Document:

Exhibit
10.15

 

SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

 

THIS SECOND
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered
into on August 10. 2007 (the “Execution Date”), to be effective for
all purposes as of August 2, 2007 (the “Effective Date”), by and
between Linens ’n Things, Inc., a Delaware corporation (the “Company”)
and wholly owned subsidiary of Linens Holding Co., a Delaware corporation (“Holding”),
and Scott Silver (the “Executive”).

 

WHEREAS, the
Company and the Executive entered in an Employment Agreement on May 5,
2006, effective as of April 3, 2006 (the “Original Employment Agreement”);

 

WHEREAS, the
Company and the Executive entered in an Amended and Restated Employment
Agreement on January 20, 2007, effective as of January 1, 2007 (the “First
Amended Employment Agreement”), to amend and restate the Original
Employment Agreement; and

 

WHEREAS, the
Company and the Executive now desire to amend certain provisions of the First
Amended Employment Agreement and restate the First Amended Employment
Agreement, as so amended, effective as of the Effective Date.

 

NOW,
THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, agree as follows:

 

1.                                      Employment
of Executive; Duties.

 

1.1                               Title.  During the Employment Period (as defined in Section 2 hereof), the Executive shall
serve as Executive Vice President, Merchandising of the Company and of
Holding.  The Executive shall have the
normal duties, responsibilities and authority commensurate with such positions.

 

1.2                               Duties.  During the Employment Period, the Executive shall
do and perform all services and acts necessary or advisable to fulfill the
duties and responsibilities of the Executive’s positions and shall render such
services on the terms set forth herein. 
In addition, the Executive shall have such other executive and
managerial powers and duties as may reasonably be assigned to the Executive,
commensurate with the Executive serving as an Executive Vice President.  The Company may adjust the duties and
responsibilities of the Executive as an Executive Vice President,
notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company’s needs from
time to time.  Except for sick leave,
reasonable vacations and excused leaves of absence, the Executive shall,
throughout the Employment Period, devote substantially all the Executive’s
working time, attention, knowledge and skills faithfully, and to the best of
the Executive’s ability, to the duties and responsibilities of the Executive’s
positions in furtherance of the business affairs and activities of the Company
and its subsidiaries and Affiliates (as defined in Section 5.4(a) hereof) and, except where the Company
provides its written consent otherwise, shall maintain the Executive’s
principal residence within 75 miles of the principal office of the Company as
of the Effective Date.  The 

 

 

Executive shall at all times be subject to,
comply with, observe and carry out (a) the Company’s rules, regulations,
policies and codes of ethics and/or conduct applicable to its employees
generally and in effect from time to time and (b) such rules, regulations,
policies, codes of ethics and/or conduct, directions and restrictions as the
Board of Directors of the Company (the “Board”) may from time to time
reasonably establish or approve for senior executive officers of the Company.

 

2.                                      Term
of Employment.

 

2.1                               Employment
Period.  The employment of the
Executive hereunder shall continue until December 31, 2008 (the “Initial
Employment Period”), unless terminated earlier in accordance with the
provisions of Section 4 of
this Agreement.

 

2.2                               Extension.  Unless terminated earlier in accordance with
the provisions of Section 4
of this Agreement, the employment of the Executive hereunder shall continue
after the end of the Initial Employment Period for additional one (1)-year
periods (each an “Extension Period” and, together with the Initial
Employment Period, the “Employment Period”), unless the Company or the
Executive notifies the other in writing not less than one (1) year prior
to the end of the Initial Employment Period, or the end of the applicable
Extension Period, of its or the Executive’s election, in its or the Executive’s
sole discretion, not to extend the Employment Period.

 

3.                                      Compensation
and General Benefits.

 

3.1                               Base
Salary.

 

(a)                                  During
the Employment Period, the Company agrees to pay to the Executive an annual
base salary in an amount equal to $400,000 (such base salary, as may be
adjusted from time to time pursuant to Section 3.1(b),
is referred to herein as the “Base Salary”).  The Executive’s Base Salary, less amounts
required to be withheld under applicable law, shall be payable in equal
installments in accordance with the Company’s normal payroll practices and
procedures in effect from time to time for the payment of salaries to officers
of the Company, but in no event less frequently than monthly.

 

(b)                                 The
Board or the Compensation Committee established by the Board (the “Compensation
Committee”) shall review the Executive’s performance on an annual basis
and, based on such review, may change the Base Salary, as it, acting in its
sole discretion, shall determine to be reasonable and appropriate.

 

3.2                               Bonus.  With respect to the 2007 calendar year and
with respect to each calendar year that commences during the Employment Period,
the Executive shall be eligible to receive from the Company an annual
performance bonus (the “Annual Bonus”) on a basis and in an amount to be
determined by the Board or the Compensation Committee in the exercise of its
sole discretion for the applicable year. 
The target Annual Bonus, if any, will be 50% of the Base Salary.  Any Annual Bonus earned shall be payable in
full as soon as reasonably practicable following the determination thereof, but
in no event later than May 15 of the following year, and in accordance
with the Company’s normal payroll practices and procedures.  Except as otherwise expressly provided in Section 4 hereof, any Annual Bonus (or

 

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portion thereof) payable under this Section 3.2 shall not be payable
unless the Executive is employed by the Company on the last day of the period
to which such Annual Bonus relates.

 

3.3                               Expenses.  During the Employment Period, in addition to
any amounts to which the Executive may be entitled pursuant to the other provisions
of this Section 3 or
elsewhere herein, the Executive shall be entitled to receive reimbursement from
the Company for all reasonable and necessary expenses incurred by the Executive
in performing the Executive’s duties hereunder on behalf of the Company,
subject to, and consistent with, the Company’s policies for expense payment and
reimbursement, in effect from time to time.

 

3.4                               Fringe
Benefits.  During the Employment
Period, in addition to any amounts to which the Executive may be entitled
pursuant to the other provisions of this Section 3
or elsewhere herein, the Executive shall be entitled to participate in, and to
receive benefits under, (a) any benefit plans, arrangements or policies
made available by the Company to its employees generally, subject to and on a
basis consistent with the terms, conditions and overall administration of each
such plan, arrangement or policy and (b) without limiting the foregoing,
the benefits set forth on Exhibit B
attached hereto.

 

3.5                               Stock
Options.

 

(a)                                  The
Company shall recommend to the Option Committee of Holding, as defined in the
Linens Holding Co. Stock Option Plan (the “Plan”), that the Executive be
granted additional nonqualified options under the Plan to purchase a total of
10,000 shares of Common Stock, par value $0.01 per share, of Holding (the “Common
Stock”) with a per share exercise price equal to the fair market value of
the Common Stock on the date of grant as determined by the Option Committee
(the “Options”).  The Options have
a term of seven (7) years from the date of grant and are equally divided
between a “Time Option” and a “Performance Option.”  The Time Option shall become vested and
exercisable in four equal annual installments
on each of the first four anniversaries of the date of grant, subject to
the Executive’s continued employment with the Company, and the Performance
Option shall become vested and exercisable upon satisfaction of the performance
criteria set forth in the grant letter. 
Except as otherwise provided herein, the Options shall be subject to the
terms and conditions of the Plan and the grant letter executed in respect of
the Options.

 

(b)                                 During
the Employment Period and subject to the approval of the Option Committee, the
Executive shall be eligible to participate in and be granted additional stock
options under the Plan.

 

4.                                      Termination.

 

4.1                               General.  The employment of the Executive hereunder
(and the Employment Period) shall terminate as provided in Section 2 hereof, unless earlier
terminated in accordance with the provisions of this Section 4.

 

4.2                               Death
or Disability of the Executive.

 

(a)                                  The
employment of the Executive hereunder (and the Employment Period) shall
terminate upon (i) the death of the Executive and (ii) at the option
of 

 

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the Company, upon not less than fifteen (15)
days’ prior written notice to the Executive or the Executive’s personal
representative or guardian, if the Executive suffers a “Total Disability” (as
defined in Section 4.2(b) hereof).  Upon termination for death or Total
Disability, subject to reduction by any benefits paid or payable to the
Executive, the Executive’s beneficiaries or estate under any Company-sponsored
disability benefit plan program or policy for the period following such date of
termination, (A) the Company shall pay to the Executive, guardian or
personal representative, as the case may be, the Executive’s current Base
Salary for the remainder of the Employment Period in effect immediately prior
to the date of termination and (B) subject further to the sole discretion
of the Board or the Compensation Committee, the Company may also pay to the
Executive, guardian or personal representative, as the case may be, a prorated
share of the Annual Bonus pursuant to Section 3.2
hereof (based on the period of actual employment) that the Executive would have
been entitled to had the Executive worked the full year during which the
termination occurred, provided that bonus targets are met for the year of such
termination.  Any bonus shall be payable
as soon as reasonably practicable following the determination thereof, but in
no event later than May 15 of the following year, and in accordance with
the Company’s normal payroll practices and procedures.

 

(b)                                 For
purposes of this Agreement, “Total Disability” shall mean (i) if
the Executive is subject to a legal decree of incompetency (the date of such
decree being deemed the date on which such disability occurred), (ii) the
written determination by a physician selected by the Company that, because of a
medically determinable disease, injury or other physical or mental disability,
the Executive is unable substantially to perform, with or without reasonable
accommodation, the material duties of the Executive required hereby, and that
such disability has lasted for ninety (90) consecutive days or any one hundred
twenty (120) days during the immediately preceding twelve (12)-month period or
is, as of the date of determination, reasonably expected to last six (6) months
or longer after the date of determination, in each case based upon medically
available reliable information or (iii) Executive’s qualifying for
benefits under the Company’s long-term disability coverage, if any.  In conjunction with determining mental and/or
physical disability for purposes of this Agreement, the Executive hereby
consents to (x) any examinations that the Board or the Compensation
Committee determines are relevant to a determination of whether the Executive
is mentally and/or physically disabled or are required by the Company physician,
(y) furnish such medical information as may be reasonably requested and (z) waive
any applicable physician patient privilege that may arise because of such
examination.

 

(c)                                  With
respect to outstanding stock options and other equity-based awards held by the
Executive as of the date of termination pursuant to this Section 4.2, (i) any such options
that are not vested or exercisable as of such date of termination shall
immediately expire and any such equity-based awards that are not vested as of
such date of termination shall immediately be forfeited and (ii) any such
options that are vested and exercisable as of such date of termination shall
expire immediately following the expiration of the one hundred eighty (180)-day
period following such date of termination.

 

(d)                                 With
respect to any shares of Common Stock held by the Executive that are vested as
of the date of termination pursuant to this Section 4.2
(or issued pursuant to the exercise of options following such date of
termination pursuant to Section 4.2(c) hereof),
for the two hundred seventy (270)-day period following such date of
termination, the 

 

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Company (or its designee) shall have the
right to purchase from the Executive or the Executive’s beneficiary, as
applicable, and the Executive or the Executive’s beneficiary hereby agrees to
sell any or all such shares to the Company (or the Company’s designee) for an
amount equal to the product of (i) the per share current fair market value
of a share of Common Stock (as determined by the Board in good faith) and (ii) the
number of shares so purchased.

 

4.3                               Termination
by the Company Without Cause or Resignation by the Executive For Good Reason.

 

(a)                                  The
Company may terminate the Executive’s employment without “Cause” (as defined in
Section 4.3(g)), and thereby
terminate the Executive’s employment (and the Employment Period) under this
Agreement at any time with no requirement for notice to the Executive.

 

(b)                                 The
Executive may resign, and thereby terminate the Executive’s employment (and the
Employment Period), at any time for “Good Reason” (as defined in Section 4.3(f) hereof), upon not
less than sixty (60) days’ prior written notice to the Company specifying in
reasonable detail the reason therefore; provided, however, that
the Company shall have a reasonable opportunity to cure any such Good Reason
(to the extent possible) within sixty (60) days after the Company’s receipt of
such notice; and provided further that, if the Company is not seeking to
cure, the Company shall not be obligated to allow the Executive to continue
working during such period and may, in its sole discretion, accelerate such
termination of employment (and the Employment Period) to any date during such
period.

 

(i)                                     Executive
may not terminate employment under this Agreement for Good Reason regarding any
of the Company’s acts or omissions of which Executive had actual notice for
sixty (60) days or more prior to giving notice of termination for Good Reason.

 

(ii)                                  A
determination of whether the Executive legitimately has Good Reason for
termination of the Executive’s employment under this Agreement, and of whether
the Company has effectively cured and thus eliminated the grounds for such Good
Reason, shall be made only by the Chief Executive Officer of the Company (the “Chief
Executive Officer”), within the Chief Executive Officer’s sole judgment and
discretion, acting in good faith after having met with the Company’s Senior
Vice President of Human Resources.

 

(c)                                  In
the event the Executive’s employment is terminated pursuant to this Section 4.3, then, subject to Section 4.3(d) hereof, the
following provisions shall apply:

 

(i)                                     The
Company shall continue to pay the Executive the Base Salary to which the
Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the
year of termination) had the Executive remained in the employ of the Company
until the expiration of the Employment Period in effect immediately prior to
the date of termination, with all such amounts payable in accordance with the
Company’s normal payroll practices 

 

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and procedures in the same manner and at the same time as though the
Executive remained employed by the Company.

 

(ii)                                  If
such termination occurs upon or within six (6) months following a Change
of Control (as defined in Exhibit A
attached hereto), the Company shall continue to pay the Executive the Base
Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary
rate during the year of termination) for the greater of (A) the period set
forth in Section 4.3(c)(i) hereof
or (B) a two (2)-year period following such date of termination, with all
such amounts payable in accordance with the Company’s normal payroll practices
and procedures in the same manner and at the same time as though the Executive
remained employed by the Company.

 

(iii)                               In
the event the Executive’s employment is terminated pursuant to this Section 4.3 without Cause, and if the
Company has previously effected reductions in the Executive’s Base Salary and
the base salary of all executives at the same level as the Executive, which
reductions were substantially similar, then the Base Salary rate for purposes
of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary
rate in effect immediately prior to such reductions.

 

(iv)                              Subject
to the sole discretion of the Board or the Compensation Committee, the Company
may pay to the Executive a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the
period of actual employment) that the Executive would have been entitled to had
the Executive worked the full year during which the termination occurred,
provided that bonus targets are met for the year of such termination.  The bonus shall be payable as soon as
reasonably practicable following the determination thereof, but in no event
later than May 15 of the following year, and in accordance with the
Company’s normal payroll practices and procedures.

 

(v)                                 With
respect to outstanding options and other equity-based awards held by the
Executive as of the date of termination pursuant to this Section 4.3, (A) any such options
that are not vested or exercisable as of such date of termination shall
immediately expire and any such equity-based awards that are not vested as of
such date of termination shall immediately be forfeited and (B) any such
options that are vested and exercisable as of such date of termination shall
expire immediately following the expiration of the ninety (90)-day period
following such date of termination.

 

(vi)                              With
respect to any shares of Common Stock held by the Executive that are vested as
of the date of termination pursuant to this Section 4.3
(or issued pursuant to the exercise of options following such date of
termination pursuant to Section 4.3(c)(v) hereof),
for the one hundred eighty (180)-day period following such date of termination,
the Company (or its designee) shall have the right to purchase from the
Executive, and the Executive hereby agrees to sell any or all such shares to
the Company (or the Company’s 

 

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designee), for an amount equal to the product
of (A) the per share current fair market value of a share of Common Stock
(as determined by the Board in good faith) and (B) the number of shares so
purchased.

 

(d)                                 As
a condition precedent to the Executive’s right to receive the benefits set
forth in Section 4.3(c) hereof,
the Executive agrees to execute a release of the Company and its respective
Affiliates, officers, directors, stockholders, employees, agents, insurers,
representatives and successors from and against any and all claims that the
Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating
to the Executive’s employment by the Company and the termination thereof, such
release to be in form and substance reasonably satisfactory to the Company.

 

(e)                                  Anything
in this Agreement to the contrary notwithstanding, if it shall be determined
that any payment, vesting, distribution or transfer by the Company or any
successor, or any Affiliate of the foregoing or by any other Person or that any
other event occurring with respect to the Executive and the Company for the
Executive’s benefit, whether paid or payable or distributed or distributable
under the terms of this Agreement or otherwise (including under any employee
benefit plan) (a “Payment”) would be subject to or result in the
imposition of the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the “Code”) (and any regulations or guidance
promulgated or issued thereunder, any successor provision, and any similar
provision of state or local income tax law) (collectively, the “Excise Tax”),
then the amount of the Payment shall be reduced to the highest amount that may
be paid by the Company or other entity without subjecting any such Payment to
the Excise Tax (the “Payment Reduction”).  The Executive shall have the right to
designate those payments or benefits that shall be reduced or eliminated under
the Payment Reduction to avoid the imposition of the Excise Tax, subject to the
confirmation of the Accounting Firm (as defined herein) with respect to the
intended effect thereof.

 

(i)                                     Subject
to the provisions of Section 4.3(e)(ii),
all determinations required to be made under this Section 4.3(e), including whether and when a Payment is
subject to Section 4999 and the assumptions to be utilized in arriving at
such determination and in determining an appropriate Payment Reduction, shall
be made by KPMG LLP, or any other nationally recognized accounting firm that
shall be the Company’s outside auditors at the time of such determination (the “Accounting
Firm”), which Accounting Firm shall provide detailed supporting calculations
to the Executive and the Company within fifteen (15) business days of the
receipt of notice from the Company or the Executive that there will be a
Payment that the Person giving notice believes may be subject to the Excise
Tax.  All fees and expenses of the
Accounting Firm shall be borne by the Company. 
Any determination by the Accounting Firm shall be binding upon the
Company and the Executive in determining whether a Payment Reduction is
required and the amount thereof (subject to Sections 4.3(e)(ii) and
(iii)), in the absence of material
mathematical or legal error.

 

(ii)                                  As
a result of uncertainty in the application of Section 4999 that may exist
at the time of the initial determination by the Accounting Firm, it may be
possible that in making the calculations required to be 

 

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made hereunder, the Accounting Firm shall
determine that a Payment Reduction need not be made that properly should be
made (an “Overpayment”) or that a Payment Reduction not properly needed
to be made should be made (an “Underpayment”).  If, within seventy-five (75) days after the
Accounting Firm’s initial determination under Section 4.3(e)(i),
the Accounting Firm shall determine that an Overpayment was made, any such
Overpayment shall be treated for all purposes, to the extent practicable and
subject to applicable law, as a loan to the Executive with interest at the
applicable Federal rate provided for in Section 1274(d) of the Code
and shall be repaid by the Executive to the Company within thirty-five (35)
days after the Executive receives notice of the Accounting Firm’s
determination; provided, however, that the amount to be repaid by
the Executive to the Company either as a loan or otherwise as a lump sum
payment (where a loan is not practicable or permitted by law) shall be reduced
to the extent that any portion of the Overpayment to be repaid will not be
offset by a corresponding reduction in tax by reason of such repayment of the
Overpayment.  If the Accounting Firm
shall determine that an Underpayment was made, any such Underpayment shall be
due and payable by the Company to the Executive within thirty-five (35) days
after the Company receives notice of the Accounting Firm’s determination.

 

(iii)                               The
Executive shall give written notice to the Company of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Executive
of an Excise Tax, such notice to be provided within fifteen (15) days after the
Executive shall have received written notice of such claim.  The Executive shall cooperate with the
Company in determining whether to contest or pay such claim and shall not pay
such claim without the written consent of the Company, which shall not be unreasonably
withheld, conditioned or delayed.

 

(iv)                              This
Section 4.3(e) shall
remain in full force and effect following the termination of the Executive’s
employment for any reason until the expiration of the statute of limitations on
the assessment of taxes applicable to the Executive for all periods in which
the Executive may incur a liability for taxes (including Excise Taxes),
interest or penalties arising out of the operation of this Agreement.

 

(f)                                    For
purposes of this Agreement, the Executive would be entitled to terminate the
Executive’s employment for “Good Reason” if without the Executive’s
prior written consent:

 

(i)                                     the
Company fails to comply with any material obligation imposed by this Agreement;

 

(ii)                                  the
Company changes the Executive’s position from that of an Executive Vice President;
provided, however, that (A) a change in the Executive’s
duties or responsibilities without a change in the Executive’s position as an
Executive Vice President shall not constitute Good Reason and (B) nothing 

 

8

 

herein shall prohibit the Company from
changing the Executive’s specific title as an Executive Vice President,
notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company’s needs from
time to time; or

 

(iii)                               the
Company effects a reduction in the Executive’s Base Salary, unless all
executives at the same level as the Executive receive a substantially similar
reduction in base salary.

 

(g)                                 For
purposes of this Agreement, “Cause” means the occurrence of any one or
more of the following events, and the Company shall have the sole discretion to
determine the existence of Cause:

 

(i)                                     a
failure by the Executive to comply with any obligation under this Agreement;

 

(ii)                                  the
Executive’s being indicted for (A) any felony or (B) any misdemeanor
that causes or is likely to cause harm or embarrassment to the Company or any
of its Affiliates, in the reasonable judgment of the Board;

 

(iii)                               theft,
embezzlement or fraud by the Executive in connection with the performance of
the Executive’s duties hereunder;

 

(iv)                              the
Executive’s engaging in any activity that gives rise to a material conflict
with the Company or any of its Affiliates;

 

(v)                                 the
misappropriation by the Executive of any material business opportunity of the
Company or any of its Affiliates;

 

(vi)                              any
failure to comply with, observe or carry out the Company’s rules, regulations,
policies and codes of ethics and/or conduct applicable to its employees
generally and in effect from time to time, including (without limitation) those
regarding conflicts, potential conflicts of interest or the appearance of a
conflict of interest;

 

(vii)                           any
failure to comply with, observe or carry out the rules, regulations, policies,
directions, codes of ethics and/or conduct and restrictions established or
approved by the Board from time to time for senior executive officers of the
Company, including (without limitation) those regarding conflicts, potential
conflicts of interest or the appearance of a conflict of interest;

 

(viii)                        substance
abuse or use of illegal drugs that, in the reasonable judgment of the Board, (A) impairs
the Executive’s performance of the Executive’s duties hereunder or (B) causes
or is likely to cause harm or embarrassment to the Company or any of its
Affiliates; and

 

(ix)                                engagement
in conduct that Executive knows or should know is injurious to the Company or
any of its Affiliates.

 

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4.4                               Termination
For Cause, Voluntary Resignation Other Than For Good Reason or Election Not to
Extend the Employment Period.

 

(a)                                  (i) The
Company may, upon action of the Board, terminate the employment of the
Executive (and the Employment Period) at any time for “Cause,” (ii) the
Executive may voluntarily resign other than for Good Reason and thereby
terminate the Executive’s employment (and the Employment Period) under this
Agreement at any time upon not less than thirty (30)-days’ prior written notice
or (iii) either the Company or the Executive may elect not to extend or
further extend the Employment Period pursuant to Section 2.2 hereof.

 

(b)                                 The
following provisions shall apply upon termination by the Company for Cause, by
the Executive as the result of resignation for other than for Good Reason, or
by the Company or the Executive at the end of the Employment Period as the
result of an election not to extend or further extend the Employment Period:

 

(i)                                     The
Executive shall be entitled to receive all amounts of earned but unpaid Base
Salary and benefits accrued through the date of such termination.  Except as provided below, all other rights of
the Executive (and all obligations of the Company) hereunder shall terminate as
of the date of such termination.

 

(ii)                                  With
respect to outstanding options and other equity-based awards held by the
Executive as of the date of termination pursuant to this Section 4.4, (A) any such options
that are not vested or exercisable as of such date of termination shall
immediately expire and any such equity-based awards that are not vested as of
such date of termination shall immediately be forfeited and (B) any such
options that are vested and exercisable as of such date of termination shall
expire immediately following the expiration of the ninety (90)-day period
following such date of termination.

 

(iii)                               With
respect to any shares of Common Stock held by the Executive that are vested as
of the date of termination pursuant to this Section 4.4
(or issued pursuant to the exercise of options following such date of
termination pursuant to Section 4.4(b)(ii) hereof),
for the one hundred eighty (180)-day period following such date of termination,
the Company (or its designee) shall have the right to purchase from the
Executive and the Executive hereby agrees to sell any or all such shares to the
Company (or the Company’s designee) for an amount equal to the product of (A) the
per share current fair market value of a share of Common Stock (as determined
by the Board in good faith) and (B) the number of shares so purchased.

 

4.5                               Resignation
from Officer Positions.  Upon the
termination of the Executive’s employment for any reason (unless otherwise
agreed in writing by the Company and the Executive), the Executive will be
deemed to have resigned, without any further action by the Executive, from any
and all officer and/or director positions that the Executive, immediately prior
to such termination, (a) held with the Company or any of its Affiliates
and (b) held with any other entities at the direction of, or as a result
of the Executive’s affiliation with, the 

 

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Company or any of its
Affiliates.  If for any reason this Section 4.5 is deemed to be
insufficient to effectuate such resignations, then Executive will, upon the
Company’s request, execute any documents or instruments that the Company may
deem necessary or desirable to effectuate such resignations.  In addition, the Executive hereby designates
the Secretary or any Assistant Secretary of the Company and of any Affiliate to
execute any such documents or instruments as the Executive’s attorney-in-fact
to effectuate such resignations if execution by the Secretary or any Assistant
Secretary of the Company or Affiliate is deemed by the Company or the Affiliate
to be a more expedient means to effectuate such resignation or resignations.

 

4.6                               Section 409A
of the Code.  Notwithstanding
anything to the contrary in this Agreement, the parties mutually desire to
avoid adverse tax consequences associated with the application of Section 409A
of the Code to this Agreement and agree to cooperate fully and take appropriate
reasonable actions to avoid any such consequences under Section 409A of
the Code, including delaying payments and reforming the form of the Agreement
if such action would reduce or eliminate taxes and/or interest payable as a result
of Section 409A of the Code. In this regard, notwithstanding anything to
the contrary in this Section 4,
to the extent necessary to comply with Section 409A of the Code, any
payment required under this Section 4
shall be deferred for a period of six (6) months, regardless of the
circumstances giving rise to or the basis for such payment.

 

5.                                      Confidentiality,
Work Product and Non-Competition and Non-Solicitation.

 

5.1                               Confidentiality.

 

(a)                                  In
connection with the Executive’s employment with the Company, the Company
promises to provide the Executive with access to “Confidential Information” (as
defined in Section 5.4(d) hereof)
in support of the Executive’s employment duties.  The Executive recognizes that the Company’s
business interests require a confidential relationship between the Company and
the Executive and the fullest practical protection and confidential treatment
of all Confidential Information.  At all
times, both during and after the Employment Period, the Executive shall not
directly or indirectly:  (i) appropriate,
download, print, copy, remove, use, disclose, divulge, communicate or otherwise
“Misappropriate” (as defined in Section 5.4(e) hereof)
any Confidential Information, including, without limitation, originals or
copies of any Confidential Information, in any media or format, except
for the Company’s benefit within the course and scope of the Executive’s
employment or with the prior written consent of the Chief Executive Officer; or
(ii) take or encourage any action that would circumvent, interfere with or
otherwise diminish the value or benefit of the Confidential Information to any
of the Company Parties (as defined in Section 5.4(b) hereof).

 

(b)                                 All
Confidential Information, and all other information and property affecting or
relating to the business of the Company Parties within the Executive’s
possession, custody or control, regardless of form or format, shall remain, at
all times, the property of the respective Company Parties, the appropriation,
use and/or disclosure of which is governed and restricted by this Agreement.

 

(c)                                  The
Executive acknowledges and agrees that:

 

11

 

(i)                                     the
Executive occupies a unique position within the Company, and the Executive is
and will be intimately involved in the development and/or implementation of
Confidential Information;

 

(ii)                                  in
the event the Executive breaches this Section 5.1
with respect to any Confidential Information, such breach shall be deemed to be
a Misappropriation of such Confidential Information; and

 

(iii)                               any
Misappropriation of Confidential Information will result in immediate and
irreparable harm to the Company.

 

(d)                                 Upon
receipt of any formal or informal request, by legal process or otherwise,
seeking the Executive’s direct or indirect disclosure or production of any
Confidential Information to any Person, the Executive shall promptly and timely
notify the Company and provide a description and, if applicable, hand deliver a
copy of such request to the Company.  The
Executive irrevocably nominates and appoints the Company as the Executive’s
true and lawful attorney-in-fact to act in the Executive’s name, place and
stead to perform any act that the Executive might perform to defend and protect
against any disclosure of Confidential Information.

 

(e)                                  At
any time the Company may request, during or after the Employment Period, the
Executive shall deliver to the Company all originals and copies of Confidential
Information and all other information and property affecting or relating to the
business of the Company Parties within the Executive’s possession, custody or
control, regardless of form or format, including, without limitation any
Confidential Information produced by the Executive.  Both during and after the Employment Period,
the Company shall have the right of reasonable access to review, inspect, copy
and/or confiscate any Confidential Information within the Executive’s
possession, custody or control.

 

(f)                                    Upon
termination or expiration of this Agreement, the Executive shall immediately
return to the Company all Confidential Information, and all other information
and property affecting or relating to the business of the Company Parties,
within the Executive’s possession, custody or control, regardless of form or
format, without the necessity of a prior Company request.

 

(g)                                 During
the Employment Period, the Executive represents and agrees that the Executive
will not use or disclose any confidential or proprietary information or trade
secrets of others, including but not limited to former employers, and that the
Executive will not bring onto the premises of the Company or access such
confidential or proprietary information or trade secrets of such others, unless
consented to in writing by said others, and then only with the prior written
authorization of the Company.

 

5.2                               Work
Product/Intellectual Property.

 

(a)                                  Assignment.  The Executive hereby assigns to the Company
all right, title and interest to all “Work Product” (as defined in Section 5.4(h) hereof) that (i) relates
to any of the Company Parties’ actual or anticipated business, research and
development or existing or future products or services, or (ii)  is
conceived, reduced to practice, 

 

12

 

developed or made using any equipment, supplies,
facilities, assets, information or resources of any of the Company Parties
(including, without limitation, any intellectual property rights).

 

(b)                                 Disclosure.  The Executive shall promptly disclose Work
Product to the Chief Executive Officer and perform all actions reasonably
requested by the Company (whether during or after the Employment Period) to
establish and confirm the ownership and proprietary interest of any of the
Company Parties in any Work Product (including, without limitation, the execution
of assignments, consents, powers of attorney, applications and other
instruments).  The Executive shall not
file any patent or copyright applications related to any Work Product except
with the written consent of the Chief Executive Officer.

 

5.3                               Non-Competition
and Non-Solicitation.

 

(a)                                  In
consideration of the Confidential Information being provided to the Executive
as stated in Section 5.1
hereof, and other good and valuable new consideration as stated in this
Agreement, including, without limitation, employment and/or continued
employment with the Company, and the business relationships, Company goodwill,
work experience, client, customer and/or vendor relationships and other fruits
of employment that the Executive will have the opportunity to obtain, use and
develop under this Agreement, the Executive agrees to the restrictive covenants
stated in this Section 5.3.

 

(b)                                 During
the Employment Period and until the end of the Restricted Period (as defined in
Section 5.4(g) hereof),
the Executive agrees that the Executive will not, directly or indirectly, on
the Executive’s own behalf or on the behalf of any other Person, within the
United States of America or in any other country or territory in which the
businesses of the Company are conducted:

 

(i)                                     engage
in a Competing Business (as defined in Section 5.4(c) hereof),
including, without limitation, by owning, managing, operating, controlling,
being employed by, providing services as a consultant or independent contractor
to or participating in the ownership, management, operation or control of any
Competing Business;

 

(ii)                                  induce
or attempt to induce any customer, vendor, supplier, licensor or other Person
in a business relationship with any Company Party, for or with which the
Executive or employees working under the Executive’s supervision had any direct
or indirect responsibility or contact during the Employment Period, (A) to
do business with a Competing Business or (B) to cease, restrict, terminate
or otherwise reduce business with the Company for the benefit of a Competing
Business, regardless of whether the Executive initiates contact; or

 

(iii)                               (A) solicit,
recruit, persuade, influence or induce, or attempt to solicit, recruit,
persuade, influence or induce anyone employed or otherwise retained by any of
the Company Parties (including any independent contractor or consultant), to
cease or leave their employment or contractual or 

 

13

 

consulting relationship with any Company
Party, regardless of whether the Executive initiates contact for such purposes
or (B) hire, employ or otherwise attempt to establish, for any Person, any
employment, agency, consulting, independent contractor or other business
relationship with any Person who is or was employed or otherwise retained by
any of the Company Parties (including any independent contractor or
consultant).

 

(c)                                  The
parties hereto acknowledge and agree that, notwithstanding anything in Section 5.3(b)(i) hereof, (i) the
Executive may own or hold, solely as passive investments, securities of Persons
engaged in any business that would otherwise be included in Section 5.3(b)(i), as long as with
respect to each such investment the securities held by the Executive do not
exceed five percent (5%) of the outstanding securities of such Person and such
securities are publicly traded and registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) the
Executive may serve on the board of directors (or other comparable position) or
as an officer of any entity at the request of the Board; provided, however,
that in the case of investments otherwise permitted under clause (i) above,
the Executive shall not be permitted to, directly or indirectly, participate
in, or attempt to influence, the management, direction or policies of (other
than through the exercise of any voting rights held by the Executive in
connection with such securities), or lend the Executive’s name to, any such
Person.

 

(d)                                 The
Executive acknowledges and agrees that, for purposes of this Section 5.3, indirect acts by the
Executive shall include, without limitation, an act by the Executive’s spouse,
ancestor, lineal descendant, lineal descendant’s spouse, sibling or other
member of the Executive’s immediate family.

 

(e)                                  The
Executive acknowledges that (i) the restrictive covenants contained in
this Section 5.3 hereof are
ancillary to and part of an otherwise enforceable agreement, such being the
agreements concerning Confidential Information and other consideration as
stated in this Agreement, (ii) at the time that these restrictive
covenants are made, the limitations as to time, geographic scope and activity
to be restrained, as described herein, are reasonable and do not impose a
greater restraint than necessary to protect the good will and other legitimate
business interests of the Company, including without limitation, Confidential
Information (including trade secrets), client, customer and/or vendor
relationships, client and/or customer goodwill and business productivity, (iii) in
the event of termination of the Executive’s employment, the Executive’s
experiences and capabilities are such that the Executive can obtain gainful
employment without violating this Agreement and without the Executive incurring
undue hardship, (iv) based on the relevant benefits and other new
consideration provided for in this Agreement, including, without limitation,
the disclosure and use of Confidential Information, the restrictive covenants
of this Section 5.3, as
applicable according to their terms, shall remain in full force and effect even
in the event of the Executive’s involuntary termination from employment, with
or without Cause and (v) the Executive has carefully read this Agreement
and has given careful consideration to the restraints imposed upon the
Executive by this Agreement and consents to the terms of the restrictive
covenants in this Section 5.3,
with the knowledge that this Agreement may be terminated at any time in
accordance with the provisions hereof.

 

14

 

5.4          Definitions.  For purposes of this Agreement, the following
terms shall have the following meanings:

 

(a)           An “Affiliate” of any specified
Person means any other Person, whether now or hereafter existing, directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes hereof, “control” or any
other form thereof, when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “controlling” and “controlled” shall have meanings correlative to
the foregoing.

 

(b)           “Company Parties” means the
Company, and its direct and indirect parents, subsidiaries and Affiliates, and
their successors in interest.

 

(c)           “Competing Business” means any
business that competes with any of the Company Parties, including, without
limitation, any enterprise that engages in, owns or operates businesses that
market, sell, distribute, manufacture or otherwise are involved in the home
textile, housewares or home accessories industries.

 

(d)           Confidential Information.

 

(i)            Definition. “Confidential
Information” means any and all material, information, ideas, inventions,
formulae, patterns, compilations, programs, devices, methods, techniques,
processes, know how, plans (marketing, business, strategic, technical or
otherwise), arrangements, pricing and other data of or relating to any of the
Company Parties (as well as their customers and/or vendors) that is
confidential, proprietary or trade secret (A) by its nature, (B) based
on how it is treated or designated by a Company Party, (C) because the
disclosure of which would have a material adverse effect on the business or
planned business of any of the Company Parties and/or (D) as a matter of
law.

 

(ii)           Exclusions.  Confidential Information does not include
material, data, and/or information (A) that any Company Party has
voluntarily placed in the public domain, (B) that has been lawfully and
independently developed and publicly disclosed by third parties, (C) that
constitutes the general non-specialized knowledge and skills gained by the
Executive during the Employment Period or (D) that otherwise enters the
public domain through lawful means; provided, however, that the
unauthorized appropriation, use or disclosure of Confidential Information by
the Executive, directly or indirectly, shall not affect the protection and
relief afforded by this Agreement regarding such information.

 

(iii)          Inclusions. Confidential
Information includes, without limitation, the following information (including
without limitation, compilations or collections of information) relating or
belonging to any Company Party (as well as their clients, customers and/or
vendors) and created, prepared, accessed, used or reviewed by the Executive
during or after the Employment

 

15

 

Period: (1) product and manufacturing information, such as ingredients,
combinations of ingredients and manufacturing processes; (2) scientific and technical information, such
as research and development, tests and test results, formulae and formulations,
studies and analysis; (3) financial and
cost information, such as operating and production costs, costs of
goods sold, costs of supplies and manufacturing materials, non-public financial
statements and reports, profit and loss information, margin information and
financial performance information; (4) customer
related information, such as customer related contracts, engagement
and scope of work letters, proposals and presentations, customer-related
contacts, lists, identities and prospects, practices, plans, histories,
requirements and needs, price information and formulae and information
concerning client or customer products, services, businesses or equipment
specifications; (5) vendor and supplier
related information, such as the identities, practices, history or
services of any vendors or suppliers and vendor or supplier contacts; (6) sales, marketing and price information,
such as marketing and sales programs and related data, sales and marketing
strategies and plans, sales and marketing procedures and processes, pricing
methods, practices and techniques and pricing schedules and lists; (7) database, software and other computer related
information, such as computer programs, data, compilations of
information and records, software and computer files, presentation software and
computer-stored or backed-up information including, but not limited to,
e-mails, databases, word processed documents, spreadsheets, notes, schedules,
task lists, images and video; (8) employee-related
information, such as lists or directories identifying employees,
representatives and contractors, and information regarding the competencies
(knowledge, skill, experience), compensation and needs of employees,
representatives and contractors and training methods; and (9) business- and operation-related information,
such as operating methods, procedures, techniques, practices and processes,
information about acquisitions, corporate or business opportunities,
information about partners and potential investors, strategies, projections and
related documents, contracts and licenses and business records, files, equipment,
notebooks, documents, memoranda, reports, notes, sample books, correspondence,
lists and other written and graphic business records.

 

(e)           “Misappropriate”, or any form
thereof, means:

 

(i)            the acquisition of any Confidential
Information by a Person who knows or has reason to know that the Confidential
Information was acquired by theft, bribery, misrepresentation, breach or
inducement of a breach of a duty to maintain secrecy or espionage through
electronic or other means (each, an “Improper Means”); or

 

(ii)           the disclosure or use of any
Confidential Information without the express consent of the Company by a Person
who (A) used Improper Means to acquire knowledge of the Confidential
Information, (B) at the time of disclosure or use, knew or had reason to
know that his or her knowledge of the Confidential Information was (x) derived
from or through a

 

16

 

Person who had utilized Improper Means to
acquire it, (y) acquired under circumstances giving rise to a duty to
maintain its secrecy or limit its use or (z) derived from or through a
Person who owed a duty to the Company to maintain its secrecy or limit its use
or (C) before a material change of his or her position, knew or had reason
to know that it was Confidential Information and that knowledge of it had been
acquired by accident or mistake.

 

(f)            “Person” means any individual,
corporation, partnership, limited liability company, joint venture,
association, business trust, joint-stock company, estate, trust, unincorporated
organization, government or other agency or political subdivision thereof or
any other legal or commercial entity.

 

(g)           “Restricted Period” means the
longer of (i) twelve (12) months after the date of termination of
employment (the Executive’s last day of work for the Company) or (ii) the
period during which the Executive is receiving payments from the Company
pursuant to Section 4 hereof.

 

(h)           “Work Product” means all patents
and patent applications, all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports, creative works,
discoveries, software, computer programs, modifications, enhancements,
know-how, formulations, concepts and ideas, and all similar or related
information (in each case whether or not patentable), all copyrights and
copyrightable works, all trade secrets, confidential information, and all other
intellectual property and intellectual property rights that are conceived,
reduced to practice, developed or made by the Executive either alone or with
others in the course of employment with the Company (including employment prior
to the date of this Agreement).

 

5.5          Remedies.  Because the Executive’s services are unique
and because the Executive has access to Confidential Information, the Executive
acknowledges and agrees that if the Executive breaches any of the provisions of
Section 5 hereof, the Company
may suffer immediate and irreparable harm for which monetary damages alone will
not be a sufficient remedy. The restrictive covenants stated in Section 5 hereof are without prejudice
to the Company’s rights and causes of action at law.

 

5.6          Interpretation; Severability.

 

(a)           The Executive has carefully considered
the possible effects on the Executive of the covenants not to compete, the
confidentiality provisions and the other obligations contained in this
Agreement, and the Executive recognizes that the Company has made every effort
to limit the restrictions placed upon the Executive to those that are
reasonable and necessary to protect the Company’s legitimate business
interests.

 

(b)           The Executive acknowledges and agrees
that the restrictive covenants set forth in this Agreement are reasonable and
necessary in order to protect the Company’s valid business interests. It is the
intention of the parties hereto that the covenants, provisions and agreements
contained herein shall be enforceable to the fullest extent allowed by law. If
any covenant, provision or agreement contained herein is found by a court
having jurisdiction to be unreasonable in duration, scope or character of
restrictions, or otherwise to be

 

17

 

unenforceable, such covenant,
provision or agreement shall not be rendered unenforceable thereby, but rather
the duration, scope or character of restrictions of such covenant, provision or
agreement shall be deemed reduced or modified with retroactive effect to render
such covenant, provision or agreement reasonable or otherwise enforceable (as
the case may be), and such covenant, provision or agreement shall be enforced
as modified. If the court having jurisdiction will not review the covenant,
provision or agreement, the parties hereto shall mutually agree to a revision
having an effect as close as permitted by applicable law to the provision
declared unenforceable. The parties hereto agree that if a court having
jurisdiction determines, despite the express intent of the parties hereto, that
any portion of the covenants, provisions or agreements contained herein are not
enforceable, the remaining covenants, provisions and agreements herein shall be
valid and enforceable. Moreover, to the extent that any provision is declared
unenforceable, the Company shall have any and all rights under applicable
statutes or common law to enforce its rights with respect to any and all
Confidential Information or unfair competition by the Executive.

 

6.             Miscellaneous.

 

6.1          Public Statements.

 

(a)           Media Nondisclosure.  The Executive agrees that during the
Employment Period or at any time thereafter, except as may be authorized in
writing by the Company, the Executive will not directly or indirectly disclose
or release to the Media any information concerning or relating to any aspect of
the Executive’s employment or termination from employment with the Company
and/or any aspect of any dispute that is the subject of this Agreement. For the
purposes of this Agreement, the term “Media” includes, without
limitation, any news organization, station, publication, show, website, web log
(blog), bulletin board, chat room and/or program (past, present and/or future),
whether published through the means of print, radio, television and/or the
Internet or otherwise, and any member, representative, agent and/or employee of
the same.

 

(b)           Non-Disparagement.  The Executive agrees that during the
Employment Period or at any time thereafter, the Executive will not make any
statements, comments or communications in any form, oral, written or electronic
to any Media or any customer, client or supplier of the Company or any of its
Affiliates, which would constitute libel, slander or disparagement of the
Company or any of its Affiliates, including, without limitation, any such
statements, comments or communications that criticize, ridicule or are
derogatory to the Company or any of its Affiliates; provided, however,
that the terms of this Section 6.1(b) shall
not apply to communications between the Executive and, as applicable, the
Executive’s attorneys or other persons with whom communications would be
subject to a claim of privilege existing under common law, statute or rule of
procedure. The Executive further agrees that the Executive will not in any way
solicit any such statements, comments or communications from others.

 

6.2          ARBITRATION.  SUBJECT TO THE RIGHTS UNDER SECTION 6.3
HEREOF TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL
BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES,
WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETO ARISING

 

18

 

UNDER
OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT BY OR TERMINATION
FROM THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE
CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, “DISPUTES”).
THE PARTIES EACH WAIVE THE RIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO
ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDE THE ARBITRATION FORUM
PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT. In the event either party provides a notice
of arbitration of any dispute to the other party, the parties agree to submit
that dispute to a single arbitrator selected from a panel of arbitrators of
JAMS located in greater New York City-Southern New Jersey area. The arbitration
will be governed by the JAMS Comprehensive Arbitration Rules and
Procedures in effect at the time the arbitration is commenced. If for any
reason JAMS cannot serve as the arbitration administrator, the Company may
select an alternative arbitration administrator such as the American
Arbitration Association, to serve under the terms of this Agreement.

 

(a)           VENUE.  THE PARTIES STIPULATE AND AGREE THAT THE
EXCLUSIVE VENUE OF ANY SUCH ARBITRATION PROCEEDING (AND OF ANY OTHER
PROCEEDING, INCLUDING ANY COURT PROCEEDING, UNDER THIS AGREEMENT) SHALL BE
PASSAIC COUNTY, NEW JERSEY (THE “AGREED VENUE”).

 

(b)           Authority and Decision.  The arbitrator shall have the authority to
award the same damages and other relief that a court could award. The arbitrator
shall issue a reasoned award explaining the decision and any damages awarded. The
arbitrator’s decision will be final and binding upon the parties and
enforceable by a court of competent jurisdiction. The parties will abide by and
perform any award rendered by the arbitrator. In rendering the award, the
arbitrator shall state the reasons therefor, including (without limitation) any
computations of actual damages or offsets, if applicable.

 

(c)           Fees and Costs.  In the event of arbitration under the terms
of this Agreement, the fees charged by JAMS or other arbitration administrator
and the arbitrator shall be borne by the parties as determined by the
arbitrator, except for any initial registration fee, which the parties shall
bear equally. Otherwise, the parties shall each bear their own costs, expenses
and attorneys’ fees incurred in arbitration; provided, however,
that the prevailing party shall be entitled to recover and have awarded its
attorneys’ fees, court costs, arbitration expenses, and its portion of the fees
and costs charged by JAMS or other arbitration administrator, regardless of
which party initiated the proceedings, in addition to any other relief to which
it may be entitled.

 

(d)           Limited Scope.  The following are excluded from binding arbitration
under this Agreement: claims for workers’ compensation benefits or unemployment
benefits; replevin; and claims for which a binding arbitration agreement is
invalid as a matter of law.

 

6.3          Injunctive Relief.  The parties hereto may seek injunctive relief
in arbitration; provided, however, that as an exception to the
arbitration agreement set forth in

 

19

 

Section 6.2
hereof, the parties, in addition to all other available remedies, shall each
have the right to initiate an action in any court of competent jurisdiction in
order to request injunctive or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. The exclusive venue of any such
proceeding shall be in the Agreed Venue. The parties agree (a) to submit
to the jurisdiction of any competent court in the Agreed Venue, (b) to
waive any and all defenses the Executive may have on the grounds of lack of
jurisdiction of such court and (c) that neither party shall be required to
post any bond, undertaking or other financial deposit or guarantee in seeking
or obtaining such equitable relief. Evidence adduced in any such proceeding for
an injunction may be used in arbitration as well. The existence of this right
shall not preclude or otherwise limit the applicability or exercise of any
other rights and remedies that a party hereto may have at law or in equity.

 

6.4          Settlement of Existing Rights.  In exchange for the other terms of this
Agreement, the Executive acknowledges and agrees that: (a) the Executive’s
entry into this Agreement is a condition of employment and/or continued
employment with the Company, as applicable; (b) except as otherwise
provided herein, this Agreement will replace any existing employment agreement
between the parties and thereby act as a novation, if applicable; (c) the
Executive is being provided with access to Confidential Information, including,
without limitation, proprietary trade secrets of one or more Company Parties,
to which the Executive has not previously had access; (d) all Company
inventions and intellectual property developed by the Executive during any past
employment with the Company and all goodwill developed with the Company’s
clients, customers and other business contacts by the Executive during any past
employment with Company, as applicable, is the exclusive property of the
Company; and (e) all Confidential Information and/or specialized training
accessed, created, received or utilized by the Executive during any past
employment with Company, as applicable, will be subject to the restrictions on
Confidential Information described in this Agreement, whether previously so
agreed or not.

 

6.5          Entire Agreement; Waiver.  This Agreement contains the entire agreement
between the Executive and the Company with respect to the subject matter
hereof, and supersedes any and all prior understandings or agreements, whether
written or oral. No modification or addition hereto or waiver or cancellation
of any provision hereof shall be valid except by a writing signed by the party
to be charged therewith. No delay on the part of any party to this Agreement in
exercising any right or privilege provided hereunder or by law shall impair,
prejudice or constitute a waiver of such right or privilege.

 

6.6          Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without
regard to principles of conflict of laws.

 

6.7          Successors and Assigns; Binding Agreement.  The rights and obligations of the parties
under this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, personal representatives, successors and
permitted assigns. This Agreement is a personal contract, and, except as
specifically set forth herein, the rights and interests of the Executive herein
may not be sold, transferred, assigned, pledged or hypothecated by any party
without the prior written consent of the others. As used herein, the term “successor”
as it relates to the Company, shall include, but not be limited to, any
successor by

 

20

 

way of merger, consolidation or
sale of all or substantially all of such Person’s assets or equity interests.

 

6.8          Representation by Counsel; Independent
Judgment.  Each of the parties
hereto acknowledges that (a) it or the Executive has read this Agreement
in its entirety and understands all of its terms and conditions, (b) it or
the Executive has had the opportunity to consult with any individuals of its or
the Executive’s choice regarding its or the Executive’s agreement to the
provisions contained herein, including legal counsel of its or the Executive’s
choice, and any decision not to was the Executive’s or its alone and (c) it
or the Executive is entering into this Agreement of its or the Executive’s own
free will, without coercion from any source, based upon its or the Executive’s
own independent judgment.

 

6.9          Interpretation.  The parties and their respective legal
counsel actively participated in the negotiation and drafting of this
Agreement, and in the event of any ambiguity or mistake herein, or any dispute
among the parties with respect to the provisions hereto, no provision of this
Agreement shall be construed unfavorably against any of the parties on the
ground that the Executive, it, or the Executive’s or its counsel was the
drafter thereof.

 

6.10        Survival.  The provisions of Sections 4.3(e), 5 and 6
hereof shall survive the termination of this Agreement.

 

6.11        Notices.  All notices and communications hereunder
shall be in writing and shall be deemed properly given and effective when
received, if sent by facsimile or telecopy, or by postage prepaid by registered
or certified mail, return receipt requested, or by other delivery service which
provides evidence of delivery, as follows:

 

If to the Company, to:

 

Linens ’n Things, Inc.

6 Brighton Road

Clifton, New Jersey 07015

Attention: General Counsel

 

with a copy (which shall not
constitute notice) to:

 

Gardere Wynne Sewell LLP

1601 Elm Street, Suite 3000

Dallas, Texas 75201-4761

Attention: Ronald M. Gaswirth, Esq.

Telephone: (214) 999-4601

Facsimile: (214) 999-3601

E-mail: rgaswirth@gardere.com

 

21

 

If to the Executive, to:

 

Scott Silver

At the most recent address of
the Executive on file

with the Company

 

or to such other address as one
party may provide in writing to the other party from time to time.

 

6.12        Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. Facsimile transmission
of any signed original document or retransmission of any signed facsimile
transmission will be deemed the same as delivery of an original. At the request
of any party, the parties will confirm facsimile transmission by signing a
duplicate original document.

 

6.13        Captions.  Paragraph headings are for convenience only
and shall not be considered a part of this Agreement.

 

6.14        No Third Party Beneficiary Rights.  Except as otherwise provided in this
Agreement, no entity shall have any right to enforce any provision of this
Agreement, even if indirectly benefited by it.

 

6.15        Withholding.  Any payments provided for hereunder shall be
paid net of any applicable withholding required under Federal, state or local
law and any additional withholding to which Executive has agreed.

 

[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK]

 

22

 

IN WITNESS
WHEREOF, the parties have duly executed this Agreement, intending it as a
document under seal, on the Execution Date to be effective for all purposes as
of the Effective Date.

 

	
   

  	
  LINENS ’N
  THINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  ROBERT J. DINICOLA

  
	
   

  	
   

  	
  Robert J. DiNicola

  
	
   

  	
   

  	
  Chairman of the Board and

  
	
   

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/
  SCOTT SILVER

  
	
   

  	
  Name: Scott Silver

  

 

 

EXHIBIT A

 

Definition of Change of Control

 

“Change of
Control” means:

 

(1)           any event occurs
the result of which is that any “Person,” as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, other than one or
more Permitted Holders or their Related Parties, becomes the beneficial owner,
as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a
Person shall be deemed to have “beneficial ownership” of all shares that any
such Person has the right to acquire within one year) directly or indirectly,
of more than 50% of the Voting Stock of Holding or any successor company,
including, without limitation, through a merger or consolidation or purchase of
Voting Stock of Holding; provided that
none of the Permitted Holders or their Related Parties have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board; provided further
that the transfer of 100% of the Voting Stock of Holding to a Person that has
an ownership structure identical to that of Holding prior to such transfer,
such that Holding becomes a wholly owned Subsidiary of such Person, shall not
be treated as a Change of Control;

 

(2)           after an initial
public offering of Capital Stock of Holding, during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board,
together with any new directors whose election by such Board or whose nomination
for election by the stockholders of Holding was approved by a vote of a
majority of the directors of Holding then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the Board then in office;

 

(3)           the sale, lease,
transfer, conveyance or other disposition, in one or a series of related
transactions other than a merger or consolidation, of all or substantially all
of the assets of Holding and its Subsidiaries taken as a whole to any Person or
group of related Persons other than a Permitted Holder or a Related Party of a
Permitted Holder; or

 

(4)           the adoption of a
plan relating to the liquidation or dissolution of Holding.

 

For purposes
of this definition, the following terms shall have the meanings set forth
below:

 

An “Affiliate” of any specified Person means any other Person,
whether now or hereafter existing, directly or indirectly controlling or
controlled by, or under direct or indirect common control with, such specified
Person. For purposes hereof, “control” or any other form thereof, when used
with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing.

 

“Apollo”
means Apollo Management V, L.P. and its Affiliates or any entity controlled
thereby or any of the partners thereof.

 

A-1

 

“Board”
means the Board of Directors of Holding or any committee thereof duly
authorized to act on behalf of such Board of Directors.

 

“Capital
Stock” of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in, however designated, equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as
amended.

 

“Holding”
means Linens Holding Co., a Delaware corporation.

 

“Permitted
Holder” means any of Apollo, NRDC Real Estate
Advisors I, LLC or Silver Point Capital Fund Investments, LLC.

 

“Person”
means any individual, corporation, partnership, limited liability company,
joint venture, association, business trust, joint-stock company, estate, trust,
unincorporated organization, government or other agency or political
subdivision thereof or any other legal or commercial entity.

 

“Preferred
Stock” as applied to the Capital Stock of any
corporation means Capital Stock of any class or classes, however designated,
that is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.

 

“Related
Party” means:

 

(1)           any
controlling stockholder, 50% (or more) owned Subsidiary, or immediate family
member (in the case of an individual) of any Permitted Holder; or

 

(2)           any
trust, corporation, partnership, limited liability company or other entity, the
beneficiaries, stockholders, partners, members, owners or Persons beneficially
holding an 50% or more controlling interest of which consist of any one or more
Permitted Holders and/or such other Persons referred to in the immediately
preceding clause (1).

 

“Subsidiary”
means, with respect to any specified Person:

 

(1)           any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency and after giving effect to any voting agreement
or stockholders’ agreement that effectively transfers voting power) to vote in
the election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and

 

(2)           any
partnership (a) the sole general partner or the managing general partner
of which is such Person or a Subsidiary of such Person or (b) the only
general

 

A-2

 

partners of which are that
Person or one or more Subsidiaries of that Person (or any combination thereof).

 

“Voting Stock” of an entity means all
classes of Capital Stock of such entity then outstanding and
normally entitled to vote in the election of directors or all interests in such
entity with the ability to control the management or actions of such entity.

 

Notwithstanding
anything to the contrary in this Exhibit A, the definition of Change of
Control shall be interpreted consistently with the definition of “Change of
Control” contained in Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”), and regulations and guidance issued by the
Internal Revenue Service under Section 409A of the Code, including IRS
Notice 2005-1.

 

A-3

 

EXHIBIT B

 

Fringe Benefits

 

1.             Health
insurance in accordance with the Company’s health insurance plan or program in
effect from time to time.

 

2.             Prescription
drug coverage in accordance with the Company’s health insurance plan or
program, or separate prescription drug coverage plan or program, in effect from
time to time.

 

3.             Dental
insurance in accordance with the Company’s dental insurance plan or program in
effect from time to time.

 

4.             Long-term
disability insurance in accordance with the Company’s long-term disability
insurance plan or program in effect from time to time.

 

5.             Eligibility
for life insurance coverage in such amount as the Company makes available to
its employees or executives, subject to a bi-weekly payroll deduction for the
premium and completion by the Executive of any authorization documentation.

 

6.             Cellular
telephone and service.

 

7.             Annual
financial planning services through Joel Isaacson Company, or a reasonable
substitute therefor, as may be determined by the Company from time to time.

 

B-1Exhibit 4.1

 

EXECUTION COPY

 

FORBEARANCE AND
CONSENT AGREEMENT

 

This
FORBEARANCE AND CONSENT AGREEMENT (this “Agreement”), is entered into as
of February 20, 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 Financing Agreement”),
among the 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 January 31, 2008 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 the 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 February 20, 2008 and the Forbearance Period (as defined in
the Prior Forbearance Agreement) will expire on February 20, 2008.

 

G.            The 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 for the purpose of affording an additional period
of time for the Company to obtain funds to pay the obligations under the Senior
Financing Documents or to restructure its capital structure pursuant to this
Agreement.

 

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.

 

 

1

 

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, it being understood that certain of the Senior Events of
Default may be continuing during the Forbearance Period and that such Senior
Events of Default are part of the agreement to forbear set forth in Section 2.

 

“Forbearance
Period” means the period commencing on the date hereof and ending on the
earliest to occur of the following: (i) December 31, 2008; or (ii) any
representation or warranty made by the 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 with respect to the Existing
Senior Defaults.

 

(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. 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 December 31,
2008, unless it receives from the Initial Purchasers a certificate specifying
another date and setting forth the provisions of this Agreement pursuant to
which an 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.

 

3.             Conditions to Effectiveness.  The Initial Purchasers’ agreement to forbear
for the Forbearance Period shall be subject to the following conditions and
covenants being fully satisfied:

 

 

2

 

(a)           The
execution and delivery to Collateral Agent of a counterpart of this Agreement
by Collateral Agent, each Initial Purchaser and the Company.

 

(b)           All
representations and warranties set forth in this Agreement shall be true and
correct as of the date hereof in all material respects.

 

(c)           The
interest rate on the unpaid balance of the Notes will be 15% per annum from February 20,
2008 until September 30, 2008.  If
the Notes have not been paid in full by September 30, 2008, the interest
rate shall be increased to 16% per annum retroactive to February 20, 2008,
with such additional interest for the period from February 20, 2008 until September 30,
2008 to be paid on September 30, 2008.

 

(d)           The
Company (i) shall comply with its obligations under the Subordination
Agreement and (ii) shall not declare or pay any dividends or make any
other payments not required or allowed under the Senior Financing Documents or
the Securities Purchase Documents on account of any equity interests in the
Company.

 

4.             Termination.  Initial Purchasers’ agreement to so forbear
shall automatically terminate, without further act or instrument, upon the
occurrence of any of the following events:

 

(a)           Bankruptcy.

 

(i)            The
Company or any of its Subsidiaries pursuant to or under or within the meaning
of any Bankruptcy Code:

 

(1)           commences a voluntary case or proceeding;

 

(2)           consents to the entry of an order for relief against it in
an involuntary ease or proceeding;

 

(3)           consents to the appointment of a Custodian of it or for
all or substantially all of its property; or

 

(4)           makes a general assignment for the benefit of its
creditors; or

 

(ii)           A
court of competent jurisdiction enters an order or decree under any Bankruptcy
Code that:

 

(1)           is for relief against the Company or any of its
Subsidiaries in an involuntary case or proceeding;

 

(2)           appoints a Custodian of the Company or any of its
Subsidiaries for all or substantially all of their properties taken as a whole;
or

 

(3)           orders the liquidation of the Company or any of its
Subsidiaries; and in each case the order or decree remains unstayed and in
effect for 60 days.

 

(b)           The
Company repudiates, or asserts a defense to, any obligation or liability under
the Senior Financing Documents or this Agreement or makes or pursues a claim
against the Initial Purchasers.

 

(c)           The
Company fails to timely perform any of the other material covenants, agreements
and obligations set forth in this Agreement.

 

 

3

 

5.             Representations and Warranties.  In consideration of the agreement of
Collateral Agent and Initial Purchasers to forbear from the exercise of their
rights and remedies as set forth in this Agreement, the Company hereby
represents and warrants to Collateral Agent and Initial Purchasers as of the
date hereof that:

 

(a)           The
Company has full power, authority and legal right to enter into this Agreement.

 

(b)           The
Senior Financing Documents constitute the legal, valid and binding obligations
of the Company and are enforceable against the Company in accordance with their
terms, except (i) as may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the enforcement of
creditors’ rights and subject to general equitable principles and (ii) as
may be specifically limited by the terms of this Agreement.

 

(c)           This
Agreement constitutes the legal, valid and binding obligation of the Company
and is enforceable against the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, moratorium, reorganization
or other similar laws affecting the enforcement of creditors’ rights and
subject to general equitable principles.

 

6.             Amendments.  This Agreement may be amended after the date
hereof only by a written amendment, fully executed and delivered by the
parties.

 

7.             Senior Financing Documents Still
in Force.  Notwithstanding anything
to the contrary in this Agreement, the Senior Financing Documents are in full
force and effect in accordance with their respective terms, remain valid and
binding obligations of the Company, and are hereby reaffirmed and ratified by
the parties. The Senior Financing Documents shall remain unmodified unless and
until otherwise expressly modified in accordance with the terms of the
respective Senior Financing Document.

 

8.             No Waiver of Rights Under Senior
Financing Documents.  Neither the
failure nor delay by the Initial Purchasers to exercise its rights and remedies
nor the acceptance of any partial performance (whether any of the foregoing is
before or after the date of this Agreement) nor any provision of this Agreement
shall amend, modify, supplement, extend, delay, renew, terminate, waive,
release or otherwise limit or prejudice Initial Purchasers’ rights and remedies
or the Company’s obligations under the Senior Financing Documents (including,
but not limited to, the Initial Purchaser’s right to receive full payment of
principal and interest as well as late charges, delinquent interest, attorney’s
fees and expenses, and other charges to the extent provided in the Senior
Financing Documents) except as specifically provided in a written agreement
between the parties that is fully executed and delivered in accordance with the
terms of the respective Senior Financing Document (and except that, without
modifying or amending the Senior Financing Documents, the Initial Purchasers
agree to forbear to the extent specifically provided in Section 2 hereof),
nor shall it affect the relative priority of the Initial Purchasers’ security
interest in the Collateral.

 

In
particular, the Company understands that nothing referred to above shall
operate to prohibit, restrict or otherwise inhibit the Initial Purchasers from
exercising any right or remedy it may have under the Senior Financing Documents
(except that the Initial Purchasers agree to forbear to the extent specifically
provided in Section 2 hereof) or constitute a cure of any existing default
and, without limitation, shall not extend to any applicable reinstatement or
redemption period.

 

9.             Voluntary Agreement.  Each party to this Agreement represents and
warrants to each other party that it is represented by legal counsel of its
choice, that it has consulted with counsel regarding this Agreement, that it is
fully aware of the terms contained herein and that it has voluntarily and
without coercion or duress of any kind entered into this Agreement.

 

 

4

 

 

10.           Effect on and Ratification of the
Senior Financing Documents.  The
Company acknowledges, confirms and agrees (without limiting or modifying the
provisions of the Senior Financing Documents or the rights and remedies
otherwise available to Collateral Agent and Initial Purchasers) that Collateral
Agent and Initial Purchasers (x) have not made any representations,
promises or agreements, and shall have no obligation, to extend the Forbearance
Period, or otherwise to grant the Company any extension, delay, deferral or
other indulgence (other than those contemplated by this Agreement), and (y) after
expiration of the Forbearance Period, may proceed immediately to enforce all
rights and remedies available to them under the Senior Financing Documents,
including, but not limited to, with respect to the Existing Senior Defaults for
collection, foreclosure or otherwise.

 

11.           Miscellaneous.

 

(a)           Counterparts.
This Agreement may be signed in multiple counterparts, each of which shall
constitute an original and all of which, taken together, shall constitute one
and the same instrument. One or more counterparts of this Agreement may be
delivered by facsimile, with the intention that they shall have the same effect
as an original counterpart thereof and shall be binding on the person
delivering the same.

 

(b)           All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper.

 

Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof by registered or certified mail, return receipt requested to such party
at the address for such notices to it under the Senior Financing Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

12.           Initial Purchasers’ Direction to
Collateral Agent. Initial Purchasers represent and warrant to Collateral
Agent that, together with Collateral Agent, they are the sole holders and
beneficial owners of the Company’s obligations under the Senior Financing Documents.
Having the power under the Senior Financing Documents to do so, Initial
Purchasers (i) direct Collateral Agent to enter into and perform its
obligations under this Agreement and (ii) confirm their indemnity
obligations to Collateral Agent as and to the extent set forth in the Senior
Financing Documents.

 

[Signatures on following page]

 

 

5

 

IN
WITNESS WHEREOF, each of the parties hereto has caused this Forbearance and
Consent Agreement to be duly executed and delivered by its duly authorized
officer as of the date first above written.

 

	
  ARTISTDIRECT,
  INC.,

  
	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Neil McCarthy

  
	
   

  	
  Name:

  	
  Neil
  McCarthy

  
	
   

  	
  Title:

  	
  Interim
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  U.S.
  BANK NATIONAL ASSOCIATION,

  
	
  as
  Collateral Agent under the Note and Warrant 

  Purchase Agreement

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Brad E. Scarbrough

  
	
   

  	
  Name:

  	
  Brad
  E. Scarbrough

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
  JMG
  TRITON OFFSHORE FUND, LTD.,

  
	
  as
  Initial Purchaser

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Jonathan Glaser

  
	
   

  	
  Name:

  	
  Jonathan
  Glaser

  
	
   

  	
  Title:

  	
  Member
  Manager of the 

  Investment Manager

  
	
   

  	
   

  	
   

  
	
  JMG
  CAPITAL PARTNERS, L.P.,

  
	
  as
  Initial Purchaser

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Jonathan Glaser

  
	
   

  	
  Name:

  	
  Jonathan
  Glaser

  
	
   

  	
  Title:

  	
  Member
  Manager of the L.P.

  
	
   

  	
   

  	
   

  
	
  JMG
  CAPITAL PARTNERS, L.P.,

  
	
  as
  Initial Purchaser

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Cyrus Haddi

  
	
   

  	
  Name:

  	
  Cyrus
  Haddi

  
	
   

  	
  Title:

  	
  Partner

  

 

 

6

 

 

	
  CCM
  MASTER QUALIFIED FUND, LTD.

  
	
  as
  Initial Purchaser

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Clint Coghill

  
	
   

  	
  Name:

  	
  Clint
  Coghill

  
	
   

  	
  Title:

  	
  President
  of Investment Manager

  
	
   

  	
   

  	
  Director
  of CCM Master Qualified Fund, LLP

  

 

 

7

 

Schedule I

 

List of Existing
Senior Defaults

 

Listed
below are the current Senior Events of Default with respect to each of the
Sections of the Senior Financing Agreement indicated below which have occurred
and are continuing.

 

·                                          Section 6(c): Company has
not timely filed all reports required to be filed with the SEC pursuant to the
1934 Act.

 

·                                          Section 6(p): Company has
not maintained its eligibility to use the registration statement filed with the
SEC for the resale of the Registrable Securities.

 

·                                          Section 6(t): Company
failed to promptly deliver copies of the management letters.

 

·                                          Section 6(u): Company has
not delivered the officers certificates described in Section 6(u).

 

·                                          Section 6(w): Company
failed to provide notice of new accounts.

 

·                                          Section 6(x): Company
failed to enter into account control agreement for new accounts.

 

·                                          Section 7(h): Company has
failed to maintain minimum working capital and failed to satisfy the following
tests or thresholds: (i) minimum leverage ratio, (ii) minimum EBITDA
and (iii) minimum fixed charge coverage ratio.

 

·                                          Section 8(a): Company has
failed to make all payments when due.

 

·                                          Section 8(b): Company has
breached the negative covenants listed above.

 

·                                          Section 8(c): Company has
breached the covenants listed above.

 

·                                          Section 8(g): Company has
defaulted under it obligations under the Convertible Subordinated Notes, the
Registration Rights Agreement associated with the Convertible Subordinated
Notes and the Securities Purchase Agreement.

 

Listed below are the current Senior Events of Default
with respect to each of the Sections of the Registration Rights Agreement
indicated below which have occurred and are continuing and known to the
Company.

 

·                                          Section 2(f).  Company has not paid the Registration Delay
Payments.

 

·                                          Section 3(m).  Company has not made generally available to
its security holders an earnings statement for the year ended December 31,
2006, within ninety (90) days of the close of the year-end period.

 

·                                          Section 8(b).  Company has not timely filed all reports
required to be filed with the SEC pursuant to the 1934 Act.

 

 

 

8

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