EXHIBIT 10.11
SUBSIDIARY GUARANTY
This Subsidiary Guaranty, dated as of July 28, 2005 (as amended,
supplemented, restated or otherwise modified from time to time, this
"Guaranty"), is made by the undersigned signatories hereto as Guarantors (each
of the undersigned, together with their respective successors and assigns,
individually a "Guarantor" and collectively the "Guarantors"), in favor of the
Collateral Agent (as defined below) and each of the Holders (as defined below)
of the Notes (as defined below) (collectively, together with their respective
successors and assigns, individually a "Guaranteed Party" and collectively the
"Guaranteed Parties");
PRELIMINARY STATEMENTS
A. ARTISTDirect, Inc., a Delaware corporation ("Company"), has entered
into that certain Note and Warrant Purchase Agreement dated as of July 28, 2005
(as amended, supplemented, restated or otherwise modified from time to time, the
"Note and Warrant Purchase Agreement") among Company, the investors listed on
the signature pages thereto (the "Initial Purchasers," and together with their
respective successors and assigns, the "Holders") and U.S. Bank National
Association, as collateral agent for the Initial Purchasers and all other
Holders (in such capacity, the "Collateral Agent"), pursuant to which Company
has issued to the Initial Holders (as defined below) its 11.25% Senior Secured
Notes due July 28, 2009 (collectively, as amended, supplemented, restated or
otherwise modified from time to time, the "Notes"), in the aggregate principal
amount of $15,000,000.
B. The proceeds of the Notes will be applied by Company to consummate the
MD Acquisition (as defined in the Note and Warrant Purchase Agreement).
C. Company owns, directly or indirectly, all of the outstanding capital
stock or other equity interests of each of the Guarantors;
D. It is a requirement of the Note and Warrant Purchase Agreement that
each Guarantor enter into this Agreement.
E. Capitalized terms used and not defined herein have the respective
meanings ascribed thereto in the Note and Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the promises contained herein, in
order to induce the Initial Purchasers to purchase the Notes and Warrants under
the Note and Warrant Purchase Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Guarantors hereby jointly and severally agree as follows:
Section 1. Guarantee. The Guarantors hereby, jointly and severally,
irrevocably, absolutely and unconditionally guarantee the due and punctual
payment of all principal of, premium, if any, and interest on, the Notes and all
other obligations owing by Company and the other Guarantors to the Guaranteed
Parties, or any of them, jointly or severally under the Note and Warrant
Purchase Agreement, the Notes, the Pledge Agreement, the Security Agreement and
the other documents, instruments and agreements relating to the transactions
contemplated by the Note and Warrant Purchase Agreement, and all renewals,
extensions, modifications and refinancings thereof, now or hereafter owing,
whether for principal, interest, premium, fees,
expenses or otherwise, including, without limitation, any and all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and expenses
actually incurred) incurred by the Guaranteed Parties in enforcing any rights
under this Guaranty (collectively, the "Guaranteed Obligations") including,
without limitation, all interest which, but for the filing of a petition in
bankruptcy with respect to Company or any other guarantor of the Guaranteed
Obligations (or any receivership, liquidation, reorganization or similar case or
proceeding in connection therewith, relative to the Company, any other guarantor
of the Guaranteed Obligations or their respective property), would accrue on any
principal portion of the Guaranteed Obligations. Any and all payments by the
Guarantors hereunder shall be made free and clear of and without deduction for
any set-off, counterclaim or withholding, so that, in each case, each Guaranteed
Party will receive, after giving effect to any taxes (but excluding taxes
imposed on overall net income of any Guaranteed Party), the full amount that it
would otherwise be entitled to receive with respect to the Guaranteed
Obligations (but without duplication of amounts for taxes already included in
the Guaranteed Obligations). Each Guarantor acknowledges and agrees that this is
a guarantee of payment when due, and not of collection, and that, subject to
Section 13 hereof, this Guaranty may be enforced up to the full amount of the
Guaranteed Obligations without proceeding against Company or against any other
Guarantor or under any other guaranty covering all or any portion of the
Guaranteed Obligations.
Section 2. Guarantee Absolute. The Guarantors guarantee that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
documents, instruments and agreements evidencing any Guaranteed Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of any Guaranteed Party
with respect thereto. The liability of each Guarantor under this Guaranty shall
be absolute and unconditional in accordance with its terms and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by the following (whether or not
such Guarantor consents thereto or has notice thereof):
(a) any change in the time, place or manner of payment of, or in any other
term of, all or any of the Guaranteed Obligations, any waiver, indulgence,
renewal, extension, amendment or modification of or addition, consent or
supplement to or deletion from or any other action or inaction under or in
respect of the Note and Warrant Purchase Agreement, or any other documents,
instruments or agreements relating to the Guaranteed Obligations or any other
instrument or agreement referred to therein or any assignment or transfer of any
thereof;
(b) any lack of validity or enforceability of the Note and Warrant Purchase
Agreement or any other document, instrument or agreement referred to therein or
any assignment or transfer of any thereof;
(c) any settlement or compromise of any of the Guaranteed Obligations;
(d) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to Company, any
Guarantor, any other guarantor of the Guaranteed Obligations or any action taken
with respect to this Guaranty by any trustee or receiver, or by any court, in
any such proceeding; and
(e) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, any Guarantor.
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If claim is ever made upon any Guaranteed Party for repayment or recovery of any
amount or amounts received in payment or on account of any of the Guaranteed
Obligations, and any Guaranteed Party repays all or part of said amount by
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over the Guaranteed Party or any of its property, or (b) any
settlement or compromise of any such claim effected by the Guaranteed Party with
any such claimant (including Company, any Guarantor, any other guarantor of the
Guaranteed Obligations or a trustee in bankruptcy for Company, any Guarantor,
any other guarantor of the Guaranteed Obligations), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding on it, notwithstanding any revocation hereof or the
cancellation of the Note and Warrant Purchase Agreement or the other documents,
instruments and agreements evidencing any Guaranteed Obligations, and each of
the Guarantors shall be and remain liable to the Guaranteed Party for the
amounts so repaid or recovered to the same extent as if such amount had never
originally been paid to the Guaranteed Party.
Subject to Section 14 hereof, this Guaranty shall remain in effect and
shall be enforceable against each Guarantor notwithstanding any sale, transfer
or other disposition by Company of all or any portion of the equity interests of
any Guarantor. Further, the obligations of each Guarantor shall be joint and
several and the release or discharge of the obligations of one Guarantor shall
not modify, affect, release or discharge the obligations of the other Guarantors
hereunder. Further, this Guaranty shall be enforceable against the Guarantors
notwithstanding the existence of any counterclaim that may be alleged by the
Company, any Guarantor, any other guarantor of the Guaranteed Obligations
against the Guaranteed Parties.
Section 3. Waiver. Each Guarantor hereby waives notice of acceptance of
this Guaranty, notice of any liability to which it may apply, and further waives
presentment, demand of payment, protest, notice of dishonor or nonpayment of any
such liabilities, suit or taking of other action by the Guaranteed Parties
against such Guarantor.
Section 4. Waiver of Subrogation. Until payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty and the
termination of the Note and Warrant Purchase Agreement, each Guarantor hereby
waives irrevocably any rights against Company, any Guarantor, or any other
guarantor of the Guaranteed Obligations which it may acquire by way of
subrogation or contribution, by any payment made hereunder or otherwise. Until
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the termination of the Note and Warrant Purchase
Agreement, each Guarantor hereby expressly waives any claim, right or remedy
which such Guarantor may now have or hereafter acquire against Company, any
Guarantor, any other guarantor of the Guaranteed Obligations that arises
hereunder and/or from the performance by any Guarantor hereunder, including,
without limitation, any claim, right or remedy of the Guaranteed Parties against
Company, any Guarantor, any other guarantor of the Guaranteed Obligations or any
security which the Guaranteed Parties now have or hereafter acquire, whether or
not such claim, right or remedy arises in equity, under contract, by statute,
under color of law or otherwise.
Section 5. Severability. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any
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such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 6. Amendments, Etc. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by a Guarantor therefrom shall in any
event be effective unless the same shall be in writing executed by the
Guarantor, the Collateral Agent and each Holder.
Section 7. Notices. All notices and other communications provided for
hereunder shall be given in the manner specified in the Note and Warrant
Purchase Agreement (i) in the case of the Guaranteed Parties, at the address
specified for the Guaranteed Parties in the Note and Warrant Purchase Agreement,
and (ii) in the case of the Guarantors, at the respective addresses specified
for such Guarantors in this Guaranty.
Section 8. No Waiver; Remedies. No failure on the part of the Guaranteed
Parties to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. No notice to or demand on any Guarantor in any case shall
entitle such Guarantor to any other further notice or demand in any similar or
other circumstances or constitute a waiver of the rights of the Guaranteed
Parties to any other or further action in any circumstances without notice or
demand.
Section 9. Right of Set-Off. In addition to and not in limitation of all
rights of offset that the Guaranteed Parties may have under applicable law, the
Guaranteed Parties shall, upon the occurrence of any Event of Default and
whether or not the Guaranteed Parties have made any demand or the Guaranteed
Obligations are matured, have the right to appropriate and apply to the payment
of the Guaranteed Obligations, all indebtedness or property then or thereafter
owing by the Guaranteed Parties to any Guarantor, whether or not related to this
Guaranty or any transaction hereunder. The Guaranteed Parties shall promptly
notify the relevant Guarantor of any offset hereunder.
Section 10. Continuing Guarantee; Transfer of Obligations. This Guaranty
is a continuing guarantee and shall (i) remain in full force and effect until
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the termination of the Note and Warrant Purchase
Agreement, (ii) be binding upon each Guarantor, its successors and assigns, and
(iii) inure to the benefit of and be enforceable by the Guaranteed Parties.
Section 11. Governing Law. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
Section 12. Subordination of Company's Obligations to the Guarantors.
(a) As an independent covenant, each Guarantor hereby expressly covenants and
agrees for the benefit of the Guaranteed Parties that all obligations and
liabilities of Company to such Guarantor of whatever description, including,
without limitation, all intercompany receivables of such Guarantor from Company
("Junior Claims") shall be subordinate and junior in right of
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payment to all obligations of Company to the Guaranteed Parties under the terms
of the Note and Warrant Purchase Agreement and the other documents, instruments
and agreements evidencing any Guaranteed Obligations ("Senior Claims").
(b) If an Event of Default shall occur, then no direct or indirect payment
(in cash, property, securities by setoff or otherwise) shall be made by Company
to any Guarantor on account of or in any manner in respect of any Junior Claim
except such payments and distributions the proceeds of which shall be applied to
the payment of Senior Claims.
(c) In the event of a Proceeding (as hereinafter defined), all Senior Claims
shall first be paid in full in cash before any direct or indirect payment or
distribution (in cash, property, securities by setoff or otherwise) shall be
made to any Guarantor on account of or in any manner in respect of any Junior
Claim except such payments and distributions the proceeds of which shall be
applied to the payment of Senior Claims. For the purposes of the previous
sentence, "Proceeding" means any action or proceeding in which Company, any
Guarantor or any other guarantor of the Guaranteed Obligations shall commence a
voluntary case concerning itself under the Bankruptcy Code of 1978, as amended
(the "Bankruptcy Code"), or any other applicable bankruptcy laws; or any
involuntary case is commenced against Company, any Guarantor or any other
guarantor of the Guaranteed Obligations; or a custodian (as defined in the
Bankruptcy Code or any other applicable bankruptcy laws) is appointed for, or
takes charge of, all or any substantial part of the property of Company, any
Guarantor or any other guarantor of the Guaranteed Obligations, or Company, any
Guarantor or any other guarantor of the Guaranteed Obligations commences any
other proceedings under any reorganization, arrangement, adjustment of debt,
relief of debtor, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to Company, any
Guarantor or any other guarantor of the Guaranteed Obligations, or any such
proceeding is commenced against Company, any Guarantor or any other guarantor of
the Guaranteed Obligations, or Company, any Guarantor or any other guarantor of
the Guaranteed Obligations is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or
Company, any Guarantor or any other guarantor of the Guaranteed Obligations
suffers any appointment of any custodian or the like for it or any substantial
part of its property; or Company, any Guarantor or any other guarantor of the
Guaranteed Obligations makes a general assignment for the benefit of creditors;
or Company, any Guarantor or any other guarantor of the Guaranteed Obligations
shall fail to pay, or shall state that it is unable to pay, or shall be unable
to pay, its debts generally as they become due; or Company, any Guarantor or any
other guarantor of the Guaranteed Obligations shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts; or
Company, any Guarantor or any other guarantor of the Guaranteed Obligations
shall by any act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate action shall be taken by
Company, any Guarantor or any other guarantor of the Guaranteed Obligations for
the purpose of effecting any of the foregoing.
(d) In the event any direct or indirect payment or distribution is made to a
Guarantor in contravention of this Section 12, such payment or distribution
shall be deemed received in trust for the benefit of the Guaranteed Parties and
shall be immediately paid over to the Collateral Agent for application against
the Guaranteed Obligations in accordance with the terms of the Note and Warrant
Purchase Agreement.
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(e) Each Guarantor agrees to execute such additional documents as the
Guaranteed Parties may reasonably request to evidence the subordination provided
for in this Section 12.
Section 13. Savings Clause.
(a) It is the intent of each Guarantor and the Guaranteed Parties that each
Guarantor's maximum obligations hereunder shall be, but not in excess of:
(i) in a case or proceeding commenced by or against such Guarantor under
the Bankruptcy Code on or within one year from the date on which any of the
Guaranteed Obligations are incurred, the maximum amount which would not
otherwise cause the Guaranteed Obligations (or any other obligations of such
Guarantor to the Guaranteed Parties) to be avoidable or unenforceable against
such Guarantor under (A) Section 548 of the Bankruptcy Code or (B) any state
fraudulent transfer or fraudulent conveyance act or statute applied in such
case or proceeding by virtue of Section 544 of the Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against such Guarantor under
the Bankruptcy Code subsequent to one year from the date on which any of the
Guaranteed Obligations are incurred, the maximum amount which would not
otherwise cause the Guaranteed Obligations (or any other obligations of the
Guarantor to the Guaranteed Parties) to be avoidable or unenforceable against
such Guarantor under any state fraudulent transfer or fraudulent conveyance
act or statute applied in any such case or proceeding by virtue of Section
544 of the Bankruptcy Code; or
(iii) in a case or proceeding commenced by or against such Guarantor under
any law, statute or regulation other than the Bankruptcy Code (including,
without limitation, any other bankruptcy, reorganization, arrangement,
moratorium, readjustment of debt, dissolution, liquidation or similar debtor
relief laws), the maximum amount which would not otherwise cause the
Guaranteed Obligations (or any other obligations of such Guarantor to the
Guaranteed Parties) to be avoidable or unenforceable against such Guarantor
under such law, statute or regulation including, without limitation, any
state fraudulent transfer or fraudulent conveyance act or statute applied in
any such case or proceeding.
(The substantive laws under which the possible avoidance or unenforceability of
the Guaranteed Obligations (or any other obligations of such Guarantor to the
Guaranteed Parties) shall be determined in any such case or proceeding shall
hereinafter be referred to as the "Avoidance Provisions").
(b) To the end set forth in Section 13(a), but only to the extent that the
Guaranteed Obligations would otherwise be subject to avoidance under the
Avoidance Provisions if (i) such Guarantor is not deemed to have received
valuable consideration, fair value or reasonably equivalent value for the
Guaranteed Obligations, and (ii) if the Guaranteed Obligations would render the
Guarantor insolvent, or leave the Guarantor with an unreasonably small capital
to conduct its business, or cause the Guarantor to have incurred debts (or to
have intended to have incurred debts) beyond its ability to pay such debts as
they mature, in each case as of the time any of the Guaranteed Obligations are
deemed to have been incurred under the Avoidance Provisions and after giving
effect to contribution as among Guarantors, the maximum Guaranteed Obligations
for which such Guarantor shall be liable hereunder shall be reduced to
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that amount which, after giving effect thereto, would not cause the Guaranteed
Obligations (or any other obligations of such Guarantor to the Guaranteed
Parties), as so reduced, to be subject to avoidance under the Avoidance
Provisions. This Section 13(b) is intended solely to preserve the rights of the
Guaranteed Parties hereunder to the maximum extent that would not cause the
Guaranteed Obligations of any Guarantor to be subject to avoidance under the
Avoidance Provisions, and neither such Guarantor nor any other Person shall have
any right or claim under this Section 13 as against the Guaranteed Parties that
would not otherwise be available to such Person under the Avoidance Provisions.
Section 14. Discharge of Guaranty Upon Sale of Guarantor. If all of the
assets (including, without limitation, any capital stock or securities of, or
equity interests in) of any Guarantor, or any of its successors in interest,
shall be sold or otherwise disposed of (including by merger or consolidation)
either (i) in accordance with Section 7(c) of the Note and Warrant Purchase
Agreement or (ii) otherwise consented to by the Guaranteed Parties, the Guaranty
of such Guarantor or such successor in interest, as the case may be, hereunder
shall automatically be discharged and released without any further action by the
Guaranteed Parties or any other Person effective as of the time of such sale.
Section 15. Survival; Entire Agreement. All agreements, representations
and warranties made herein shall survive the execution and delivery of this
Guaranty. This Guaranty constitutes the sole and entire agreement between each
Guarantor and the Guaranteed Parties with respect to the subject matter hereof
and supersedes and replaces any and all prior and contemporaneous agreements,
understandings, negotiations or correspondence between them with respect hereto.
Section 16. Counterparts. This Guaranty and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
Section 17. Additional Guarantors. As provided for in the Note and Warrant
Purchase Agreement, upon execution and delivery by any Subsidiary of Company of
an instrument in the form of this Guaranty, such Subsidiary of Company shall
become a Guarantor hereunder with the same force and effect as if originally
named a Guarantor herein (each an "Additional Guarantor"). The execution and
delivery of any such instrument shall not require the consent of any Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any Additional
Guarantor as a party to this Guaranty.
Section 18. Successors and Assigns. This Guaranty shall be binding upon
the respective successors and assigns of the Guarantors. This Guaranty shall
inure to the benefit of the respective successors and permitted transferees of
the Guaranteed Parties, including any subsequent holder of any Notes. No
Guarantor may assign its obligations hereunder to any other Person.
Section 19. Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION ARISING OUT OF, UNDER OR IN
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CONNECTION WITH THIS GUARANTY OR ANY OF THE DOCUMENTS, AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Company and each Guarantor have caused this Guaranty
to be duly executed and delivered by their respective duly authorized officers
as of the date first above written.
GUARANTORS:
ARTISTDIRECT INTERNET GROUP, INC., a
Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Secretary
ARTISTDIRECT DIGITAL, INC., a Delaware
corporation
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Secretary
MEDIADEFENDER, INC., a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Secretary
Address for Notices to Guarantors:
c/o ARTISTdirect, Inc.
00000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 12 of the foregoing Guaranty is
acknowledged and agreed to:
ARTISTDIRECT, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
