In the United States Bankruptcy Court for the District of Delaware

Home , Beatport, Electric Zoo, Mysteryland, Sensation (event), Tomorrowland (festival), TomorrowWorld

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re: Chapter 11

SFX ENTERTAINMENT, INC., et al.,1 Case No. 16-10238 ( )

Debtors. (Joint Administration Requested)

MOTION OF THE DEBTORS FOR ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING (A) THE DEBTORS TO PAY (I) ALL OR A PORTION OF THE PREPETITION CLAIMS OF CERTAIN CRITICAL VENDORS AND FOREIGN VENDORS AND (II) CERTAIN PREPETITION MECHANICS’ LIENS AND SHIPPING AND WAREHOUSING CHARGES IN THE ORDINARY COURSE OF BUSINESS, AND (B) FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED CHECKS AND TRANSFERS

The above-captioned debtors and debtors-in-possession (collectively, the “Debtors”) hereby move the Court (the “Motion”) pursuant to sections 105(a), 363, 503, 1107 and 1108 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”) and Rules

6003 and 6004(h) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) for entry of interim and final orders: (a) authorizing the Debtors to pay (i) all or a portion of the prepetition claims of certain Critical Vendors and Foreign Vendors (each, as defined below) and (ii) certain

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, 15th Floor, New York, NY 10010.

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prepetition Mechanics’ Liens and Shipping and Warehousing Charges (as defined below) in the

ordinary course of business; (b) authorizing financial institutions to honor and process related

checks and transfers and (c) providing any additional relief. In support of this Motion, the Debtors respectfully state as follows:

Status of the Case

1. On the date hereof (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 and a

creditors’ committee has not yet been appointed in these Chapter 11 Cases.

Jurisdiction, Venue and Statutory Predicates

4. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and

1334. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. This matter is

core within the meaning of 28 U.S.C. § 157(b)(2).

5. The statutory predicates for the relief sought herein are sections 105(a), 363, 503,

1107 and 1108 of the Bankruptcy Code and Bankruptcy Rules 6003 and 6004(h).

Background

6. The Debtors along with their non-Debtor affiliates (collectively, “SFX”) are a

leading producer of live events and digital entertainment content focused exclusively on

electronic music culture. The Debtors commenced material operations in 2012 with the intent of

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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.

7. 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.

8. 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.

9. 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.

10. 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’ balance sheet. As part of that transaction, certain of the holders of the secured debt also agreed

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to provide the Debtors with $115 million of 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.

11. A detailed factual background of the Debtors’ business 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”), filed contemporaneously herewith and incorporated herein by reference.

Relief Requested

12. By this Motion, the Debtors seek entry of interim and final orders: (a) authorizing,

but not directing, the Debtors, in their sole discretion, and subject in all respects to the terms and

conditions provided in the interim and final orders, to pay (i) all or a portion of the prepetition claims of certain Critical Vendors and Foreign Vendors and (ii) certain prepetition Mechanics’

Liens and Shipping and Warehousing Charges in the ordinary course of business; (b) authorizing

financial institutions to honor and process checks or electronic transfers used by the Debtors to

pay the foregoing; and (c) granting related relief.

Critical Vendors and Foreign Vendors

13. The Debtors operate in a highly competitive environment, where customer

satisfaction and customer loyalty are of critical importance. Retaining current and attracting new

customers to EDM events, products and services related thereto is vital to the Debtors’ business

and their efforts to reorganize successfully. As a result, the Debtors cannot risk an interruption

of services at their events and festivals. In order to assure the Debtors’ festivals and related

products continue without disruption, the Debtors are dependent on certain domestic and foreign

suppliers and/or providers of services, including high-profile artists and DJs. In many cases, it

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would not be possible replace those vendors on an expedited time frame. In addition, the

Debtors rely on many vendors located outside the United States supporting the Debtors’ global operations.

14. The relief sought herein is immediately necessary in light of the nature of the

Debtors’ operations. If the requested relief is not granted and certain critical vendors refuse to perform at the Debtors’ festivals or to continue to supply goods and/or services to the Debtors postpetition, the Debtors will be unable to continue their operations, keep their customers satisfied, or maintain important relationships with sponsors and other business partners. The occurrence of any of these outcomes will endanger the Debtors’ successful reorganization.

A. The Debtors’ Vendors and Service Providers

15. The vendors fall into two general categories: (i) sole source and limited suppliers that the Debtors identify as critical to the Debtors’ operations (the “Critical Vendors”); and

(ii) service or good providers located outside the United States (the “Foreign Vendors”).

I. Critical Vendors

16. The Debtors operate in two segments: (i) producing live events and festivals and

(ii) a digital platform that provides year-round coverage and access to electronic music via an online streaming service and music store. The Debtors and their professionals analyzed the importance of vendors in each segment to ensure that they are in fact critical. As a result, the

Debtors have identified non-exhaustive categories that contain Critical Vendors:

Creative Talent, Artists and Agencies.

17. The Debtors’ festivals are famous for their elaborate stage designs and themes.

Most festivals are multi-day events, attracting hundreds of thousands of fans. The Debtors

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partner with creative talent to conceive of fairytale themes for the festivals, and work with performers to implement that theme through stages and scenery.

18. The Debtors rely on a select class of vendors and creative artists (including the artists’ agencies and labels) that conceive of themes that compliment EDM and are involved in critical stages of the production. These EDM mavens are limited and highly sought after and critical to the Debtors’ operations.

19. Additionally, the Debtors require the ability to sign top talent for their festivals.

A festival’s profitability hinges in significant part on these headliners. The pool of artists that can reliably attract large numbers of fans is extremely limited. During the timeframe leading up to the bankruptcy filings, some artists have already demanded more stringent payments terms— asking for upfront payments. Word of any delay in payment to artists will ripple among the small, tight-knit EDM community and dissuade artists and DJs from contracting with the Debtors in the future. These musicians are vital to a successful reorganization as there is a limited talent pool and number of top artists that are able to attract millions of fans to SFX’s events.

20. The artists are generally represented by one of three agencies. A disruption with one talent agency will not only hamper the Debtors’ ability to negotiate with that agency going forward but will likely be known among all of the vital talent agencies in the music industry.

The Debtors do not have a long-term arrangement with any of these agencies; normally artists are booked on a one-off basis. If the agencies are not paid, they may not steer artists to the

Debtors; instead steering them to the Debtors’ competitors. As a result, through this Motion, the

Debtors seek to pay amounts due to the creative talent, which is critical to the Debtors’ operations.

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Production Crews and Critical Service Providers.

21. As noted above, SFX’s festivals showcase the most advanced stages that incorporate state-of-the-art-technology such as pyrotechnics, lasers, waterfalls, mobile elements and LED screens that are deployed in tandem with the beats of the music to submerge festivalgoers in a parallel world. Surrounding some of these stages are themed viewing platforms decked with bars, pools and VIP clubs.

22. TomorrowWorld, for instance, provides up to nine stages, amusement rides, and experience-triggering activations scattered throughout a massive hilled venue that fans can discover over the course of days. Each of TomorrowWorld’s stages informs the chapters of a narrative capturing the festival’s theme.

23. In order to implement and produce such creative sets, the Debtors outsource the production to third parties. Many of these vendors have institutional knowledge of the Debtors’ festivals and the safety needs associated with producing sets and stages. These include, but are not limited to, companies in charge of creating furniture, décor and other props that enhance the fans’ experiences at the events; construction and transportation crews that assemble, disassemble and transport the stages worldwide; and the graphic design teams. The Debtors conduct business with many of these vendors pursuant to short term purchase orders without a long-term agreement.

24. For these live events, in many instances, the Debtors’ vendors are extremely limited in nature. Some of these vendors are “sole-source” suppliers that maintain an effective monopoly on the goods necessary to run certain of the Debtors’ festivals. In other instances, it is

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simply too difficult and costly, both in terms of time and pricing, for the Debtors to find another

vendor who would supply comparable goods or services.2

25. By way of example, one of the Debtors’ premier stage-makers is Stageco Belgium

NV (“Stageco”), which works with the Debtors to create and produce some of the Debtors’ largest tours, such as TomorrowLand. Stageco incorporates elements such as water, fire and moving parts onto elaborate stages and sets. The Debtors are then able to transport the actual stages and sets internationally to the United States and Brazil to capitalize further on the

Debtors’ brands. The Debtors do not have a long-term agreement with Stageco. Delaying payment to Stageco and similar vendors creates significant risk to the Debtors’ enterprise value.

26. Additionally, the Debtors rely on regional and smaller companies in connection with an upcoming event or festival who in many instances rely completely on the Debtors for their revenue. Some of these vendors are entities that provide essential products or services to the Debtors; these entities may not survive if the Debtors stop making payments for such products or services. Keeping these small yet essential vendors afloat is also important for the

Debtors’ success in these Chapter 11 Cases and the Debtors’ long-term viability.

Venue Owners.

27. The Debtors scour various locations to ensure that the setting is appropriate for the specific planned event. Venues that can accommodate SFX events are limited—SFX requires massive lawn areas, some with camping grounds, to accommodate the thousands of fans that attend a festival. The Debtors need to ensure that these venues will be available for upcoming performances, and certain of these venues do not have a long-term obligation to the

2 The Debtors seek to pay one vendor that is owned by a current director of SFX. This entity provides the necessary, specialized medical care to meet the venue, legal and permitting requirements for mass gatherings, such as the Debtors’ festivals. The Debtors’ contract with that entity has expired, but the Debtors require the services going forward. Further, the vast majority of the amounts owed by the Debtors are pass-through expenses that the vendor owes as reimbursements to specialty medical providers.

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Debtors. If these entities are not paid, these venues may be unavailable to the Debtors in the future, and may also negatively affect the Debtors’ ability to contract with other venues.

Accordingly, the Debtors seek authority to pay the amount owed to such venues.

Beatport Royalties and Service Fees.

28. Beatport offers EDM fans and DJs an online music store to purchase high quality audio files and a music and audiovisual streaming service. As part of its operations and to ensure exclusive and engaging content remains in its online store and available for streaming, Beatport has obligations to pay certain rightsholders of copyrighted works, including copyright owners of:

(i) the sound recordings or masters that Beatport streams and sells and (ii) the underlying musical compositions embodied in those recordings. To secure these rights, Beatport entered into agreements with thousands of record labels, either directly or through distribution agents. To acquire the rights to the musical compositions, Beatport entered into agreements with music publishers, either directly or through agencies that collect royalties for mechanical rights, or performance rights organizations (known as PROs) that collect royalties for public performance of said musical compositions throughout the world (e.g., ASCAP (US), PRS (Europe)).

29. Beatport pays royalties to record labels, distributors, PROs and mechanical agencies on a monthly and/or quarterly basis, depending on the agreement with the specific entity. Any delay in payment to these vendors would adversely impact Beatport’s repertoire available for sale and streaming, which creates a risk that future artists, labels and rightsholders may refuse to do business with the Debtors. These entities may cease to provide Debtors with new and/or exclusive content or may outright refuse to permit the Debtors to stream the music.

Furthermore, these entities may not survive if the Debtors stop making payments for such products or services.

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30. In fact, the critical nature of these payments was evidenced in August 2015 when

Beatport delayed its payment to independent record labels. SFX issued an apology and paid the

rightsholders, but the resulting negative publicity damaged Beatport’s reputation in the

marketplace. SFX has worked hard and believes it restored confidence in Beatport, and it would

be extremely difficult or potentially impossible, to re-establish that recently re-established goodwill if the Debtors do not timely pay these obligations to the rightsholders. Another disruption of Beatport’s payment to vendors may weaken the Debtors’ reputation and standing in the EDM community and endanger its ongoing business, not only with respect to the Beatport brand, but also to the SFX brand worldwide.

31. The Debtors and their advisors have carefully examined whether the agreement to pay some or all of certain vendors’ unsecured claims, on an expedited basis, would reduce the

immediate and irreparable harm to the Debtors’ business operations that would result from the

nonpayment of any such claims. Specifically, the Debtors have undertaken a thorough review of

their accounts payable and their list of prepetition vendors to identify those vendors who are

uniquely critical to the Debtors’ operations.

32. In this regard, the Debtors have and continue to consult with the appropriate

members of their management team to identify those vendors that are in fact critical to the

Debtors’ operations, using the following criteria: (a) whether the vendor in question is a “sole-

source” or “limited source” provider; (b) whether the Debtors receive advantageous pricing or

other terms from a vendor such that replacing the vendor postpetition would result in

significantly higher costs to the Debtors; (c) the overall impact on the Debtors’ operations if the

vendor ceased or delayed shipments; and/or (d) whether the vendor might be able to obtain (or

has obtained) mechanics’ liens, possessory liens, shippers’ liens or similar state law trade liens

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on property necessary to the Debtors’ ongoing operations. Applying these criteria, the Debtors have designated, in their discretion, certain vendors who appropriately satisfy the above criteria as vendors critical to their operations.

33. As illustrated in detail above, the Critical Vendors are absolutely essential to the

Debtors’ ability to operate their business. The Debtors believe, in the exercise of their sound business judgment, that the failure to satisfy the Critical Vendors’ unsecured claims, in whole or in part, would result in the Critical Vendors refusing to provide critical goods, services and supplies to the Debtors during the postpetition period. This outcome would have an immediate and devastating effect on the Debtors’ ability to operate their business. Moreover, any delay attendant to a change from a Critical Vendor to another vendor of similar products or services

(assuming one could be located) would likely delay the Debtors’ operations and shake the confidence of the Debtors’ sponsors and business partners.

II. Foreign Vendors

34. In the ordinary course of business, the Debtors obtain certain critical goods and services from Foreign Vendors, including vendors who provide supplies needed for producing and promoting live events abroad. The Debtors rely on vendors in foreign countries to promote, market and organize the logistics of events. While in some instances, a local non-Debtor affiliate is responsible to pay vendors, the Debtors may be directly liable for these obligations.

35. If Foreign Vendors are not paid, they may withhold goods from the Debtors (or the non-Debtor affiliates), terminate service contracts and cause other potential interruptions, for which the Debtors may not have effective recourse. The resulting service interruptions could have disastrous consequences for the Debtors’ business operations due to the lack of alternative service providers or the amount of time needed to locate an alternative service providers.

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36. Additionally, some of the Foreign Vendors may lack the sufficient minimum

contacts with the United States to subject them to the jurisdiction of this Court or provisions of

the Bankruptcy Code. Some Foreign Vendors may sue one of the Debtors (or a non-Debtor

affiliate) in a foreign court to recover prepetition amounts owed to them. If successful, the

Foreign Vendors may exercise post-judgment remedies that could include withholding vital supplies from the Debtors.

37. Since the Debtors would have limited, if any, effective and timely recourse, their business could be irreparably harmed by any such action to the detriment of their estates and

their creditors. Accordingly, by this Motion, the Debtors seek authorization to pay certain claims

held by Foreign Vendors to enable the Debtors to continue to receive the services of and

eliminate the risk of potential collection attempts.

B. Request to Pay Vendors

38. The Debtors seek the authority to pay, in their sole discretion and business

judgment, all or a portion of the prepetition claims held by Critical Vendor and Foreign Vendors

(collectively, the “Vendor Claims”). The Debtors estimate the maximum amount needed to pay

the Vendor Claims is approximately $10,000,000 (the “Vendor Claims Cap”).3 Of this amount,

the Debtors are requesting authority to pay up to approximately $5,000,000 prior to the hearing

to authorize relief requested herein on a final basis. The Vendor Claims Cap represents the

Debtors’ best estimate as to how much must be paid to such creditors to continue an

uninterrupted supply of critical goods and services. The Debtors may pay less than the requested

amount.

3 The Vendor Claims Cap does not include any amounts for any prepetition claims that the Debtors have requested authority to pay under other orders entered by this Court in these Chapter 11 Cases.

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39. To minimize the amount of payments required, the Debtors request authority to

identify which Critical Vendors and Foreign Vendors will receive payments under this Motion in

the ordinary course of their business. Identifying the potential Critical Vendors and Foreign

Vendors now would likely cause all such vendors to demand payment in full.4 The Debtors

propose to pay the Vendor Claims of each Critical Vendor or Foreign Vendor that demands

payment of a prepetition claim, but also agrees to continue to supply goods or services to the

Debtors for a period of time acceptable to the Debtors, on (a) the normal and customary trade

terms, practices and programs (including, but not limited to, credit limits, pricing, cash discounts,

timing of payments, allowances, rebates, coupon reconciliation, normal product mix and

availability and other applicable terms and programs), that were most favorable to the Debtors

and in effect between such Critical Vendor or Foreign Vendor and the Debtors prior to the

Petition Date (the “Customary Trade Terms”) or (b) such other trade terms that are agreed to

by the Debtors and such Critical Vendor or Foreign Vendor (the “Agreed Trade Terms,” and

together with the Customary Trade Terms, the “Governing Trade Terms”).

40. Further, the Debtors will take any and all appropriate steps to cause such Critical

Vendor or Foreign Vendor to repay payments made to it on account of its prepetition Vendor

Claim to the extent that such payments exceed the postpetition amounts then owing to such

Critical Vendor or Foreign Vendor, in the event that a Critical Vendor or Foreign Vendor that has received payment of a prepetition claim later refuses to continue to supply goods or services for the applicable period in compliance with the Vendor Agreement or Order of this Court.

4 A list of potential Critical Vendors and Foreign Vendors will be provided to the Court, the U.S. Trustee (as defined herein), the professionals retained by the Committee (as defined herein) appointed in these Chapter 11 Cases, once formed, counsel to the Debtors’ postpetition lenders (the “DIP Lenders”) and counsel to the ad hoc group of holders of the Debtors’ 9.625% Second Lien Senior Secured Notes due 2019 (the “Ad Hoc Group”); provided, however, that these entities shall keep the identity of potential Critical Vendors and Foreign Vendors confidential and shall not disclose the identity of such potential Critical Vendors and Foreign Vendors to anyone, including, but not limited to, any member of the Committee, without prior written consent from the Debtors.

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41. To ensure that Critical Vendors and Foreign Vendors transact business with the

Debtors in accordance with the Governing Trade Terms, the Debtors propose to take all

appropriate efforts to cause Critical Vendors and Foreign Vendors to enter into an agreement,

substantially similar to the form of the letter attached hereto as Exhibit A (“Vendor

Agreement”). The Debtor moreover will deliver a copy of the order granting the relief sought herein.

42. Additionally, the Debtors propose that payment of the Vendor Claims include a

communication of the following statement:

By accepting this payment, the payee agrees to the terms of the Order of the U.S. Bankruptcy Court for the District of Delaware, dated ______, 2016, in the Chapter 11 Cases of SFX Entertainment, Inc., et al. (Case Nos. 16-_____(_) through 16- ____(_)), entitled Order Authorizing (A) Debtors to Pay (I) All or a Portion of the Prepetition Claims of Certain Critical Vendors and Foreign Vendors and (II) Certain Prepetition Mechanics’ Liens and Shipping and Warehousing Charges in the Ordinary Course of Business, and (B) Financial Institutions to Honor and Process Related Checks and Transfers, and submits to the jurisdiction of that Court for enforcement thereof.

43. As a further condition of receiving payment on a Vendor Claim, the Debtors

propose that a Critical Vendor and Foreign Vendor agree to take whatever action is necessary to

remove any existing trade liens at such creditor’s sole cost and expense and waive any right to

assert a trade lien on account of the paid Vendor Claim. In addition, the Debtors may, in their

discretion, condition receipt of payment on a Vendor Claim on the Critical Vendor’s or Foreign

Vendor’s agreement to waive any right to assert a claim such creditor has under

section 503(b)(9) of the Bankruptcy Code.

44. However, the Debtors propose that their inability to enter into a Vendor

Agreement shall not preclude them from paying a Vendor Claim when, in the exercise of their

reasonable business judgment, such payment is necessary to the Debtors’ operations

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45. The Debtors will maintain a matrix summarizing (a) the name of each Critical

Vendor and Foreign Vendor paid on account of Vendor Claims, (b) the amount paid to each

Critical Vendor and Foreign Vendor on account of its Vendor Claim and (c) a brief description of the goods or services provided by such Critical Vendor or Foreign Vendor. This matrix will periodically be provided to the following parties (together, the “Notice Parties”): the United

States Trustee for the District of Delaware (the “U.S. Trustee”), professionals retained by the official committee of unsecured creditors appointed in these Chapter 11 Cases (the

“Committee”), if any, counsel to the DIP Lenders and counsel to the Ad Hoc Group; provided, however, that the Notice Parties shall keep the matrix confidential and shall not disclose any of the information in the matrix to anyone, including, but not limited to, any member of the

Committee, without prior written consent from the Debtors.

46. Payment of some or all of the Vendor Claims is necessary to preserve operations so as to afford the Debtors the ability to reorganize their business. The need for the flexibility to pay such claims is particularly acute in the period immediately following the Petition Date.

During this period, the Debtors, their attorneys, financial advisors and other professionals will be focusing on preserving the value of the Debtors’ assets so that the Debtors can maximize the value of their estates. At the same time, while the Debtors are working to stabilize the business, negotiating case strategies and other long-term planning, Critical Vendors and Foreign Vendors may attempt to assert their considerable leverage by denying the provision of goods and services going forward.

47. Furthermore, if the relief sought herein is not granted, Critical Vendors and

Foreign Vendors will have no incentive to continue to finance the Debtors on beneficial trade terms and may insist that the Debtors pay for their goods on accelerated payment terms, cash in

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advance or a cash-on-delivery basis. Any further expansion of these activities by other Critical

Vendors and Foreign Vendors would be detrimental to the Debtors, their estates and their

creditors.

48. The continued availability of trade credit, in amounts and on terms consistent with

those the Debtors were able to obtain over the years, is clearly advantageous to the Debtors. It

allows the Debtors to maintain and enhance necessary liquidity and focus on maximizing the

value of their estates in these Chapter 11 Cases. Preserving working capital through the retention

or reinstatement of their normally advantageous trade credit terms will enable the Debtors to

stabilize business operations at this critical time, to maintain their competitiveness and to

maximize the value of their business for the benefit of all interested parties. Conversely, any

deterioration of trade credit or disruption or cancellation of deliveries of goods or provision of

essential services could be severely detrimental for the Debtors’ restructuring or sale efforts.

Mechanics’ Liens and Shipper and Warehousing Charges

49. As part of their business operations, the Debtors rely on a variety of service

providers, production crews, common carriers, shippers, truckers and a network of warehouse

facilities (collectively, the “Shippers and Warehousemen”). The Debtors use extravagant and

costly sets, lightshows and pyrotechnics to enhance the customers’ experiences at electronic

music festivals. Many of these sets are built by third-party providers, are in transit between

different venues or are stored for future use both by the Debtors and third-party licensees. It is essential to the Debtors’ business that the Debtors may transport and use these sets and accessories without interruption.

50. The services provided by the Shippers and Warehousemen, including the timely, reliable delivery of goods for the Debtors, and the storage of such goods for later use, is an

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absolute necessity to the Debtors’ ability to conduct business in an efficient manner. The

Debtors’ inability to access their materials in preparation for events would be detrimental to their business and deteriorate the value of their estates.

51. It is essential for the Debtors’ continuing business viability, as well as to the value of their estates, that they receive certain critical services and maintain a reliable distribution of their sets worldwide. Because the Debtors are in many cases dependent on third parties to carry out various distribution and storage functions, it is essential that the filing of these Chapter 11

Cases not provide an excuse for any third party to cease performing timely services. For example, if the Debtors cannot ship their sets to different parts of the country, then the Debtors will either be forced to purchase these expensive sets and accessories elsewhere or risk diminishing the customer experience at the Debtors’ events. At the very least, the Debtors will likely suffer a significant loss of credibility and customer goodwill, thereby causing substantial harm to the Debtors’ business.

52. Further, under the laws of some states, a service provider, such as the carrier or a warehouseman, may have a lien on the goods in its possession that secures the prompt satisfaction of charges or expenses incurred in connection with the repair, transportation or storage of the goods. In addition, pursuant to section 363(e) of the Bankruptcy Code, a carrier or a warehouseman, as a bailee, may be entitled to adequate protection of a valid possessory lien.

The Shippers and Warehousemen may argue that they are entitled to possessory liens for repairs, transportation and storage, as applicable, of the goods in their possession as of the Petition Date and may refuse to deliver or release such goods before their claims have been satisfied and their liens redeemed.

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53. By this Motion, the Debtors seek to prevent the breakdown of their operations,

including, but not limited to, their shipping and warehouse network and the contractors working

on the sets. The Debtors expect that, as of the Petition Date, certain of the Shippers and

Warehousemen will have outstanding invoices and/or potential liens for services performed

and/or goods that were delivered to the Debtors prior to the Petition Date (collectively with any

possessory liens, the “Mechanics’ Liens and Shipping and Warehousing Charges”). If the

Debtors do not pay the Mechanics’ Liens and Shipping and Warehousing Charges, certain of the

Shippers and Warehousemen may abruptly discontinue services, withhold shipment of essential

goods and may even refuse to release essential goods.

54. As a result, the Debtors seek authority to pay certain of the Mechanics’ Liens and

Shipping and Warehouse Charges, as, in their business judgment, the Debtors determine, subject

to the requirements imposed on the Debtors under any order regarding the Debtors’ postpetition

financing and use of cash collateral, is necessary or appropriate to (a) satisfy a lien or release of

critical or valuable goods detained in transit or in a warehouse pending payment, (b) maintain a reliable, efficient and smooth distribution system and (c) induce critical service providers to continue to provide services and the Shippers and Warehousemen to continue to carry goods and make timely delivery.

55. It is necessary and essential to the value of their estates that the Debtors are permitted to make payments on account of certain Mechanics’ Liens and Shipping and

Warehousing Charges. Accordingly, by this Motion, the Debtors seek an order authorizing them, inter alia, to make payments to the Shippers and Warehousemen as the Debtors, in their business judgment, determine are necessary or appropriate in order to obtain the release of the goods held by such Shippers and Warehousemen. Such payments are not expected to exceed

18 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 19 of 28

approximately $200,000. The Debtors seek authority to make such payments, including, but not

limited to, those set forth on Exhibit B hereto, in the amounts and to the extent necessary to

satisfy non-disputed prepetition Mechanics’ Liens and Shipping and Warehousing Charges and

to satisfy any potential, asserted or actual possessory liens, if any, on the goods that may be held

by any Shippers and Warehousemen pending the payment of such charges. 5 The Debtors

represent that they will only pay Mechanics’ Liens and Shipping and Warehousing Charges

where they believe, in their business judgment, benefits to their estates and creditors from

making such payments would exceed (a) the costs that their estates would incur by bringing an

action to compel the turnover of such goods and (b) the delays associated with such actions.

56. The Debtors submit that the total amount to be paid to the Shippers and

Warehousemen if the requested relief is granted is minimal compared to the importance and

necessity of the Shippers and Warehousemen and the losses the Debtors may suffer if their

operations are disrupted. Moreover, the Debtors do not believe there are viable timely

alternatives to the Shippers and Warehousemen that they have used prior to the Petition Date.

Request for Authority for Financial Institutions

57. The Debtors also request that all applicable banks and other financial institutions

be authorized to process and honor all checks presented for payment of Vendor Claims and

Mechanics’ Liens and Shipping and Warehousing Charges, and to honor all fund transfer

requests made by the Debtors related to Vendor Claims and Mechanics’ Liens and Shipping and

Warehousing Charges, regardless of whether the checks were presented or fund transfer requests

5 In the event that a claim held by a creditor meets the criteria of one or more of the categories discussed in this Motion, the Debtors shall classify any and all claims of Shippers and Warehousemen as arising as Mechanics’ Liens and Shipping and Warehousing Charges, unless otherwise agreed to by the Required DIP Lenders and Requisite Noteholders (each as defined in the Debtors’ DIP motion).

19 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 20 of 28

were submitted before or after the Petition Date, provided that funds are available in the Debtors’

accounts to cover such checks and fund transfers. In addition, in an abundance of caution, the

Debtors request that the Court enter an order confirming that all banks and other financial

institutions are authorized to rely on the Debtors’ designation of any particular check as

approved by the attached proposed order.

Basis for Relief Requested

A. The Court May Authorize Payment of the Vendor Claims and the Mechanics’ Liens and Shipping and Warehousing Charges Pursuant to Section 363 of the Bankruptcy Code

58. The Court may authorize the Debtors to pay the Vendor Claims and the

Mechanics’ Liens and Shipping and Warehousing Charges under Bankruptcy Code

section 363(b). That section provides that “[t]he trustee, after notice and a hearing, may use, sell,

or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C.

§363(b). Under this section, a court may authorize a debtor to pay certain prepetition claims. See

In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989) (finding that a sound

business justification existed to justify payment of certain claims); Armstrong World Indus., Inc.

v. James A. Phillips, Inc., (In re James A. Phillips, Inc.), 29 B.R. 391, 397 (S.D.N.Y. 1983)

(authorizing, pursuant to section 363, contractor to pay prepetition claims of some suppliers who were potential lien claimants, because payments were necessary for general contractors to release funds owed to debtors); In re Hancock Fabrics, Inc., Case No. 07-10353 (BLS) (Bankr. D. Del.

Apr. 13, 2007) (pursuant to section 363, authorizing payment of prepetition claims to certain vendors deemed critical by debtors).

59. As detailed above, maintaining the products and services provided by the Critical

Vendors and Foreign Vendors is vital to the Debtors’ continuing business operations and the success of these Chapter 11 Cases. As such, the Debtors submit that the amount of the Vendor

20 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 21 of 28

Claims Cap pales in comparison to the likely damage to the Debtors’ business should the relief requested herein not be granted, resulting in an impediment to a successful reorganization.

Accordingly, not only will the Debtors’ other creditors not be impaired by payment of the

Vendor Claims, but such creditors will benefit by this Court’s empowering the Debtors to negotiate payment to the Critical Vendors and Foreign Vendors to achieve a smooth transition into bankruptcy and evaluate and implement case alternatives. In light of the foregoing, the

Debtors submit that they have a sound business purpose for payment of the Vendor Claims.

60. Further, the continuation of the Debtors’ positive relationship with the Shippers and Warehouseman is imperative to their continued operation and chances to maximize value, and that the payment of the prepetition Mechanics’ Liens and Shipping and Warehousing

Charges is essential to assure the maintenance of the value of their estates and that the Court should exercise its equitable power to grant the relief requested in this Motion.

B. The Court May Also Grant the Motion Pursuant to its Equitable Powers under Section 105(a) of the Bankruptcy Code and the Necessity of Payment Doctrine

61. Section 105(a) of the Bankruptcy Code authorizes the Court to issue “any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the

Bankruptcy Code].” 11 U.S.C. § 105(a). The purpose of section 105(a) is “to assure the bankruptcy courts [sic] power to take whatever action is appropriate or necessary in aid of the exercise of [its] jurisdiction.” 2 Collier on Bankruptcy ¶ 105.01 (15th ed. rev. 2010). Under section 105(a) of the Bankruptcy Code, courts may permit pre-plan payments of prepetition obligations when essential to the continued operation of a debtor’s businesses. See In re Just for

Feet, Inc., 242 B.R. 821, 825 (D. Del. 1999). The Debtors submit that the relief requested in this

Motion is critical to the Debtors and is justified under section 105(a) of the Bankruptcy Code.

21 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 22 of 28

62. Moreover, the relief requested in this Motion is supported by the well-established

“necessity of payment” rule (also referred to as the “doctrine of necessity”). The United States

Court of Appeals for the Third Circuit recognized the “necessity of payment” doctrine in In re

Lehigh & New England Railway Co., 657 F.2d 570, 581 (3d Cir. 1981). The Third Circuit held that a court could authorize the payment of prepetition claims if such payment was essential to the continued operation of the debtor. See id. (stating courts may authorize payment of prepetition claims when there “is the possibility that the creditor will employ an immediate economic sanction, failing such payment”); see also In re Penn Central Transp. Co., 467 F.2d

100, 102 n.1 (3d Cir. 1972) (holding necessity of payment doctrine permits “immediate payment of claims of creditors where those creditors will not supply services or material essential to the conduct of the business until their pre-reorganization claims have been paid”); Official Comm. of

Unsecured Creditors of Motor Coach Indus. Int’l, Inc. v. Motor Coach Indus. Int’l, Inc. (In re

Motor Coach Int’l, Inc.), Civ. No. 09-078, 2009 U.S. Dist. LEXIS 10024 (D. Del. Feb. 10, 2009)

(reaffirming viability of doctrine of necessity in Third Circuit with respect to payment of prepetition critical vendor claims); Pension Benefit Guarantee Corp. v. Sharon Steel Corp. (In re

Sharon Steel Corp.), 159 B.R. 730, 736 (Bankr. W.D. Pa. 1993) (embracing “necessity of payment” doctrine and citing Leigh & New England Ry. Co. with approval); In re Columbia Gas

Sys., Inc., 171 B.R. 189, 191-92 (Bankr. D. Del. 1994) (same). The rationale in these cases applies to the Debtors’ efforts to continue their businesses and to preserve the going concern value of their businesses for the benefit of their creditors. Without the authority to pay the

Vendor Claims and the Mechanics’ Liens and Shipping and Warehousing Charges, the Debtors’ ability to continue operations and to effectively reorganize would be significantly reduced.

22 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 23 of 28

63. Allowing the Debtors to pay Vendor Claims and the Mechanics’ Liens and

Shipping and Warehousing Charges, pursuant to all or some of the above-referenced provisions, is especially appropriate where, as here, doing so is consistent with the “two recognized policies” of chapter 11 of the Bankruptcy Code—preserving going concern value and maximizing the value of property available to satisfy creditors. See Bank of Am. Nat’l Trust & Says. Assoc. v.

203 N LaSalle St. P’ship, 526 U.S. 434, 453 (1999).

64. Courts in this district regularly grant relief consistent to that which the Debtors are seeking in this Motion. See, e.g., In re Appleseed’s Intermediate Holdings LLC, Case No.

11-10160 (KG) (Bankr. D. Del. Feb. 23, 2011) (authorizing payment to critical vendors); In re

PMGI Holdings, Inc., Case No. 13-12404 (CSS) (Bankr. D. Del. Sept. 18, 2013) (authorizing payments to shippers and warehousemen); In re ATLS Acquisition, LLC, Case No. 13-10262

(PJW) (Bankr. D. Del. Feb. 20, 2013) (same). The Debtors respectfully submit that similar relief is warranted in these Chapter 11 Cases because without the goods and services provided by the

Critical Vendors, Foreign Vendors, Shippers and Warehousemen, the Debtors could not continue in an uninterrupted manner to operate their businesses or progress towards a successful reorganization.

65. The Debtors also believe that a portion of the Vendor Claims arise from goods received by the Debtors in the ordinary course of business within the twenty (20) days immediately preceding the Petition Date. In that regard, those Vendor Claims would be afforded administrative expense priority under sections 503(b)(9) and 507(a)(2) of the Bankruptcy Code, see 11 U.S.C. §§ 503(b)(9), 507(a)(2), and the Debtors would be required to pay such claims in full as a prerequisite to confirmation of a chapter 11 plan. See id. § 1129(a)(9) (requiring

payment in full of claims entitled to priority under section 507(a)(2)). Accordingly, to the extent

23 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 24 of 28

any Vendor Claims would be entitled to priority under section 503(b)(9), the relief requested

herein will affect only the timing of the payment.

66. Further, as noted above, while the automatic stay generally prevents

counterparties from terminating the provision of goods and services based on prepetition

defaults, Foreign Vendors are not always either aware of or willing to respect such restrictions, and it can be unduly burdensome and costly to enforce the automatic stay against such counterparties. If the Foreign Vendors are not paid, the Foreign Vendors may take action against

the Debtors based on the belief that they are not subject to the jurisdiction of this Court and, thus,

not subject to the automatic stay provisions of section 362. The Foreign Vendors could, among

other things, attempt to sue the Debtors in a foreign court for unpaid prepetition debts. The

Foreign Vendors could also seek to attach or seize the Debtors’ foreign assets. More importantly

the Foreign Vendors could refuse to do business with the Debtors. The impact of such actions

against the Debtors would be disastrous for the Debtors’ reorganization efforts.

C. The Court May Also Authorize the Relief Requested as a Valid Exercise of the Debtors’ Fiduciary Duties

67. The Debtors, operating their businesses as debtors-in-possession pursuant to

sections 1107(a) and 1108 of the Bankruptcy Code, are fiduciaries “holding the bankruptcy

estate[s] and operating the business for the benefit of . . . [their] creditors and (if the value

justifies) equity owners.” In re CoServ, 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002). Implicit in

the duties of a debtor-in-possession is the duty “to protect and preserve the estate, including an

operating business’s going-concern value.” Id.

68. It has been noted that there are instances in which a debtor-in-possession can

fulfill its fiduciary duty “only . . . by the preplan satisfaction of a pre-petition claim.” Id. The

CoServ court specifically noted that preplan satisfaction of prepetition claims would be a valid

24 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 25 of 28

exercise of a debtor’s fiduciary duty when the payment “is the only means to effect a substantial

enhancement of the estate” and also when the payment was to “sole suppliers of a given

product.” Id. at 497-98. The court provided a three-pronged test for determining whether a preplan payment on account of a prepetition claim was a valid exercise of a debtor’s fiduciary duty:

First, it must be critical that the debtor deal with the claimant. Second, unless it deals with the claimant, the debtor risks the probability of harm, or, alternatively, loss of economic advantage to the estate or the debtor’s going concern value, which is disproportionate to the amount of the claimant’s pre-petition claim. Third, there is no practical or legal alternative by which the debtor can deal with the claimant other than by payment of the claim.

Id. at 498.

69. Payment of the Vendor Claims and the Mechanics’ Liens and Shipping and

Warehousing Charges meets the test set forth in CoServ. As described above, the Debtors have narrowly tailored the amount to be paid to those parties that are essential to the Debtors’ ongoing business operations. Any shutdown of the Debtors’ operations could cost the Debtors’ estates substantial amounts in lost revenues, and furthermore, could adversely impact the Debtors’ ongoing operations. Accordingly, the harm and economic disadvantage that would stem from the failure to pay the Critical Vendors, Foreign Vendors, Shippers and Warehousemen is grossly disproportionate to the amount of the prepetition claims that would have to be paid in order to ensure ongoing business with the Debtors, ensure the continued supply of critical goods and services to the Debtors and facilitate the Debtors’ continued business operations and reorganization efforts. Finally, the Debtors have examined other options short of payment of the

Vendor Claims and the Mechanics’ Liens and Shipping and Warehousing Charges and have determined that to avoid significant disruption of the Debtors’ business operations, there exists no practical available alternative to payment of such claims. Accordingly, the Debtors request that the Court grant the relief requested herein.

25 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 26 of 28

Bankruptcy Rule 6003 Is Satisfied and Request for Waiver of Stay

70. The Debtors further submit that because the relief requested in this Motion is necessary to avoid immediate and irreparable harm to the Debtors for the reasons set forth herein and in the First Day Declaration, Bankruptcy Rule 6003 has been satisfied and the relief requested herein should be granted.

71. Specifically, Bankruptcy Rule 6003 provides:

Except to the extent that relief is necessary to avoid immediate and irreparable harm, the court shall not, within 21 days after the filing of the petition, issue an order granting the following: . . . (b) a motion to use, sell, lease, or otherwise incur an obligation regarding property of the estate, including a motion to pay all or part of a claim that arose before the filing of the petition, but not a motion under Rule 4001 . . . .

Fed. R. Bankr. P. 6003.

72. The Third Circuit Court of Appeals has interpreted the “immediate and irreparable harm” language in the context of preliminary injunctions. In that context, irreparable harm has been interpreted as a continuing harm that cannot be adequately redressed by final relief on the merits and for which money damages cannot provide adequate compensation. See, e.g., Norfolk S. Ry. Co. v. City of Pittsburgh, 235 F. App’x 907, 910 (3d Cir. 2007) (citing

Glasco v. Hills, 558 F.2d 179, 181 (3d Cir. 1977)). Further, the harm must be shown to be actual and imminent, not speculative or unsubstantiated. See, e.g., Acierno v. New Castle Cty., 40 F.3d

645, 653-55 (3d Cir. 1994).

73. The Debtors further seek a waiver of any stay of the effectiveness of the order approving this Motion. Pursuant to Bankruptcy Rule 6004(h), “[a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise.” Fed. R. Bankr. P. 6004(h). As set forth above, the relief requested herein is essential to prevent irreparable damage to the

26 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 27 of 28

Debtors’ operations, going concern value, and their efforts to pursue a sale or restructuring of their

assets and liabilities.

74. Accordingly, the relief requested herein is appropriate under the circumstances

and under Bankruptcy Rules 6003 and 6004(h).

Consent to Jurisdiction

75. Pursuant to Rule 9013-1(f) of the Local Rules of Bankruptcy Practice and

Procedure of the United States Bankruptcy Court for the District of Delaware (the “Local

Rules”), the Debtors consent to the entry of a final judgment or order with respect to this motion

if it is determined that the Court would lack Article III jurisdiction to enter such final order or

judgment absent consent of the parties.

Notice6

76. 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 Ad Hoc Group; (d) Catalyst, as the Administrative Agent and

Lender to the Debtors’ prepetition Credit Agreement and Foreign Loan; (e) U.S. Bank National

Association, as Indenture Trustee to the Indenture governing the 2019 Notes; (f) creditors

holding the forty (40) largest unsecured claims as set forth in the consolidated list filed with the

Debtors’ petitions; (g) those parties requesting notice pursuant to Bankruptcy Rule 2002; (h) the

Office of the United States Attorney General for the District of Delaware; (i) the Internal

Revenue Service; (j) the Securities and Exchange Commission; and (k) each of the parties set

forth in Exhibit B, attached hereto. As the Motion is seeking “first day” relief, within two

business days of the hearing on the Motion, the Debtors will serve copies of the Motion and any

6 Capitalized terms used in the Notice section but not otherwise defined in this Motion shall have the meanings ascribed to them in the First Day Declaration.

27 Case 16-10238-MFW Doc 6 Filed 02/01/16 Page 28 of 28

order entered respecting the Motion in accordance with the Local Rules. The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given.

No Prior Request

77. 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 this Court enter an order granting

the relief requested herein and that it grant the Debtors such other and further relief as is just and

proper.

Dated: February 1, 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 19801 Telephone: (302) 661-7000 Facsimile: (302) 661-7360 Email: [email protected]

-and-

Nancy A. Mitchell (pro hac vice pending) Maria J. DiConza (pro hac vice pending) Nathan A. Haynes (pro hac vice pending) Greenberg Traurig, LLP MetLife Building 200 Park Avenue New York, NY 10166 Telephone: (212) 801-9200 Facsimile: (212) 801-6400 Email: [email protected] [email protected] [email protected]

Proposed Counsel for the Debtors and Debtors-in-Possession

28 Case 16-10238-MFW Doc 6-1 Filed 02/01/16 Page 1 of 6

Exhibit A

Vendor Agreement Case 16-10238-MFW Doc 6-1 Filed 02/01/16 Page 2 of 6

To: [Critical/Foreign Vendor] [Name] [Address]

______, 2016

Re: In re SFX Entertainment, Inc., et al.

Dear Valued Supplier:

As you are aware, SFX Entertainment, Inc., and several of its affiliates (collectively, the “Company”) filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Chapter 11 Cases” and the “Bankruptcy Court”, respectively) on ______, 2016 (the “Petition Date”). On the Petition Date, the Company requested the Bankruptcy Court’s authority to pay the prepetition claims of certain suppliers in recognition of the importance of the Company’s relationship with such suppliers and its desire that the Chapter 11 Cases have as little effect on the Company’s ongoing business operations as possible. On ______, 2016 the Bankruptcy Court entered an order (the “Order”) authorizing the Company, under certain conditions, to pay all or portions of the prepetition claims of certain trade creditors that agree to the terms set forth below and to be bound by the terms of the Order. A copy of the Order is enclosed.

In order to receive payment on account of prepetition claims, you must agree to continue to supply goods and services to the Company based on Governing Trade Terms (as defined in the Order). In the Order, Governing Trade Terms are defined as the normal and customary trade terms, practices and programs (including, but not limited to, credit limits, pricing, cash discounts, timing of payments, allowances, rebates, coupon reconciliation, normal product mix and availability and other applicable terms and programs) that were most favorable to the Company and in effect between you and the Company prior to the Petition Date, or such other trade terms as you and the Company agree.

For purposes of administration of this trade program as authorized by the Bankruptcy Court, you and the Company both agree to the conditions stated herein.

1. The estimated percentage of the prepetition claim (net of any setoffs, credits or discounts) (the “Vendor Claim”) that you will receive from the Company is ___% [OR the amount of your prepetition claim (net of any setoffs, credits or discounts) (the “Vendor Claim”) that you will be paid from the Company is $_____], subject to final reconciliation with the Company’s books and records.

2. You agree to waive any general unsecured claim against the Company to the extent of the amount of any payment received under the Order. In addition, you agree to waive any claim under section 503(b)(9) of title 11 of the United States Code (the “Bankruptcy Code”) against the Company to the extent of the amount of any payment received under the Order.

3. You will continue to ship goods or provide services (as applicable) to the

Case 16-10238-MFW Doc 6-1 Filed 02/01/16 Page 3 of 6

Company postpetition. Payment terms for such shipments will approximate ___ days for the duration of the Company’s Chapter 11 Cases, or on other terms mutually acceptable to you and the Company, as follows (if more space is required, attach additional pages):

______

4. During the pendency of these Chapter 11 Cases, you will continue to extend to the Company all Governing Trade Terms.

5. You will not demand a lump sum payment upon consummation of a plan of reorganization in these Chapter 11 Cases on account of any administrative expense priority claim that you assert, but instead agree that such claims will be paid in the ordinary course of business after consummation of a plan under applicable Governing Trade Terms, if the plan provides for the ongoing operations of the Company.

6. The undersigned, a duly authorized representative of [Name of Critical/Foreign Vendor], has reviewed the terms and provisions of the Order and agrees that [Name of Critical/Foreign Vendor] is bound by such terms.

7. You will not separately seek payment for reclamation, section 503(b)(9) and similar claims outside of the terms of the Order unless your participation in the vendor payment program authorized by the Order (the “Vendor Payment Program”) is terminated.

8. You agree not to file or otherwise assert against the Company, the estates, or any other person or entity, or any of their respective assets or property (real or personal) any lien (regardless of the statute or other legal authority upon which such lien is asserted) related in any way to any remaining prepetition amounts allegedly owed to you by the Company arising from agreements entered into prior to the Petition Date. Furthermore, you agree to take (at your own expense) all necessary steps to remove any such lien(s) previously asserted or asserted in the future as soon as possible.

9. If either the Vendor Payment Program or your participation therein terminates as provided in the Order, or you later refuse to continue to supply goods to the Company on Governing Trade Terms during the pendency of the Chapter 11 Cases, any payments you receive on account of your Vendor Claim may be deemed voidable postpetition transfers pursuant to section 549(a) of the Bankruptcy Code. The Company may then take any and all appropriate steps to cause you to repay any payments you received on account of your Vendor Claim to the extent that the aggregate amount of such payments exceeds the postpetition obligations then outstanding.

10. Any dispute with respect to this letter agreement, the Order and/or your participation in the Vendor Payment Program shall be determined by the Bankruptcy Court.

Case 16-10238-MFW Doc 6-1 Filed 02/01/16 Page 4 of 6

If you have any questions about this Agreement or our financial restructuring, please do not hesitate to call.

Sincerely,

SFX ENTERTAINMENT, INC.

By:______[Name], [Title] Accepted and Agreed [Critical/Foreign Vendor]

By its______

Dated______

Case 16-10238-MFW Doc 6-1 Filed 02/01/16 Page 5 of 6

Exhibit B

Shippers and Warehousemen

Case 16-10238-MFW Doc 6-1 Filed 02/01/16 Page 6 of 6

Vendor Category Address Artist Endeavor, LLC Shipper 50 Terminal Street Charlestown, MA 02129 EFM Management, Inc. Shipper 853 E. Sandhill Ave. Carson, CA 90746 EmJay Sales & Leasing, Inc. Shipper 600 West 51 Street Forest View, IL 60638 FedEx Shipper P.O. Box 371461 Pittsburgh PA 15250-7461 Interport Logistics Shipper P.O. Box 226257 Miami, FL 33222 Music Today Warehousemen 5400 Three Notched Rd. Crozet, VA 22932 Office Furniture Warehouse, Inc. Warehousemen 2099 West Atlantic Blvd. Pompano Beach, FL 33069 Ozark Mountain Leasing, Inc. Shipper 7478 County Road 3400 Mountain View, MO 65548 Rock It Cargo USA LLC Shipper 3450-C Buffington Center Atlanta, GA 30349 Total Quality Logistics Shipper PO Box 634558 Cincinnati, OH 45263

Total Monthly Estimated Usage: $200,000.00

Case 16-10238-MFW Doc 6-2 Filed 02/01/16 Page 1 of 6

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re: Chapter 11

SFX ENTERTAINMENT, INC., et al.,1 Case No. 16-10238 ( )

Debtors. (Joint Administration Requested)

Ref. Docket No. ____

INTERIM ORDER AUTHORIZING (A) THE DEBTORS TO PAY (I) ALL OR A PORTION OF THE PREPETITION CLAIMS OF CERTAIN CRITICAL VENDORS AND FOREIGN VENDORS AND (II) CERTAIN PREPETITION MECHANICS’ LIENS AND SHIPPING AND WAREHOUSING CHARGES IN THE ORDINARY COURSE OF BUSINESS, AND (B) FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED CHECKS AND TRANSFERS

Upon the motion (the “Motion”)2 filed by the above-captioned debtors and debtors-in- possession (collectively, the “Debtors”) pursuant to sections 105(a), 363, 503, 1107 and 1108 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”) and

Bankruptcy Rules 6003 and 6004(h) for entry of interim and final orders: (a) authorizing the Debtors to pay (i) all or a portion of the prepetition claims of certain Critical Vendors and Foreign Vendors

and (ii) certain prepetition mechanics’ liens and shipping and warehousing charges in the ordinary

2 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Motion.

Case 16-10238-MFW Doc 6-2 Filed 02/01/16 Page 2 of 6

course of business; (b) authorizing financial institutions to honor and process related checks and

transfers and (c) providing any additional relief required in order to effectuate the foregoing; and upon the Declaration of Michael Katzenstein in Support of the Debtors’ Chapter 11 Petitions and Requests for First Day Relief (the “First Day Declaration”); and upon the statements of counsel in support of the relief requested in the Motion at the hearing before the Court; and it appearing that this Court has jurisdiction to consider the Motion pursuant to 28 U.S.C. §§ 157 and 1334; and it appearing that venue of these Chapter 11 Cases and the Motion in this district is proper pursuant to 28 U.S.C. §§ 1408 and 1409; and it appearing that this matter is a core proceeding pursuant to 28 U.S.C. § 157(b); and this Court having determined that the relief requested in the Motion is in the best interests of the Debtors, their estates, their creditors and other parties-in-interest; and it appearing that proper and adequate notice of the Motion has been given and that no other or further notice is necessary; and after due deliberation thereon; 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. Pursuant to sections 105(a), 363(b), 503, 1107 and 1108 of the Bankruptcy Code, the Debtors are authorized, but not directed, to pay all or a portion of: (i) each prepetition

Mechanics’ Liens and Shipping and Warehousing Charges as set forth in the Motion in an aggregate amount not to exceed $200,000, unless otherwise ordered by the Court; and (ii) each

Vendor Claim, provided that the aggregate payments on account of Vendor Claims shall not exceed $10,000,000, provided, however, that prior to a final hearing to consider the relief requested in the Motion (the “Final Hearing”), the amount paid with respect to Vendor Claims shall not exceed the aggregate of $5,000,000.

2 Case 16-10238-MFW Doc 6-2 Filed 02/01/16 Page 3 of 6

3. The deadline by which objections to the Motion and the final order must be filed

is ______, 2016 at _:___ __.m. (Prevailing Eastern Time). A Final Hearing, if required, on the Motion will be held on ______, 2016 at _:___ __.m. (Prevailing Eastern Time). If no objections are filed to the Motion, the Court may enter the final order without further notice or hearing.

4. The Debtors shall only make payment on account of Vendor Claims to Critical

Vendors and Foreign Vendors who agree to continue to supply goods or services to the Debtors on Governing Trade Terms.

5. The Debtors’ determination of who is a Critical Vendor shall take into account, among other things, (a) whether the vendor in question is a “sole-source” or “limited source” provider, (b) whether the Debtors receive advantageous pricing or other terms from a vendor such that replacing the vendor postpetition would result in significantly higher costs to the

Debtors, (c) the overall impact on the Debtors’ operations if the vendor ceased or delayed shipments and/or (d) whether the vendor might be able to obtain (or have obtained) mechanics’ liens, possessory liens, shippers’ liens or similar state law trade liens on property necessary to the

Debtors’ ongoing operations.

6. The Debtors shall maintain a matrix summarizing (a) the name of each Critical

Vendor and Foreign Vendor paid on account of Vendor Claims, (b) the amount paid to each

Critical Vendor or Foreign Vendor on account of its Vendor Claim and (c) the goods or services provided by such Critical Vendor or Foreign Vendor. This matrix will periodically be provided to the following parties (together, the “Notice Parties”): the United States Trustee for the

District of Delaware (the “U.S. Trustee”), professionals retained by the official committee of unsecured creditors appointed in these Chapter 11 Cases (the “Committee”), if any, counsel to

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the Debtors’ DIP Lenders and counsel to the Ad Hoc Group; provided, however, that the Notice

Parties shall keep the matrix confidential and shall not disclose any of the information in the matrix to anyone, including, but not limited to, any member of the Committee, without prior written consent from the Debtors.

7. The Debtors shall undertake all appropriate efforts to cause Critical Vendors and

Foreign Vendors to enter into an agreement (the “Vendor Agreement”) including provisions substantially similar to the form attached to the Motion as Exhibit A.

8. The Debtors are authorized, but not required, to enter into Vendor Agreements when the Debtors determine, in the exercise of their reasonable business judgment, that it is appropriate to do so. However, the Debtors’ inability to enter into a Vendor Agreement shall not preclude them from paying a Vendor Claim when, in the exercise of their reasonable business judgment, such payment is necessary to the Debtors’ operations. The Debtors shall provide to counsel to the Committee, counsel to the Debtors’ DIP Lenders and counsel to the Ad Hoc

Group copies of any Vendor Agreement entered into with a Critical Vendor or Foreign Vendor.

9. If a Critical Vendor or Foreign Vendor that has received payment of a prepetition claim later refuses to continue to supply goods or services for the applicable period in compliance with the Vendor Agreement or this Order, then the Debtors may take any and all appropriate steps to cause such Critical Vendor or Foreign Vendor to repay payments made to it on account of its prepetition Vendor Claim to the extent that such payments exceed the postpetition amounts then owing to such Critical Vendor or Foreign Vendor.

10. As a condition to resolving any payment pursuant to this Order, the Shippers and

Warehousemen shall waive and release any previously asserted mechanics’ lien, statutory lien, possessory lien or any other lien on the assets of the Debtors.

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11. Nothing herein shall impair the Debtors’ ability to contest, in their discretion, the

validity and amounts of the Mechanics’ Liens and Shipping and Warehousing Charges.

12. Notwithstanding the relief granted herein and any actions taken hereunder, nothing contained herein shall constitute, nor is intended to constitute, the assumption or adoption of any contract or agreement under Bankruptcy Code section 365.

13. Each of the banks and financial institutions at which the Debtors maintain their accounts relating to the payment of the claims that the Debtors request authority to pay in the

Motion are authorized to receive, process, honor and pay all checks presented for payment and to honor all fund transfer requests made by the Debtors related thereto, to the extent that sufficient funds are on deposit in those accounts, and are authorized to rely on the Debtors designation of any particular check as approved by this Order.

14. Notwithstanding anything to the contrary contained herein, any payment made or to be made, and authorization contained in this Order shall be subject to the requirements imposed on the Debtors under any approved debtor-in-possession financing facility, any order regarding the Debtors’ postpetition financing or use of cash collateral, and any budget in connection therewith.

15. Bankruptcy Rule 6003(b) has been satisfied because the relief requested in the

Motion is necessary to avoid immediate and irreparable harm to the Debtors.

16. Notwithstanding any applicability of Bankruptcy Rule 6004(h), the terms and conditions of this Order shall be immediately effective and enforceable upon its entry.

17. The Debtors are authorized and empowered to take all actions necessary to implement the relief granted in this Order.

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18. This Court shall retain jurisdiction with respect to all matters arising from or relating to the interpretation or implementation of this Order.

Dated: ______, 2016

______HONORABLE ______UNITED STATES BANKRUPTCY JUDGE