Exhibit 4.1
EXECUTION COPY
FORBEARANCE AND CONSENT
AGREEMENT
This FORBEARANCE
AND CONSENT AGREEMENT (this “ Agreement ”), is
entered into as of January 31, 2008, by and among
ARTISTdirect, Inc., a Delaware corporation and its
subsidiaries and affiliates (collectively, the “
Company ”), U.S. Bank National Association, as
Collateral Agent under the Note and Warrant Purchase Agreement (as
defined below) (in such capacity, “ Collateral Agent
”) and the senior lenders signatories hereto (“
Initial Purchasers ”).
Recitals
A.
The Company, Initial Purchasers and Collateral Agent are parties to
that certain Note and Warrant Purchase Agreement, dated as of
July 28, 2005 (the “ Senior Financial Agreement
”), among Company, the investors party thereto, as Initial
Purchasers, and Collateral Agent. The Senior Financing Agreement,
together with the other Transaction Documents (as defined in the
Senior Financing Agreement) as such documents have been amended
from time to time, are collectively referred to herein as the
“ Senior Financing Documents. ”
B.
The Company is in default under certain provisions of the Senior
Financing Documents.
C.
The Existing Senior Defaults (as defined herein) constitute “
Events of Default ” for purposes hereof that entitle
Collateral Agent and Initial Purchasers to enforce their rights and
remedies under the Senior Financing Documents.
D.
The parties hereto entered into a Forbearance and Consent
Agreement, dated as of April 17, 2007, as extended pursuant to
the Notice of Extension of Forbearance Period dated May 31,
2007, as amended pursuant to Amendment No. 1, dated
June 25, 2007, and as further amended pursuant to Amendment
No. 2 as of November 30, 2007, pursuant to which the
Collateral Agent and Initial Purchasers agreed to forbear from the
exercise of their rights and remedies relating to the Existing
Senior Defaults and any other additional Events of Default for the
purpose of affording a period of time for Company to obtain funds
to pay the obligations under the Senior Financing Documents or to
restructure its capital structure (the “ Prior Forbearance
Agreement ”)
E.
The Company entered into the Waiver and Forbearance Agreement,
dated as of August 3, 2007, with the holders of the
Company’s Convertible Subordinated Notes, dated July 28
,2005 (the “ Subordinated Note Holders ”) (the
“ Subordinated Forbearance Agreement ”),
pursuant to which the Subordinated Note Holders agreed
to waive their right to charge the Default interest Rate (as
defined therein) and forbear the exercise of their rights and
remedies relating to the Existing Subordinated Defaults (as defined
therein) during the Waiver Period (as defined therein) to allow the
Subordinated Note Holders to consider a restructuring of the
Company’s capital structure.
F.
The Prior Forbearance Agreement will expire on January 31,
2008 and the Forbearance Period (as defined in the Prior
Forbearance Agreement) will expire on January 31,
2008.
G.
Company has requested, subject to the conditions contained herein,
that Collateral Agent and Initial Purchasers forbear from the
exercise of their rights and remedies relating to the Existing
Senior Defaults and any other additional Events of Default for the
purpose of affording an additional period of time for Company to
obtain funds to pay the obligations under the Senior Financing
Documents or to restructure its capital Structure pursuant to this
Agreement.
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H.
Subject to the terms contained herein, Collateral Agent and Initial
Purchasers are willing to agree to forbear from the exercise of
their rights and remedies relating to the Existing Senior Defaults
and any other additional Events of Default.
Agreement
For good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as
follows:
1.
Definitions . Capitalized terms used herein but not
defined herein shall have the meanings ascribed to them in the
Senior Financing Agreement. The following terms as used in this
Agreement shall have the meanings set forth below:
“
Existing Senior Defaults ” means the existing Senior
Events of Default described on Schedule I hereto, together with any
other Senior Events of Default under the Senior Financing Documents
which are in existence as of the date hereof of which the Initial
Purchasers have knowledge.
“
Forbearance Period ” means the period commencing on
the date hereof and ending on the earliest to occur of the
following: (i) February 20, 2008 (as such date may be
extended pursuant to the terms of this Agreement); or (ii) any
material representation or warranty made by Company in this
Agreement proves to be materially false as of the date when
made.
“ Senior
Event of Default ” means an Event of Default under the
Senior Financing Agreement.
2.
Agreement to Forbear .
(a)
Subject to the conditions set forth in Section 3 below, during
the Forbearance Period, and subject to the terms hereof, Collateral
Agent and Initial Purchasers hereby agree to forbear from
exercising any of their rights and remedies under the Senior
Financing Documents or the Prior Forbearance Agreement
‘existing during the Forbearance Period.
(b)
Nothing in this Section 2 shall be construed to be a waiver of
or acquiescence in any Existing Senior Default, and all such
Existing Senior Defaults shall continue in existence, subject only
to the written agreement of Collateral Agent and Initial
Purchasers, as Set forth herein, to forbear during the Forbearance
Period from exercising any of their rights and remedies under the
Senior Financing Documents or the Prior Forbearance Agreement.
Collateral Agent and Initial Purchasers expressly reserve all of
their rights and remedies under the Senior Financing Documents and
under applicable law with respect to such Existing Senior Defaults,
except as expressly limited in this Agreement. Nothing in this
Section 2 shall act as a waiver of the accrual of any default
interest due under section 2(b) of the Senior Financing
Agreement during the Forbearance Period.
(c)
Upon expiration of the Forbearance Period, Collateral Agent and
Initial Purchasers shall have all the rights and remedies available
to them under the Senior Financing Documents, applicable law and
otherwise.
(d)
Collateral Agent may assume without inquiry that the Forbearance
Period expires on February 2C’, 2008, unless it receives
from the Initial Purchasers a certificate specifying another date
and setting forth the provisions of this Agreement pursuant to
which alternative Forbearance Period termination date was
established.
(e)
The parties acknowledge and agree that the Prior Forbearance
Agreement shall be deemed to have expired and terminated, shall no
longer be in full force and effect, and that the matters governed
therein shall be governed pursuant to this Agreement.
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