Case MFW Doc 681 Filed 05/27/16 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

Transcription

1 Case MFW Doc 681 Filed 05/27/16 Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: SFX ENTERTAINMENT, INC., et al., 1 Debtors. Chapter 11 Case No (MFW) (Jointly Administered) Hearing Date: June 22, 2016 at 11:30 a.m. Objection Deadline: June 15, 2016 at 4:00 p.m. MOTION OF THE DEBTORS FOR ENTRY OF AN ORDER PURSUANT TO SECTIONS 105 AND 363 OF THE BANKRUPTCY CODE AUTHORIZING THE DEBTORS TO ENTER INTO A RESIGNATION AND TRANSITION AGREEMENT WITH ROBERT F.X. SILLERMAN The above-captioned debtors and debtors-in-possession (collectively, the Debtors ) hereby move the Court (the Motion ) pursuant to sections 105(a) and 363(b) of title 11 of the United States Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code ), for entry of an order, substantially in the form annexed hereto, authorizing the Debtors to enter into a Resignation and Transition Agreement (the Resignation Agreement ) with the Debtors former Chief Executive Officer and Executive Chairman, Mr. Robert F.X. Sillerman, a copy of which is attached as Exhibit A hereto. In support of this Motion, the Debtors respectfully state as follows: 1 The Debtors in these Chapter 11 Cases, along with the last four (4) digits of each Debtor s federal tax identification number, if applicable, are: 430R Acquisition LLC (7350); Beatport, LLC (1024); Core Productions LLC (3613); EZ Festivals, LLC (2693); Flavorus, Inc. (7119); ID&T/SFX Mysteryland LLC (6459); ID&T/SFX North America LLC (5154); ID&T/SFX Q-Dance LLC (6298); ID&T/SFX Sensation LLC (6460); ID&T/SFX TomorrowWorld LLC (7238); LETMA Acquisition LLC (0452); Made Event, LLC (1127); Michigan JJ Holdings LLC (n/a); SFX Acquisition, LLC (1063); SFX Brazil LLC (0047); SFX Canada Inc. (7070); SFX Development LLC (2102); SFX EDM Holdings Corporation (2460); SFX Entertainment, Inc. (0047); SFX Entertainment International, Inc. (2987); SFX Entertainment International II, Inc. (1998); SFX Intermediate Holdco II LLC (5954); SFX Managing Member Inc. (2428); SFX Marketing LLC (7734); SFX Platform & Sponsorship LLC (9234); SFX Technology Services, Inc. (0402); SFX/AB Live Event Canada, Inc. (6422); SFX/AB Live Event Intermediate Holdco LLC (8004); SFX/AB Live Event LLC (9703); SFX-94 LLC (5884); SFX-Disco Intermediate Holdco LLC (5441); SFX-Disco Operating LLC (5441); SFXE IP LLC (0047); SFX-EMC, Inc. (7765); SFX-Hudson LLC (0047); SFX-IDT N.A. Holding II LLC (4860); SFX-LIC Operating LLC (0950); SFX-IDT N.A. Holding LLC (2428); SFX-Nightlife Operating LLC (4673); SFX-Perryscope LLC (4724); SFX-React Operating LLC (0584); Spring Awakening, LLC (6390); SFXE Netherlands Holdings Coöperatief U.A. (6812); SFXE Netherlands Holdings B.V. (6898). The Debtors business address is 902 Broadway, 15 th Floor, New York, NY

2 Case MFW Doc 681 Filed 05/27/16 Page 2 of 12 Status of the Case 1. On February 1, 2016 (the Petition Date ), the Debtors commenced these cases (the Chapter 11 Cases ) by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code. 2. The Debtors have continued in possession of their properties and are operating and managing their businesses as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 3. No request has been made for the appointment of a trustee or examiner. 4. On February 12, 2016, an official committee of unsecured creditors was appointed in these Chapter 11 Cases (the Committee ). 5. On March 31, 2016, the Debtors and Mr. Sillerman entered into the Resignation Agreement. The Debtors believe their entry into the Resignation Agreement is in the ordinary course of business, however, out of an abundance of caution, the Debtors are seeking the Court s authorization to enter into the Resignation Agreement. Jurisdiction, Venue and Statutory Predicates 6. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. 157 and Venue is proper in this district pursuant to 28 U.S.C and This matter is core within the meaning of 28 U.S.C. 157(b)(2). 7. The statutory predicates for the relief requested herein are sections 105(a) and 363(b) of the Bankruptcy Code. Background 8. The Debtors along with their non-debtor affiliates (collectively, SFX ) are a leading producer of live events and digital entertainment content focused exclusively on 2

3 Case MFW Doc 681 Filed 05/27/16 Page 3 of 12 electronic music culture. The Debtors commenced material operations in 2012 with the intent of acquiring and operating companies within the electronic dance music ( EDM ) industry, specifically those engaged in the promotion and production of live music events, festivals and digital offerings attractive to EDM fans in the United States and abroad. Over the next three years, the Debtors acquired a number of leading EDM brands, such as TomorrowWorld, Beatport, Mysteryland, Sensation and Electric Zoo, and expanded operations worldwide. 9. Today, the Debtors are actively engaged in the production and promotion of EDM festivals and events both domestically and abroad. In addition, Debtors manage large, event-driven nightclubs that serve as venues for performances by key electronic music talent. The Debtors also offer an online platform for EDM DJs, artists and fans to purchase, share and stream music components and to connect with each other. 10. The Debtors and their 120 non-debtor subsidiaries operate a business that spans the globe, with operations in over 34 countries. The Debtors constitute substantially all of the domestic companies comprising SFX s business as well as select foreign subsidiaries. The Debtors have more than 325 employees and, together with the non-debtor entities, have more than 625 employees. 11. The Debtors capital structure is highly levered. In 2015, the Debtors began to face significant liquidity issues. While the Debtors attempted to enhance liquidity through a September 2015 financing and potential sales of non-strategic assets, the Debtors concluded that they needed to restructure their liabilities through a bankruptcy process. 12. Prior to the filing of these Chapter 11 Cases, the Debtors entered into a restructuring support agreement with holders of over 70% of their outstanding secured debt. The restructuring support agreement provides for a comprehensive restructuring of the Debtors 3

4 Case MFW Doc 681 Filed 05/27/16 Page 4 of 12 balance sheet. As part of that transaction, certain of the holders of the secured debt also agreed to provide the Debtors with debtor-in-possession financing to allow for the Debtors to prosecute these Chapter 11 Cases. The Debtors intend to use these Chapter 11 Cases to effect their balance sheet restructuring and implement operational improvements. 13. A detailed factual background of the Debtors businesses and operations, as well as the events precipitating the commencement of these Chapter 11 Cases, is more fully set forth in the Declaration of Michael Katzenstein in Support of the Debtors Chapter 11 Petitions and Requests for First Day Relief (the First Day Declaration ) [Docket No. 13] filed on the Petition Date and incorporated herein by reference. Mr. Sillerman and the Debtors 14. As the founder of SFX, Mr. Sillerman has been the Chairman of the Board and, until his recent resignation, CEO of SFX since its inception in As of the Petition Date, Mr. Sillerman and SFX Entertainment, Inc. (the Company ) were parties to an Employment Agreement dated October 18, 2012 (the Employment Agreement ) and an Indemnification Agreement (the Indemnification Agreement ) dated April 15, 2013 governing the relationship between Mr. Sillerman and the Company Pursuant to the Restructuring Support Agreement, dated as of January 31, 2016 (together with all exhibits thereto, the RSA ) entered into by and among the Debtors, certain holders of the Debtors Second Lien Notes, and Mr. Sillerman prior to the Petition Date, Mr. Sillerman agreed to resign from his positions with SFX on or prior to April 1, The RSA contemplated that Mr. Sillerman would be replaced by Mr. Katzenstein of FTI on an interim basis unless a permanent CEO had been identified by that date. 2 Pursuant to separate motion, the Debtors are seeking to reject the Employment Agreement. 4

5 Case MFW Doc 681 Filed 05/27/16 Page 5 of On March 31, 2016, consistent with the terms of the RSA, the Company and Mr. Sillerman entered into the Resignation Agreement. On the following day, Michael Katzenstein, the Debtors Chief Restructuring Officer, was appointed the Debtors interim Chief Executive Officer. The Resignation Agreement 17. Pursuant to the Resignation Agreement, Mr. Sillerman has agreed to resign from all officer and director positions at SFX effective as of March 31, 2016, other than his position as Chairman of the Board of Directors of the Company. 18. The Resignation Agreement contains the following key terms: As he was prior to his resignation, Mr. Sillerman will be entitled to participate in, and receive benefits under, any health insurance plan made available by the Company to its employees from time to time. Mr. Sillerman will remain as an employee of SFX and in this position will be paid minimum wage (as he was prior to his resignation) for as long as he remains Chairman of the Board of Directors of the Company. 3 Mr. Sillerman may retain the support of his personal assistant (on an exclusive basis) for so long as he remains Chairman of the Board of the Company; provided that if his personal assistant resigns then the Company shall have no obligation to provide an exclusive assistant for Mr. Sillerman and shall provide Mr. Sillerman an assistant on a non-exclusive basis. Mr. Sillerman may retain his current office, but only for so long as the Company is occupying the 15 th floor of 902 Broadway. Mr. Sillerman will be permitted to use the Company s car currently available to him until the earlier of the date (a) on which he ceases to be Chairman of the Board or (b) the Company sells or otherwise disposes of 3 Mr. Sillerman will receive the New York State statutory minimum salary for an exempt employee, or approximately $675 per week. The Debtors health benefit plans are provided through co-employer TriNet HR Corporation. Under this co-employment arrangement, Mr. Sillerman must maintain employment with the Debtors and receive at least minimum wage in order to be eligible to receive the health benefits contemplated by the Resignation Agreement. 5

6 Case MFW Doc 681 Filed 05/27/16 Page 6 of 12 the car; provided that (x) the Company shall not have any obligation to pay for the services of a driver for the car; (y) Mr. Sillerman shall pay the Company $1,000 per month plus the amount of estimated costs, expenses or other charges the Company expects to incur in connection with the car in advance and in immediately available funds; and (z) Mr. Sillerman shall be personally responsible for all charges related to the car including, without limitation, insurance, fuel, maintenance, and repairs. In addition, Mr. Sillerman has agreed to hold the Company harmless and to indemnify the Company for any damages, costs or expenses incurred by the Company in connection with his use of the car. Thus, the expenses to the Company relating to the car are essentially passed through to Mr. Sillerman. Mr. Sillerman has agreed that he will not assert claims (other than prepetition unsecured claims) on account of severance or termination benefits under his Employment Agreement, or any other employment agreement he may currently have or has had in the past with the Company and/or any of its subsidiaries. Mr. Sillerman has agreed to release the Company, its subsidiaries, successors and assigns, and its directors, officers, employees, or agents in such capacities (collectively, the Released Parties ) from any and all claims, liabilities and obligations that are based in any way on any act or omission on the part of the Released Parties that occurred on or prior to the date of the Resignation Agreement and arise out of or relate to (i) Mr. Sillerman s resignation as Chief Executive Officer and Executive Chairman of the Company; (ii) fraud, defamation, emotional distress, and discharge in violation of public policy related to Mr. Sillerman s resignation and his employment with the Company through the date of the Resignation Agreement; and (iii) all federal, state, and local statutory claims relating to Mr. Sillerman s resignation and his employment with the Company through the date of the Resignation Agreement. Relief Requested 19. The Debtors maintain that entry into the Resignation Agreement is within the ordinary course business. However, out of an abundance of caution and in the interest of full disclosure, the Debtors request that the Court enter an order authorizing the Debtors entry into the Resignation Agreement. 6

7 Case MFW Doc 681 Filed 05/27/16 Page 7 of A proposed form of order granting the relief requested in the Motion is attached hereto as Exhibit B. In support of the Motion, the Debtors submit the declaration of Michael Katzenstein, attached hereto as Exhibit C. A. Entry into the Resignation Agreement Is a Sound Exercise of the Debtors Business Judgment and Should Be Approved Pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code 21. Section 363(b)(1) of the Bankruptcy Code permits a debtor-in-possession to use property of the estate other than in the ordinary course of business after notice and a hearing. 11 U.S.C. 363(b)(1). Uses of estate property outside the ordinary course of business may be authorized if the debtor demonstrates a sound business purpose for it. See Myers v. Martin (In re Martin), 91 F.3d 389, 395 (3d Cir. 1996) (noting that under normal circumstances, courts defer to a trustee s judgment concerning use of property under section 363(b) when there is a legitimate business justification); In re Lionel Corp., 722 F. 2d 1063, 1071 (2d Cir. 1983) ( The rule we adopt requires that a judge determining a 363(b) application expressly find from the evidence presented before him a good business reason to grant the application. ); Dai-Ichi Kangyo Bank, Ltd. v. Montgomery Ward Holding Corp. (In re Montgomery Ward Holding Corp.), 242 B.R. 147, 153 (D. Del. 1999); In re Delaware Hudson Ry. Co., 124 B.R. 169, (D. Del. 1991). 22. Once the debtor articulates a valid business justification for a particular form of relief, the Court reviews the debtor s request under the business judgment rule. The business judgment rule is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action was in the best interests of the company. In re Integrated Res. Inc., 147 B.R. 650, 656 (S.D.N.Y. 1992) (quoting Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985)). In determining whether to 7

8 Case MFW Doc 681 Filed 05/27/16 Page 8 of 12 authorize the use, sale or lease of property of the estate under [section 363(b)], courts require the debtors to show that a sound business purpose justifies such actions. In re Montgomery Ward Holding Co., 242 B.R. 147, 153 (D. Del. 1999). 23. In addition, under section 105(a) of the Bankruptcy Code, the court may issue any order, process, or judgment that is necessary to carry out the provisions of [the Bankruptcy Code]. 11 U.S.C. 105(a); see also In re Combustion Eng n, Inc., 391 F.3d 190, 225 (3d Cir. 2004). Section 105(a) empowers the Court to fashion orders necessary to further the purposes of other sections of the Bankruptcy Code. See, e.g., Combustion Eng g, Inc., 391 F.3d at 236 ( The general grant of equitable power contained in 105(a)... must be exercised within the parameters of the Code itself. ); In re Padilla, 389 B.R. 409, 425 (E.D. Pa. 2008) ( [A] court may invoke 105(a) if the equitable remedy utilized is demonstrably necessary to preserve a right elsewhere provided in the Code.... ). As long as the Court does not invoke its equitable powers to achieve a result outside the scope of the Bankruptcy Code, the exercise of its equitable powers under section 105(a) is proper. See In re Nixon, 404 Fed. Appx. 575, 578 (3d Cir. 2010) ( The Bankruptcy Court s actions cannot trump specific provisions of the Bankruptcy Code. ) (citing Combustion Eng g, Inc., 391 F.3d at 236)). 24. Entry into the Resignation Agreement is a sound exercise of the Debtors business judgment. The RSA was structured to require Mr. Sillerman s resignation by April 1, 2016 because the Debtors and the noteholder parties to the RSA believed, inter alia, (i) the Debtors retaining Mr. Sillerman as Chief Executive Officer through the end of March 2016 would allow the Debtors to stabilize their business in the early days of these Chapter 11 Cases and reduce the risk of additional turmoil; and (ii) Mr. Sillerman s resignation by April 1, 2016 would be 8

9 Case MFW Doc 681 Filed 05/27/16 Page 9 of 12 beneficial because it would allow the Debtors to prepare for the future and attract a management team that could successfully lead the Debtors after their emergence from bankruptcy. 25. In order to comply with their obligations under the RSA, the Debtors sought Mr. Sillerman s resignation by the end of March The RSA itself did not spell out the terms and conditions of the resignation. Mr. Sillerman indicated to the Debtors that he would agree to resign as required by the RSA in exchange for certain limited benefits. Accordingly, the Debtors, the DIP lenders, the pre-petition secured lenders and Mr. Sillerman negotiated the terms of the Resignation Agreement. As part of those negotiations, Mr. Sillerman indicated to the Debtors that he believed he possessed prepetition and postpetition claims arising from his employment that could be asserted against the Debtors. The Debtors disputed those allegations. 26. The Debtors believed the cost of the Resignation Agreement to the Debtors was minimal. In addition, the Debtors believed allowing Mr. Sillerman to retain his health benefits was appropriate under the circumstances. 27. Aside from entering into the Resignation Agreement, the Debtors other options were to (i) leave Mr. Sillerman in as Chief Executive Officer, which would violate the RSA, would not have been supported by the Committee, and would not, in the Debtors business judgment, have represented a productive step in moving their restructuring forward; or (ii) remove Mr. Sillerman from office, which also would not comply with the terms of the RSA, and would have resulted in a public dispute with Mr. Sillerman. The Debtors believed that the optics and practical effect of such dispute would have been detrimental to the Debtors business and would have resulted in the expenditure of significant time and money by the Debtors. 28. Accordingly, the Debtors determined that entry into the Resignation Agreement was the best approach. The Resignation Agreement is reasonable, favorable to the Debtors, and 9

10 Case MFW Doc 681 Filed 05/27/16 Page 10 of 12 for no material incremental cost to the estates allows the Debtors to focus on implementing critical business objectives and moving forward with its restructuring plan, all of which will ultimately inure to the benefit of the Debtors creditors, estates and other parties in interest. Mr. Sillerman has provided a full release of all claims, other than prepetition claims, on account of severance or termination benefits under his Employment Agreement. The Resignation Agreement further avoids the cost of litigation attendant to terminating Mr. Sillerman s employment under other than amicable circumstances, which would far outweigh the costs associated with the Resignation Agreement. Finally, the Committee has made clear to the Debtors that it does not believe Mr. Sillerman should remain in his position of Chief Executive Officer, and the Resignation Agreement accomplishes that goal. Therefore, entry into the Resignation Agreement represents a sound exercise of the Debtors business judgment. B. Section 503(c) of the Bankruptcy Code 29. Section 503(c) of the Bankruptcy Code provides criteria for courts to use in approving certain types of payments to insiders. Section 503(c) comprises three subsections: (1) a general prohibition against retention plans for insiders; (2) limitations on severance payments; and (3) standards governing other transfers to certain employees and consultants, among others, that are outside of the ordinary course. 30. While Mr. Sillerman continues to serve as Chairman of the Board, section 503(c)(1) pertaining to retention plans is not applicable to the Resignation Agreement, as it was not entered into for the purpose of inducing Mr. Sillerman to remain with the Debtors. Rather, the reason is the opposite the Resignation Agreement was entered into to effectuate Mr. Sillerman s resignation from all of his director and officer positions with the SFX Entities other than his role as Chairman of the Board. In any event, even if the Debtors ongoing obligations 10

11 Case MFW Doc 681 Filed 05/27/16 Page 11 of 12 under the Resignation Agreement were viewed in light of Mr. Sillerman s continued service as Chairman, there is no bonus plan implicated and the relatively modest amounts can only be viewed as reasonable compensation for those services. The restrictions of section 503(c)(1) apply to transfers made to an insider to induce such person to remain with the debtor s business, not to general compensation for services rendered in the ordinary course of business. 31. The Resignation Agreement does not constitute severance for an insider subject to the provisions of Bankruptcy Code section 503(c)(2), because no administrative severance will be paid to Mr. Sillerman. 32. Section 503(c)(3) requires a sound business purpose for transfers outside the ordinary course to certain employees. In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983) (quoted with approval in In re Montgomery Ward, 242 B.R. at ). Even assuming that the Resignation Agreement is outside the ordinary course, this standard is satisfied upon showing of a good business reason, or that the action will aid the debtor s reorganization. Courts have recognized that the business judgment test is the same test used to evaluate transfers under section 363(b)(1) of the Bankruptcy Code. See In re Nobex Corp., No (MFW) 2006 WL at *3 (Bankr. D. Del. Jan. 19, 2006); In re Dana Corp., 358 B.R. 567, (Bankr. S.D.N.Y. 2006); In re Silicon Graphics, Inc., No (BRL) (Bankr. S.D.N.Y. July 27, 2006). As set forth in Section A above, the Debtors have demonstrated a sound business purpose justifying their entry into the Resignation Agreement. Notice 33. Notice of this Motion has been given to the following parties or, in lieu thereof, to their counsel, if known: (a) the Office of the United States Trustee for the District of Delaware; (b) the DIP Lenders; (c) the Committee; (d) those parties requesting notice pursuant to 11

12 Case MFW Doc 681 Filed 05/27/16 Page 12 of 12 Bankruptcy Rule 2002; (e) Mr. Sillerman; (f) the Office of the United States Attorney General for the District of Delaware; (g) the Internal Revenue Service; and (h) the Securities and Exchange Commission. The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given. No Prior Request 34. No prior request for the relief sought in this Motion has been made to this or any other court. Conclusion WHEREFORE, the Debtors respectfully request that the Court enter an order substantially in the form attached hereto as Exhibit B granting the relief sought requested herein and such other and further relief as is just. Dated: May 27, 2016 GREENBERG TRAURIG, LLP /s/ Dennis A. Meloro Dennis A. Meloro (DE Bar No. 4435) 1007 North Orange Street, Suite 1200 Wilmington, Delaware Telephone: (302) Facsimile: (302) melorod@gtlaw.com -and- Nancy A. Mitchell (admitted pro hac vice) Maria J. DiConza (admitted pro hac vice) Nathan A. Haynes (admitted pro hac vice) 200 Park Avenue New York, New York Telephone: (212) Facsimile: (212) mitchelln@gtlaw.com diconzam@gtlaw.com haynesn@gtlaw.com Counsel for the Debtors and Debtors-in-Possession 12

13 Case MFW Doc Filed 05/27/16 Page 1 of 3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: SFX ENTERTAINMENT, INC., et al., 1 Debtors. Chapter 11 Case No (MFW) (Jointly Administered) Hearing Date: June 22, 2016 at 11:30 a.m. Objection Deadline: June 15, 2016 at 4:00 p.m. NOTICE OF MOTION PLEASE TAKE NOTICE that the above-captioned debtors and debtors-in-possession (collectively, the Debtors ) filed the Motion of the Debtors for Entry of an Order Pursuant to Sections 105 and 363 of the Bankruptcy Code Authorizing the Debtors to Enter into a Resignation and Transition Agreement with Robert F.X. Sillerman (the Motion ) with the United States Bankruptcy Court for the District of Delaware (the Court ). PLEASE TAKE FURTHER NOTICE that any response or objection to the relief sought in the Motion must be filed with the Court, 824 North Market Street, 3rd Floor, Wilmington, Delaware on or before JUNE 15, 2016, AT 4:00 P.M. PREVAILING EASTERN TIME. PLEASE TAKE FURTHER NOTICE that at the same time, you must also serve a copy of the response or objection upon: (i) the Debtors, 902 Broadway, 15th Floor, New York, NY (Attn: Michael Katzenstein); (ii) the Debtors counsel, (a) Greenberg Traurig, LLP, The Nemours Building, 1007 North Orange Street, Suite 1200, Wilmington, DE (Attn: 1 The Debtors in these Chapter 11 Cases, along with the last four (4) digits of each Debtor s federal tax identification number, if applicable, are: 430R Acquisition LLC (7350); Beatport, LLC (1024); Core Productions LLC (3613); EZ Festivals, LLC (2693); Flavorus, Inc. (7119); ID&T/SFX Mysteryland LLC (6459); ID&T/SFX North America LLC (5154); ID&T/SFX Q- Dance LLC (6298); ID&T/SFX Sensation LLC (6460); ID&T/SFX TomorrowWorld LLC (7238); LETMA Acquisition LLC (0452); Made Event, LLC (1127); Michigan JJ Holdings LLC (n/a); SFX Acquisition, LLC (1063); SFX Brazil LLC (0047); SFX Canada Inc. (7070); SFX Development LLC (2102); SFX EDM Holdings Corporation (2460); SFX Entertainment, Inc. (0047); SFX Entertainment International, Inc. (2987); SFX Entertainment International II, Inc. (1998); SFX Intermediate Holdco II LLC (5954); SFX Managing Member Inc. (2428); SFX Marketing LLC (7734); SFX Platform & Sponsorship LLC (9234); SFX Technology Services, Inc. (0402); SFX/AB Live Event Canada, Inc. (6422); SFX/AB Live Event Intermediate Holdco LLC (8004); SFX/AB Live Event LLC (9703); SFX-94 LLC (5884); SFX-Disco Intermediate Holdco LLC (5441); SFX-Disco Operating LLC (5441); SFXE IP LLC (0047); SFX-EMC, Inc. (7765); SFX-Hudson LLC (0047); SFX-IDT N.A. Holding II LLC (4860); SFX-LIC Operating LLC (0950); SFX-IDT N.A. Holding LLC (2428); SFX-Nightlife Operating LLC (4673); SFX-Perryscope LLC (4724); SFX-React Operating LLC (0584); Spring Awakening, LLC (6390); SFXE Netherlands Holdings Coöperatief U.A. (6812); SFXE Netherlands Holdings B.V. (6898). The Debtors business address is 902 Broadway, 15 th Floor, New York, NY

14 Case MFW Doc Filed 05/27/16 Page 2 of 3 Dennis Meloro, Esq.) and (b) Greenberg Traurig, LLP, The Metlife Building, 200 Park Avenue, 38th Floor, New York, NY (Attn: Nathan A. Haynes, Esq.); (iii) counsel for the DIP Lenders and DIP Agent, (a) Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, NY (Attn: Kristopher M. Hansen, Esq., Jonathan D. Canfield, Esq., and Elizabeth Taveras, Esq.) and (b) Young Conaway Stargatt & Taylor, LLP, 1000 N. King Street, Wilmington, DE (Attn: Matthew Lunn, Esq. and Robert Poppiti, Esq.); (iv) the Office of the U.S. Trustee, 844 King Street, Suite 2207, Lockbox 35, Wilmington, DE (Attn: Hannah McCollum, Esq.); and (v) counsel to the Official Committee of Unsecured Creditors, (a) Pachulski Stang Ziehl & Jones LLP, 150 California Street, 15th Floor, San Francisco, CA (Attn: Debra I. Grassgreen, Esq. and Joshua M. Fried, Esq.) and (b) Pachulski Stang Ziehl & Jones LLP, 919 N. Market Street, 17th Floor, Wilmington, DE (Attn: Bradford J. Sandler, Esq. and Colin R. Robinson, Esq.). PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER THE RELIEF SOUGHT IN THE MOTION WILL BE HELD ON JUNE 22, 2016 AT 11:30 A.M. PREVAILING EASTERN TIME BEFORE THE HONORABLE MARY F. WALRATH AT THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, 824 MARKET STREET, 5TH FLOOR, COURTROOM NO. 4, WILMINGTON, DELAWARE Dated: May 27, 2016 GREENBERG TRAURIG, LLP /s/ Dennis A. Meloro Dennis A. Meloro (DE Bar No. 4435) The Nemours Building 1007 North Orange Street, Suite 1200 Wilmington, Delaware Telephone: (302) Facsimile: (302) melorod@gtlaw.com -and- 2

15 Case MFW Doc Filed 05/27/16 Page 3 of 3 Nancy A. Mitchell (admitted pro hac vice) Maria J. DiConza (admitted pro hac vice) Nathan A. Haynes (admitted pro hac vice) Greenberg Traurig, LLP MetLife Building 200 Park Avenue New York, NY Telephone: Facsimile: mitchelln@gtlaw.com diconzam@gtlaw.com haynesn@gtlaw.com Counsel for the Debtors and Debtors-in- Possession 3

16 Case MFW Doc Filed 05/27/16 Page 1 of 15 Exhibit A Resignation Agreement

17 Case MFW Doc Filed 05/27/16 Page 2 of 15

18 Case MFW Doc Filed 05/27/16 Page 3 of 15

19 Case MFW Doc Filed 05/27/16 Page 4 of 15

20 Case MFW Doc Filed 05/27/16 Page 5 of 15

21 Case MFW Doc Filed 05/27/16 Page 6 of 15 Exhibit B Proposed Order

22 Case MFW Doc Filed 05/27/16 Page 7 of 15 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: SFX ENTERTAINMENT, INC., et al., 1 Debtors. Chapter 11 Case No (MFW) (Jointly Administered) Ref Docket No. ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A RESIGNATION AND TRANSITION AGREEMENT WITH ROBERT F.X. SILLERMAN Upon consideration of the motion (the Motion ) 2 of the debtors and debtors in possession in the above-captioned cases (collectively, the Debtors ) for entry of an order (the Order ), pursuant to sections 105(a) and 363(b) of title 11 of the United States Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code ), authorizing the Debtors to enter into a Resignation and Transition Agreement (the Resignation Agreement ) with the Debtors former Chief Executive Officer, Mr. Robert F.X. Sillerman, a copy of which is attached as Exhibit A to the Motion; the Court, having reviewed the Motion and having heard the statements of counsel in support of the relief requested in the Motion at the hearing before the Court (the Hearing ), finds that the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, this 1 The Debtors in these Chapter 11 Cases, along with the last four (4) digits of each Debtor s federal tax identification number, if applicable, are: 430R Acquisition LLC (7350); Beatport, LLC (1024); Core Productions LLC (3613); EZ Festivals, LLC (2693); Flavorus, Inc. (7119); ID&T/SFX Mysteryland LLC (6459); ID&T/SFX North America LLC (5154); ID&T/SFX Q-Dance LLC (6298); ID&T/SFX Sensation LLC (6460); ID&T/SFX TomorrowWorld LLC (7238); LETMA Acquisition LLC (0452); Made Event, LLC (1127); Michigan JJ Holdings LLC (n/a); SFX Acquisition, LLC (1063); SFX Brazil LLC (0047); SFX Canada Inc. (7070); SFX Development LLC (2102); SFX EDM Holdings Corporation (2460); SFX Entertainment, Inc. (0047); SFX Entertainment International, Inc. (2987); SFX Entertainment International II, Inc. (1998); SFX Intermediate Holdco II LLC (5954); SFX Managing Member Inc. (2428); SFX Marketing LLC (7734); SFX Platform & Sponsorship LLC (9234); SFX Technology Services, Inc. (0402); SFX/AB Live Event Canada, Inc. (6422); SFX/AB Live Event Intermediate Holdco LLC (8004); SFX/AB Live Event LLC (9703); SFX-94 LLC (5884); SFX-Disco Intermediate Holdco LLC (5441); SFX-Disco Operating LLC (5441); SFXE IP LLC (0047); SFX-EMC, Inc. (7765); SFX-Hudson LLC (0047); SFX-IDT N.A. Holding II LLC (4860); SFX-LIC Operating LLC (0950); SFX-IDT N.A. Holding LLC (2428); SFX-Nightlife Operating LLC (4673); SFX-Perryscope LLC (4724); SFX-React Operating LLC (0584); Spring Awakening, LLC (6390); SFXE Netherlands Holdings Coöperatief U.A. (6812); SFXE Netherlands Holdings B.V. (6898). The Debtors business address is 902 Broadway, 15 th Floor, New York, NY Capitalized terms otherwise not defined herein shall have the meanings ascribed to them in the Motion.

23 Case MFW Doc Filed 05/27/16 Page 8 of 15 is a core matter pursuant to 28 U.S.C. 157(b)(2), notice of the Motion and the Hearing were sufficient under the circumstances and that no further notice need be given, the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein, and it appearing that the relief requested by this Motion is in the best interests of the Debtors, their estates, creditors and other parties in interest, and good and sufficient cause appearing therefor, IT IS HEREBY ORDERED THAT: 1. For the reasons set forth on the record, the Motion is GRANTED as set forth herein. 2. The Debtors are hereby authorized to enter into the Resignation Agreement. 3. The Debtors are hereby authorized and empowered to take all actions necessary to implement the relief granted in this Order. 4. Notwithstanding Bankruptcy Rule 6004(h), this Order shall be effective and enforceable immediately upon entry hereof. 5. This Court shall retain jurisdiction with respect to all matters relating to the interpretation or implementation of this Order. Dated:, 2016 HONORABLE MARY F. WALRATH UNITED STATES BANKRUPTCY JUDGE 2

24 Case MFW Doc Filed 05/27/16 Page 9 of 15 Exhibit C Katzenstein Declaration

25 Case MFW Doc Filed 05/27/16 Page 10 of 15 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: SFX ENTERTAINMENT, INC., et al., 1 Debtors. Chapter 11 Case No (MFW) (Jointly Administered) DECLARATION OF MICHAEL KATZENSTEIN IN SUPPORT OF MOTION OF THE DEBTORS FOR ENTRY OF AN ORDER PURSUANT TO SECTIONS 105 AND 363 OF THE BANKRUPTCY CODE AUTHORIZING THE DEBTORS TO ENTER INTO A RESIGNATION AND TRANSITION AGREEMENT WITH ROBERT F.X. SILLERMAN Michael Katzenstein makes this declaration under 28 U.S.C. 1746: 1. I am the Chief Restructuring Officer ( CRO ) of SFX Entertainment, Inc. and its subsidiaries (collectively, SFX ), including the above-captioned debtors and debtors-inpossession (collectively, the Debtors ). I began serving as CRO on January 3, I am a senior managing director of FTI Consulting, Inc., an international financial advisory firm ( FTI ). My business address is FTI s New York office located at 3 Times Square, New York, New York The Debtors in these Chapter 11 Cases, along with the last four (4) digits of each Debtor s federal tax identification number, if applicable, are: 430R Acquisition LLC (7350); Beatport, LLC (1024); Core Productions LLC (3613); EZ Festivals, LLC (2693); Flavorus, Inc. (7119); ID&T/SFX Mysteryland LLC (6459); ID&T/SFX North America LLC (5154); ID&T/SFX Q-Dance LLC (6298); ID&T/SFX Sensation LLC (6460); ID&T/SFX TomorrowWorld LLC (7238); LETMA Acquisition LLC (0452); Made Event, LLC (1127); Michigan JJ Holdings LLC (n/a); SFX Acquisition, LLC (1063); SFX Brazil LLC (0047); SFX Canada Inc. (7070); SFX Development LLC (2102); SFX EDM Holdings Corporation (2460); SFX Entertainment, Inc. (0047); SFX Entertainment International, Inc. (2987); SFX Entertainment International II, Inc. (1998); SFX Intermediate Holdco II LLC (5954); SFX Managing Member Inc. (2428); SFX Marketing LLC (7734); SFX Platform & Sponsorship LLC (9234); SFX Technology Services, Inc. (0402); SFX/AB Live Event Canada, Inc. (6422); SFX/AB Live Event Intermediate Holdco LLC (8004); SFX/AB Live Event LLC (9703); SFX-94 LLC (5884); SFX-Disco Intermediate Holdco LLC (5441); SFX-Disco Operating LLC (5441); SFXE IP LLC (0047); SFX-EMC, Inc. (7765); SFX-Hudson LLC (0047); SFX-IDT N.A. Holding II LLC (4860); SFX-LIC Operating LLC (0950); SFX-IDT N.A. Holding LLC (2428); SFX-Nightlife Operating LLC (4673); SFX-Perryscope LLC (4724); SFX-React Operating LLC (0584); Spring Awakening, LLC (6390); SFXE Netherlands Holdings Coöperatief U.A. (6812); SFXE Netherlands Holdings B.V. (6898). The Debtors business address is 902 Broadway, 15 th Floor, New York, NY All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the Motion.

26 Case MFW Doc Filed 05/27/16 Page 11 of On the date hereof, the Debtors filed the Motion of the Debtors for Entry of an Order Pursuant to Sections 105 and 363 of the Bankruptcy Code Authorizing the Debtors to Enter into a Resignation and Transition Agreement with Robert F.X. Sillerman (the Motion ). 4. I submit this Declaration on behalf of the Debtors (the Declaration ) in support of the Motion. Except as otherwise noted, 3 I have personal knowledge of the matters set forth in the Motion. Mr. Sillerman and the Debtors 5. As the founder of SFX, Mr. Sillerman has been the Chairman of the Board and, until his recent resignation, CEO of SFX since its inception in As of the Petition Date, Mr. Sillerman and SFX Entertainment, Inc. (the Company ) were parties to an Employment Agreement dated October 18, 2012 (the Employment Agreement ) and an Indemnification Agreement (the Indemnification Agreement ) dated April 15, 2013 governing the relationship between Mr. Sillerman and the Company Prior to the Petition Date, Mr. Sillerman agreed to resign from his positions with SFX in accordance with the terms of the RSA entered into by and among the Debtors, certain holders of the Debtors Second Lien Notes, and Mr. Sillerman. 7. On March 31, 2016, consistent with the terms of the RSA, the Company and Mr. Sillerman entered into the Resignation Agreement. On the following date, I was appointed the Debtors interim Chief Executive Officer. 3 Certain of the disclosures herein relate to matters within the personal knowledge of the Debtors employees or other professionals at FTI and are based on information provided by them to me. 4 Pursuant to separate motion, the Debtors are seeking to reject the Employment Agreement. 2

27 Case MFW Doc Filed 05/27/16 Page 12 of 15 The Resignation Agreement 8. Pursuant to the Resignation Agreement, Mr. Sillerman has agreed to resign from all officer and director positions at SFX effective as of March 31, 2016, other than his position as Chairman of the Board of Directors of the Company. The Motion contains a summary of the key terms of the Resignation Agreement. 9. Entry into the Resignation Agreement is a sound exercise of the Debtors business judgment. The RSA was structured to require Mr. Sillerman s resignation by April 1, 2016 because the Debtors and the noteholder parties to the RSA believed, inter alia, (i) the Debtors retaining Mr. Sillerman as Chief Executive Officer through the end of March 2016 would allow the Debtors to stabilize their business in the early days of these Chapter 11 Cases and reduce the risk of additional turmoil; and (ii) Mr. Sillerman s resignation by April 1, 2016 would be beneficial because it would allow the Debtors to prepare for the future and attract a management team that could successfully lead the Debtors after their emergence from bankruptcy. 10. In order to comply with their obligations under the RSA, the Debtors sought Mr. Sillerman s resignation by the end of March The RSA itself did not spell out the terms and conditions of the resignation. Mr. Sillerman indicated to the Debtors that he would agree to resign as required by the RSA in exchange for certain limited benefits. Accordingly, the Debtors, the DIP lenders, the pre-petition secured lenders and Mr. Sillerman negotiated the terms of the Resignation Agreement. As part of those negotiations, Mr. Sillerman indicated to the Debtors that he believed he possessed prepetition and postpetition claims arising from his employment that could be asserted against the Debtors. The Debtors disputed those allegations. 3

28 Case MFW Doc Filed 05/27/16 Page 13 of The Debtors believed the cost of the Resignation Agreement to the Debtors was minimal. In addition, the Debtors believed allowing Mr. Sillerman to retain his health benefits was appropriate under the circumstances. 12. Aside from entering into the Resignation Agreement, the Debtors other options were to (i) leave Mr. Sillerman in as Chief Executive Officer, which would violate the RSA, would not have been supported by the Committee, and would not, in the Debtors business judgment, have represented a productive step in moving their restructuring forward; or (ii) remove Mr. Sillerman from office, which also would not comply with the terms of the RSA, and would have resulted in a public dispute with Mr. Sillerman. The Debtors believed that the optics and practical effect of such dispute would have been detrimental to the Debtors business and would have resulted in the expenditure of significant time and money by the Debtors. 13. Accordingly, the Debtors determined that entry into the Resignation Agreement was the best approach. The Resignation Agreement is reasonable, favorable to the Debtors, and for no material incremental cost to the estates allows the Debtors to focus on implementing critical business objectives and moving forward with its restructuring plan, all of which will ultimately inure to the benefit of the Debtors creditors, estates and other parties in interest. Mr. Sillerman has provided a full release of all claims, other than prepetition claims, on account of severance or termination benefits under his Employment Agreement. The Resignation Agreement further avoids the cost of litigation attendant to terminating Mr. Sillerman s employment under other than amicable circumstances, which would far outweigh the costs associated with the Resignation Agreement. Finally, the Committee has made clear to the Debtors that it does not believe Mr. Sillerman should remain in his position of Chief Executive 4

29 Case MFW Doc Filed 05/27/16 Page 14 of 15 Officer, and the Resignation Agreement accomplishes that goal. Therefore, entry into the Resignation Agreement represents a sound exercise of the Debtors business judgment. 14. While Mr. Sillerman continues to service as Chairman of the Board, the Resignation Agreement was not entered into for the purpose of inducing Mr. Sillerman to remain with the Debtors. Rather, the reason is the opposite the Resignation Agreement was entered into to effectuate Mr. Sillerman s resignation from all of his director and officer positions with the SFX Entities other than his role as Chairman of the Board. In any event, even if the Debtors ongoing obligations under the Resignation Agreement were viewed in light of Mr. Sillerman s continued service as Chairman, there is no bonus plan implicated and the relatively modest amounts are reasonable compensation for those services. 5

30 Case MFW Doc Filed 05/27/16 Page 15 of 15 I declare under the penalty of perjury that the foregoing is true and correct, to the best of my knowledge. /s/ Michael Katzenstein Michael Katzenstein Senior Managing Director FTI Consulting, Inc.