Document:

Exhibit 10.1

 

	
 
    	
Execution Version
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
June 14, 2015
    	
 
    

 

Niska Gas Storage Partners LLC

400, 607-8th Avenue SW

Calgary, AB. Canada

Attention:  General Counsel

 

Re:  Commitment Letter

 

Ladies and Gentlemen:

 

You (the “Borrower”) have requested that BIF II Swan Finance Co. (Delaware) LLC (the “Lender”) commit to provide a senior multiple draw term loan credit facility in an aggregate amount of $50,000,000 (the “Facility”) upon the terms and subject to the conditions set forth in this commitment letter (the “Commitment Letter”) and in the Term Sheet attached hereto (the “Term Sheet”).  The Lender is pleased to advise you of its commitment to provide the entire amount of the Facility.  In addition, the Lender reserves the right to allocate its commitment among its affiliates and assign some or all of its rights to and delegate some or all of its responsibilities hereunder to one of its affiliates.

 

The Lender’s commitment hereunder, and its obligation to make the loans under the Facility, is subject to (a) the execution and delivery by all parties thereto of the Agreement and Plan of Merger and Membership Interest Transfer Agreement (the “Merger Agreement”), by and among the Borrower, Niska Gas Storage Management LLC, Niska Sponsor Holdings Cooperatief U.A., Swan Holdings LP and Swan Merger Sub LLC; (b) there not having occurred any uncured breach by any Company Entity (as defined in the Merger Agreement) or by Swan Sponsor (as defined in the Merger Agreement) of any of their respective obligations under the Merger Agreement which has resulted in a termination of the Merger Agreement (a “Merger Agreement Default”); (c) the occurrence after the date hereof  or the existence of any facts or circumstances that, in the reasonable good faith determination of both Lender and you, would (whether with the giving of notice, lapse of time or otherwise) result in the occurrence of a Merger Agreement Default; (d) the negotiation, execution and delivery on or before 60 days after the date of this Commitment Letter (or such later date as the Lender shall agree in writing) of definitive documentation with respect to the Facility satisfactory to the Lender acting reasonably and in good faith; and (e) your compliance with the terms of this Commitment Letter; and (f) the other conditions set forth in the Term Sheet.  The terms (but not the conditions) of the Lender’s commitment hereunder and of the Facility are not limited to those set forth herein and in the Term Sheet.  Those matters that are not covered by the provisions hereof and of the Term Sheet are subject to the approval and agreement of the Lender and the Borrower acting reasonably.

 

You agree (a) to indemnify and hold harmless the Lender and its affiliates and their respective officers, directors, employees, advisors, and agents (each, an “indemnified person”) from and against any and all losses, claims, damages and liabilities to which any such indemnified person may become subject arising out of or in connection with any claim, litigation, investigation or proceeding (each, a “Proceeding”) arising out of or relating to this Commitment Letter, the Facility, or the use of the proceeds thereof, regardless of whether any indemnified person is a party thereto or whether such Proceedings are brought by you, your equity holders, affiliates, creditors or any other person, and to reimburse each indemnified person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified person, apply to losses, claims, damages, liabilities or related expenses to the extent they are found by a final, non-appealable judgment of a court of competent jurisdiction, to arise or result from the willful misconduct or gross negligence of, such indemnified person (or its officers, directors or employees) and (b) to reimburse the Lender and its affiliates on demand for all reasonable out-of-pocket

 

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expenses (including reasonable fees, charges and disbursements of counsel) incurred in connection with the Facility and any related documentation (including this Commitment Letter, the Term Sheet and the definitive financing documentation) or the administration, amendment, modification or waiver thereof.  You also agree that no indemnified person shall have any liability to you for any special, indirect, consequential or punitive damages in connection with the Commitment Letter, the Term Sheet and the Facility.  No indemnified person shall be liable for any damages arising from the use by others of information that has been or will be made available to the Lender by you or any of your representatives or other materials obtained through electronic, telecommunications or other information transmission systems or for any special, indirect, consequential or punitive damages in connection with the Facility or in connection with its activities related to the Facility.

 

You shall not be liable for any settlement of any Proceedings if the amount of such settlement was effected without your consent (which consent shall not be unreasonably withheld), but if settled with your written consent or if there is a final judgment for the plaintiff in any such Proceedings, you agree to indemnify and hold harmless each indemnified person from and against any and all losses, claims, damages, liabilities and expenses by reason of such settlement or judgment in accordance with the preceding paragraph.  You shall not, without the prior written consent of an indemnified person (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened Proceedings in respect of which indemnity could have been sought hereunder by such indemnified person unless (a) such settlement includes an unconditional release of such indemnified person in form and substance reasonably satisfactory to such indemnified person from all liability on claims that are the subject matter of such Proceedings and (b) does not include any statement as to, or any admission of, fault, culpability or a failure to act by or on behalf of any indemnified person or any injunctive relief or other non-monetary remedy.

 

You acknowledge that the Lender is not as a financial advisor or a fiduciary to, or an agent of, the Borrower or any other person.  Additionally, you hereby acknowledge and agree that the Lender is not advising the Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction.  The Borrower shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby (the “Transactions”), and the Lender shall have no responsibility or liability to the Borrower with respect thereto.  Any review by the Lender of the Borrower, the Transactions or other matters relating to the Transactions will be performed solely for the benefit of the Lender and shall not be on behalf of the Borrower.

 

You further acknowledge that the Lender and any of its affiliates may be providing debt financing, equity capital or other services to other companies in respect of which you may have conflicting interests.  Neither the Lender nor any of its affiliates will use confidential information obtained from you by virtue of the Transactions or their other relationships with you in connection with the performance by the Lender or any of its affiliates of services for other companies.  You also acknowledge that the Lender and its affiliates have no obligation to use in connection with the Transactions or to furnish to you confidential information obtained from other companies.

 

This Commitment Letter shall not be assignable by you without the prior written consent of the Lender (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto.  This Commitment Letter may not be amended or waived except by an instrument in writing signed by you and the Lender.  This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement.  Delivery of an executed signature page of this Commitment Letter by facsimile or email transmission shall be effective as delivery of a manually executed counterpart hereof.  This Commitment Letter and the Term Sheet set forth the entire understanding of the parties with respect thereto.  This Commitment Letter shall be governed by, and

 

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construed in accordance with, the laws of the State of New York.  You hereby consent to the exclusive jurisdiction and venue of the state or federal courts located in the City of New York.  EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (A) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING BROUGHT BY OR ON BEHALF OF ANY PARTY ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER, THE TERM SHEET OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) AND (B) ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LEGAL PROCEEDING IN THE STATE OR FEDERAL COURTS LOCATED IN THE CITY OF NEW YORK.

 

The reimbursement and indemnification provisions contained herein and in the Term Sheet shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the Lender’s commitment hereunder; provided that your obligations under this Commitment Letter shall automatically terminate and be superseded by the provisions of the definitive financing documentation covering the same subject matter, if and when executed.

 

If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheet by returning to us an executed counterpart hereof.  This Commitment Letter and Term Sheet supersede any and all prior versions hereof and thereof.

 

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The Lender is pleased to have been given the opportunity to assist you in connection with this important financing.

 

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
BIF II SWAN FINANCE CO. (DELAWARE) LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Darren Soice
    
	
 
    	
 
    	
Name:
    	
Darren   Soice
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President
    
	
 
    	
 
    	
 
    
	
Accepted   and agreed to as of
    	
 
    	
 
    
	
the   date first written above by:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
NISKA   GAS STORAGE PARTNERS LLC
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   William H. Shea, Jr.
    	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
William   H. Shea, Jr.
    	
 
    	
 
    
	
 
    	
Title:
    	
President   and Chief Executive Officer
    	
 
    	
 
    
							

 

- Signature Page to Commitment Letter -

 

 

TERM SHEET

 

June 14, 2015

 

This Term Sheet is delivered with a commitment letter of even date herewith (the “Commitment Letter”) from BIF II Swan Finance Co. (Delaware) LLC to the Borrower in connection with the multiple advance term loan facility described below and is subject to all of the terms and provisions of the Commitment Letter.  Capitalized terms used herein and not otherwise defined herein will have the meanings attributed to such terms in the Commitment Letter.

 

	
Borrower:
    	
 
    	
Niska Gas Storage Partners LLC
    
	
 
    	
 
    	
 
    
	
Lender:
    	
 
    	
BIF II Swan Finance Co.   (Delaware) LLC
    
	
 
    	
 
    	
 
    
	
Facility   Type; Use of Proceeds:
    	
 
    	
Term loans available in   multiple draws (the “Loans”), in minimum amounts and subject to   procedures to be negotiated, governed by a new definitive written loan   agreement (the “New Term Loan Agreement”).  Proceeds of Loans to be used for working capital   purposes. 
    
	
 
    	
 
    	
 
    
	
Guarantors:
    	
 
    	
All entities that are   now or hereafter become guarantors under the Amended and Restated Credit   Agreement dated as of June 29, 2012 (the “Credit Agreement”),   among the Borrower, certain subsidiaries thereof, Royal Bank of Canada as   Administrative Agent, and the other lenders party thereto. In addition, Niska   Sponsor Holdings Cooperatief (“Riverstone”) will guarantee repayment   of the Loans until the Guarantee Termination Date (as defined below) on terms   reasonably satisfactory to the Lender.    
    
	
 
    	
 
    	
 
    
	
Guarantee   Termination:
    	
 
    	
Riverstone’s guarantee   of the Loans will terminate (and the Lender will release such guarantee) upon   the earlier to occur of (i) the acquisition of the business of the   Borrower and its subsidiaries pursuant to the Merger Agreement and   (ii) the effectiveness of an amendment, restatement, refinancing or   other modification of the Credit Agreement that permits the Borrower and   certain of its subsidiaries to provide security over its assets to the Lender   as described below (such earlier date, the “Guarantee Termination Date”).  The Lender agrees to act reasonably   (i) in determining whether such amendment, restatement, refinancing or   other modification of the Credit Agreement is satisfactory in form and   substance to Lender, and (ii) in negotiating the corresponding release   of Riverstone’s guarantee.
    
	
 
    	
 
    	
 
    
	
Collateral:
    	
 
    	
Riverstone’s   obligations under its guarantee of the Loans would be secured by a first   priority perfected security interest in all of the equity interests in   Borrower owned by Riverstone.  Borrower   will use commercially reasonable efforts to seek an amendment to the Credit   Agreement, beginning as soon as possible after execution of the Commitment   Letter, and will facilitate Lender’s participation in the negotiation of such   amendment, to permit the grant of liens on collateral as contemplated herein.   The collateral to be pledged by the Borrower and its subsidiaries will be   substantially similar to the collateral currently pledged pursuant to the Credit   Agreement. The secured parties under the Credit Agreement will retain a first   priority lien on all accounts receivable,
    

 

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inventory and related   assets, including any assets comprising the “borrowing base” thereunder   (other than fixed assets which currently comprise the “borrowing base”)   (collectively, the “Current Assets”), and will have a second priority   lien on all other collateral (the “Fixed Assets”), in each case,   subject to permitted liens. The Lender will be granted a second priority lien   on the Current Assets and a first priority lien on the Fixed Assets, in each   case, subject to customary permitted liens to be negotiated. The relative   priorities of the liens securing the Credit Agreement and the New Term Loan   Agreement will be set forth in an intercreditor agreement reasonably   satisfactory to the Borrower, the administrative agent under the Credit   Agreement, and the Lender.
    
	
 
    	
 
    	
 
    
	
Principal   Amount
    	
 
    	
$50 million
    
	
 
    	
 
    	
 
    
	
Maturity:
    	
 
    	
Earlier of (a) the   date that is 18 months after the date of execution of the New Term Loan   Agreement by the Borrower, the Lender and the Guarantors, and (b) the   Trigger Date (as hereinafter defined).    “Trigger Date”  means the   first to occur of (i) the acceleration of the Loans during the   continuance of an Event of Default, (ii) the date on which the Merger   Agreement is terminated in accordance with its terms, (iii) the date   that is 90 days after the date on which the Lender provides written notice to   Borrwer of the Lender’s determination, made reasonably and in good faith,   that the acquisition of the business of Borrower and its subsidiaries cannot   or will not be consummated for any reason, including without limitation   regulatory matters or legal bars, and (iv) any uncured breach of any   other agreement between the Borrower or Riverstone, on the one hand, and  Lender or any affiliate thereof, on the   other hand, which breach results in termination of such agreement.
    
	
 
    	
 
    	
 
    
	
Interest   Rate:
    	
 
    	
10.0% per annum.  Interest will be paid, at the Borrower’s   option, either quarterly in arrears or by addition to the principal amount   (and thus deferred) until maturity of the Loans.
    
	
 
    	
 
    	
 
    
	
Prepayment:
    	
 
    	
The Borrower will be permitted (but not required, except upon   acceleration) to prepay all or a portion of the Loans at any time, without   premium or penalty, provided that once prepaid, a Loan may not be reborrowed.
    
	
 
    	
 
    	
 
    
	
Representations   and Warranties: 
    	
 
    	
The New Term Loan Agreement will contain representations and   warranties substantially consistent with the Credit Agreement (excluding any   representations and warranties solely due to the asset-based nature of the   Credit Agreement), including with respect to financial statements; no   material adverse change; existence and standing; authorization and validity;   compliance with law, including, without limitation, anti-corruption laws   relating to bribery or corruption (“Anti-Corruption Laws”) and   economic or financial sanctions or trade embargoes imposed, administered or   enforced from time to time by the U.S. government, including those   administered by the Office of Foreign Assets Control of the U.S. Department   of the Treasury or the U.S. Department of State (“Sanctions”);   corporate power and authority; enforceability of the loan documents; no   conflict with law or contractual obligations; no material litigation; no   default; ownership of property; liens; intellectual property;
    

 

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taxes; insurance; subsidiaries; environmental matters; labor   matters; and accuracy of disclosure. 
    
	
 
    	
 
    	
 
    
	
Affirmative   Covenants:
    	
 
    	
Affirmative covenants substantially consistent with the Credit   Agreement (excluding any affirmative covenants solely due to the asset-based   nature of the Credit Agreement), including, without limiting the generality   of the foregoing, covenants with respect to delivery of financial statements,   compliance certificates and   projections; delivery of other information requested by the Lender;   payment of obligations; continuation of business and maintenance of existence   and material rights and privileges; compliance with laws; compliance with   Anti-Corruption Laws and applicable Sanctions; maintenance of property and   insurance; maintenance of books and records; right of the Lender to inspect   property and books and records; notices of defaults, litigation and other   material events; compliance with environmental laws; entry into necessary   intercreditor agreements (with lenders under the Credit Agreement)   satisfactory in all respects to the Lender, related to the collateral to be   obtained; execution of security agreements and other lien instruments   reflecting such collateral, and containing substantially the same terms and   provisions pertaining to collateral as those set forth in the Credit   Agreement and related lien instruments; and use of proceeds, including in   compliance with Anti-Corruption Laws and Sanctions.
    
	
 
    	
 
    	
 
    
	
Negative   Covenants:
    	
 
    	
Negative covenants substantially consistent with the Credit   Agreement (excluding any negative covenants solely due to the asset-based   nature of the Credit Agreement), including, without limiting the generality   of the foregoing, limitations on debt; liens; mergers, acquisitions and   dissolutions; asset dispositions; payments of dividends and other payments in   respect of equity interests; investments; limitation on payment of   subordinated debt; transactions with affiliates; prepayments of indebtedness   for borrowed money other than as permitted under the Merger Agreement;   limitations on restrictions on payments and pledges; and amendment of   material documents.
    
	
 
    	
 
    	
 
    
	
Events   of Default
    	
 
    	
The New Term Loan Agreement will include events of default   substantially consistent with the Credit Agreement (excluding any events of   default solely due to the asset-based nature of the Credit Agreement),   including, without limiting the generality of the foregoing, (a) cross   defaults to (i) the Credit Agreement and (ii) the Indenture dated   March 17, 2014, by Borrower, certain subsidiaries thereof as “issuers”   of the 6.5% Senior Notes due 2019 and The Bank of New York Mellon as   indenture trustee, in   each case in the form existing on the closing date; (b) nonpayment of   principal, interest, fees or other amounts when due (subject to grace periods   consistent with the Credit Agreement); (c) representations and   warranties are incorrect in any material respect; (d) bankruptcy events;   (e) material judgments; (f) any of the Loan Documents, including   Riverstone’s guarantee, shall cease to be in full force and effect of any   party thereto shall so assert (except, with respect to the guarantee of   Riverstone, as expressly contemplated herein); (g) any security   interests granted to the Lender shall cease to be enforceable and of the same   priority purported to be created by the Loan Documents; and (h) a change   of control (the definition of which is to be agreed but in any event to   permit
    

 

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the transactions contemplated by the Merger Agreement).
    
	
 
    	
 
    	
 
    
	
Initial   Conditions Precedent
    	
 
    	
The availability of the term loan facility will be conditioned upon   satisfaction of, among other things, the following conditions precedent (the   date upon which all such conditions precedent will be satisfied, the “Closing   Date”):

 

(a)           The Borrower will   have executed and delivered the New Term Loan Agreement and Riverstone will   have executed and delivered a guarantee in accordance with the above   (together with the New Term Loan Agreement, the “Loan Documents”)   mutually satisfactory to the Borrower and the Lender and reflecting the terms   and conditions set forth herein.

 

(b)           The Borrower will   have reimbursed the Lender for all reasonable, out of pocket expenses in   connection with the New Term Loan Agreement (excluding, for the avoidance of   doubt, any expenses in connection with the Merger Agreement) for which   invoices have been presented on or before the Closing Date.

 

(c)           The transactions   contemplated by the New Term Loan Agreement do not result in the violation of   applicable law by any party to the New Term Loan Agreement.

 

(d)           The Lender will   have received from the Borrower resolutions, good standing certificates,   incumbency certificates, a solvency certificate from the chief financial   officer, opinions of counsel, organizational documents, and other customary   documents and agreements substantially consistent with those required under   the Credit Agreement at the closing thereof (other than instruments to create   liens, which will not be required until the Credit Agreement is amended to   permit same, as contemplated herein) all in form and substance reasonably   acceptable to the Lender.
    
	
 
    	
 
    	
 
    
	
Ongoing   Conditions Precedent
    	
 
    	
The making of each Loan   will be conditioned upon (a) the accuracy and correctness of all representations   and warranties in the Loan Documents; (b) there being no default or   event of default under the New Term Loan Agreement in existence at the time   of, or after giving effect to the making of, such extension of credit;   (c) the absence of any determination by Lender, made reasonably and in   good faith, that the acquisition of the business of Borrower and its   subsidiaries cannot or will not be consummated for any reason, including   without limitation regulatory matters or legal bars and (d) the Borrower   will have delivered a borrowing request to the Lender describing the   requested Loan and otherwise in form and substance satisfactory to the   Lender.
    
	
 
    	
 
    	
 
    
	
Reimbursement   of Expenses and Indemnification
    	
 
    	
The Borrower will pay   (a) all reasonable, out-of-pocket expenses of the Lender associated with   the preparation, execution, delivery and administration of the Loan Documents   and any amendment or waiver with respect thereto (including the reasonable fees,   disbursements and other charges of counsels as required by Lender) and   (b) all expenses of the Lender (including the fees, disbursements and   other charges of counsel) in connection with the enforcement of the Loan   Documents, in each case, excluding, for the avoidance of doubt, any expenses in connection   with the
    

 

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Merger Agreement.  The   Lender (and its affiliates and their respective officers, directors,   employees, advisors and agents) will have no liability for, and will be   indemnified and held harmless against, any loss, liability, cost or expense   incurred in respect of any claim, litigation, investigation or proceeding   relating to the financing contemplated hereby or the use of proceeds thereof   (except to the extent found in a final judgment by a court of competent   jurisdiction to have resulted from the gross negligence or willful misconduct   of the indemnified party (or its officers, directors or employees)).
    
	
 
    	
 
    	
 
    
	
Other   Terms
    	
 
    	
The New Term Loan   Agreement will contain provisions relating to tax matters, changes in law,   assignments and participations, and other matters customarily found in credit   agreements such as the Credit Agreement. 
    
	
 
    	
 
    	
 
    
	
Governing   Law:
    	
 
    	
New York
    
	
 
    	
 
    	
 
    
	
Process:
    	
 
    	
Lender will prepare   initial drafts of all loan documentation based on the Credit Agreement (and   related loan documents).  Loan   documents will be governed by New York law.    The Lender’s legal fees for loan document preparation and otherwise   incurred in connection with the loan facility will be paid or reimbursed by   the Borrower upon execution of the New Term Loan Agreement (excluding, for the avoidance of   doubt, any legal fees in connection with the Merger Agreement). 
    

 

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5Exhibit 10.1

 

SFX ENTERTAINMENT, INC.

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (“Agreement”) is made as of June 17, 2015 (the “Effective Date”), by and among SFX Entertainment, Inc., a Delaware corporation (the “Company”), and each of those persons and entities, severally and not jointly, listed as a Purchaser on the Schedule of Purchasers attached as Exhibit A hereto (the “Schedule of Purchasers”).  Such persons and entities are hereinafter collectively referred to herein as “Purchasers” and each individually as a “Purchaser”.

 

AGREEMENT

 

In consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and each Purchaser (severally and not jointly) hereby agree as follows:

 

SECTION 1.        AUTHORIZATION OF SALE OF SHARES.

 

The Company has authorized the sale and issuance of 3,342,555 shares of its Common Stock, par value $0.001 per share (the “Common Stock”), on the terms and subject to the conditions set forth in this Agreement.  The shares of Common Stock sold hereunder at the Closing (as defined below) shall be referred to as the “Shares.”

 

SECTION 2.        AGREEMENT TO SELL AND PURCHASE THE SHARES.

 

2.1         Sale of Shares.  At the Closing (as defined in Section 3), the Company will sell to each Purchaser, and each Purchaser will purchase from the Company the number of Shares set forth opposite such Purchaser’s name on the Schedule of Purchasers.  The aggregate purchase price for the Shares purchased by each Purchaser is set forth opposite such Purchaser’s name on the Schedule of Purchasers.

 

2.2         Separate Agreement.  Each Purchaser shall severally, and not jointly, be liable for only the purchase of the Shares that appear on the Schedule of Purchasers that relate to such Purchaser.  The Company’s agreement with each of the Purchasers is a separate agreement, and the sale of Shares to each of the Purchasers is a separate sale.  The obligations of each Purchaser hereunder are expressly not conditioned on the purchase by any or all of the other Purchasers of the Shares such other Purchasers have agreed to purchase.

 

SECTION 3.        CLOSING AND DELIVERY.

 

3.1         Closing.  The closing (the “Closing”) of the purchase and sale of the Shares (which Shares are set forth in the Schedule of Purchasers) pursuant to this Agreement shall be held on June 18, 2015 at the offices of the Company, 902 Broadway, 15th Floor, New York, New York 10010, or on such other date and place as may be agreed to by the Company and the Purchasers.  At or prior to the Closing, each Purchaser shall execute any related agreements or other documents required to be executed hereunder, dated as of the date of the Closing (the “Closing Date”).

 

 

3.2         Issuance of the Shares at the Closing.  Within three (3) business days following the Closing, the Company shall issue to each Purchaser stock certificates registered in the name of such Purchaser, or in such nominee name(s) as designated by such Purchaser, representing the number of Shares to be purchased by such Purchaser at the Closing as set forth in the Schedule of Purchasers against payment of the purchase price for such Shares.  The name(s) in which the stock certificates are to be issued to each Purchaser are set forth on the signature pages hereto.

 

3.3         Delivery of the Documents at Closing.  At the Closing, each Purchaser and Robert F.X. Sillerman shall execute that certain side letter agreement providing for Mr. Sillerman’s purchase of the Shares under certain conditions (the “Side Letter”) from such Purchaser.  At the Closing, the Company shall deliver such other documents relating to the transactions contemplated by this Agreement as such Purchaser may reasonably request.

 

SECTION 4.        REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

Except as set forth on the Schedule of Exceptions delivered to the Purchasers concurrently with the execution of this Agreement (the “Schedule of Exceptions”), the Company hereby represents and warrants as of the date hereof to, and covenants with, the Purchasers as follows:

 

4.1         Organization and Standing.  The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Delaware, has full corporate power and authority to own or lease its properties and conduct its business as presently conducted, and is duly qualified as a foreign corporation and in good standing in (i) the State of New York, and (ii) all other jurisdictions in which the character of the property owned or leased or the nature of the business transacted by it makes qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the business, properties, financial condition or results or operations of the Company (a “Company Material Adverse Effect”).

 

4.2         Corporate Power; Authorization.  The Company has all requisite corporate power, and has taken all requisite corporate action, to execute and deliver this Agreement (as defined below and collectively, the “Transaction Documents”), sell and issue the Shares and carry out and perform all of its obligations under the Transaction Documents.  Each Transaction Document constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, and (ii) as limited by equitable principles generally, including any specific performance.  The execution and delivery of the Transaction Documents do not, and the performance of the Transaction Documents and the compliance with the provisions of the Transaction Documents and the issuance, sale and delivery of the Shares by the Company will not conflict with, or result in a breach or violation of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien pursuant to the terms of, the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), the Company’s Second Amended and Restated Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), or any statute, law or rule (including

 

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federal and state securities laws and the rules and regulations of the NASDAQ Global Select Market (the “Principal Market”)) applicable to the Company or regulation or any state or federal order, judgment or decree applicable to the Company or any indenture, mortgage, lease or other material agreement or instrument to which the Company is a party or any of its properties is subject.  The Certificate of Incorporation and Bylaws are filed with the Commission and included in the SEC Documents.

 

4.3         Issuance and Delivery of the Shares.  The Shares have been duly authorized and, when issued and paid for in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable.  The issuance and delivery of the Shares is not subject to preemptive, co-sale, right of first refusal or any other similar rights of the stockholders of the Company or any liens or encumbrances.  Assuming the accuracy of the representations made by each Purchaser in Section 5, the offer and issuance by the Company of the Shares is exempt from registration under the Securities Act.

 

4.4         SEC Documents; Financial Statements.  The Company has filed in a timely manner all documents that the Company was required to file with the Securities and Exchange Commission (the “Commission”) under Sections 13, 14(a) and 15(d) the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since becoming subject to the requirements of the Exchange Act.  As of their respective filing dates (or, if amended prior to the date of this Agreement, when amended), all documents filed by the Company with the Commission (the “SEC Documents”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder.  None of the SEC Documents as of their respective dates contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Documents (the “Financial Statements”) comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto.  The Financial Statements have been prepared in accordance with United States generally accepted accounting principles consistently applied and fairly present the financial position of the Company at the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring adjustments).  Except as disclosed in the SEC Documents, since December 31, 2014, the Company has not altered materially its method of accounting or the manner in which it keeps its accounting books and records.  Except as disclosed in the SEC Documents, the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock (other than in connection with repurchases of unvested stock issued to employees of the Company).  The Company has not issued any equity securities to any officer, director or affiliate, except (a) Common Stock issued pursuant to existing Company stock option or stock purchase plans or executive and director corporate arrangements disclosed in the SEC Documents, (b) Common Stock issued pursuant to other existing agreements disclosed in the SEC Documents or (c) otherwise as disclosed in the SEC Documents.  The Company has no liabilities or obligations required to be disclosed in the SEC Documents that are not so disclosed in the SEC Documents, which, individually or in the aggregate, would have or reasonably be expected to have a Material Adverse Effect.

 

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4.5         Capitalization.  All of the Company’s outstanding shares of capital stock have been duly authorized and validly issued and are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and were not issued in violation of or subject to any preemptive right or other rights to subscribe for or purchase securities.  The authorized capital stock of the Company consists of 300,000,000 shares of common stock and 100,000,000 shares of undesignated Preferred Stock.  As of the Effective Date, there are no shares of Preferred Stock issued and outstanding and there are 94,275,503 shares of Common Stock issued and outstanding, of which no shares are owned by the Company.  There are no other shares of any other class or series of capital stock of the Company issued or outstanding.  There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) (“Voting Debt”) of the Company issued and outstanding.  Except as stated above or as disclosed in the SEC Documents, there are no existing options, warrants, calls, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued capital stock of the Company, obligating the Company to issue, transfer, sell, redeem, purchase, repurchase or otherwise acquire or cause to be issued, transferred, sold, redeemed, purchased, repurchased or otherwise acquired any capital stock or Voting Debt of, or other equity interest in, the Company or securities or rights convertible into or exchangeable for such shares or equity interests or obligations of the Company to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment.  The issuance of Common Stock or other securities pursuant to any provision of this Agreement will not give rise to any preemptive rights or rights of first refusal on behalf of any Person or result in the triggering of any anti-dilution or other similar rights, except as provided herein.  There are no securities or instruments containing anti-dilution provisions that will be triggered by the issuance of the Shares.  The Company has made available upon request of the Purchasers, a true, correct and complete copy of the Certificate of Incorporation and the Bylaws.

 

4.6         Litigation.  Except as disclosed in the SEC Documents or the Schedule of Exceptions, there are no legal or governmental actions, suits or other proceedings pending or, to the Company’s knowledge, threatened against the Company before or by any court, regulatory body or administrative agency or any other governmental agency or body, domestic, or foreign, which actions, suits or proceedings, individually or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect.  The Company is not a party to or subject to the provisions of any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental agency or body that might have a Company Material Adverse Effect.

 

4.7         Governmental Consents.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement for (a) the filing of a Form D with the Commission under the Securities Act and compliance with the securities and blue sky laws in the states and other jurisdictions in which shares of Common Stock are offered and/or sold, which compliance will be effected in accordance with such laws, and (b) the approval by the Principal Market of the listing of the Shares.

 

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4.8         No Default or Consents.  Neither the execution, delivery or performance of the Transaction Documents by the Company nor the consummation of any of the transactions contemplated thereby (including, without limitation, the issuance and sale by the Company of the Shares) will give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach of any term or provision of, or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or require any consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to the terms of, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company is a party or by which the Company or any of its properties or businesses is bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company or violate any provision of the Certificate of Incorporation or the Bylaws, except in each case as would not cause, either individually or in the aggregate, a Material Adverse Effect, and except for such consents or waivers which have already been obtained and are in full force and effect.

 

4.9         No Material Adverse Change.  Since December 31, 2014, there have not been any changes in the authorized capital, assets, liabilities, financial condition, business, Material Agreements or operations of the Company from that reflected in the Financial Statements except changes in the ordinary course of business which have not been, either individually or in the aggregate, materially adverse to the business, properties, financial condition or results of operations of the Company.

 

4.10      No General Solicitation.  Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D promulgated under the Securities Act) in connection with the offer or sale of the Shares.

 

4.11      No Integrated Offering.  None of the Company, its Subsidiaries, any of their affiliates, or any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Shares under the Securities Act or cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Principal Market.

 

4.12      Sarbanes-Oxley Act.  To the knowledge of the executive officers of the Company, the Company is in material compliance with the requirements of the Sarbanes-Oxley Act of 2002 that are effective and applicable to the Company as of the date hereof, and the rules and regulations promulgated by the Commission thereunder that are effective and applicable to the Company as of the date hereof.

 

4.13      Patents and Trademarks.  To the knowledge of the executive officers of the Company, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Documents and which the failure to so have could, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse

 

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Effect (collectively, the “Intellectual Property Rights”). Except as set forth in the SEC Documents, neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person.  Except as set forth in the SEC Documents, to the knowledge of the executive officers of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.

 

4.14      Listing and Maintenance Requirements.  Except as specified in the SEC Documents, the Company has not, in the two years preceding the date hereof, received notice from the Principal Market to the effect that the Company is not in compliance with the listing or maintenance requirements thereof.  Except as disclosed in the SEC Documents, the Company is in compliance with the listing and maintenance requirements for continued listing of the Common Stock.  The issuance and sale of the Shares under this Agreement does not contravene the rules and regulations of the Principal Market and no approval of the stockholders of the Company thereunder is required for the Company to issue and deliver to the Purchasers the Shares.

 

4.15      Disclosure.  The Company understands and confirms that the Purchasers will rely on the foregoing representations and covenants in effecting transactions in securities of the Company.  No event or circumstance has occurred or information exists with respect to the Company or its business, properties, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed, except for the announcement of this Agreement and related transactions and as may be disclosed in the Current Report on Form 8-K filed by the Company.

 

4.16      Contracts.  (a)  Each indenture, contract, lease, mortgage, deed of trust, note agreement, loan or other agreement or instrument of a character that is required to be described or summarized in the SEC Documents or to be filed as an exhibit to the SEC Documents under the Securities Act and the rules and regulations promulgated thereunder (collectively, the “Material Contracts”) is so described, summarized or filed.

 

(b)           The Material Contracts to which the Company is a party have been duly and validly authorized, executed and delivered by the Company and constitute the legal, valid and binding agreements of the Company, enforceable by and against the Company in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to enforcement of creditors’ rights generally, and general equitable principles relating to the availability of remedies, except as rights to indemnity or contribution may be limited by federal or state securities laws.

 

4.17      Properties and Assets.  The Company has good and marketable title to all the properties and assets described as owned by it in the Company’s consolidated financial statements, free and clear of all liens, mortgages, pledges or encumbrances of any kind except (i) those, if any, reflected in such consolidated financial statements or (ii) those that are not material in amount and do not adversely affect the use made and proposed to be made of such property by the Company.  The Company holds its leased properties under valid and binding leases.  The Company owns or leases all such properties as are necessary to its operations as now conducted.

 

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4.18      Compliance.  The Company has not been advised, nor does it have any reason to believe, that it is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal environmental laws and regulations, except where failure to be so in compliance would not have a Company Material Adverse Effect.

 

4.19      Taxes.  The Company has filed on a timely basis (giving effect to extensions) all required federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company does not have any knowledge of a tax deficiency that has been or might be asserted or threatened against it that could have a Company Material Adverse Effect.  All tax liabilities accrued through the date hereof have been adequately provided for on the books of the Company.

 

4.20      Transfer Taxes.  On the Closing Date, all stock transfer or other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Shares to be sold to the Purchasers hereunder will have been fully paid or provided for by the Company and all laws imposing such taxes will have been fully complied with.

 

4.21      Investment Company.  The Company is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder, and shall conduct its business in a manner so that it will not become required to be registered as an “investment company” under the Investment Company Act.

 

4.22      Insurance.  The Company maintains insurance underwritten by insurers of recognized financial responsibility, of the types and in the amounts that the Company reasonably believes is adequate for businesses, including, but not limited to, Directors’ and Officers’ liability insurance and insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, with such deductibles as are customary for companies in the same or similar business, all of which insurance is in full force and effect.  The Company has not received any written notice of cancellation of such insurance or that the Company will not be able to renew its existing insurance coverage as and when such coverage expires.  The Company believes it will be able to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

 

4.23      Governmental Permits, Etc.  The Company has all franchises, licenses, certificates and other authorizations from such federal, state or local government or governmental agency, department or body that are currently necessary for the operation of the business of the Company as currently conducted, except where the failure to possess currently such franchises, licenses, certificates and other authorizations is not reasonably expected to have a Company Material Adverse Effect.

 

4.24      Internal Control over Financial Reporting; Sarbanes-Oxley Matters.  The Company maintains internal control over financial reporting (as such term is defined in paragraph (f) of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act.

 

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The Company is in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by its most recently filed quarterly or annual periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently filed annual periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the Company’s disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there has been no change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

4.25      Foreign Corrupt Practices.  Neither the Company, nor, to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

4.26      ERISA.  The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (herein called “ERISA”); no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan”; or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the “Code”); and each “Pension Plan” for which the Company would have liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

 

4.27      OFAC. Neither the Company nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), and the Company will not intentionally directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

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SECTION 5.        REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

 

5.1         Each Purchaser, severally and not jointly, represents and warrants to and covenants with the Company that:

 

(a)           Purchaser, taking into account the personnel and resources it can practically bring to bear on the purchase of the Shares contemplated hereby, is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities presenting an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company, and has requested, received, reviewed and considered all information Purchaser deems relevant (including the SEC Documents) in making an informed decision to purchase the Shares.

 

(b)           Purchaser is acquiring the Shares pursuant to this Agreement in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Shares or any arrangement or understanding with any other persons regarding the distribution of such Shares, except in compliance with Section 5.1(c).

 

(c)           Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares purchased hereunder except in compliance with the Securities Act, applicable blue sky laws, and the rules and regulations promulgated thereunder.

 

(d)           Purchaser has, in connection with its decision to purchase the Shares, relied with respect to the Company and its affairs solely upon the SEC Documents and the representations and warranties of the Company contained herein.

 

(e)           Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act or a Qualified Institutional Buyer within the meaning of Rule 144A promulgated under the Securities Act.

 

(f)            Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated by this Agreement and has taken all necessary action to authorize the execution, delivery and performance of this Agreement.  Upon the execution and delivery of this Agreement by Purchaser, this Agreement shall each constitute a valid and binding obligation of Purchaser, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, and (ii) as limited by equitable principles generally, including any specific performance.

 

(g)           Purchaser is not a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (a “registered broker-dealer”) and is not affiliated with a registered broker dealer.  Purchaser is not party to any agreement for distribution of any of the Shares.

 

5.2         Purchaser understands that nothing in this Agreement or any other materials presented to Purchaser in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice.  Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares.

 

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5.3         Legends.

 

(a)           Purchaser understands that, until such time as the Shares have been sold pursuant to a registration statement or the Shares may be sold pursuant to Rule 144 under the Securities Act (“Rule 144”) without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Shares may bear one or more legends in substantially the following form and substance:

 

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge, and/or grant a security interest in, some or all of the legended Shares in connection with applicable securities laws, pursuant to a bona fide margin agreement in compliance with a bona fide margin loan.  Such a pledge would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion shall be required in connection with a subsequent transfer or foreclosure following default by the Purchaser transferee of the pledge.  No notice shall be required of such pledge, but Purchaser’s transferee shall promptly notify the Company of any such subsequent transfer or foreclosure.  Each Purchaser acknowledges that the Company shall not be responsible for any pledges relating to, or the grant of any security interest in, any of the Shares or for any agreement, understanding or arrangement between any Purchaser and its pledgee or secured party.  At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Shares may reasonably request in connection with a pledge or transfer of the Shares.  Each Purchaser acknowledges and agrees that, except as otherwise provided herein, any Shares subject to a pledge or security interest as contemplated by this Section 5.3 shall

 

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continue to bear the legend set forth in this Section 5.3 and be subject to the restrictions on transfer set forth herein.

 

In addition stock certificates representing the Shares may contain:

 

(i)            Any legend required by the blue sky laws of any other state to the extent such laws are applicable to the sale of such Shares hereunder.

 

(ii)           A legend regarding affiliate status, if applicable.

 

(b)           Removal of Legends.  Upon receipt of written notice from a Purchaser, the legend set forth in Section 5.3(a) above shall be removed and the Company shall issue a certificate without such legend or any other legend to the holder of the applicable Shares upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at the Depository Trust Company (“DTC”), if (i) such Shares are registered for resale under the Securities Act (provided that, if the Purchaser is selling pursuant to the effective registration statement registering the Shares for resale, the Purchaser agrees to only sell such Shares during such time that such registration statement is effective and not withdrawn or suspended, and only as permitted by such registration statement), (ii) such Shares are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the Company), or (iii) such Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such securities and without volume or manner-of-sale restrictions.  Following the earlier of (i) the effective date of a registration statement covering a resale of the Shares or (ii) Rule 144 becoming available for the resale of Shares, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such securities and without volume or manner-of-sale restrictions, upon written request of a Purchaser the Company shall cause Company counsel to issue to the transfer agent for the shares of Common Stock (the “Transfer Agent”) a legal opinion acceptable to such Purchaser relating to the removal of such legend.  Any fees (with respect to the Transfer Agent, Company counsel or otherwise) associated with the issuance of such opinion or the removal of such legend shall be borne by the Company.  Following the Effective Date, or at such earlier time as a legend is no longer required for certain Shares, the Company will no later than three (3) Trading Days following the delivery by a Purchaser to the Company (with notice to the Company) of a legended certificate representing Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer), and an opinion of counsel to the extent required by Section 5.3(a) (such third (3rd) Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such Shares that is free from all restrictive and other legends.  The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 5.3(b).  Certificates for Shares subject to legend removal hereunder may be transmitted by the Transfer Agent to the Purchasers by crediting the account of the Purchaser’s prime broker with DTC as directed by such Purchaser.

 

5.4         Restricted Securities.  Purchaser understands that the Shares are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and

 

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applicable regulations such Shares may be resold without registration under the Securities Act only in certain limited circumstances.  In this connection, such Purchaser represents that it is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

5.5         Furnishing of Information.  In order to enable the Purchasers to sell the Securities under Rule 144, for so long as any Purchaser holds any Shares, the Company shall use its commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. During such period, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Shares under Rule 144.  At any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of the Shares may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, (i) if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) or (ii) if the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail for any reason to satisfy any condition set forth in Rule 144(i)(2) (each of clauses (i) and (ii), a “Public Information Failure”), then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Shares, an amount in cash equal to one percent (1.0%) of the aggregate purchase price of such Purchaser’s Shares on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than thirty (30) days) thereafter until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such public information is no longer required for the Purchasers to transfer the Shares pursuant to Rule 144.  The payments to which a Purchaser shall be entitled pursuant to this Section 5.5) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (y) the last day of the calendar month during which such Public Information Failure Payments are incurred and (z) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full.  Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

5.6         Securities Laws Disclosure; Publicity.  By 9:00 A.M., New York City time, on the Trading Day immediately following the date hereof, the Company shall issue a press release (the “Press Release”) reasonably acceptable to the Purchasers disclosing all material terms of the transactions contemplated hereby or a Current Report on Form 8-K with the Commission describing the terms of the Transaction Documents. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser or an Affiliate of any Purchaser, or include the name of any Purchaser or an Affiliate of any Purchaser in any press release or filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of

 

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such Purchaser, except (i) as required by federal securities law in connection with (A) any registration statement and (B) the filing of final Transaction Documents (including signature pages thereto) with the Commission and (ii) to the extent such disclosure is required by law, request of the Staff of the Commission or Trading Market regulations, in which case the Company shall provide the Purchasers with prior written notice of such disclosure permitted under this subclause (ii).  From and after the issuance of such Press Release or Form 8-K, no Purchaser shall be in possession of any material, non-public information received from the Company, any Subsidiary or any of their respective officers, directors, employees or agents, that is not disclosed in such Press Release or Form 8-K.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are required to be publicly disclosed by the Company as described in this Section 5.6, such Purchaser will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction)

 

5.7         Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, including this Agreement, or as expressly required by any applicable securities law, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information regarding the Company that the Company believes constitutes material non-public information without the express written consent of such Purchaser, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

SECTION 6.        CONDITIONS TO COMPANY’S OBLIGATIONS AT THE CLOSING.

 

The Company’s obligation to complete the sale and issuance of the Shares and deliver Shares to each Purchaser, individually, as set forth in the Schedule of Purchasers at the Closing shall be subject to the following conditions to the extent not waived by the Company:

 

6.1         Receipt of Payment.  The Company shall have received payment, by wire transfer of immediately available funds, in the full amount of the purchase price for the number of Shares being purchased by such Purchaser at the Closing as set forth in the Schedule of Purchasers.

 

6.2         Representations and Warranties.  The representations and warranties made by such Purchaser in Section 5 hereof shall be true and correct in all material respects as of, and as if made on, the date of this Agreement and as of the Closing Date.

 

6.3         Nasdaq Approval.  The Shares shall have been approved for listing on the Principal Market, subject to official notice of issuance.

 

SECTION 7.        CONDITIONS TO PURCHASERS’ OBLIGATIONS AT THE CLOSING.

 

Each Purchaser’s obligation to accept delivery of the Shares and to pay for the Shares shall be subject to the following conditions to the extent not waived by such Purchaser:

 

13

 

7.1         Representations and Warranties Correct.  The representations and warranties made by the Company in Section 4 hereof shall be true and correct in all material respects as of, and as if made on, the date of this Agreement and as of the Closing Date.

 

7.2         Receipt of Executed Side Letter.  Mr. Sillerman shall have executed and delivered to each Purchaser the Side Letter.

 

7.3         Certificate.  Each Purchaser shall have received a certificate signed by the Chief Executive Officer and the Chief Financial or Accounting Officer to the effect that the representations and warranties of the Company in Section 4 hereof are true and correct in all material respects as of, and as if made on, the date of this Agreement and as of the Closing Date and that the Company has satisfied in all material respects all of the conditions set forth in this Section 7.

 

7.4         Good Standing.  The Company is validly existing as a corporation in good standing under the laws of Delaware.

 

7.5         Nasdaq Approval.  The Shares shall have been approved for listing on the Principal Market, subject to official notice of issuance.

 

7.6          Judgments.  No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby.

 

7.7          Stop Orders.  No stop order or suspension of trading shall have been imposed by the Principal Market, the SEC or any other governmental regulatory body with respect to public trading in the Common Stock.

 

SECTION 8.        INDEMNIFICATION.

 

8.1         Indemnification by the Company.  The Company agrees to indemnify and hold harmless each of the Purchasers and each Person, if any, who controls any Purchaser within the meaning of the Securities Act (each, an “Indemnified Party”), against any losses, claims, damages, liabilities or expenses, joint or several, to which such Indemnified Party may become subject under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company contained in this Agreement or any failure of the Company to perform its obligations hereunder, and will reimburse each Indemnified Party for any legal and other expenses reasonably incurred as such expenses are reasonably incurred by such Indemnified Party in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) the failure of such Indemnified Party to comply with the covenants and

 

14

 

agreements contained in Section 5 above respecting sale of the Shares, or (ii) the inaccuracy of any representations made by such Indemnified Party herein.

 

8.2         Indemnification by Purchasers.  Each Purchaser shall severally, and not jointly, indemnify and hold harmless the other Purchasers and the Company, each of its directors, and each Person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors or each of its controlling Persons may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Purchaser) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure by such Purchaser to comply with the covenants and agreements contained in Section 5 above respecting the sale of the Shares or (ii) the inaccuracy of any representation made by such Purchaser herein, in each case to the extent, and will reimburse the Company, each of its directors, and each of its controlling Persons for any legal and other expense reasonably incurred, as such expenses are reasonably incurred by the Company, each of its directors, and each of its controlling Persons in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action.  No Purchaser shall be liable for the indemnification obligations of any other Purchaser.

 

SECTION 9.        ACCESS TO INFORMATION.

 

From the date hereof until the Closing, the Company will make reasonably available to the Purchasers’ representatives, consultants and their respective counsels for inspection, such information and documents as the Purchasers reasonably request, and will make available at reasonable times and to a reasonable extent officers and employees of the Company to discuss the business and affairs of the Company.

 

SECTION 10.      USE OF PURCHASERS’ NAMES.

 

Except as otherwise required by applicable law or regulation, the Company shall not use the Purchasers’ names or the name of any of their affiliates in any advertisement, announcement, press release or other similar public communication unless it has received the prior written consent of the applicable Purchaser for the specific use contemplated which consent shall not be unreasonably withheld.

 

SECTION 11.      NOTICES.

 

All notices, requests, consents and other communications hereunder shall be in writing, shall be sent by confirmed electronic mail, or mailed by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, and shall be deemed given when so sent in the case of electronic mail transmission, or when so received in the case of mail or courier, and addressed as follows:

 

(a)           if to the Company, to:

 

SFX Entertainment, Inc.

 

15

 

902 Broadway, 15th Floor

New York, New York 10010

Attention: Richard Rosenstein

E-Mail:  rich@sfxii.com

 

with a copy to:

 

SFX Entertainment, Inc.

902 Broadway, 15th Floor

New York, New York 10010

Attention: Howard Tytel

E-Mail:  howard@sfxii.com

 

or to such other person at such other place as the Company shall designate to the Purchasers in writing; and

 

(b)           if to the Purchasers, at the address as set forth at the end of this Agreement, or at such other address or addresses as may have been furnished to the Company in writing.

 

SECTION 12.      MISCELLANEOUS.

 

12.1      Waivers and Amendments.  Neither this Agreement nor any provision hereof may be changed, waived, discharged, terminated, modified or amended except upon the written consent of the Company and holders of at least a majority of the Shares.

 

12.2      Headings.  The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

 

12.3      Severability.  In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

 

12.4      Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof (other than Section 5-1401 of the New York General Obligations Law).  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit,

 

16

 

action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

12.5      Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

 

12.6      Successors and Assigns.  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

12.7      Entire Agreement.  This Agreement and other documents delivered pursuant hereto, including the exhibit and the Schedule of Exceptions, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof.

 

12.8      Payment of Fees and Expenses.  Each of the Company and the Purchasers shall bear its own expenses and legal fees incurred on its behalf with respect to this Agreement and the transactions contemplated hereby; provided, that the Company shall promptly reimburse Wolverine Flagship Fund Trading Limited (“Wolverine”) for its legal and other due diligence fees and expenses (including fees and expenses of Goodwin Procter, LLP, counsel to Wolverine) incurred in connection with the transactions contemplated herein in an amount not to exceed $10,000 (the “Wolverine Expense Reimbursement”).  Wolverine may, in its sole discretion, withhold the Wolverine Expense Reimbursement from its payment of the purchase price for the Shares at Closing to the extent not previously reimbursed by the Company.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

 

12.9      Survival.  The representations, warranties, covenants and agreements made in this Agreement shall survive the closing of the transactions contemplated hereby and the delivery of the Shares.

 

[signature pages follow]

 

17

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.

 

 

	
 
    	
SFX ENTERTAINMENT, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Richard   Rosenstein
    
	
 
    	
Name:
    	
Richard   Rosenstein
    
	
 
    	
Title:
    	
Chief Financial   Officer
    

 

SIGNATURE PAGES TO

SECURITIES PURCHASE AGREEMENT

 

 

PURCHASERS:

 

	
 
    	
WOLVERINE FLAGSHIP FUND TRADING LIMITED
    
	
 
    	
 
    
	
 
    	
By: Wolverine Asset Management, LLC 
    
	
 
    	
Its: Investment Manager
    
	
 
    	
By:
    	
/s/ Andy Sudjak
    
	
 
    	
Name:
    	
Andy Sudjak
    
	
 
    	
Title:
    	
Authorized Signatory
    
	
 
    	
 
    
	
 
    	
Address: 175 W. Jackson Blvd., Suite 340,
   Chicago, Illinois
    

 

SIGNATURE PAGES TO

SECURITIES PURCHASE AGREEMENT

 

 

	
 
    	
SILLERMAN INVESTMENT COMPANY III LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Robert F.X. Sillerman
    
	
 
    	
Name:
    	
Robert F.X. Sillerman
    
	
 
    	
Title:
    	
Authorized Officer
    
	
 
    	
 
    
	
 
    	
Address: 902 Broadway, 15th Floor, New York,
   New York 10010
    

 

SIGNATURE PAGES TO

SECURITIES PURCHASE AGREEMENT

 

20

 

	
 
    	
VIRTUAL POINT HOLDINGS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ A. Wayne Johnson
    
	
 
    	
Name:
    	
A. Wayne Johnson 
    
	
 
    	
Title:
    	
President and Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address: PO Box 28020, Macon, GA 31221
    

 

SIGNATURE PAGES TO

SECURITIES PURCHASE AGREEMENT

 

21

 

EXHIBIT A

SCHEDULE OF PURCHASERS

 

	
Investor & Address for Correspondence
    	
 
    	
Subscription
   Amount
    	
 
    	
Shares
   Purchased
    	
 
    	
Certificate to be sent
   to:
    	
 
    
	
Sillerman Investment Partners III LLC
   Street
   902 Broadway, 15th Floor
   New York, New York 10010
    	
 
    	
$
    	
5,000,000
    	
 
    	
1,037,345
    	
 
    	
902 Broadway, 15th
   Floor, New York,
   New York 10010
    	
 
    
	
Wolverine Flagship Fund Trading
    Limited
   175 W. Jackson Blvd., Suite 340
   Chicago, Illinois 60604
    	
 
    	
$
    	
5,000,000
    	
 
    	
1,152,605
    	
 
    	
175 W. Jackson Blvd.,
   Suite 340
   Chicago, Illinois
   60604
    	
 
    
	
Virtual Point Holdings, LLC
   P.O. Box 28020
   Macon, Georgia
    	
 
    	
$
    	
5,000,000
    	
 
    	
1,152,605
    	
 
    	
P.O. Box 28020
   Macon, Georgia
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
TOTAL
    	
 
    	
$
    	
15,000,000
    	
 
    	
3,342,555
    	
 
    	
 
    	
 
    

 

1

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