<PAGE>   1
                                                                   Exhibit 10.54

                               ARTISTdirect, Inc.
                          5670 Wilshire Blvd, Suite 200
                              Los Angeles, CA 90036

                                                             Dated: July 1, 2001

Marc P. Geiger
16655 Stone Oak Park
Los Angeles, CA 90049

        RE: AMENDMENT TO EMPLOYMENT AGREEMENT

Dear Marc:

        This Amendment is being entered into in light of the following:

        A. WHEREAS, you and we (sometimes referred to herein as the "Company"),
as successor-in-interest to ARTISTdirect, LLC, are parties to a certain
employment agreement dated as of July 28, 1998, as amended pursuant to that
certain letter agreement dated as of April 27, 2001 (the "Agreement"); and

        B. WHEREAS, you and the Company desire to amend the Agreement as set
forth below.

        NOW THEREFORE, in consideration of the mutual benefits and agreements
set forth below, you and the Company hereby agree as follows:

        1. Unless specifically defined herein, all terms defined in the
Agreement and used below shall have the same meaning as when used in the
Agreement.

        2. Notwithstanding anything to the contrary contained in the Agreement,
conditioned upon and effective as of the approval by the Company's Board of
Directors (the "Company Board") of this Amendment:

            (a) Section 1 of the Agreement is hereby deleted in its entirety and
shall be deemed replaced by the following section in its place and stead:

               1. Employment and Duties. Subject to the other terms and
        conditions set forth herein, the Company hereby employs Employee and
        Employee agrees to be employed by the Company as Vice Chairman and
        President, Artist Services. Employee shall report solely and directly to
        the Company's Chief Executive Officer (the "CEO") and Board of Directors
        (the "Company Board").

            (b) Section 2 of the Agreement is hereby amended by deleting the
words "and in a satisfactory manner" in the first and second lines thereof and
by inserting the words "CEO or" immediately prior to the words "the Company
Board" in the third line thereof.

            (c) Section 4 of the Agreement is hereby amended by extending the
Initial Period through June 30, 2006, unless terminated sooner as provided in
Section 7 of the Agreement. The reference to "July 28, 2001" in the third line
of said Section 4 shall be deemed to refer to July 1, 2006. The period
commencing on July 1, 2001 and ending on June 30, 2006 is
<PAGE>   2

sometimes referred to below as the "Renewal Period." Each twelve (12)-month
period of the Renewal Period commencing July 1 is referred to below as a
"Renewal Year."

            (d) Section 5(a) of the Agreement is hereby amended to provide that
Employee's "Base Salary" commencing as of July 1, 2001 shall be at the annual
rate of Five Hundred Thousand Dollars ($500,000), less required withholdings,
and the following sentence is added to the end of said Section 5(a): "The Base
Salary shall be reviewed annually for any increases by the Compensation
Committee of the Company Board or, if none, the Company Board (the "Committee")
in consultation with the CEO."

            (e) Within five (5) business days following the later of the
complete execution hereof and the approval by the Company Board of this
Amendment, the Company shall pay Employee a one-time advance in the amount of
Three Hundred Thousand Dollars ($300,000). The first Sixty Thousand Dollar
($60,000) portion of such advance shall be deemed a pre-payment of any monies
otherwise becoming payable to Employee pursuant to Section 2(f) of this
Amendment during the first Renewal Year; the second Sixty Thousand Dollar
($60,000) portion of such advance shall be deemed a pre-payment of any monies
otherwise becoming payable to Employee pursuant to Section 2(f) of this
Amendment during the second Renewal Year; the third Sixty Thousand Dollar
($60,000) portion of such advance shall be deemed a pre-payment of any monies
otherwise becoming payable to Employee pursuant to Section 2(f) this Amendment
during the third Renewal Year; the fourth Sixty Thousand Dollar ($60,000)
portion of such advance shall be deemed a pre-payment of any monies otherwise
becoming payable to Employee pursuant to Section 2(f) of this Amendment during
the fourth Renewal Year; and the fifth Sixty Thousand Dollar ($60,000) portion
of such advance shall be deemed a pre-payment of any monies otherwise becoming
payable to Employee pursuant to Section 2(f) of this Amendment during the fifth
Renewal Year. Notwithstanding anything to the contrary contained in the
Agreement or in this Amendment, Employee acknowledges and agrees that in the
event Employee's employment shall terminate at any time either by the Company
for Cause or by Employee other than for Good Reason, then Employee shall within
thirty (30) days following such termination repay to the Company the "Unearned
Portion of the Commencement Advance," which shall mean the amount, if any, by
which Three Hundred Thousand Dollars ($300,000) exceeds the lesser of the amount
earned by Employee pursuant to Section 2(f) of this Amendment or the product of
Five Thousand Dollars ($5,000) and the number of full months that shall have
elapsed between July 1, 2001 and the date of that termination. To the extent
that Employee does not repay the amount required to be repaid pursuant to the
preceding sentence, the Company shall be entitled, in addition to all other
remedies available under applicable law, to offset any obligation of any nature
of the Company to Employee against such unpaid amount. For the avoidance of
doubt, notwithstanding anything to the contrary contained herein, Company
acknowledges and agrees that if Employee's employment is terminated by Company
for reasons other than "Cause" defined in the Agreement or by the Employee for
"Good Reason" as defined in the Agreement, then Employee shall have no
obligation to Company to repay the Unearned Portion of the Commencement Advance.

            (f) Employee shall be eligible to participate in the Company's
executive performance bonus pool. The bonus amount will be based on the
following factors: (1) the financial performance of the Company as determined
and measured by the Board and the Company's Chief Executive Officer; and (2)
Employee's achievement of management targets and goals as set by the Company.
The bonus amount is intended to reward contribution to the Company's performance
over an entire fiscal year, and consequently will be paid only if Employee is
employed and in good standing at the time of bonus payments, which generally is
within 45 days after the close of the Company's fiscal year.


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            (g) Section 5(b) of the Agreement is hereby deleted in its entirety
and shall be deemed replaced by the following sections in its place and stead:

               (b) Participation in A&R Bonus Plan. ARTISTdirect Records, L.L.C.
        (the "Record Label Subsidiary") hereby agrees that, during the Term, so
        long as the Record Label Subsidiary remains a Subsidiary of the Company,
        Employee shall be entitled to participate in the A&R Bonus Plan of the
        Record Label Subsidiary as if Employee were an employee of the Record
        Label Subsidiary, in accordance with the A&R Exhibit attached hereto.

            (h) Amounts payable to Employee pursuant to subparagraphs 2(d), (e),
(f) and (g) above shall be subject to required withholdings. Employee hereby
acknowledges and agrees that he shall not be eligible to participate in any
employee bonus plans of the Company or any Subsidiary other than as expressly
set forth in this Amendment.

            (i) Section 6(b) of the Agreement is hereby deleted in its entirety
and shall be deemed replaced by the following section in its place and stead:

               (b) Employee shall be entitled to not less than four (4) weeks'
        vacation during each year of the Term hereof to be scheduled at mutually
        agreeable times and accrued and taken in accordance with Company policy.
        Employee may not accrue more than a maximum of forty (40) days of unused
        vacation time and, accordingly, vacation time will cease to accrue
        during any period in which Employee has forty (40) days of accrued
        vacation time.

            (j) The following is hereby inserted as a new Section 6(d) of the
Agreement:

               (d) Employee shall be entitled to fringe benefits commensurate
        with those available to comparable level executives.

            (k) Section 7 of the Agreement is hereby amended by inserting the
following two sentences at the beginning thereof:

        Employee and the Company hereby agree and acknowledge that the Company
        shall have the right to terminate Employee's employment for any reason
        whatsoever; provided, however, that if the Company terminates Employee's
        employment other than pursuant to Sections 7(a), 7(b) or 7(c) below, it
        shall be obligated to make the payment described in Section 7(f)(ii)
        below. For the avoidance of doubt, for the purposes of this Amendment
        and the Agreement, Company's election not to extend the Term pursuant to
        Section 4 above shall not constitute a termination of Employee's
        employment by Company other than pursuant to Sections 7(a), 7(b) or 7(c)
        below.

            (l) Section 7(b) of the Agreement is hereby deleted in its entirety
and shall be deemed replaced by the following section in its place and stead:

               (b) Cause. The Company may terminate Employee's employment
        hereunder for Cause. For the purposes of this Agreement, "Cause" shall
        mean Employee shall have (i) been convicted of, or pleaded nolo
        contendere to, any felony or lesser crime involving fraud, embezzlement
        or misappropriation of the property of the Company or any of its
        Subsidiaries; (ii) engaged in gross negligence or willful misconduct in
        the performance of Employee's duties hereunder; (iii) materially
        breached any material provision


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<PAGE>   4

        hereof; or (iv) misappropriated for his own purpose and benefit any (A)
        material property of Company or any Subsidiary or (B) any material
        opportunity of Company or any Subsidiary. Notwithstanding anything to
        the contrary contained herein, none of the events or circumstances
        described in clauses (ii), (iii) or (iv)B above shall constitute "Cause"
        for purposes of this Agreement unless the Company gives Employee written
        notice delineating the claimed event or circumstance and setting forth
        the Company's intention to terminate Employee's employment if such
        claimed event or circumstance is not capable of remedy or is not duly
        remedied within thirty (30) days following such notice, if capable of
        remedy, and Employee fails to remedy such event or circumstance within
        such thirty (30)-day period. For the avoidance of doubt, Employee's
        resignation from the Board during any time which he is a member of the
        Board shall not in and of itself constitute a breach of this Agreement.

            (m) Section 7(d) of the Agreement is hereby amended by deleting
clause (i) of the second sentence thereof and replacing it by the following
clause in its place and stead:

               (i) a material and substantial reduction in Employee's title,
        responsibilities or duties;

            (n) Section 7(e) of the Agreement is hereby deleted in its entirety
and shall be deemed replaced by the following section in its place and stead:

               (e) If Employee's employment is terminated pursuant to this
        Section 7, Employee shall be entitled to, and the Company's obligation
        hereunder shall be limited to, (i) the payment of any unpaid
        compensation accrued under Section 5(a) above through the effective date
        of such termination; (ii) any unreimbursed expenses incurred, and other
        accrued employee benefits (as described above) accrued, through the date
        of termination; and (iii) the additional compensation provided in
        Section 7(f) below, if any.

            (o) Section 7(f)(ii) of the Agreement is hereby deleted in its
entirety and shall be deemed replaced by the following section in its place and
stead:

               (ii) (A) by the Company other than pursuant to Sections 7(a),
        7(b) or 7(c) above, or (B) by Employee pursuant to Section 7(d) above,
        the Company shall pay to Employee the Severance Amount as hereinafter
        defined, less required withholdings, in twelve (12) equal semi-monthly
        installments over the six (6) month period immediately following such
        termination. The "Severance Amount" shall mean the sum of (A) One
        Million Dollars ($1,000,000) and (B) the amount of Base Salary that
        would be payable to Employee pursuant to Section 5(a) above during the
        shorter of (1) the twelve (12) month period following the effective date
        of such termination or (2) the remainder of the then-current period of
        the Term. Notwithstanding the foregoing, In the event that Employee
        would receive one or more payments that would constitute "parachute
        payments" within the meaning of Section 280G(b)(1) of the Internal
        Revenue Code, the payments shall be reduced so that they are one dollar
        ($1) less than the threshold to be treated as parachute payments. In the
        event that the Employee is entitled to receive more than one such
        payment, the Employee shall have the choice as to which payment or
        payments shall be reduced. The parties hereto agree that the payments
        set forth in this Section 7(f)(ii) constitute fair compensation and the
        sole remedy for damages for any termination by the Company other than


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<PAGE>   5


        pursuant to any of Sections 7(a), 7(b) or 7(c) above, or by Employee
        pursuant to Section 7(d) above.

            (p) The first sentence of Section 8(a) of the Agreement is hereby
deleted and replaced with the following sentence in its place and stead:

        All inventions, trade secrets, ideas, recordings, original works of
        authorship or other work product of any kind that Employee conceives,
        develops, discovers or makes in whole or in part pursuant to this
        Agreement or in the scope of Employee's employment and Employee's
        contributions thereto (hereinafter referred to as "Works") shall belong
        solely and exclusively to the Company.

            (q) The third sentence of Section 8(b) of the Agreement is hereby
deleted and replaced with the following sentence in its place and stead:

        To the extent that the Works are deemed works other than contributions
        to collective works and/or parts or components of audiovisual works,
        Employee hereby irrevocably assigns and transfers to the Company to the
        maximum extent permitted by law all right, title and interest in the
        Works, including but not limited to all copyrights, patents, trade
        secret rights, and other proprietary rights in or relating to the Works.

            (r) The following is added as the last sentence of Section 8(d) of
the Agreement: "A copy of California Labor Code Sections 2870, 2871 and 2872 is
attached to this Agreement as Exhibit 1."

            (s) Section 9 of the Agreement is hereby deleted in its entirety and
shall be deemed replaced by the following section in its place and stead:

               9. Restrictions. In recognition of the considerations described
        herein, Employee agrees that:

                  (a) Without limiting the generality of Section 2 above,
        Employee acknowledges and agrees that given the extent and nature of the
        confidential and proprietary information he will obtain during the
        course of his employment with the Company, it would be inevitable that
        such confidential information would be disclosed or utilized by Employee
        should he obtain employment from or otherwise become associated with any
        person or entity engaged in any activity directly competitive with any
        business then carried on by, or anticipated to be carried on by, the
        Company or any of its Subsidiaries (a "Competitor"). Consequently, prior
        to the termination of Employee's employment, Employee shall not, without
        the prior written consent of the Company Board, directly or indirectly,
        own, manage, operate, join, control or participate in the ownership,
        management, operation or control of, or be employed by or connected in
        any manner with, any Competitor. Notwithstanding the foregoing, Employee
        may acquire or hold, solely for investment, publicly traded securities
        of any corporation, so long as such securities, in the aggregate,
        constitute less than five percent (5%) of any class or series of
        outstanding securities of such corporation.


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<PAGE>   6



                  (b) During the term of Employee's employment and at all times
        thereafter, Employee shall hold in secrecy all trade secrets and
        confidential information relating to the Company's (and its
        Subsidiaries') business and affairs that come to his knowledge while
        employed by the Company (excluding information that is or becomes
        publicly known or available for use through no fault of Employee),
        including but not limited to: (i) matters of a business nature, such as
        information about costs, profits, markets, sales, lists of customers,
        lists of clients and other information of a similar nature, (ii) plans
        or strategies for development of the business of the Company and (iii)
        matters of a technical nature. Except as required in the performance of
        Employee's duties to the Company under this Agreement, Employee shall
        not use for his own benefit or disclose to any person (except as
        required by law or legal process, provided Employee shall undertake to
        give the Company notice prior to such disclosure and shall comply with
        any applicable protective order or equivalent), directly or indirectly,
        such matters unless such use or disclosure has been specifically
        authorized in writing by the Company in advance.

                  (c) Employee shall not, directly or indirectly, hire, offer to
        hire, entice away, or in any other manner persuade or attempt to
        persuade any officer, employee, agent, representative, customer, client,
        performer or songwriter of the Company or any Subsidiary, to discontinue
        his or her relationship with the Company or any Subsidiary at any time
        during the Term and for a one (1) year period immediately following the
        expiration of the Term.

            (t) The following is added as the last sentence of Section 19 of the
Agreement: "Notwithstanding the foregoing, Employee shall be entitled to dispute
the factual basis of any breach asserted by Company."

            (u) Section 22 of the Agreement is amended to provide that a copy of
each notice to Company shall be simultaneously sent to Allen D. Lenard, Esq.,
1801 Century Park West, 6th Floor, Los Angeles, California 90067, in lieu of the
address provided for Lenard & Gonzalez in said Section 22.

            (v) The following is hereby inserted as a new Section 25 of the
Agreement:

               25. Section Headings. The Section headings herein are used solely
        for convenience and shall not be used in the interpretation or
        construction of this Agreement.

        3. This Amendment may be executed in two counterparts, each of which
shall be deemed an original and both of which together shall be deemed one
agreement.

        4. As modified hereby, the Agreement shall remain in full force and
effect and is hereby ratified and affirmed. In this regard, you hereby agree not
to seek to terminate your employment for Good Reason (either as defined in this
Amendment or in the Agreement prior to the effectiveness of this Amendment) by
virtue of this Amendment or anything that may have occurred prior to this
Amendment. By signing this Amendment, you expressly waive any right to terminate
your employment for Good Reason based upon any act or thing that has occurred up
to and including the date of this Amendment.


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<PAGE>   7

                                            ARTISTdirect, Inc.


                                            By:    /s/ FREDERICK W. FIELD
                                                   -----------------------------
                                                   Frederick W. Field
                                            Its:   Chief Executive Officer

ACCEPTED AND AGREED:

/s/ MARC P. GEIGER
-----------------------------
    Marc P. Geiger


AGREED SOLELY AS TO THE PROVISIONS OF SECTION 2(g) ABOVE:

ARTISTdirect Records, L.L.C.


By:     /s/ FREDERICK W. FIELD
        ------------------------------------
        Frederick W. Field
Its:    Chief Executive Officer



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<PAGE>   8


                                    Exhibit 1



               California Labor Code Sections 2870, 2871 and 2872


SECTION 2870

(a) Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either:

        (1)    Relate at the time of conception or reduction to practice of the
               invention to the employer's business, or actual or demonstrably
               anticipated research or development of the employer; or

        (2)    Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.


SECTION 2871

No employer shall require a provision made void and unenforceable by Section
2870 as a condition of employment or continued employment. Nothing in this
article shall be construed to forbid or restrict the right of an employer to
provide in contracts of employment for disclosure, provided that any such

disclosures be received in confidence, of all of the employee's inventions made
solely or jointly with others during the term of his or her employment, a review
process by the employer to determine such issues as may arise, and for full
title to certain patents and inventions to be in the United States,

as required by contracts between the employer and the United States or any of
its agencies.


SECTION 2872

If an employment agreement entered into after January 1, 1980, contains a
provision requiring the employee to assign or offer to assign any of his or her
rights in any invention to his or her employer, the employer must also, at the
time the agreement is made, provide a written notification to the employee that
the agreement does not apply to an invention which qualifies fully under the
provisions of Section 2870. In any suit or action arising thereunder, the burden
of proof shall be on the employee claiming the benefits of its provisions.


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<PAGE>   9




                                   A&R Exhibit

                                 A&R BONUS PLAN

                                       FOR

                          ARTISTdirect RECORDS, L.L.C.

ARTISTdirect Records L.L.C. (the "Company") has established this A&R Bonus Plan
(the "Plan") in order to motivate and reward participants in connection with the
performance of their artist & repertoire duties and responsibilities based on
the success of the Company's recorded music.

1. PARTICIPANTS: The Company's Chief Executive Officer (the "CEO") shall have
the sole and absolute discretion to make determinations under the Plan,
including, without limitation, the determination as to which employees of the
Company shall be participants in the Plan (each, a "Participant"). Participant
acknowledges that the Plan may have provisions that vary with respect to the
applicable Participant.

2. ENTITLEMENT TO A&R BONUS:

        (a) Subject to the terms and conditions hereof, a Participant will be
entitled to receive a bonus (an "A&R Bonus") based on net sales of "Qualifying
Albums" delivered by a "Qualifying Artist" (as such terms are defined below).

        (b) As used herein:

            (i) "Qualifying Artist" means an artist (A) that enters into, during
the Employment Term, a Recording Agreement primarily because of the
Participant's efforts, as determined by the CEO in his sole good faith
discretion, and/or (B) for which the Participant is substantially responsible
for the performance of day-to-day artist & repertoire duties for the Company, as
determined by the CEO in his sole good faith discretion.

            (ii) "Qualifying Album" means an Album delivered during the
Employment Term by a Qualifying Artist in satisfaction of the minimum delivery
commitment provided in such artist's Recording Agreement and commercially
released in the United States during the Employment Term.

            (iii) "Recording Agreement" means an exclusive recording agreement
between the Company and a Qualifying Artist (or an entity furnishing the
services of a Qualifying Artist).

            (iv) "Employment Term" shall mean the term of Participant's
employment by the Company.

        (c) In respect of each Qualifying Album, the CEO may determine in his
sole good faith discretion that, although such album shall be deemed a
Qualifying Album, a Participant's A&R Bonus with respect to such Qualifying
Album shall be at a reduced rate, for example, when an artist is a Qualifying
Artist with respect to more than one Participant. In such cases, the total A&R
Bonus payable to all of the Participants shall not exceed the applicable royalty
rates set forth in Exhibit A attached hereto (which is hereby incorporated into
the Plan by reference), with such total A&R Bonus being split in equal portions
between the Participant(s) subject to clause

<PAGE>   10


(A) of paragraph 2(b)(i) above and the Participant(s) then subject to clause (B)
of paragraph 2(b)(i) above, or as the CEO may otherwise determine. The final
determination of whether a Participant shall receive an A&R Bonus as to any
artist, and whether the rates shall be subject to any reductions, shall be made
by the CEO, in his sole good faith discretion, and no such determination shall
be subject to challenge by a Participant. The Company and/or the CEO shall
undertake to advise Participant of any reductions of Participant's A&R Bonus
under this paragraph 2(c) prior to the implementation thereof, provided that the
Company's or the CEO's failure to do so will not constitute a breach hereof or
impede the Company's right to rely on the CEO's determination under this
paragraph 2(c).

3. CALCULATION OF A&R BONUS:

        (a) A&R Bonuses paid under the Plan shall be payable in respect of
Qualifying Albums only and shall be based upon a royalty computed, reduced,
adjusted, determined and paid in the manner set forth in said Exhibit A. Any
term defined in said Exhibit A and used herein shall have the same meaning as
ascribed to it in Exhibit A, unless otherwise defined herein.

        (b) Notwithstanding anything contained herein or in Exhibit A to the
contrary:

            (i) An A&R Bonus with respect to each Qualifying Artist shall only
be payable to a Participant if and when the applicable Qualifying Artist is in a
recouped position as of the end of an accounting period under the applicable
Recording Agreement, as calculated in accordance with the next sentence. A
Qualifying Artist shall only be deemed to be in a recouped position hereunder if
the cumulative royalties credited to the account of a Qualifying Artist under
the applicable Recording Agreement with respect to the Qualifying Albums by such
Qualifying Artist exceed all cumulative Recoupable Costs (as defined below) with
respect to the applicable Qualifying Artist. For the avoidance of doubt, the A&R
Bonus shall not be paid on any Net Sales of the Qualifying Albums that are
applied towards such recoupment. As used herein, "Recoupable Costs" shall mean
the aggregate of (A) all monies paid to a Qualifying Artist as required under
the applicable Recording Agreement (for example, a signing advance), but
excluding royalties, video costs, tour support, extra-contractual advances and
marketing and promotion costs, (B) all recording funds paid under a Recording
Agreement for Qualifying Albums by the applicable Qualifying Artist, and (C) to
the extent not included in a recording fund under clause (B) of this paragraph
3(b)(i), all recording costs (as defined in the applicable Recording Agreement)
for Qualifying Albums by the applicable Qualifying Artist and any master
recording recorded in connection therewith or a single derived therefrom.

            (ii) Notwithstanding paragraph 3(b)(i) above, after the first time
the A&R Bonus shall have become payable to a Participant in respect of a
particular Qualifying Album, the A&R Bonus shall continue to be payable in
respect of all subsequent Net Sales of such Qualifying Album (subject to
paragraph 4 below) regardless of whether Company's subsequent payment of
additional Recoupable Costs causes the applicable Qualifying Artist's royalty
account to be in an unrecouped position under paragraph 3(b)(i) above.

            (iii) No Participant shall be paid aggregate A&R Bonuses during any
fiscal year in excess of $500,000 (pre tax). Subject to the provisions of the
Plan, excess amounts will be carried forward for future payment.

            (iv) If a Participant is entitled to receive a royalty with respect
to a Qualifying Album pursuant to a separate agreement (for example, a producer
agreement), he or she shall not be entitled to receive an A&R Bonus under the
Plan.

<PAGE>   11


4. PERIOD OF PARTICIPATION IN THE PLAN: Notwithstanding anything in this Plan or
said Exhibit A to the contrary, no A&R Bonus (including any amounts carried
forward from preceding accounting period(s) pursuant to paragraph 3(b)(iii)
above) shall be payable to Participant with respect to the accounting periods
that commence after the Employment Term except as follows: Provided that a
Participant shall continue to "qualify" (as described below), a Participant
shall be entitled to receive A&R Bonus under this Plan with respect to
Qualifying Albums for a period of four (4) full accounting periods immediately
following the termination of such Participant's employment by Company, except
that the A&R Bonus shall be computed at 75% of the otherwise applicable royalty
rate with respect of Net Sales of Qualifying Albums occurring during the first
two (2) accounting periods following termination of employment and at 50% of the
otherwise applicable royalty rate with respect of Net Sales of Qualifying Albums
occurring during the third and fourth accounting periods following termination
of employment; including all amounts carried forward from preceding accounting
period(s) pursuant to paragraph 3(b)(iii) above (provided that no such
carried-forward amounts shall be reduced by applying either of said 75% or 50%
rates, it being understood that paragraph 3(b)(iii) shall continue to apply in
respect of any aggregate A&R Bonus amounts payable hereunder after the
termination of employment). A Participant shall be deemed to "qualify" for A&R
Bonus after the termination of employment pursuant to this paragraph 4 if the
Participant has fulfilled his or her obligations under his or her employment
agreement with Company for the full scheduled term of such agreement (as same
may have been extended) and has not resigned or had his or her employment
terminated by Company for "cause," as defined in such agreement.

5. MISCELLANEOUS:

        (a) The Company expressly reserves the right to amend or modify the Plan
in any respect or to terminate the Plan in its entirety, as the Company's Board
of Directors may determine in its sole and absolute discretion; provided,
however, that all benefits that have accrued under the Plan up to the date of
termination or amendment shall be calculated and paid, if applicable, to the
Participant in accordance with the form and terms of the Plan in effect
immediately prior to such termination or amendment.

        (b) Subject only to a Participant's examination rights as set forth in
Exhibit A, the Plan shall be interpreted, construed and administered by the CEO
and his interpretations and constructions and actions taken in good faith
hereunder shall be final, conclusive and binding on all Participants for all
purposes.

<PAGE>   12

                                    Exhibit A

1 ROYALTIES: Company shall accrue and credit to the account of each Participant,
as applicable, in accordance with the provisions of paragraph 2.01 below, the
following royalties for the sale of Phonograph Records derived from Master
Recordings hereunder:

        1.01 A royalty of two percent (2%) of the Royalty Base for Net Sales
through Normal Retail Channels in the United States of Qualifying Albums ("USNRC
Net Album Sales").

        1.02 (a) The royalty rate with respect to Net Sales of Qualifying Albums
sold for distribution in Canada shall be eighty-five percent (85%) of the
otherwise applicable royalty rate set forth herein.

            (b) The royalty rate with respect to Net Sales of Qualifying Albums
sold for distribution in the following countries to the extent such countries
are included in the "Territory" as defined in the applicable Recording
Agreement: Australia, Germany, Japan, New Zealand and the United Kingdom shall
be seventy-five percent (75%) of the otherwise applicable royalty rate set forth
herein.

            (c) The royalty rate with respect to Net Sales of Records sold for
distribution in the rest of the "Territory" as defined in the applicable
Recording Agreement (i.e., all applicable countries other than those set forth
in paragraphs 1.02(a) and 1.02(b) above) shall be fifty percent (50%) of the
otherwise applicable royalty rate set forth herein.

        1.03 (a) Notwithstanding anything to the contrary set forth herein, with
respect to Net Sales of Qualifying Albums sold in the form of compact discs, the
royalty rate shall be eighty-five percent (85%) of the otherwise applicable
royalty rate set forth herein.

            (b) With respect to Net Sales of Qualifying Albums sold in the form
of Record configurations not specifically provided for herein, Company shall
have the option to accrue, at its sole discretion, with respect to each such
Record, either a royalty equal to the same dollars-and-cents (or other currency)
royalty amount as would otherwise be accrued hereunder with respect to an
equivalent Record in the form of an analog cassette, or a royalty computed at
the same percentage of the Royalty Base of such other Record configuration as
the percentage of the Royalty Base utilized to compute the royalty for an
equivalent Record in the form of an analog cassette. If the foregoing royalty
amount or Royalty Base with respect to an equivalent Record in the form of an
analog cassette does not exist, then, with respect to Net Sales of Records sold
in the form of Record configurations not specifically provided for herein, the
royalty rate for such Records shall be seventy-five percent (75%) of the
otherwise applicable royalty rate set forth in this agreement. For purposes of
this paragraph only, the term "configurations not specifically provided for
herein" means configurations other than vinyl disc, analog cassette, audio-only
compact disc, and Audio-Visual Devices. For the avoidance of doubt, no royalties
shall be payable to Participant with respect to Audio-Visual Recordings and
Audio-Visual Devices.

            (c) (i) Notwithstanding paragraph 1.03(b) above, in the event that
Company shall, or shall license third parties to, transmit information embodying
the Master(s) hereunder for sale to the consumer via Electronic Distribution,
point-of-sale manufacturing or any other means of Electronic Distribution now
known or hereafter devised, the royalty to be accrued hereunder in respect of
such exploitation shall be seventy-five percent (75%) of the royalty rate
applicable to the equivalent Record in the form of compact disc and shall be
computed based on the applicable Royalty Base.

                (ii) Participant shall not be entitled to a royalty with respect
to the public performance income received by Company in connection with the
digital broadcast of
<PAGE>   13

Qualifying Albums hereunder (or, for the avoidance of doubt, any master
recording contained thereon).

        1.04 (a) The royalty for Net Sales of Qualifying Albums as premium
Records and Budget Records shall be accrued at one-half (1/2) of the otherwise
applicable royalty rate set forth herein and shall be computed based on the
particular Royalty Base of each such Record.

            (b) The royalty for Net Sales of Qualifying Albums as Mid-Priced
Records and Net Sales of Qualifying Albums sold through Armed Forces Post
Exchanges shall be three-fourths (3/4) of the otherwise applicable royalty rate
set forth herein and shall be computed based on the particular Royalty Base of
each such Record.

            (c) The royalty rate on a Qualifying Albums in the form of a
Multiple-Record Album shall be one-half (1/2) of the otherwise applicable
royalty rate set forth herein, if the Royalty Base in the applicable territory
of that Multiple-Record Album is the same as the Royalty Base applicable to a
top-line single unit Album in the same configuration marketed by Company or its
principal licensee in the territory concerned at the beginning of the royalty
accounting period concerned. If a different Royalty Base applies to a
Multiple-Record Album, the royalty rate prescribed in the preceding sentence
shall be adjusted in proportion to the variance in the Royalty Base, provided
that in no event shall it be more than the applicable basic Album royalty rate
set forth in paragraphs 1.01 and 1.02 above in the applicable territory.

        1.05 (a) With respect to Qualifying Albums through record clubs or
similar sales plans whether operated by Non-Affiliated Third Parties or
otherwise, the royalty to be accrued hereunder shall be a sum equal to five
percent (5%) of fifty percent (50%) of Company's net receipts with respect to
such exploitation.

            (b) The terms "net receipts" and "net amount received" and similar
terms in this paragraph 1.05 shall mean amounts received by Company in
connection with the subject matter thereof which are solely attributable to a
Qualifying Album (excluding catalog and/or administrative fees payable to
Company), after deduction of any costs or expenses or amounts which Company is
obligated to pay to third parties (such as, without limitation, production
costs, mechanical copyright payments, AF of M and other union or guild
payments).

        1.06 (a) As to Net Sales by Company or its affiliated licensees of
Qualifying Albums through direct mail or mail order, whether or not in
conjunction with radio or TV advertising, including through methods of
distribution such as "key outlet marketing", or by any combination of such
methods, the royalty to be accrued hereunder shall be a fifty percent (50%) of
the otherwise applicable royalty rate.

            (b) Notwithstanding the foregoing, in the event Company or any of
its affiliated licensees in a particular country utilize television, radio
and/or movie theater advertising in conjunction with a television campaign
and/or radio campaign and/or movie theater campaign to promote its sales of
Records derived from Master Recordings hereunder, then the royalty to be accrued
hereunder with respect to Net Sales of such Records sold by Company or the
particular affiliated licensee in such country during the semi-annual accounting
period in which the first such advertisement is broadcast through the end of the
semi-annual accounting period in which the last such advertisement is broadcast,
shall be fifty percent (50%) of the otherwise applicable royalty rate set forth
herein.

        1.07 With respect to Joint Recordings, the royalty to be accrued
hereunder shall be the otherwise applicable royalty provided for herein divided
by the total number of artists
<PAGE>   14

(including the Qualifying Artist) whose performances are embodied on the Joint
Recording concerned.

2 ACCOUNTINGS

        2.01 Accountings as to royalties accruing or which otherwise would have
accrued hereunder shall be made by Company to Participant on or before September
30th for the period ending the preceding June 30th, and on or before March 31st
for the period ending the preceding December 31st, or such other accounting
periods as Company may in general adopt, but in no case less frequently than
semi-annually, together with payment of accrued royalties, if any, earned by
Participant during such preceding half-year, less advances to Participant or
other recoupable and/or deductible amounts hereunder. Company shall have the
right to hold reasonable reserves in respect of sales hereunder.

        2.02 Royalties in connection with the exploitation of Master Recordings
hereunder shall be computed in the same national currency as Company is
accounted to by its licensees and shall be paid at the same rate of exchange as
Company is paid, and shall be subject to any taxes applicable to royalties
remitted by or received from foreign sources, provided, however, that royalties
on Records sold outside the United States shall not be due and payable by
Company until payment therefor has been received by Company in the United States
in United States Dollars. If Company shall not receive payment in the United
States, or in United States Dollars, and shall be required to accept payment in
a foreign country or in foreign currency, Company shall deposit to the credit of
Participant (at Participant's request and expense), in such currency in a
depository in the country in which Company is required to accept payment,
Participant's share of royalties due and payable to Participant with respect to
such sales. Deposit as aforesaid shall fulfill the obligations of Company as to
Record sales to which such royalty payments are applicable. If any law,
government ruling or any other restriction affects the amount of the payments
which Company's licensee can remit to Company, Company may deduct from
Participant's royalties an amount proportionate to the reduction in such
licensee's remittances to Company.

        2.03 All royalty statements rendered by Company to Participant shall be
binding upon Participant and not subject to any objection by Participant for any
reason unless a specific objection in writing, stating the basis thereof, is
given to Company within two and one-half (2 1/2) years from the date rendered
(provided a statement shall be deemed rendered when due for purposes of
computing time periods hereunder unless Participant notifies Company otherwise
in writing within 60 days from the date such statement was originally due).
Failure to make specific objection within said time period shall be deemed
approval of such statement.

        2.04 (a) Participant shall have the right at Participant's own expense
to audit Company's books and records only as the same pertain to sales or other
distributions of Phonograph Records hereunder on which royalties are payable to
Participant or other exploitations of Master Recordings hereunder on which
royalties are payable to Participant, in each case for the five (5) accounting
periods prior to Company's receipt of written notice from Participant of
Participant's desire to audit such books and records. Participant may make such
an examination for a particular statement only once, and only within two and
one-half (2) years after the date when Company renders (or is deemed to have
rendered under paragraph 2.03) said statement as set forth in paragraph 2.01
above. Such audit shall be conducted during Company's usual business hours, and
at Company's regular place of business (in the United States or at Company's
foreign offices, if applicable) where Company keeps the books and records to be
examined. Such audit shall be conducted by an independent certified public
accountant of Participant's own choice. If such accountant, or his or her firm,
has begun an
<PAGE>   15

examination of Company's books and records for another party or pursuant to an
agreement other than this agreement, the examination on Participant's behalf
shall not be undertaken until such other examination is concluded and any
applicable audit issues relating to such other examination have been resolved.
Notwithstanding the foregoing, if Company notifies Participant that the
accountant designated by Participant to conduct an examination of Company's
books and records is engaged in an examination on behalf of another party
("Other Examination") and Company does not elect to waive the foregoing
provisions requiring that Participant's representative not be engaged in any
Other Examination, then Participant may nevertheless have its examination
conducted by its designee, and the running of the time within which such
examination may be made shall be suspended until Participant's designee has
completed the Other Examination, subject to the following conditions:

                (i) Participant shall notify Company of its election to that
effect within fifteen (15) days after the date of Company's said notice to
Participant;

                (ii) Participant's designee shall proceed in a reasonably
continuous and expeditious manner to complete the Other Examination and render
the final report thereon to the client and Company; and

                (iii) Participant's examination shall not be commenced by its
designee before the delivery to Company of the final report on the Other
Examination, shall be commenced within thirty (30) days thereafter, and shall be
conducted in a reasonably continuous and expeditious manner.

            (b) Participant acknowledges that Company's books and records
contain confidential trade information. Neither a Participant nor his or her
representatives shall at any time communicate to others (except as required by
law or legal process, provided Participant shall undertake to give Company
notice prior to such disclosure and shall comply with any applicable protective
order or equivalent) or use on behalf of any other Person any facts or
information obtained as a result of such examination of Company's books and
records.

        2.05 Participant will not have the right to bring an action against
Company in connection with any royalty accounting or payments hereunder unless a
Participant commences the suit within thirty-six (36) months from the date such
statement of accounting for royalties or such payment was rendered (or deemed
rendered). If Participant commences suit on any controversy or claim concerning
royalty accountings rendered by Company under this agreement, the scope of the
proceeding will be limited to determination of the amount of the royalties due
for the accounting periods concerned, and the court will have no authority to
consider any other issues or award any relief except recovery of any royalties
found owing. A Participant's recovery of any such royalties will be the sole
remedy available to Participant by reason of any claim related to Company's
royalty accountings.

        2.06 Participant hereby authorizes and directs Company to withhold from
any monies due Participant from Company any part thereof required by the United
States Internal Revenue Service and/or any other governmental authority to be
withheld, and to pay such withheld amount on behalf of Participant to the United
States Internal Revenue Service and/or such other authority.

        2.07 Notwithstanding anything to the contrary expressed or implied
elsewhere herein, if, at any time during or after the Term, the performances
embodied on any Master Recording become property of the public domain in any
territory of the applicable territory such that any Person may reproduce and/or
exploit Records embodying such performances in such territory without license
from and/or payment to Company, then no monies whatsoever shall thereafter
<PAGE>   16

be accrued to Participant's account hereunder in connection with the
exploitation by Company or its subsidiaries, affiliates or licensees of such
performances in such territory on and after the date on which such performances
become property of the public domain in such territory.

        3 DEFINITIONS

        3.01 As used herein, the following terms shall have the meaning ascribed
to them below:

            (a) "Additional Deductions" shall mean twenty-five percent (25%) of
the Base Price for compact discs or for any other equivalent Record other than
as expressly provided for in this paragraph 3.01(a) (unless Company applies the
dollar-and-cents royalty provisions of paragraph 1.03(b) above). With respect to
the sale of Records by Electronic Transmission through a music distribution
source owned by a Non-Affiliated Party, there will be a further Additional
Deduction equal to the administration fee, if any, that is charged to Company by
such Non-Affiliated Party for the transaction concerned.

            (b) "Album" shall mean one or more LPs, sold in a single package.

            (c) "Armed Forces Post Exchanges" shall mean United States military
posts, ships' stores or other United States armed forces facilities, including,
without limitation, federal, state and/or local governments.

            (d) "Artwork" shall mean all artwork created for use on or in
connection with Phonograph Records or other derivatives of such Master
Recordings.

            (e) "Audio-Visual Devices" shall mean all forms of reproductions of
Audio-Visual Recordings now or hereafter known, manufactured or distributed
primarily for home and/or jukebox use and/or use on or in means of
transportation.

            (f) "Audio-Visual Recordings" shall mean every form of recording
wherein a visual image is embodied, reproduced, transmitted or otherwise
communicated, whether of a Qualifying Artist or otherwise, together with sound,
whether or not the interaction of a consumer is possible, or necessary, for the
visual images to be utilized or viewed.

            (g) "Base Price" shall mean:

                (i) The "Retail List Price", defined as Company's suggested
retail list price (or the equivalent price category) in the United States for
records sold in the United States, and, with respect to Records sold outside the
United States, an equivalent of or substitute for an actual or hypothetical
retail price ("Retail-related Base") as may be established by Company or its
licensee(s) in conformity with the general practice of the Record industry in
such country, or otherwise, provided that Company may but shall not be obligated
to utilize the price adopted by the local mechanical copyright collection agency
as the basis for the collection of mechanical copyright royalties.
Notwithstanding anything to the contrary expressed or implied in the preceding
sentence, it is understood and agreed that if a Retail-related Base cannot be
established in a particular country, the Base Price shall be that amount equal
to the lowest wholesale price payable by the largest category of Company's
customers in the normal course of business with respect to such Records sold for
distribution during the applicable semi-annual accounting period, multiplied by
one hundred twenty-six percent (126%), provided however, that if a published
price to dealers ("ppd") exists in the applicable country of sale then Company
may apply the ppd in lieu of the lowest wholesale price.
<PAGE>   17

                (ii) With respect to the sale of Master Recordings whereby a
consumer purchases the rights to use or otherwise exploit such Masters through
Electronic Transmission to any medium, now known or hereafter developed, that
has the capacity to store such Masters for use at a later time, the Base Price
shall be the actual price for such transaction paid by the largest category of
such consumers.

            (h) "Budget Record" shall mean a Record, whether or not previously
released, bearing a Base Price more than thirty-two percent (32%) lower than the
Base Price applicable to top-line Records in the same configuration (e.g.,
whether it is a tape cassette, compact disc, or vinyl Record and whether it is
an Album or a Single) released by Company or Company's licensees in the country
concerned. Notwithstanding the foregoing, if a particular Record is marketed and
priced by any licensee outside of the United States as a "budget record," and if
the accounting statement rendered by the licensee concerned provides for payment
of royalties at the "budget rate," then Company will be entitled to treat such
Records as Budget Records hereunder.

            (i) "Electronic Distribution" or "Electronic Transmission" shall
mean any transmission to the consumer, whether sound alone or sound coupled with
an image, in any form, analog or digital, now known or later developed
(including, but not limited to, direct broadcast satellite, point-to- point
satellite, cable system, broadcast station, point-of-sale manufacturing, etc.).

            (j) "Joint Recording" shall mean any Master Recording embodying a
Qualifying Artist's performances together with the performances of any other
Person in respect of which Company is obligated to pay royalties to a third
party.

            (k) "Master," "Recording" and "Master Recording" shall mean a sound
recording intended for reproduction in the form of Phonograph Records, or
otherwise.

            (l) "Mid-Priced Record" shall mean a Record, whether or not
previously released, bearing a Base Price at least fifteen percent (15%), but
not more than thirty-two percent (32%), lower than the Base Price applicable to
top-line Records in the same configuration (e.g., whether it is a tape cassette,
compact disc, or vinyl Record and whether it is an Album or a Single) released
by Company or Company's licensees in the country concerned. Notwithstanding the
foregoing, if a particular Record is marketed and priced by any licensee outside
of the United States as a "mid-price Record," and if the accounting statement
rendered by the licensee concerned provides for payment of royalties at the
"mid-price rate," then Company will be entitled to treat such Records as
Mid-Price Records hereunder.

            (m) "Multiple-Record Album" shall mean an Album of more than one LP.

            (n) "Net Sales" shall mean sales of Records, paid for, less returns
and credits. Net Sales shall specifically exclude the following:

                (i) (A) Records given away gratis or sold for fifty percent
(50%) or less of the Gross Price (as hereinafter defined); Records distributed
for publicity, advertising or promotional purposes to disc jockeys, radio or
television stations, publishers, distributors, dealers, consumers, or others and
Records sold as cutouts, surplus or for scrap.

                    (B) Free or bonus Records given away together with Records
sold for monetary consideration (sometimes referred to as "free goods"). The
number of Records automatically deemed not sold for royalty purposes under this
paragraph 3.01(n)(i)(B) shall not exceed Company's standard discount limitation,
which is for Singles and Long-Play
<PAGE>   18

Singles, 23.08% of the gross total distributed and, for Albums (including Albums
sold via Electronic Distribution), 15% of the gross total distributed. Albums
deemed not sold pursuant to the immediately preceding sentence are sometimes
referred to herein as "Standard Album Free Goods." (The calculations of Records
deemed not sold for royalty purposes pursuant to the terms of this paragraph
3.01(n)(i)(B) shall be applicable regardless of whether or not any such
discounts are, in fact, on the invoices or other type of billing document to
Company's customers.)

                    (C) Free or bonus Records given away pursuant to special
sales plans in addition to free goods.

                    (D) To the extent that Records hereunder are sold subject to
a sales plan, pursuant to paragraphs 3.01(n)(i)(B) or 3.01(n)(i)(C) above,
entailing a selling price for such Records reduced by a percentage discount from
Company's or its licensee's "Gross Price" (i.e., the selling price to
distributors before any discounts or free goods or bonus plans), the number of
such Records deemed to be Net Sales shall be determined by reducing the number
of Records actually sold by the percentage of discount granted applicable to
such sale.

                (ii) Without limitation of the generality of paragraph
3.01(n)(i) above, Company shall have the right to deduct from the number of
Records sold returns and credits of any nature, including without limitation:
(i) those on account of any return or exchange privilege; (ii) defective
merchandise; and (iii) errors in billing or shipment, provided that returns
shall be pro-rated between royalty-bearing and non-royalty-bearing Records in
the same proportion as actually shipped.

                (iii) Without limitation of the foregoing, royalties shall not
be payable with respect to distributions which are not Net Sales and the terms
"Net Sales" and/or "net royalty-bearing sales" shall not include the sales
described in paragraphs 3.01(n)(i) and 3.01(n)(ii) above and shall not include
any sales which are being held as royalty reserves.

            (o) "Non-Affiliated Parties" and "Non-Affiliated Third Parties"
shall mean Persons other than Persons as to which ARTISTdirect, Inc., Company or
any principal of Company now or hereafter directly or indirectly holds more than
a fifty percent (50%) interest or control (including joint ventures).

            (p) "Person" shall mean any individual, corporation, partnership,
association, or other entity, or the legal successors or representative of any
of the foregoing.

            (q) "Records" and "Phonograph Records" shall mean any device now or
hereafter known, on or by which sound may be recorded and reproduced, which is
manufactured or distributed primarily for home and/or consumer and/or jukebox
use and/or use on or in means of transportation, including Electronic
Transmission, but excluding "sight and sound" devices.

            (r) (i) "Royalty Base" shall mean the Base Price less all excise,
sales and similar taxes and less the applicable Additional Deductions, if any.

Company may at any time and from time to time change the method by which it
computes royalties in the United States from a retail basis to some other basis
(the "New Basis"), such as, without limitation, a wholesale basis. The New Basis
will replace the then-current Royalty Base and the royalty rates shall be
adjusted to the appropriate royalty which would be applied to the New Basis so
that the dollars-and-cents royalty amounts payable with respect to the top-line
product through Normal Retail Channels as of the date of such change would be
the same as
<PAGE>   19

that which was payable immediately prior to such New Basis; for sales other than
top-line product, for which there is a New Basis, the adjusted royalty rate
shall be reduced in the ratio of the royalty rate for such sales to the royalty
rates for sales of top-line product. If there are other adjustments made by
Company that would otherwise make the New Basis more favorable (a particular
example of which might be the distribution of smaller quantities of free goods
than theretofore distributed) then the benefits of such other adjustments will
be taken into consideration in adjusting the royalty rate.