of this Section 2.14.
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SECTION 2.15. Refinancing Facilities.
(a) Notwithstanding anything to the contrary in this Credit Agreement, the Borrower may by written notice to the Administrative Agent establish one or more additional tranches of term loans under this Credit Agreement (such loans, “Refinancing Term Loans”), all Net Cash Proceeds of which are used to refinance in whole or in part any Class of Term Loans pursuant to Section 2.8(c)(i). Each such notice shall specify the date (each, a “Refinancing Effective Date”) on which the Borrower proposes that the Refinancing Term Loans shall be made, which shall be a date not earlier than five (5) Business Days after the date on which such notice is delivered to the Administrative Agent (or such shorter period agreed to by the Administrative Agent in its sole discretion); provided that:
(i) before and after giving effect to the borrowing of such Refinancing Term Loans on the Refinancing Effective Date each of the conditions set forth in Section 5.2 shall be satisfied;
(ii) the final maturity date of the Refinancing Term Loans shall be no earlier than the maturity date of the refinanced Term Loans;
(iii) the Average Life of such Refinancing Term Loans shall be no shorter than the then-remaining Average Life of the refinanced Term Loans;
(iv) the aggregate principal amount of the Refinancing Term Loans shall not exceed the outstanding principal amount of the refinanced Term Loans plus amounts used to pay fees, premiums, costs and expenses (including original issue discount) and accrued interest associated therewith and other fees, costs and expenses relating thereto;
(v) all other terms applicable to such Refinancing Term Loans (other than provisions relating to original issue discount, upfront fees, interest rates and any other pricing terms (which original issue discount, upfront fees, interest rates and other pricing terms shall not be subject to the provisions set forth in Section 2.13(a)(H)) and optional prepayment or mandatory prepayment or redemption terms, which shall be as agreed between the Borrower and the Lenders providing such Refinancing Term Loans) shall be substantially similar to, or no less favorable to LGEC and its Subsidiaries, when taken as a whole, than (as reasonably determined by LGEC), the terms, taken as a whole, applicable to the Term Loans being refinanced (except to the extent such covenants and other terms apply solely to any period after the latest maturity date applicable to the Term Loans being refinanced unless less favorable terms are added for the benefit of the existing Lenders);
(vi) with respect to Refinancing Term Loans secured by Liens on the Collateral, such Liens rank pari passu in right of security to the Term Loans and are subject to a customary Intercreditor Agreement;
(vii) there shall be no borrower (other than the Borrower or another Credit Party organized and existing under laws of Canada, any province of Canada, the United States of America, any State of the United States or the District of Columbia) and no guarantors (other than the Guarantors) in respect of such Refinancing Term Loans; and
(viii) Refinancing Term Loans shall not be secured by any assets of LGEC and its Subsidiaries other than the Collateral.
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(b) The Borrower may approach any Lender or any other person that would be an Eligible Assignee to provide all or a portion of the Refinancing Term Loans; provided that any Lender offered or approached to provide all or a portion of the Refinancing Term Loans may elect or decline, in its sole discretion, to provide a Refinancing Term Loan. Any Refinancing Term Loans made on any Refinancing Effective Date shall be designated an additional Class of Term Loans for all purposes of this Credit Agreement; provided, further, that any Refinancing Term Loans may, to the extent provided in the applicable Refinancing Amendment governing such Refinancing Term Loans, be designated as an increase in any previously established Class of Term Loans made to the Borrower.
(c) Notwithstanding anything to the contrary in this Credit Agreement, the Borrower may by written notice to the Administrative Agent establish one or more additional Facilities (“Replacement Revolving Facilities”) providing for revolving commitments (“Replacement Revolving Credit Commitments”), which replace in whole or in part any Class of Revolving Credit Commitments under this Credit Agreement. Each such notice shall specify the date (each, a “Replacement Revolving Credit Facility Effective Date”) on which the Borrower proposes that the Replacement Revolving Credit Commitments shall become effective, which shall be a date not less than five (5) Business Days after the date on which such notice is delivered to the Administrative Agent (or such shorter period agreed to by the Administrative Agent in its reasonable discretion); provided that:
(i) before and after giving effect to the establishment of such Replacement Revolving Credit Commitments on the Replacement Revolving Credit Facility Effective Date, each of the conditions set forth in Section 5.2 shall be satisfied;
(ii) after giving effect to the establishment of any Replacement Revolving Credit Commitments and any concurrent reduction in the aggregate amount of any other Revolving Credit Commitments, the aggregate amount of Revolving Credit Commitments shall not exceed the aggregate amount of the Revolving Credit Commitments outstanding immediately prior to the applicable Replacement Revolving Credit Facility Effective Date plus amounts used to pay fees, premiums, costs and expenses (including original issue discount) and accrued interest associated therewith and other fees, costs and expenses relating thereto;
(iii) no Replacement Revolving Credit Commitments shall have a final maturity date (or require commitment reductions or amortizations) prior to the Revolving Credit Termination Date for the Revolving Credit Commitments being replaced;
(iv) all other terms applicable to such Replacement Revolving Facility (other than provisions relating to (x) fees, interest rates and other pricing terms and prepayment and commitment reduction and optional redemption terms which shall be as agreed between the Borrower and the Lenders providing such Replacement Revolving Credit Commitments and (y) the amount of any letter of credit sublimit under such Replacement Revolving Facility, which shall be as agreed between the Borrower, the Lenders providing such Replacement Revolving Credit Commitments, the Administrative Agent and the replacement issuing bank, if any, under such Replacement Revolving Credit Commitments), when taken as a whole, shall be substantially similar to, or no less favorable to LGEC and its Subsidiaries than (as reasonably determined by LGEC), those, taken as a whole, applicable to the Revolving Credit Commitments so replaced (except to the extent such covenants and other terms apply solely to any period after the latest Revolving Credit Termination Date in effect at the time of incurrence or added for the benefit of the existing Lenders);
(v) there shall be no borrower (other than the Borrower) and no guarantors (other than the Guarantors) in respect of such Replacement Revolving Facility;
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(vi) Replacement Revolving Credit Commitments and extensions of credit thereunder shall not be secured by any asset of LGEC and its Subsidiaries other than the Collateral; and
(vii) if such Replacement Revolving Facility is secured by Liens on the Collateral, such Liens rank pari passu in right of security to the Revolving Loans and are subject to a customary Intercreditor Agreement.
(d) The Borrower may approach any Lender or any other person that would be an Eligible Assignee of a Revolving Credit Commitment to provide all or a portion of the Replacement Revolving Credit Commitments; provided that any Lender offered or approached to provide all or a portion of the Replacement Revolving Credit Commitments may elect or decline, in its sole discretion, to provide a Replacement Revolving Credit Commitment. Any Replacement Revolving Credit Commitment made on any Replacement Revolving Credit Facility Effective Date shall be designated an additional Class of Revolving Credit Commitments for all purposes of this Credit Agreement; provided that any Replacement Revolving Credit Commitments may, to the extent provided in the applicable Refinancing Amendment, be designated as an increase in any previously established Class of Revolving Credit Commitments.
(e) The Borrower and each Lender providing the applicable Refinancing Term Loans and/or Replacement Revolving Credit Commitments (as applicable) shall execute and deliver to the Administrative Agent an amendment to this Credit Agreement (a “Refinancing Amendment”) and such other documentation as the Administrative Agent shall reasonably specify to evidence such Refinancing Term Loans and/or Replacement Revolving Credit Commitments (as applicable). For purposes of this Credit Agreement and the other Fundamental Documents, (A) if a Lender is providing a Refinancing Term Loan, such Lender will be deemed to have a Term Loan having the terms of such Refinancing Term Loan and (B) if a Lender is providing a Replacement Revolving Credit Commitment, such Lender will be deemed to have a Revolving Credit Commitment having the terms of such Replacement Revolving Credit Commitment. Notwithstanding anything to the contrary set forth in this Credit Agreement or any other Fundamental Document (including without limitation this Section 2.15), (i) no Refinancing Term Loan or Replacement Revolving Credit Commitment is required to be in any minimum amount or any minimum increment, (ii) there shall be no condition to any incurrence of any Refinancing Term Loan or Replacement Revolving Credit Commitment at any time or from time to time other than those set forth in clauses (a) or (c) above, as applicable, and (iii) all Refinancing Term Loans, Replacement Revolving Credit Commitments and all obligations in respect thereof shall be Obligations under this Credit Agreement and the other Fundamental Documents that rank equally and ratably in right of security with the Term Loans and other Obligations.
SECTION 2.16. Defaulting Lenders. Notwithstanding any provision of this Credit Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a) Fees shall cease to accrue for such Defaulting Lender pursuant to Section 2.12.
(b) The Revolving Credit Commitments, Loans and Revolving Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders, Required RC Lenders or Required RC/TLA Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 11.12); provided that this Section 2.16(b) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification effecting (i) an increase or extension of such Defaulting Lender’s Revolving Credit Commitment or (ii) the reduction or excuse of principal amount of, or interest or fees payable on, such Defaulting Lender’s Loans or the postponement of the scheduled date of payment of such principal amount, interest or fees to such Defaulting Lender.
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(c) If any Letters of Credit exist at the time such Lender becomes a Defaulting Lender then:
(i) Such Defaulting Lender’s L/C Exposure shall be reallocated among the non-Defaulting Lenders in accordance with their respective Revolver Percentages (but excluding the Revolving Credit Commitments of all the Defaulting Lenders from both the numerator and the denominator) but only to the extent (x) the sum of all the Revolving Exposure owed to all non-Defaulting Lenders does not exceed the total of all non-Defaulting Lenders’ Unused Revolving Credit Commitments, (y) the Revolving Exposure owed to any non-Defaulting Lender does not exceed such non-Defaulting Lender’s Revolving Credit Commitment, (z) the representations and warranties of each Credit Party set forth in the Fundamental Documents to which it is a party are true and correct at such time, except to the extent that any such representation and warranty relates to an earlier date (in which case such representation and warranty shall be true and correct as of such earlier date), and (z) no Default shall have occurred and be continuing at such time;
(ii) If the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall, within two Business Days following notice by the Administrative Agent, cash collateralize for the benefit of relevant Issuing Banks such Defaulting Lender’s L/C Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) for so long as any Letters of Credit are outstanding;
(iii) If the Borrower cash collateralizes any portion of such Defaulting Lender’s L/C Exposure pursuant clause (ii) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s L/C Exposure during the period such Defaulting Lender’s L/C Exposure is cash collateralized by the Borrower;
(iv) If L/C Exposures of the non-Defaulting Lenders are reallocated pursuant to clause (i) above, then the fees payable to the Revolving Lenders pursuant to Section 2.12(a) and Section 2.12(b) shall be adjusted to reflect such non-Defaulting Lenders’ L/C Exposure as reallocated; and
(v) If any Defaulting Lender’s L/C Exposure is neither cash collateralized nor reallocated pursuant to clauses (i) or (ii) above, then, without prejudice to any rights or remedies of the Issuing Banks or any Revolving Lender hereunder, all letter of credit fees payable under Section 2.12(b) with respect to such Defaulting Lender’s L/C Exposure shall be payable to each applicable Issuing Bank until such L/C Exposure is cash collateralized and/or reallocated.
(d) So long as such Defaulting Lender is a Defaulting Lender, the Issuing Banks shall not be required to issue, amend or increase any Letter of Credit, unless the related L/C Exposure will be 100% covered by the Unused Revolving Credit Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.16(c)(ii), and the participating interests in any such newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.16(c)(i) (and such Defaulting Lender shall not participate therein).
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The rights and remedies against a Defaulting Lender under this Credit Agreement are in addition to other rights and remedies that Borrower may have against such Defaulting Lender with respect to any funding default and that the Administrative Agent or any Lender may have against such Defaulting Lender with respect to any funding default. In the event that the Administrative Agent, the Borrower and each applicable Issuing Bank agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Revolving Exposure shall be readjusted to reflect the inclusion of such Lender’s unused Revolving Credit Commitment and on such date such Lender shall purchase at par such of the Revolving Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause such outstanding Revolving Loans and funded and unfunded participations in Letters of Credit to be held on a pro rata basis by the Revolving Lenders (including such Lender) in accordance with their applicable percentages, whereupon such Lender will cease to be a Defaulting Lender and will be a non-Defaulting Lender and any applicable cash collateral shall be promptly returned to the Borrower and any L/C Exposure of such Lender reallocated pursuant to the requirements above shall be reallocated back to such Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; provided that, subject to Section 11.22 and except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.
ARTICLE 3 CHANGES IN CIRCUMSTANCES, TAXES, INDEMNITY
SECTION 3.1. Inability to Determine Interest Rate. If prior to the first day of any Interest Period:
(a)
(a) the Administrative Agent shall have determined (which determination shall be conclusive
and binding absent manifest error) that adequate and reasonable means do not exist for ascertaining the Eurodollar Base Rate or the Eurodollar
RateAdjusted Term SOFR, as applicable (including,
without limitation, because the
ScreenTerm
SOFR Reference Rate is not available or published on a current basis), for such Interest Period, or
(b)
(b) the Administrative Agent shall have received notice from the Majority Facility Lenders
in respect of the relevant Facility that the Eurodollar Base Rate or the Eurodollar Rate, as applicable,Adjusted Term SOFR determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any
EurodollarTerm
Benchmark Loans under the relevant Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans under the relevant Facility that were
to have been converted on the first day of such Interest Period to EurodollarTerm Benchmark Loans shall be continued as Base Rate Loans and
(z) any outstanding
EurodollarTerm
Benchmark Loans under the relevant Facility shall be converted, on the last day of the then-current Interest Period, to Base Rate Loans. Until such notice has been withdrawn by the Administrative
Agent, no further
EurodollarTerm
Benchmark Loans under the relevant Facility shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Facility to EurodollarTerm
Benchmark Loans.
(c) (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 (a) have arisen and such circumstances
are unlikely to be temporary or (ii) the circumstances set forth in clause (b) have not arisen but the supervisor for the administrator of the Screen
RateSOFR Administrator or a Governmental
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Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the Screen RateTerm
SOFR shall 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 Eurodollar Base
RateTerm SOFR 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. Notwithstanding anything to the contrary in Section 11.12, 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 clause (ii) of the first sentence of this Section 3.1(c), only to the
extent the
ScreenTerm
SOFR Reference Rate for such Interest Period is not available or published at such time on a current basis), (y) any Notice of Continuation/Conversion that requests the conversion of any
Borrowing to, or continuation of any Borrowing as,
EurodollarTerm
Benchmark Loans shall be ineffective and (z) if any Notice of Borrowing requests a Borrowing of
EurodollarTerm
Benchmark Loans, such Borrowing shall be made as a Borrowing of Base Rate Loans; provided that, if such alternate rate of interest shall be less than zero, such rate shall be deemed to be zero for
the purposes of this Credit Agreement.
SECTION 3.2. Change in Legality.
(a) Notwithstanding anything to the contrary contained elsewhere in this Credit Agreement, if any change after the date hereof in 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 EurodollarTerm
Benchmark Loan or to give effect to its obligations as contemplated hereby with respect to a
EurodollarTerm
Benchmark Loan, then, by written notice to the Borrower and the Administrative Agent such Lender may (i) declare that EurodollarTerm
Benchmark Loans will not thereafter be made by such Lender hereunder and/or (ii) require that, subject to Section 3.6, all outstanding EurodollarTerm
Benchmark Loans made by it be converted to Base Rate Loans whereupon all of such EurodollarTerm Benchmark Loans shall automatically be converted to Base Rate Loans
as of the effective date of such notice as provided in paragraph (b) below. Such Lender’s Percentage of any subsequent EurodollarTerm Benchmark Loan shall, instead, be an Base Rate Loan unless such
declaration is subsequently withdrawn.
(b) A notice to the Borrower by any Lender pursuant to paragraph (a) above shall be
effective for purposes of clause (ii) thereof, if lawful, on the last day of the current Interest Period for each outstanding EurodollarTerm Benchmark Loan; and in all other cases, on the date of receipt of
such notice by the Borrower.
SECTION 3.3. Change in Circumstances (a) . (a) In the event that any Change in Law shall occur or, with respect to clauses (iii) below, after the Restatement Date, any changes in conditions shall occur, which in either case shall:
(i) subject any Lender to, or increase the net amount of, any tax, levy, impost, duty, charge, fee, deduction or withholding with respect to any Loan, or change the basis of taxation of any payment to any Lender of principal of or interest on any Loan or other fees and amounts payable to any Lender hereunder (other than withholding tax imposed by Canada or the United States of America, or any political subdivision or taxing authority thereof or therein, or any other tax, levy, impost, duty, charge, fee, deduction or withholding (x) that is measured with respect to the overall net income of such Lender or of a Lending Office of such Lender, and that is imposed by Canada, the United States of
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America or by the jurisdiction in which such Lender or Lending Office carries on business, is incorporated, located, managed or controlled, or has its principal office or a presence not otherwise connected with, or required by, this transaction (or any political subdivision or taxing authority thereof or therein), (y) that is imposed solely by reason of any Lender failing to make a declaration of, or otherwise to establish, nonresidence, or to make any other claim for exemption, or otherwise to comply with any certification, identification, information, documentation or reporting requirements prescribed under the laws of the relevant jurisdiction, in those cases where a Lender may properly make such declaration or claim or so establish nonresidence or otherwise comply or (z) imposed under FATCA); or
(ii) impose, modify or deem applicable any reserve, deposit or similar requirement against any assets held by, deposits with or for the account of, or loans or commitments by, an office of such Lender with respect to any Loan; or
(iii) impose upon such Lender or the London interbank market any other condition with respect to this Credit Agreement;
and the result of any of the foregoing shall be to increase the actual
cost to such Lender of making or maintaining any
EurodollarTerm
Benchmark Loan hereunder or to reduce the amount of any payment (whether of principal, interest or otherwise) received or receivable by such Lender in connection with any EurodollarTerm
Benchmark Loan hereunder, or to require such Lender to make any payment in connection with any
EurodollarTerm
Benchmark Loan hereunder, in each case by or in an amount which such Lender in its sole judgment shall deem material, then and in each case, the Borrower agrees to pay to the Administrative Agent
for the account of such Lender, as provided in paragraph (c) below, such amounts as shall be necessary to compensate such Lender for such cost, reduction or payment.
(b) If any Lender or an Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the applicable Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank holding company, if any, as a consequence of this Credit Agreement or the Loans made or Letters of Credit issued or participated in by such Lender or such Issuing Bank pursuant hereto to a level below that which such Lender or such Lender’s or such Issuing Bank’s holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy or liquidity) by an amount deemed by such Lender or such Issuing Bank to be material, then from time to time the Borrower agrees to pay to the Administrative Agent for the account of such Lender, as provided in paragraph (c) below, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered to the extent attributable to this Credit Agreement or the Loans or Letters of Credit issued or participated in made pursuant hereto.
(c) Each Lender and Issuing Bank shall deliver to the Borrower and to the Administrative Agent from time to time one or more certificates setting forth the amounts due to such Lender or such Issuing Bank under paragraphs (a) or (b) above, the changes as a result of which such amounts are due and the manner of computing such amounts. Each such certificate shall be conclusive in the absence of manifest error. The Borrower shall pay to the Administrative Agent for the account of each such Lender or such Issuing Bank the amounts shown as due on any such certificate within fifteen (15) Business Days after the Borrower’s receipt of the same. Failure on the part of any Lender or such Issuing Bank to demand compensation under paragraphs (a) or (b) above on any one occasion shall not constitute a waiver of its right to demand such compensation on any other occasion, provided that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to paragraphs (a) or (b) above for any increased costs incurred or reductions suffered more than 180 days prior to the date that
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such Lender or Issuing Bank, as the case may be, notifies the Borrower of the changes giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefrom. The protection of this Section 3.3 shall be available to each Lender or such Issuing Bank regardless of any possible contention of the invalidity or inapplicability of any law, regulation or other condition which shall give rise to any demand by such Lender or such Issuing Bank for compensation hereunder.
(d) 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 3.3 or Section 3.4 or (ii) would require the Borrower to pay an increased amount under this Section 3.3 or Section 3.4, to the extent not inconsistent with such Lender’s internal policies it will use 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 would cease to exist, or the increased costs which would otherwise be required to be paid in respect of such Loans pursuant to this Section 3.3 or Section 3.4 would be materially reduced or the taxes or other amounts otherwise payable under this Section 3.3 or Section 3.4 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 materially adversely affect such Loans or such Lender.
(e) Each Lender will use reasonable efforts to notify the Borrower, through the Administrative Agent, of any event of which it has knowledge that will entitle such Lender to compensation pursuant to this Section 3.3 or Section 3.4. Other than as set forth in this Section 3.3, no inadvertent failure by any Lender to give (or delay in giving) such notice shall adversely affect such Lender’s rights to such compensation.
(f) If the Borrower shall receive notice from any Lender that amounts are due to such Lender pursuant to paragraph (c) hereof or that any of the events designated in paragraph (d) hereof have occurred, the Borrower may (but subject in any such case to the payments required by Section 3.1 and Section 3.6), upon at least five (5) Business Days’ prior written or telecopier notice to such Lender and the Administrative Agent, identify to the Administrative Agent a lending institution acceptable to the Borrower and the Administrative Agent, which will purchase the Revolving Credit Commitments, the amount of outstanding Loans and any participations in Letters of Credit from the Lender providing such notice, and such Lender shall thereupon assign its Revolving Credit Commitment, any Loans owing to such Lender, any participations in Letters of Credit and the Notes held by such Lender to such replacement lending institution pursuant to Section 11.3.
(g) This Section shall survive the termination of this Credit Agreement and the payment of the Loans and/or the expiration of any Letter of Credit.
SECTION 3.4. Withholding Taxes.
(a) Prior to the date of the initial Loans hereunder, and prior to the effective date set forth in the Assignment and Assumption with respect to any Lender becoming a Lender after the date hereof, and from time to time thereafter if requested by the Borrower or the Administrative Agent or required because, as a result of a Change in Law or a change in circumstances or otherwise, a previously delivered form or statement becomes incomplete or incorrect in any material respect, each Lender shall provide, if applicable and to the extent a Lender is legally entitled to do so, the Administrative Agent and the Borrower with complete, accurate and duly executed forms or other statements prescribed by the
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Canada Revenue Agency or the Internal Revenue Service of the United States, as applicable, certifying such Lender’s exemption from, or entitlement to a reduced rate of, Canadian or United States withholding taxes (including backup withholding taxes) with respect to all payments to be made to such Lender hereunder and under any other Fundamental Document, provided that, following the Borrower Assignment Effectiveness Date, such forms and other statements prescribed by the Canada Revenue Agency shall not be required to be delivered by any Lender pursuant to this Section 3.4(a). Where a payment made to a Lender organized under the laws of a jurisdiction outside the United States would be subject to U.S. federal withholding tax imposed by FATCA if such Lender fails to comply with the applicable reporting requirements of FATCA, such Lender shall deliver to the Administrative Agent and the Borrower at the time or times prescribed by Applicable Law and at such time or times reasonably requested by the Borrower or the Administrative Agent, such documentation under any Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) or reasonably requested by the Administrative Agent or the Borrower sufficient for the Administrative Agent or the Borrower to comply with their respective obligations under FATCA and to determine that such Lender has complied with such applicable reporting requirements, or to determine the amount to deduct and withhold, if any, from such payment. Solely for purposes of the preceding sentence, “FATCA” shall include any amendments made to FATCA after the date of this Credit Agreement.
(b) The Borrower and the Administrative Agent shall be entitled to deduct and withhold any and all present or future taxes or withholdings, and all liabilities with respect thereto, from payments to a Lender hereunder or under any other Fundamental Document, if and to the extent that the Borrower or the Administrative Agent in good faith determines that such deduction or withholding is required by the law of Canada or the United States, including, without limitation, any applicable treaty of Canada or the United States. In the event the Borrower or the Administrative Agent shall so determine that deduction or withholding of taxes is required, they shall advise the affected Lender as to the basis of such determination prior to actually deducting and withholding such taxes. In the event the Borrower or the Administrative Agent shall so deduct or withhold taxes from amounts payable hereunder, they (i) shall pay to, or deposit with, the appropriate taxing authority in a timely manner the full amount of taxes it has deducted or withheld; (ii) shall provide to each Lender from whom taxes were deducted or withheld, evidence of payment of such taxes to, or the deposit thereof with, the appropriate taxing authority and a statement setting forth the amount of taxes deducted or withheld, the applicable rate, and any other information or documentation reasonably requested by such Lender; and (iii) shall forward to each such Lender any official tax receipts or other documentation with respect to the payment or deposit of the deducted or withheld taxes as may be issued from time to time by the appropriate taxing authority. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments hereunder or under any Note are not subject to Canadian or United States withholding tax (as applicable) or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Administrative Agent may withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside Canada or the United States, as the case may be.
(c) Each Lender agrees (i) to the extent required by Applicable Law, that as between it and the Borrower or the Administrative Agent, such Lender shall be the Person to deduct and withhold taxes, and shall deduct and withhold taxes on amounts that such Lender may remit to any other Person(s) by reason of any undisclosed transfer or assignment of an interest in this Credit Agreement to such other Person(s) pursuant to Section 11.3; and (ii) to indemnify the Administrative Agent and any Related Party of the Administrative Agent against, and to hold them harmless from, any tax, interest, additions to tax, penalties, reasonable counsel and accountants’ fees, disbursements or payments arising from (a) the assertion by any appropriate taxing authority of any claim against them relating to a failure to withhold taxes as required by law with respect to such Lender or (b) the failure of such Lender to comply with the provisions of Section 11.3(d) relating to the maintenance of a Participant Register.
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(d) Each assignee of a Lender’s interest in this Credit Agreement in conformity with Section 11.3 shall be bound by this Section 3.4, so that such assignee will have all of the obligations and provide all of the forms and statements and all indemnities, representations and warranties required to be given under this Section 3.4.
(e) Notwithstanding the foregoing, in the event that any withholding taxes or additional withholding taxes (other than, for the avoidance of doubt, any such taxes that are Excluded Taxes) shall become payable in respect of any sum payable hereunder or under any other Fundamental Document to any Lender or the Administrative Agent solely as a result of any change in any statute, treaty, ruling, determination or regulation occurring after the Restatement Date or, if later, the date on which such Lender becomes a Lender hereunder (pursuant to an assignment or otherwise) or changes its applicable Lending Office, (i) the sum payable by the Borrower or any Guarantor shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.4) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable withholding agent, shall make such deductions, (iii) the applicable withholding agent shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with Applicable Law and (iv) the applicable withholding agent shall forward to such Lender or the Administrative Agent (as the case may be) the official tax receipts or other documentation pursuant to Section 3.4(b). In addition, the Borrower shall indemnify each Lender, the Issuing Bank and the Administrative Agent within ten (10) Business Days after written demand, for any additional withholding taxes paid by such Lender, Issuing Bank or the Administrative Agent, as the case may be, in respect of which withholding taxes the Borrower or any Guarantor would have a gross-up obligation pursuant to clause (i) in the immediately preceding sentence, or any liability (including penalties and interest) arising therefrom or with respect thereto, whether or not such additional withholding taxes were correctly or legally asserted by the relevant Governmental Authority. Notwithstanding anything to the contrary in this Credit Agreement, the Borrower will not be required to pay any increased amounts or indemnify any Person for Excluded Taxes.
(f) In the event that a Lender receives a refund of taxes withheld or paid pursuant to clause (e) of this Section, which refund is identified by such Lender as being a result of taxes withheld or paid in connection with sums payable hereunder or under any other Fundamental Document, such Lender shall promptly notify the Administrative Agent and the Borrower and shall, if no Default or Event of Default has occurred and is continuing, remit to the Borrower the amount of such refund allocable to payments made hereunder or under any other Fundamental Document, net of any reasonable out-of-pocket expenses (including taxes) incurred in obtaining such refund.
(g) Each Lender agrees that after it becomes aware of the occurrence of an event that would cause the Borrower to pay any amount pursuant to clause (e) of this Section 3.4, it will use reasonable efforts to notify the Borrower of such event and, to the extent not inconsistent with such Lender’s internal policies, will use its 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 by reason of Section 3.4(e) in respect of such Loans would be materially reduced, and if, as determined by such Lender, in its discretion, the making, funding or maintaining of such Loans through such other Lending Office would not otherwise materially adversely affect such Loans or such Lender.
(h) This Section shall survive the termination of this Credit Agreement and the payment of the Loans.
For purposes of this Section 3.4, the term “Lender” includes the Issuing Banks.
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SECTION 3.5. Foreign Currency Conversion; Withholding. If the net amount of any payment received by the Administrative Agent hereunder, after such amount has (in the case of an amount received in a currency other than Dollars and/or received outside of the United States) been converted into Dollars and transferred to New York in accordance with normal banking procedures, is less than the amount otherwise then due and owing by the Borrower to the Lenders hereunder, or if the Administrative Agent is unable to immediately convert and transfer any such amount as aforesaid, then the Borrower agrees as a separate obligation to the Lenders to indemnify the Lenders against the loss incurred by reason of such shortfall or delay to the extent but only to the extent such shortfall or delay is due to (i) the application of any exchange controls or similar laws and regulations or (ii) the fact that such amount was received in a currency other than Dollars; and if the amount of Dollars thus received by the Administrative Agent, after such conversion, exceeds the amount otherwise then due and owing, the Administrative Agent shall remit such excess to the Borrower.
SECTION 3.6.
Indemnity. The Borrower shall reimburse each Lender on demand for any loss (excluding any loss of the Applicable Margin) incurred or to be incurred by it in the reemployment of the funds released (i) by any prepayment or conversion (for
any reason) of any
EurodollarTerm
Benchmark Loan if such Loan is repaid other than on its last day of the Interest Period for such Loan or (ii) in the event that after the Borrower delivers a notice of advance, continuation
or conversion of a Borrowing under Section 2.5 in respect of EurodollarTerm Benchmark Loans, such Loan is not made on the first day of the
Interest Period specified in such notice of borrowing for any reason other than (I) a suspension or limitation under Section 3.3(b) of the right of the Borrower to select a EurodollarTerm
Benchmark Loan or (II) a breach by the Lenders of their obligation hereunder. Such loss shall be the amount as reasonably determined by such Lender as the excess, if any, of (A) 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 hereof (but excluding the Applicable
Margin) over (B) the amount realized by such Lender in reemploying the funds not advanced or the funds received in prepayment or realized from the Loan so continued or converted during the period referred to above. Each Lender shall deliver to
the Borrower from time to time one or more certificates setting forth the amount of such loss (and in reasonable detail the manner of computation thereof) as determined by such Lender, which certificates shall be conclusive absent manifest error.
The Borrower shall pay the Administrative Agent for the account of such Lender the amount shown or such certificate within ten (10) days of the Borrower’s receipt of such certificate.
SECTION 3.7. Replacement of Lenders. If any Lender (i) requests compensation under Section 3.3 or Section 3.4,
(ii) becomes a Defaulting Lender, (iii) does not consent to any waiver , consent or modification requested by the Borrower (but only where the consent of all the Lenders or all Lenders directly affected thereby, or all the Lenders of the
applicable Class is required for such waiver, consent or modification and the Borrower obtains approval for the waiver, consent or modification from the Required Lenders or a majority of all Lenders or all Lenders of the applicable Class, as the
case may be, directed affected thereby have otherwise consented), or (iv) refuses to provide or requires the conversion of its EurodollarTerm Benchmark Loans pursuant to Section 3.2, 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 11.3), 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 (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 Percentage of the L/C Exposure, and (y) in the case of any such assignment resulting from a claim for compensation under
Section 3.3 or payments required to be made pursuant to Section
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3.4, such assignment will result in a reduction in such compensation or payment on an ongoing basis. 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. Each party hereto agrees that an assignment required pursuant to this Section 3.7 may be effected pursuant to an Assignment and Assumption executed by the Borrower, the Administrative Agent and the assignee and that the affected Lender required to make such assignment need not be a party thereto.
SECTION 3.8. Interest Adjustments. 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 Applicable Law with respect to any Loan, the interest payments to that Lender shall be reduced to the extent necessary in order that such Lender shall not receive interest in excess of such maximum amount. If, as a result of the foregoing, a Lender shall receive 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 and 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 Applicable Law with respect to the Loans.
The amount of any Interest Deficit relating to a Loan and any 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 under the relevant Facility at that time outstanding pursuant to Section 2.8(a) or Section 2.8(b). The amount of any Interest Deficit relating to a particular Loan and Note at the time of any complete payment of the Loans at that time outstanding (other than an optional prepayment thereof pursuant to Section 2.8(a) or Section 2.8(b) hereof and a termination of the Revolving Credit Commitments under Section 2.10) shall be canceled and not paid.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES
In order to induce the Administrative Agent, the Issuing Banks and the Lenders to enter into this Credit Agreement and to make the Loans and issue the Letters of Credit provided for herein, the Credit Parties, jointly and severally, make the following representations and warranties to, and agreements with, the Administrative Agent, the Issuing Banks and the Lenders on the date hereof and on the dates to the extent required pursuant to Section 5.1 and Section 5.2, as applicable, all of which shall survive the execution and delivery of this Credit Agreement, the issuance of the Notes and the making of the Loans and issuance of the Letters of Credit:
SECTION 4.1. Existence and Power. (a) Each of the Credit Parties is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is qualified to do business and in good standing in all jurisdictions where the nature of its properties or business so requires, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, have a Material Adverse Effect.
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(b) 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, except where the failure to have such power or authority would not, individually or in the aggregate, have a Material Adverse Effect, (ii) to execute, deliver and perform, as applicable, its obligations under the Fundamental Documents, (iii) in the case of the Borrower, to borrow the Loans hereunder, (iv) to grant to the Administrative Agent, for the benefit of itself and the Secured Parties, a security interest in the Collateral (and, as of the Restatement Date, to reaffirm such security interest), as contemplated by this Credit Agreement and the other Fundamental Documents to which it is a party; and (v) in the case of the Guarantors, to guarantee the Obligations as contemplated by Article 9 hereof (and, as of the Restatement Date, to reaffirm such guarantee obligations).
SECTION 4.2. Authority and No Violation. The execution, delivery and performance of this Credit Agreement, the Amendment No. 2 and the other Fundamental Documents to which it is a party, by each Credit Party, the grant to the Administrative Agent for the benefit of the Administrative Agent and the Secured Parties of the security interest in the Collateral and the reaffirmation of such security interest pursuant to the Amendment No. 2, as contemplated herein and by Amendment No. 2 and the other Fundamental Documents and, 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 Guarantee of the Obligations as contemplated in Article 9 hereof and as reaffirmed by Amendment No. 2, (i) have been duly authorized by all necessary corporate or company (as applicable) action on the part of each such Credit Party, (ii) will not constitute a violation of any provision of Applicable Law or any order of any Governmental Authority applicable to such Credit Party, or any of its properties or assets, (iii) will not violate any provision of the Certificate of Incorporation, By-Laws, limited liability company agreement or any other organizational document of any Credit Party, (iv) will not violate any provision of any Distribution Agreement, indenture, agreement, bond, note or other similar instrument to which such Credit Party is a party or by which such Credit Party or any of its properties or assets are bound, (v) will not 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 such Distribution Agreement, indenture, agreement, bond, note or other instrument, and (vi) will not result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever, other than any Permitted Lien, upon any of the properties or assets of any of the Credit Parties other than pursuant to this Credit Agreement or the other Fundamental Documents, except, in the case of clauses (ii), (iv) and (v) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.3. Governmental Approval. All material authorizations, approvals, registrations or filings from or with any Governmental Authority (other than filings with the UK Companies House, and any other filings necessary for granting any lien or obtaining perfection, in each case which will be delivered to the Administrative Agent on or prior to the Restatement Date or otherwise in accordance with the Fundamental Documents, in form suitable for recording or filing with the appropriate filing office) required for the execution, delivery and performance by any Credit Party of this Credit Agreement and the other 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, except for such authorizations, approvals, registrations or filings as would not adversely affect the ability of the Borrower or the Guarantors to enter into or perform their obligations under the Fundamental Documents or have a Material Adverse Effect.
SECTION 4.4. Binding Agreements. This Credit Agreement and the other Fundamental Documents when executed, will constitute the legal, valid and binding obligations of each Credit Party that is a party thereto, enforceable against such Credit Party in accordance with their respective terms, subject, as to the enforcement of remedies, to applicable bankruptcy, insolvency, reorganization and similar laws affecting creditors’ rights generally and to general principles of equity.
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SECTION 4.5. Financial Statements .
(a) The audited consolidated balance sheets of LGEC and its Subsidiaries at March 31, 2017, March 31, 2016 and March 31, 2015, together with the related statements of income, equity and cash flows and the related notes and supplemental information for the fiscal years then ended, have been prepared in accordance with GAAP in effect as of such date consistently applied, except as otherwise indicated in the notes to such financial statements. Such financial statements fairly present the financial position or the results of operations of LGEC and its Subsidiaries on a consolidated basis at the dates or for the periods indicated and reflect all known liabilities, contingent or otherwise, that GAAP require, as of such dates, to be shown or reserved against.
(b) The unaudited condensed balance sheet of LGEC and its Subsidiaries at December 31, 2017, together with the related statements of income, equity and cash flows and the related notes and supplemental information for the fiscal quarter then ended, have been prepared in accordance with GAAP in effect as of such date consistently applied, except as otherwise indicated in the notes to such financial statements. Such financial statements fairly present the financial position or the results of operations of LGEC and its Subsidiaries on a consolidated basis at the date or for the period indicated and reflect all known liabilities, contingent or otherwise, that GAAP require, as of such dates, to be shown or reserved against.
SECTION 4.6. No Material Adverse Change; No Default; Solvency. (a) There has been no material adverse change with respect to the business, assets, properties, management, operations, or financial condition of the Credit Parties taken as a whole since March 31, 2017.
(b) No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Credit Agreement or any other Fundamental Document.
(c) As of the Restatement Date, immediately after giving effect to the consummation of the Transactions, (i) the fair value of the assets of LGEC and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of LGEC and its Subsidiaries on a consolidated basis; (ii) the present fair saleable value of the property of LGEC and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of LGEC and its Subsidiaries on a consolidated basis on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) LGEC and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) LGEC and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Restatement Date. As of the Restatement Date, immediately after giving effect to the consummation of the Transactions, LGEC does not intend to, and LGEC does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its debts or the debts of any such Subsidiary.
SECTION 4.7. Ownership of Subsidiaries, etc. (a) The outstanding shares or other equity interests of the Restricted Subsidiaries have been duly and validly authorized and issued, are fully paid and non-assessable, except as would not reasonably be expected to have a Material Adverse Effect. The outstanding shares or other Capital Stock of each Restricted Subsidiary that are owned directly or indirectly by LGEC, are owned free and clear of any lien, charge, encumbrance, hypothec, security interest, restriction on voting or transfer or any other claim of any third party, other than (i) Permitted Liens or (ii) any restrictions on transfer under applicable securities laws.
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(b) Annexed hereto as Schedule 4.7(b) is a correct and complete list of all Unrestricted Subsidiaries as of the Original Closing Date.
SECTION 4.8. Title to Properties.
(a) Except as would not reasonably be expected to result in a Material Adverse Effect, the Credit Parties have good title to each of the properties and assets owned thereby and all such properties and assets are free and clear of Liens, except Permitted Liens.
(b) LGEC and its Restricted Subsidiaries possess all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, provincial, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses, except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and neither LGEC nor any of its Restricted Subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course, except as would not have a Material Adverse Effect.
(c) LGEC and its Restricted Subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses, except for the lack of which would not have, individually or in the aggregate, a Material Adverse Effect; and the conduct of their respective businesses does not conflict in any material respect with any such rights of others, and LGEC and its Restricted Subsidiaries have not received any notice of any claim of infringement of or conflict with any such rights of others that, if determined adversely to LGEC or any of its Restricted Subsidiaries, would individually or in the aggregate have a Material Adverse Effect.
SECTION 4.9. Litigation. There are no actions, suits or other proceedings at law or in equity by or before any arbitrator or arbitration panel, or any Governmental Authority (including, but not limited to, matters relating to environmental liability) or any investigation by any Governmental Authority of the affairs of, or to the best of each Credit Party’s knowledge, threatened action, suit or other proceeding against any Credit Party or of any of their respective properties or rights which either (A) if adversely determined, would reasonably be expected to have a Material Adverse Effect or (B) exists on the Restatement Date (or on the date of any Credit Extension after the Restatement Date to the extent that the applicable action, suit, proceeding or investigation is brought by LGEC or any of its subsidiaries) and challenges any Credit Party’s right or power to enter into or perform any of its obligations under the Fundamental Documents to which it is a party, or the validity or enforceability of any Fundamental Document or any action taken thereunder. 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, which default would reasonably be expected to have a Material Adverse Effect.
SECTION 4.10. Federal Reserve Regulations. No part of the proceeds of the Loans will be used, directly or indirectly, for any other purpose violative of Regulations T, U and X of the Board.
SECTION 4.11. Investment Company Act. No Credit Party is, or will be after giving effect to the making of the Loans on the Restatement Date, an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.
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SECTION 4.12. Taxes. Each Credit Party has filed or caused to be filed all 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 them in writing, to the extent that such taxes have become due, except in any case in which the failure to so pay or file would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.13. Compliance with ERISA; Labor Disputes. (a) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (i) except with respect to Multiemployer Plans, each Qualified Plan has either received a favorable determination letter from the Internal Revenue Service or may rely on a favorable opinion letter issued by the Internal Revenue Service, and nothing has occurred that would cause the loss of such qualification or tax-exempt status; (ii) each Pension Plan is in compliance in all respects with the applicable provisions of ERISA, the Code and its terms, including the timely filing of all reports required under the Code or ERISA; (iii) neither any Credit Party nor ERISA Affiliate has failed to make any contribution or pay any amount due as required by either Section 412 of the Code or Section 302 of ERISA or the terms of any such Pension Plan; and (iv) no “prohibited transaction,” as defined in Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan that would subject any Credit Party to a tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the Code.
(b) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect: (i) no Title IV Plan is or is reasonably expected to be in “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA); (ii) no ERISA Event has occurred or to the knowledge of any Credit Party is reasonably expected to occur; (iii) there are no pending, or to the knowledge of any Credit Party, threatened material claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any liability as a result of a complete or partial withdrawal from a Multiemployer Plan; and (v) within the last five years no Title IV Plan of any Credit Party or ERISA Affiliate has been terminated, whether or not in a “standard termination” as that term is used in Section 4041 of ERISA, nor has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined at any time within the last five years) with unfunded pension liabilities been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate (determined at such time).
(c) Except as disclosed to the Lenders on or prior to the Restatement Date, no labor disturbance by or dispute with employees of LGEC or any of its Subsidiaries exists or, to the knowledge of the Borrower and each of the Guarantors, is contemplated or threatened and neither the Borrower nor any Guarantor is aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of LGEC’s or any of LGEC’s Subsidiaries’ principal suppliers, contractors or customers, except as would not have a Material Adverse Effect. Neither LGEC nor any of its Subsidiaries has received any notice of cancellation or termination with respect to any collective bargaining agreement to which it is a party.
SECTION 4.14. Non-U.S. Plan Compliance. Except as would not reasonably be expected to result in a Material Adverse Effect, each Non-U.S. Plan has been maintained in compliance with its terms and with the requirements of any and all Applicable Laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Non-U.S. Plan have been timely made, except as would not reasonably be expected to result in a Material Adverse Effect. With respect to each Non-U.S. Plan, neither any Credit Party nor any Restricted Subsidiaries or any of their respective directors, officers, employees or agents has engaged in a transaction which would subject any Credit Party or any Restricted Subsidiary, directly or indirectly, to a tax or civil penalty which would reasonably be expected,
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individually or in the aggregate, to result in a Material Adverse Effect. Except as would not reasonably be expected to result in a Material Adverse Effect, the present value of the accrued benefit liabilities (whether or not vested) under each Non-U.S. Plan, determined as of the end of the Credit Party’s most recently ended fiscal year on the basis of actuarial assumptions, each of which is reasonable, did not materially exceed the current value of the assets of such Non-U.S. Plan allocable to such benefit liabilities. No Non-U.S. Plan is a “registered pension plan” within the meaning of section 147.1 of the Income Tax Act (Canada) and no Credit Party or any Restricted Subsidiaries have ever maintained, sponsored or contributed to any such “registered pension plan”.
SECTION 4.15. Agreements. There exists no default by any Credit Party in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument (including, without limitation, any Distribution Agreement) to which it is a party which would reasonably be expected to result in a Material Adverse Effect.
SECTION 4.16. Creation, Validity and Perfection of Security Interest. The execution and delivery of the Existing Credit Agreement, Amendment No. 2 and the Collateral Documents is effective to create and grant to the Administrative Agent for the benefit of itself and the other Secured Parties, a valid and enforceable security interest in the Collateral. Upon (i) the filing of UCC-1 and PPSA financing statements and the publication/registration of the notice with respect to the Hypothec pursuant to CCQ, the Copyright Security Agreement and the Trademark Security Agreement in the appropriate filing offices, (ii) the delivery of the Pledged Collateral (as defined in the Pledge and Security Agreement) with appropriate stock powers and instruments of endorsement to the Administrative Agent and (iii) with respect to the Initial Lux/UK Guarantors, the completion of the actions referred to in Section 6.17 (including for the avoidance of doubt, upon completion of any perfection formalities applicable), the Collateral Documents shall be effective to create a fully perfected (to the extent that perfection can be achieved by the actions described in the foregoing clauses (i), (ii) or (iii), as applicable) and continuing Lien on, and security interest in, all right, title and interest of the Credit Parties in the Collateral as security for the Obligations, in each case prior and superior in right to any other Person (except for Permitted Liens), subject, as to the enforcement of remedies, to applicable bankruptcy, insolvency or reorganization or similar laws affecting creditors’ rights generally and to principles of equity.
SECTION 4.17. Disclosure. All information furnished in writing to the Administrative Agent for the benefit of the Administrative Agent, the Issuing Banks and the Lenders by any Credit Party in connection with the transactions contemplated hereby (other than any projections, forward-looking information and information of a general economic or industry nature), at the time it was furnished or delivered, did not contain any untrue statement of a material fact regarding the Credit Parties or, when taken together with all such other agreements, documents, certificates and statements, omit to state a material fact necessary under the circumstances under which it was made in order to make the statements contained herein or therein not misleading.
SECTION 4.18. Distribution Rights. Except as would not reasonably be expected to result in a Material Adverse Effect, each Credit Party has sufficient right, title and interest in each item of Product to enable it (i) to enter into and perform all of the Distribution Agreements to which it is a party and other agreements generating accounts receivable reflected on the most recent balance sheet delivered to the Lenders pursuant hereto, and (ii) to charge, earn, realize and retain all fees and profits to which such Credit Party is entitled thereunder. Each Credit Party is not in breach of any of its obligations under any such agreements, nor does any Credit Party have any knowledge of any breach or anticipated breach by any other parties thereto, which breach in either case either individually or when aggregated with all other such breaches would reasonably be expected to have a Material Adverse Effect.
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SECTION 4.19. Environmental Liabilities. (a) Except as would not reasonably be expected to have a Material Adverse Effect, (i) no Credit Party has used, stored, treated, transported, manufactured, refined, handled, produced or disposed of any Hazardous Materials on, under, at, from or in any way affecting, any of its properties or assets owned or leased by a Credit Party, in any manner which at the time of the action in question violated any Environmental Law governing the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of Hazardous Materials and (ii) to the best of each Credit Party’s knowledge, no prior owner of such property or asset or any tenant, subtenant, prior tenant or prior subtenant thereof has used Hazardous Materials on or affecting such property or asset, or otherwise, in any manner which at the time of the action in question violated any Environmental Law governing the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of Hazardous Materials.
(b) To the best of each Credit Party’s knowledge (i) no Credit Party has any obligations or liabilities, known or unknown, matured or not matured, absolute or contingent, assessed or unassessed, which would 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 years and no presently outstanding citations or notices have been issued against any of the Credit Parties, which would reasonably be expected to have a Material Adverse Effect, which in the case of clauses (i) or (ii) have been or are imposed by reason of or based upon any provision of any Environmental Law, including, without limitation, any such obligations or liabilities relating to or arising out of or attributable, in whole or in part, to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation or handling of any Hazardous Materials by any Credit Party, or any of its employees, agents, representatives or predecessors in interest in connection with or in any way arising from or relating to any of the Credit Parties or any of their respective owned or leased properties, or relating to or arising from or attributable, in whole or in part, to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation or handling of any such substance, by any other Person at or on or under any of the real properties owned or used by any of the Credit Parties or any other location where such would reasonably be expected to have a Material Adverse Effect.
SECTION 4.20. Compliance with Laws. No Credit Party is in violation of any Applicable Law except for such violations in the aggregate which would not have a Material Adverse Effect.
SECTION 4.21. Real Property. Except as set forth on Schedule 4.21, as of the Original Closing Date, each Credit Party does not have any ownership interest in real property.
SECTION 4.22. OFAC, FCPA, etc.
(a) None of the Credit Parties or any of their Subsidiaries (i) is a person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 and Annex A of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages, in any dealings or transactions prohibited by executive order, or is otherwise associated with any such person in any manner violative of such executive order, (iii) appears on any list maintained by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) of persons with whom U.S. persons are prohibited from dealing, including OFAC’s Specially Designated Nationals and Blocked Persons List and Foreign Sanctions Evaders List, or is subject to the limitations or prohibitions under any other OFAC regulation or executive order, or (iv) is a person subject to the limitations or prohibitions under any other economic or trade sanctions issued by regulation or executive order of the U.S. Department of State, the U.S. Department of Commerce, or the Canadian federal government (including the Special Economic Measures Act (SEMA)).
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(b) Each Credit Party and its Subsidiaries is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the USA Patriot Act.
(c) No part of the proceeds of the Loans will be used, directly or, to the knowledge of LGEC, indirectly, (i) for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to improperly obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended; (ii) for the purpose of financing the activities of any person currently the subject of sanctions administered by OFAC, the U.S. Department of State, the U.S. Department of Commerce, or the Canadian federal government; or (iii) for the purpose of financing any transactions or dealings with the governments of, or with any person resident in, Cuba, Iran, North Korea, Sudan, Syria, or the Crimea region of Ukraine.
SECTION 4.23. Use of Proceeds.
(a) The proceeds of the Revolving Loans, and Letters of Credit to be issued, will be used (A) on the Restatement Date, (i) to repay in full the outstanding amount of Existing Revolving Loans (if any), (ii) to replace, backstop or cash collateralize letters of credit of the Borrower and its Subsidiaries outstanding on the Restatement Date and (iii) to pay Transaction Expenses; and (B) after the Restatement Date, for working capital needs and for other general corporate purposes of LGEC and its Subsidiaries, including the financing of acquisitions and Investments permitted hereunder.
(b) The proceeds of the Term Loans will be used on the Restatement Date to refinance the Existing Term Loans and the payment of Transaction Expenses, and for working capital and other general corporate purposes.
ARTICLE 5 CONDITIONS PRECEDENT
SECTION 5.1. Conditions to Initial Credit Extension.
(a) The obligations of each Lender to make a Credit Extension under this Credit Agreement on the Restatement Date are subject to satisfaction in full of the conditions precedent set forth in Section 5 of Amendment No. 2.
SECTION 5.2. Conditions to Each Subsequent Credit Extension. The obligation of each Lender to make a Credit Extension hereunder after the Restatement Date is subject to satisfaction in full of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and warranties made by any Credit Party in or pursuant to the Fundamental Documents shall be true and correct in all material respects (or in all respects, if qualified by a materiality threshold) on and as of such date as if made on and as of such date (except to the extent that such representations and warranties expressly relate to an earlier date).
(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.
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(c) Revolving Credit Availability. After giving effect to any requested extension of credit, the aggregate principal amount of all Revolving Loans and L/C Obligations under this Credit Agreement shall not exceed the aggregate Revolving Credit Commitments.
(d) Other. (i) In the case of Loans, the Administrative Agent shall have received the notice required by Section 2.5 hereof, (ii) in the case of the issuance of any Letter of Credit the applicable Issuing Bank shall have received a duly completed Application, and/or (iii) in the case of an extension or increase in the amount of a Letter of Credit, the applicable Issuing Bank shall have received a written request therefor in a form reasonably acceptable to the applicable Issuing Bank.
Each Borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.2 have been satisfied.
ARTICLE 6 AFFIRMATIVE COVENANTS
From the date hereof and for so long as the Revolving Credit Commitments shall be in effect, any Loan shall remain outstanding, or L/C Exposure shall remain outstanding or any monetary Obligation then due and payable shall remain unpaid or unsatisfied (other than with respect to a Specified Swap Agreement or Specified Cash Management Agreement):
SECTION 6.1. Financial Statements and Other Information.
(a) Within 45 days after the end of each fiscal quarter of LGEC not corresponding with the fiscal year end of LGEC, commencing with the first fiscal quarter ending after the Original Closing Date, LGEC shall deliver to the Administrative Agent (for delivery to the Lenders) LGEC’s consolidated balance sheet as at the end of such fiscal quarter and the related consolidated statements of income, and cash flows for such fiscal quarter and for the elapsed portion of the fiscal year-to-date period then ended, each in reasonable detail, prepared by LGEC in accordance with GAAP, and setting forth comparative figures for the corresponding fiscal quarter in the prior fiscal year, all of which shall be certified by the chief financial officer or other financial or accounting officer of LGEC that they fairly present in all material respects in accordance with GAAP the financial condition of LGEC and its Subsidiaries as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated, subject to normal year-end audit adjustments and the absence of footnotes.
(b) Within 90 days after the close of each fiscal year of LGEC (commencing with the fiscal year of LGEC ending after the Original Closing Date), LGEC shall deliver to the Administrative Agent (for delivery to the Lenders) a copy of LGEC’s consolidated balance sheet as of the last day of the fiscal year then ended and LGEC’s consolidated statements of income, cash flows and shareholders’ equity for the fiscal year then ended, and accompanying notes thereto, each in reasonable detail and showing in comparative form the figures for the previous fiscal year, accompanied by a report thereon of Ernst & Young LLP or another firm of independent public accountants of recognized national standing, selected by LGEC, to the effect that the consolidated financial statements have been prepared in accordance with GAAP and present fairly in accordance with GAAP the consolidated financial condition of LGEC and its Subsidiaries as of the close of such fiscal year and the results of their operations and cash flows for the fiscal year then ended and that an examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards (which report shall be unqualified as to scope of such audit and shall not contain any “going concern”, other than solely with respect to, or resulting solely from, an upcoming maturity date under any Indebtedness incurred under this Credit Agreement occurring within one year from the time such opinion is delivered).
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(c) Within 90 days after the commencement of each fiscal year of LGEC, LGEC shall deliver to the Administrative Agent (for delivery to the Lenders) an annual budget for LGEC and its Subsidiaries for such fiscal year in a form customarily prepared by management of LGEC for its internal use (including a projected consolidated balance sheet and consolidated statements of income and capital expenditures as of the end of and for such fiscal year).
(d) LGEC shall deliver to the Administrative Agent (for delivery to the Lenders) (i) within 45 days after the close of each of the first three (3) fiscal quarters of LGEC, a customary management discussion and analysis of LGEC’s and its Subsidiaries’ financial performance for that fiscal quarter and a comparison of financial performance for that financial quarter to the corresponding fiscal quarter of the previous fiscal year and (ii) within 90 days after the close of each fiscal year, a management discussion and analysis of LGEC’s and its Subsidiaries’ financial performance for that fiscal year and a comparison of financial performance for that fiscal year to the prior year.
(e) For purposes of this Section 6.1, the Borrower and the Guarantors will be deemed to have furnished the reports and other information to the Lenders as required by this Section 6.1 if LGEC has filed such reports with the SEC via the EDGAR or any successor filing system and such reports are publicly available.
(f) LGEC will also hold a conference call each quarter to discuss such results of operations for the relevant reporting period, which conference call may be with Lenders only or may be with investors generally (including, for the avoidance of doubt, earnings calls consistent with past practice).
SECTION 6.2. Compliance Certificate and Other Information.
(a) On or prior to the tenth Business Day following the delivery or making available of the annual and quarterly financial statements pursuant to Section 6.1(a) and Section 6.1(b), LGEC shall deliver to the Administrative Agent (for delivery to the Lenders) a Compliance Certificate signed by the chief financial officer or other financial or accounting Officer of LGEC (w) stating no Default or Event of Default has occurred and is then continuing or, if a Default or Event of Default exists, a detailed description of the Default or Event of Default and all actions LGEC is taking with respect to such Default or Event of Default, (x) to the extent the Revolving Facility or Term Loan A Facility remains outstanding, showing LGEC’s compliance with the financial ratios set forth in Section 7.9(a) and (b) and (y) solely in connection with the delivery of financial statements pursuant to Section 6.1(b) for any fiscal year beginning with the first full fiscal year ended after the Original Closing Date and solely to the extent the Term B Facility remains outstanding, if the Net First Lien Leverage Ratio calculated on a Pro Forma Basis as of the last day of such fiscal year is greater than 4.00:1.00, calculating Excess Cash Flow for such fiscal year.
(b) LGEC shall provide to the Administrative Agent, within 10 days after receiving knowledge of the occurrence thereof, (i) written notice of any events which would constitute a Default, their status and what action LGEC is taking or proposing to take in respect thereof, (ii) written notice of the commencement of, or threat in writing of, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against LGEC or any of the Restricted Subsidiaries as to which an adverse determination is reasonably probable and which would reasonably be expected to result in a Material Adverse Effect, and (iii) any other event which would reasonably be expected to result in a Material Adverse Effect.
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(c) LGEC shall provide to the Administrative Agent, from time to time, such other information or documents (financial or otherwise) as the Administrative Agent may reasonably request (for itself or on behalf of any Lender); provided that the Administrative Agent may request such information in its capacity as Administrative Agent only and may not use such information for any purpose other than a purpose reasonably related to its capacity as Administrative Agent.
Information and documents required to be delivered pursuant to Section 6.1 or this Section 6.2 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which LGEC posts such documents, or provides a link thereto on LGEC’s website on the Internet at the website address provided to the Administrative Agent or on an Intralinks or similar site to which the Lenders have been granted access; or (ii) on which such documents are transmitted by electronic mail to the Administrative Agent.
SECTION 6.3. Taxes. LGEC shall pay, and shall cause each of its Restricted Subsidiaries to pay, prior to delinquency, all taxes, assessments and governmental levies except such as are contested in good faith and by appropriate negotiations or proceedings or where the failure to make payment could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
SECTION 6.4. Corporate Existence. Except as (i) permitted by Section 7.6 or (ii) with respect to clause (a) (other than LGEC and LGEI (but, for the avoidance of doubt, not the Restricted Subsidiaries thereof, other than LGEI)) or (b), would not reasonably be expected to result in a Material Adverse Effect, LGEC shall do or cause to be done all things necessary to preserve and keep in full force and effect (a) its corporate existence and the corporate, partnership, limited liability company, unlimited liability company or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of LGEC or any such Restricted Subsidiary and (b) the rights (charter and statutory), licenses and franchises of LGEC and its Restricted Subsidiaries necessary to the conduct of its business or the business of any of its Restricted Subsidiaries.
SECTION 6.5. Maintenance of Properties and Insurance.
(a) LGEC will cause all properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order as in the judgment of LGEC may be necessary so that the business of LGEC and its Restricted Subsidiaries may be properly conducted at all times; provided that nothing in this Section 6.5 prevents LGEC or any Restricted Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal (i)(A) is, in the judgment of LGEC, desirable in the conduct of the business of LGEC and its Restricted Subsidiaries taken as a whole or (B) would not reasonably be expected to have a Material Adverse Effect.
(b) LGEC will provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith opinion of LGEC, is adequate and appropriate for the conduct of the business of LGEC and its Restricted Subsidiaries.
SECTION 6.6. Books and Records. LGEC will, and will cause each Restricted Subsidiary to, maintain proper books of record and account in which entries that are full, true and correct in all material respects and are in conformity with GAAP consistently applied shall be made of all material financial transactions and matters involving the assets and business of LGEC or its Restricted Subsidiaries, as the case may be.
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SECTION 6.7. Inspection Rights. LGEC will, and will cause each Restricted Subsidiary to, permit officers, designated representatives and agents of the Administrative Agent (or during the occurrence and continuation of any Event of Default, any Lender solely if accompanying the Administrative Agent), to visit and inspect any tangible property of LGEC or such Restricted Subsidiary, and to examine the books of account of LGEC or such Restricted Subsidiary and discuss the affairs, finances and accounts of LGEC or such Restricted Subsidiary with its and their officers and independent accountants, all at such reasonable times during normal business hours as the Administrative Agent may request; provided that (i) reasonable prior written notice of any such visit, inspection or examination shall be provided to LGEC and such visit, inspection or examination shall be performed at reasonable times to be agreed to by LGEC, which agreement will not be unreasonably withheld, (ii) excluding any such visits and inspections during the continuation of an Event of Default, the Administrative Agent shall not exercise its rights under this Section 6.7 more often than one time during any such fiscal year, LGEC is not obligated to compensate the Administrative Agent for more than one inspection and examination by the Administrative Agent during any calendar year, and (iii) the Administrative Agent may conduct inspections pursuant to this Section 6.7 in its respective capacity as Administrative Agent only and may not conduct inspections or utilize information from such inspections for any purpose other than a purpose reasonably related to its capacity as Administrative Agent. The Administrative Agent shall give LGEC a reasonable opportunity to participate in any discussions with LGEC’s independent public accountants.
SECTION 6.8. Compliance with Laws. LGEC shall, and shall cause each Restricted Subsidiary to, comply in all respects with all Applicable Laws, where any such non-compliance, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.
SECTION 6.9. Compliance with Agreements. Except as would not reasonably be expected to result in a Material Adverse Effect, LGEC shall, and shall cause each Restricted Subsidiary to duly observe and perform all material terms and conditions of all agreements with respect to the production, distribution and/or exploitation of items of Product and diligently protect and enforce the rights of the Credit Parties under all such agreements in a manner consistent with prudent business judgment and subject to the terms and conditions of such agreements.
SECTION 6.10. ERISA Event Notice. Promptly following receipt thereof, LGEC shall furnish copies of (i) any documents described in Sections 101(k) or 101(l) of ERISA that any Credit Party or any ERISA Affiliate may request with respect to any Multiemployer Plan or any documents described in Section 101(f) of ERISA with respect to any Title IV Plan or any Multiemployer Plan provided to or received by any Credit Party or any ERISA Affiliate; provided, that if the relevant Credit Parties or ERISA Affiliates have not requested or received such documents or notices, as applicable, from the administrator or sponsor of the applicable Multiemployer Plan, then, upon reasonable request of the Administrative Agent, such Credit Party or the ERISA Affiliate shall promptly make a request for such documents or notices from such administrator or sponsor and LGEC shall provide copies of such documents and notices to the Administrative Agent promptly after receipt thereof. As soon as possible upon becoming aware of the occurrence of any ERISA Event that has resulted or would reasonably be expected to result in material liability to any Credit Party, LGEC shall furnish Administrative Agent a written notice specifying the nature thereof, what action the Credit Party or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the U.S. Department of Labor or the Pension Benefit Guarantee Corporation with respect thereto; and (ii) with reasonable promptness, and upon the Administrative Agent’s request, furnish copies of each Schedule SB (Actuarial Information) to the annual report (Form 5500 Series) filed by any of the Credit Parties or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Title IV Plan.
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SECTION 6.11. Non-U.S. Plan Compliance and Reports.
(a) Each Credit Party and each of their applicable Subsidiaries shall cause all Non-U.S. Plans administered by it, or into which it is required to make payments, obtains or retains (as applicable) registered status under and as required by Applicable Law and is administered in a timely manner in all respects in compliance with all Applicable Laws, except where the failure to do so would not result in a Material Adverse Effect.
(b) LGEC shall furnish to the Administrative Agent as soon as possible, and in any event within twenty (20) Business Days after receipt, copies of any notices received by any Credit Party or any of their Subsidiaries with respect to any Non-U.S. Plan with respect to which there would reasonably be expected to result in a Material Adverse Effect.
SECTION 6.12. Environmental Laws.
(a) LGEC shall promptly notify the Administrative Agent upon 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 actual or pending violations or liabilities under any Environmental Laws would 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.
SECTION 6.13. Additional Guarantors.
(a) LGEC shall not, as of the last day of each fiscal quarter of LGEC, to the extent that as of such date the Net Total Leverage Ratio is greater than 4.00 to 1.00, permit the Credit Parties, taken as a whole, to represent less than (A) 70% of the consolidated revenue (calculated on a Pro Forma Basis) for the then-ended Test Period or (B) 70% of the total assets as of such date, in each case of LGEC and the Restricted Subsidiaries (other than any Special Purpose Producer which is not a Guarantor pursuant to clause (n) of the definition of Excluded Subsidiary) on a consolidated basis.
(b) Promptly (i) after formation or acquisition of any new Wholly-Owned Subsidiary other than an Excluded Subsidiary after the Restatement Date, (ii) to the extent required to comply with the provisions of Section 6.13(a), after the delivery of the most recent financial statements delivered or required to be delivered pursuant to Section 6.1 or (iii) after any Restricted Subsidiary that is not a Credit Party guarantees any Material Indebtedness of the Borrower, the Credit Parties shall cause such new or additional Restricted Subsidiary (and, without limiting the foregoing, LGEC may, in its sole discretion, cause any other Restricted Subsidiary including any Excluded Subsidiary which is organized in an Approved Jurisdiction), to execute and deliver to the Administrative Agent a Joinder Agreement to this Credit Agreement or such other document as the Administrative Agent shall reasonably deem appropriate for such purpose pursuant to which such Restricted Subsidiary will agree to be a Guarantor under this Credit Agreement and be bound by the terms of this Credit Agreement applicable to Guarantors, including, but not limited to, Article 9.
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SECTION 6.14. Further Assurances.
(a) If (i)(A) property (other than Excluded Assets) is acquired by the Borrower or a Guarantor (other than property acquired by a Guarantor which is organized outside of the United States or Canada and which is not of the type covered by the Collateral Documents governed by the law of such Guarantor’s jurisdiction then outstanding), or (B) property that is owned by the Borrower or a Guarantor which had been an Excluded Asset ceases to be an Excluded Asset, and in either case such property is not automatically subject to a perfected security interest under the Collateral Documents or (ii) a Subsidiary of LGEC becomes a Guarantor under this Credit Agreement, then the Borrower or such Guarantor will, as soon as reasonably practical (and in any event within 20 Business Days, or such longer period as (1) provided in the second-to-last sentence of this Section 6.14(a), (2) provided in Section 6.14(b) below with respect to owned real property or (3) otherwise agreed to by the Administrative Agent) after such property’s acquisition or its no longer being an Excluded Asset or such Subsidiary’s becoming a Guarantor, as applicable, provide security over such property or the assets of such Guarantor in favor of the Administrative Agent on a basis that would provide a perfected Lien on such terms, in each case, consistent with the Collateral Documents, and take such additional actions (including any of the actions described in this Section 6.14) as the Administrative Agent may deem reasonable and appropriate or advisable to create and fully perfect in favor of the secured parties under the Collateral Documents a valid and enforceable security interest in such Collateral. To the extent that any Collateral Document provides that, as to any property or asset, the Borrower or the Guarantors shall have greater than 20 Business Days to grant or perfect a security interest, or that the Borrower or the Guarantors need only use commercially reasonable efforts to grant or perfect a security interest, or otherwise limits the obligations of the Borrower or the Guarantors to comply with this Section 6.14(a), the provisions of such Collateral Document shall control.
(b) Within 90 days of the purchase by the Borrower or the Guarantors of any owned real property which is not an Excluded Asset, LGEC shall (i) furnish and deliver to the Administrative Agent an executed mortgage with respect to such real property and (ii) use commercially reasonable efforts to furnish and deliver to the Administrative Agent a title insurance policy for the benefit of the Administrative Agent in the amount of 120% of the Fair Market Value of such real property with extended coverage covering the real property as well as a current ALTA survey thereof, together with a surveyor’s certificate unless the title insurance policy referred to above shall not contain an exception for any matter shown by a survey (except to the extent an existing survey has been provided and specifically incorporated into such title insurance policy), each in form and substance reasonably satisfactory to the Administrative Agent. If any portion of any mortgaged property is at any time located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area with respect to which flood insurance has been made available under the Flood Insurance Laws, then LGEC shall, or shall cause the Borrower or each Guarantor to (A) prior to the delivery of any such executed mortgage for such property, deliver to the Administrative Agent (for further distribution to the Lenders) advance notice of the location of any such property as required to permit the Administrative Agent and the Lenders to determine whether such property is located in any such special flood hazard area, (B) maintain, or cause to be maintained, with a financially sound and reputable insurer, flood insurance in an amount and other-wise sufficient to comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and (C) cooperate with the Administrative Agent and provide information reasonably required by the Administrative Agent to comply with the Flood Insurance Laws and (iii) deliver to the Administrative Agent evidence of such compliance in form and substance reasonably acceptable to the Administrative Agent, including, without limitation, evidence of annual renewals of such insurance, provided that, notwithstanding this clause (b), (i) no such security interest shall be granted by the applicable Credit Party nor accepted by the Administrative Agent until the Administrative Agent has received confirmation that each Lender under the Term A Facility and Revolving Facility has completed its flood insurance due diligence to its reasonable satisfaction (it being understood that such satisfactory due diligence of such Lenders shall be deemed completed to the extent the Administrative Agent has not received written notice to the contrary within ten (10) Business Days after notice of location of such property has been made available to the Lenders), and (ii) to the extent real property which is not an Excluded Asset is acquired by any Guarantor organized outside of the United States or Canada, such Guarantor may (I) comply with this clause (b), (II) provide security over such real property pursuant to documentation and procedures customary in its jurisdiction as reasonably agreed between LGEC and the Administrative Agent or (III) if agreed to by the Administrative Agent in its sole discretion, not provide any security over such real property.
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(c) Upon the reasonable request of the Administrative Agent, the Borrower and each of the Guarantors will make, execute, endorse, acknowledge, file, record, register and/or deliver such agreements, documents, instruments, and further assurances (including, without limitation, UCC, CCQ and PPSA financing statements, mortgages, hypothecs, deeds of trust, vouchers, invoices, schedules, confirmatory assignments, conveyances, transfer endorsements, powers of attorney, certificates, real property surveys and reports), and take such other actions, as may be required under Applicable Law or as the Administrative Agent may deem reasonably appropriate or advisable to create, perfect, preserve or protect the security interest in the Collateral of the secured parties under the Collateral Documents, all at the Borrower’s expense; provided that, notwithstanding anything herein or in any other Fundamental Document to the contrary, under no circumstances will the Borrower or any Guarantor be obligated to enter into any pledgeholder, laboratory access or similar arrangements or deposit account control agreements, securities account control agreements, or other lockbox or control agreements, or to obtain bailee agreements or landlord or mortgagee waivers, or to send any notices to account debtors or other contractual third parties unless an Event of Default has occurred and is continuing. Additionally, notwithstanding anything in this Credit Agreement or in any other Fundamental Document to the contrary, under no circumstances will the Borrower or any Guarantor be obligated to (i) enter into security agreements or pledge agreements or similar agreements governed under the laws of any non-U.S. or non-Canadian jurisdiction or (ii) take any other actions in any non-U.S. or non-Canadian jurisdiction to create or perfect any security interests, except in each case to the extent LGEC elects to add any Guarantor organized outside of the U.S. or Canada, in which case LGEC will cause such Guarantor to enter into customary security and pledge agreements consistent with the terms of this Credit Agreement governed by the law of such jurisdiction, and the Administrative Agent (with the cooperation of such Guarantor) may take customary actions to create and perfect security interests on the assets of such Guarantor in such jurisdiction.
SECTION 6.15. OFAC, FCPA.
(a) The Borrower will use the proceeds of each Credit Extension in accordance with Section 4.22(c) and Section 4.23.
(b) LGEC will maintain in effect and enforce policies and procedures designed to promote compliance by LGEC, its Subsidiaries and their respective directors, officers and employees with the provisions of Section 4.22.
SECTION 6.16. Maintenance of Ratings. LGEC will use commercially reasonable efforts to cause to be maintained at all times (a)(i) a corporate family rating, in the case of Moody’s, (ii) an issuer credit rating, in the case of S&P or (iii) an issuer default rating, in the case of Fitch, for the Borrower and (b) credit ratings for the Facilities from any two of Moody’s, S&P and Fitch, but in the case of clauses (a) and (b), for the avoidance of doubt, not any specific rating.
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SECTION 6.17. Post-Closing Actions.
The Borrower and each other Credit Party shall take each action set forth on Schedule 6.17 within the period set forth on such Schedule 6.17 for such action; provided that, in each case, the Administrative Agent may, in its sole reasonable discretion, grant extensions of the time periods set forth on such Schedule 6.17 and, each representation or warranty which would be true, each covenant or agreement which would be complied with, and each condition which would be satisfied, in each case as set forth in any Fundamental Document, but for an action set forth on Schedule 6.17 not having been completed, will be deemed true, complied with, or satisfied, as the case may be, unless such action is not completed within the period set forth in Schedule 6.17 for such action (as such period may be extended by the Administrative Agent).
SECTION 6.18. ERISA Matters. No Credit Party shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur (i) an event that would result in the imposition of an ERISA Lien or (ii) an ERISA Event to the extent such ERISA Event or ERISA Lien, either alone or together with all such other ERISA Events, would reasonably be expected to have a Material Adverse Effect.
ARTICLE 7 NEGATIVE COVENANTS
From the date hereof and for so long as the Revolving Credit Commitments shall be in effect, any Loan shall remain outstanding, or L/C Exposure shall remain outstanding or any monetary Obligation then due and payable shall remain unpaid or unsatisfied (other than with respect to a Specified Swap Agreement or Specified Cash Management Agreement):
SECTION 7.1. Limitations on Indebtedness.
(a) LGEC will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Secured Funded Indebtedness; provided, however, that the Borrower and the Guarantors may Incur Secured Funded Indebtedness if on the date thereof and after giving effect thereto and to the application of the proceeds thereof on a Pro Forma Basis: (i) the Net First Lien Leverage Ratio is not greater than 4.50 to 1.00; and (ii) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of Incurring such Secured Funded Indebtedness or the application of the proceeds thereof.
(b) LGEC will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness; provided, however, that the Borrower and the Guarantors may Incur Indebtedness if on the date thereof and after giving effect thereto and to the application of the proceeds thereof on a Pro Forma Basis: (i) the Net Total Leverage Ratio is not greater than 6.00 to 1.00; and (ii) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of Incurring such Indebtedness or the application of the proceeds thereof.
(c) The foregoing Section 7.1(a) and (b) will not prohibit the Incurrence of the following Indebtedness:
(i) (A) Indebtedness Incurred under this Credit Agreement (including any Guarantee under Article 9 of this Credit Agreement), including Indebtedness Incurred pursuant to Section 2.13, Section 2.14 or Section 2.15, (B) any Incremental Equivalent Debt incurred in lieu of Incremental Facilities, and (C) any Refinancing Notes;
(ii) (A) Indebtedness of LGEC and its Restricted Subsidiaries in existence on the Restatement Date (other than Indebtedness described in clauses (i), (iii), (iv) and (vi) of this Section 7.1(c)), and (B) the Senior Notes in an aggregate principal amount not to exceed $1,000,000,000;
(iii) Guarantees by (A) the Borrower or the Guarantors of Indebtedness permitted to be Incurred by the Borrower or a Guarantor in accordance with the terms of this Credit
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Agreement, provided that in the event such Indebtedness that is being Guaranteed is a Subordinated Obligation, then the related Guarantee shall be subordinated in right of payment to the Loans or the Guarantees under Article 9 of this Credit Agreement, as the case may be, substantially to the same extent as such Indebtedness is subordinated to the Loans or the Guarantees under Article 9 of this Credit Agreement, as applicable, and (B) Non-Guarantor Subsidiaries of Indebtedness Incurred by Non-Guarantor Subsidiaries in accordance with the terms of this Credit Agreement;
(iv) Indebtedness of LGEC owing to and held by any Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by LGEC or any Wholly-Owned Subsidiary; provided, however,
(A) if the Borrower is the obligor on Indebtedness owing to a Non-Guarantor Subsidiary, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations under this Credit Agreement;
(B) if a Guarantor is the obligor on such Indebtedness and the Borrower or a Guarantor is not the obligee, such Indebtedness is subordinated in right of payment to the Guarantee of such Guarantor under Article 9 of this Credit Agreement; and
(C) (1) any subsequent issuance or transfer of Capital Stock or any other event which results in any such Indebtedness being held by a Person other than LGEC or a Wholly-Owned Subsidiary of LGEC and (2) any sale, assignment, transfer, conveyance, exchange or other disposition of any such Indebtedness of any such Indebtedness to a Person other than LGEC or a Wholly-Owned Subsidiary of LGEC, shall be deemed, in each case, to constitute an Incurrence of such Indebtedness by LGEC or such Subsidiary, as the case may be.
(v) Indebtedness (A) of LGEC or any Restricted Subsidiary Incurred to finance the acquisition of or a merger, amalgamation or consolidation with another Person (or a line of business of any Person) or (B) of any Person Incurred and outstanding on the date on which such Person became a Restricted Subsidiary or was acquired by, or merged, amalgamated or consolidated into, LGEC or any Restricted Subsidiary; provided, however, that at the time such Person or line of business is acquired or merged, amalgamated or consolidated, after giving effect thereto and to the Incurrence of such Indebtedness pursuant to this clause (v) and the use of the proceeds thereof on a Pro Forma Basis, (1) either (I) LGEC would have been able to Incur $1.00 of additional Indebtedness pursuant to Section 7.1(b) above or (II) the Net Total Leverage Ratio would be no greater than it was immediately prior to such transaction and (2) in the event that such Indebtedness is secured on a pari passu basis with the Obligations, LGEC would have been able to Incur $1.00 of Secured Funded Indebtedness pursuant to Section 7.1(a) above.
(vi) Indebtedness under Hedging Obligations that are Incurred (A) for the purpose of fixing or hedging interest rate risk with respect to any Indebtedness not prohibited by this Credit Agreement; (B) for the purpose of fixing or hedging currency exchange rate risk; or (C) for the purpose of fixing or hedging commodity price risk;
(vii) Indebtedness (including Finance Lease Obligations) of LGEC or a Restricted Subsidiary Incurred to finance the purchase, lease, construction or improvement of any property, plant or equipment used or to be used in the business of LGEC or such Restricted Subsidiary, whether through the direct purchase of such property, plant or equipment or the purchase of Capital Stock of any Person owning such property, plant or equipment (but no other material assets), in a principal amount outstanding not to exceed, at the time of Incurrence thereof, together with all other outstanding (x) Indebtedness incurred under this clause (vii) and (y) Refinancing Indebtedness incurred under clause (xi) in respect of Indebtedness previously incurred under this clause (vii), the greater of (A) $315,000,000 and (B) 3.0% of Total Assets;
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(viii) Indebtedness Incurred by LGEC or its Restricted Subsidiaries in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance, self-insurance obligations, performance, bid surety and similar bonds and Completion Guarantees (not for borrowed money) provided by LGEC or a Restricted Subsidiary in the ordinary course of business;
(ix) Indebtedness arising from agreements of LGEC or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, Incurred or assumed in connection with the disposition of any business or assets of LGEC or any business, assets or Capital Stock of a Restricted Subsidiary, other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition, provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the Fair Market Value of such non-cash proceeds being measured at the time received and without giving effect to subsequent changes in value) actually received by LGEC and the Restricted Subsidiaries in connection with such disposition;
(x) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided, however, that such Indebtedness is extinguished within five Business Days of Incurrence;
(xi) the Incurrence or issuance by LGEC or any Restricted Subsidiary of Refinancing Indebtedness that serves to refund, refinance or defease any Indebtedness Incurred as permitted under Section 7.1(a) or (b) above and clauses (i)(B), (i)(C), (ii), (v), (vii), (xix) and this clause (xi) of this Section 7.1(c) or any Indebtedness issued to so refund, refinance or defease such Indebtedness, including additional Indebtedness Incurred to pay premiums (including reasonable, as determined in good faith by LGEC, tender premiums), defeasance costs, accrued interest and fees and expenses in connection therewith prior to its respective maturity;
(xii) Indebtedness incurred by LGEC or any Restricted Subsidiary that is a Special Purpose Producer which is non-recourse to LGEC or any Restricted Subsidiary other than any Special Purpose Producer, except to the extent that a Negative Pick-up Obligation, Program Acquisition Guarantee or short-fall guarantee, or any other guarantee permitted by clause (xviii) below, would be considered recourse Indebtedness of LGEC or any of its Restricted Subsidiaries;
(xiii) (A) to the extent constituting Indebtedness pursuant to the definition thereof, any Permitted Slate Financing and (B) any Indebtedness incurred by any ProdCo to the extent not prohibited by the definition of “Permitted Slate Transaction”;
(xiv) Replication Advances not to exceed $100,000,000 outstanding in the aggregate at the time of Incurrence thereof, which are otherwise entered into in the ordinary course of business and on terms and conditions substantially no less favorable in any material respect, taken as a whole, to LGEC as similar transactions entered into by LGEC or its Subsidiaries prior to the Original Closing Date; provided that, the granting of a Lien in respect of the related assets, which is junior in right to the Lien on such assets which secures the Loans, to secure any such Replication Advances will not be considered to be less favorable to LGEC;
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(xv) Indebtedness secured solely by liens on tax credits which is otherwise non-recourse to LGEC and any Restricted Subsidiary, other than customary representations and warranties;
(xvi) liabilities relating to profit participations, revenue participations, talent participations, deferments and guild residuals, and music royalties, collection agencies and tribunals (e.g., ASCAP), arising in the ordinary course of business in connection with the production, acquisition and/or distribution of Product;
(xvii) unsecured liabilities (including without limitation Guarantees) or liabilities (including without limitation Guarantees) secured solely by the related rights related to the acquisition, production or distribution of Product or acquisitions of rights incurred in the ordinary course of business (including co-productions, co-ventures and other co-financing arrangements), which are not otherwise prohibited hereunder , in an amount no greater than $30,000,000 outstanding in the aggregate at the time of Incurrence thereof;
(xviii) Negative Pick-up Obligations, Program Acquisition Guarantees and direct or indirect guarantees (including minimum guarantees) related to the acquisition or production of items of Product in the ordinary course of business; and
(xix) in addition to the items referred to in clauses (i) through (xviii) above, Indebtedness of LGEC and the Restricted Subsidiaries in an aggregate outstanding principal amount not to exceed, at the time of Incurrence thereof, together with all other outstanding (x) Indebtedness incurred under this clause (xix) and (y) Refinancing Indebtedness incurred under clause (xi) in respect of Indebtedness previously incurred under this clause (xix), the greater of (a) $315,000,000 and (b) 3.0% of Total Assets;
(d) For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness Incurred pursuant to and in compliance with, this Section 7.1:
(i) subject to clause (ii) and (vi) below, in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in Section 7.1(a), (b) and (c) above, LGEC, in its sole discretion, may classify such item (or portion) of Indebtedness on the date of Incurrence and may later re-divide or reclassify such item (or portion) of Indebtedness in any manner that complies with this covenant; provided that all Indebtedness represented by the Senior Notes on the Amendment No. 4 Effective Date will, at all times, be treated as incurred on the Amendment No. 4 Effective Date under Section 7.1(c)(ii)(B) and may not be reclassified.
(ii) Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness that is otherwise included in the determination of a particular amount of Indebtedness shall not be included;
(iii) if obligations in respect of letters of credit are Incurred pursuant to a credit facility and are being treated as Incurred pursuant to Section 7.1(a) or Section 7.1(b) above and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included;
(iv) the principal amount of any Disqualified Stock of LGEC or a Restricted Subsidiary, or Preferred Stock of a Restricted Subsidiary that is not a Guarantor, will be, subject to the next succeeding paragraph, equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the liquidation preference thereof;
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(v) subject to clause (vi) below, Indebtedness permitted by this Section 7.1 need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this Section 7.1 permitting such Indebtedness;
(vi) (A) Indebtedness under this Credit Agreement (including any Guarantee under Article 9 of this Credit Agreement), including Indebtedness Incurred pursuant to Section 2.13, Section 2.14 or Section 2.15, (B) any Incremental Equivalent Debt incurred in lieu of Incremental Facilities, and (C) any Refinancing Notes, shall in any event be deemed to be Incurred solely under Section 7.1(c)(i)(A), (B) or (C), as applicable; and
(vii) the amount of Indebtedness issued at a price that is less than the principal amount thereof will be equal to the amount of the liability in respect thereof determined in accordance with GAAP.
(e) Accrual of interest, accrual of dividends, the accretion of accreted value or the amortization of debt discount, the payment of interest in the form of additional Indebtedness and the payment of dividends in the form of additional shares of Preferred Stock or Disqualified Stock will not be deemed to be an Incurrence of Indebtedness for purposes of this Section 7.1. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof in the case of any Indebtedness issued with original issue discount or the aggregate principal amount outstanding in the case of Indebtedness issued with interest payable in kind and (ii) the principal amount or liquidation preference thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.
(f) If at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be Incurred by a Restricted Subsidiary as of such date (and, if such Indebtedness is not permitted to be Incurred as of such date under this Section 7.1, the Borrower shall be on such date in Default under this Section 7.1).
(g) For purposes of determining compliance with any Dollar denominated restriction on the Incurrence of Indebtedness, the Dollar equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable Dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such Dollar denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. Notwithstanding any other provision of this Section 7.1, the maximum amount of Indebtedness that LGEC or the Restricted Subsidiaries may Incur pursuant to this Section 7.1 shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Refinancing Indebtedness is denominated that is in effect on the date of such refinancing.
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SECTION 7.2. Limitations on Restricted Payments.
(a) LGEC will not, and will not permit any of the Restricted Subsidiaries, directly or indirectly, to:
(i) declare or pay any dividend or make any distribution (whether made in cash, securities or other property) on or in respect of LGEC’s or any of its Restricted Subsidiaries’ Capital Stock (including any payment in connection with any merger, amalgamation or consolidation involving LGEC or any of its Restricted Subsidiaries) other than:
(A) dividends or distributions by LGEC payable solely in Capital Stock (other than Disqualified Stock) of LGEC;
(B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any Capital Stock issued by a Restricted Subsidiary that is not a Wholly-Owned Subsidiary, LGEC or Restricted Subsidiary holding such Capital Stock receives at least its pro rata share of such dividend or distribution; or
(C) cash payments made to (or on behalf of) current and former officers, directors and employees of LGEC and its Subsidiaries to pay tax liabilities incurred by such Persons upon the vesting of equity interests of any kind held thereby, including restricted stock units;
(ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of LGEC or any direct or indirect parent of LGEC held by Persons other than LGEC or a Restricted Subsidiary (other than in exchange for Capital Stock of LGEC (other than Disqualified Stock)), including in connection with any merger, amalgamation or consolidation;
(iii) make any principal payment on, or purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled repayment, scheduled sinking fund payment, or scheduled maturity, any Subordinated Obligations, other than:
(A) Indebtedness permitted under Section 7.1(c)(iv); or
(B) the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase, redemption, defeasance or other acquisition or retirement; or
(iv) make any Restricted Investment in any Person;
(all such payments and other actions referred to in the foregoing clauses (i) through (iv) (other than any exception thereto) shall be collectively referred to as a “Restricted Payment”), unless, at the time of and after giving effect to such Restricted Payment:
(A) no Default shall have occurred and be continuing (or would result therefrom);
(B) in the case of a Restricted Payment of the type referred to in clauses (i) through (iii) of this Section 7.2(a), LGEC shall be in compliance with the financial ratios set forth in Section 7.9(a) and (b) for the relevant fiscal quarter on a Pro Forma Basis; and
(C) the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made subsequent to the Original Closing Date (excluding Restricted Payments made pursuant to clauses (i), (ii), (iii), (iv), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii) and (xiv) of Section 7.2(b)) would not exceed the sum of (without duplication):
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| (1) | 100% of Adjusted EBITDA of LGEC and its Restricted Subsidiaries for the period (treated as one accounting period) from the Original Closing Date to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which financial statements have been delivered or were required to be delivered pursuant to Section 6.1(a) and Section 6.1(b) less 1.4 times the Consolidated Applicable Interest Charge of LGEC and its Restricted Subsidiaries for the same period; plus |
| (2) | 100% of the aggregate Net Cash Proceeds and the Fair Market Value of any property other than cash received by LGEC from the issue or sale of its Capital Stock (other than Disqualified Stock) or other capital contributions subsequent to the Original Closing Date, (other than Net Cash Proceeds received from an issuance or sale of such Capital Stock to a Subsidiary of LGEC or to an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or Guaranteed by LGEC or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination) excluding in any event Excluded Contributions; plus |
| (3) | the amount by which Indebtedness of LGEC or its Restricted Subsidiaries is reduced on LGEC’s consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary of LGEC) subsequent to the Original Closing Date of any Indebtedness of LGEC or its Restricted Subsidiaries for Capital Stock (other than Disqualified Stock) of LGEC or any direct or indirect parent of LGEC (less the amount of any cash, or the Fair Market Value of any other property, distributed by LGEC upon such conversion or exchange); plus |
| (4) | the amount equal to the net reduction in Restricted Investments made by LGEC or any of the Restricted Subsidiaries in any Person resulting from: |
(A) repurchases or redemptions of such Restricted Investments by such Person, proceeds realized upon the sale of such Restricted Investment to an unaffiliated purchaser, repayments of loans or advances or other transfers of assets (including by way of dividend or distribution) by such Person to LGEC or any Restricted Subsidiary; or
(B) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries or the merger or consolidation of an Unrestricted Subsidiary with and into LGEC or any of its Restricted Subsidiaries (valued in each case as provided in the definition of “Investment”) not to exceed the amount of Investments previously made by LGEC or any Restricted Subsidiary in such Unrestricted Subsidiary,
which amount in each case under this clause (4) was included in the calculation of the amount of Restricted Payments; provided, however, that no amount will be included under this clause (4) to the extent it is already included in Adjusted EBITDA; plus
| (5) | $150,000,000. |
(b) The foregoing Section 7.2(a) will not prohibit:
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(i) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Capital Stock, Disqualified Stock or Subordinated Obligations of the Borrower or any Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of LGEC or contributions to the equity capital of LGEC (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of LGEC or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or Guaranteed by LGEC or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided, however, that the Net Cash Proceeds from such sale of Capital Stock will be excluded from Section 7.2(a)(iv)(C)(2) above;
(ii) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations of the Borrower or any Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations of the Borrower or any Guarantor that, in each case, is permitted to be Incurred under Section 7.1 and that, in each case, constitutes Refinancing Indebtedness;
(iii) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Disqualified Stock of LGEC or a Restricted Subsidiary made by exchange for or out of the proceeds of the substantially concurrent sale of Disqualified Stock of LGEC or such Restricted Subsidiary, as the case may be, that, in each case, is permitted to be Incurred under Section 7.1 and that, in each case, constitutes Refinancing Indebtedness;
(iv) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent the Borrower has complied with its obligations to prepay all Term Loans to the extent required by Section 2.8(c)(ii) prior to such purchase or redemption;
(v) dividends or distributions paid within 60 days after the date of declaration if at such date of declaration such dividends or distributions would have complied with this provision;
(vi) (a) the purchase, redemption or other acquisition, cancellation or retirement for value of Capital Stock, (b) options, warrants, equity appreciation rights or other rights to purchase or acquire Capital Stock of LGEC or any direct or indirect parent of LGEC or (c) cash dividends distributed to any direct or indirect parent of LGEC for the purpose of consummating such purchase, redemption or other acquisition, cancellation or retirement for value; provided that such redemptions or repurchases pursuant to this clause (vi) will not exceed $75,000,000 in the aggregate during any fiscal year; provided further that (x) such amount, if not so expended in the fiscal year for which it is permitted, may be carried forward in the next fiscal year and (y) redemptions or repurchases made pursuant to this clause (vi) during any fiscal year shall be deemed made first in respect of amounts carried over from the prior fiscal year and second in respect of amounts permitted for such fiscal year as provided above;
(vii) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of LGEC permitted to be Incurred pursuant to Section 7.1 of this Credit Agreement;
(viii) repurchases of Capital Stock deemed to occur upon the exercise of stock options, warrants, other rights to purchase Capital Stock or other convertible securities if such Capital Stock represents a portion of the exercise price thereof;
(ix) the declaration and payment of cash dividends, distributions, loans or other transfers by LGEC to any direct or indirect parent of LGEC, directly or indirectly, in amounts required for such parent entity to pay, in each case without duplication:
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(A) federal, provincial, state, local or foreign income taxes payable to the extent that such income taxes are directly attributable to the income of LGEC and its Subsidiaries (rather than the income of such parent entity resulting from distributions of property from LGEC or any Subsidiary) and only to the extent such taxes are not offset by applicable tax credits, tax losses or other assets; provided that in each case the amount of such payments in any fiscal year does not exceed the amount that LGEC and its Subsidiaries would be required to pay in respect of foreign, federal, provincial, state and local taxes for such fiscal year were LGEC and its Subsidiaries to pay such taxes separately from any such parent entity;
(B) franchise taxes and other fees required to maintain such parent entity’s legal existence; and
(C) corporate overhead expenses Incurred in the ordinary course of business, and salaries or other compensation of employees who perform services for both such parent entity and LGEC or its Subsidiaries, provided that the amount available under this clause (C) in any fiscal year shall not exceed the greater of $25,000,000 and 3.0% of Adjusted EBITDA of LGEC for such fiscal year;
(x) purchases of Receivables Financing Assets pursuant to a Receivables Financing Repurchase Obligation in connection with a Qualified Receivables Financing and the payment or distribution of Receivables Financing Fees;
(xi) Restricted Payments that are made with the proceeds of Excluded Contributions;
(xii) other Restricted Payments made in an aggregate amount (as reduced by the amount of capital returned from any such Restricted Payments that constituted Restricted Investments in the form of cash and Cash Equivalents (exclusive of items reflected in Consolidated Net Income)) from the Original Closing Date not to exceed $150,000,000;
(xiii) other Restricted Payments of the type referred to in clauses (i) or (ii) of Section 7.2(a), provided, however, that at the time of and after giving pro forma effect to any such Restricted Payment, the Net Total Leverage Ratio is not greater than 4.00 to 1.00 on a Pro Forma Basis; and
(xiv) other Restricted Payments of the type referred to in clauses (iii) or (iv) of Section 7.2(a), provided, however, that at the time of and after giving pro forma effect to any such Restricted Payment, the Net Total Leverage Ratio is not greater than 4.50 to 1.00 on a Pro Forma Basis;
provided, however, that at the time of and after giving effect to, any Restricted Payment permitted under the foregoing clauses (iv), (vi), (xi), (xii), (xiii) and (xiv), no Default shall have occurred and be continuing or would occur as a consequence thereof.
(c) The amount of all Restricted Payments (other than cash) shall be the Fair Market Value on the date of such Restricted Payment of the asset(s) or securities proposed to be paid, transferred or issued by LGEC or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment.
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(d) All of LGEC’s Subsidiaries will be Restricted Subsidiaries, except for the Initial Unrestricted Subsidiaries. The Borrower shall not be permitted to be designated as an Unrestricted Subsidiary. LGEC will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except in accordance with the definition of “Unrestricted Subsidiary.” For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by LGEC and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments and/or, in the discretion of LGEC, Investments, in an amount determined as set forth in the definition of “Investment.” Such designation will be permitted only if a Restricted Payment (and/or Permitted Investment) in such amount would be permitted at such time and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in this Credit Agreement.
SECTION 7.3. Limitation on Liens. LGEC will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, Incur, assume or suffer to exist any Lien (other than Permitted Liens) upon any of its property or assets (including Capital Stock of Subsidiaries), or income or profits therefrom, whether owned on the Original Closing Date or acquired after that date, which Lien secures any Indebtedness.
SECTION 7.4. Limitation on Restrictions on Distribution from Restricted Subsidiaries.
(a) LGEC will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital Stock to LGEC or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits (it being understood that the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on any other Capital Stock shall not be deemed a restriction on the ability to make distributions on Capital Stock); or
(ii) make any loans or advances to LGEC or any Restricted Subsidiary (it being understood that the subordination of loans or advances made to LGEC or any Restricted Subsidiary to other Indebtedness Incurred by LGEC or any Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances).
(b) The foregoing Section 7.4(a) will not apply to encumbrances or restrictions existing under or by reason of:
(i) contractual encumbrances or restrictions pursuant to an agreement in effect on the Restatement Date, including without limitation, the Senior Notes (and related documentation);
(ii) this Credit Agreement and the Collateral Documents;
(iii) any agreement or other instrument of a Person acquired by LGEC or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries, or the property or assets of the Person and its Subsidiaries, so acquired (including after acquired property);
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(iv) any amendment, restatement, modification, renewal, supplement, refunding, replacement or refinancing of an agreement or arrangement referred to in Section 7.4(a)(ii); provided, however, that any encumbrances or restrictions contained in any such amendments, restatements, modifications, renewals, supplements, refundings, replacements, or refinancings are, in the good faith judgment of LGEC, no less favorable in any material respect, taken as a whole, to the Lenders than the encumbrances and restrictions contained in the agreements or arrangement so amended, restated, modified, renewed, supplemented, refunded, replaced or refinanced;
(v) purchase money obligations and Finance Lease Obligations permitted under this Credit Agreement;
(vi) customary restrictions on cash or other deposits or net worth imposed by customers or by co-production partners, Joint Venture partners or similar parties under contracts;
(vii) any customary provisions in Joint Venture agreements and other similar agreements;
(viii) any customary provisions in leases, subleases or licenses and other agreements entered into by LGEC or any Restricted Subsidiary;
(ix) encumbrances or restrictions arising or existing by reason of Applicable Law or any applicable rule, regulation or order;
(x) any restriction with respect to LGEC or a Restricted Subsidiary or any asset or line of business thereof imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of LGEC or such Restricted Subsidiary or any asset or line of business thereof pending the closing of such sale or disposition;
(xi) imposed by any agreement relating to Indebtedness or Investments, as applicable, permitted to be Incurred in accordance with Section 7.1, 7.2 or the definition of “Permitted Investment,” in each case, if such restrictions or conditions apply only to the property or assets securing such Indebtedness or Investments and/or only to the Restricted Subsidiary incurring such Indebtedness or in which such Investments are made, or its Subsidiaries;
(xii) other Indebtedness, Disqualified Stock or Preferred Stock of LGEC or any Restricted Subsidiary so long as such encumbrances and restrictions contained in any agreement or instrument will not materially affect Borrower’s or any Guarantor’s ability to make anticipated principal or interest payments on the Loans (in each case, as determined in good faith by Borrower), provided that such Indebtedness, Disqualified Stock or Preferred Stock is permitted to be Incurred pursuant to Section 7.1;
(xiii) any restrictions or encumbrances imposed on Special Purpose Producers or ProdCos, or otherwise in connection with any Permitted Slate Financing or Permitted Slate Transaction, in each case which are customary for slate or production financing or similar transactions; and
(xiv) any encumbrance or restriction of a Receivables Subsidiary effected in connection with a Qualified Receivables Financing; provided, however, that such restrictions apply only to such Receivables Subsidiary.
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SECTION 7.5. Limitation on Affiliate Transactions.
(a) LGEC will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease, exchange or other disposition of any property or asset or the rendering of any service) with any Affiliate of LGEC (an “Affiliate Transaction”) involving consideration in excess of $30,000,000 unless:
(i) the terms of such Affiliate Transaction are not materially less favorable to LGEC or such Restricted Subsidiary, as the case may be, than those that could have been obtained by LGEC or such Restricted Subsidiary in a comparable transaction with a Person that is not an Affiliate; and
(ii) in the event such Affiliate Transaction involves an aggregate consideration in excess of $60,000,000 (or with respect to transactions involving any item of Product, $90,000,000), the terms of such transaction have been approved by a majority of the members of the Board of Directors of LGEC and by a majority of the members of such Board of Directors having no personal stake in such transaction, if any (and such majority or majorities, as the case may be, determines that such Affiliate Transaction satisfies the criteria in clause (i) above).
(b) The preceding Section 7.5(a) will not apply to:
(i) (A) transactions between or among LGEC and any of its Restricted Subsidiaries, and (B) any merger, amalgamation, or consolidation of LGEC and any direct parent of LGEC, provided, however that such parent shall have no Indebtedness other than Indebtedness that would be permitted to be Incurred by LGEC at the time of such merger, amalgamation, or consolidation and such merger, amalgamation, or consolidation is otherwise not prohibited by the terms of this Credit Agreement;
(ii) any Restricted Payment permitted to be made under Section 7.2 or any Permitted Investments;
(iii) any loan or issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements and other compensation arrangements, options to purchase Capital Stock of LGEC, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee benefits plans and/or indemnity provided on behalf of Officers and employees;
(iv) the payment of reasonable and customary fees and reimbursement of expenses paid to and indemnity provided on behalf of, directors of LGEC or any Restricted Subsidiary;
(v) any agreement as in effect as of the Restatement Date, as these agreements may be amended, modified, supplemented, extended or renewed from time to time, so long as any such amendment, modification, supplement, extension or renewal is not more disadvantageous to the Lenders in any material respect in the good faith judgment of LGEC when taken as a whole than the terms of the agreements in effect on the Restatement Date;
(vi) any agreement between any Person and an Affiliate of such Person existing at the time such Person is acquired by or merged, amalgamated or consolidated into LGEC or a Restricted Subsidiary; provided, that such agreement was not entered into in contemplation of such acquisition or merger, amalgamation, or consolidation , or any amendment thereto (so long as any such agreement is not disadvantageous to the Lenders in the good faith judgment of LGEC when taken as a whole as compared to the applicable agreement as in effect on the date of such acquisition or merger, amalgamation, or consolidation );
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(vii) transactions with customers, clients, suppliers, Joint Venture partners or purchasers or sellers of goods or services (including, without limitation, licensing, production, co-production, services (e.g., shared services agreements), advertising, distribution, promotional or delivery agreements), in each case in the ordinary course of the business of LGEC and the Restricted Subsidiaries and otherwise in compliance with the terms of this Credit Agreement; provided that in the reasonable determination of LGEC, such transactions are on terms that are no less favorable to LGEC or the relevant Restricted Subsidiary than those that could reasonably have been obtained at the time of such transactions in a comparable transaction by LGEC or such Restricted Subsidiary with an unrelated Person;
(viii) any issuance or sale of Capital Stock (other than Disqualified Stock) to affiliates of LGEC and the granting of registration and other customary rights in connection therewith;
(ix) the entering into of any tax sharing agreement or arrangement and the performance thereunder;
(x) any contribution to the capital of LGEC, or any sale of Capital Stock of LGEC (other than Disqualified Stock);
(xi) transactions permitted by, and complying with, the provisions of Section 7.6;
(xii) pledges of Capital Stock of Unrestricted Subsidiaries;
(xiii) any employment agreements entered into by LGEC or any of its Restricted Subsidiaries in the ordinary course of business;
(xiv) any distribution, license, participation, sale, lease, production, reproduction or co-financing agreement, guarantee, negative pick-up or other acquisition agreement, or other similar agreement to any of the foregoing, entered into in the ordinary course of business and on an arm’s length basis;
(xv) any Permitted Slate Transaction; and
(xvi) any transaction effected as part of a Qualified Receivables Financing.
SECTION 7.6. Limitation on Mergers and Consolidations.
(a) Neither LGEC nor the Borrower will merge, amalgamate or consolidate with or into (whether or not LGEC or the Borrower is the surviving corporation), or convey, transfer or lease all or substantially all of its assets to, any Person, unless:
(i) LGEC or the Borrower, as applicable, is the surviving person or the resulting, surviving or transferee Person (the “Successor Person”) is a corporation organized and existing under the laws of Canada, any Province of Canada, the United States of America, any State of the United States or the District of Columbia;
(ii) the Successor Person (if not LGEC or the Borrower) will expressly assume, by documentation executed and delivered to the Administrative Agent, in form satisfactory to the Administrative Agent, all the obligations of LGEC or the Borrower, as applicable, under this Credit Agreement and the Collateral Documents (as applicable) and shall cause such amendments, supplements or other instruments to be executed, filed, and recorded in such jurisdictions as may be required by
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Applicable Law to preserve and protect the Lien on the Collateral owned by or transferred to the Successor Person, together with such financing statements or comparable documents as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement or a similar document under the applicable PPSA, the CCQ, the UCC or other similar statute or regulation of the relevant states or jurisdictions;
(iii) immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the Successor Person or any Subsidiary of the Successor Person as a result of such transaction as having been Incurred by the Successor Person or such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing;
(iv) immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period, LGEC (including any Successor Person) shall be in compliance with the financial ratios set forth in Section 7.9(a) and (b) for the relevant fiscal quarter on a Pro Forma Basis;
(v) each Guarantor (unless it is the other party to the transactions above, in which case the next succeeding paragraph shall apply) shall have by documentation in form and substance satisfactory to the Administrative Agent, confirmed that its Guarantee under Article 9 of this Credit Agreement shall apply to such Person’s obligations in respect of this Credit Agreement and shall have by written agreement confirmed that its obligations under the Collateral Documents Agreement shall continue to be in effect and shall cause such amendments, supplements or other instruments to be executed, filed, and recorded in such jurisdictions as may be required by Applicable Law to preserve and protect the Lien on the Collateral owned by such Guarantor, together with such financing statements or comparable documents as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement or a similar document under the applicable PPSA, the CCQ, the UCC or other similar statute or regulation of the relevant provinces, states or jurisdictions; and
(vi) the Borrower shall have delivered to the Administrative Agent an Officers’ Certificate stating that such merger, amalgamation, consolidation, conveyance or transfer and such supplemental documentation (if any) comply with the terms of this Credit Agreement and any other documentation and other information about the Successor Person as shall have been reasonably required by any Lender through the Administrative Agent that such Lender shall have reasonably determined is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulation, including the Patriot Act.
(b) Notwithstanding clauses (iii) and (iv) of the preceding Section 7.6(a):
(i) any Restricted Subsidiary may merge with, amalgamate with, consolidate with or into or transfer all or part of its properties and assets to LGEC or the Borrower so long as no Capital Stock of the Restricted Subsidiary is distributed to any Person other than LGEC or the Borrower or another Restricted Subsidiary; and
(ii) the Borrower may merge with, amalgamate with or consolidate with an Affiliate of LGEC solely for the purpose of reincorporating the Borrower in Canada, a Province of Canada or a State or territory of the United States or the District of Columbia, so long as the amount of Indebtedness of LGEC and its Restricted Subsidiaries is not increased thereby; provided that, in the case of a Restricted Subsidiary that merges, amalgamates or consolidates into the Borrower, the Borrower will not be required to comply with Section 7.6(a)(iv).
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(c) The Borrower and LGEC will not, and will not permit any Guarantor to, merge, amalgamate or consolidate with or into (whether or not the Borrower or such Guarantor is the surviving corporation), or convey, transfer or lease all or substantially all of its properties to any Person (other than with or into, or to, the Borrower or a Guarantor) unless:
(i) if such entity remains a Guarantor, the resulting, surviving or transferee Person (the “Successor Guarantor”) will be a corporation, partnership, trust or limited liability company organized and existing under the laws of Luxembourg, any country within the United Kingdom, Canada, a Province of Canada, the United States of America, any State of the United States or the District of Columbia or the jurisdiction of organization of such Guarantor and shall assume by written agreement all the obligations of such Guarantor under the Collateral Documents (as applicable) and shall cause such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdictions as may be required by Applicable Law to preserve and protect the Lien on the Collateral pledged by or transferred to the surviving entity, together with such financing statements or comparable documents as may be required to perfect any security interest in such Collateral which may be perfected by the filing of a financing statement or similar document under the applicable PPSA, the CCQ, the UCC or other similar statute or regulation of the relevant states, provinces or jurisdictions in each case in a form reasonably satisfactory to the Administrative Agent;
(ii) the Successor Guarantor, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under this Credit Agreement and its Guarantee under Article 9 hereof pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent;
(iii) immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the resulting, surviving or transferee Person or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Person or such Restricted Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; and
(iv) the Borrower will have delivered to the Administrative Agent an Officers’ Certificate stating that such consolidation, merger, winding up or disposition and such supplemental documentation (if any) comply with the terms of this Credit Agreement.
Except as otherwise described in this Credit Agreement, the Successor Guarantor shall succeed to, and be substituted for, such Guarantor under this Credit Agreement and the Guarantee of such Guarantor.
Notwithstanding this Section 7.6(c), without complying with any of clauses (i)-(iv) of this Section 7.6(c), any Guarantor (other than LGEC) may merge, amalgamate or consolidate with or into or transfer all or part of its properties and assets (A) to another Guarantor or the Borrower or (B) to any other Person in a transaction permitted by Section 7.8 or by the definition of the term “Asset Sale”.
Additionally, notwithstanding this Section 7.6(c), any Guarantor (other than LGEC) may merge, amalgamate or consolidate with a Restricted Subsidiary of LGEC solely for the purpose of reincorporating the Guarantor federally, in a Province of Canada or a State of the United States or the District of Columbia, as long as the amount of Indebtedness of such Guarantor and its Restricted Subsidiaries is not increased thereby.
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(d) The Borrower or a Guarantor (other than LGEC), as the case may be, will be released from its obligations under this Credit Agreement and its Guarantee under Article 9 hereof, as the case may be, and the Successor Person or Successor Guarantor, as the case may be, will succeed to, and be substituted for, and may exercise every right and power of, the Borrower or a Guarantor, as the case may be, under this Credit Agreement, the Guarantee under Article 9 hereof and the Collateral Documents; provided that, in the case of a lease of all or substantially all its assets, the Borrower will not be released from the obligation to pay the principal of and interest on the Loans and a Guarantor will not be released from its obligations under Article 9 hereof.
SECTION 7.7. Limitation on Lines of Business. LGEC will not, and will not permit any Restricted Subsidiary to, engage in any material respect in any business other than a Related Business.
SECTION 7.8. Limitation on Sales of Assets. LGEC will not, and will not permit any of its Restricted Subsidiaries to, cause or make any Asset Sale, unless:
(i) LGEC or such Restricted Subsidiary, as the case may be, receives consideration at least equal to the Fair Market Value (such Fair Market Value to be determined on the date of contractually agreeing to such Asset Sale) of the shares and assets subject to such Asset Sale;
(ii) at least 75% of the consideration from such Asset Sale received by LGEC or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; and
(iii) the Net Available Cash from such Asset Sale is applied by LGEC or such Restricted Subsidiary in accordance with Section 2.8(c)(ii).
For the purpose of this Section 7.8 and for no other purpose, the following will be deemed to be cash:
(I) any liabilities (as shown on LGEC’s or such Restricted Subsidiary’s most recent balance sheet) of LGEC or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Loans or the Guarantees under Article 9 of this Credit Agreement) that are assumed by the transferee of any such assets and from which LGEC and all Restricted Subsidiaries have been validly released by all creditors in writing;
(II) any securities, notes or other obligations received by LGEC or any Restricted Subsidiary from the transferee that are converted by LGEC or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Sale;
(III) consideration consisting of Indebtedness of LGEC (other than Subordinated Obligations) received after the Original Closing Date from Persons who are not LGEC or any Restricted Subsidiary, and
(IV) any Designated Non-cash Consideration received by LGEC or any Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value (as determined in good faith by LGEC), taken together with all other Designated Non-cash Consideration received pursuant to this Section 7.8(IV) that is at that time outstanding, not to exceed the greater of $160,000,000 and 1.25% of Total Assets at the time of the receipt of such Designated Non-cash Consideration (with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value).
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SECTION 7.9. Financial Covenant. Solely with respect to the Revolving Facility and the Term A Facilities:
(a) Net First Lien Leverage Ratio. LGEC shall not, as of the last day of each fiscal quarter of LGEC ending on and after March 31, 2021, permit the Net First Lien Leverage Ratio to be greater than 4.75 to 1.00.
(b) Interest Coverage Ratio: LGEC shall not, as of the last day of each fiscal quarter of LGEC ending on and after March 31, 2021, permit the Interest Coverage Ratio to be less than 2.25 to 1.00.
ARTICLE 8 EVENTS OF DEFAULT
SECTION 8.1. Events of Default. Any one or more of the following shall constitute an “Event of Default”:
(a) default (i) in the payment when due (whether at the stated maturity thereof or at any other time provided for in this Credit Agreement) of all or any part of the principal of any Loan or Reimbursement Obligation or (ii) in the payment when due of interest on any Loan, any fee, or any other amount payable hereunder or under any other Fundamental Document and such default shall continue unremedied for a period of five (5) Business Days; or
(b) default in the observance or performance of any covenant set forth in Section 6.2(b)(i), Section 6.4 (with respect to LGEC) or Article 7 hereof; provided that no breach or default by LGEC under Section 7.9 shall constitute an Event of Default with respect to the Term B Facility, unless and until the Required RC/TLA Lenders have accelerated the Revolving Loans and/or Term A Loans and/or terminated the Revolving Credit Commitments; or
(c) failure by the Borrower or any Guarantor to comply for 30 days after notice as provided below with any of its other agreements contained in the Fundamental Documents; or
(d) any representation or warranty made by the Borrower or any Guarantor herein or in any other Fundamental Document or that is contained in any certificate or other document furnished by it at any time under or in connection with this Credit Agreement or any other Fundamental Document shall prove to have been inaccurate in any material respect on or as of the date made; or
(e) default under any mortgage, indenture, agreement or instrument, in each case governing Indebtedness for money borrowed by any Guarantor or the Borrower or any of the Restricted Subsidiaries (or the payment of which is guaranteed by any Guarantor or the Borrower or any of the Restricted Subsidiaries), other than Indebtedness owed to any Guarantor or the Borrower or a Restricted Subsidiary, and other than Indebtedness incurred by a Special Purpose Producer that is non-recourse to LGEC or any Restricted Subsidiary other than such Special Purpose Producer (for the avoidance of doubt, an outstanding Negative Pick-up Obligation of LGEC or a Restricted Subsidiary shall be considered recourse Indebtedness of LGEC or such Restricted Subsidiary), whether such indebtedness or guarantee now exists, or is created after the Original Closing Date, which default:
(i) is caused by a failure to pay principal of such Indebtedness prior to the expiration of the final maturity date provided in such Indebtedness unless such Indebtedness is discharged (“payment default”); or
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(ii) results in the acceleration of such Indebtedness prior to its maturity; or
(iii) which default causes, or permits the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders), with all applicable grace or cure periods having expired, to cause any such Indebtedness to become due or required to be prepaid, repurchased, defeased or redeemed prior to its stated maturity;
and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a payment default or such other default or the maturity of which has been so accelerated, aggregates $75,000,000 or its foreign currency equivalent or more; or
(f) LGEC, the Borrower or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the most recent audited consolidated financial statements of LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(i) commences proceedings to be adjudicated bankrupt or insolvent;
(ii) consents to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking an arrangement of debt, reorganization, dissolution, winding up or relief under applicable Bankruptcy Law (including, for the avoidance of doubt, the filing of a notice of intention under the Bankruptcy and Insolvency Act (Canada) or of an application under the Companies’ Creditors Arrangement Act (Canada) or any proposal to compromise, arrange or reorganize any of its debts or obligations under Section 192 of the Canada Business Corporations Act or any similar provision of Canadian federal or provincial corporate law, or any applicable Bankruptcy Law in Luxembourg or England);
(iii) consents to the appointment of a receiver, interim receiver, receiver and manager, liquidator, assignee, trustee, sequestrator or other similar official of it or for all or substantially all of its property; or
(iv) makes a general assignment for the benefit of its creditors; or
(g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(i) is for relief against LGEC, the Borrower, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the most recent audited consolidated financial statements of LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary, in a proceeding in which LGEC, the Borrower, any such Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the most recent audited consolidated financial statements of LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary, is to be adjudicated bankrupt or insolvent;
(ii) appoints a receiver, interim receiver, receiver and manager, liquidator, assignee, trustee, sequestrator or other similar official of LGEC, the Borrower, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the most recent audited consolidated financial statements of LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary, or for all or substantially all of the property of LGEC, the Borrower, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the most recent audited consolidated financial statements of LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary;
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(iii) orders the liquidation, dissolution or winding up of LGEC, the Borrower, any Restricted Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together (as of the most recent audited consolidated financial statements of LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary; or
(iv) orders the presentation of any plan or arrangement, compromise or reorganization of LGEC, the Borrower, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the most recent audited consolidated financial statements of LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days; or
(h) failure by LGEC, the Borrower or any Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for LGEC and the Restricted Subsidiaries), would constitute a Significant Subsidiary to pay final judgments aggregating in excess of $75,000,000 or its foreign currency equivalent (net of any amounts that a reputable and creditworthy insurance company has acknowledged liability for in writing), which judgments are not paid, discharged or stayed for a period of 60 days; or
(i) (i) an ERISA Event shall have occurred; (ii) a trustee shall be appointed by a United States district court to administer any Plan; (iii) the PBGC shall institute proceedings to terminate any Plan; (iv) any Credit Party or any of their respective ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan that it has incurred or will be assessed Withdrawal Liability to such Multiemployer Plan and such entity does not have reasonable grounds for contesting such Withdrawal Liability or is not contesting such Withdrawal Liability in a timely and appropriate manner; or (v) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to result in a Material Adverse Effect;
(j) (i) any of the Fundamental Documents shall, for any reason, not be or shall cease to be in full force and effect or shall be declared null and void or (ii) the validity or enforceability of the Liens granted or purported to be granted by any Collateral Document on any material portion of the Collateral shall cease to be valid and perfected, or shall be contested by any Credit Party, except to the extent that any such loss of perfection results from the limitations of foreign laws, rules and regulations as they apply to pledges of Capital Stock in Foreign Subsidiaries or the application thereof, or from failure of the Administrative Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents, or to file Uniform Commercial Code continuation statements or other similar statements (so long as such failure does not result from the breach or non-compliance with the Fundamental Documents by any Credit Party); or
(k) a Change of Control shall occur.
SECTION 8.2. Non-Bankruptcy Defaults. When any Event of Default other than those described in subsection (f) or (g) of Section 8.1 hereof has occurred and is continuing, the Administrative Agent shall, by written notice to the Borrower: (a) if so directed by the Required RC Lenders, terminate the remaining Revolving Credit Commitments, and if so directed by the Required Lenders, terminate all other obligations of the Lenders hereunder on the date stated in such notice (which may be the date thereof); (b) if so directed by the Required Lenders, declare the principal of and the
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accrued interest on all outstanding Loans to be forthwith due and payable and thereupon all outstanding Loans, including both principal and interest thereon, shall be and become immediately due and payable together with all other amounts payable under the Fundamental Documents without further demand, presentment, protest or notice of any kind; (c) after a breach or default by LGEC under Section 7.9, if so directed by the Required RC/TLA Lenders, terminate the remaining Revolving Credit Commitments and declare the principal of and the accrued interest on all outstanding Revolving Loans and Term A Loans to be forthwith due and payable, and thereafter, if so directed by the Required RC/TLA Lenders, terminate all other obligations of the Revolving Lenders and Term A Lenders hereunder on the date stated in such notice (which may be the date thereof) and (d) if so directed by the Required RC Lenders, demand that the Borrower immediately pay to the Administrative Agent, as cash collateral, the full amount then available for drawing under each or any Letter of Credit, whether or not any drawings or other demands for payment have been made under any Letter of Credit.
SECTION 8.3. Bankruptcy Defaults. When any Event of Default described in subsections (f) or (g) of Section 8.1 hereof has occurred and is continuing, then all outstanding Loans shall immediately become due and payable together with all other amounts payable under the Fundamental Documents without presentment, demand, protest or notice of any kind, the Revolving Credit Commitments and any and all other obligations of the Lenders to extend further credit pursuant to any of the terms hereof shall immediately terminate and the Borrower shall immediately pay to the Administrative Agent, as cash collateral, the full amount then available for drawing under all outstanding Letters of Credit, whether or not any draws or other demands for payment have been made under any of the Letters of Credit.
SECTION 8.4. Collateral for Undrawn Letters of Credit.
(a) If the prepayment of the amount available for drawing under any or all outstanding Letters of Credit is required under Section 2.8(c)(iv) or under Section 8.2 or Section 8.3 above, the Borrower shall forthwith pay the amount required to be so prepaid, to be held by the Administrative Agent as provided in subsection (b) below.
(b) All amounts prepaid pursuant to clause (a) above shall be held by the Administrative Agent in one or more separate collateral accounts (each such account, and the credit balances, properties, and any investments from time to time held therein, and any substitutions for such account, any certificate of deposit or other instrument evidencing any of the foregoing and all proceeds of and earnings on any of the foregoing being collectively called the “Collateral Account”) as security for, and for application by the Administrative Agent (to the extent available) to, the reimbursement of any payment under any Letter of Credit then or thereafter made by the Issuing Banks, and to the payment of the unpaid balance of any other Obligations in respect of any Letter of Credit. The Collateral Account shall be held in the name of and subject to the exclusive dominion and control of the Administrative Agent for the benefit of the Administrative Agent, the Lenders and the Issuing Banks. If and when requested by the Borrower, the Administrative Agent shall invest funds held in the Collateral Account from time to time in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America with a remaining maturity of one year or less; provided that the Administrative Agent is irrevocably authorized to sell investments held in the Collateral Account when and as required to make payments out of the Collateral Account for application to amounts due and owing from the Borrower to the Issuing Banks, the Administrative Agent or the Lenders in respect of any Letter of Credit; provided, however, that if (i) the Borrower shall have made payment of all such obligations referred to in clause (a) above and (ii) no Letters of Credit remain outstanding hereunder, then the Administrative Agent shall release to the Borrower any remaining amounts held in the Collateral Account.
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SECTION 8.5. Right to Realize on Collateral and Enforce Guarantees. Anything contained in any of the Fundamental Documents to the contrary notwithstanding, the Borrower, the Administrative Agent and each Secured Party hereby agree that (a) no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce any Guarantee set forth in any Fundamental Document, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by the Administrative Agent, on behalf of the Secured Parties in accordance with the terms hereof and all powers, rights and remedies under the Collateral Documents may be exercised solely by the Administrative Agent; provided that, notwithstanding the foregoing, the Lenders may exercise the set-off rights contained in Section 11.6 in the manner set forth therein, and (b) in the event of a foreclosure by the Administrative Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Administrative Agent or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Administrative Agent, as agent for and representative of the Secured Parties (but not any Lender or Lenders in its or their respective individual capacities unless the Required Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by the Administrative Agent at such sale or other disposition.
SECTION 8.6. LGEC’s Right to Cure. Notwithstanding anything to the contrary contained in Section 8.1 or Section 8.2 or otherwise, for purposes of determining whether an Event of Default under Section 7.9 has occurred, the cash proceeds of any equity contribution in the form of common equity , “qualified” preferred or other equity on terms acceptable to the Administrative Agent made to, and actually received by, LGEC during the period commencing after the last day of any fiscal quarter and ending fifteen (15) Business Days after the date on which financial statements are required to be delivered hereunder with respect to such fiscal quarter (such period, the “Equity Cure Period”), if requested in writing by LGEC, shall be deemed to increase Adjusted EBITDA for purposes of determining compliance with Section 7.9 at the end of such fiscal quarter and applicable subsequent periods that include such fiscal quarter (any such equity contribution so included in the calculation of Adjusted EBITDA, a “Specified Equity Contribution”); provided that (i) in each period of four consecutive fiscal quarters, there shall be at least two fiscal quarters in which no Specified Equity Contribution is made, (ii) no more than four (4) Specified Equity Contributions may be made in the aggregate during the term of this Credit Agreement, (iii) the amount of any Specified Equity Contribution shall be no more than the amount required to cause LGEC to be in pro forma compliance with Section 7.9 for any applicable period and (iv) the Specified Equity Contributions shall be counted solely for the purposes of compliance with Section 7.9 and shall not be included for any other purposes including availability or amount of any covenant “baskets”, Excess Cash Flow and, whether or not used to prepay indebtedness, there shall be no reduction in indebtedness or netting of cash in connection with the proceeds of any Specified Equity Contributions for determining compliance with any financial ratio during any fiscal quarter in which it is included in Adjusted EBITDA. Upon receipt by the Administrative Agent of such written request from LGEC prior to the last day of the Equity Cure Period, neither the Administrative Agent nor any Lender shall exercise any rights or remedies under Section 8.2 on the basis of any failure to comply with Section 7.9 until the expiration of the Equity Cure Period. For the avoidance of doubt, no Revolving Lender shall be obligated to fund any Revolving Loan during such Equity Cure Period.
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ARTICLE 9 GUARANTEE
SECTION 9.1. Guarantee. (a) Each Guarantor, jointly and severally, unconditionally and irrevocably guarantees to the Administrative Agent, the Issuing Banks and the other Secured Parties 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 Guarantee notwithstanding any extension or renewal of any Obligation.
(b) Each Guarantor waives presentation 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 Banks or any Secured Party 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 Banks or any Secured Party 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 of any other agreement; (iv) the release, exchange, waiver or foreclosure of any security held by the Administrative Agent for the Obligations or any of them; (v) the failure of the Administrative Agent, the Issuing Banks or any 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 either Borrower or other Credit Party, any change in the corporate existence, structure, ownership or control of either Borrower or other 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 11.7 hereof), 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.
(c) Each Guarantor further agrees that this Guarantee is a continuing guarantee, shall secure the Obligations and any ultimate balance thereof, notwithstanding that the Borrower or others may from time to time satisfy the Obligations in whole or in part and thereafter incur further Obligations, and that this Guarantee constitutes a guarantee 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 Banks or any Secured Party 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 Banks or any Secured Party 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 Guarantors and any other guarantors of the Obligations and any circumstances affecting the Collateral or the ability of the Borrower to perform under this Credit Agreement.
(e) Each Guarantor’s obligations under the Guarantee 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 Guarantee. The Administrative Agent, the Issuing Banks and the Secured Parties make no representation or warranty with respect to any such circumstances and have no duty or responsibility whatsoever to any Guarantor in respect to the management and maintenance of the Obligations or any collateral security for the Obligations.
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SECTION 9.2. No Impairment of Guarantee, 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 Banks or any Secured Party 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 are paid in full.
SECTION 9.3. Continuation and Reinstatement, etc.
(a) Each Guarantor further agrees that its Guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Administrative Agent, the Issuing Banks or the Secured Parties 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, the Issuing Banks or the Secured Parties 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, the Issuing Banks and/or the Secured Parties, forthwith pay or cause to be paid to the Administrative Agent for the benefit of itself, the Issuing Banks and/or the Lenders (as applicable) in cash an amount equal to the unpaid amount of all the Obligations with interest thereon at a rate of interest equal to the rate specified in Section 2.4 hereof, 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 Guarantors making such payment; such assignment to be subordinate and junior to the rights of the Administrative Agent on behalf of itself, the Issuing Banks and 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 a 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 Administrative Agent, the Issuing Banks and/or 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 prior final and indefeasible payment in full of all the Obligations. If any amount shall be paid to such Guarantor (other than a Luxembourg Guarantor) for the account of the Borrower, such amount shall be held in trust for the benefit of the Administrative Agent, segregated from such Guarantor’s own assets, and shall forthwith be paid to the Administrative Agent on behalf of the Administrative Agent, the Issuing Banks and/or the Secured Parties to be credited and applied to the Obligations, whether matured or unmatured. If any amount shall be paid to a Luxembourg Guarantor for the account of the Borrower, such Luxembourg Guarantor will hold such amount for and on behalf of the Administrative Agent.
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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. In addition, to the extent that any Person becomes a Guarantor of this Credit Agreement and such Person is organized outside of the United States or Canada, the Guarantee by such Person of the Obligations hereunder may be subject to such other limitations as are customary in such Guarantor’s jurisdiction as reasonably agreed by the Administrative Agent and the Borrower.
SECTION 9.5. Voluntary Arrangements.
(a) Without prejudice to the Administrative Agent’s, the Issuing Banks’ and the Secured Parties’ rights to recover such sums under the Guarantee and indemnity under Section 9.1, on the approval of any company voluntary arrangement in respect of the Borrower (or the implementation of any compromise or scheme of arrangement or any analogous procedure to any of the foregoing in any other jurisdiction) under which the Borrower’s obligations to the Administrative Agent, the Issuing Banks and the Secured Parties are compromised in any way, each Guarantor shall as principal obligor be liable to the Administrative Agent, the Issuing Banks and the Secured Parties for, and hereby undertakes to the Administrative Agent, the Issuing Banks and the Secured Parties (as a separate and additional covenant) immediately on demand from time to time to pay to the Administrative Agent, the Issuing Banks and the Secured Parties, amounts equal to the sums that would have been payable to the Administrative Agent, the Issuing Banks and the Secured Parties by the Borrower, or any guarantor of the Borrower, had such compromise not occurred, and so that payment shall be made by a Guarantor to the Administrative Agent, the Issuing Banks and the Secured Parties under this Section in the amounts and at the times at which but for the said compromise the Borrower would have been obliged to make payment to the Administrative Agent, the Issuing Banks and the Secured Parties. Each Guarantor’s liability under Section 9.1 and this Section 9.5 shall not be affected in any way by the Administrative Agent and the Lenders voting in favor of (if the Administrative Agent, the Issuing Banks and the Secured Parties chooses to do so) any company voluntary arrangement, compromise, scheme of arrangement or analogous procedure proposed by or in respect of the Borrower.
(b) If and to the extent that any right is or may be held by a Guarantor as against the Borrower, the existence or exercise of which may affect the right or ability of the Administrative Agent, the Issuing Banks and the Secured Parties to obtain the full benefit of this Guarantee and indemnity from a Guarantor if a company voluntary arrangement, compromise, scheme of arrangement or analogous procedure proposed by or in respect of the Borrower is approved, each Guarantor hereby waives such right. In the event of any inconsistency between this Section and any other provision of the Credit Agreement this Section shall prevail.
SECTION 9.6. Release of Guarantees.
(a) A Guarantor shall be automatically and unconditionally released and discharged from its obligations under its Guarantee, this Credit Agreement and the Fundamental Documents to which it is a party, and no further action by such Guarantor, the Borrower or the Administrative Agent shall be required for the release of such Guarantor’s Guarantee, upon:
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(i) any sale, assignment, transfer, conveyance, exchange or other disposition (by merger, amalgamation, consolidation or otherwise) of the Capital Stock of such Guarantor, after which the applicable Guarantor is no longer a Restricted Subsidiary or any sale, assignment, transfer, conveyance, exchange or other disposition of all or substantially all the assets of such Guarantor (other than by lease); provided that, in each of the foregoing cases, (x) such sale, assignment, transfer, conveyance, exchange or other disposition is made in compliance with this Credit Agreement, including Section 7.6 and 7.7 (it being understood that only such portion of the Net Available Cash as is required to be applied on or before the date of such release in accordance with Section 2.8(c) is to be applied in accordance therewith at such time) and (y) all the obligations of such Guarantor under all Consolidated Debt of LGEC terminate upon consummation of such transaction;
(ii) the proper designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary;
(iii) in the case of any Guarantor which has provided a Guarantee in LGEC’s discretion and which does not or, substantially contemporaneously with the release, will not Guarantee any Material Indebtedness of the Borrower, LGEC’s delivering notice to the Administrative Agent of its election to release such Guarantor from its Guarantee;
(iv) in the case of any Guarantor which meets the definition of an Excluded Subsidiary, delivery to the Administrative Agent of an Officer’s Certificate certifying thereto; and
(v) the Termination Date.
SECTION 9.7. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under Applicable Law (but subject to Section 9.9), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Credit Agreement or any other Fundamental Document or related agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to any Collateral Document to satisfy in whole or in part a claim of any Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.
SECTION 9.8. Contribution and Subrogation. Each Guarantor (a “Contributing Guarantor”) agrees (subject to Section 9.9) that, in the event a payment shall be made by any other Guarantor hereunder or under any other Fundamental Document or related agreement, in respect of any Obligation, or assets of any other Guarantor shall be sold pursuant to any Collateral Document to satisfy any Obligation owed to any Secured Party, and such other Guarantor (the “Claiming Guarantor”) shall not have been fully indemnified by the Borrower as provided in Section 9.7, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to (i) the amount of such payment or (ii) the greater of the book value or the Fair Market Value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto after the date hereof, the date such Guarantor becomes a party). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 9.8 shall be subrogated to the rights of such Claiming Guarantor under Section 9.7 to the extent of such payment.
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SECTION 9.9. Subordination. (a) Notwithstanding any provision of this Credit Agreement to the contrary, all rights of the Guarantors under Section 9.7 and 9.8 and all other rights of indemnity, contribution or subrogation under Applicable Law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 9.7 and 9.8 (or any other payments required under Applicable Law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of its obligations hereunder.
(b) The Borrower and each Guarantor hereby agree that all Indebtedness and other monetary obligations owed by it to LGEC or any Subsidiary shall be fully subordinated to the indefeasible payment in full in cash of the Obligations.
SECTION 9.10. Luxembourg Guarantors. (a) Notwithstanding any other provision of this Credit Agreement, the maximum liability of any Guarantor incorporated under the laws of Luxembourg (a “Luxembourg Guarantor”) under this Section 9.10 for the Obligations of any obligor (including, but not limited to, the Borrower) which is not a direct or indirect Subsidiary of such Luxembourg Guarantor shall be limited to the sum of:
(i) an amount equal to the aggregate (without double-counting) of (A) all moneys received by the Luxembourg Guarantor or its direct or indirect present of future Subsidiaries under the Fundamental Documents and (B) the aggregate amount directly or indirectly made available to the Luxembourg Guarantor or its direct or indirect present or future Subsidiaries by other members of the Group that has been financed by a borrowing under the Fundamental Documents;
plus
(ii) an amount equal to 95% of the greater of (a) the Luxembourg Guarantor’s own funds (capitaux propres), as referred to in annex I to the grand ducal regulation dated December 18, 2015 defining the form and content of the presentation of balance sheet and profit and loss account implementing Articles 34, 35, 46 and 47 of the Luxembourg law dated December 19, 2002 concerning the trade and companies register and the accounting and annual accounts of undertakings as amended (the “Regulation”) as increased by the amount of any Intra Group Liabilities, each as reflected in the Luxembourg Guarantor’s latest duly approved annual accounts and other relevant documents available to the Administrative Agent at the date of this Credit Agreement or (B) the Luxembourg Guarantor’s own funds (capitaux propres), as referred to in the Regulation as increased by the amount of any Intra Group Liabilities, each as reflected in the Luxembourg Guarantor’s latest duly approved annual accounts and other relevant documents available to the Administrative Agent at the time the Guarantee is called.
For the purposes of this paragraph, “Intra Group Liabilities” means all existing liabilities owed by the Luxembourg Guarantor to the Borrower or any Guarantor that have not been financed, directly or indirectly, by a borrowing under the Fundamental Documents.
Where for the purpose of the determination of the Luxembourg Guarantor’s own funds under paragraph (ii) above, no duly established and approved annual accounts are available for the relevant reference period (which, for the avoidance of doubt, includes a situation where, in respect of the determination to be made under (ii) above, no final annual accounts have been established in due time in respect of the then most recently ended financial year) the relevant Luxembourg Guarantor shall, promptly, establish unaudited interim accounts (as of the date of the end of the then most recent financial quarter) or annual accounts (as applicable) duly established in accordance with applicable accounting rules, pursuant to which the relevant Luxembourg Guarantor’s own funds and Intra Group Liabilities will be determined. If the relevant Luxembourg Guarantor fails to provide such unaudited interim accounts or annual accounts (as applicable) within 30 Business Days as from the request of the Administrative Agent,
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the Administrative Agent may appoint an independent auditor (réviseur d’entreprises agréé) or an independent reputable investment bank which shall undertake the determination of the relevant Guarantor’s own funds and Intra Group Liabilities. In order to prepare such determination, the independent auditor (réviseur d’entreprises agréé) or the independent reputable investment bank shall take into consideration such available elements and facts at such time, including without limitation, the latest annual accounts of its Subsidiaries, any recent valuation of the assets of such Luxembourg Guarantor and its subsidiaries (if available), the market value of the assets of such Luxembourg Guarantor and its subsidiaries as if sold between a willing buyer and a willing seller as a going concern using a standard market multi criteria approach combining market multiples, book value, discounted cash flow or comparable public transaction of which price is known (taking into account circumstances at the time of the valuation and making all necessary adjustments to the assumption being used) and acting in a reasonable manner.
The limitation set out in this Section 9.10 does not apply to any security granted by any Luxembourg Guarantors under the Collateral Documents (excluding any personal or corporate guarantee).
(b) Notwithstanding any other provision of this Credit Agreement to the contrary, in this Credit Agreement where it relates to the Borrower (to the extent organized under the laws of Luxembourg), any Guarantor organized under the laws of Luxembourg, or any other party which is organized under the laws of Luxembourg, a reference to:
(i) a winding-up, administration, liquidation, bankruptcy, general assignment for the benefit of creditors, receivership, insolvency, reorganization or dissolution includes bankruptcy (faillite), insolvency, voluntary or judicial liquidation (liquidation voluntaire ou judiciare), composition with creditors (concordat préventif de la faillite), moratorium or reprieve from payment (sursis de paiement), controlled management (gestion contrôlée), fraudulent conveyance (action paulienne), general settlement with creditors, reorganization or similar laws affecting the rights of creditors generally;
(ii) a receiver, receiver and manager, liquidator, administrator, trustee, custodian, sequestrator, conservator or similar officer includes a juge délégué, commissaire, juge-commissaire, mandataire ad hoc, administrateur provisoire, liquidateur or curateur;
(iii) a lien or security interest includes any hypothèque, nantissement, gage, privilège, sûreté réelle, droit de rétention, and any type of security in rem (sûreté réelle) or agreement or arrangement having a similar effect and any transfer of title by way of security;
(iv) attachments or similar creditors process means an executory attachment (saisie exécutoire) or conservatory attachment (saisie arrêt);
(v) by-laws includes its articles of association (statuts); and
(vi) a “set-off” includes, for purposes of Luxembourg law, legal set-off.
ARTICLE 10 THE ADMINISTRATIVE AGENT AND THE ISSUING BANKS
SECTION 10.1. Administration by the Administrative Agent. (a) The general administration of the Fundamental Documents and any other documents contemplated by this Credit Agreement or any other Fundamental Document shall be by the Administrative Agent or its designees. Except as otherwise expressly provided herein (including by way of an express instruction given to the
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Administrative Agent by the Required Lenders, Required RC Lenders or Required RC/TLA Lenders, as applicable under the circumstances), each of the Lenders and the Issuing Banks 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, the Notes and any other documents contemplated by this Credit Agreement or any other Fundamental Document 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 the Issuing Banks hereby authorize the Administrative Agent (without the consent of any Lender or Issuing Bank, who hereby irrevocably authorize any such action pursuant to this clause (b)):
(i) to release any Lien on the Collateral or any Guarantor from its guarantee in accordance with the terms of this Credit Agreement or any other applicable Fundamental Document;
(ii) to determine that the cost to the Borrower or another Credit Party is disproportionate to the benefit to be realized by the Administrative Agent, the Issuing Banks and the Lenders by perfecting a Lien in a given asset or group of assets included in the Collateral and that the Borrower or other Credit Party should not be required to perfect such Lien in favor of the Administrative Agent (for the benefit of itself, the Issuing Banks and the Lenders);
(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 Administrative Agent, the Issuing Banks and the Lenders);
(iv) in connection with an item of Product being produced by a Credit Party, the principal photography of which is being done outside the United States, 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 (as defined in the Pledge and Security Agreement) of such item of Product in a production laboratory located outside the United States;
(v) to enter into and perform its obligations under the other Fundamental Documents;
(vi) to enter into intercreditor, subordination, non-disturbance and/or attornment agreements, or any similar or comparable agreement, with (A) any union and/or guild with respect to the security interests in favor of such unions and/or guilds required pursuant to the terms of collective bargaining agreements, (B) Persons who have been granted Liens which are permitted pursuant to this Credit Agreement, (C) any licensee, licensor, co-financier or co-producer having any rights to any item of Product, (D) Persons providing any services in connection with any item of Product, or (E) any other lessor to or lessee of LGEC or any Subsidiaries, or any other counterparty of LGEC or any or its Subsidiaries, at the request of the Borrower;
(vii) upon the request of the Borrower, if any additional Indebtedness permitted to be incurred under this Credit Agreement is secured by first priority Liens or junior Liens on the Collateral and permitted to be incurred under this Credit Agreement (including any Permitted Slate Financing or Permitted Slate Transaction), the Administrative Agent shall, at the request of the Borrower, enter into an (or amend any existing) Intercreditor Agreement with such other secured creditor(s), as necessary to accommodate the additional Indebtedness; and
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(viii) upon the request of the Borrower, to enter into amendments, replacements, extensions, restatements, modifications and supplements of or to any Intercreditor Agreements then in existence.
(c) It is understood and agreed that the use of the term “agent” herein or in any other Fundamental Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
SECTION 10.2. Sharing of Setoffs. 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 Title 11 of the United States 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 Obligations (which term, for purposes of this Section 10.2 only, shall refer solely to those Obligations referred to in clause (a) of the definition of “Obligations”) as a result of which the unpaid portion of its Obligations is proportionately less than the unpaid portion of Obligations of any of the other Lenders (a) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Lenders a participation in the Obligations of such other Lenders, so that the aggregate unpaid principal amount of each of the Lender’s Obligations and its participation in Obligations of the other Lenders shall be in the same proportion to the aggregate unpaid amount of all remaining Obligations as the amount of its Obligations prior to the obtaining of such payment was to the amount of all Obligations prior to the obtaining of such payment and (b) 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 Note or Letter of Credit 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 Note and was the original obligee thereon or was the issuer of the Letter of Credit, in the amount of such participation. Notwithstanding the foregoing, a Defaulting Lender shall not be entitled to share in any benefit contemplated by this Section 10.2 realized by a non-Defaulting Lender until all the Obligations owed to the non-Defaulting Lenders have been paid in full and the Revolving Credit Commitments have been terminated. Notwithstanding the foregoing, the provisions of this Section 10.2 shall not be construed to apply to any payment made by or on behalf of LGEC or any Subsidiary thereof pursuant to and in accordance with the express terms of this Credit Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in L/C Disbursements to any assignee or participant, including LGEC or any Subsidiary thereof.
SECTION 10.3. Notice to the Lenders. (a) Upon receipt by the Administrative Agent or the Issuing Banks from any of the Credit Parties of any communication calling for an action on the part of the Lenders, or upon notice to the Administrative Agent or an Issuing Bank of any Event of Default, the Administrative Agent or such Issuing Bank will in turn immediately inform the other 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 or the Issuing Banks shall not be deemed to know of any Default or Event of Default unless a Responsible Officer of the Administrative Agent or the Issuing Banks has actual knowledge thereof or unless written notice of any event which is in fact such a Default or Event of Default is received by the Administrative Agent or the Issuing Banks at its address for notices set forth in Section 11.1, and such notice references the existence of a Default or Event of Default and this Credit Agreement.
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SECTION 10.4. Liability of the Administrative Agent, Issuing Banks. (a) The Administrative Agent, or the Issuing Banks, when acting on behalf of the Lenders, may execute any of its duties under this Credit Agreement or the other Fundamental Documents by or through its officers, agents, or employees and neither the Administrative Agent, the Issuing Banks nor their respective officers, agents or employees shall be liable to the Lenders or any of them for any action taken or omitted to be taken in good faith, nor be responsible to the Lenders 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. The Administrative Agent, the Issuing Banks and their Related Parties shall in no event be liable to the Lenders or to any of them for any action taken or omitted to be taken by it pursuant to: (i) instructions received by it from the Required Lenders, Majority Facility Lenders, Required RC Lenders or Required RC/TLA Lenders, as applicable or (ii) in reliance upon the advice of counsel selected by it with reasonable care. Without limiting the foregoing, neither the Administrative Agent, the Issuing Banks, nor any of its Related Parties shall be responsible to any of the Lenders 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 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 or 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 Banks or any of their Related Parties shall have any responsibility to the Borrower or 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 Related Parties shall have any responsibility to the Borrower or 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, as agent for the Lenders hereunder and the Issuing Banks in such capacity, 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 (including, for the avoidance of doubt, in connection with the Administrative Agent’s reliance on any Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), and it shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by it.
(d) The Administrative Agent may perform any and all of its duties and exercise its rights and powers by or through one or more sub-agents. The exculpatory provisions of this Article shall apply to any such sub-agent and to any respective Related Parties of the Administrative Agent or the Issuing Banks and any such sub-agent, and shall apply to their respective activities in connection with the syndication of this Credit Agreement as well as activities as Administrative Agent or the Issuing Banks. The Administrative Agent and the Issuing Banks shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent or the Issuing Bank, as applicable, acted with gross negligence or willful misconduct in the selection of such sub-agents.
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(e) None of the provisions of this Credit Agreement shall require the Administrative Agent or the Issuing Banks to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity reasonably satisfactory to it against such risk or liability is not assured to it.
SECTION 10.5. Reimbursement and Indemnification.
(a) Each of the Lenders agrees (i) to reimburse the Administrative Agent and the Issuing Banks for such Lender’s applicable Percentage 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 not reimbursed by or on behalf of the Borrower and (ii) to indemnify and hold harmless the Administrative Agent, any of its Related Parties and the Issuing Banks, 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, any of them in any way relating to or arising out of any Fundamental Documents or any related agreement or document, or any action taken or omitted by it or any of them under 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 their gross negligence or willful misconduct). To the extent indemnification payments made by the Lenders pursuant to this Section 10.5 are subsequently recovered by the Administrative Agent, or the Issuing Banks from a Credit Party, the Administrative Agent will promptly refund such previously paid indemnity payments to the Lenders. 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 10.5, 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 10.5(a) 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.
(c) (i) Each Lender (including, for purposes of this Section 10.5(c), each Issuing Bank) hereby agrees that (x) if the Administrative Agent notifies such Lender that the Administrative Agent has determined in its sole discretion that any funds received by such Lender from the Administrative Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such Lender (whether or not known to such Lender), and demands the return of such Payment (or a portion thereof), such Lender shall promptly, but in no event later than two Business Days thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent at the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank
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compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender shall not assert, and hereby waives, as to the Administrative Agent, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Payments received, including without limitation any defense based on “discharge for value” or any similar doctrine. A notice of the Administrative Agent to any Lender under this Section 10.5(c) shall be conclusive, absent manifest error.
(ii) Each Lender hereby further agrees that if it receives a Payment from the Administrative Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on notice, in each such case, that an error has been made with respect to such Payment. Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender shall promptly notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in no event later than two Business Days thereafter, return to the Administrative Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent at the greater of the NYFRB Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(iii) The Borrower and each other Credit Party hereby agrees that (x) in the event an erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Credit Party.
(iv) Each party’s obligations under this Section 10.5(c) shall survive the resignation or replacement of the Administrative Agent or any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the Revolving Credit Commitments, the Term A Loan Commitments and the Term B Loan Commitments or the repayment, satisfaction or discharge of all Obligations under any Fundamental Document.
SECTION 10.6. Rights of Administrative Agent. (a) It is understood and agreed that 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.
(b) The Administrative Agent may consult with counsel of its selection and the written advice of such counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
SECTION 10.7. 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 nor the Issuing Banks shall bear any responsibility therefor.
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SECTION 10.8. Agreement of Required Lenders. Except as otherwise expressly stated herein, upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Required Lenders, Majority Facility Lenders, Required RC Lenders or Required RC/TLA Lenders, as required under this Credit Agreement, action shall be taken by the Administrative Agent for and on behalf of, or for the benefit of, all Lenders upon the direction of such Required Lenders, Majority Facility Lenders, Required RC Lenders or Required RC/TLA Lenders, as applicable, 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 11.12 hereof.
SECTION 10.9. Notice of Transfer. The Administrative Agent and the Issuing Banks 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 11.3 hereof.
SECTION 10.10. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower. Such resignation shall become effective upon the earlier to occur of (i) 30 days from the date of such notice and (ii) acceptance by a successor agent of its appointment pursuant hereto (the “Resignation Effective Date”). Upon the Resignation Effective Date, the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Fundamental Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders under any of the Fundamental Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed). Upon any such resignation, the Required Lenders shall promptly appoint a successor agent from among the Lenders which successor shall be experienced and sophisticated in entertainment industry lending, provided that such replacement is reasonably acceptable (as evidenced in writing) to the Borrower; provided, however, that such approval by the Borrower shall not be required at any time when an Event of Default is continuing. If no successor agent shall have been so appointed by the Required Lenders and shall have accepted such appointment, within thirty (30) days after the retiring 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 successor is experienced and sophisticated in entertainment industry lending and 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 $500,000,000 and shall be experienced and sophisticated in entertainment industry lending. 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 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 10 and Article 11 shall inure to such retiring Administrative Agent, its sub-agents and their respective Related Parties’ benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement.
SECTION 10.11. Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any bankruptcy or insolvency proceeding or any other judicial proceeding relative to any Credit Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:
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(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations under the Fundamental Documents that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel.
SECTION 10.12. Québec Security. For the purposes of holding any security granted by or to be granted by any of the Credit Parties pursuant to the laws of the Province of Québec, each of the parties hereto hereby appoints and designates JPMorgan Chase Bank, N.A. as the hypothecary representative (within the meaning of Article 2692 of the CCQ) for the Administrative Agent, the Issuing Banks, and all present and future Lenders and their Affiliates and the other Secured Parties. By executing an Assignment and Assumption, any future Lender (and their Affiliates) shall be deemed to ratify the appointment as hypothecary representative granted to JPMorgan Chase Bank, N.A. hereunder for and on behalf of the Administrative Agent, the Issuing Banks, all present and future Lenders and their Affiliates and the other Secured Parties. JPMorgan Chase Bank, N.A. agrees to act in such capacity. The execution prior to the date hereof by JPMorgan Chase Bank, N.A. in its capacity as hypothecary representative of any security pursuant to the laws of the Province of Québec is hereby ratified and confirmed. For greater certainty, JPMorgan Chase Bank, N.A., acting as hypothecary representative, shall have the same rights, powers, immunities, indemnities and exclusions from liability as prescribed in favour of the Administrative Agent in this Credit Agreement, which shall apply mutatis mutandis. In the event of the resignation or replacement and appointment of a successor Administrative Agent, such successor Administrative Agent shall also act as the hypothecary representative unless a hypothecary representative is otherwise appointed.
SECTION 10.13. Other Agent Titles . Other than the title “Administrative Agent,” any title accorded to any Person on the cover page hereof including Sole Bookrunner, Joint Bookrunner, Sole Lead Arranger, Joint Lead Arranger or any other title containing the word “Agent,” is granted for recognition only and any such Person 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 Persons as such. Without limiting the foregoing, no such Person shall have or be deemed to have any fiduciary relationship with any other Lender or the Credit Parties. Each Lender acknowledges that it has not relied, and will not rely, on any Person 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 Person in any capacity or purported capacity inferred from any such title, such Person shall have the benefit of Section 11.5 to the same extent as the Administrative Agent.
SECTION 10.14. Certain ERISA Matters. (a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of the Administrative Agent, each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that at least one of the following is and will be true:
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(i) such Lender is not using “plan assets” (within the meaning of the Plan Asset Regulations) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Revolving Credit Commitments,
(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Credit Commitments and this Credit Agreement,
(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Revolving Credit Commitments and this Credit Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Credit Commitments and this Credit Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Credit Commitments and this Credit Agreement, or
(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(b) In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect
to a Lender or such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person
became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of the Administrative Agent, each Arranger and their
respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that none of the Administrative Agent or any Arranger or any of their respective Affiliates is a fiduciary with respect to
the Collateral or the assets of such Lender (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Credit Agreement, any
LoanFundamental
Document or any documents related to hereto or thereto).
(c) The Administrative Agent,
and each Arranger hereby informs the Lenders that each such Person is not undertaking to provide investment advice or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a
financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Revolving Credit Commitments, this Credit
Agreement and any other
LoanFundamental
Documents (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Revolving Credit Commitments for an amount less than the amount being paid for an interest in the Loans, the
Letters of Credit or the Revolving Credit Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the LoanFundamental Documents or otherwise, including structuring fees, commitment fees,
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arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
ARTICLE 11 MISCELLANEOUS
SECTION 11.1. Notices. 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 or electronic photocopy (i.e., “PDF” or “TIFF”) format sent by electronic mail, as follows, (a) if to the Administrative Agent or JPMorgan Chase Bank, N.A., to it at (i) JPMorgan Chase Bank, N.A., 2029 Century Park East, 38th Floor, Los Angeles, CA, 90067, Attention: David Shaheen, Phone No.: 310-860-7241, Facsimile No.: 310-860-7260 or (b) if to any Credit Party to it at Lions Gate Entertainment Inc., 2700 Colorado Avenue, Santa Monica, CA, 90404, Attn: James W. Barge, Chief Financial Officer, Facsimile No.: 310-255-3801, E-mail:jbarge@lionsgate.com, or (c) if to a Lender or an Issuing Bank, to it at its address set forth on the signature pages hereto, or such other address as such party may from time to time designate by giving written notice to the other parties hereunder. Notwithstanding the foregoing, any notification made by the Borrower to the Administrative Agent from time to time with respect to the identity of the Disqualified Lenders shall be sent by electronic mail to: JPMDQ_Contact@jpmorgan.com. Any failure of the Administrative Agent, an Issuing Bank or a Lender giving notice pursuant to this Section 11.1, to provide a courtesy copy to a party as provided herein, shall not affect the validity of such notice. All notices and other communications given to any party hereto in accordance with the provisions of this Credit Agreement shall be deemed to have been given on the fifth (5th) Business Day after the date when sent by registered or certified mail, postage prepaid, return receipt requested, if by mail, or upon receipt by such party, if by any telegraphic or facsimile communications equipment or electronic mail, in each case addressed to such party as provided in this Section 11.1 or in accordance with the latest unrevoked written direction from such party.
SECTION 11.2. Termination, Survival of Agreement, Representations and Warranties, etc. All warranties, representations and covenants made by any of the Credit Parties herein, 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, Issuing Banks 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 regardless of any investigation made by the Administrative Agent, the Issuing Banks or the Lenders or on their behalf and shall continue in full force and effect until the Termination Date. This Credit Agreement and each other Fundamental Document will terminate and be of no further force and effect on the Termination Date, except with respect to those sections hereof or thereof which expressly survive.
SECTION 11.3. Successors and Assigns; Syndications; Loan Sales; Participations.
(a) Successors and Assigns Generally. The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that, other than as permitted by Section 7.6 of this Credit Agreement, the Borrower may not assign or otherwise transfer any of its rights or obligations under any Fundamental Document without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of clause (b) of this Section 11.3, (ii) by way of participation
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in accordance with the provisions of clause (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of clause (f) of this Section 11.3. Nothing in this Credit Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in clause (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement.
(b) Assignments by Lenders.
(i) Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement with respect to all or a portion of its Revolving Credit Commitment(s) and the Loans at the time owing to it.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Revolving Credit Commitment(s) and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Revolving Credit Commitment(s) (which for this purpose includes Loans outstanding thereunder) or, if the applicable Revolving Credit Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of such Trade Date) shall not be less than $5,000,000, in the case of any assignment in respect of the Revolving Facility, or less than $250,000, in the case of any assignment in respect of any Term Facility (calculated, in each case, in the aggregate with respect to multiple, simultaneous assignments by two (2) or more Approved Funds) unless each of the Administrative Agent and the Borrower otherwise consent (each such consent not to be unreasonably withheld or delayed);
(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Credit Agreement with respect to the Facility or the Revolving Credit Commitment assigned, except that this clause (B) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis;
(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 (unless otherwise waived or reduced by the Administrative Agent in its sole discretion), and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire in a form supplied by the Administrative Agent and completed by such Eligible Assignee; and
(D) the Eligible Assignee provides the Borrower and the Administrative Agent the forms required by Section 3.4(a) prior to the assignment.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to clause (c) of this Section 11.3, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Credit Agreement and, to the extent of the interest assigned by such Assignment and Assumption, shall become a Lender hereunder and have the rights and obligations of a Lender under this Credit Agreement, and the assigning Lender thereunder
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shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Credit Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 3.3, Section 3.4, 11.4 and 11.5 and subject to any obligations hereunder with respect to facts and circumstances occurring prior to the effective date of such assignment. All parties hereto consent that assignments to the Borrower permitted by the terms hereof shall not be construed as violating pro rata, optional redemption or any other provisions hereof, it being understood that, notwithstanding anything to the contrary elsewhere in this Credit Agreement, immediately upon receipt by the Borrower of any Loans and/or Revolving Credit Commitments the same shall be deemed cancelled and no longer outstanding for any purpose under this Credit Agreement, including without limitation, Section 11.12, and in no event shall the Borrower have any rights of a Lender under this Credit Agreement or any other Fundamental Document.
(c) Register.
(i) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, the Revolving Credit Commitment(s) of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time, and each repayment in respect of the principal amount (and any interest thereon) (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender (as to its own interest, but not the interest of any other Lender), at any reasonable time and from time to time upon reasonable prior notice.
(ii) The Administrative Agent shall (A) accept the Assignment and Assumption and (B) promptly record the information contained therein in the Register once all the requirements of clause (a) and (b) above have been met. No assignment shall be effective unless it has been recorded in the Register.
(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower, the Administrative Agent or any Issuing Bank, sell participations to any Person (other than a natural person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person) or a Disqualified Lender) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Credit Agreement (including all or a portion of its Revolving Credit Commitment(s) and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Credit Agreement.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification, supplement or waiver of any provision of this Credit Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification, supplement or waiver described in subclause (A) (to the extent that such Participant is directly affected) or (B) of Section 11.12. Subject to clause (e) of this Section 11.3, the Borrower agrees that each Participant shall be entitled to the benefits of Section 3.3, Section 3.4 and Section 3.6 (subject to the requirements and limitations therein (including the
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requirements under Section 3.4, it being understood that the documentation required to be provided under Section 3.4 shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to clause (b) of this Section 11.3. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.2 as though it were a Lender; provided that such Participant agrees to be subject to Section 10.2 as though it were a Lender.
Each Lender that sells a participation pursuant to this Section 11.3(d), acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain a register for the recordation of the names and addresses of the Participants, the commitments of, and principal amounts (and stated interest) of the Loans owing to, each Participant pursuant to the terms hereof from time to time, and each repayment in respect of the principal amount (and any interest thereon) (each, a “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender and the Borrower shall treat each Person whose name is recorded in the Participant Register pursuant to the terms hereof as the owner of a participation for all purposes of this Credit Agreement, notwithstanding notice to the contrary; provided that no Lender shall have the obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Loan or other Obligations under any Fundamental Document) to any Person except to the extent such disclosure is necessary in connection with a tax audit or other proceeding to establish that any such Obligations are in registered form for U.S. federal income tax purposes.
(e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.3 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. A Participant shall not be entitled to receive any greater payment under Section 3.4 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, except to the extent such entitlement to a greater payment results from a Change in Law after the sale of the participation.
(f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Credit Agreement (other than to any Disqualified Lender) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central bank having jurisdiction over such Lender, and this Section 11.3 shall not apply to any pledge or assignment of a security interest; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(g) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures 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 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 Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
(h) Assignments to LGEC and its Subsidiaries. LGEC or its Subsidiaries may purchase by way of open market purchases or auction or otherwise, and become an Eligible Assignee with respect to Term B Loans at any time and from time to time from Lenders in accordance with Section 11.3(b) hereof, subject to the following limitations:
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(i) under no circumstances, whether or not a Credit Party is subject to bankruptcy or other insolvency proceeding, shall LGEC or such Subsidiary be entitled to exercise any voting rights or other privileges with respect to Term B Loans under this Credit Agreement and the other Fundamental Documents;
(ii) LGEC or such Subsidiary shall not receive information provided solely to Lenders by the Administrative Agent or any Lender and shall not be permitted to attend or participate in meetings by the Administrative Agent and the Lenders and their advisors;
(A) the Revolving Facility shall not be utilized to fund the purchase or assignment and (B) no Default or Event of Default shall have occurred and be continuing at the time of such purchase or assignment; and
(iii) all Term B Loans acquired by LGEC or any of its Subsidiaries shall be immediately and automatically cancelled.
Notwithstanding anything to the contrary herein, this Section 11.3(h) shall supersede any provisions in Section 10.2 to the contrary.
(i) If the Borrower wishes to replace the Loans or Revolving Credit Commitments under any Facility with ones having different terms, it shall have the option, with the consent of the Administrative Agent and subject to at least three (3) Business Days’ advance notice to the Lenders under such Facility, instead of prepaying the Loans or reducing or terminating the Revolving Credit Commitments to be replaced, to (i) require the Lenders under such Facility to assign all such Loans or Revolving Credit Commitments under such Facility to the Administrative Agent or its designees and (ii) amend the terms thereof in accordance with Section 11.12 (with such replacement, if applicable, deemed to have been made pursuant to Section 2.15). Pursuant to any such assignment, all Loans and Revolving Credit Commitments to be replaced shall be purchased at par (allocated among the Lenders under such Facility in the same manner as would be required if such Loans were being optionally prepaid or such Revolving Credit Commitments were being optionally reduced or terminated by the Borrower), accompanied by payment by the Borrower of any accrued interest and fees thereon and any amounts owing pursuant to Section 11.4 to the extent demanded in writing prior to the date of such assignment. By receiving such purchase price, the Lenders under such Facility shall automatically be deemed to have assigned the Loans or Revolving Credit Commitments under such Facility pursuant to the terms of the form of Assignment and Assumption attached hereto as Exhibit F and accordingly no other action by such Lenders shall be required in connection therewith. The provisions of this clause (i) are intended to facilitate the maintenance of the perfection and priority of existing security interests in the Collateral during any such replacement.
(j) In the case of any assignment, transfer or novation by a Lender to a new lender of all or any part of its rights and obligations under this Credit Agreement and the other Fundamental Documents, the Lender and the new lender agree that, for the purposes of Article 1278 of the Luxembourg Civil Code (to the extent applicable), the pledge created under the Luxembourg law governed Collateral Documents and securing the rights assigned, transferred or novated thereby will be preserved for the benefit of the new lender.
SECTION 11.4. Expenses; Documentary Taxes. The Borrower agrees to pay (a) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent in connection with the performance of due diligence, the syndication of the credit facility contemplated hereby, 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 and the issuance of the Letters of Credit, the Collateral or any Fundamental Document, including but not limited to, the verification of financial data and the transactions contemplated hereby, including the reasonable fees and disbursements of one firm of outside counsel to the Administrative Agent and, if
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reasonably necessary, one firm of special or local counsel in each applicable jurisdiction, and (b) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, the Issuing Banks or the Lenders in the enforcement or protection (as distinguished from administration) of the rights and remedies thereof in connection with this Credit Agreement, the other Fundamental Documents, the Letters of Credit or the Notes, or as a result of any transaction, action or non-action arising from any of the foregoing, including but not limited to, the reasonable fees and disbursements of one firm of outside counsel for the Administrative Agent, the Issuing Banks or the Lenders and, if reasonably necessary, one firm of special or local counsel in each applicable jurisdiction. Such payments shall be made on the date this Credit Agreement is executed by the Borrower and thereafter promptly upon on demand. The Borrower agrees that it shall indemnify the Administrative Agent, the Issuing Banks 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 the Letters of Credit, but, in each case, only if and to the extent that the Administrative Agent, the Issuing Banks and the Lenders comply with all reasonable requests of the Borrower to comply with applicable reporting requirements (which requirements would not subject the Administrative Agent, the Issuing Banks or Lenders to any unreimbursed cost or expense and would not otherwise be materially disadvantageous to the Administrative Agent, Issuing Banks or Lenders, as applicable) as may be necessary to reduce or eliminate such documentary taxes, assessments or charges. The obligations of the Borrower under this Section shall survive the termination of this Credit Agreement and the payment of the Loans and/or the expiration of any Letter of Credit.
SECTION 11.5. Indemnification of the Administrative Agent, the Issuing Banks and the Lenders. The Borrower agrees (a) to indemnify and hold harmless the Administrative Agent, the Issuing Banks and the Lenders and their respective Related Parties (each, an “Indemnified Party”) (to the full extent permitted by Applicable Law) from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever nature, and (b) to pay to the Indemnified Parties an amount equal to the amount of all reasonable and documented out-of-pocket costs and expenses of investigation or defense, including reasonable legal fees of one firm of outside counsel for all Indemnified Parties taken as a whole, and, if reasonably necessary, one firm of special or local counsel in each applicable jurisdiction (or, in the event of an actual or perceived conflict of interest, one additional firm of counsel for such Indemnified Parties so conflicted) and disbursements, and with regard to both (a) and (b) in connection with or resulting from any litigation, investigation or other proceedings relating to the Collateral, this Credit Agreement and the other Fundamental Documents and the Letters of Credit, the making of the Loans, the Acquisition or any other Transaction (regardless of whether such Indemnified Party is a party thereto, and whether or not such proceedings are brought by a Credit Party, their equity holders, Affiliates, creditors or any other third Person) but excluding therefrom all claims, demands, losses, judgments, liabilities, costs and expenses arising out of or resulting from (i) the gross negligence, willful misconduct, or material breach of its obligations under this Credit Agreement or any Fundamental Document by an Indemnified Party, as determined by a court of competent jurisdiction in a final and non-appealable decision, (ii) litigation or claims among Indemnified Parties in connection with the Fundamental Documents or in any way relating to the transactions contemplated hereby not involving an act or omission by a Credit Party (other than disputes involving claims against the Administrative Agent or Arranger or any Person with another titled capacity or similar role in its capacity as such), (iii) claims asserted or litigation commenced against any Indemnified Party by a Credit Party in which the Credit Party is the prevailing party, and (iv) an act or omission that does not involve a Credit Party and is not a claim against an Indemnified Party. The foregoing indemnity agreement includes any reasonable out-of-pocket costs incurred by any Indemnified Party in connection with any action or proceeding which may be instituted in respect of the foregoing by any Indemnified Party, or by any other Person either against the Lenders or in connection with which any officer, director, agent or employee of any Indemnified Party is called as a witness or deponent, including, but not limited to, the reasonable fees and disbursements of outside counsel to the Administrative Agent (subject to the limitations described in this clause (b) on
number and type of counsel), and any out-of-pocket costs incurred by any Indemnified Party in appearing as a witness or in otherwise complying with legal process served upon them.
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All indemnities contained in this Section 11.5 shall survive the expiration or earlier termination of this Credit Agreement and shall inure to the benefit of any Person who was a Lender notwithstanding such Person’s assignment of all its Loans and Revolving Credit Commitments as to any actions taken or omitted to be taken by it while it was a Lender.
SECTION 11.6. Set-Off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon the occurrence and during the continuation of any Event of Default, each Lender and each subsequent holder of any Obligation is hereby authorized by the Borrower at any time or from time to time, without prior notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts, and in whatever currency denominated) and any other indebtedness at any time held or owing by that Lender or that subsequent holder to or for the credit or the account of the Borrower, whether or not matured, against and on account of any amount due and payable by the Borrower hereunder. Each Lender or any such subsequent holder of any Obligations agrees to promptly notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.
SECTION 11.7. 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.
SECTION 11.8. 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 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 MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 11.8 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY OTHER PARTY TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
SECTION 11.9. WAIVER WITH RESPECT TO DAMAGES. EACH CREDIT PARTY ACKNOWLEDGES THAT NEITHER THE ADMINISTRATIVE AGENT, THE ISSUING BANKS NOR 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 ISSUING BANKS AND THE LENDERS, ON THE ONE HAND, AND THE CREDIT PARTIES, ON THE OTHER HAND, IN CONNECTION THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR. TO THE EXTENT PERMITTED
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BY APPLICABLE LAW, NO CREDIT PARTY SHALL ASSERT, AND EACH CREDIT PARTY HEREBY WAIVES, ANY CLAIMS AGAINST THE ADMINISTRATIVE AGENT, THE ISSUING BANKS 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 FUNDAMENTAL DOCUMENT, ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 11.10. No Waiver. No failure on the part of the Administrative Agent or any Lender or the Issuing Banks 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 any Letter 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 11.11. Extension of Payment Date. Except as otherwise specifically provided in Article 2 hereof, should any payment or prepayment of principal of or interest on the Notes 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 11.12. Amendments, etc.
(a) Except as provided (W) in Section 2.13 with respect to any Incremental Facility, Section 2.14 with respect to any Extension and Section 2.15 with respect to any Refinancing Term Loans or Replacement Revolving Facility, (X) in Sections 3.1(c), (Y) in Section 10.1 or (Z) as otherwise expressly provided herein or in any Fundamental Document, (a) no provision of this Credit Agreement or the other Fundamental Documents may be amended, modified, supplemented or waived unless such amendment, modification, supplement or waiver is in writing and is signed by (i) the Borrower, (ii) the Required Lenders, (iii) if the rights or duties of the Administrative Agent are adversely affected thereby, the Administrative Agent, and (iv) if the rights or duties of the Issuing Banks are affected thereby, the Issuing Banks; provided that:
(A) no amendment, modification, supplement or waiver pursuant to this Section 11.12 shall:
(i) increase any Revolving Credit Commitment, Term A Loan Commitment or Term B Loan Commitment or extend the expiry date of any such Revolving Credit Commitment, Term A Loan Commitment or Term B Loan Commitment of any Lender without the consent of such Lender (it being understood that any such amendment, modification, supplement or waiver that provides for the payment of interest in kind in addition to, and not as substitution for or as conversion of, the interest otherwise payable hereunder shall only require the consent of the Required Lenders and that a waiver of any condition precedent or the waiver of any Default or Event of Default or mandatory prepayment shall not constitute an extension or increase of any Revolving Credit Commitment, Term A Loan Commitment or Term B Loan Commitment);
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(ii) reduce the amount of, postpone the date for any scheduled payment of any principal of or interest or fee on, or extend the final maturity of any Loan or of any Reimbursement Obligation or of any fee payable hereunder (other than with respect to a waiver of default interest and it being understood that any change in the definitions of any ratio used in the calculation of such rate of interest or fees (or the component definitions) shall not constitute a reduction in any rate of interest or fees) without the consent of each Lender (but not the Required Lenders) to which such payment is owing or which has committed to make such Loan or Letter of Credit (or participate therein) hereunder; or
(iii) change the application of payments set forth in Section 2.9 hereof without the consent of any Lender adversely affected thereby;
(B) no amendment, modification, supplement or waiver pursuant to this Section 11.12 shall, unless signed by each Lender:
(i) change the definition of “Required Lenders” in a manner that reduces the voting percentages set forth therein;
(ii) change the provisions of this Section 11.12;
(iii) release all or substantially all of the Collateral (except as expressly provided in the Fundamental Documents) or all or substantially all of the value of the guarantees provided by the Guarantors (except as expressly provided in the Fundamental Documents);or
(iv) change or waive Section 10.2;
(C) no amendment, modification, supplement or waiver pursuant to this Section 11.12 shall amend or otherwise modify Section 2.8 or any other provisions of any Fundamental Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the consent of the Majority Facility Lenders of each affected Class (it being understood that the Required Lenders may waive, in whole or in part, any prepayment of Loans hereunder so long as the application, as between Classes, of any portion of such prepayment that is still required to be made is not altered); and
(D) no amendment, modification, supplement or waiver pursuant to this Section 11.12 shall amend or modify the provisions of Section 2.3 or any letter of credit application and any bilateral agreement between the Borrower and an Issuing Bank regarding such Issuing Bank’s Letter of Credit Commitment or the respective rights and obligations between the Borrower and such Issuing Bank in connection with the issuance of Letters of Credit without the prior written consent of the Administrative Agent and such Issuing Bank, respectively.
Notwithstanding anything to the contrary herein:
(v) except as set forth in clause (A) above, no Defaulting Lender shall have any right to approve or disapprove any amendment, modification, supplement, waiver or consent hereunder or otherwise give any direction to the Administrative Agent;
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(w) the Borrower and the Administrative Agent may, without the input or consent of any other Lender, effect amendments to this Credit Agreement and the other Fundamental Documents as may be necessary in the reasonable opinion of the Borrower and the Administrative Agent to effect the provisions of Section 2.8(d), 2.13, 2.14, 2.15, Section 7.6 or as contemplated by Section 10.1;
(x) intercreditor agreements, guarantees, collateral or security documents and other related documents executed by LGEC or any of its Subsidiaries in connection with this Credit Agreement may be in a form reasonably determined by the Administrative Agent and may be amended, restated, supplemented or waived without the consent of any Lender;
(y) the Administrative Agent may, with the consent of Borrower only, amend, modify or supplement this Credit Agreement or any other Fundamental Document to cure any ambiguity, omission, defect or inconsistency, so long as such amendment, modification or supplement does not adversely affect the rights of any Lender and the Lenders shall have received, at least five (5) Business Days’ prior written notice thereof and the Administrative Agent shall not have received, within five (5) Business Days of the date of such notice to the Lenders, a written notice from the Required Lenders stating that the Required Lenders object to such amendment;
(z) in connection with the addition of any Guarantor from an Approved Jurisdiction, the Borrower and the Administrative Agent may, without the consent of any Lender, amend, modify or supplement any Fundamental Documents, in order to include provisions which are reasonably required as to Guarantors organized in the applicable jurisdiction, including customary limitation language for such jurisdictions.
Notwithstanding the foregoing, (i) only the consent of the Required RC/TLA Lenders shall be required in respect of amendments, modifications or waivers of the financial covenants set forth in Section 7.9 (or any component definition thereof to the extent applicable thereto) and (ii) only the consent of the Required RC Lenders shall be required with respect to waivers of any conditions to the Borrowing of any Revolving Loans, and any such amendment, modification or waiver may be made without the consent of any other Lender (including, for the avoidance of doubt, the Required Lenders).
In addition, notwithstanding the foregoing, this Credit Agreement may be amended (or amended and restated) with the written consent of the Required Lenders (as determined hereunder prior to any such amendment or amendment and restatement), the Administrative Agent and the Borrower (i) to add one or more additional credit facilities to this Credit Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Credit Agreement and the other Fundamental Documents with the Loans and the accrued interest and fees in respect thereof and (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders, the Required RC/TLA Lenders, the Required RC Lenders and other definitions related to such new credit facilities; provided that no Lender shall be obligated to commit to or hold any part of such credit facilities.
(b) Each waiver, amendment, modification, supplement or consent made or given pursuant to this Section 11.12 shall be effective only in the specific instance and for the specific purpose for which given, and such waiver, amendment, modification or supplement shall apply equally to each of the Lenders and shall be binding on the Credit Parties, the Lenders, the Administrative Agent and all future holders of the Loans and Revolving Credit Commitments.
SECTION 11.13. 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.
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SECTION 11.14. SERVICE OF PROCESS; SUBMISSION TO JURISDICTION. EACH PARTY HERETO (EACH, A “SUBMITTING PARTY”) HEREBY IRREVOCABLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN (OR IF SUCH COURT LACKS SUBJECT MATTER JURISDICTION, THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN), AND ANY APPELLATE COURT FROM ANY THEREOF, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE LETTERS OF CREDIT), 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, AN 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 11.1 HEREOF. EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF EACH OF THE OTHER SUBMITTING PARTIES. 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 SUBMITTING 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 BANKS 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 11.15. 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.
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SECTION 11.16. Execution in Counterparts; Electronic Execution. 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 a signature page of (x) this Credit Agreement, (y) any other Fundamental Document and/or (z) any document, amendment, approval, consent, information, notice (including, for the avoidance of doubt, any notice delivered pursuant to Section 11.1), certificate, request, statement, disclosure or authorization related to this Credit Agreement, any other Fundamental Document and/or the transactions contemplated hereby and/or thereby (each an “Ancillary Document”) that is an Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Credit Agreement, such other Fundamental Document or such Ancillary Document, as applicable. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Credit Agreement, any other Fundamental Document and/or any Ancillary Document shall be deemed to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), 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; provided that nothing herein shall require the Administrative Agent to accept Electronic Signatures in any form or format without its prior written consent and pursuant to procedures approved by it; provided, further, without limiting the foregoing, (i) to the extent the Administrative Agent has agreed to accept any Electronic Signature, the Administrative Agent and each of the Lenders shall be entitled to rely on such Electronic Signature purportedly given by or on behalf of the Borrower or any other Credit Party without further verification thereof and without any obligation to review the appearance or form of any such Electronic signature and (ii) upon the request of the Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by a manually executed counterpart. Without limiting the generality of the foregoing, the Borrower and each Credit Party hereby (i) agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lenders, the Borrower and the Credit Parties, Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page and/or any electronic images of this Credit Agreement, any other Fundamental Document and/or any Ancillary Document shall have the same legal effect, validity and enforceability as any paper original, (ii) agrees that the Administrative Agent and each of the Lenders may, at its option, create one or more copies of this Credit Agreement, any other Fundamental Document and/or any Ancillary Document in the form of an imaged electronic record in any format, which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document (and all such electronic records shall be considered an original for all purposes and shall have the same legal effect, validity and enforceability as a paper record), (iii) waives any argument, defense or right to contest the legal effect, validity or enforceability of this Credit Agreement, any other Fundamental Document and/or any Ancillary Document based solely on the lack of paper original copies of this Credit Agreement, such other Fundamental Document and/or such Ancillary Document, respectively, including with respect to any signature pages thereto and (iv) waives any claim against any Indemnified Party for any losses, claims (including intraparty claims), demands, damages or liabilities of any kind (collectively, and solely for purposes of this Section 11.16, “Liabilities”) arising solely from the Administrative Agent’s and/or any Lender’s reliance on or use of Electronic Signatures and/or transmissions by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page, including any Liabilities arising as a result of the failure of the Borrower and/or any Credit Party to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature.
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SECTION 11.17. 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 the Credit Parties and their investors, 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 11.18. Entire Agreement. This Credit Agreement (including the Exhibits and Schedules 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 prior to the execution of this Credit Agreement which relate to Loans to be made hereunder shall be replaced by the terms of this Credit Agreement.
SECTION 11.19. Confidentiality.
(a) Each of the Administrative Agent, the Issuing Banks and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to it and its affiliates’ Related Parties (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 Governmental 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 11.19, 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, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations and (iii) to any credit insurance provider relating to the Borrower and the Obligations (it being understood that the list of Disqualified Lenders may be disclosed to any assignee or participant, prospective assignee or prospective participant, or actual or prospective counterparty (or its advisors) in reliance on this clause (f)), (g) with the consent of the Borrower, or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section 11.19, or (y) becomes available to the Administrative Agent, the Issuing Banks 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 11.19, “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 Banks or any Lender on a non-confidential basis prior to disclosure by such Credit Party and other than information pertaining to this Credit Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the lending industry; provided, that in the case of information received from a Credit Party after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 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.
SECTION 11.20. Judgment Currency.
(a) If for the purpose of obtaining or enforcing judgment against the Borrower or any other Credit Party which is incorporated or organized under the laws of Canada or any province thereof in any court in any jurisdiction, it becomes necessary to convert into Canadian currency an amount due in United States Dollars under this Credit Agreement or any other Fundamental Document, the conversion shall be made at the rate of exchange prevailing on the Business Day immediately preceding:
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(i) the date of actual payment of the amount due, in the case of any proceeding in the courts of the Province of British Columbia or in the courts of any other jurisdiction that will give effect to such conversion being made on such date; or
(ii) the date on which the judgment is given, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 11.20(a)(ii) being hereinafter in this Section 11.20 referred to as the “Judgment Conversion Date”).
(b) If, in the case of any proceeding in the court of any jurisdiction referred to in Section 11.20(a)(ii), there is a change in the rate of exchange prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the Borrower shall pay such additional or lesser amount as may be necessary to ensure that the amount paid in Canadian currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of United States dollars which could have been purchased with the amount of Canadian dollars stipulated in the judgment or judicial order at the rate of exchange prevailing on the Judgment Conversion Date.
(c) Any amount due from the Borrower or any other Credit Party under the provisions of Section 11.20(b) shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Credit Agreement or any other Fundamental Document.
(d) The term “rate of exchange” in this Section 11.20 means the noon rate of exchange based on Canadian interbank transactions in United States dollars and Canadian dollars published or quoted by the Bank of Canada for the day in question.
SECTION 11.21. Lender Obligations Several. The respective obligations of the Lenders under this Credit Agreement and the other Fundamental Documents are several and not joint, and no Lender shall be responsible for the failure of any other Lender to satisfy its obligations hereunder and thereunder.
SECTION 11.22. Acknowledgement and Consent to Bail-In of Affected 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 Affected Financial Institution arising under any Fundamental Document may be subject to the Write-Down and Conversion Powers of the applicable 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 the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(1) a reduction in full or in part or cancellation of any such liability;
(2) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected 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
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(3) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
SECTION 11.23. Amendment and Restatement. Upon the Restatement Date, this Credit Agreement shall amend and restate the Existing Credit Agreement, but shall not constitute a novation thereof or in any way impair or otherwise affect the rights or obligations of the parties thereunder (including with respect to Loans and representations and warranties made thereunder) except as such rights or obligations are amended or modified hereby. The Existing Credit Agreement as amended and restated hereby shall be deemed to be a continuing agreement among the parties, and all documents, instruments and agreements delivered pursuant to or in connection with the Existing Credit Agreement not amended and restated in connection with the entry of the parties into this Credit Agreement shall remain in full force and effect, each in accordance with its terms, as of the date of delivery or such other date as contemplated by such document, instrument or agreement to the same extent as if the modifications to the Existing Credit Agreement contained herein were set forth in an amendment to the Existing Credit Agreement in a customary form, unless such document, instrument or agreement has otherwise been terminated or has expired in accordance with or pursuant to the terms of this Credit Agreement, the Existing Credit Agreement or such document, instrument or agreement or as otherwise agreed by the required parties hereto or thereto.
SECTION 11.24. Acknowledgement Regarding Any Supported QFCs. To the extent that the Fundamental Documents provide support, through a guarantee or otherwise, for Specified Swap Agreements or any other agreement or instrument that is a QFC (such support “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Fundamental Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Fundamental Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Fundamental Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
[Signature Pages Removed]
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Annex B
(Attached hereto)
EXHIBIT A
NOTICE OF BORROWING
Date: ,
| To: | JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders party to the Credit and Guarantee Agreement dated as of December 8, 2016 (as extended, renewed, amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Lions Gate Entertainment Corp., a corporation organized under the laws of the province of British Columbia, Canada (the “Borrower”), the Guarantors referred to therein, the Lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto |
Ladies and Gentlemen:
The undersigned, the Borrower, refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.5 of the Credit Agreement, of the Borrowing of Loans specified below:
| 1. | The Business Day of the proposed Borrowing is , ,1 |
| 2. | The aggregate amount of the proposed Borrowing is $ .2 |
| 3. | The Borrowing is being advanced under the [Revolving Facility] [Term A Facility] [Term B Facility]. |
| 4. | The Borrowing is to be comprised of [Base Rate] [Term Benchmark] Loans. |
| 5. | [The duration of the Interest Period for the Term Benchmark Loans included in the Borrowing shall be .]3 |
[In consideration for permitting the Borrower to request Loans as Term Benchmark Loans pursuant to the Credit Agreement prior to the effectiveness thereof, the Borrower hereby agrees that, in the event the Borrower fails to borrow such Term Benchmark Loans on the requested date of Borrowing above for any reason (other than the failure by a Lender to make a Loan, but including the failure of the Credit Agreement to become effective), the Borrower shall reimburse each applicable Lender in respect of its Term Benchmark Loans upon its demand as set forth in Section 3.6 of the Credit Agreement as if the Credit Agreement were in effect with respect to the requested Term Benchmark Loans.]4
[Notwithstanding anything herein to the contrary, the Borrowings contemplated by this Notice of Borrowing shall be subject to and conditioned upon the effectiveness of the Credit Agreement.]5
| 1 | Notice must be provided by telephone (promptly confirmed in writing) or telecopy by (i) 12:00 p.m. (New York time) at least three U.S. Government Securities Business Days before the date on which the Borrower requests the Lenders to advance a Borrowing of Loans that are Term Benchmark Loans and (ii) noon (New York time) on the date the Borrower requests the Lenders to advance a Borrowing of Loans that are Base Rate Loans. |
| 2 | Each Borrowing of Base Rate Loans shall be in amount not less than $1,000,000 or such greater amount that is an integral multiple of $500,000. Each Borrowing of Term Benchmark Loans advanced shall be in an amount equal to $1,000,000 or such greater amount that is in integral multiple of $250,000. |
| 3 | May be 1, 3, 6, or if agreed to by all Lenders under the relevant Facility, 12 months. |
| 4 | Only to be included for Borrowings on the Closing Date. |
| 5 | Only to be included for Borrowings on the Closing Date. |
Exh. A-1
| LIONS GATE ENTERTAINMENT CORP. | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to Notice of Borrowing]
Annex C
(Attached hereto)
2
EXHIBIT B
NOTICE OF CONTINUATION/CONVERSION
Date:
| To: | JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders party to the Credit and Guarantee Agreement dated as of December 8, 2016 (as extended, renewed, amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among Lions Gate Entertainment Corp. (the “Borrower”), the Guarantors referred to therein, the Lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as Administrative Agent and the other agents party thereto |
Ladies and Gentlemen:
The undersigned, Lions Gate Entertainment Corp., refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.5 of the Credit Agreement, of the [conversion] [continuation] of the [Revolving] [Term A] [Term B] Loans specified herein, that:
| 1. | The conversion/continuation Date is , .1 |
| 2. | The aggregate amount of the Loans to be [converted] [continued] is $ .2 |
| 3. | The Loans are to be [converted into] [continued as] [Term Benchmark] [Base Rate] Loans denominated in Dollars. |
| 4. | [If applicable:] The duration of the Interest Period for the Loans included in the [conversion] [continuation] shall be .3 |
| 1 | Notice of the continuation of a Borrowing of Loans that are Term Benchmark Loans for an additional Interest Period or of the conversion of part or all of a Borrowing of Loans that are Base Rate Loans into Term Benchmark Loans must be given by no later than 12:00 p.m. (New York time) at least three (3) U.S. Government Securities Business Days before the date of the requested continuation or conversion of Borrowing of Loans that are denominated in Dollars. |
| 2 | Each Borrowing of Term Benchmark Loans continued or converted shall be in an amount equal to $1,000,000 or such greater amount that in an integral multiple of $250,000. |
| 3 | May be 1, 3, 6, or if agreed to by all Lenders under the relevant Facility, 12 months. [If no Interest Period is specified with respect to any conversion to or continuation of as a Borrowing of Term Benchmark Loans, the Borrower shall be deemed to have selected an Interest Period of one month’s duration.] |
Exh. B-1
| LIONS GATE ENTERTAINMENT CORP. | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to Assumption and Joinder]
Exhibit 31.3
CERTIFICATION
I, Jon Feltheimer certify that:
1. I have reviewed this Form 10-K/A of Lions Gate Entertainment Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
| /s/ Jon Feltheimer |
| Jon Feltheimer |
| Chief Executive Officer |
Date: July 20, 2023
Exhibit 31.4
CERTIFICATION
I, James W. Barge certify that:
1. I have reviewed this Form 10-K/A of Lions Gate Entertainment Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
| /s/ JAMES W. BARGE |
| James W. Barge |
| Chief Financial Officer |
Date: July 20, 2023
Exhibit 99.1
LIONS GATE ENTERTAINMENT CORP.
USE OF NON-GAAP FINANCIAL MEASURES
This proxy statement presents the following important financial measures utilized by Lions Gate Entertainment Corp. (the “Company,” “we,” “us” or “our”) that are not all financial measures defined by generally accepted accounting principles (“GAAP”). The Company uses non-GAAP financial measures, among other measures, to evaluate the operating performance of our business. These non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with United States GAAP.
Adjusted OIBDA: Adjusted OIBDA is defined as operating income (loss) before adjusted depreciation and amortization (“OIBDA”), adjusted for adjusted share-based compensation (“adjusted SBC”), purchase accounting and related adjustments, restructuring and other costs, certain charges (benefits) related to the COVID-19 global pandemic, certain programming and content charges as a result of management changes and/or changes in strategy, and unusual gains or losses (such as goodwill impairment and charges related to Russia’s invasion of Ukraine), when applicable.
| • | Adjusted depreciation and amortization represents depreciation and amortization as presented on our consolidated statement of operations, less the depreciation and amortization related to the amortization of purchase accounting and related adjustments associated with recent acquisitions. Accordingly, the full impact of the purchase accounting is included in the adjustment for “purchase accounting and related adjustments”, described below. |
| • | Adjusted share-based compensation represents share-based compensation excluding the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements, which are included in restructuring and other expenses, when applicable. |
| • | Restructuring and other includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable. |
| • | COVID-19 related charges or benefits include incremental costs associated with the pausing and restarting of productions including paying/hiring certain cast and crew, maintaining idle facilities and equipment costs, and when applicable, certain motion picture and television impairments and development charges associated with changes in performance expectations or the feasibility of completing the project resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries, which are included in direct operating expense, when applicable. In addition, the costs include early or contractual marketing spends for film releases and events that have been canceled or delayed and will provide no economic benefit, which are included in distribution and marketing expense, when applicable. |
| • | Programming and content charges include certain charges as a result of changes in management and/or changes in programming and content strategy, which are included in direct operating expenses, when applicable. |
| • | Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in recent acquisitions. These adjustments include the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the non-cash charge for the amortization of the recoupable portion of the purchase price and the expense associated with the noncontrolling equity interests in the distributable earnings related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense. |
Adjusted OIBDA is calculated similar to how the Company defines segment profit and manages and evaluates its segment operations. Segment profit also excludes corporate general and administrative expense.
Exhibit 99.1-1
Total Segment Profit and Studio Business Segment Profit: We present the sum of our Motion Picture and Television Production segment profit as our “Studio Business” segment profit. Total segment profit and Studio Business segment profit, when presented outside of the segment information and reconciliations included in our consolidated financial statements, is considered a non-GAAP financial measure, and should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with United States GAAP. We use this non-GAAP measure, among other measures, to evaluate the aggregate operating performance of our business.
The Company believes the presentation of total segment profit and Studio Business segment profit is relevant and useful for investors because it allows investors to view total segment performance in a manner similar to the primary method used by the Company’s management and enables them to understand the fundamental performance of the Company’s businesses before non-operating items. Total segment profit and Studio Business segment profit is considered an important measure of the Company’s performance because it reflects the aggregate profit contribution from the Company’s segments, both in total and for the Studio Business and represents a measure, consistent with our segment profit, that eliminates amounts that, in management’s opinion, do not necessarily reflect the fundamental performance of the Company’s businesses, are infrequent in occurrence, and in some cases are non-cash expenses. Not all companies calculate segment profit or total segment profit in the same manner, and segment profit and total segment profit as defined by the Company may not be comparable to similarly titled measures presented by other companies due to differences in the methods of calculation and excluded items.
Overall: These measures are non-GAAP financial measures as defined in Regulation G promulgated by the SEC and are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with United States GAAP.
We use these non-GAAP measures, among other measures, to evaluate the operating performance of our business. We believe these measures provide useful information to investors regarding our results of operations and cash flows before non-operating items. Adjusted OIBDA is considered an important measure of the Company’s performance because this measure eliminates amounts that, in management’s opinion, do not necessarily reflect the fundamental performance of the Company’s businesses, are infrequent in occurrence, and in some cases are non-cash expenses.
These non-GAAP measures are commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. However, not all companies calculate these measures in the same manner and the measures as presented may not be comparable to similarly titled measures presented by other companies due to differences in the methods of calculation and excluded items.
A general limitation of these non-GAAP financial measures is that they are not prepared in accordance with U.S. generally accepted accounting principles. These measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of operating income, as determined in accordance with GAAP. Reconciliations of the adjusted metrics utilized to their corresponding GAAP metrics are provided below.
Exhibit 99.1-2
LIONS GATE ENTERTAINMENT CORP.
RECONCILIATION OF OPERATING INCOME (LOSS)
TO ADJUSTED OIBDA AND TOTAL SEGMENT PROFIT
The following table reconciles the GAAP measure, operating income (loss) to the non-GAAP measures, Adjusted OIBDA and Total Segment Profit:
| Year Ended March 31, | ||||||||||||
| 2022 Actual | 2023 Plan | 2023 Actual | ||||||||||
| (Unaudited, amounts in millions) | ||||||||||||
| Operating income (loss) |
$ | 9.0 | $ | (2.2 | ) | $ | (1,857.7 | ) | ||||
| Goodwill impairment(1) |
— | — | 1,475.0 | |||||||||
| Adjusted depreciation and amortization(2) |
43.0 | 41.8 | 40.2 | |||||||||
| Restructuring and other(1) |
16.8 | 20.5 | 411.9 | |||||||||
| COVID-19 related charges (benefit)(3) |
(3.4 | ) | — | (11.6 | ) | |||||||
| Programming and content charges(4) |
36.9 | — | 7.0 | |||||||||
| Charges related to Russia’s invasion of Ukraine(5) |
5.9 | — | — | |||||||||
| Adjusted share-based compensation expense(6) |
100.0 | 139.8 | 97.8 | |||||||||
| Purchase accounting and related adjustments(7) |
194.0 | 180.2 | 195.5 | |||||||||
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| Adjusted OIBDA |
$ | 402.2 | $ | 380.1 | $ | 358.1 | ||||||
| Corporate general and administrative expenses |
97.1 | 117.5 | 122.9 | |||||||||
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| Total Segment Profit |
$ | 499.3 | $ | 497.6 | $ | 481.0 | ||||||
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| (1) | Restructuring and other includes restructuring and severance costs, certain transaction and other costs, and certain unusual items, when applicable, as shown in the table below: |
| Year Ended March 31, | ||||||||||||
| 2022 Actual | 2023 Plan | 2023 Actual | ||||||||||
| (Unaudited, amounts in millions) | ||||||||||||
| Restructuring and other: |
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| Content and other impairments(a) |
$ | — | $ | — | $ | 385.2 | ||||||
| Severance(b) |
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| Cash |
4.6 | — | 18.0 | |||||||||
| Accelerated vesting on equity awards |
— | — | 4.2 | |||||||||
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| Total severance costs |
4.6 | — | 22.2 | |||||||||
| COVID-19 related charges included in restructuring and other(c) |
1.1 | — | 0.1 | |||||||||
| Transaction and other costs (benefits)(d) |
11.1 | 20.5 | 4.4 | |||||||||
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| $ | 16.8 | $ | 20.5 | $ | 411.9 | |||||||
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| (a) | Media Networks Goodwill Impairment and Restructuring: In fiscal 2023, in the second quarter ended September 30, 2022, due to the macro and microeconomic conditions, including the competitive environment, continued inflationary trends and recessionary economies worldwide and its impact on the Company’s growth in subscribers worldwide, we began a plan to restructure our LIONSGATE+ business (formerly STARZPLAY International). This restructuring includes exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan). Our Starz domestic operations have also been impacted by these current market conditions, and we have revised our subscriber growth and forecasted cash flow assumptions and implemented certain cost- saving measures. These changes in forecasted cash flow resulted in an impairment of $1.475 billion of goodwill related to the Media Networks segment in the second quarter ended September 30, 2022. |
During the third quarter ended December 31, 2022, due to the continuing macro and microeconomic conditions which led to the LIONSGATE+ restructuring, we expanded our restructuring plan discussed above to identify additional cost-saving initiatives, which included a strategic review of content performance across Starz’s domestic and international platforms, resulting in certain programming being removed from those platforms and written down to fair value.
Exhibit 99.1-3
As a result of these restructuring initiatives, we recorded content impairment charges associated with impairment of programming related to the territories being exited and individual content abandonment upon removal of certain titles from the Starz platforms related to the Media Networks segment in the year ended March 31, 2023 of $379.3 million.
Other Impairments: Amounts in the fiscal year ended March 31, 2023 also include an impairment of an operating lease right-of-use asset related to the Studio business and corporate facilities associated with a portion of a facility lease that will no longer be utilized by the Company. The impairment reflects a decline in market conditions since the inception of the lease impacting potential sublease opportunities, and represents the difference between the estimated fair value, which was determined based on the expected discounted future cash flows of the lease asset, and the carrying value.
| (b) | Severance costs were primarily related to the restructuring activities and other cost-saving initiatives. |
| (c) | Amounts represent certain incremental general and administrative costs associated with the COVID-19 global pandemic, such as costs related to transitioning the Company to a remote-work environment, costs associated with return-to-office safety protocols, and other incremental general and administrative costs associated with the COVID-19 global pandemic. |
| (d) | Transaction and other costs in the year ended March 31, 2023 and 2022 reflect transaction, integration and legal costs associated with certain strategic transactions, and restructuring activities and also include costs and benefits associated with certain legal matters. In the year ended March 31, 2023, these amounts include a benefit of $11.0 million for a settlement of a legal matter related to the Media Networks segment. |
| (2) | Adjusted depreciation and amortization represents depreciation and amortization as presented on our consolidated statements of operations less the depreciation and amortization related to the non-cash fair value adjustments to property and equipment and intangible assets acquired in recent acquisitions which are included in the purchase accounting and related adjustments line item above, as shown in the table below: |
| Year Ended March 31, | ||||||||||||
| 2022 Actual | 2023 Plan | 2023 Actual | ||||||||||
| (Unaudited, amounts in millions) | ||||||||||||
| Depreciation and amortization |
$ | 177.9 | $ | 172.0 | $ | 180.3 | ||||||
| Less: Amount included in purchase accounting and related adjustments |
(134.9 | ) | (130.2 | ) | (140.1 | ) | ||||||
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| Adjusted depreciation and amortization |
$ | 43.0 | $ | 41.8 | $ | 40.2 | ||||||
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| (3) | Amounts represent the incremental costs included in direct operating expense and distribution and marketing expense resulting from circumstances associated with the COVID-19 global pandemic, net of insurance recoveries. During the fiscal years ended March 31, 2023 and 2022, the Company has incurred a net benefit in direct operating expense due to insurance recoveries in excess of the incremental costs expensed in the period. These charges (benefits) are excluded from segment operating results. |
| (4) | Amounts represent certain unusual programming and content charges. In the fiscal year ended March 31, 2023, the amounts represent development costs written off as a result of changes in strategy across the Company’s theatrical slate in connection with certain management changes and changes in the theatrical marketplace in the Motion Picture segment. In the fiscal year ended March 31, 2022, the amounts represent impairment charges recorded as a result of a strategic review of original programming on the STARZ platform, which identified certain titles with limited viewership or strategic purpose which were removed from the STARZ service and abandoned by the Media Networks segment. These charges are excluded from segment results and included in amortization of investment in film and television programs in direct operating expense on the consolidated statement of operations. |
| (5) | Amounts represent charges related to Russia’s invasion of Ukraine, primarily related to bad debt reserves for accounts receivable from customers in Russia, included in direct operating expense in the consolidated statements of operations, and excluded from segment operating results. |
| (6) | The following table reconciles total share-based compensation expense to adjusted share-based compensation expense: |
| Year Ended March 31, | ||||||||||||
| 2022 Actual | 2023 Plan | 2023 Actual | ||||||||||
| (Unaudited, amounts in millions) | ||||||||||||
| Total share-based compensation expense |
$ | 100.0 | $ | 139.8 | $ | 102.0 | ||||||
| Less: Amount included in restructuring and other(a) |
— | — | (4.2 | ) | ||||||||
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| Adjusted share-based compensation |
$ | 100.0 | $ | 139.8 | $ | 97.8 | ||||||
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Exhibit 99.1-4
| (a) | Represents share-based compensation expense included in restructuring and other expenses reflecting the impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements. |
| (7) | Purchase accounting and related adjustments primarily represent the amortization of non-cash fair value adjustments to certain assets acquired in recent acquisitions. The following sets forth the amounts included in each line item in the financial statements: |
| Year Ended March 31, | ||||||||||||
| 2022 Actual | 2023 Plan | 2023 Actual | ||||||||||
| (Unaudited, amounts in millions) | ||||||||||||
| Purchase accounting and related adjustments: |
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| Direct operating |
$ | 0.4 | $ | 0.2 | $ | 0.7 | ||||||
| General and administrative expense(a) |
58.7 | 49.8 | 54.7 | |||||||||
| Depreciation and amortization |
134.9 | 130.2 | 140.1 | |||||||||
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| $ | 194.0 | $ | 180.2 | $ | 195.5 | |||||||
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| (a) | These adjustments include the accretion of the noncontrolling interest discount related to Pilgrim Media Group and 3 Arts Entertainment, the amortization of the recoupable portion of the purchase price and the expense associated with the earned distributions related to 3 Arts Entertainment, all of which are accounted for as compensation and are included in general and administrative expense, as presented in the table below. The earned distributions related to 3 Arts Entertainment represent the 3 Arts Entertainment noncontrolling equity interest in the earnings of 3 Arts Entertainment and are reflected as an expense rather than noncontrolling interest in the consolidated statement of operations due to the relationship to continued employment. |
| Year Ended March 31, | ||||||||||||
| 2022 Actual | 2023 Plan | 2023 Actual | ||||||||||
| (Unaudited, amounts in millions) | ||||||||||||
| Amortization of recoupable portion of the purchase price |
$ | 7.7 | $ | 7.7 | $ | 7.7 | ||||||
| Noncontrolling interest discount amortization |
22.7 | 13.2 | 13.2 | |||||||||
| Noncontrolling equity interest in distributable earnings |
28.3 | 28.9 | 33.8 | |||||||||
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| $ | 58.7 | $ | 49.8 | $ | 54.7 | |||||||
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Exhibit 99.1-5