Exhibit 4.2


 


SUBORDINATED
PROMISSORY NOTE


 




	
  $                   

  	
   

  	
  January 30,
  2009

  	
   

  






 


 


ARTISTdirect, Inc., a
Delaware corporation (the “Company”), for value received, hereby promises to
pay to (“Holder”) the principal sum
of                                                   
($                  ),
pursuant to the terms of this subordinated promissory note (this “Subordinated
Promissory Note”).


 


1.             Installment
Payment Date. On January 30, 2014 (the “Maturity Date”) the
outstanding principal balance of this Subordinated Promissory Note, together
with interest accrued but unpaid thereon shall be paid in full.


 


2.             Interest. 
Interest shall accrue from January 30, 2009 on the unpaid principal
amount at a simple rate without compounding equal to six percent (6.0%) per
annum.


 


3.             Subordination. 
The Company agrees, and the Holder of this Subordinated Promissory Note
by its acceptance hereof likewise agrees, that the payment of Subordinated
Indebtedness (as hereinafter defined) shall be made only in accordance with this
Section 3.  As used herein, “Senior
Indebtedness” shall mean all indebtedness of the Company for money borrowed
including, without limitation, all principal and interest (including such
interest as may accrue after the initiation of bankruptcy proceedings) thereon,
and all premiums, fees and expenses owing by the Company in respect of Senior
Indebtedness.  As used herein, “Subordinated
Indebtedness” shall mean all principal and interest on this Subordinated Note
and the subordinated notes of even date herewith by and between the Company and
each of                                                                   .


 


3.1.          Liquidation, etc. 
In the event of any distribution of the assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings), or upon any assignment
for the benefit of creditors, or upon any other marshaling of the assets and
liabilities of the Company for the benefit of any creditor or creditors, or
otherwise (a “Liquidation”):


 


(a)           all
Senior Indebtedness shall first be paid in full before any payment or
distribution of any character, whether in cash, securities or other property,
shall be made in respect of the Subordinated Indebtedness;


 


(b)           any
payment or distribution of any character, whether in cash, securities or other
property, which (except for the terms of this Section 3.1) would be
payable or deliverable in respect of the Subordinated Indebtedness shall be
paid or delivered directly to the holders of Senior Indebtedness to the extent
necessary to pay all Senior Indebtedness in full after giving effect to any
concurrent payment or distribution in respect of such Senior Indebtedness; and


 

















 


(c)           if,
notwithstanding the foregoing terms of this Section 3.1, any payment or
distribution of any character, whether in cash, securities or other property,
shall be received in a Liquidation by the Holders of the Subordinated
Indebtedness before all Senior Indebtedness shall have been paid in full as
aforesaid, such payment or distribution shall be held in trust for the benefit
of, and shall be paid or delivered to, the holders of Senior Indebtedness (as
provided in Sections 3.3 and 3.4) to the extent necessary to pay all Senior
Indebtedness in full after giving effect to any concurrent payment or
distribution in respect of such Senior Indebtedness, provided, however,
that such amounts paid to the holders of Senior Indebtedness shall not be
deemed to discharge the Subordinated Indebtedness.


 


Upon any payment or distribution of the
character referred to in this Section 3.1, the Holders of Subordinated
Indebtedness shall be entitled to rely upon a certificate of any liquidating
trustee, receiver, agent or other person making such payment or distribution
for the purpose of determining the persons entitled to participate in such
payment or distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed in respect thereof, and all other facts
pertinent thereto and to this Section 3.


 


3.2.          Standback. 
The Company shall not make any payment or prepayment in respect of
Subordinated Indebtedness, if, at the time and after immediately giving effect
to the payment or prepayment of such amount, there shall exist a default or an
event of default with respect to the Senior Indebtedness under which the same
is outstanding, permitting (or which will, with the passage of time or notice
or both, permit) the holder or holders thereof (or any representative on behalf
of such holder or holders) to accelerate the maturity or demand immediate
payment thereof (a “Senior Default”), and the Holder of Subordinated
Indebtedness shall not accept, ask, demand or sue for any payment in respect of
Subordinated Indebtedness, if the Holder is aware that, at the time or after
immediately giving effect to the payment of such amount, there shall exist a
Senior Default, unless and until all Senior Indebtedness is paid in full or
such Senior Default shall have been cured or waived by the holders of the
Senior Indebtedness.  As long as the
Senior Indebtedness is outstanding, the Holders of Subordinated Indebtedness
shall not, without the prior written consent of holders of Senior Indebtedness
sufficient to bind all holders of Senior Indebtedness, commence, or join with
any other creditor in commencing any proceeding referred to in paragraphs (iii) or
(v) of Section 4(a).


 


3.3.          Payments in Respect of Senior Indebtedness.  For the purposes of Section 3.1, (i) Senior
Indebtedness shall not be deemed to have been paid in full unless and until the
holders thereof shall have received cash or, if so approved by holders of the
Senior Indebtedness sufficient to bind all holders of Senior Indebtedness and
at the sole option of the Company, marketable securities taken at their then
market value, or both, equal to the full amount of such Senior Indebtedness at
the time outstanding, and (ii) any payment or distribution required to be
paid or delivered to the holders of Senior Indebtedness shall be deemed to have
been received by such holders if paid or delivered to an authorized
representative or representatives of such holders.


 


2

















 


3.4.          Further Assurances. 
The Holders of the Subordinated Indebtedness (i) irrevocably
authorize and empower (without imposing any obligation on) each holder of
Senior Indebtedness or such holder’s representatives to accelerate, demand, sue
for, collect and receive  such holder’s ratable
share of all payments and distributions in respect of the Subordinated
Indebtedness which are required to be paid or delivered to the holders of
Senior Indebtedness as provided in Section 3.1, and to file and prove all
such claims and take all such other action (including the right to vote such
Holder’s ratable share of the Subordinated Indebtedness) in the name of the
Holders of the Subordinated Indebtedness or otherwise, as such holder of Senior
Indebtedness or such holder’s representatives may determine to be reasonably
necessary or appropriate for the enforcement of Section 3.1, and (ii) shall
execute and deliver to each holder of Senior Indebtedness or such holder’s
representatives such other instruments confirming such authorization and such
powers of attorney, proofs of claim, assignments of claim and/or rights,
financing statements and other instruments, and shall take all such other
action as may be reasonably requested by such holder or such holder’s
representatives in order to enable such holder to enforce such holder’s ratable
share of all Subordinated Indebtedness and all such payments and distributions
in respect thereof, and to otherwise enforce the subordination provisions of
this Section 3 and to perfect its rights herein.


 


3.5.          Rights of Subrogation.  Upon payment in full to the holders of all
Senior Indebtedness, the Holders of the Subordinated Indebtedness shall be
subrogated to the rights of such holders of Senior Indebtedness to receive
payments and distributions in respect of Senior Indebtedness until all such
holders of the Subordinated Indebtedness shall have been paid in full.  No payment or distribution to the holders of
Senior Indebtedness by virtue of the provisions of this Section 3, which
would otherwise have been made to the holders of the Subordinated Indebtedness,
shall, as between the Company and its creditors other than the holders of
Senior Indebtedness, be deemed to be a payment by the Company in respect of
Senior Indebtedness, it being understood that the terms of this Section 3
are for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand and the Holders of Subordinated Indebtedness on
the other hand.


 


3.6.          Modifications of Senior Indebtedness and Security.  The holders of the Senior Indebtedness may,
at any time and from time to time, without impairing or releasing the
subordination provisions of this Section 3, do any one or more of the
following:  (a) change or extend the
time of payment of the Senior Indebtedness; (b) release any person or
entity liable in any manner for the payment or collection of the Senior
Indebtedness; (c) exercise or refrain from exercising any rights in
respect of the Senior Indebtedness against the Company or any other person or
entity; (d) apply any monies or other property paid by any person or
entity  or otherwise released in any
manner, to the Senior Indebtedness; or (e) accept or release any security
for the Senior Indebtedness.


 


3.7.          Agreements with Holders of Senior Indebtedness.  The Holder of this Subordinated Promissory
Note shall promptly execute such additional agreements as any holder or holders
of Senior Indebtedness may reasonably request to confirm the provisions of this
Subordinated Promissory Note and otherwise providing for the reasonable
subordination of the 


 


3

















 


indebtedness evidenced by this Subordinated
Promissory Note not materially inconsistent with this Subordinated Promissory
Note.


 


3.8.          Modification of Subordinated Promissory Note.  No modification or waiver of the terms of
this Subordinated Promissory Note that accelerates the time or amount of
payments, or increases the interest rate, or changes the subordination
provisions, shall be effective without the prior written consent of such
holders of the Senior Indebtedness necessary to bind all of the holders of
Senior Indebtedness.


 


3.9.          Incorrect Payments. 
If any payment on account of this Subordinated Indebtedness not
permitted by the terms of this Subordinated Promissory Note is received by the
Holder hereof prior to the payment in full of the Senior Indebtedness, such
payment shall be held in trust by such Holder for the benefit of the holders of
the Senior Indebtedness, and shall be paid over to the holders of the Senior Indebtedness,
or their authorized representative for application to the payment of the Senior
Indebtedness until paid in full.


 


4.             Events
of Default; Acceleration.   If one or
more of the following occurs (each an “Event of Default”):


 


(a)           The
Company shall be involved in financial difficulties as evidenced:


 


(i)            by its commencement of a voluntary case under Title 11 of
the United States Code as from time to time in effect;


 


(ii)           by its filing an answer or other pleading admitting or
failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting to
or acquiescing in the relief therein provided, or by its failing to controvert
timely the material allegations of any such petition;


 


(iii) by the entry of an
order for relief in any involuntary case commenced under said Title 11;


 


(iv)  by the entry of an
order by a court of competent jurisdiction (A) by finding it to be
bankrupt or insolvent, (B) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its
creditors, or (C) assuming custody of, or appointing a receiver or other
custodian for all or a substantial part of its property and such order shall
not be vacated or stayed on appeal or otherwise stayed within 90 days;


 


(v)           by the filing of a petition against the Company under said
Title 11 which shall not be vacated within 90 days; or


 


(vi)          by its making an assignment for the benefit of, its
creditors, or appointing or consenting to the appointment of a receiver or
other custodian for all or a substantial part of its property;


 


4

















 


(b)           the
Company shall sell substantially all of its assets to an unaffiliated third
party in one or a series of related transactions; or


 


(c)           the
Company fails to pay in full, all principal and interest due under this
Subordinated Promissory Note on or before the Maturity Date.


 


then, and in any such event, and at any time
thereafter, if any Event of Default shall be continuing, subject to Section 3,
Holder may, at Holder’s sole option do any one of the following:  (i) declare the entire unpaid balance of
principal and interest under this Note to be immediately due and payable; and (ii) exercise
any and all rights and remedies available to Holder at law, in equity or
otherwise, whether for the specific performance of any covenant, agreement, or
other provision contained herein, or in any document or instrument delivered in
connection with or pursuant to this Subordinated Promissory Note, or any of the
exhibits attached thereto.


 


5.             Stockholders,
Officers and Directors Not Liable. 
In no event shall any stockholder, officer or director of the Company be
liable for any amounts due or payable pursuant to this Subordinated Promissory
Note.


 


6.             Waivers.  The Company hereby waives presentment,
demand, notice, protest and all other demands and notices in connection with
the delivery, acceptance, performance or enforcement of this Subordinated
Promissory Note.


 


7.             Action to Collect on Note.  If
action is instituted to collect on this Subordinated Promissory Note, the
Company promises to pay all costs and expenses, including reasonable attorney’s
fees, incurred in connection with such action.


 


8.             Notice.  Any notice required or permitted by this
Subordinated Promissory Note shall be in writing and shall be deemed sufficient
upon receipt, when delivered personally or by courier, overnight delivery
service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail
as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party’s address or facsimile
number as set forth below or as subsequently modified by written notice.


 


ARTISTdirect Inc.


1601 Cloverfield Boulevard, Suite 400S


Santa Monica, California 90404-4082


Phone (310) 956-3300


 


5

















 


IN WITNESS WHEREOF, the
undersigned and Holder have executed this Subordinated Promissory Note as of
the date above written.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARTISTDIRECT, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dimitri S. Villard

  
	
   

  	
  Dimitri Villard, Chief Executive Officer

  



 


6