15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 1 of 16 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 RELATIVITY FASHION, LLC, et al.,1 Case No. 15-11989 (MEW) Debtors. (Jointly Administered) DECLARATION OF MARNI WIESHOFER IN SUPPORT OF CONFIRMATORY FINDING 1 The Debtors in these chapter 11 cases are set forth on the following page (i). Main Document 15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 2 of 16 Main Document The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, are: Relativity Fashion, LLC (4571); Relativity Holdings LLC (7052); Relativity Media, LLC (0844); Relativity REAL, LLC (1653); RML Distribution Domestic, LLC (6528); RML Distribution International, LLC (6749); RMLDD Financing, LLC (9114); 21 & Over Productions, LLC (7796); 3 Days to Kill Productions, LLC (5747); A Perfect Getaway P.R., LLC (9252); A Perfect Getaway, LLC (3939); Armored Car Productions, LLC (2750); Best of Me Productions, LLC (1490); Black Or White Films, LLC (6718); Blackbird Productions, LLC (8037); Brant Point Productions, LLC (9994); Brick Mansions Acquisitions, LLC (3910); Brilliant Films, LLC (0448); Brothers Productions, LLC (9930); Brothers Servicing, LLC (5849); Catfish Productions, LLC (7728); Cine Productions, LLC (8359); CinePost, LLC (8440); Cisco Beach Media, LLC (8621); Cliff Road Media, LLC (7065); Den of Thieves Films, LLC (3046); Don Jon Acquisitions, LLC (7951); DR Productions, LLC (7803); Einstein Rentals, LLC (5861); English Breakfast Media, LLC (2240); Furnace Films, LLC (3558); Gotti Acquisitions, LLC (6562); Great Point Productions, LLC (5813); Guido Contini Films, LLC (1031); Hooper Farm Music, LLC (3773); Hooper Farm Publishing, LLC (3762); Hummock Pond Properties, LLC (9862); Hunter Killer La Productions, LLC (1939); Hunter Killer Productions, LLC (3130); In The Hat Productions, LLC (3140); J & J Project, LLC (1832); JGAG Acquisitions, LLC (9221); Left Behind Acquisitions, LLC (1367); Long Pond Media, LLC (7197); Madaket Publishing, LLC (9356); Madaket Road Music, LLC (9352); Madvine RM, LLC (0646); Malavita Productions, LLC (8636); MB Productions, LLC (4477); Merchant of Shanghai Productions, LLC (7002); Miacomet Media LLC (7371); Miracle Shot Productions, LLC (0015); Most Wonderful Time Productions, LLC (0426); Movie Productions, LLC (9860); One Life Acquisitions, LLC (9061); Orange Street Media, LLC (3089); Out Of This World Productions, LLC (2322); Paranoia Acquisitions, LLC (8747); Phantom Acquisitions, LLC (6381); Pocomo Productions, LLC (1069); Relative Motion Music, LLC (8016); Relative Velocity Music, LLC (7169); Relativity Development, LLC (5296); Relativity Film Finance II, LLC (9082); Relativity Film Finance III, LLC (8893); Relativity Film Finance, LLC (2127); Relativity Films, LLC (5464); Relativity Foreign, LLC (8993); Relativity India Holdings, LLC (8921); Relativity Jackson, LLC (6116); Relativity Media Distribution, LLC (0264); Relativity Media Films, LLC (1574); Relativity Music Group, LLC (9540); Relativity Production LLC (7891); Relativity Rogue, LLC (3333); Relativity Senator, LLC (9044); Relativity Sky Land Asia Holdings, LLC (9582); Relativity TV, LLC (0227); Reveler Productions, LLC (2191); RML Acquisitions I, LLC (9406); RML Acquisitions II, LLC (9810); RML Acquisitions III, LLC (9116); RML Acquisitions IV, LLC (4997); RML Acquisitions IX, LLC (4410); RML Acquisitions V, LLC (9532); RML Acquisitions VI, LLC (9640); RML Acquisitions VII, LLC (7747); RML Acquisitions VIII, LLC (7459); RML Acquisitions X, LLC (1009); RML Acquisitions XI, LLC (2651); RML Acquisitions XII, LLC (4226); RML Acquisitions XIII, LLC (9614); RML Acquisitions XIV, LLC (1910); RML Acquisitions XV, LLC (5518); RML Bronze Films, LLC (8636); RML Damascus Films, LLC (6024); RML Desert Films, LLC (4564); RML Documentaries, LLC (7991); RML DR Films, LLC (0022); RML Echo Films, LLC (4656); RML Escobar Films LLC (0123); RML Film Development, LLC (3567); RML Films PR, LLC (1662); RML Hector Films, LLC (6054); RML Hillsong Films, LLC (3539); RML IFWT Films, LLC (1255); RML International Assets, LLC (1910); RML Jackson, LLC (1081); RML Kidnap Films, LLC (2708); RML Lazarus Films, LLC (0107); RML Nina Films, LLC (0495); RML November Films, LLC (9701); RML Oculus Films, LLC (2596); RML Our Father Films, LLC (6485); RML Romeo and Juliet Films, LLC (9509); RML Scripture Films, LLC (7845); RML Solace Films, LLC (5125); RML Somnia Films, LLC (7195); RML Timeless Productions, LLC (1996); RML Turkeys Films, LLC (8898); RML Very Good Girls Films, LLC (3685); RML WIB Films, LLC (0102); Rogue Digital, LLC (5578); Rogue Games, LLC (4812); Roguelife LLC (3442); Safe Haven Productions, LLC (6550); Sanctum Films, LLC (7736); Santa Claus Productions, LLC (7398); Smith Point Productions, LLC (9118); Snow White Productions, LLC (3175); Spy Next Door, LLC (3043); Story Development, LLC (0677); Straight Wharf Productions, LLC (5858); Strangers II, LLC (6152); Stretch Armstrong Productions, LLC (0213); Studio Merchandise, LLC (5738); Summer Forever Productions, LLC (9211); The Crow Productions, LLC (6707); Totally Interns, LLC (9980); Tribes of Palos Verdes Production, LLC (6638); Tuckernuck Music, LLC (8713); Tuckernuck Publishing, LLC (3960); Wright Girls Films, LLC (9639); Yuma, Inc. (1669); Zero Point Enterprises, LLC (9558). The location of the Debtors’ corporate headquarters is: 9242 Beverly Blvd., Suite 300, Beverly Hills, CA 90210. -(i)- 15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 3 of 16 Main Document I, Marni Wieshofer, state the following: 1. I am a Managing Director in the Technology, Media & Telecom Group of Houlihan Lokey Capital, Inc. (“Houlihan Lokey”), a financial advisory firm that maintains offices at 10250 Constellation Boulevard, 5th Floor, Los Angeles, California 90067. Houlihan Lokey has been retained by the Debtors as their financial advisor in these Chapter 11 Cases.2 2. I have personal knowledge of the matters set forth herein. Except as otherwise indicated, all statements set forth herein are based upon information of which I became aware throughout the course of Houlihan Lokey’s involvement with the Debtors, both prior and subsequent to our engagement as the Debtors’ financial advisor. If called upon as a witness, I could and would competently testify under oath as to the matters set forth in this Declaration. 3. I make this Declaration in support of the entry of an Order containing the Confirmatory Finding, as provided for in paragraph 1 of the Confirmation Order. 4. I attended the hearing on confirmation of the Plan Proponents’ Third Amended Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, which took place on February 1 and 2, 2016 (the “Confirmation Hearing”). I was called by the Debtors to testify at the Confirmation Hearing on February 1, 2016. Based upon my qualifications, as described on the record at the Confirmation Hearing, I was qualified as an expert in the media/film finance industry. I am likewise familiar with the terms of the final Plan, filed on February 8, 2016, in connection with entry of the Confirmation Order. 2 All capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Plan Proponents’ Fourth Amended Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code filed on February 8, 2016 [ECF No. 1572] (the “Plan”), or in the Findings of Fact, Conclusions of Law and Order Confirming, Pursuant to Section 1129 of the Bankruptcy Code, The Plan Proponents’ Fourth Amended Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code entered on February 8, 2016 [ECF No. 1573] (the “Confirmation Order”), as the case may be. 15-11989-mew 5. Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 4 of 16 Main Document I understand that, pursuant to section 1129(a)(11) of the Bankruptcy Code, the Plan may be confirmed only if “[c]onfirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan.” 6. As indicated in my prior testimony, and in that of my colleague, Matthew Niemann, to assess whether the Plan is feasible and whether the Reorganized Debtors will be financially viable entities on a prospective basis, Houlihan Lokey reviewed financial projections prepared by the Debtors’ management and members of their finance and business planning teams for the period of February 1, 2016 through December 31, 2018 (the “Financial Projections”), that contemplated implementation of the Debtors’ three-year strategic business plan (the “Business Plan”), and which were attached as Exhibit A to Mr. Niemann’s Declaration that was filed with the Bankruptcy Court on January 30, 2016 [ECF No. 1505] (the “Niemann Declaration”) and admitted into evidence at the Confirmation Hearing. 7. As set forth in Exhibit A to the Niemann Declaration, the Financial Projections were based upon the assumption that the Debtors would have approximately $78.4 million in available Exit Funding at emergence (assumed to be on February 1, 2016), consisting of the following incremental amounts (collectively, the “Exit Funding Assumptions”): (i) an assumed term loan from Macquarie in the gross amount of $60 million, reduced by a $26.6 million repayment to Macquarie on the Post-Release P&A Secured Claims (for a net amount of $33.4 million in available funds as of the Effective Date); (ii) a contemplated vendor advance in the amount of $20 million; (iii) an equity raise in the amount of $20 million; and (iv) a convertible preferred instrument in the amount of $5 million. In addition, the Debtors also had access to a $60 million pre-release revolving P&A payment terms facility. -2- 15-11989-mew 8. Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 5 of 16 Main Document Since the entry of the Confirmation Order, I have worked closely with the Debtors’ management with respect to their implementation of the Plan. I have likewise reviewed the Declaration of Richard L. Wynne in Support of Confirmatory Finding (the “Wynne Declaration”) filed concurrently herewith and Exhibits thereto, and I have conversed with and met with the Debtors’ management in order to address my informational requests. Based on my review of these materials, I understand that the Exit Funding Assumptions have been revised such that Exit Funding will instead be provided by two new financing arrangements: (i) a $40 million senior secured term loan from Midcap Financial Trust (“MidCap Term Loan”); and (ii) a $35 million subordinated convertible debt financing (“Subordinated Convertible Financing”) from Relativity Secured Lender, LLC, an entity owned and controlled by Joseph Nicholas. I understand that Mr. Nicholas will be primarily responsible for the future capital raises contemplated by the Business Plan, and that he believes it will be beneficial and enhance the likelihood of success of those raises for the valuation of the initial such raise to be determined by arms-length negotiation at the time of the raise. Accordingly, this is the reason that the Subordinated Convertible Financing is being utilized for consummation at the Effective Date. 9. Attached as Exhibit A hereto is a revised set of Financial Projections (the “Revised Financial Projections”) reflecting the revised assumptions regarding sources and uses at emergence, including substitution of the MidCap Term Loan and the Subordinated Convertible Financing for the Exit Funding Assumptions. Attached as Exhibit B hereto is a bridge reflecting these changes. The Revised Financial Projections are based on information provided by the Debtors’ management and members of their finance and business planning teams. Notably, the new Exit Funding agreements do not require immediate payment of the -3- 15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 6 of 16 Main Document Post-Release P&A Secured Claims, which have been reduced to $23.4 million at emergence instead of $26.6 million as previously assumed. Rather, that obligation will be repaid over time from the collateral securing such claims, as contemplated by Section II.C.4 of the Plan. Based on the above revisions to the Financial Projections, the Debtors will have available Exit Funding of $75 million, and the cash on the balance sheet just prior to emergence—assumed to be March 19, 2016—has improved by $3.3 million compared to the cash on the balance sheet at February 1, 2016. However, the transaction fees and cure payments at emergence have increased by $7.7 million resulting in a similar ($7.8 million) reduction in opening cash. In addition, the Debtors also have access to a $60 million pre-release revolving P&A payment terms facility. 10. Based on Houlihan Lokey’s review of the Revised Financial Projections, and assuming that the operations of the Debtors perform reasonably consistently with the Revised Financial Projections, and that the Debtors successfully close the financing transactions contemplated both prior and subsequent to the confirmation of the Plan, it is my opinion that the Reorganized Debtors will have sufficient liquidity to fund obligations as they arise through the projection period under the Revised Financial Projections. Specifically, the Revised Financial Projections indicate that, after giving effect to confirmation and consummating all restructurings and transactions contemplated by the Plan (and subject to the reasonable limitations and assumptions described in the Revised Financial Projections and elsewhere in the Disclosure Statement), the Reorganized Debtors will have and will maintain sufficient liquidity and capital resources to meet their future financial obligations during the projection period. In fact, the Revised Financial Projections indicate a $66.4 million improvement in ending cash at December 31, 2018 compared to the Financial Projections, primarily due to the removal of the $20 million vendor advance that provided for significantly increased third party distribution fees and -4- 15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 7 of 16 Main Document immediate repayment from net distribution proceeds. As is the case with any projections, actual performance will necessarily deviate from the projected financial results set forth in the Revised Financial Projections; however, it is my opinion, based on my review and my experience with media companies, such as the Debtors, that the Revised Financial Projections have been reasonably developed and can be relied upon by a reasonable investor insofar as the prospects for the future performance of the Reorganized Debtors’ businesses. 11. For all of the foregoing reasons, and presuming that the assumptions set forth herein and in the Revised Financial Projections are achieved, I believe that confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtors or any successor to the Debtors under the Plan. 12. I have also reviewed (i) the agreements relating to the Trigger Street Transactions that are attached as Exhibits B and C to the Wynne Declaration, and (ii) the Declaration of Dana Brunetti in Support of Confirmatory Finding (the “Brunetti Declaration”) filed concurrently herewith, including the attached statement from Kevin Spacey. My assessment of the Debtors’ ability to carry out their Business Plan was not contingent on Mr. Spacey’s personal involvement in the business going forward. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing statements are true and correct to the best of my knowledge, information, and belief. Executed this 12th day of March, 2016 at Los Angeles, California. /s/ Marni Wieshofer Marni Wieshofer -5- 15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 8 of 16 Exhibit A Revised Financial Projections Main Document 15-11989-mew Doc 1641 Model Assumptions Dashboard Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 9 of 16 Main Document Pre-Release Revolving P&A Payment Terms Assumptions Non-Recourse Ultimates Facility Assumptions 3 Year Modeling Financing Assumptions ($ in thousands) ($ in thousands) ($ in thousands) Pre-Release Revolving P&A Payment Terms Facility Size Interest Rate (PIK) Term (Years) Y $60,000 10.0% 5.0 Draw Date (Months) Credit Terms (Months) Drawdown Availability (% of P&A Budget) 1 Month Before Release 2 Months Before Release 0.0 (3.0) 40% 30% Senior Secured Term Loan Assumptions Ultimates Facility at Emergence Facility Size Interest Rate (L + 1100) (PIK) Commitment Fees N $150,000 12.0% 3.0% Borrowing Base (Film Studio) Pay TV Advance Rate PPV/VOD Advance Rate Home Video Advance Rate Free TV Advance Rate Library Credit Advance Rate Library Credit Discount Rate 90.0% 90.0% 90.0% 90.0% 40.0% 10.0% 10.0% Borrowing Base (Film Library) All Media Advance Rate Library Credit Advance Rate Library Credit Discount Rate 90.0% 40.0% 10.0% 10.0% ($ in thousands) Senior Secured Term Loan Issued Facility Size Interest Rate (L + 1000) (Cash)(1) Term (Years) Date of Re-financing with Non-Recourse Ultimates Facility Repayment from Film Library Cash Flows Upfront fee (3%) & Arrangement fee (0.5%)(2) Administrative Agency Fee(3) Exit Fees Y $40,000 10.5% 1.0 4/30/2016 Y 3.5% $200.0 4.0% Initial Draw Weekend Opening Box Office / TBO Multiple of Weekend Opening Box Office Cap at % of P&A Amount Drawdown Availability (Months to Release) OID 30.0% 2.0x 110.0% 0.0 3.0% Pre-Release Revolving P&A Payment Terms Senior Secured Term Loan Non-Recourse Ultimates Facility Equity Raises Subordinated Convertible Financing Asset Sale Film Equity Financing Sources and Uses at Emergence (March 19, 2016) ($ in thousands) Sources Senior Secured Term Loan Subordinated Convertible Financing Cash on Balance Sheet Total Sources $40,000 35,000 8,931 $83,931 Uses Full Repayment of New DIP Facility Transaction Fees & Cure Payments Cash to Balance Sheet Total Uses $35,000 32,706 16,225 $83,931 BidCo Note Assumptions Subordinated Convertible Financing ($ in thousands) ($ in thousands) Total Facility Size BidCo Note (Incremental $30M)(4) Interest Rate (Cash) Term (Years) BidCo Note (Initial $30M) Interest Rate (Cash) Term (Years) $60,000 $60,000 40,000 150,000 100,000 35,000 7,500 100,000 13.5% 1.0 Facility Size Interest Rate (Cash) Term (Years) Subordinated Convertible Financing at Emergence 10.0% 2.0 ($ in thousands) $35,000 12.0% 5.0 35,000 Pre-Release RKA Facilities Assumptions Interest Rate (PIK) 2.50% Post-Release P&A Facility Assumptions ($ in thousands) Facility Size Interest Rate (PIK) Term (Years) Repayment from Macquarie Films $23,367 9.9% N/A Y RKA Beginning Balances (at 2/29/2016) Masterminds Before I Wake (Somnia) Kidnap Disappointments Room $31,236 23,289 16,289 20,356 Note: All Per RML Management. (1) Subject to a LIBOR floor of 0.5%. (2) Included in Transaction Fees & Cure Payments at Emergence. (3) Assumed to be paid monthly ($33k per month), plus the remainder of the minimum amount (if any) payable at the time of final payment. (4) No less than $15 million shall be paid within six months of the Effective Date, with the remaining $15 million due within twelve months of the Effective Date. 1 15-11989-mew Doc 1641 RML Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 10 of 16 Strictly Private & Confidential SUMMARY OF OPERATING RESULTS ($ in millions) 1 Total Revenue Mar 2016 2 Gross Margin (1) 3 Total Overhead 4 EBITDA (Before Minority Interest) 5 Less: Minority Interest (Relativity China) 6 EBITDA (After Minority Interest) CAPITALIZATION SUMMARY ($ in millions) 7 Cash 8 BidCo Note 9 Subordinated Convertible Financing 10 Total Debt (Recourse) 11 12 13 14 15 16 17 18 19 20 Main Document Senior Secured Term Loan Non-Recourse Ultimates Facility Non-Recourse Ultimates Facility (Initial Draw) Pre-Release RKA Facilities Post-Release P&A Facility Pre-Release Revolving P&A Payment Terms Secured Guilds Claims Deferred Transaction Fees and Cure Payments Vendor Debt & General Unsecured Total Debt (Non-Recourse)(2) Opening as of Mar 2016 $16.2 Q2 2016 $6.9 $27.5 $1.6 $6.8 Q3 2016 $102.6 ($27.5) Q4 2016 $79.6 Q1 2017 $145.6 Q2 2017 $246.1 Q3 2017 $148.0 Q4 2017 $216.8 $3.3 $57.6 $33.7 $28.1 ($29.2) (3.5) (8.6) (8.6) (8.6) (9.5) ($2.0) ($1.9) ($36.1) ($37.8) ($6.2) (9.5) $48.1 (9.5) $24.1 (9.5) $18.6 FY 2016 $216.5 ($48.3) FY 2017 $756.5 FY 2018 $882.9 $122.7 $232.3 (29.4) (38.1) ($77.7) $84.6 (38.3) $194.1 (0.1) (0.3) (0.3) (0.3) (1.0) (1.0) (1.0) (1.0) (1.1) (4.0) (19.6) ($2.1) ($2.2) ($36.4) ($38.1) ($7.2) $47.1 $23.2 $17.6 ($78.9) $80.6 $174.5 Mar 2016 $6.2 Q2 2016 $26.0 Q3 2016 $73.2 Q4 2016 $34.0 Q1 2017 $86.9 Q2 2017 $100.7 Q3 2017 $103.4 Q4 2017 $126.3 FY 2016 $34.0 FY 2017 $126.3 FY 2018 $245.6 $60.0 35.0 $95.0 $60.0 35.0 $95.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $30.0 35.0 $65.0 $0.0 35.0 $35.0 $40.0 --92.5 23.4 -3.0 26.8 8.4 $194.0 $39.1 --92.7 20.2 -3.0 20.8 8.4 $184.1 $ -50.1 -93.2 14.7 8.1 3.0 17.3 7.3 $193.7 $ -56.1 74.5 93.8 11.1 83.3 3.0 13.8 6.3 $341.8 $ -83.2 52.5 94.4 11.8 36.5 -5.1 5.2 $288.7 $ -77.2 72.7 95.0 12.3 59.4 -0.6 4.2 $321.3 $ -101.3 40.9 87.9 12.9 14.0 -0.4 3.1 $260.6 $ -85.5 24.7 74.2 13.6 49.5 -0.2 2.1 $249.8 $ -97.4 45.9 69.3 14.3 27.5 --1.0 $255.4 $ -83.2 52.5 94.4 11.8 36.5 -5.1 5.2 $288.7 $ -97.4 45.9 69.3 14.3 27.5 --1.0 $255.4 $ -101.7 76.3 47.6 17.2 51.1 ---$293.8 21 Total Debt $289.0 $279.1 $258.7 $406.8 $353.7 $386.3 $325.6 $314.8 $320.4 $353.7 $320.4 $328.8 22 Net Debt $272.8 $273.0 $232.7 $333.7 $319.7 $299.5 $225.0 $211.4 $194.1 $319.7 $194.1 $83.2 165.0 -$454.0 165.0 -$444.1 165.0 50.0 $473.7 165.0 50.0 $621.8 165.0 50.0 $568.7 165.0 100.0 $651.3 165.0 100.0 $590.6 165.0 100.0 $579.8 165.0 100.0 $585.4 165.0 50.0 $568.7 165.0 100.0 $585.4 165.0 100.0 $593.8 NM NM NM NM NM NM NM NM NM NM 1.7x 1.2x 3.3x 2.2x 4.3x 2.6x NM NM 3.8x 2.3x 1.7x 0.4x 23 Preferred Units(3) 24 Equity Raised 25 Total Capitalization 26 Total Debt / EBITDA (Before Minority Interest) 27 Net Debt / EBITDA (Before Minority Interest) (1) Includes litigation expenses totaling $2.0 million to be paid 24 months after emergence. (2) Excludes production debt related to Masterminds and Disappointments Room which are collateralized by foreign pre-sales and other foreign collateral that offset these debt amounts; collateral amounts also excluded from the model. (3) Ryan Kavanaugh and Joe Nicholas received Preferred Units with a $165 million liquidation preference in exchange for $30 million. 2 15-11989-mew RML PROJECTED INCOME STATEMENT ($ in millions) (Includes Non-Wholly Owned Businesses) 1 Revenue 2 Film Studio & Film Library(1) 3 Digital / Madvine 4 Scripted Television & Music 5 Total Revenue 6 Expenses 7 Film Studio & Film Library(1) 8 Digital / Madvine 9 Scripted Television & Music 10 Total Expenses 11 Gross Margin 12 13 14 15 Corporate Overhead(2) Development Costs Relativity China Overhead Total Overhead 16 EBITDA (Before Minority Interest) 17 Less: Minority Interest (Relativity China) 18 EBITDA (After Minority Interest) Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 11 of 16 Main Document Strictly Private & Confidential Mar 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2016 FY 2017 FY 2018 $6.7 -0.2 $6.9 $20.6 6.4 0.5 $27.5 $86.8 12.7 3.1 $102.6 $70.3 6.2 3.1 $79.6 $127.3 15.1 3.2 $145.6 $235.3 7.6 3.2 $246.1 $128.5 14.1 5.5 $148.0 $202.8 8.6 5.5 $216.8 $184.3 25.3 6.9 $216.5 $693.9 45.2 17.3 $756.5 $776.6 78.2 28.1 $882.9 ($5.3) -(0.0) ($5.3) ($15.6) (5.0) (0.1) ($20.7) ($121.2) (8.8) (0.1) ($130.0) ($103.1) (5.5) (0.1) ($108.7) ($133.0) (9.2) (0.1) ($142.2) ($182.9) (5.4) (0.1) ($188.4) ($104.4) (9.9) (0.1) ($114.4) ($181.9) (6.7) (0.1) ($188.7) ($245.1) (19.3) (0.3) ($264.8) ($602.1) (31.3) (0.3) ($633.8) ($612.9) (37.3) (0.4) ($650.6) $1.6 $6.8 ($27.5) ($29.2) $3.3 $57.6 $33.7 $28.1 ($48.3) $122.7 $232.3 ($3.0) (0.4) (0.1) ($3.5) ($7.7) (0.6) (0.3) ($8.6) ($7.7) (0.6) (0.3) ($8.6) ($7.7) (0.6) (0.3) ($8.6) ($7.9) (1.3) (0.3) ($9.5) ($7.9) (1.3) (0.3) ($9.5) ($7.9) (1.3) (0.3) ($9.5) ($7.9) (1.3) (0.3) ($9.5) ($26.1) (2.3) (1.0) ($29.4) ($31.8) (5.0) (1.3) ($38.1) ($31.8) (5.0) (1.5) ($38.3) ($2.0) ($1.9) ($36.1) ($37.8) ($6.2) $48.1 $24.1 $18.6 ($77.7) $84.6 $194.1 $0.1 $0.3 $0.3 $0.3 $1.0 $1.0 $1.0 $1.0 $1.1 $4.0 $19.6 ($2.1) ($2.2) ($36.4) ($38.1) ($7.2) $47.1 $23.2 $17.6 ($78.9) $80.6 $174.5 (1) Includes Relativity China. (2) Includes litigation expenses totaling $2.0 million to be paid 24 months after emergence. 3 15-11989-mew RML Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 12 of 16 Strictly Private & Confidential SUMMARY OF CASH FLOW FOR DEBT ($ in millions) Mar 2016 1 Cash 2 Beginning 3 Total Cash Available from Operations 4 Less: Debt Repayment 5 Plus: Additional Equity Raise 6 Ending 7 Debt Repayment 8 BidCo Note 9 Secured Guilds Claims 10 Deferred Transaction Fees and Cure Payments 11 Vendor Debt & General Unsecured 12 Total Debt Repayment DEBT (Excludes New Facilities) ($ in millions) 13 BidCo Note 14 Beginning 15 Repayment from Non-Recourse Ultimates Facility 16 Repayment from Equity Raise Proceeds 17 Remaining Mandatory Repayment 18 Ending 19 Secured Guilds Claims 20 Beginning 21 Repayment 22 Ending 23 Deferred Transaction Fees and Cure Payments 24 Beginning 25 Repayment 26 Ending 27 Vendor Debt & General Unsecured 28 Beginning 29 Repayment 30 Ending Main Document Q2 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2016 FY 2017 FY 2018 $16.2 (4.1) (6.0) -$6.2 $6.2 4.4 (34.6) 50.0 $26.0 $26.0 51.8 (4.5) -$73.2 $73.2 (26.4) (12.7) -$34.0 $34.0 8.4 (5.5) 50.0 $86.9 $86.9 15.1 (1.3) -$100.7 $100.7 4.0 (1.3) -$103.4 $103.4 24.2 (1.3) -$126.3 $16.2 25.6 (57.8) 50.0 $34.0 $34.0 51.6 (9.3) 50.0 $126.3 $126.3 150.3 (31.0) -$245.6 $ --(6.0) -($6.0) ($30.0) -(3.5) (1.0) ($34.6) $ --(3.5) (1.0) ($4.5) $ -(3.0) (8.7) (1.0) ($12.7) $ --(4.5) (1.0) ($5.5) $ --(0.2) (1.0) ($1.3) $ --(0.2) (1.0) ($1.3) $ --(0.2) (1.0) ($1.3) ($30.0) (3.0) (21.7) (3.1) ($57.8) $ --(5.1) (4.2) ($9.3) ($30.0) --(1.0) ($31.0) Mar 2016 0.0% Q3 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2016 FY 2017 FY 2018 $60.0 ---$60.0 $60.0 (7.7) (22.3) -$30.0 $30.0 ---$30.0 $30.0 ---$30.0 $30.0 ---$30.0 $30.0 ---$30.0 $30.0 ---$30.0 $30.0 ---$30.0 $60.0 (7.7) (22.3) -$30.0 $30.0 ---$30.0 $30.0 --(30.0) $ -- $3.0 -$3.0 $3.0 -$3.0 $3.0 -$3.0 $3.0 (3.0) $ -- $ --$ -- $ --$ -- $ --$ -- $ --$ -- $3.0 (3.0) $ -- $ --$ -- $ --$ -- $26.8 (6.0) $20.8 $20.8 (3.5) $17.3 $17.3 (3.5) $13.8 $13.8 (8.7) $5.1 $5.1 (4.5) $0.6 $0.6 (0.2) $0.4 $0.4 (0.2) $0.2 $0.2 (0.2) $ -- $26.8 (21.7) $5.1 $5.1 (5.1) $ -- $ --$ -- $8.4 -$8.4 $8.4 (1.0) $7.3 $7.3 (1.0) $6.3 $6.3 (1.0) $5.2 $5.2 (1.0) $4.2 $4.2 (1.0) $3.1 $3.1 (1.0) $2.1 $2.1 (1.0) $1.0 $8.4 (3.1) $5.2 $5.2 (4.2) $1.0 $1.0 (1.0) $ -- 4 15-11989-mew Doc 1641 Film Release Schedule ($ in thousands) Film 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Title Kidnap Solace Masterminds Before I Wake (Somnia) TBD Acquisition 1 Disappointments Room Strangers 2 Not Without Hope Hunter Killer Act of Valor: SWAT TBD Acquisition 2 High Noon TBD Acquisition 3 TBD Acquisition 4 Immortals 2 TBD 2018 1 (Not Without Hope Model) TBD 2018 2 (Hunter Killer Model) TBD 2018 3 (Act of Valor: SWAT Model) TBD 2018 4 (TBD Acquisition 1 Model) TBD 2018 5 (High Noon Model) TBD 2018 6 (TBD Acquisition 2 Model) TBD 2018 7 (Immortals 2 Model) Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 13 of 16 Release Date Aug-16 Sep-16 Sep-16 Oct-16 Oct-16 Dec-16 Feb-17 Feb-17 Apr-17 May-17 Sep-17 Oct-17 Nov-17 Dec-17 Mar-18 Apr-18 Apr-18 May-18 Jun-18 Sep-18 Dec-18 Dec-18 Total Lifetime Revenue(1) $93,027 37,820 130,090 64,062 56,760 72,621 60,394 98,659 143,467 91,197 56,760 98,659 56,760 56,760 162,437 98,659 143,467 91,197 56,760 98,659 56,760 162,437 (2) Distribution Costs ($56,880) (28,821) (78,729) (42,208) (41,244) (58,450) (51,450) (80,010) (113,161) (81,663) (41,244) (80,010) (41,244) (41,244) (130,822) (80,010) (113,161) (81,663) (41,244) (80,010) (41,244) (130,822) Main Document Net Production Costs(3) 3,457 7,460 1,928 7,460 14,316 7,460 1,928 7,460 14,316 Note: Release schedule per management. (1) Includes first cycle revenues (theatrical, home entertainment, Pay TV, PPV, Free TV and other revenue) and library value. (2) Includes P&A, third-party distribution fees, participations, residuals, third-party shares and other costs. (3) Film budget net of equity, pre-sales, overages, foreign excess collateral and soft money; for completed films all net production costs incurred prior to exit. 5 15-11989-mew ($ in thousands) Cash to Balance Sheet(1) Cash Collateral Doc 1641 October 20, 2015 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 14 of 16 Pro-Forma Capitalization Table Non Cash Items ($) $10,204 $27,550 Cash In / (Cash Out) ($) Post Closing October 21, 2015 -- $10,204 $27,550 Non Cash Items ($) Main Document Interim Period Cash Flow (1,273) 10,100 Cash In / (Cash Out) ($) Post Emergence March 19, 2016 7,294 37,650 $16,225 $ -- Debt Holdco Debt Existing DIP Facility(2) $49,500 (14,500) -- $35,000 374,500 (125,000) -- 249,500 (189,500) -- -- 60,000 Subordinated Convertible Financing(4) Total Holdco Debt -$374,500 -(125,000) --- -$249,500 -(189,500) --- 35,000 35,000 35,000 $95,000 Elliott Subordinated Debt $138,900 -- $138,900 (138,900) -- -- $ -- Total Secured Facilities $562,900 -- $423,400 (328,400) -- -- $95,000 Term Loan A & B / BidCo Note(3) Asset Level Debt Term Loans Senior Secured Term Loan(5) Total Term Loans -(139,500) -- -- (35,000) $ -- -$ -- --- --- -$ -- --- --- 40,000 40,000 40,000 $40,000 Pre-Release P&A Facility Lazarus Effect Masterminds Before I Wake Kidnap Disappointments Room Total Pre-Release P&A Facility $1,300 29,539 22,024 15,508 19,250 $87,621 ------- ------- $1,300 29,539 22,024 15,508 19,250 $87,621 75 1,698 1,266 781 1,106 4,925 ------- ------- $1,375 31,236 23,289 16,289 20,356 $92,546 Post-Release P&A Facility Beyond the Lights Woman in Black 2 Lazarus Effect Total Post-Release P&A Facility $3,181 13,078 10,376 $26,634 ----- ----- $3,181 13,078 10,376 $26,634 837 247 597 1,681 --(4,948) (4,948) ----- $4,018 13,325 6,024 $23,367 $114,255 -- -- $114,255 6,606 (4,948) -- $115,913 Production Loans (6) Masterminds Disappointments Room Total Production Loans Total P&A Facilities $21,707 12,316 $34,023 ---- ---- $21,707 12,316 $34,023 ---- (5,659) (2,690) (8,349) ---- $16,048 9,626 $25,674 Vine/Verite Yuma Forbidden Kingdom Bank Job Total Vine/Verite Loans $37,226 32,769 9,775 $79,770 ----- $ ---$ -- ----- ----- ----- $ ---$ -- Ultimates Facility (CIT)(7) New Ultimates Facility $28,726 -- --- --- $28,726 -- --- 2,274 -- (31,000) -- -- -- $28,726 -- 2,274 (31,000) -- $177,004 6,606 (11,023) 9,000 Total Ultimates Facilities $28,726 Total Asset Level Debt $256,774 (37,226) (32,769) (9,775) (79,770) (79,770) $ --$ -$141,587 Vendor Debt & General Unsecured Deferred Transaction Fees and Cure Payments (8) Secured Guilds Claims $82,795 -9,650 ---- ---- $82,795 -9,650 (74,412) 26,787 -- ---- --(6,650) $8,383 26,787 3,000 Total Unsecured Debt $92,445 -- -- $92,445 (47,625) -- (6,650) $38,169 -- $692,849 (369,420) 2,350 $314,756 Total Debt $912,119 (219,270) (11,023) (1) Cash as of October 20, 2015 and Interim Period Cash Flow per RML management. Excludes cash collateral on account for CIT Ultimates and secured guilds claims. Also excludes cash for professional fees in segregated account. (2) At close, Elliott purchased the $49.5 million interim DIP in exchange for $35 million. The balance is expected to be repaid at emergence. (3) Ryan Kavanaugh and Joe Nicholas received Preferred Units with a $165 million liquidation preference in exchange for $30 million. (4) Lender is Relativity Secured Lender, LLC. (5) Expected to be refinanced by the Non-Recourse Ultimates Facility. (6) Opening and closing balances do not include accrued interest and professional fees during the case. (7) The existing CIT ultimates facility is to be repaid at or before emergence from cash collateral as of October 20, 2015, plus library cash flows received and retained as cash collateral on or before December 9, 2015. (8) Secured guilds claims of $9.65 million. The $6.65 million of secured residuals is assumed to be paid at or before emergence and the remaining $3.0 million of secured guilds claims is assumed to be paid in Q4 2016. 6 15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 15 of 16 Exhibit B Financial Projections Bridge Main Document 15-11989-mew Doc 1641 Filed 03/12/16 Entered 03/12/16 20:22:43 Pg 16 of 16 Main Document Sources and Uses Comparison Bridge ($ in thousands) Feb. 1 Hearing Updated Model Change Sources Senior Secured Term Loan Cash on Balance Sheet Equity Raise Vendor Advance Subordinated Convertible Financing / Convertible Preferred Total Sources $60,000 5,648 20,000 20,000 5,000 $110,648 $40,000 8,931 --35,000 $83,931 ($20,000) 3,283 (20,000) (20,000) 30,000 ($26,717) Uses Full Repayment of New DIP Facility Transaction Fees & Cure Payments Cash to Balance Sheet Post Release P&A Facility Total Uses $35,000 25,000 24,014 26,634 $110,648 $35,000 32,706 16,225 -$83,931 $ -7,706 (7,789) (26,634) ($26,717)