The Reporting Person acquired 5,000,000 shares of the Company’s Common Stock on February 12, 2013. On February 11, 2013, Sillerman Investment Company II, LLC (the “Lender”), an affiliate of the Reporting Person provided an additional line of credit (the “Second Line of Credit”) to the Company in the amount of up to $25,000,000. An affiliate of the Reporting Person, Sillerman Investment Company, LLC, had previously provided the Company with a line of credit of up to $20,000,000, and that $20,000,000 line of credit (the “First Line of Credit”) had been fully drawn by the Company. The Lender provided the Second Line of Credit to the Company to meet the Company’s ongoing capital needs. In consideration of the Lender's agreement to provide the Second Line of Credit, the Company issued to the Lender thereunder 5,000,000 shares of the Company's common stock. Such 5,000,000 shares of the Company's common stock were issued on February 12, 2013 in a transaction exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2) thereunder and Rule 506 of Regulation D promulgated thereunder. Because the transactions involving the Second Line of Credit were between the Company and an affiliate of the Reporting Person, who is the Executive Chairman and Chief Executive Officer of the Company, the Company formed a special committee of independent directors to review the proposed transactions. Such special committee reviewed and unanimously approved such transactions. The Company has also agreed that all net proceeds received by the Company or any of its wholly-owned subsidiaries from any debt or equity offering by the Company or any of such subsidiaries must first be applied toward the payment in full of all outstanding principal and accrued and unpaid interest outstanding under the Second Line of Credit Note.
The Reporting Person intends to engage in negotiations with the Company relating to the First Line of Credit and the Second Line of Credit as soon as practicable in an attempt to restructure such indebtedness on a long term basis.
Other than the negotiations which the Reporting Person intends to have with the Company as described in the preceding paragraph, the Reporting Person has no plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company, (b) an extraordinary transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the present capitalization or dividend policy of the Company, (f) any other material change in the Company’s business or corporate structure, (g) changes in the Company’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person, (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Act of 1933, or (j) any action similar to any of those enumerated above.
The Reporting Person beneficially owns 62,306,910 shares of common stock, including the following:
| (i) | The Reporting Person directly owns 5,730,455 shares of the Company’s common stock. |
| (ii) | The Reporting Person also indirectly owns 56,576,455 shares of the Company’s common stock, including the following: |
| a. | 46,267,000 shares of common stock owned by Sillerman Investment Company, LLC; |
| b. | 5,000,000 shares of common stock owned by Sillerman Investment Company II, LLC, |
| c. | 2,064,000 shares of common stock issuable upon the exercise of warrants held by Sillerman Investment Company, LLC which are exercisable at $8.00 per share; |
| d. | 545,455 shares of common stock issuable upon the exercise of warrants held by Sillerman which are exercisable at $5.00 per share; and |
| e. | 2,700,000 shares of common stock owned of record by Laura Baudo Sillerman, the Reporting Person’s spouse. |
For purposes of Items 7 and 9 of the cover page of this Schedule 13D, the Reporting Person has included all of the above shares, other than the 2,700,000 shares held by Laura Baudo Sillerman, the reporting Person’s spouse. Those additional 2,700,000 shares are included in Items 8 and 10 of the cover page of this Schedule 13D. The Company’s most recent Quarterly Report on Form 10-Q reported that the Company had 82,641,753 shares of its common stock outstanding. Accordingly, the 62,306,910 shares owned by the Reporting Person and described above represent 74.4% of the Company’s common stock. The acquisition of the 5,000,000 shares of the Company’s common stock as described in Item 4 of this Schedule 13D are the only transactions in the Company’s common stock in the previous 60 days.
Reference is made to the Line of Credit Grid Promissory Note, dated as of February 11, 2013, by and between the Company and Sillerman Investment Company II LLC, which is attached as Exhibit 10.35 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 14, 2013.
