Document:

Exhibit 10.38

 

NON-BINDING TERM SHEET

 

Proprietary and Confidential

 

Information provided herein is considered “Confidential Information”. By receiving this term sheet (the “Term Sheet”) and any other information related to the contemplated Transaction (defined below), you agree to keep this information confidential and you shall not disclose the information to any third party, other than your representatives that will help you evaluate the Transaction, without the written consent of SFX Holding Corporation and Robert F.X. Sillerman (“Sillerman”), and you agree that you will safeguard the information with the same degree of care that you safeguard your own confidential information, but in any event with no less than reasonable care. You will not use the information in any manner (other than for purposes of evaluating whether to enter into the Transaction) without the prior written consent of Sillerman.

 

Terms and Conditions

 

	
THE   TRANSACTION:
    	
 
    	
SFX   Holding Corporation (“SFX”) shall enter into an agreement with I-Motion   (“I-Motion”) to acquire Sixty Percent (60%) of the equity interests and/or   the assets relating to I-Motion’s business (collectively the “Business”) for   a purchase price (the “Purchase Price”) of Twelve Million US Dollars (US   $12,000,000), to be paid as described below (such acquisition is herein the   “Transaction”).
    
	
 
    	
 
    	
 
    
	
PURCHASE   PRICE:
    	
 
    	
Upon   closing of the Transaction, the Purchase Price shall be satisfied through the   payment Eight Million US Dollars (US $8,000,000) in cash and Eight Hundred   Thousand (800,000) common shares of the public company.
    
	
 
    	
 
    	
 
    
	
ADDITIONAL   PURCHASE:
    	
 
    	
SFX   shall purchase the remaining 40% of I-Motion not purchased in the Transaction   after the end of the 2014 calendar year for an amount equal to forty percent   of five and one-half (5.5) times the average of 2013 and 2014. Payment for   such purchase would be made two thirds (2/3) in cash and one-third (1/3) in   shares of common stock in the public company at the then-current value of the   stock.
    
	
 
    	
 
    	
 
    
	
STRUCTURE:
    	
 
    	
The   parties shall consider such structure or alternative methods for the   Transaction to effect an optimal tax position to all parties.
    

 

 

	
CONDITIONS   TO EXECUTION OF A TRANSACTION AGREEMENT AND CONSUMMATION OF THE TRANSACTION:
    	
 
    	
The   following shall be satisfied during a due diligence period of thirty (30)   days after execution of this Tern Sheet while preparation of the definitive   Transaction Agreement is underway:

 

(a)                                 satisfactory   completion by SFX of a financial, legal and business due diligence   investigation of I-Motion, its directors, officers and shareholders, and the   assets, as applicable;

 

(b)                                 entry by Key   Employees (as defined in “Management”) into employment agreements on terms   mutually acceptable to SFX and the Key Employee(s);

 

(c)                                  confirmation   of good standing of I-Motion in the jurisdiction of formation and other   applicable governmental requirements;

 

(d)                                 satisfaction   of all liens, judgments and other encumbrances on I-Motion and its assets, as   applicable;

 

(e)                                  obtaining of   all requisite regulatory, administrative, or governmental authorizations and   third party consents, if any;

 

(f)                                   no material   adverse changes to I-Motion and its business and financial conditions,   subject to customary exceptions;

 

(g)                                  the   truthfulness and completeness of all covenants, representations and   warranties contained in the Transaction Agreement; and

 

(h)                                 approval of   the Board of Directors of SFX and approval of the Board of Directors and   Shareholders of I-Motion.

 

If   the Transaction proceeds to closing, the closing date shall be no later than thirty   (30) days after the execution of the Transaction Agreement, and provide it is   contingent on, among other standard items, delivery of good title to the   equity interests and/or assets; no material adverse change in the equity   interests and/or assets; updated representations and warranty of due   diligence materials, to the extent relevant; and delivery of such additional   documents or instruments as may be appropriate or required to consummate the   transaction as set forth in the Transaction Agreement.
    
	
 
    	
 
    	
 
    
	
FINANCIAL   STATEMENTS:
    	
 
    	
The   closing of any Transaction will be conditioned on receipt of audited   financial statements (satisfactory to SFX) for the calendar years 2010 and   2011 (depending on the closing date, we may also need audited financial   statements for 2012), as well as interim financial statements through the end   of the quarter immediately preceding the closing date and the comparable   quarter of the prior
    

 

 

	
 
    	
 
    	
year.   The financial statements shall comply with the requirements of the United   States Securities and Exchange Commission.
    
	
 
    	
 
    	
 
    
	
MANAGEMENT:
    	
 
    	
Such   employees as SFX and I-Motion shall agree are necessary to the business shall   each enter into an employment agreement with SFX, providing for him, her or   them to serve as employees of the I-Motion business on mutually acceptable   terms and conditions including a term of no less than five (5) years and   mutually acceptable salary and discretionary bonuses.
    
	
 
    	
 
    	
 
    
	
FINANCING:
    	
 
    	
There   shall be no contingency for financing.
    
	
 
    	
 
    	
 
    
	
PUBLIC   DISCLOSURE:
    	
 
    	
None   of the parties or their advisors shall disclose the terms and conditions of   this Term Sheet without the consent of each party, provided however that   either party shall be entitled to disclose the terms if required pursuant to   law or to comply with regulatory requirements deemed reasonably necessary by   the party. Each party agrees that the timing and content of any other public   disclosure of the Engagement shall not be made without the prior consent of   each party.
    
	
 
    	
 
    	
 
    
	
GOVERNING   LAW:
    	
 
    	
To   the extent not inconsistent with Federal Law, the exclusivity and   confidentiality provisions of this Term Sheet will be governed in all   respects, including validity, interpretation, and effect, by the laws of the   State of New York applicable to contracts made and to be performed wholly   within the State of New York by residents thereof. Any disputes hereunder   shall be resolved pursuant to binding arbitration in New York, New York under   the rules of ADR Services. The prevailing party shall be entitled to his or   its reasonable attorney’s fees and costs.
    
	
 
    	
 
    	
 
    
	
CONFIDENTIALITY:
    	
 
    	
Both   parties agree to treat the terms and conditions set forth in this Term Sheet   and any information conveyed to the other party in connection herewith   confidential and shall not disclose any of such confidential information to   any third parties (other than the party’s officers, directors, employees,   advisors, lenders, or potential financing sources, or members of SFX or   I-Motion who may need to know for the purpose of moving the Transaction   forward or as otherwise required to be in compliance with applicable law).
    
	
 
    	
 
    	
 
    
	
EXCLUSIVITY:
    	
 
    	
In   order to induce SFX to commit the resources and incur the legal, accounting   and incidental expenses necessary to properly evaluate the Transaction, I-Motion   agrees that until the earlier of (a) the end of the sixty (60) day period   beginning on the date of its execution of a counterpart of this Term Sheet,   or (b) such time as SFX and I-Motion mutually agree to discontinue   discussions of
    

 

 

	
 
    	
 
    	
the   Transaction (the “Exclusivity Period”), I-Motion will not, and will not   permit any of its directors, shareholders, affiliates, employees or other   .advisors or agents, to (1) solicit, initiate or encourage (including by way   of furnishing confidential information concerning I-Motion to any party) the   submission of inquiries, proposals or offers from any person, corporation or   other entity (other than SFX and its respective affiliates), relating to any   acquisition or purchase of all or a significant portion of the assets or   equity interests of I-Motion or any of its subsidiaries relating to the   Business, or any merger, business combination or joint venture involving   I-Motion or any of its subsidiaries (each, a “Competing Transaction”); (ii) enter   into, continue or otherwise participate in any discussions or negotiations   with, or furnish any information concerning its business to, any corporation,   person or other entity in connection with, a possible Competing Transaction;   and (iii) enter into (or commit to enter into) any agreement with respect to,   or consummate, a Competing Transaction. I-Motion agrees that it shall   immediately cease any existing discussions or negotiations with any party   (other than SFX or its affiliates) that relate to, or may reasonably be   expected to lead to, any Competing Transaction. I-Motion hereby agrees to   inform SFX in the event it receives any inquiries or offers for a Competing   Transaction during the Exclusivity Period immediately upon receipt of such an   inquiry or offer and provide the details of the inquiry or offer; provided,   however, that in no event shall SFX be required to provide the identity of   the party involved.
    
	
 
    	
 
    	
 
    
	
CONDITIONS:
    	
 
    	
The   negotiation and execution of definitive documents
    
	
 
    	
 
    	
 
    
	
TERMINATION:
    	
 
    	
Either   party may terminate this Term Sheet by delivering written notice thereof to   the other party; provided, that any such termination shall have no effect on   the Exclusivity or Confidentiality provisions.
    

 

Except for the Exclusivity and Confidentiality provisions of this Term Sheet, which shall be binding on the parties hereto, the other provisions of this term sheet are for discussion purposes only and neither party is bound to the terms set forth herein. The parties acknowledge that there is no agreement, arrangement, or understanding and this is a preliminary outline only, except for Exclusivity and Confidentiality.

 

Signatures on following page

 

 

ACKNOWLEDGED AND AGREED:

 

 

	
I-MOTION
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Nikolaus Schar
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
Nikolaus   Schar
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SFX HOLDING CORPORATION
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Robert F.X. Sillerman
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
Robert   F.X. Sillerman
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
PresidentExhibit 10.39

 

Execution Version

 

AMENDMENT NO. 1 AND CONSENT TO CREDIT AGREEMENT

 

This Amendment No. 1 and Consent to Credit Agreement, dated as of May 22, 2013 (this “Amendment”), is among SFX INTERMEDIATE HOLDCO II LLC, a Delaware limited liability company (the “Borrower”), the other Persons listed on the signature pages hereof, the Lenders party hereto (collectively, the “Lenders” and individually, a “Lender”) and BARCLAYS BANK PLC, as administrative agent and collateral agent (in such capacities, together with its successors and permitted assigns, the “Administrative Agent”) under the Credit Agreement (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, reference is made to the Credit Agreement, dated as of March 15, 2013 (as amended, restated, extended, supplemented, modified and otherwise in effect to the date hereof, the “Credit Agreement”), among, inter alios, the Borrower, Holdings (as defined in the Credit Agreement), each lender from time to time party thereto and the Administrative Agent;

 

WHEREAS, the Borrower has requested that the restricted payments covenant be amended to permit any Loan Party to make a payment to the Parent Company or any Affiliate thereof to enable such Person to make a payment of up to the Dollar equivalent of A$5,000,000 in connection with the acquisition (the “Stereosonic Acquisition”) pursuant to the Asset Contribution Agreement, dated as of May 15, 2013, by and among SFX Entertainment, INC., SFX-Totem Operating PTY LTD, and the Transferor Parties (as defined therein) (the “Stereosonic Acquisition Agreement”) of the Transferred Assets (as defined in the Stereosonic Acquisition Agreement); and

 

WHEREAS, subject to the terms and conditions set forth in this Amendment, the Lenders agree to permit such use of the proceeds of the Term Loans;

 

NOW THEREFORE, in consideration of the foregoing recitals, mutual agreements contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Administrative Agent and the Lenders hereby agree as follows:

 

Section 1.              Defined Terms.  All capitalized terms used but not defined in this Amendment shall have the respective meanings specified in the Credit Agreement.  The rules of interpretation set forth in Section 1.02 of the Credit Agreement shall apply to this Amendment, mutatis mutandis, as if set forth herein.  References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to “this Agreement” and “this Credit Agreement” (and indirect references such as “hereunder,” “hereby,” “herein,” and “hereof”) shall be deemed to be references to the Credit Agreement as amended by this Amendment.

 

Section 2.              Amendments to the Credit Agreement.  Subject to the satisfaction of the conditions set forth in Section 3 of this Amendment, the Credit Agreement (including all schedules and exhibits thereto) is hereby amended as follows:

 

(a)           The following definitions are hereby inserted in the appropriate alphabetical locations into Section 1.01:

 

(i)            “A$” or “Australian Dollars” means lawful money of the Commonwealth of Australia.

 

 

(ii)           “Amendment No. 1” means Amendment No. 1 to this Agreement dated as of May 22, 2013.

 

(iii)          “Amendment No. 1 Effective Date” means the date as of which Amendment No. 1 shall become effective pursuant to Section 3 thereof.

 

(iv)          “Stereosonic Acquisition” has the meaning assigned to such term in Amendment No. 1.

 

(v)           “Stereosonic Consideration” means the A$5,000,000 cash payment made to the sellers party to the Stereosonic Acquisition Agreement pursuant to the Stereosonic Acquisition Agreement.

 

(vi)          “Stereosonic Acquisition Agreement” has the meaning assigned to such term in Amendment No. 1.

 

(b)           Section 6.05(d) is hereby restated in its entirety to read as follows:

 

(d)           Restricted Payments (i) to the Parent Company on the Closing Date (x) to pay the Beatport Consideration, (y) to repay the Nightlife Note in an amount not to exceed $3,000,000 and (z) to pay any transactions costs in connection with the Beatport Acquisition, the IDT Joint Venture Transaction and the Nightlife Acquisition, and (ii) to the Parent Company or any Affiliate thereof on the Amendment No. 1 Effective Date to pay the Stereosonic Consideration.

 

Section 3.              Consent.  Pursuant to Section 9.02(b) of the Credit Agreement, the Lenders hereby consent to the payment of the Stereosonic Consideration.

 

Section 4.              Conditions to Effectiveness.  This Amendment shall become effective on the date on which each of the following conditions is satisfied (the “Amendment No. 1 Effective Date”):

 

(a)           Executed Amendment No. 1 to Credit Agreement.  The Administrative Agent shall have received one or more counterparts of this Amendment duly executed by the Loan Parties, the Administrative Agent and the Lenders.

 

(b)           Fees and Expenses.  The Borrower shall have paid all fees, costs and expenses (including reasonable and documented out-of-pocket legal fees and expenses) agreed in writing to be paid by it to the Arrangers, Agents and/or the Lenders in connection herewith to the extent due (and, in the case of expenses (including reasonable and documented out-of-pocket legal fees and expenses), to the extent that statements for such expenses shall have been delivered to the Borrower not less than one Business Day prior to the Amendment No. 1 Effective Date).

 

(c)           Representations and Warranties; No Default.  each of the representations and warranties in Section 5 hereof shall be true and correct in all respects on and as of this date as if made on and as of this date.

 

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Section 5.              Representations and Warranties.  To induce the Administrative Agent and the Lenders to enter into this Amendment, each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders that:

 

(a)           the execution, delivery and performance of this Amendment has been duly authorized by all requisite corporate action on the part of the Loan Parties; this Amendment has been duly executed and delivered by the Loan Parties; and this Amendment constitutes a valid and binding agreement of the Loan Parties, enforceable against the Loan Parties in accordance with its terms, except (i) as such enforceability thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) that rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability (regardless of whether enforcement is sought by proceedings in equity or at law);

 

(b)           no Default or Event of Default exists or would result from giving effect to this Amendment and the consummation of the transactions contemplated hereby; and

 

(c)           the representations and warranties of the Group Members as set forth in this Amendment and in any other Loan Document to which a Loan Party is a party are true and correct in all material respects on and as of this date as if made on and as of this date except to the extent that such representations and warranties relate to an earlier date, in which case such representations and warranties are true and correct in all material respects as of such earlier date; provided, that any representation and warranty that is qualified as to “materiality”, “Material Adverse Effect” or similar language is true and correct in all respects. No Default or Event of Default has occurred and is continuing or would result from the payment of the Stereosonic Consideration as of the Amendment No. 1 Effective Date.

 

Section 6.              Miscellaneous.

 

(a)           Confirmation of Loan Documents.  Except as expressly provided in this Amendment, each of the Loan Parties hereby ratifies and confirms all of the terms and conditions of the Credit Agreement, the Security Documents and the other Loan Documents to which it is a party and all documents, instruments and agreements related thereto, which remain in full force and effect.  The Borrower hereby reconfirms its obligations pursuant to the Credit Agreement to pay and reimburse the Administrative Agent and the Lenders for all costs and expenses (including without limitation, the fees and expenses of its counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment to the extent required by Section 9.03 of the Credit Agreement.  The Credit Agreement, together with this Amendment, shall be read and construed as a single agreement.  All references in the Loan Documents to the Credit Agreement or any other Loan Document shall hereafter refer to the Credit Agreement or any other Loan Document as amended hereby.  This Amendment shall constitute a Loan Document.

 

(b)           Limitation of this Amendment.  The amendments set forth herein are effective solely for the purposes set forth herein and shall be limited precisely as written.  Except as expressly provided herein, this Amendment shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Credit Agreement or any other Loan Document, or (ii) operate as a waiver or otherwise prejudice any right, power or remedy that the Administrative Agent or Lenders may now have or may have in the future under or in connection with the Credit Agreement or any other Loan Document, except as specifically set forth herein.  Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “herein”, “hereof” and words of like import and each reference in the Credit Agreement and the Loan Documents to the Credit Agreement shall mean the Credit Agreement as amended hereby.  This Amendment shall be construed in connection with and as part of the Credit Agreement.

 

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(c)           Captions.  Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.

 

(d)           Governing Law.  This Amendment and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Amendment and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the Law of the State of New York.

 

(e)           Counterparts.  This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment.  Receipt by facsimile or electronic transmission of any executed signature page to this Amendment shall constitute effective delivery of such signature page.

 

(f)            Successors and Assigns.  This Amendment shall be binding upon and shall inure to the sole benefit of the Loan Parties, Administrative Agent and Lenders and their respective successors and assigns.

 

(g)           References.  Any reference to the Credit Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Amendment shall be deemed to include this Amendment unless the context shall otherwise require.

 

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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered as of the date first above written.

 

 

	
 
    	
BARCLAYS   BANK PLC, as Administrative Agent and as a Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Craig J. Malloy
    
	
 
    	
 
    	
Name:   Craig J. Malloy
    
	
 
    	
 
    	
Title:   Director
    

 

(Signature Page to Amendment No. 1 and Consent)

 

 

	
 
    	
UBS   LOAN FINANCE LLC, as a Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Lana Gifas
    
	
 
    	
 
    	
Name:   Lana Gifas
    
	
 
    	
 
    	
Title:   Director
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Joselin Fernandes
    
	
 
    	
 
    	
Name:   Joselin Fernandes
    
	
 
    	
 
    	
Title:   Associate Director
    

 

(Signature Page to Amendment No. 1 and Consent)

 

 

	
 
    	
JEFFERIES   GROUP LLC, as a Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   John Stacconi
    
	
 
    	
 
    	
Name:   John Stacconi
    
	
 
    	
 
    	
Title:   Global Measurer
    

 

(Signature Page to Amendment No. 1 and Consent)

 

 

	
Accepted   and Agreed:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SFX   INTERMEDIATE HOLDCO II LLC,
    	
 
    
	
SFX   INTERMEDIATE HOLDCO I LLC,
    	
 
    
	
PITA   I LLC
    	
 
    
	
SFX-LIC   OPERATING LLC
    	
 
    
	
SFX-NIGHTLIFE   OPERATING LLC
    	
 
    
	
SFX-IDT   N.A. HOLDING LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Sheldon Finkel
    	
 
    
	
Name:   Sheldon Finkel
    	
 
    
	
Title:   President
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
BEATPORT,   LLC
    	
 
    
	
BEATPORT   JAPAN, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Sheldon Finkel
    	
 
    
	
Name:   Sheldon Finkel
    	
 
    
	
Title:   President
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
ID&T/SFX   NORTH AMERICA LLC
    	
 
    
	
ID&T/SFX   Q-DANCE LLC
    	
 
    
	
ID&T/SFX   SENSATION LLC
    	
 
    
	
ID&T/SFX   MYSTERYLAND LLC
    	
 
    
	
ID&T/SFX   TOMORROWWORLD LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Sheldon Finkel
    	
 
    
	
Name:   Sheldon Finkel
    	
 
    
	
Title:   Co-Chief Executive Officer
    	
 
    

 

(Signature Page to Amendment No. 1 and Consent)

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