On January 29, 2014, Viggle Inc. (the “Company”), and Viggle Merger Sub II Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Dijit Media, Inc., a Delaware corporation (“Dijit”), certain stockholders of Dijit (solely with respect to Articles 1, 5 and 6 and Subsection 11.1) and Nancy Y. Lee (solely in her capacity as the Stockholders’ Agent).
The Merger Agreement and the transactions contemplated thereby were approved by the board of directors of each of the Company, Merger Sub and Dijit. Within twenty four hours following the execution and delivery of the Merger Agreement, Dijit delivered to the Company and Merger Sub the irrevocable written consent (the “Written Consent”) of certain of the holders of Dijit common stock (the “Dijit Common Stock”) and Dijit preferred stock (the “Dijit Preferred Stock” and, collectively with the Dijit Common Stock, the “Dijit Capital Stock”) adopting and approving the Merger Agreement and the transactions contemplated thereby. Following receipt of the Written Consent, upon the terms set forth in the Merger Agreement, Merger Sub merged with and into Dijit (the “Merger”), with Dijit continuing as the surviving corporation and a wholly-owned subsidiary of the Company. The Merger is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.
In connection with the Merger, the Company is required to issue to the holders of Dijit Capital Stock and to certain creditors of Dijit (the “Dijit/Viggle Holders”) 2,897,938 shares of Viggle Common Stock (the “Stock Consideration”). In connection with the issuance of the Stock Consideration, certain Dijit/Viggle Holders entered into a stockholders agreement, effective at the closing of the Merger, with the Reporting Person and the Company (the “Stockholders Agreement”). Pursuant to the terms of the Stockholders Agreement, those Dijit/Viggle Holders appointed Mr. Sillerman as their proxy and granted him a power of attorney to vote their respective shares of the Company’s Common Stock and any other Company securities in his sole discretion. That proxy will expire on
the first to occur of the Company’s completion of
a R
ecapitalization (which is defined in the Merger Agreement as a transaction involving the conversion of a majority of the Company’s debt or preferred stock into common stock) and December 31, 2015.
As a result of the proxy granted pursuant to the Stockholders Agreement, the Reporting Person has the sole power to vote the shares of the Dijit/Viggle Holders with respect to any proposal submitted for the approval of the Company’s stockholders. The following Dijit/Viggle Holders (along with their representative with regard to certain shares placed in escrow (the “Escrow Shares”) signed the Stockholders Agreement, and have thus granted the proxy described above over such number and percentage of the Company’s Common Stock as set forth next to their respective names below:
Alsop Louis Capital 2, L.P. – 2,175,217 shares
JWS Capital Corp. – 46,236 shares
Guy Blume – 46,236 shares
David Goldenberg – 9,057 shares
Alan M. Braverman – 92,511 shares
Nancy Y. Lee, as shareholders’ representative – 320,456 shares
Nancy Y. Lee serves as a representative of the Dijit/Viggle Holders for the Escrow Shares, and thus has no pecuniary interest in those shares. In addition, the Company is in the process of distributing documents to the remainder of the Dijit/Viggle Holders instructing them on how to exchange their Dijit debt or shares for the Company’s shares. In accordance with the terms of the Merger Agreement, it is a condition of their receipt of the Stock Consideration that they shall have entered into the Stockholders Agreement. Accordingly, when all Dijit/Viggle Holders have exchanged their shares, it is anticipated that 2,897,938 shares will have been issued, and the Dijit/Viggle Holders will all have granted the proxy set forth in the Stockholders Agreement. Accordingly, for purposes of this Schedule 13D, the reporting Person has claimed the power to vote all 2,897,938 (the “Dijit/Viggle Shares”) of such shares.
Also pursuant to the Merger Agreement, the Company entered into a “lockup agreement,” effective at the closing of the Merger, with certain Dijit/Viggle Holders (the “Lockup Agreement”), pursuant to which the Dijit/Viggle Holders party thereto are prohibited from selling shares of the Company’s Common Stock until the date that is six months following the date on which the Company completes an offering of its equity securities with net proceeds to the Company of at least $20 million.