Document:

Exhibit 4.1

WAIVER AND FORBEARANCE AGREEMENT

This
WAIVER AND FORBEARANCE AGREEMENT (this “Agreement”) is entered into as
of August 3, 2007 by and among ARTISTdirect, Inc., a Delaware corporation,
its subsidiaries and affiliates (collectively with ARTISTdirect, Inc., the “Company”)
and the holders of the Company’s Convertible Subordinated Notes, dated July 28,
2005 (the “Subordinated Notes”), indicated on the signature pages hereto
(the “Subordinated Note Holders”).

RECITALS

A.            The Subordinated Notes were issued
under the Securities Purchase Agreement, dated July 28, 2005, by and among the
Company, the Subordinated Note Holders and the other parties thereto (the “SPA”).

B.            The Company is currently in default
and may trigger additional defaults under certain provisions of the
Subordinated Notes, the SPA and the other Transaction Documents (as defined in
the SPA), as such documents have been amended from time to time and which are
collectively referred to herein as the “Subordinated Financing Documents.”

C.            The Existing Subordinated Defaults
(as defined hereinafter) constitute “Events of Default” for purposes hereof
that entitle the Subordinated Note Holders to enforce certain rights and
remedies under the Subordinated Financing Documents.

D.            Among other thing, under Section
2(a) of the Subordinated Notes, the interest rate charged upon such notes
increases from four percent (4%) per annum (the “Standard Interest Rate”)
to twelve percent (12%) per annum (the “Default Interest Rate”) from an
after the occurrence of an Event of Default until such Event of Default has
been cured.

E.             The Company has requested, subject
to the conditions contained herein, that the Subordinated Note Holders waive
their right to charge the Default Interest Rate and forbear from the exercise
of their other rights and remedies relating to the Existing Subordinated
Defaults and any other additional Events of Default during the Waiver Period
(as hereinafter defined) to allow the Subordinated Note Holders to consider a
restructuring of the Company’s capital structure.

F.             Subject to the terms contained
herein, the Subordinated Note Holders are willing to agree to forbear from the
exercise of their rights and remedies relating to the Existing Subordinated
Defaults and any other additional Events of Default, including, without
limitation, the right to receive the Default Interest Rate, during the Waiver
Period.

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 SPA.  The following terms as used in this Agreement
shall have the meanings set forth below:

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“Existing
Subordinated Defaults” means the existing Subordinated Events of Default
described on Schedule 1 hereto, other Subordinated Events of
Default related thereto and those Subordinated Events of Default that currently
exist or may develop during the Waiver Period (as hereinafter defined) as a
consequence of the Company’s accounting treatment of its embedded derivatives.

“Waiver
Period” means the period commencing on July 16, 2007 and terminating August
31, 2007.

“Subordinated
Event of Default” means an Event of Default under the SPA, the Subordinated
Notes or any other Transaction Document.

2.             Waiver
of Right to Receive Default Interest Rate and Agreement to Forbear.

(a)           Subject to the conditions set forth
in Section 3 below, during the Waiver Period, and subject to the
terms hereof, the Subordinated Note Holders hereby agree to:

(i)            waive their right
to accrue interest on the principal balance under the Subordinated Notes at the
Default Interest Rate (interest upon which shall accrue, instead, at the
Standard Interest Rate during this period); and

(ii)           forbear from
exercising any of their other rights and remedies under the Subordinated
Financing Documents.

(b)           Nothing in this Section 2
shall be construed to be a waiver of or acquiescence to any Existing
Subordinated Defaults, and all such Existing Subordinated Defaults shall
continue in existence; provided, that the Subordinated Note Holders, as set
forth herein, agree to waive their right to charge the Default Interest Rate
during the Waiver Period and instead charge only the Standard Interest Right
and to forbear during the Waiver Period from exercising any of their rights and
remedies under the Subordinated Financing Documents.  The Subordinated Note Holders acknowledge the
limitations contained in the Subordination Agreement, dated July 28, 2005, by
and among the Company and the initial holders of the Permitted Senior
Indebtedness (as defined in the Subordinated Note).  The Subordinated Note Holders expressly
reserve all of their rights and remedies under the Subordinated Financing
Documents and under applicable law with respect to such Existing Subordinated
Defaults, except as expressly limited in this Agreement.

(c)           From and after expiration of the
Waiver Period, the Subordinated Note Holders shall have all the rights and
remedies available to them under the Subordinated Financing Documents,
applicable law and otherwise (including the right to charge interest at the
Default Interest Rate (if applicable) for the period following the Waiver
Period).

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3.             Conditions to Effectiveness.  The Subordinated Note Holders’ agreement to
waive and forbear during the Waiver Period shall be subject to the following
conditions being fully satisfied:

(a)           The
execution and delivery to the Company of a counterpart of this Agreement by
each Subordinated Note Holder 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.

4.             Termination.  The Subordinated Note Holders’ agreement to
so waive and 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 case 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 fails to timely perform
any of the other material covenants, agreements and obligations set forth in
this Agreement.

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

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

(b)           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.             Subordinated Financing Documents
Still in Force.  Notwithstanding
anything to the contrary in this Agreement, the Subordinated 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 Subordinated Financing Documents shall remain unmodified unless and
until otherwise expressly modified in accordance with the terms of the
respective Subordinated Financing Document.

8.             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.

9.             Effect on and Ratification of
the Subordinated Financing Documents. 
The Company acknowledges, confirms and agrees (without limiting or
modifying the provisions of the Subordinated Financing Documents or the rights
and remedies otherwise available to the Subordinated Note Holders) that the
Subordinated Note Holders: (a) have not made any representations, promises
or agreements, and shall have no obligation, to extend the Waiver Period, or
otherwise to grant the Company any extension, delay, deferral or other
indulgence (other than those contemplated by this Agreement), and
(b) after expiration of the Waiver Period, may proceed immediately to
enforce all rights and remedies available to them under the Subordinated
Financing Documents for collection, foreclosure or otherwise (except as
provided for in this Agreement).

10.           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.

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(b)           Governing Law; Jurisdiction; Jury
Trial.  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 SPA 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.

[SIGNATURE
PAGE FOLLOWS]

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

	
  

  	
  ARTISTDIRECT, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Robert Weingarten

  
	
   

  	
  Name:

  	
   

  	
  Robert Weingarten

  
	
   

  	
  Title:

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  DKR SOUNDSHORE OASIS HOLDING FUND, LTD.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Barbara Burger

  
	
   

  	
  Name:

  	
   

  	
  Barbara Burger

  
	
   

  	
  Title:

  	
   

  	
  Authorized Signatory of DKR Oasis Management Co.,
  LP, its investment manager

  

 

	
  

  	
  CCM MASTER QUALIFIED FUND, LTD.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Clint D. Coghill

  
	
   

  	
  Name:

  	
   

  	
  Clint D. Coghill

  
	
   

  	
  Title:

  	
   

  	
  Director

  

 

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  CLIFF CHAPMAN

  
	
   

  	
   

  
	
   

  	
  /s/ Cliff Chapman

  
	
   

  	
  Cliff Chapman

  

 

	
  

  	
  LONGVIEW FUND, LP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Wayne H. Coleson

  
	
   

  	
  Name:

  	
   

  	
  Wayne H. Coleson

  
	
   

  	
  Title:

  	
   

  	
  Chief Investment Officer

  

 

	
  

  	
  LONGVIEW EQUITY FUND, LP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Wayne H. Coleson

  
	
   

  	
  Name:

  	
   

  	
  Wayne H. Coleson

  
	
   

  	
  Title:

  	
   

  	
  Chief Investment Officer

  

 

	
  

  	
  LONGVIEW INTERNATIONAL EQUITY FUND, LP

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Wayne H. Coleson

  
	
   

  	
  Name:

  	
   

  	
  Wayne H. Coleson

  
	
   

  	
  Title:

  	
   

  	
  Chief Investment Officer

  

 

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  RANDY SAAF

  
	
   

  	
   

  
	
   

  	
  /s/ Randy Saaf

  
	
   

  	
  Randy Saaf

  

 

	
  

  	
  OCTAVIO HERRERA

  
	
   

  	
   

  
	
   

  	
  /s/ Octavio Herrera

  
	
   

  	
  Octavio Herrera

  

 

	
  

  	
  MICHAEL RAPP

  
	
   

  	
   

  
	
   

  	
  /s/ Michael Rapp

  
	
   

  	
  Michael Rapp

  

 

	
  

  	
  PHILIP WAGENHEIM

  
	
   

  	
   

  
	
   

  	
  /s/ Philip Wagenheim

  
	
   

  	
  Philip Wagenheim

  

 

	
  

  	
  KARL BRENZA

  
	
   

  	
   

  
	
   

  	
  /s/ Karl Brenza

  
	
   

  	
  Karl Brenza

  

 

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  JEFFREY MESHEL

  
	
   

  	
   

  
	
   

  	
  /s/ Jeffrey Meshel

  
	
   

  	
  Jeffrey Meshel

  

 

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Schedule 1

List of Existing Subordinated
Defaults

Listed
below are the current defaults with respect to each of the sections of the SPA
indicated below which have occurred and are continuing and known to the
Company.  The parties hereto acknowledge
that additional defaults may occur during the Waiver Period.  The parties further acknowledge that the
Company, by listing these defaults, is not admitting that such defaults
necessarily give rise to an Event of Default as that term is defined under the
Subordinated Financing Documents.

·                                          Section 4(c):  The Company did not timely file all reports
required to be filed with the SEC pursuant to the 1934 Act.

·                                          Section 4(n):  The Company has not held an annual meeting of
stockholders in accordance with the requirements of law.

Listed
below are the current defaults with respect to each of the sections of the
Registration Rights Agreement, dated July 28, 2005, by and among the Company,
the Subordinated Note Holders,  JLF
Partners I, LP, JLF Partners II, LP and JLF Offshore Fund, Ltd. (the “Registration
Rights Agreement”) indicated below which have occurred and are continuing
and known to the Company.  The parties
hereto acknowledge that additional defaults may occur during the Waiver
Period  . The parties further acknowledge
that the Company, by listing these defaults, is not admitting that such defaults
necessarily give rise to an Event of Default as that term is defined under the
Subordinated Financing Documents.

·                                          Section 2(f).  The Company triggered a Maintenance Failure
(as defined in the Registration Rights Agreement) and has not paid the Registration
Delay Payments (as defined in the Registration Rights Agreement) nor the
interest payments thereon.

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

Listed
below are the current of defaults with respect to each of the sections of the
Subordinated Notes indicated below which have occurred and are continuing and
known to the Company.  The parties hereto
acknowledge that additional defaults may occur during the Waiver Period.  The parties further acknowledge that the
Company, by listing these defaults, is not admitting that such defaults
necessarily give rise to an Event of Default as that term is defined under the
Subordinated Financing Documents.

·                                          Section 4(a)(i):  The Company has not maintained its
eligibility to use the registration statement filed with the SEC for the resale
of the Registrable Securities for a period of ten (10) consecutive Trading Days
or for more than an aggregate of thirty (30) Trading days in any three hundred
and sixty-five (365)-day period.

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·                                          Section
4(a)(vi):  The Company
has triggered a default of Indebtedness (as defined in the Subordinated Note)
with an unpaid principal amount in excess of $1,000,000 at the time of such
default.

·                                          Section 4(a)(x):  The Company has materially breached one or
more representations, warranties or covenants of the Transaction Documents and
such breach continued for a period of ten (10) consecutive Business Days.

·                                          Section 8(f):  The Company has violated certain financial
covenants contained in this section.

 11Exhibit 10.1

RESTRICTED
STOCK AGREEMENT

THIS RESTRICTED STOCK AGREEMENT
(this “Agreement”) is made as of the 7th day of August, 2007, between PARTICLE DRILLING TECHNOLOGIES, INC., a Nevada corporation
(the “Company”), and JIM B. TERRY (“Employee”).

1.             Award.  Pursuant to the PARTICLE
DRILLING TECHNOLOGIES, INC. 2005 STOCK INCENTIVE PLAN, as amended
(the “Plan”), as of the date of this Agreement, 329,250 shares (the “Restricted
Shares”) of the Company’s common stock shall be issued as hereinafter provided
in Employee’s name subject to certain restrictions thereon.  The Restricted Shares shall be issued upon
acceptance hereof by Employee and upon satisfaction of the conditions of this
Agreement.  Employee acknowledges receipt
of a copy of the Plan, and agrees that this award of Restricted Shares shall be
subject to all of the terms and provisions of the Plan, including future
amendments thereto, if any, pursuant to the terms thereof.  In the event of any conflict between the
terms of this Agreement and the Plan, the Plan shall control.  Capitalized terms used but not defined in
this Agreement shall have the meaning attributed to such terms under the Plan,
unless the context requires otherwise.

2.             Restricted Shares.  Employee hereby accepts the Restricted Shares
when issued and agrees with respect thereto as follows:

(a)           Forfeiture Restrictions.  The Restricted Shares may not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of to the extent then subject to the Forfeiture Restrictions (as
hereinafter defined), and in the event of termination of Employee’s employment
with the Company, except as otherwise provided in Section 2(b) hereof, Employee
shall, for no consideration, forfeit to the Company all Restricted Shares to
the extent then subject to the Forfeiture Restrictions.  The prohibition against transfer and the
obligation to forfeit and surrender Restricted Shares to the Company upon
termination of employment are herein referred to as the “Forfeiture Restrictions.”  The Forfeiture Restrictions shall be binding
upon and enforceable against any transferee of Restricted Shares.

(b)           Lapse of Forfeiture
Restrictions.

The Forfeiture Restrictions shall lapse as to 129,250
of the Restricted Shares upon achievement of the following performance target,
provided that Employee has been continuously employed by the Company from the
date of this Agreement through the date of such lapse:

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The date the Company
files its first quarterly or annual report with the U.S. Securities and
Exchange Commission in which the Company reports Adjusted EBITDA for a fiscal
quarter that is greater than $0.  For
this purpose, “Adjusted EBITDA” for a particular fiscal quarter shall be
calculated as the Company’s net income (or net loss), increased by the reported
amount of (i) interest expense net of interest income, (ii) income tax expense,
(iii) depreciation expense, (iv) amortization expense and (v) non-cash,
stock-based compensation expense, with each such item to be determined in
accordance with generally accepted accounting principles.

The Forfeiture Restrictions shall lapse as to 200,000
of the Restricted Shares upon achievement of the following performance target,
provided that Employee has been continuously employed by the Company from the date
of this Agreement through the date of such lapse:

The date the Company
consummates a strategic transaction with a third party that the Committee, in
its sole discretion, determines satisfies the following criteria:

(i) the transaction is
supported by the holders of a majority of the Company’s securities entitled to
vote in the election of directors generally if the approval of such
stockholders is required by applicable law (including the rules and regulations
of any exchange or other self regulatory organization applicable to the
Company);

(ii) the transaction is
approved by a majority of the members of the Board;

(iii) the transaction
does not expose the Company to a significant risk of litigation due to either
the type of transaction or the method of consummating the transaction;

(iv) the transaction
creates additional liquidity for the Company;

(v) the transaction
results in a relationship with a third party that provides strategic
advantages; and

(vi) the transaction
creates significant additional value for the Company’s stockholders.

Notwithstanding the foregoing, the Forfeiture
Restrictions shall lapse as to all of the Restricted Shares then subject to the
Forfeiture Restrictions (i) in accordance with the provisions of that certain
Employment Agreement between Employee and the Company effective as of January
23, 2006, as the same may be amended from time to time, or (ii) on the date
Employee’s employment with the Company is terminated by reason of death or
disability (within the meaning of section 22(e)(3) of the Code).

(c)           Certificates.  A certificate evidencing the Restricted
Shares shall be issued by the Company in Employee’s name, pursuant to which
Employee shall have all 

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of the rights of a stockholder of the Company with
respect to the Restricted Shares, including, without limitation, voting rights
and the right to receive dividends (provided, however, that dividends paid in
shares of the Company’s stock shall be subject to the Forfeiture Restrictions
and further provided that dividends that are paid other than in shares of the
Company’s stock shall be paid no later than the end of the calendar year in
which the dividend for such class of stock is paid to stockholders of such
class or, if later, the 15th day of the third month following the date the
dividend is paid to stockholders of such class of stock). Employee may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock
until the Forfeiture Restrictions have expired and a breach of the terms of
this Agreement shall cause a forfeiture of the Restricted Shares. The
certificate shall be delivered upon issuance to the Secretary of the Company or
to such other depository as may be designated by the Committee as a depository
for safekeeping until the forfeiture of such Restricted Shares occurs or the
Forfeiture Restrictions lapse pursuant to the terms of the Plan and this award.
Employee agrees to deliver to the Company a stock power, endorsed in blank,
relating to the Restricted Shares. Upon the lapse of the Forfeiture Restrictions
without forfeiture, the Company shall cause a new certificate or certificates
to be issued without legend (except for any legend required pursuant to
applicable securities laws or any other agreement to which Employee is a party)
in the name of Employee in exchange for the certificate evidencing the
Restricted Shares.  However, the Company,
in its sole discretion, may elect to deliver the certificate either in
certificate form or electronically to a brokerage account established for
Employee’s benefit at a brokerage/financial institution selected by the
Company.  Employee agrees to complete and
sign any documents and take additional action that the Company may request to
enable it to deliver the shares on Employee’s behalf.

(d)           Corporate Acts.  The existence of the Restricted Shares shall
not affect in any way the right or power of the Board or the stockholders of
the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding. The prohibitions of Section
2(a) hereof shall not apply to the transfer of Restricted Shares pursuant to a
plan of reorganization of the Company, but the stock, securities or other
property received in exchange therefor shall also become subject to the
Forfeiture Restrictions and provisions governing the lapsing of such Forfeiture
Restrictions applicable to the original Restricted Shares for all purposes of
this Agreement and the certificates representing such stock, securities or other
property shall be legended to show such restrictions.

3.             Withholding
of Tax/Tax Election.
To the extent that the receipt of the Restricted Shares or the lapse of any
Forfeiture Restrictions results in compensation income or wages to Employee for
federal, state or local tax purposes, Employee shall deliver to the Company at
the time of such receipt or lapse such amount of money as the Company may
require to meet its minimum obligation under applicable tax laws or regulations
or make such other arrangements to satisfy such withholding obligation as the
Company or the Committee may approve.  In
addition, the Company may withhold unrestricted shares of stock of the Company
(valued at their fair market value on the date of withholding of such shares)
otherwise to be issued upon the lapse of the Forfeiture Restrictions to satisfy
its withholding obligations.  If Employee
makes the election 

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authorized by
section 83(b) of the Code in connection with the award of the Restricted
Shares, Employee shall submit to the Company a copy of the statement filed by
Employee to make such election.

4.             Status of
Stock.  Employee agrees that the Restricted Shares
issued under this Agreement will not be sold or otherwise disposed of in any
manner which would constitute a violation of any applicable securities laws,
whether federal or state. Employee also agrees that (a) the certificates
representing the Restricted Shares may bear such legend or legends as the
Committee deems appropriate in order to reflect the Forfeiture Restrictions and
to assure compliance with applicable securities laws, (b) the Company may
refuse to register the transfer of the Restricted Shares on the stock transfer
records of the Company if such proposed transfer would constitute a violation
of the Forfeiture Restrictions or, in the opinion of counsel satisfactory to
the Company, of any applicable securities law, and (c) the Company may give
related instructions to its transfer agent, if any, to stop registration of the
transfer of the Restricted Shares.

5.             Employment Relationship. 
For purposes of this Agreement, Employee shall be considered to be in
the employment of the Company as long as Employee remains an employee of either
the Company, an Affiliate, or any successor corporation.  Without
limiting the scope of the preceding sentence, it is expressly provided that
Employee shall be considered to have terminated employment with the Company at
the time of the termination of the “Affiliate” status under the Plan of the
entity or other organization that employs Employee.  Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee and its determination shall
be final.

6.             Notices.
Any notices or other communications provided for in this Agreement shall be
sufficient if in writing.  In the case of
Employee, such notices or communications shall be effectively delivered if hand
delivered to Employee at his principal place of employment or if sent by
registered or certified mail to Employee at the last address Employee has filed
with the Company. In the case of the Company, such notices or communications
shall be effectively delivered if sent by registered or certified mail to the
Company at its principal executive offices.

7.             Entire
Agreement; Amendment. This Agreement replaces and merges all
previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and constitutes the entire agreement
between Employee and the Company with respect to the subject matter of this
Agreement.  Without limiting the scope of
the preceding sentence, all prior understandings and agreements, if any, among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect. 
Any modification of this Agreement shall be effective only if it is in
writing and signed by both Employee and an authorized officer of the Company.

8.               Binding
Effect. This Agreement shall be binding upon and inure to the benefit
of any successors to the Company and all persons lawfully claiming under
Employee.

9.               Governing
Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Nevada,
without regard to conflicts of laws principles thereof.

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10.             Jurisdiction.         Each
of the Company and Employee hereby irrevocably (i) submits and consents to the
personal jurisdiction of the state and federal courts sitting in Harris County,
Texas with respect to any suit, action, or proceeding arising out of or based
upon this Agreement or the transactions contemplated hereby and (ii) waives the
right to contend in any such action that venue is improperly laid in any such
court or that it is an improper or inconvenient forum or lacks personal jurisdiction.  If Employee now or hereafter resides outside
the State of Texas, Employee hereby irrevocably appoints the General Counsel of
the Company as Employee’s authorized agent upon whom process may be served at
such General Counsel’s Company office for notices under this Agreement in any
suit, action, or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby that may be instituted in any state or federal
court in the State of Texas by the Company, and Employee hereby agrees to so
act.  Employee agrees to take any and all
action, including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as
aforesaid.  Service of process upon the
authorized agent of Employee and written notice of such service to Employee
shall be deemed, in every respect, effective service of process as to Employee
for purposes of any such suit, action, or proceeding instituted in any state or
federal court in the State of Texas.

IN
WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed by its officer thereunto duly authorized, and Employee has
executed this Agreement, all effective as of the day and year first above
written.

	
  

  	
   

  	
  PARTICLE DRILLING TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ken R. LeSuer

  
	
   

  	
   

  	
  Name:

  	
  Ken R. LeSuer

  
	
   

  	
   

  	
  Position: Chairman of the Board

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jim B. Terry

  
	
   

  	
   

  	
  Jim B. Terry

  	
   

  	
   

  
							

 

 5

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