Exchange, Contribution And Distribution Agreement

THE ULTIMATE BAND LIST, LLC/ARTISTDIRECT, LLC


EXCHANGE, CONTRIBUTION AND DISTRIBUTION AGREEMENT


This Exchange, Contribution and Distribution Agreement (the "Agreement") is made as of May 18, 1999 by and among ARTISTdirect, LLC, a California limited liability company ("AD"), ARTISTdirect New Media, LLC, a California limited liability company and indirectly wholly-owned subsidiary of AD ("ADNM"), The Ultimate Band List, LLC, a California limited liability company (the "UBL"), Marc Geiger ("Geiger"), Don Muller ("Muller") and each of the unitholders of the UBL (other than ADNM) listed on the signature pages hereto (individually, a "Unitholder," and collectively, the "Unitholders").


W I T N E S S E T H:


WHEREAS, each of AD, ADNM and the Unitholders have agreed that it is in the best interests of all that (i) each of the Unitholders exchange their Common Units ("UBL Common Units") and/or Series A Preferred Units ("UBL Series A Preferred Units"), and all accrued and unpaid Preferred Return thereon, as applicable, in the UBL (collectively, the "UBL Units") for Common Units ("AD Common Units") and/or Series A Preferred Units ("AD Series A Preferred Units") in AD (collectively, the "AD Units"), and an identical amount of accrued and unpaid Preferred Return thereon, and (ii) ADNM convert its Series B Preferred Units in the UBL ("UBL Series B Preferred Units") into UBL Common Units, and then distribute such UBL Common Units, as well as its other UBL Common Units, to AD and to ARTISTdirect Holdings, LLC, a California limited liability company and direct wholly-owned subsidiary of AD ("AD Holdings"), such that upon consummation of such distribution, AD and AD Holdings will hold a 99% and 1% interest in the UBL, respectively, each of such transactions to occur on the terms and conditions outlined in this Agreement; and


WHEREAS, to effect the foregoing, (i) the Unitholders have agreed to make an aggregate capital contribution to AD in the form of 8,042,134.01 UBL Common Units and 1,940,000 UBL Series A Preferred Units, and in exchange therefor, AD has agreed to issue to the Unitholders, upon the terms and conditions provided in this Agreement and in that certain Second Amended and Restated Operating Agreement of ARTISTdirect, LLC to be entered into in connection herewith (as so amended, the "Operating Agreement"), an aggregate of 15,469,494 AD Common Units and an aggregate of 3,372,921 AD Series A Preferred Units, all as specified further on the signature pages to this Agreement, (ii) in connection therewith, all accrued and unpaid Preferred Return on such UBL Series A Preferred Units shall become an identical amount of accrued and unpaid Preferred Return on the AD Series A Preferred Units issued in exchange therefor, (iii) in order to induce Rick Rubin ("Rubin") to exchange UBL Common Units for AD Common Units hereunder and to cause the equalization of the ownership of Rubin, Geiger and Muller, Geiger has agreed to contribute 491,467 AD Common Units to the capital of AD, Muller has agreed to contribute 995,819 AD Common Units to the capital of AD, and Rubin will receive an aggregate of 1,487,286 AD Common Units (which is in excess of the number of AD Common Units which


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it would have otherwise received pursuant to the terms of this Agreement based upon its proportionate ownership of its UBL Common Units otherwise to be exchanged for AD Common Units), and (iv) ADNM has agreed to make an aggregate distribution of 9,281,452 UBL Common Units to AD and 93,752 UBL Common Units to AD Holdings.


NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Unitholders, AD, ADNM and the UBL hereby agree as follows:


A G R E E M E N T:


Terms used herein which are not defined shall have such definitions as are given to them in the Operating Agreement.


SECTION 1


The Exchange, Contribution and Distribution Transactions


1.1 Exchange Transaction. Subject to the terms and conditions set forth in this Agreement and in the Operating Agreement, upon execution of this Agreement, (a) each Unitholder agrees to exchange that number of UBL Common Units and UBL Series A Preferred Units set forth after such Unitholder's name on the signature pages to this Agreement in return for that portion of the AD Common Units and AD Series A Preferred Units listed thereat, and AD agrees to issue such AD Units to the Unitholders in exchange for such UBL Units, all as specified further on the signature pages to this Agreement, and (b) in connection with such exchange, the accrued and unpaid, Preferred Return on such UBL Series A Preferred Units set forth after such Unitholder's name on the signature pages to this Agreement shall become an identical amount of accrued and unpaid Preferred Return on the AD Series A Preferred Units issued in exchange therefor, and such UBL Units and the accrued and unpaid Preferred Return on such UBL Series A Preferred Units shall be deemed cancelled.


1.2 Contribution Transaction. Subject to the terms and conditions set forth in this Agreement and in the Operating Agreement, upon execution of this Agreement, Geiger shall contribute 491,467 AD Common Units to the capital of AD, Muller shall contribute 995,819 AD Common Units to the capital of AD, and Rubin will receive an aggregate of 1,487,286 AD Common Units (which in excess of the number of AD Common Units which he would have otherwise received pursuant to the terms of this Agreement based upon his proportionate ownership of UBL Common Units otherwise to be exchanged for AD Common Units) as set forth on the signature pages to this Agreement, in order that the percentage ownership in AD of each of Rubin, Geiger and Muller will be equal after giving effect to such contribution and issuance and the other transactions contemplated by this Agreement.


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1.3 Distribution Transaction. Subject to the terms and conditions set forth in this Agreement and in the Operating Agreement, upon execution of this Agreement, ADNM agrees to convert all of its UBL Series B Preferred Units, and all accrued and unpaid Preferred Return thereon, into UBL Common Units, and to distribute such UBL Common Units, along with the 7,350,000 UBL Common Units that it already owns, to AD and AD Holdings, as follows: ADNM will distribute 9,281,452 of such UBL Common Units to AD, and will distribute 93,752 of such UBL Common Units to AD Holdings, so that after giving effect to such distributions, AD and AD Holdings will hold a 99% and 1% interest in ADNM, respectively.


SECTION 2


Closing, Payment and Delivery


2.1 Closing Date and Place of Closing. The closing (the "Closing") shall be held on May 18, 1999 (the "Closing Date") and shall be held at the offices of Riordan & McKinzie, 300 S. Grand Avenue, 29th Floor, Los Angeles, California 90071-3109 or on such other date and at such other place as shall be mutually agreed to by the parties hereto.


2.2 Payment and Delivery. At the Closing, AD will deliver to each Unitholder a fully executed copy of the Operating Agreement, whereby such Unitholder shall become the holder of that number of AD Units set forth next to such Unitholder's name on the signature pages hereto.


SECTION 3


Representations and Warranties of AD


AD hereby represents and warrants to the Unitholders that, except as set forth on the "Schedule of Exceptions" attached as Exhibit A hereto which refers specifically to the representations and warranties in this Agreement and which reasonably identifies the basis for an exception thereto:


3.1 Capitalization. Exhibit A sets forth both prior to and after giving effect to the Closing, the authorized equity capital of AD and the number of issued and outstanding securities of each class of securities of AD. All of the issued and outstanding securities, including the AD Units to be issued pursuant to the terms of this Agreement, are validly issued, fully paid and non-assessable. Except as set forth in the Operating Agreement or on Exhibit A, there are (i) no existing options, warrants, calls, commitments or other contracts to which AD is a party requiring, and no convertible securities of AD outstanding which upon conversion would require, the issuance of any additional securities of AD, or other securities convertible into securities of AD, (ii) no contracts to which AD is a party, with respect to the voting or Transfer of such securities and (iii) no shareholders' preemptive rights or rights of first refusal or other similar


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rights with respect to the issuance of securities by AD. True and correct copies of the Articles of Organization of AD and the Operating Agreement have been delivered to the Unitholders.


3.2 Authorization and Issuance of Units. The issuance by AD of the AD Units has been duly authorized by all necessary action on the part of AD and, upon issuance in accordance with the terms hereof, the AD Units will be validly issued, fully paid and non-assessable, free and clear of all liens.


3.3 Securities Laws. In reliance on the investment representations contained in Section 4.4 of this Agreement, and assuming that each of the Unitholders resides at the address listed in Section 12.4 of this Agreement, the offer, issuance, sale and delivery of the AD Units, as provided in this Agreement, are exempt from the registration requirements of the Securities Act and all California state securities laws, and are otherwise in compliance with such laws. Neither AD nor any Person acting on its behalf has taken or will take any action which might subject the offering, issuance or sale of the AD Units to the registration requirements of Section 5 of the Securities Act.


3.4 Existence; Compliance with Law. AD (i) is a limited liability company duly organized, validly existing and in good standing under the laws of its applicable jurisdiction of organization; (ii) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification (except for jurisdictions in which the failure to so qualify or to be in good standing would not have a material adverse effect on the properties, business, condition (financial or otherwise) or results of operations (a "Material Adverse Effect") of AD; (iii) has the requisite power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now being conducted; (iv) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all governmental authorities having jurisdiction, to the extent required for such ownership, operation and conduct except where such failure would not have or could not reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect on AD; (v) is in compliance with its organizational documents and operating agreements; and (vi) is in compliance with all applicable provisions of law, except for such noncompliance which would not have, or could not reasonably be expected to have, a Material Adverse Effect on AD.


3.5 Subsidiaries. Except as disclosed on Exhibit A, there are no subsidiaries of AD, and AD does not hold any securities or other proprietary interest, directly or indirectly, of any Person or have any agreement or arrangement to acquire any securities or other proprietary interest other than the interests described in Exhibit A.


3.6 Power, Authorization; Enforceable Obligations. Except as set forth in Exhibit A (a) the execution, delivery and performance by AD of this Agreement and all agreements to be executed and delivered in connection herewith (the "Ancillary Agreements") to which it is a party and all other instruments and documents to be delivered by AD, the issuance by AD of the


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AD Units and the consummation of the other transactions contemplated by any of the foregoing: (i) are within AD's power and authority; (ii) have been duly authorized by all necessary or proper action; (iii) are not in contravention (with or without the lapse of time or giving of notice or both) of any provision of AD's organizational documents or Operating Agreement; (iv) do not and will not violate (with or without the lapse of time or giving of notice or both) any law, or any order or decree of any governmental authority; (v) do not and will not (with or without the lapse of time or giving of notice or both) conflict with or result in the breach or termination of, constitute a default under, accelerate any performance required by, give rise to any right to increase the obligations or otherwise modify the terms under, any contract to which AD is a party or by which AD or any of its assets or property is bound; (vi) do not and will not (with or without the lapse of time or giving of notice or both) result in the creation or imposition of any lien upon any of the assets or property of AD; and (vii) do not require the consent or approval of, or any filing with, any governmental authority or any other Person, except in the case of (iv), (v), (vi) and (vii) for such violations, conflicts, breaches, terminations, defaults, accelerations, rights, modifications, liens, consents, approvals or filings which, singly or in the aggregate, would not have or could not reasonably be expected to have, a Material Adverse Effect on AD. Each of this Agreement and the other Ancillary Agreements to which AD is a party has been duly executed and delivered by AD and, assuming the due authorization, execution and delivery by the other parties hereto and thereto, each constitutes a legal, valid and binding obligation of AD, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).


3.7 Securities Act. It is acquiring the UBL Units for investment and not with the current view to, or for resale in connection with, any distribution thereof, other than in compliance with Federal and State securities laws. It is an "accredited investor" within the meaning of the Securities Act and the rules thereunder, and understands that the UBL Units have not been registered under the Securities Act nor qualified under any State blue sky law by reason of specified exemptions therefrom which depend upon, among other things, the bona fide nature of the investment intent expressed herein. It acknowledges that the UBL Units must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available.


3.8 Disclosure. The representations and warranties of AD contained in (i) this Agreement and the exhibits attached hereto and (ii) any certificate furnished or to be furnished to the Unitholders at the Closing, when read together, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.


3.9 Investment Company. AD is not and, after giving effect to the transactions contemplated by this Agreement and the Ancillary Agreements, will not be an "investment company" as defined in the Investment Company Act of 1940.


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SECTION 4


Representations and Warranties of Unitholders


Each Unitholder hereby represents and warrants to AD, individually and not collectively, that:


4.1 Existence; Power and Authority. If not an individual, it (i) is a limited liability company, partnership or corporation duly organized, validly existing and in good standing under the laws of its applicable jurisdiction of organization or formation, and (ii) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification (except for jurisdictions in which the failure to so qualify or to be in good standing would not have a Material Adverse Effect on such entity). Whether or not it is an individual, it has all requisite power, authority and capacity to enter into this Agreement and the Ancillary Agreements to which it is a party and all other documents to be executed and delivered by it pursuant to the terms hereof, to exchange the UBL Units to be exchanged by it, and to carry out and perform its other obligations under such agreements and other documents


4.2 Authorization; No Conflicts. All action on the part of it necessary for the authorization, execution, delivery and performance by it of this Agreement and the Ancillary Agreements to which it is a party, and for the consummation of the transactions contemplated herein, has been taken. This Agreement and the Ancillary Agreements to which it is a party have been duly executed and delivered by it, and assuming the due authorization, execution and delivery by the other parties hereto, will be a valid and binding obligation of it, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and to gene ...