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| ARTD.OB > SEC Filings for ARTD.OB > Form 8-K on 4-Feb-2009 | All Recent SEC Filings |
4-Feb-2009
Entry into a Material Definitive Agreement, Termination of a Material Definitive
Senior Debt Restructuring
Effective January 30, 2009, ARTISTdirect, Inc. (the "Company") entered into a First Amendment to Note and Warrant Purchase Agreement dated as of December 31, 2008 (the "Senior Amendment") with the holders of the Company's senior secured debt (the "Senior Note Holders"). Pursuant to the Senior Amendment, the Senior Note Holders agreed to extinguish all obligations by the Company under the Note and Warrant Purchase Agreement, dated July 28, 2005, and other documents entered into in connection with the senior secured debt transaction (the "Senior Debt Restructuring"), upon completion of the following: (1) $3,500,000 cash payment to the Senior Note Holders; (2) issuance of new subordinated notes, in the aggregate principal amount of $1,000,000, to the Senior Note Holders (the "New Notes"); (3) issuance of 9,000,000 restricted shares of the Company's common stock to the Senior Note Holders, which are subject to a lock-up period of 12 months; and (4) the conversion of all of the previously issued Subordinated Notes.
The New Notes are unsecured and bear interest at 6.0% per annum, beginning January 30, 2009. The principal and the interest accrued thereon are payable on the maturity date, January 30, 2014, and are subordinated to the senior indebtedness of the Company.
Additionally, in connection with the Senior Debt Restructuring, Trilogy Capital Partners, Inc. agreed to deliver to the Company for cancellation a warrant to purchase up to 433,333 shares of the Company's capital stock at an exercise price of $2.00 per share. Fifty percent of such warrant was beneficially owned by Dimitri Villard, the Company's Chief Executive Officer, who had acquired such warrants as part of the acquisition of 6,190,000 shares from Trilogy Capital Partners, Inc., which occurred on January 15, 2009.
Conversion of Subordinated Notes
In connection with the Senior Debt Restructuring, effective January 30, 2009, the Company entered into a Second Amendment to the Convertible Subordinated Note with holders of the Subordinated Notes representing no less than the majority of the current outstanding aggregate principal amount to provide for the immediate conversion of the Subordinated Notes (the "Subordinated Amendment"). The Subordinated Amendment also provides for the extinguishment of all obligations of the Company under the Subordinated Notes and related documents, including the Registration Rights Agreement among the Company and the holders. Such obligations included the outstanding principal amount and accrued and unpaid interest on the Subordinated Notes, accrued and unpaid late charges and amounts owed under the Registration Rights Agreement.
Financing by Factoring Accounts Receivables
On January 30, 2009, the Company's two wholly-owned subsidiaries, ARTISTdirect Internet Group, Inc. ("ADIG") and MediaDefender, Inc. ("MD") each entered into an Accounts Receivable Purchase & Security Agreement (the "A/R Agreement") with Pacific Business Capital Corporation ("PBCC"), pursuant to which ADIG and MD agreed to sell and PBCC agreed to purchase qualified accounts receivable on a recourse basis. On January 30, 2009, PBCC purchased an aggregate of approximately $1,600,000 of unpaid receivables to be acquired by PBCC pursuant to the A/R Agreement, subject to a maximum aggregate amount of $3,000,000. The . . .
The obligations to the Senior Note Holders and the holders of the Subordinated Notes were terminated on January 30, 2009, as disclosed in Item 1.01.
Refer to Item 1.01 above regarding the terms of the A/R Agreement and New Notes, which is incorporated herein by this reference.
On January 30, 2009 the Company issued to the Senior Note Holders in exchange for the extinguishment of its obligations under the Note and Warrant Purchase Agreement 9,000,000 restricted shares of Common Stock, subject to a lock-up period of 12 months. In connection with the Senior Debt Restructuring, the Company cancelled the outstanding warrants issued to the holders of the Subordinated Notes and converted the Subordinated Notes based on a conversion price equal to $1.00 per share. A total of 36,732,492 restricted shares of Common Stock were issued to the holders of the then existing Subordinated Notes, some of which are subject to a lock-up period of 12 months.
The issuances of the shares above were exempt from registration under the Securities Act of 1933, pursuant of Section 4(2) of that Act as transactions not involving a public offering. The Company did not use any general solicitation or general advertising in connection with these sales. Each issuee of the aforementioned shares that was party to either the Senior Amendment or Subordinated Amendment represented that he or she was acquiring the shares for investment purposes only and the Company placed appropriate restrictions on transfer on the shares issued.
As a result of the Senior Debt Restructuring and the conversion of the Subordinated Note on January 30, 2009, the Senior Note Holders and the holders of the Subordinated Notes together own approximately 85.7% of the Company's outstanding shares of common stock (the Senior Note Holders hold approximately 19.5% and the holders of the Subordinated Notes hold approximately 66.2%), based on the number of outstanding shares as reported in the Company's Form 10-Q for the quarter ended September 30, 2008 and the 45,732,492 shares of common stock issued on January 30, 2009 in connection with the transactions described in Item 1.01, which is incorporated herein by this reference.
Effective February 1, 2009, Dimitri Villard, the Chairman of the Board of Directors, was appointed to serve as the Company's Chief Executive Officer. Prior to that date, Mr. Villard was the Company's interim Chief Executive Officer.
Pursuant to a 3-year employment agreement, effective February 1, 2009, Mr. Villard will receive base compensation equal to $25,000 per month. Mr. Villard will also be entitled to participate in the Company's stock compensation plan that may exist from time to time and will receive a bonus based on the Company's EBITDA if the Company's EBITDA exceeds a certain threshold amount as determined by the Company's Compensation Committee for such fiscal year.
On February 4, 2009, the Company issued a press release with respect to the transactions and matters described in this Form 8-K.
(d) Exhibits
4.1 Second Amendment to Subordinated Convertible Subordinated Note, dated as of December 31, 2008, by and among ARTISTdirect, Inc., DKR Soundshore Oasis Holding Fund Ltd., Trilogy Capital Partners, Inc., Michael Rapp, Broadband Capital Management, LLC, Philip Wagenheim, Karl Brenza, Jeffrey Meshel and Cliff Chapman.
4.2 Form of Subordinated Note, dated as of January 30, 2009, issued to each of the Senior Lenders.
10.1 First Amendment to Note and Warrant Purchase Agreement, dated
as of December 31, 2008, by and among ARTISTdirect, Inc., U.S. Bank National
Association, JMB Capital Partners, L.P., JMG Capital Partners, L.P., CCM Master
Qualified Fund, Ltd., JMG Triton Offshore Fund, Ltd., and with respect to
Section 3 only, Trilogy Capital Partners, Inc.
10.2 Form of Accounts Receivable Purchase & Security Agreement with Pacific Business Capital Corporation, dated as of January 27, 2009.
99.1 Press Release issued on February 4, 2009.
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