Document:

<PAGE>
                                                                   EXHIBIT 10.33

                                                                  EXECUTION COPY

                          ARTISTdirect RECORDS, L.L.C.

                                      UNIT

                               PURCHASE AGREEMENT

                                October __, 2001

<PAGE>

                          ARTISTdirect RECORDS, L.L.C.

                                      UNIT

                               PURCHASE AGREEMENT

               THIS UNIT PURCHASE AGREEMENT (this "AGREEMENT") is made as of the
___ day of October, 2001, by and among ARTISTdirect Records, L.L.C., a Delaware
limited liability company (the "COMPANY"), ARTISTdirect Recordings, Inc., a
Delaware corporation ("ADR"), Radar Records Holdings, LLC, a Delaware limited
liability company ("FIELDCO" and, together with ADR, the "FOUNDERS" and each a
"FOUNDER"), BMG Music, a New York general partnership (the "PURCHASER" or
"BMG"), and ARTISTdirect, Inc., a Delaware corporation ("ADI"), Frederick W.
Field ("FIELD").

               THE PARTIES HEREBY AGREE AS FOLLOWS:

        1.     PURCHASE AND SALE OF STOCK.

               1.1    Sale and Issuance of Units. Subject to the terms and
conditions of this Agreement, the Purchaser agrees to purchase at the Closing,
and ADR agrees to sell, assign and transfer to the Purchaser, at the Closing,
that number of the Company's Membership Units (collectively, the "UNITS") set
forth opposite the Purchaser's name on Exhibit A hereto at a purchase price of
$0.50 per Unit (the "PURCHASE PRICE") and for an aggregate purchase price of
$250,000.

               1.2    Closing; Delivery. The purchase and sale of the Units will
take place at the offices of Brown Raysman Millstein Felder & Steiner LLP, 900
Third Avenue, New York, New York, 10022, at 10:00 A.M., on November 16, 2001, or
at such other time and place as the Company and ADR mutually agree upon orally
or in writing (which time and place are designated as the "CLOSING"). At the
Closing, and in order to give effect to the sale, assignment and transfer
contemplated hereby, Purchaser will pay the Purchase Price to ADR by wire
transfer of immediately available funds and ADR will cause the Company, and the
Company hereby agrees, to (a) record the transfer and sale of the Units from ADR
to the Purchaser in its books and records, by, among other actions, adding the
Purchaser to the Company's Schedule of Members attached to the Company's
Operating Agreement (defined below), and (b) admit the Purchaser as a Member of
the Company in accordance with the terms and conditions set forth in the
Company's Operating Agreement, dated as of May 31, 2001 (the "OPERATING
AGREEMENT"), by and among ADR, FieldCo and the Company, as amended as
contemplated hereby and otherwise from time to time.

               1.3    Advance. At Closing, the Purchaser will make an Advance
(as such term is defined in the Loan Agreement and the Operating Agreement) to
the Company in the amount of $4,750,000, by wire transfer of immediately
available funds, pursuant to the terms of the Loan Agreement (as defined below),
as amended as contemplated hereby and otherwise from time to time.

        2.     REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY. Each of the

                                       1
<PAGE>

Company, ADR and ADI hereby, jointly and severally, represents and warrants that
as of the date of this Agreement:

               2.1    Organization, Good Standing and Qualification. The Company
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite limited
liability company power and authority to (i) own and operate its property and
assets and to carry on its business as now conducted and as presently proposed
to be conducted, and (ii) to execute, deliver and perform its obligations under
this Agreement and the other documents, to be executed and delivered upon the
date hereof or at the Closing, as the case may be, in connection with the
transactions contemplated hereby (collectively, the "TRANSACTION DOCUMENTS"), to
which it is a party, which documents and agreements include, without limitation,
the Amendment to the Operating Agreement (as hereinafter defined), the Amendment
to the Loan Agreement (as hereinafter defined) and the BMG Note (as hereinafter
defined). The Company is duly qualified and is authorized to transact business
and is in good standing as a foreign limited liability company in each
jurisdiction in which the failure to so qualify could reasonably be expected to
have, either in a single case or in all cases taken together, a material adverse
effect on its business, results of operations or properties.

               2.2    Capitalization. Exhibit B accurately sets forth the total
number of Units of the Company issued and outstanding as of the Closing and
accurately sets forth the ownership of all such issued and outstanding Units. At
Closing, all of the issued and outstanding Units will have been duly authorized,
validly issued, fully-paid and nonassessable and issued in compliance with all
applicable federal and state securities laws. Except as set forth in the
Operating Agreement, there are not outstanding any options, warrants, rights
(including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements orally or in writing for the purchase or
acquisition from or by the Company of any Units.

               2.3    Subsidiaries. The Company does not own or control,
directly or indirectly, any interest in any other corporation, association,
partnership, limited liability company or other business entity. The Company is
not a participant in any joint venture, partnership or similar arrangement.

               2.4    Authorization. Each of the Transaction Documents will,
upon execution and delivery thereof by a duly authorized officer of the Company,
be duly executed and delivered by the Company. All requisite action on the part
of each of the Company, its officers, directors, stockholders or Members
necessary for the authorization, execution and delivery of the Transaction
Documents, to which it is a party, and the performance of all obligations of the
Company, hereunder and thereunder, has been taken or will be taken prior to the
Closing, and the Transaction Documents, when executed and delivered by the
Company, will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.

               2.5    Securities. Each of the Units being sold, assigned and
transferred by ADR to the Purchaser hereunder has been duly authorized and
validly issued, and is fully-paid and nonassessable and is owned of record and
beneficially by ADR.

                                       2
<PAGE>

               2.6    Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company's, ADI's or ADR's knowledge, threatened
against the Company or that questions the validity of the Transaction Documents,
or the right of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby and thereby. The Company is not a party to, or
subject to the provisions of, any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation that the Company intends to initiate.

               2.7    Compliance with Other Instruments and Laws. The Company is
not in violation or default of (a) any statute, rule or regulation that could
reasonably be expected to have, either in one case or in all cases taken
together, a materially adverse effect on the Company's business, results of
operations or properties, if decided adversely to the Company, (b) any provision
of the Operating Agreement, or of any note, indenture, mortgage, lease,
agreement, contract, purchase order or other instrument, document or agreement
to which it is a party or by which it is bound, including the Loan and Security
Agreement, dated as of May 31, 2001 (the "LOAN AGREEMENT"), by and between ADR
and the Company, and agreed to and accepted by FieldCo, as the same may have
been amended from time to time, or (c) any order, writ, injunction or decree of
any court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, that
specifically names the Company. There exists no condition, event or act which
after notice, lapse of time, or both, would constitute a default by the Company
under any of the foregoing. To the best of the Company's, ADR's or ADI's
knowledge, no third party is in default under any agreement, contract or other
instrument, document, or agreement to which the Company is a party.

               2.8    Effect of Transactions. The execution, delivery and
performance of the Transaction Documents, and compliance with the provisions
hereof and thereof by the Company, does not and will not, with or without the
passage of time or the giving of notice or both, (a) violate any provision of
law, statute, rule or regulation or any ruling, writ, injunction, order,
judgment or decree of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign to which the Company is subject or by which it is affected,
or (b) conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or, except as contemplated by the
Loan Agreement, result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any note,
indenture, mortgage, lease, agreement, contract, purchase order or other
instrument, document or agreement (including, without limitation, the Operating
Agreement, as amended on the date hereof) to which the Company is a party.

               2.9    Contracts. Exhibit C sets forth each "artist agreement"
and any other material agreement (whether written or oral; it being understood
and agreed that, in the case of any such oral agreement, such Exhibit C, sets
forth and true and complete description of the material terms thereof) to which
the Company is a party. True and complete copies of each agreement set forth on
Exhibit C, as the same as may have been amended to date, have been delivered to
the Purchaser prior to the date hereof. Each material agreement, including all
"artist agreements", described above is a legal, valid and binding contract, in
full force and effect, and the Company is not in material default and has not
materially failed to perform any obligation under any such agreement and, to the
Company's, ADI's and ADR's knowledge, no other party

                                       3
<PAGE>

to such agreements are in material default or have materially failed to perform
any obligation under any such agreement.

               2.10   Advances. As of the date hereof, ADR has made to the
Company in cash in immediately available funds $4,000,000 in Advances of which
$0, of principal or interest, have been repaid by the Company as of the date
hereof and, accordingly, all of which remain outstanding as principal under the
Loan Agreement.

        3.     REPRESENTATIONS AND WARRANTIES OF ADI AND ADR. Each of ADI and
ADR hereby, jointly and severally, represents and warrants that as of the date
of this Agreement:

               3.1    Organization, Good Standing and Qualification. ADR is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. ADR has all requisite corporate power and authority to
(i) own and operate its property and assets and to carry on its business as now
conducted and as presently proposed to be conducted, and (ii) to execute,
deliver and perform its obligations under the Transaction Documents to which it
is a party, to be executed and delivered upon the date hereof or at the Closing,
as the case may be. ADR is duly qualified and is authorized to transact business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to so qualify could reasonably be expected to have, either in one
case or in all cases taken together, a material adverse effect on its business
or properties.

               3.2    Authorization. Each of the Transaction Documents, to which
ADR is a party, will, upon the execution and delivery thereof by a duly
authorized officer of ADR, be duly executed and delivered by ADR. All requisite
action on the part of each of ADR and its officers, directors or stockholders
necessary for the authorization, execution and delivery of each Transaction
Document to which it is a party, and the performance of all obligations of ADR
hereunder and thereunder, has been taken or will be taken prior to the Closing,
and each Transaction Document when executed and delivered by ADR, if it is a
party thereto, will constitute valid and legally binding obligations of ADR
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.

               3.3    Title. ADR has good, clear and marketable title to the
Units being sold hereunder and, other than pursuant to the terms of this
Agreement, has not transferred, conveyed or assigned any interest or right of
participation of any kind in any of the Units owned by it. The Units being sold,
assigned and transferred by ADR to the Purchaser hereunder, when delivered in
accordance with the terms of this Agreement, will be, and all other Units owned
by ADR as shown on Exhibit B are, free of all liens, claims, options security
interests and other encumbrances and will be free of all restrictions on
transfer other than restrictions on transfer under the Operating Agreement and
under applicable state and federal securities laws.

               3.4    Litigation. There is no action, suit, proceeding or
investigation pending or, to ADR's or ADI's knowledge, threatened against ADR,
or that questions the validity of any Transaction Document, or the right of ADR
to enter into such agreements, or to consummate the transactions contemplated
hereby or thereby. ADR is not a party to, nor subject to the provisions of, any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation that ADR
intends to initiate.

                                       4
<PAGE>

               3.5    Compliance with Other Instruments and Laws. ADR is not in
violation or default of (a) any statute, law, rule or regulation that could
reasonably be expected to have, either in one case or in all cases taken
together, a materially adverse effect on ADR's business, results of operations
or properties if decided adversely to ADR, (b) any provision of its certificate
of incorporation or bylaws, or of any note, indenture, mortgage, lease,
agreement, contract, purchase order or other instrument, document or agreement
to which it is a party or by which it is bound, including the Loan Agreement or
(c) any order, writ, injunction or decree of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that specifically names ADR. There exists
no condition, event or act which after notice, lapse of time, or both, would
constitute a default by ADR under any of the foregoing. To the best of the ADR's
and ADI's knowledge, no third party is in default under any agreement, contract
or other instrument, document, or agreement to which ADR is a party.

               3.6    Effect of Transactions. The execution, delivery and
performance of the Transaction Documents, sale of the Units, and compliance with
the provisions hereof and thereof by ADR do not and will not, with or without
the passage of time or the giving of notice or both, (a) violate any provision
of law, statute, rule or regulation or any ruling, writ, injunction, order,
judgment or decree of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign to which ADR is subject or by which it is affected, or (b)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of ADR under its charter or by-laws or under any note, indenture,
mortgage, lease, agreement, contract, purchase order or other instrument,
document or agreement (including, without limitation, the Operating Agreement,
as amended on the date hereof) to which ADR is a party.

               3.7    Operating Agreement Representations. All of the
representations and warranties made by ADI or ADR to the other Members of the
Company under the Operating Agreement are true and correct as of the date
hereof, are hereby made by ADR and ADI to BMG and, accordingly, are incorporated
by reference for purposes of this Section 3.7.

               3.8    Investments. ADR owns no stock, shares, partnership
interests, membership interests participations in any profit-sharing agreement
or arrangement, options, warrants, bonds, debentures, notes or other evidences
of indebtedness, or any other interests, or any right to subscribe to, purchase
or acquire any of the foregoing in any entity other than the Company, and ADR is
not a participant in any joint venture or similar common enterprise with any
other entity.

               3.9    Ownership of ADR. ADI owns, beneficially and of record,
all of the outstanding capital stock of ADR.

        4.     REPRESENTATIONS AND WARRANTIES OF FIELDCO. FieldCo hereby
represents and warrants that as of the date of this Agreement:

               4.1    Organization, Good Standing and Qualification. FieldCo is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. FieldCo has all requisite
limited liability company power and authority to (i) own and operate its
property and assets and to carry on its business as now conducted and as
presently proposed to be conducted, and (ii) to execute, deliver and perform its
obligations under

                                       5
<PAGE>

the Transaction Documents, to which it is a party, to be executed and delivered
upon the date hereof or at the Closing, as the case may be. FieldCo is duly
qualified and is authorized to transact business and is in good standing as a
foreign limited liability company in each jurisdiction in which the failure to
so qualify could reasonably be expected to have, either in one case or in all
cases taken together, a material adverse effect on its business or properties.

               4.2    Authorization. Each of the Transaction Documents to which
FieldCo is a party, upon the execution and delivery thereof by a duly authorized
officer of FieldCo, will be duly executed and delivered by FieldCo. All
requisite action on the part of each of the FieldCo, and its officers, directors
or members necessary for the authorization, execution and delivery of each
Transaction Document to which it is a party, and the performance of all
obligations of FieldCo hereunder and thereunder, has been taken or will be taken
prior to the Closing, and each Transaction Document when executed and delivered
by FieldCo, if a party thereto, will constitute valid and legally binding
obligations of FieldCo enforceable in accordance with their respective terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.

               4.3    Litigation. There is no action, suit, proceeding or
investigation pending or, to FieldCo's knowledge, threatened against FieldCo or
that questions the validity of any Transaction Document, or the right of FieldCo
to enter into such agreements, or to consummate the transactions contemplated
hereby or thereby. FieldCo is not a party to, or subject to the provisions of,
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or investigation
that FieldCo intends to initiate.

               4.4    Compliance with Other Instruments and Laws. FieldCo is not
in violation or default of (a) any statute, rule or regulation that could
reasonably be expected to have, either in one case or in all cases taken
together, a materially adverse effect on ADR's business, results of operation or
properties if decided adversely to FieldCo, (b) any provision of its operating
agreement, or of any note, indenture, mortgage, lease, agreement, contract,
purchase order or other instrument, document or agreement to which it is a party
or by which it is bound, or (c) any order, writ, injunction or decree of any
court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, that
specifically names FieldCo that could reasonably be expected to have a
materially adverse effect on the FieldCo's business, results of operations or
properties if decided adversely to FieldCo. There exists no condition, event or
act which after notice, lapse of time, or both, would constitute a default by
FieldCo under any of the foregoing. To the best of the FieldCo's knowledge, no
third party is in default under any agreement, contract or other instrument,
document, or agreement to which FieldCo is a party.

               4.5    Effect of Transactions. The execution, delivery and
performance of the Transaction Documents, to which it is a party, and the
compliance with the provisions hereof and thereof by FieldCo, do not and will
not, with or without the passage of time or the giving of notice or both, (a)
violate any provision of law, statute, rule or regulation or any ruling, writ,
injunction, order, judgment or decree of any court or any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign to which FieldCo is subject or by which it
is affected or (b) conflict with or result in any

                                       6
<PAGE>

breach of any of the terms, conditions or provisions of, or constitute a default
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of FieldCo under its operating
agreement or under any note, indenture, mortgage, lease, agreement, contract,
purchase order or other instrument, document or agreement to which FieldCo is a
party.

               4.6    Operating Agreement Representations. All of the
representations and warranties made by FieldCo to the other Members of the
Company under the Operating Agreement are true and correct as of the date hereof
and are hereby made by FieldCo to BMG and, accordingly, are incorporated by
reference for purposes of this Section 4.6; provided, however, that Field has
caused FieldCo to grant certain "phantom" interests in FieldCo to employees of,
and one recording artist under contract with, the Company (it being understood
and agreed that, wherever in this Agreement or the Schedules hereto reference is
made to a transfer or grant of so-called "phantom" interests in net proceeds of
or from a sale, of equity or assets, or change of control of FieldCo or the
Company or proceeds of or from the sale of Units of FieldCo or the Company, such
reference will mean that the transferor or grantor of such phantom interests has
retained all record ownership of, and voting rights under, the securities in
respect of which a transfer or grant of phantom interests has been made and that
the transferee(s) thereof are entitled solely to look to the transferor or
grantor of such phantom interests insofar as the enforcement of rights to such
interests are concerned and are in no way entitled to enforce any right against
the issuer of such securities or to enjoy any rights as a security holder of
such securities).

               4.7    Investments. FieldCo owns no stock, shares, partnership
interests, membership interests participations in any profit-sharing agreement
or arrangement, options, warrants, bonds, debentures, notes or other evidences
of indebtedness, or any other interests, or any right to subscribe to, purchase
or acquire any of the foregoing in any entity other than the Company, and
FieldCo is not a participant in any joint venture or similar common enterprise
with any other entity.

               4.8    Ownership of FieldCo. Field owns, directly or indirectly,
all of the outstanding membership interests of FieldCo.

        5.     REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants that as of the date of this Agreement:

               5.1    Organization, Good Standing and Qualification. The
Purchaser is a general partnership, validly existing and in good standing under
the laws of the State of New York. The Purchaser has all requisite power and
authority to (i) own and operate its property and assets and to carry on its
business as now conducted and as presently proposed to be conducted and (ii) to
execute, deliver and perform its obligations under the Transaction Documents to
which it is a party, to be executed and delivered upon the date hereof or at the
Closing, as the case may be. The Purchaser is duly qualified and is authorized
to transact business and is in good standing as a foreign partnership in each
jurisdiction in which the failure to so qualify could reasonably be expected to
have, either in one case or in all cases taken together, a material adverse
effect on its business or properties.

               5.2    Authorization. Each of the Transaction Documents, upon the
execution and delivery thereof by a duly authorized officer of the Purchaser,
will be duly executed and delivered by the Purchaser. All requisite action on
the part of each of the Purchaser, and its

                                       7
<PAGE>

officers, directors or partners necessary for the authorization, execution and
delivery of each Transaction Document to which it is a party and the performance
of all obligations of the Purchaser hereunder and thereunder has been taken or
will be taken prior to Closing, and each Transaction Document when executed and
delivered by the Purchaser will constitute valid and legally binding obligations
of the Purchaser enforceable in accordance with their respective terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

               5.3    Restricted Securities. The Purchaser is acquiring the
Units hereunder for its own account as an investment and without any intent to
distribute such Units in violation of applicable securities laws. BMG hereby
acknowledges that the Units it is purchasing have not been registered under the
Securities Act of 1933, as amended (the "ACT"), or any state securities laws,
and may not be transferred or resold by BMG without registration in accordance
with the Act or the availability of an exemption from such requirements.

               5.4    Effect of Transactions. The execution, delivery and
performance of the Transaction Documents and compliance with the provisions
hereof and thereof by the Purchaser, do not and will not, with or without the
passage of time or the giving of notice or both, (a) violate any provision of
law, statute, rule or regulation or any ruling, writ, injunction, order,
judgment or decree of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign to which the Purchaser is subject or by which it is
affected, or (b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
respective properties or assets of the Purchaser under its partnership agreement
or under any note, indenture, mortgage, lease, agreement, contract, purchase
order or other instrument, document or agreement to which the Purchaser is a
party.

        6.     [INTENTIONALLY OMITTED].

        7.     CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING. The obligations
of the Purchaser in Section 1 hereof are subject to the fulfillment on or before
the Closing of each of the following conditions, the waiver of which will not be
effective against the Purchaser if it does not consent in writing thereto:

               7.1    Representations and Warranties. The representations and
warranties of the Company, ADI, ADR and FieldCo contained in Sections 2, 3 and 4
are true and correct in all material respects on and as of the Closing (and
after giving effect to the Amendment to the Operating Agreement and the
Amendment to the Loan Agreement) with the same effect as though such
representations and warranties had been made on and as of such date. It is
hereby agreed and acknowledged that (1) ADR's funding Advances pursuant to the
terms of the Loan Agreement, (2) the Company's executing additional "artist's
agreements", on terms not materially more favorable to the artists than those
delivered as of the date hereof, and (3) the Company's executing additional
employment agreements, which agreements are entered into in the ordinary course
of business, are anticipated events, the mere occurrence and scheduling of which
will not be deemed to be a failure to satisfy the condition set forth in this
Section 7.1.

               7.2    Performance. Each of the Company, ADI, ADR and FieldCo
have

                                       8
<PAGE>

performed and complied with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing.

               7.3    Compliance Certificate. A duly authorized officer of the
Company, ADI and ADR will deliver to the Purchaser at the Closing a certificate
stating that the conditions specified in Sections 7.1 and 7.2 have been
fulfilled and stating that there has been no material adverse change in the
business, affairs, operations, properties, assets or condition of the Company
since the date hereof.

               7.4    Proceedings and Document. All corporate, limited liability
company and other proceedings, as the case may be, in connection with the
transactions contemplated at the Closing and all documents incident thereto will
be reasonably satisfactory in form and substance to Purchaser's counsel, and
they will have received all such counterpart original and certified or other
copies of such documents as they may reasonably request.

               7.5    Opinion of Company Counsel. The Purchaser will have
received from Kramer Levin Naftalis & Frankel LLP, special counsel for the
Company, an opinion, dated as of the Closing, in the form attached hereto as
Exhibit F.

               7.6    Amendment to the Operating Agreement. The Company, the
Founders and the Purchaser will have entered into an amendment to the Operating
Agreement in form and substance reasonably satisfactory to each of them and
their respective counsel (the "AMENDMENT TO THE OPERATING AGREEMENT"), which
Amendment to the Operating Agreement, it is hereby agreed, will incorporate the
terms set forth on Exhibit D hereto.

               7.7    Amendment to the Loan and Security Agreement. The Company,
ADR and the Purchaser will have entered into the Amendment to the Loan and
Security Agreement in form and substance reasonably satisfactory to each of them
and their respective counsel (the "AMENDMENT TO THE LOAN AGREEMENT"), which
Amendment to the Loan and Security Agreement, it is hereby agreed, will
incorporate the terms set forth on Exhibit E hereto.

               7.8    Note. The Company will have issued and delivered to the
Purchaser a promissory note (the "BMG NOTE"), evidencing the Advance made to it
by the Purchaser in accordance with the terms of the Loan Agreement, as amended
by the Amendment to the Loan Agreement and otherwise from time to time.

        8.     CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of ADR to the Purchaser under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Purchaser, unless otherwise waived:

               8.1    Representations and Warranties. The representations and
warranties of the Purchaser contained in Section 5 are true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.

               8.2    Amendment to the Operating Agreement. The Company, the
Founders and the Purchaser will have entered into the Amendment to the Operating
Agreement in form and substance reasonably satisfactory to each of them and
their respective counsel, which Amendment to the Operating Agreement, it is
hereby agreed, will incorporate the terms set forth on Exhibit D hereto.

               8.3    Amendment to the Loan and Security Agreement. The Company,
ADR

                                       9
<PAGE>

and the Purchaser will have entered into the Amendment to the Loan and Security
Agreement in form and substance reasonably satisfactory to each of them, which
Amendment to the Loan and Security Agreement, it is hereby agreed, will
incorporate the terms set forth on Exhibit E hereto.

        9.     COVENANTS.

               9.1    Use of Proceeds. ADR agrees that it will immediately upon
receipt transfer to the Company an amount equal in the aggregate to the Purchase
Price, or direct the Purchaser to pay the aggregate Purchase Price directly to
the Company. Each of the Company and ADR hereby agrees that the amount equal in
the aggregate to the Purchase Price that is paid by ADR to the Company or paid
directly at ADR's direction to the Company by the Purchaser, will be, and for
all purposes will be deemed to be, an Advance by ADR under the Loan Agreement
and the Operating Agreement.

               9.2    Reasonable Efforts. The parties hereto hereby agree to use
all reasonable efforts to satisfy the terms and conditions set forth herein
prior to Closing and will negotiate in good faith all documents reasonably
required prior to Closing, including, without limitation, the Amendment to the
Operating Agreement, the Amendment to the Loan Agreement and the BMG Note.

               9.3    Ownership Covenants.

                      (a)    ADI hereby agrees that, absent the prior written
consent of the Purchaser, which consents may be withheld for any reason
whatsoever, for so long as (1) the Purchaser, or any of its Permitted
Transferees, has a direct or indirect beneficial interest in the Company and (2)
ADR or any of its Permitted Transferees remains a Member of the Company, (i) ADI
and its Permitted Transferees will own (directly or indirectly) 100% of the
outstanding equity interests of ADR or its permitted successors in interest in
the Company, and (ii) ADI and its Permitted Transferees will not transfer any of
its voting rights, consent rights, rights of approval and like rights and powers
with respect to ADR or its permitted successors in interest in the Company,
except to a Permitted Transferee, provided, however, that ADI may transfer up to
twenty percent (20%) of its shares in ADR, or beneficial or other derivative
interests in up to twenty percent (20%) of its shares in ADR to such entities
that provide financing, services or support to the Company, provided, further,
that at no time will ADI own (directly or indirectly) less than 80% of ADR and
its successors in interest in the Company; and

                      (b)    Field hereby agrees that, absent the prior written
consent of the Purchaser, which consents may be withheld for any reason
whatsoever, for so long as (1) the Purchaser, or any of its Permitted
Transferees, has a direct or indirect beneficial interest in the Company, (2)
FieldCo or any of its Permitted Transferees remains a Member of the Company, (i)
Field or his Permitted Transferee will own (directly or indirectly) 100% of the
outstanding equity interests of FieldCo or its permitted successor in interest
in the Company, and (ii) Field and his Permitted Transferees will not transfer
any of his or their voting rights, consent rights, rights of approval and like
rights and powers with respect to FieldCo or its permitted successor in interest
in the Company (or beneficial or other derivative interests in such interests of
FieldCo or its permitted successor in interest in the Company), provided,
however, that Field may transfer up to twenty percent (20%) of his interests in
FieldCo or its permitted successor in interest in the Company to employees of
the Company, provided, further that at no time will Field and his Permitted
Transferees own (directly or indirectly) less than 80% of FieldCo and its
successors in interest. Notwithstanding, anything set forth above, FieldCo may
be converted into a corporation

                                       10
<PAGE>

at any time.

        10.    MISCELLANEOUS.

               10.1   Survival of Warranties. The representations and warranties
of the parties made in Sections 2, 3, 4 and 5 will survive the Closing for a
period of two years from such Closing, except that the representations made in
Sections 2.1, 2.2, 2.4, 3.1, 3.2, 3.3, 4.1, 4.2, 5.1 and 5.2 will survive
indefinitely. The covenants set forth herein will survive until a date 30 days
after the expiration of the applicable statute of limitations for the breach of
such covenants (or extensions or waivers thereof).

               10.2   Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement will inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any Units). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

               10.3   Governing Law. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto will be governed by and construed under the laws of the State of New York
without reference to the choice of law provisions thereof.

               10.4   Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

               10.5   Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

               10.6   Notices. Unless otherwise provided, any notice required or
permitted under this Agreement will be given in writing and will be deemed
effectively given (i) upon personal delivery to the party to be notified, (ii)
five days after having been sent by registered or certified mail, return receipt
requested, postage prepaid or (iii) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications will be sent to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.

               10.7   Fees and Expenses. Each party will pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement.

               10.8   Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the parties hereto.

               10.9   Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision will be
excluded from this Agreement and the balance of the Agreement will be
interpreted as if such provision were so excluded and will be enforceable in
accordance with its terms.

                                       11
<PAGE>

               10.10  Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties pertaining
to the subject matter hereof.

               10.11  Waiver of Jury Trial. The parties hereto hereby
irrevocably waive all right to trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement or any related
agreement, instrument or document.

               10.12  Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, will impair any such
right, power or remedy of such non-breaching or non-defaulting party nor will it
be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
will any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and will
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, are cumulative and not alternative.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

               IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.

                                 ARTISTdirect RECORDS, L.L.C.

                                    By ARTISTdirect Recordings, Inc., a Member

                                       By: ____________________________
                                          Name:
                                          Title:

                                    By Radar Records Holdings, LLC, a Member

                                       By: ____________________________
                                          Name: Frederick W. Field
                                          Title:

                                 Address: ARTISTdirect Recordings, Inc.
                                 5670 Wilshire Boulevard
                                 Suite 200
                                 Los Angeles, California 90036
                                 Facsimile: (323) 634-4299
                                 Attn: Chief Executive Officer

                                 Address: Radar Records Holdings, LLC
                                 10900 Wilshire Boulevard, 6th Floor
                                 Los Angeles, California 90024
                                 Facsimile: (310) 208-1197
                                 Attn: Frederick W. Field

               And:              Address: c/o Bertelsmann Inc.
                                 1540 Broadway
                                 New York, New York 10036
                                 Facsimile: (212) 782-1103
                                 Attn: Senior Vice President and General Counsel

               With copies to:   Address:  Legal & Business Affairs Department
                                 ARTISTdirect Recordings, Inc.
                                 5670 Wilshire Boulevard
                                 Suite 200
                                 Los Angeles, California 90036
                                 Facsimile: (323) 634-4299
                                 Attn: Angie Rho

                                       S-1
<PAGE>

                                 Lenard, Brisbin & Klotz LLP
                                 1801 Century Park West, 6th Floor
                                 Los Angeles, California 90067
                                 Facsimile: (310) 552-0740
                                 Attn: Allen D. Lenard, Esq.

                                 Ziffren Brittenham Branca & Fischer LLP
                                 1801 Century Park West, 6th Floor
                                 Los Angeles, California 90067
                                 Facsimile: (310) 553-7068
                                 Attn: Gary S. Stiffelman, Esq.

               And:              Brown Raysman Millstein Felder & Steiner LLP
                                 900 Third Avenue
                                 New York, New York 10022
                                 Facsimile: (212) 895-2900
                                 Attn: Charles D. Uniman, Esq.

                                 BMG MUSIC
                                 By: Bertelsmann Music Group, Inc.,
                                     its general partner

                                    By: ____________________________
                                       Name:
                                       Title:

                                 Address: c/o Bertelsmann, Inc.
                                 1540 Broadway
                                 New York, NY  10036
                                 Facsimile: (212) 782-1103
                                 Attn: Senior Vice President and General Counsel

               With a copy to:   Brown Raysman Millstein Felder & Steiner LLP
                                 900 Third Avenue
                                 New York, New York  10022
                                 Facsimile: (212) 895-2900
                                 Attn: Charles D. Uniman, Esq.

                                       S-2
<PAGE>

                                 ARTISTDIRECT RECORDINGS, INC.

                                    By: ____________________________
                                       Name:
                                       Title:

                                 Address: ARTISTdirect Recordings, Inc.
                                 5670 Wilshire Boulevard
                                 Suite 200
                                 Los Angeles, California 90036
                                 Facsimile: (323) 634-4299
                                 Attn: Chief Executive Officer

               With copies to:   Address: Legal & Business Affairs Department
                                 ARTISTdirect Recordings, Inc.
                                 5670 Wilshire Boulevard
                                 Suite 200
                                 Los Angeles, California 90036
                                 Facsimile: (323) 634-4299
                                 Attn: Angie Rho

               and:              Lenard, Brisbin & Klotz LLP
                                 1801 Century Park West, 6th Floor
                                 Los Angeles, California 90067
                                 Facsimile: (310) 552-0740
                                 Attn: Allen D. Lenard, Esq.

                                    RADAR RECORDS HOLDINGS, LLC

                                       By: ____________________________
                                          Name: Frederick W. Field
                                          Title:

                                 Address: Radar Records Holdings, LLC
                                 10900 Wilshire Boulevard, 6th Floor
                                 Los Angeles, California 90024
                                 Facsimile: (310) 208-1197
                                 Attn: Frederick W. Field

               With a copy to:   Ziffren Brittenham Branca & Fischer LLP
                                 1801 Century Park West, 6th Floor
                                 Los Angeles, California 90067
                                 Facsimile: (310) 553-7068
                                 Attn: Gary S. Stiffelman, Esq.

                                       S-3
<PAGE>

                                 BMG MUSIC
                                 By: Bertelsmann Music Group, Inc.,
                                     its general partner

                                    By: ____________________________
                                       Name:
                                       Title:

                                 Address: c/o Bertelsmann Inc.
                                 1540 Broadway
                                 New York, NY  10036
                                 Facsimile: (212) 782-1103
                                 Attn: Senior Vice President and General Counsel

               With a copy to:   Brown Raysman Millstein Felder & Steiner LLP
                                 900 Third Avenue
                                 New York, New York  10022
                                 Facsimile: (212) 895-2900
                                 Attn: Charles D. Uniman, Esq.

                                 ARTISTdirect, Inc.

                                       By: ____________________________
                                          Name:
                                          Title:

                                 Address: ARTISTdirect Recordings, Inc.
                                 5670 Wilshire Boulevard
                                 Suite 200
                                 Los Angeles, California 90036
                                 Facsimile: (323) 634-4299
                                 Attn: Chief Executive Officer

               With copies to:   Address: Legal & Business Affairs Department
                                 ARTISTdirect Recordings, Inc.
                                 5670 Wilshire Boulevard
                                 Suite 200
                                 Los Angeles, California 90036
                                 Facsimile: (323) 634-4299
                                 Attn: Angie Rho

                                 Lenard, Brisbin & Klotz LLP
                                 1801 Century Park West, 6th Floor
                                 Los Angeles, California 90067
                                 Facsimile: (310) 552-0740
                                 Attn: Allen D. Lenard, Esq.

                                       S-4
<PAGE>

                                 With respect to the covenants set forth in
                                 Section 9.3(b) only,

                                 ______________________________________
                                    Name: Frederick W. Field

                                 Address:  c/o Radar Records Holdings, LLC
                                 10900 Wilshire Boulevard, 6th Floor
                                 Los Angeles, California 90024
                                 Facsimile: (310) 208-1197
                                 Attn: Frederick W. Field

               With a copy to:   Ziffren Brittenham Branca & Fischer LLP
                                 1801 Century Park West, 6th Floor
                                 Los Angeles, California 90067
                                 Facsimile: (310) 553-7068
                                 Attn: Gary S. Stiffelman, Esq.

                                       S-5
<PAGE>

                                    EXHIBIT A

                                UNITS TO BE SOLD

<TABLE>
<CAPTION>
Purchaser                           Number of Units              Percentage
---------                           ---------------              ----------
<S>                                 <C>                          <C>
BMG Music                               500,000                      5%
</TABLE>

                                       1
<PAGE>

                                    EXHIBIT B

                            CAPITALIZATION AT CLOSING

<TABLE>
<CAPTION>
Purchaser                           Number of Units              Percentage
---------                           ---------------              ----------
<S>                                 <C>                          <C>
Radar Records Holdings, LLC               5,000,000                     50%

ARTISTdirect Recordings, Inc.             4,500,000                     45%

BMG Music                                   500,000                      5%
</TABLE>

                                       1
<PAGE>

                                    EXHIBIT C

                               MATERIAL CONTRACTS

1.    Certificate of Formation of the Company dated May 29, 2001.

2.    Operating Agreement of the Company among the Company, ADR and FieldCo
      dated May 31, 2001.

3.    Loan and Security Agreement dated May 31, 2001.

4.    Letter Agreement among ADI, ADR, the Company, FieldCo and Field dated
      May 31, 2001.

5.    Employment Agreement between the Company and Field dated May 31, 2001.

6.    A&R Consulting and First Look Agreement between the Company and John Reese
      dated as of June 1, 2001.

7.    Agreement between the Company and Tuff Break Entertainment, LLC f/s/o
      Brigade dated June 5, 2001.

8.    Employment Agreement between the Company and Gary Harris dated as of
      July 1, 2001.

9.    Contingent Compensation Agreement between FieldCo and Garry Harris dated
      as of July 1, 2001.

10.   Employment Agreement between the Company and Patrick McDowell dated as of
      July 1, 2001.

11.   Employment Agreement between the Company and Ken Friedman dated as of
      July 1, 2001.

12.   $50,000,000 Revolving Credit Note by the Company in Favor of ADR dated
      July 13, 2001.

13.   Waiver by FieldCo in respect of ADR's initial Advance, dated as of
      July 13, 2001.

14.   Employment Agreement between the Company and Sean Carasov dated as of
      July 30, 2001.

15.   Short Form Recording Agreement with Production Deal between the Company
      and Duane Lavold p/k/a "Custom "dated as of August 2, 2001.

16.   Unanimous Written Consent approving Custom Recording Agreement, with
      Written Consent of ADR approving FieldCo grant of "phantom" FieldCo equity
      participation to Custom, dated as of August 3, 1001.

17.   Contingent Compensation Agreement between FieldCo and Custom (Draft).

18.   Short Form Recording Agreement between the Company and Johnny Whitney,
      Cody Votolato, Mark Gajadhar, Morgan Henderson and Jordan Blilie p/k/a
      "Blood Brothers" dated as of August 27, 2001.

                                       1
<PAGE>

19.   Employment Agreement between the Company and Freddie Pendarvis dated
      September 6, 2001.

20.   Employment Agreement between the Company and Heidi Ellen Robinson dated as
      of September 10, 2001.

21.   Employment Agreement between the Company and Patrick Grueber dated
      September 30, 2001.

22.   Employment Agreement between the Company and Marc Benesch dated _____,
      2001.

23.   Contingent Compensation Agreement between FieldCo and Benesch dated _____,
      2001.

24.   Unanimous Written Consent approving Benesch and Swindel Employment
      Agreement, as of September 28, 2001.

25.   Employment Agreement between the Company and Dawn Hood (Draft -- Employee
      Has Commenced Employment).

26.   Employment Agreement between the Company and James Barnes (Draft --
      Employee Has Commenced Employment).

27.   Employment Agreement between the Company and James Swindel (Draft --
      Employee Has Commenced Employment).

28.   Contingent Compensation Agreement between FieldCo and Swindel (Draft).

29.   Employment Agreement between the Company and Kathie Romero (Draft --
      Employee Has Commenced Employment).

30.   Employment Agreement between the Company and Steve Walker (Draft --
      Employee Has Commenced Employment).

31.   Employment Agreement between the Company and Ann Carloss (Draft --
      Employee Has Commenced Employment).

32.   Employment Agreement between the Company and Brian Corona (Draft --
      Employee Has Commenced Employment).

                                       2
<PAGE>

                                    EXHIBIT D

                      TERMS OF THE AMENDMENT TO THE OPERATING AGREEMENT

        This Term Sheet summarizes the principal terms of the Amendment to the
Operating Agreement, which will be executed and delivered by the Company, the
Founders and BMG as of Closing (capitalized terms used herein, and not otherwise
defined herein or in the Unit Purchase Agreement to which this Exhibit D is
attached, have the meaning given to such terms in the Operating Agreement as in
affect on the date of such Unit Purchase Agreement):

Admission of BMG:  The Founders will consent to and take all affirmative action
                   necessary to admit BMG as a Member of the Company, including
                   amending the Schedule of Members of the Operating Agreement
                   to reflect the ownership of the Company as set forth in
                   Exhibit A to the Unit Purchase Agreement, to reflect the
                   agreements set forth herein and making any other amendments
                   or corrections deemed reasonably necessary by the parties
                   thereto. BMG will agree to be bound by all of the terms and
                   conditions of the Operating Agreement, as amended.

Consent:           Prior to a Vesting Event (defined below), BMG will have no
                   right to vote on, or consent to or withhold consent or
                   approval with respect to any matter relating to the
                   management of the Company, except as set forth below. ADR
                   will be deemed to continue to hold the Purchased Units for
                   purposes of all votes (but for no other purposes), except
                   that BMG's consent will be required for the Company to do any
                   of the following:

                       (a)   effect a Liquidation, except in connection with a
                             transaction contemplated by the sale procedure set
                             forth in Section 10.2 of the Operating Agreement,
                             unless, immediately after such Liquidation, BMG
                             will have received aggregate payments in cash on
                             its Advance or in distribution or redemption of the
                             Purchased Units in an amount no less than the sum
                             of (i) the product of (X) two multiplied by (Y) the
                             sum of (a) $5,000,000 plus (b) interest thereon
                             accruing during the period from the date of Closing
                             until the date such amount is paid in full at the
                             rate specified in the Loan Agreement as applicable
                             to Advances thereunder plus (ii) fully recouped or
                             received payment in full in cash of an amount equal
                             to not less than all of its recoupable advances to
                             the Company under the Distribution Agreement, of
                             even date herewith (the "DISTRIBUTION AGREEMENT"),
                             by and between the Company and BMG, (the "MINIMUM
                             RETURN");

                       (b)   cause or permit the sale, transfer, lease,
                             sublease, license or otherwise dispose of all or
                             substantially all of the Company's assets, except
                             in connection with a transaction contemplated by
                             the sale procedure set forth in Section 10.2 of the
                             Operating Agreement, unless, immediately after such
                             transaction, the Minimum Return will have been paid
                             in full in cash;

                       (c)   cause or permit the merger or consolidation of the
                             Company

                                       1
<PAGE>

                             into or with another entity, except in connection
                             with a transaction contemplated by the sale
                             procedure set forth in Section 10.2 of the
                             Operating Agreement unless, immediately after such
                             transaction, the Minimum Return will have been paid
                             in full in cash;

                       (d)   cause or permit the conversion of the Company into
                             another form of business entity, other than in
                             connection with an initial public offering of stock
                             of the Company;

                       (e)   conduct any business other than the Record Label
                             Business or the music publishing business, or
                             engage in any transaction not substantially related
                             thereto;

                       (f)   during the "DISTRIBUTION PERIOD", which means the
                             period during which BMG or an Affiliate of BMG has
                             a distribution agreement with the Company, (1)
                             admit any new Member, whether such proposed Member
                             is to receive Units on issuance from the Company,
                             from existing Members or as a proposed Substitute
                             Member, who is a "major record label" or Zomba, or
                             (2) enter into any joint venture, partnership or
                             similar arrangement with a "major record label" or
                             Zomba that is effective during the Distribution
                             Period;

                       (g)   during the Distribution Period, encumber (whether
                             by mortgage, lien pledge, charge, security
                             interest, guarantee or otherwise) any assets of the
                             Company other than in accordance with the
                             provisions of the Operating Agreement relating to
                             Substitute Financing, other than to secure Purchase
                             Money Indebtedness (as defined in the Loan
                             Agreement) or any Lien (as defined in the Loan
                             Agreement) that by its terms is subordinated to the
                             Liens granted pursuant to the Loan Agreement;

                       (h)   enter into any agreement, contract or arrangement
                             that provides for an event of default, termination,
                             acceleration or payment of any amount or penalty in
                             the event (i) any Officer or employee of the
                             Company no longer performs a specified function or
                             (ii) of a change of control of the Company;

                       (i)   (A) terminate Field's employment (other than for
                             Cause), (B) during the Distribution Period, enter
                             into or modify the terms of any employment
                             agreement or arrangement with Field in a manner
                             that increases Field's compensation, benefits or
                             perquisites or, (C) during the Distribution Period,
                             insofar as the actions referred to in clause (B)
                             above are concerned, take any such actions, at such
                             times, with respect to any person or people who
                             succeed to Field's duties, title or position with
                             the Company;

                       (j)   sell, transfer, license exclusively or otherwise
                             dispose of any intellectual property rights other
                             than in the ordinary course of

                                       2
<PAGE>

                             business, it being understood and acknowledged that
                             a sale of any assets that generate
                             seventeen-and-one-half percent (17.5%) or more of
                             the revenue of the Company as measured during any
                             12-month period during the preceding 24 months will
                             be deemed not to be in the ordinary course of
                             business;

                       (k)   change, in any manner materially adverse to BMG or
                             its Permitted Transferees or to its or their rights
                             under the Transaction Agreements, the nature of the
                             rights and/or obligations of ADR, FieldCo, Field,
                             the Company or BMG to one another as set forth in
                             the Operating Agreement, as amended, the Loan
                             Agreement, as amended, or any exhibits thereto, or
                             any other terms thereof, except such changes as are
                             contemplated therein in accordance with the terms
                             of such agreements; or

                       (l)   authorize any amendment to the Certificate of
                             Formation of the Company or the Operating Agreement
                             in a manner that materially and adversely alters
                             the rights or obligations of BMG.

Post-Vesting
Management
Rights:            A "Vesting Event" means the occurrence of any event after
                   which BMG, together with any Affiliates, owns Units
                   representing at least a seventeen-and-one-half percent
                   (17.5%) Percentage. Upon the occurrence of a Vesting Event,
                   notwithstanding any amount, whether or not equal to or
                   greater than the Minimum Amount, previously paid to BMG on or
                   in respect of its Units or Advances, or in any distribution
                   or redemption on or in respect thereof, and also
                   notwithstanding any such amount paid to BMG after the Vesting
                   Event, the right to vote the Units owned and held by BMG will
                   automatically revert to and vest in BMG, and BMG will have
                   the consent rights set forth in items (d) -- (l).

Transfers of
Artist's           Agreements: If the Company desires to sell an "artist's
                   agreement" or "artist's agreements", it will be obligated to
                   first offer BMG the opportunity to purchase such "artist's
                   agreement(s)" at a price named by the Company:

                       (a)   In the event the Company proposes to sell any of
                             its "artist's agreement(s)", the Company will make
                             BMG a written offer to sell to BMG such "artist's
                             agreement(s)" (the "AA Offer"), which offer will
                             describe the price and the material terms upon
                             which it is proposed that the "artist agreement(s)"
                             be sold.

                       (b)   BMG will have an option for a period of thirty (30)
                             days from the date of the AA Offer to elect to
                             purchase all, but not less than all, of the offered
                             "artist's agreement(s)" at the same price and
                             subject to the same material terms and conditions
                             as described in the AA Offer (the "AA Purchase
                             Option"). BMG

                                       3
<PAGE>

                             may exercise the AA Purchase Option by notifying
                             the Company in writing before expiration of such
                             thirty (30)-day period that it wishes to do so (the
                             "AA Purchase Notice"). If BMG fails to deliver the
                             AA Purchase Notice within such thirty (30)-day
                             period, it will be deemed not to have exercised the
                             AA Purchase Right. If BMG does not exercise or is
                             deemed not to have exercised the AA Purchase Right,
                             insofar as BMG is concerned, the sale of such
                             "artist's agreement(s)" may be made to one or more
                             third parties, on terms not more favorable to the
                             third parties than those offered to BMG or its
                             Affiliate, for a period of up to ninety (90) days
                             thereafter. If such "artist's agreements" are not
                             sold to a third party on the terms set forth above
                             within such ninety (90) day period, those
                             agreements will again be subject to BMG's rights
                             described herein.

                       (c)   The closing of the sale of any "artist's
                             agreement(s)" to BMG hereunder will occur no more
                             than sixty (60) days following the last date for a
                             timely election by BMG to exercise the AA Purchase
                             Option. If said closing does not occur within said
                             time period, due to failure by BMG to tender timely
                             payment in full, the sale of such "artist's
                             agreement(s)" may be made to one or more third
                             parties, on terms not more favorable to the third
                             parties than those offered to BMG, for a period of
                             up to ninety (90) days thereafter. If such
                             "artist's agreements" are not sold to a third party
                             on the terms set forth above within such ninety
                             (90) day period, those agreements will again be
                             subject to BMG's rights described herein.

Restrictions on
BMG Transfers;
Right of First
Offer To Purchase
BMG Units:         BMG may Transfer its Units or the BMG Note to a Permitted
                   Transferee and, subject to the right of first offer in favor
                   of ADR (solely to the extent of the first 500,000 Units owned
                   by BMG that are proposed to be transferred) and thereafter
                   the Company, as set forth below, to any Person (other than a
                   Direct AD Competitor):

                       (a)   In the event BMG proposes to Transfer all or any
                             portion of its Units or the BMG Note to a Person
                             other than a Permitted Transferee, then, with
                             respect to each such sale (the "BMG Sale"), BMG
                             will make ADR and the Company a written offer to
                             sell (the "BMG Sale Offer"), which offer will
                             describe the portion of the Units or the BMG Note
                             proposed to be sold (the "BMG Offered Interest"),
                             as well as the price and the material terms upon
                             which BMG is willing to make such sale.

                       (b)   ADR will have an option for a period of twenty-five
                             (25) days from the date of the BMG Sale Offer to
                             elect to purchase all or any portion of the BMG
                             Offered Interest at the same price and subject to
                             the same terms and conditions as described in the
                             BMG Sale Offer; provided, however, that ADR will
                             not have the right to purchase more than 500,000
                             Units in the aggregate

                                       4
<PAGE>

                             pursuant to this right of first offer. ADR may
                             exercise such purchase option by notifying BMG and
                             the Company in writing before expiration of such
                             twenty-five (25)-day period that it wishes to make
                             such a purchase (such notice, an "ADR Purchase
                             Notice"). If ADR fails to deliver the ADR Purchase
                             Notice within such twenty-five (25)-day period, it
                             shall be deemed not to have exercised its right of
                             first offer under this paragraph.

                       (c)   If ADR does not elect to purchase the BMG Offered
                             Interest (as set forth above), then the Company
                             will have an option for a period of five (5)
                             Business Days from the date of the ADR Purchase
                             Notice, or, if there is no ADR Purchase Notice, the
                             date thirty (30) days from the date of the BMG Sale
                             Offer, to elect to purchase all, but not less than
                             all, of such portion of the BMG Offered Interest,
                             if any, as ADR shall not have elected (or be deemed
                             not to have elected) to purchase at the same price
                             and subject to the same material terms and
                             conditions as described in the BMG Sale Offer, by
                             notifying BMG and ADR in writing of its desire to
                             do so. If the Company fails to deliver such notice
                             within the prescribed time period, then it will be
                             deemed not to have exercised its right of first
                             offer under this paragraph (c). If ADR and the
                             Company do not exercise or are deemed not to have
                             exercised their right of first offer to purchase
                             the entire BMG Offered Interest, insofar as they
                             are concerned, the sale of the entire BMG Offered
                             Interest may be made to one or more third parties,
                             on terms not more favorable to the third parties
                             than those set forth in the BMG Sale Offer, for a
                             period of up to ninety (90) days thereafter. For
                             purposes of clarification, ADR and the Company do
                             not have any rights of first offer to purchase only
                             a portion of the BMG Offered Interest. Separately
                             or collectively, they only have the right to
                             purchase the entire BMG Offered Interest.

                       (d)   The closing of any purchase of the BMG Offered
                             Interest by ADR or the Company, as the case may be,
                             will occur no more than sixty (60) days following
                             the last date for a timely election by ADR or the
                             Company to make such purchase. If not thus sold,
                             BMG may Transfer to third parties, on terms not
                             more favorable to the third parties than those
                             offered to ADR, for a period of up to ninety (90)
                             days thereafter. If such Units are not sold to a
                             third party on the terms set forth above within
                             such ninety (90) day period, those Units will again
                             be subject to the limitations on transfer described
                             herein.

Restriction Period;
Relationship Period:   (a)   As used herein, "RESTRICTION PERIOD" means (i) any
                             time after the occurrence of a Vesting Event or
                             (ii) during the Relationship Period (as defined
                             below).

                       (b)   As used herein, "RELATIONSHIP PERIOD" means the
                             Distribution Period, subject to either early
                             termination as set forth in paragraph (i) below, or
                             extension as set forth in paragraph (ii) below:

                                       5
<PAGE>

                             (i)   The Relationship Period will terminate either
                                   (A) immediately following the fifteenth month
                                   of the term of the Distribution Agreement if
                                   BMG has not exercised its option to extend
                                   the Distribution Agreement to a third year or
                                   (B) upon the end of the period during which
                                   BMG has the Right of First Negotiation (as
                                   defined in the Distribution Agreement) if BMG
                                   fails to make a good faith offer to extend
                                   the term of the Distribution Agreement
                                   pursuant thereto.

                             (ii)  If BMG exercises the option set forth in
                                   clause (b)(i)(B) above, and makes a good
                                   faith offer to extend the Distribution
                                   Agreement during the period of its Right of
                                   First Negotiation, the Relationship Period
                                   will be extended for so long as (A) the
                                   Purchaser or its Permitted Transferees owns a
                                   Unit (or an economic interest in a Unit) of
                                   the Company and (B) either (I) the Company
                                   enters into a distribution agreement with a
                                   third party on terms less favorable to the
                                   Company than, or equivalent to, those
                                   contained in BMG's last offer to the Company,
                                   or (II) if the Company enters into a
                                   distribution agreement with a third party on
                                   terms more favorable to the Company than
                                   those contained in BMG's last offer to the
                                   Company, without affording BMG the
                                   opportunity, exercisable within thirty (30)
                                   days, to match the terms offered by such
                                   third party. It being understood that, as
                                   used in this section, BMG is deemed to
                                   include its Affiliates.

Restrictions on
Founders' Transfers;
Right of First
Offer To Purchase
Founder Units:     During the Restriction Period, transfers of Units by ADR or
                   FieldCo and any proposed transfer by ADR of its interests or
                   obligations under the Loan Agreement, as amended (a "LOAN
                   INTEREST"), are subject to a right of first offer in favor of
                   BMG.

                       (a)   This right of first offer will not apply to
                             transfers of Units: (i) that are permitted without
                             the consent of the "Majority in Interest" pursuant
                             to Article 10 of the Operating Agreement; (ii) in
                             connection with establishment of a business
                             relationship deemed by a Majority in Interest to be
                             strategic to the Company from an operational
                             perspective; unless (A) such business relationship
                             is with Zomba, one of the other so-called "major
                             record labels" or any Affiliate thereof or (B) the
                             number of Units proposed to be Transferred
                             hereunder represent a Percentage of ten percent
                             (10%) or greater in any single transaction or
                             twenty percent (20%) or greater in the aggregate;
                             or (iii) being Transferred to effect a forced sale
                             of all of the Company pursuant to Section 10.2(e)
                             of the Operating Agreement if BMG is not exercising
                             the BMG

                                       6
<PAGE>

                             Company Purchase Option.

                       (b)   In the event that, during the Restriction Period, a
                             Founder proposes to Transfer all or any portion of
                             its Units or ADR proposes to transfer a Loan
                             Interest, other than pursuant to Section 10.2 of
                             the Operating Agreement, then, with respect to each
                             such sale (the "Founder Sale"), such Founder will
                             make BMG a written offer to sell (the "Founder Sale
                             Offer"), which offer will describe the portion of
                             the Founder's Units or Loan Interest proposed to be
                             sold (the "Founder Offered Interest"), as well as
                             the price and the material terms upon which such
                             Founder is willing to make such sale.

                       (c)   BMG will have an option for a period of thirty (30)
                             days from the date of the Founder Sale Offer to
                             elect to purchase all, but not less than all, of
                             the Founder Offered Interest at the same price and
                             subject to the same terms and conditions as
                             described in the Founder Sale Offer. BMG may
                             exercise such purchase option by notifying the
                             Founders and the Company in writing before the
                             expiration of such thirty (30)-day period that it
                             wishes to purchase the Founder Offered Interest
                             (the "BMG Purchase Notice"). If BMG fails to
                             deliver the BMG Purchase Notice within such thirty
                             (30)-day period, it will be deemed not to have
                             exercised its right of first offer under this
                             paragraph. If BMG does not exercise or is deemed
                             not to have exercised with respect to its right of
                             first offer with respect to the entire Founder
                             Offered Interest, insofar as BMG is concerned, the
                             sale of the Founder Offered Interest may be made to
                             one or more third parties, on terms not more
                             favorable to the third parties than those set forth
                             in the Founder Sale Offer, for a period of ninety
                             (90) days thereafter. If the Founder Offered
                             Interests are not sold to a third party on the
                             terms set forth above within such ninety (90) day
                             period, such sale will again be subject to BMG's
                             rights described herein.

                       (d)   The closing of any purchase of the Founder Offered
                             Interest by BMG will occur no more than sixty (60)
                             days following the last date for a timely election
                             by BMG to make such purchase, provided that such
                             closing is not delayed due to the need to satisfy
                             the requirements of any law, regulation or any
                             governmental agency or entity with respect to
                             anti-trust or competition regulations (including,
                             but not limited to, requirements to file set forth
                             in the Hart-Scott-Rodino Act), in which case the
                             period for such closing will be extended until such
                             time as all filings have been made and all
                             necessary approvals, licenses or permits have been
                             issued, provided BMG is working diligently and in
                             good faith to promptly satisfy all such regulatory
                             or governmental requirements, and provided,
                             further, that such extension shall not be for a
                             period exceeding ninety (90) days. To the extent
                             not thus sold, the applicable Founder may Transfer
                             to third parties, subject to the provisions of the
                             Operating Agreement, on terms not more favorable to
                             the third parties than those offered to BMG, for a
                             period of up to ninety (90) days thereafter. If
                             such Founder Offered Interests are not sold to a
                             third party on the terms set forth

                                       7
<PAGE>

                             above within such ninety (90) day period, the Units
                             represented thereby will again be subject to the
                             limitations on transfer described herein.

                       (e)   In the event that a Founder proposes to Transfer
                             its Units, pursuant to Section 10.2 of the
                             Operating Agreement, one of the Founders (the
                             "OPTION FOUNDER") will be given the option to elect
                             to buy the Units subject to the proposed Transfer,
                             or to sell its Units. If such proposed Transfer is
                             to occur during the Restriction Period, BMG will be
                             given prompt notice of the Option Founder's
                             decision to buy or sell Units, and will have the
                             option, upon delivery of written notice to the
                             Option Founder and the other Founder (the "BMG
                             PARTICIPATION NOTICE") for a period of thirty (30)
                             days to purchase or sell, as applicable, on the
                             same terms and conditions as the Option Founder,
                             (A) up to thirty-five percent (35%) of the amount
                             of Units that the Option Founder has elected to
                             purchase or (B) to sell all of its Units, if the
                             Option Founder has elected to sell, in connection
                             with the rights under Section 10.2. If BMG fails to
                             deliver the BMG Participation Notice within such
                             thirty (30) day period, it will be deemed not to
                             have exercised its right of first offer under this
                             paragraph. If BMG does not exercise or is deemed
                             not to have exercised its right of first offer
                             under this paragraph, insofar as BMG is concerned,
                             the sale of the Founder's Units may be made
                             pursuant to the terms of 10.2. If BMG exercises its
                             option to participate in the Option Founder's
                             purchase of Units hereunder, the selling Founder
                             will sell subject Units proportionally as among BMG
                             and the purchasing Founder, with BMG purchasing, at
                             its election, up to thirty-five percent (35%) and
                             the remainder being purchased by the purchasing
                             Founder. If BMG exercises its option to sell
                             hereunder it will sell all of its Units.
                             Notwithstanding the foregoing, a Founder may not
                             purchase Units held by BMG or its Permitted
                             Transferees hereunder without its consent.

                       (f)   The closing of any purchase of the Founder's Units
                             by BMG or the non-transferring Founder as described
                             in paragraph (e) above will occur within the time
                             periods provided in Section 10.2(d)(ii) of the
                             Operating Agreement.

                       (g)   Notwithstanding anything set forth above, nothing
                             in this section is intended or will be deemed to
                             affect the Founders' obligation to obtain consents
                             set forth in Section 10.1(a) of the Operating
                             Agreement.

BMG Right of
First Offer to
Provide Substitute
Financing:         The Company will provide BMG with prompt written notice of
                   its decision to seek a Substitute Financier subject to the
                   terms and conditions set forth in such notice (a "SUBSTITUTE
                   FINANCIER NOTICE"). Upon receipt of a Substitute Financier
                   Notice, BMG will have an option for a period of ten (10) days
                   to offer to become the Substitute Financier on the terms and
                   conditions set forth in the Substitute Financier Notice. If
                   BMG does not exercise its right of first offer or is deemed
                   not to exercised its right of first offer hereunder, the
                   Company

                                       8
<PAGE>

                   will have ninety (90) days following the last date for a
                   timely election by BMG to reach a firm commitment with a
                   third party pursuant to which such third party would become
                   the Substitute Financier. If the Company fails to sign such a
                   firm commitment within such ninety (90) day period or fails
                   to appoint a Substitute Financier within one hundred and
                   twenty (120) days, the first offer procedure set forth above
                   again will apply.

BMG Right of
First Offer to
Purchase the
Entire Company:    If, during the Restriction Period, the Founders desire to
                   cause a sale of the entire Company (whether by way of sale of
                   assets or Units, merger or other form of transaction,
                   including as a result of a Founder initiating the procedure
                   to cause a forced sale pursuant to Section 10.2(e) of the
                   Operating Agreement) (a "Company Sale"), then the Founders
                   and the Company first will be obligated to offer BMG the
                   opportunity to purchase the entire Company at a price named
                   by the Company (or, if applicable, the Founder entitled to
                   seek to cause a forced sale pursuant to Section 10.2(e) of
                   the Operating Agreement).

                       (a)   In the event the Founders propose to cause a
                             Company Sale, the Founders and the Company will
                             make BMG a written offer to sell (the "Company Sale
                             Offer"), which offer will describe the price and
                             the material terms upon which it is proposed that
                             the entire Company be sold.

                       (b)   BMG will have an option for a period of thirty (30)
                             days from the date of the Company Sale Offer to
                             elect to purchase the entire Company at the same
                             price and subject to the same material terms and
                             conditions as described in the Company Sale Offer
                             (the "BMG Company Purchase Option"). BMG may
                             exercise the BMG Company Purchase Option by
                             notifying the Founders and the Company in writing
                             before expiration of such thirty (30)-day period
                             that it wishes to do so (the "BMG Company Purchase
                             Notice"). If BMG fails to deliver the BMG Company
                             Purchase Notice within such thirty (30)-day period,
                             it will be deemed not to have exercised the BMG
                             Company Purchase Right. If BMG does not exercise or
                             is deemed not to have exercised the BMG Company
                             Purchase Option, the sale of the Company may be
                             made to one or more third parties, on terms not
                             more favorable to the third parties than those
                             offered to BMG for a period of up to ninety (90)
                             days thereafter. If the Company is not sold to a
                             third party on the terms set forth above within
                             such ninety (90) day period, such sale will again
                             be subject to BMG's rights described herein.

                       (c)   The closing of the Company Sale to BMG will occur
                             no more than sixty (60) days following the timely
                             election by BMG to exercise the BMG Company
                             Purchase Option, provided that such closing is not
                             delayed due to the need to satisfy the requirements
                             of any law, regulation or any governmental agency
                             or entity with respect to anti-trust or competition
                             regulations (including, but not limited to,

                                       9
<PAGE>

                             requirements to file set forth in the
                             Hart-Scott-Rodino Act), in which case the period
                             for which such closing will be extended until such
                             time as all filings have been made and all
                             necessary approvals, licenses or permits have been
                             issued, provided BMG is working diligently and in
                             good faith to promptly satisfy all such regulatory
                             or governmental requirements, and provided,
                             further, that such extension shall not be for a
                             period exceeding ninety (90) days. If said closing
                             does not occur within said time period, insofar as
                             BMG is concerned, the Company Sale may be made to
                             one or more third parties, on terms not more
                             favorable to the third parties than those offered
                             to BMG, for a period of up to ninety (90) days
                             thereafter. If the Company is not sold to a third
                             party on the terms set forth above within such
                             ninety (90) day period, such sale will again be
                             subject to BMG's rights described herein.

BMG Preemptive
Right:             BMG will have the right to purchase up to 35%, during the
                   Restriction Period, and, thereafter, up to the greater of 10%
                   or its Percentage of the Company as of the date such right is
                   being exercised (the "Preemptive Percentage") of any and all
                   Units or other equity securities that the Company may, from
                   time to time, propose to sell and issue to any Person or
                   Persons (each, a "Proposed Issuance"), on the same terms and
                   conditions as offered to such Person or Persons.

                       (b)   BMG's preemptive right will not apply to issuance
                             of Units or other equity securities: (i) to
                             employees or officers of the Company in
                             transactions with primarily non-financing purposes,
                             if the aggregate number of Units so issued does not
                             exceed a Percentage of ten percent (10%) in the
                             aggregate; (ii) in connection with establishment of
                             a business relationship deemed by a Majority in
                             Interest to be strategic to the Company from an
                             operational perspective, unless (A) such business
                             relationship is with Zomba, one of the other
                             so-called "major record labels" or any Affiliate
                             thereof and (B) the number of Units to be
                             transferred represents a Percentage of ten percent
                             (10%) or greater in a single transaction or twenty
                             percent (20%) or greater in the aggregate; or (iii)
                             to any Units issued by the Company as Substitute
                             Financier Units or Field Replacement Units under
                             the Operating Agreement.

                       (c)   In the event the Company proposes to undertake a
                             Proposed Issuance, then, with respect to such
                             Proposed Issuance, the Company will give BMG
                             written notice of its intention, describing the
                             price and the general terms upon which the Company
                             proposes to make such Proposed Issuance. BMG will
                             have thirty (30) Business Days from the date such
                             notice is given to agree, by giving written notice
                             to the Company and

                                       10
<PAGE>

                             stating therein the portion of the new issuance to
                             be purchased, to purchase up to the Preemptive
                             Percentage of such new issuance for the price and
                             upon the terms applicable to the Proposed Issuance.
                             If BMG determines to participate in a Proposed
                             Issuance, it will have sixty (60) days (commencing
                             on the expiration of the above-described notice
                             period) to consummate the purchase from the
                             Company.

Tag-Along Rights:  In the event that BMG does not exercise its "Right of First
                   Offer" to purchase Founder's Units as contemplated above
                   (including, without limitation, in connection with a Company
                   Sale), BMG will have tag-along rights to participate in any
                   proposed transfer of Units by FieldCo or ADR, as the case may
                   be, on the same terms and conditions as are obtained by
                   FieldCo or ADR, as the case may be, from the proposed
                   transferee of such Units. If BMG exercises its tag-along
                   right in lieu of its "Right of First Offer" to purchase a
                   Founder's Units in connection with a sale of all of a
                   Founder's Units pursuant to Section 10.2 of the Operating
                   Agreement, then, in lieu of selling a pro rata proportion of
                   the Units to be sold, BMG will sell all of its Units to the
                   purchasing Founder, who will be required to purchase all such
                   Units.

Guaranty:          ADI agrees to guaranty to BMG the prompt, complete and
                   punctual performance and payment by ADR of ADR's obligation
                   to provide Advances to the Company under the Loan Agreement
                   (except to the extent that the Company waives its right to
                   the full amount of Advances that it may draw for a Fiscal
                   Year as described in 5.1(d)(i) of the Operating Agreement).

                                       11
<PAGE>

                                    EXHIBIT E

            TERMS OF THE AMENDMENT TO THE LOAN AND SECURITY AGREEMENT

        This Term Sheet summarizes the principal terms of the Amendment to the
Loan and Security Agreement, which will be executed and delivered by the
Company, ADR and BMG as of Closing (capitalized terms used herein, and not
otherwise defined or in the Unit Purchase Agreement to which this Exhibit E is
attached, having the meaning given to such terms in the Loan Agreement as in
affect on the date of such Unit Purchase Agreement):

Advance:             A $4,750,000 advance made by BMG (the "BMG ADVANCE") at the
                     Closing will be deemed to be an Advance under the Loan and
                     Security Agreement, as amended, subject to the terms and
                     conditions found therein. The funds advanced by BMG will
                     reduce ADR's obligation to provide funding under the Loan
                     Agreement, as amended, on a dollar for dollar basis for all
                     purposes.

Commitment:          BMG will have no obligation to make any further Advances
                     under the Loan Agreement, as amended, or otherwise,
                     notwithstanding any repayments or prepayments of principal.

Repayment:           Any repayment or prepayment of principal under the Loan
                     Agreement, as amended, will be shared ratably between ADR
                     and BMG based on the ratio of their respective principal
                     amounts outstanding at the time of such repayment or
                     prepayment.

Interest Payments:   Will be shared ratably between ADR and BMG based on the
                     ratio of their respective interest amounts outstanding at
                     the time of such payment.

No Approval Rights:  Except as explicitly set forth below, BMG will have no
                     right to vote on, or consent to or withhold consent or
                     approval with respect to any matter relating to the Loan
                     Agreement.

Agent:               ADR will act as agent for BMG (in addition to acting on
                     ADR's own behalf) with respect to all notices to be given
                     or received (and agrees to promptly forward any and all
                     such notices received or given by ADR to or from the
                     Company), and all votes, approvals, decisions or consents
                     to be made or given, pursuant to the Loan Agreement, as
                     amended. ADR also will hold all security interests granted
                     to it under the Loan Agreement, as amended, as agent for
                     BMG as well as on ADR's own behalf. Nothing in this
                     paragraph, is intended, and it will not be construed, to
                     limit BMG's rights upon default or remedies under the Loan
                     Agreement.

Subordination:       BMG's rights to payments under the Loan Agreement,
                     including repayment of Advances, and its security interest
                     in respect of such rights, will rank pari passu with a
                     Substitute Financier's right of repayment and security
                     interest in respect of such right. In addition, any
                     successor distributor will be entitled to a security
                     interest and priority of

                                       1
<PAGE>

                     payment of the same rank and quality as BMG's security
                     interest and priority of payment under the Distribution
                     Agreement and for purposes of the Loan Agreement, such
                     third-party distributor's security interest will have the
                     same rank and priority that BMG's security interest had
                     pursuant to the Distribution Agreement.

Minority Lender
Protections:         The Amendment to the Loan Agreement will afford BMG the
                     right to consent to any amendment that would (1) reduce the
                     interest rate applicable to BMG's Advance, (2) reduce
                     principal of BMG's Advance, (3) postpone the maturity of
                     BMG's Advance, (4) postpone the interest payments on BMG's
                     Advance, (5) alter any of the foregoing consent rights, (6)
                     subordinate its security interests, except as contemplated
                     herein, or (7) limit the lenders remedies, including its
                     right to payment of fees and expenses of enforcement
                     actions.

                                       2
<PAGE>

                                    EXHIBIT F

                                 FORM OF OPINION

The proposed rendering by Kramer Levin Naftalis & Frankel LLP ("Kramer Levin")
of the opinions listed below is subject to Kramer Levin's review of final
executed versions of all Transaction Documents and other documents upon which
such opinions will be based, verification of all facts necessary to support such
opinions, and expression of appropriate assumptions, exclusions, limitations,
qualifications, and exceptions in the opinion letter, as well as authorization
by Kramer Levin's Opinion Committee. Without limiting the generality of the
foregoing, certain opinions listed below will be limited in that Kramer Levin
will express no opinion that any payments by Purchaser to the Company as
contemplated under the Transaction Documents (each as defined below) will be
treated as debt rather than equity. All such opinions will also be limited to
Relevant Laws (as defined below).

Opinions

1. The Company is a limited liability company duly organized, validly existing,
and in good standing under the laws of the State of Delaware.

2. The Company has all requisite limited liability company power and authority
(i) to own its property and assets and to carry on its business as now conducted
and (ii) to execute, deliver and perform its obligations under the Transaction
Documents to which it is a party.

3. The Company is qualified as a foreign corporation in each of the
jurisdictions listed on Exhibit [__] hereto.

4. __________ membership interests in the Company ("Units") are validly issued
and outstanding as of the date hereof.

5. To our knowledge, except as set forth in the Operating Agreement and the Loan
Agreement (each as amended through the date hereof), there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal or similar rights) or agreements orally or in writing for the
purchase or acquisition from the Company of any Units.

6. Each of the Transaction Documents to which the Company is a party has been
duly executed and delivered by the Company.

7. The execution, delivery, and performance by the Company of the Transaction
Documents to which it is a party have been duly authorized by all necessary
limited liability company action on the part of the Company.

8. The Transaction Documents to which the Company is a party constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms.

<PAGE>

9. To our knowledge, there is no action, suit, proceeding or investigation
pending or threatened against the Company that questions the validity of any of
the Transaction Documents to which the Company is a party or the right of the
Company to enter into such Transaction Documents or to consummate the
transactions contemplated thereby.

10. The execution, delivery and performance by the Company of the Transaction
Documents to which it is a party do not, at the date of this letter, (a) violate
any Relevant Laws or, to our knowledge, any ruling, writ, injunction, order,
judgment, or decree of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, to which the Company is subject, or (b) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or (except as contemplated under the Transaction
Documents) result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under, the
Operating Agreement (as amended to date) or the agreements listed on Exhibit
[___] hereto.

11. The Loan Agreement (as amended by the Amendment to the Loan Agreement) is
effective to create in favor of the Collateral Agent (as defined in the
Amendment to the Loan Agreement) a security interest under the UCC in the
Company's right, title and interest in and to the Collateral (as defined in the
Loan Agreement) to the extent a security interest in the Collateral would be
governed by the UCC.

12. Financing Statements have been filed with the Secretary of State of the
State of Delaware which perfect the security interest granted in the Collateral
under the Loan Agreement (as amended by the Amendment to the Loan Agreement) but
only to the extent that, under the UCC, a security interest in the Collateral
can be perfected by filing.

13. ADR is a corporation validly existing and in good standing under the laws of
the State of Delaware.

14. ADR has all requisite corporate power and authority to (i) own its property
and assets and to carry on its business as now conducted and (ii) to execute,
deliver and perform its obligations under the Transaction Documents to which it
is a party.

15. ADR is qualified as a foreign corporation in each of the jurisdictions
listed on Exhibit [__] hereto.

16. Each of the Transaction Documents to which ADR is a party has been duly
executed and delivered by ADR.

17. The execution, delivery, and performance by ADR of the Transaction Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of ADR.

18. The Transaction Documents to which ADR is a party constitute valid and
legally binding obligations of ADR, enforceable against ADR in accordance with
their respective terms.

19. To our knowledge, there is no action, suit, proceeding or investigation
pending or threatened against ADR that questions the validity of any of the
Transaction Documents to which ADR is a

<PAGE>

party or the right of ADR to enter into such agreements or to consummate the
transactions contemplated thereby.

20. The execution, delivery and performance by ADR of the Transaction Documents
to which it is a party do not, at the date of this letter, (a) violate any
Relevant Laws or, to our knowledge, any ruling, writ, injunction, order,
judgment, or decree of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, to which ADR is subject, or (b) conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute a
default under, or (except as contemplated under the Transaction Documents)
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company under, its certificate of
incorporation or by-laws or the agreements listed on Exhibit [___] hereto.

Defined Terms

For purposes of the foregoing opinions:

"AD Parties" means the Company and ADR.

"Financing Statements" means the UCC financing statements in the form of Exhibit
[__] hereto.

"Relevant Laws" means the laws of the State of New York and the United States of
America, the General Corporation Law of the State of Delaware, and the Limited
Liability Company Act of the State of Delaware, in each case which in Kramer
Levin's experience are generally applicable to transactions of the type
contemplated by the Transaction Documents.

"Transaction Documents" means the following documents:

        a. The Agreement to which this Exhibit F is attached.

        b. Amendment to the Operating Agreement.

        c. Amendment to the Loan Agreement.

        d. BMG Note.

"UCC" means the Uniform Commercial Code in effect in the State of Delaware on
the date the opinion is rendered.

As to all opinions limited to "our knowledge," such opinions are based solely
upon the information contained in the respective certificates executed by
___________, on behalf of the Company, and by ____________ on behalf of ADR and
delivered to us in connection with the rendering of this opinion; and facts,
based upon our limited representation of the AD Parties, actually known to
attorneys within our firm who have been directly involved in representing the AD
Parties in connection with the Agreement to which this Exhibit F is attached,
without having undertaken any search of the public records, investigation,
verification or other inquiry of any kind.

<PAGE>

Capitalized terms used but not defined in this Exhibit F have the respective
meanings assigned to such terms in the Agreement to which this Exhibit F is
attached.<PAGE>
                                                                   EXHIBIT 10.34

                            ARTISTDIRECT RECORDS, LLC
              SHORT FORM DISTRIBUTION AND FOREIGN LICENSE AGREEMENT

Reference is made to the short form equity agreement between BMG Music d/b/a BMG
Entertainment, having an office at 1540 Broadway, New York, NY 10036-4098
("BMG") and ARTISTdirect Recordings Inc. ("ARI") dated of even date herewith
whereby BMG shall purchase a five percent (5%) interest in ARTISTdirect Records,
LLC, a Delaware limited liability company, having an office at 56700 Wilshire
Boulevard, 2nd Floor, Los Angeles, CA 90036 ("Owner") (the "Equity Agreement").
Reference is also made to the standard form exclusive distribution agreement of
BMG Distribution, a unit of BMG attached hereto as Exhibit 1 (the "Standard
Agreement"). The Standard Agreement (to the extent incorporated herein) and this
Agreement shall constitute the basis for the agreement as set forth below
between BMG and Owner with respect to BMG's rendering distribution and foreign
license services to Owner.

This Agreement together with such provisions of the Standard Agreement as may be
incorporated herein by reference shall constitute the agreement between Owner
and BMG concerning the subject matter hereof until the Supplemental Agreement is
entered into. Owner and BMG agree to expeditiously prepare and execute one or
more formal agreements (collectively, the "Supplemental Agreement") and to
negotiate in good faith with respect to the additional provisions (other than
those provisions set forth in this Agreement which shall be deemed
non-negotiable (except as provided herein)) to be included therein. In the event
of any conflict between the Standard Agreement and this agreement, the
provisions described in this agreement shall control.

The Supplemental Agreement will include all the provisions of this Agreement and
the Standard Agreement (which have been incorporated herein by reference) and
shall otherwise be in the form of the Standard Agreement, or as Owner and BMG
shall negotiate in good faith. Owner and BMG further agree that the failure or
refusal of Owner or BMG to enter into the Supplemental Agreement shall not in
any manner impede or compromise the enforceability and effectiveness of this
agreement. In the negotiations relating to the Supplemental Agreement, BMG's
good faith negotiation shall be judged by reference to its business practices
regarding distribution and license agreements with companies which, taken as a
whole are as of the present date, of a size (including, without limitation, both
funding commitment and sales history) and stature similar to Owner, and in which
BMG has a similar equity interest. Unless specifically provided to the contrary
below, all terms defined in the Standard Agreement will have the same meanings
when used herein.

1.      TERM

        (a)     The term of this agreement (hereinafter, the "Term") shall be
                the initial period of two (2) Contract Years commencing on
                October 1, 2001 and ending on September 31, 2003 (unless such
                period is extended, or terminated as provided in this Agreement)
                (the "Initial Period") plus any additional period in respect of
                which BMG exercises the Option granted to BMG below.
                Notwithstanding the foregoing, if no albums are released
                hereunder prior to December 31, 2001, the Term shall be deemed
                automatically extended so that the first Contract Year will be
                deemed to commence on the first day of the calendar quarter in
                which the first album is released hereunder. (By way of example,
                if the first album to be released hereunder is released on
                February 1, 2002, the first Contract Year will be deemed to
                commence

                                      -1-
<PAGE>

                on January 1, 2002 and the Term shall run through December 31,
                2003, unless otherwise extended or terminated as provided in
                this Agreement.)

        (b)     Owner grants BMG one (1) option to extend the Term for one (1)
                additional Contract Year (the "Option Period"). BMG shall
                exercise such option, if at all, by giving Owner written notice
                thereof at the address first written above no later than at the
                end of the third month of the Second Contract Year of the Term.
                If BMG exercises such option, the Option Period shall begin
                immediately after the end of the Initial Period.

        (c)     As used herein, "Contract Year" means the annual period
                beginning on the date of commencement of the Term, and each
                subsequent annual period during the Term beginning on the
                anniversary of that commencement date (as each such annual
                period may be suspended, extended or terminated and those dates
                postponed as expressly provided herein).

        (d)     Owner and BMG agree to enter into exclusive, good faith
                negotiations to extend or renew this Agreement, for a period of
                sixty (60) days, which period will commence six (6) months prior
                to the termination of this Agreement provided that this
                Agreement has been extended pursuant to subparagraph 1(b) above.

2.      TERRITORY

        (a)     The "Domestic Territory" of this agreement is the fifty (50)
                United States, its territories and possessions and Puerto Rico;

        (b)     The "Foreign Territory" of this Agreement is the universe except
                for the Domestic Territory;

        (c)     As used herein, the "Territory" refers to the Domestic Territory
                and the Foreign Territory combined.

3.      BASIC DOMESTIC DISTRIBUTION RIGHTS AND SERVICES

        (a)     Terms used herein and not otherwise defined shall have the same
                meaning as in the Standard Agreement except the following:

                (i)     "Gross Sales" means the total amount invoiced to BMG's
                        Customer(s) for Owner's Product(s) sold hereunder;

                (ii)    "Net Sales" means Gross Sales (i) less any and all
                        credits issued (including returns credits and any
                        applicable incentive/disincentive credits), and reserves
                        established pursuant to paragraph 7 hereof, in respect
                        of Customer(s) returns to BMG of Owner's Product(s) sold
                        hereunder, (ii) plus such reserves as are liquidated
                        pursuant to paragraph 7 hereof;

                (iii)   "Affiliate(s)" shall have the same meaning as in the
                        Standard Agreement, except that Affiliate shall not
                        include any person or entity solely because such

                                      -2-
<PAGE>

                        person or entity owns, directly or indirectly, an equity
                        interest in ARTISTdirect, Inc. ("ADI") or any affiliate
                        thereof; and

                (iv)    Subject to the exclusions defined below, "Owner's
                        Product(s) means any and all so-called "audio Records"
                        including, without limitation, "Record(s)" configured as
                        enhanced and/or other types of compact discs ("CD(s)"),
                        "DVD(s)", cassettes, tapes, tape cartridges,
                        soundtracks, digital audio (and/or video), black vinyl
                        records and all other Record(s) forms, now or hereafter
                        known or developed, and "audio-visual Records", now or
                        hereafter known or developed, derived from "Master(s)"
                        owned or controlled, in whole or in part, directly or
                        indirectly by Owner and/or an Affiliate(s), currently or
                        at any time during the Term, including Ted Field
                        ("Field"), but only to the extent that Owner, such
                        Affiliate(s) or Field actually controls such rights
                        during the Term. Notwithstanding the immediately
                        preceding sentence, if Field's employment is terminated
                        by Owner other than "for cause," then Field shall no
                        longer be bound by the exclusivity provision of this
                        Agreement.

        (b)     BMG shall have the exclusive right to distribute Owner's
                Products in the Domestic Territory during the Term as set forth
                in paragraph 2 of the Standard Agreement. Notwithstanding the
                foregoing, the exclusive distribution rights granted by Owner to
                BMG hereunder in the Domestic Territory will NOT include mail
                order and direct response sales (including record clubs),
                premium sales, and licenses of individual Master(s) for
                compilation records and synchronization purposes; provided,
                however, that during the Term, Owner shall grant BMG's record
                club (BMG Direct, i.e., or any successor thereto) a license on
                terms and conditions comparable to those Owner grants to
                Columbia House (or any successor thereto), if indeed Owner has a
                licensing agreement with Columbia House, and further provided
                that during the Term Owner will give good faith consideration to
                licensing opportunities from the BMG Special Products Unit (or
                any successor thereto) and, Owner warrants represents and agrees
                that if Owner avails itself of any licensing opportunities first
                presented to Owner by BMG Special Products (or any successor
                thereto), Owner shall not pursue such opportunities directly so
                that BMG Special Products (or any successor thereto) does not
                receive a fee for such services.

        (c)     The rights granted to BMG hereunder shall include the right to
                distribute Owner's Products in any and all intangible digital
                formats throughout the Territory ("Digital Distribution"),
                except:

                (i)     Owner may grant ADI the right to Digitally Distribute
                        Owner's Product(s) directly to consumers in the
                        Territory without any financial obligation to BMG
                        provided, however, that the license between Owner and
                        ADI (or the applicable ADI subsidiary or Affiliate) in
                        connection therewith is negotiated on an arm's length
                        basis;

                (ii)    Owner may grant ADI (or ADI's subsidiaries and
                        Affiliates) the right to Digitally Distribute Owner's
                        Product(s) in connection with one (1) or more digital
                        services which ADI (or the applicable ADI subsidiary or
                        Affiliate) syndicates to or with third parties;
                        provided, however, Owner will pay to BMG a distribution
                        fee in connection with such uses equal to fifteen
                        percent (15%) of Owner's net royalty receipts (to be
                        defined) therefor and provided that the

                                      -3-
<PAGE>

                        territory of any such grant shall either be for all or
                        part of the Domestic Territory or for the entire world.

                (iii)   Owner shall have the right to grant licenses to
                        Digitally Distribute Owner's Product(s) to third parties
                        (including, without limitation, PressPlay and MusicNet)
                        for so-called on-line digital "subscription" services
                        without any financial obligation to BMG, provided that
                        the territory of any such license shall either be for
                        all or part of the Domestic Territory or for the entire
                        world. Owner will consult with BMG regarding the terms
                        and conditions of any such third party license agreement
                        prior to entering into such agreement; provided, Owner's
                        inadvertent non-repetitive failure to so consult shall
                        not constitute a breach hereof. Upon BMG's request,
                        Owner shall grant a non-exclusive license to MusicNet
                        for its subscription service on commercial terms to be
                        negotiated in good faith.

        (d)     Additional exclusions;

                (i)     Owner's Product(s) shall not include Record(s) derived
                        from Master(s): (A) which constitute the assets related
                        to a "significant acquisition" of an entity by Owner,
                        ADI or an Affiliate (i.e., an entity which is acquired
                        (in whole or in part) by Owner, ADI or an Affiliate for
                        a purchase price of more than ten million dollars
                        ($10,000,000); provided, however, that those
                        acquisitions for a purchase price in excess of ten
                        million dollars ($10,000,000) shall nonetheless be
                        subject to the terms of this agreement if: (x) such
                        acquisition is of an individual artist, or (y) such
                        acquisition is funded in substantial part by the amounts
                        which ARI is required to fund Owner pursuant to Article
                        5 of the Operating Agreement of Owner, dated May 31,
                        2001). Notwithstanding the foregoing, with respect to
                        any acquisition (other than of an individual artist) for
                        a purchase price in excess of ten million dollars
                        ($10,000,000) funded in substantial part by the amounts
                        which ARI is required to fund Owner pursuant to Article
                        5 of the Operating Agreement, Owner may grant a third
                        party a license for the Foreign Territory only subject
                        to a right of first negotiation and matching right to
                        BMG; (B) of an entity into which or with which ADI or
                        ARI is merged, or which acquires ADI after the date
                        hereof; (C) acquired by ARI, ADI, an Affiliate or Field
                        which are subject to a pre-existing agreement with a
                        third party for the exclusive distribution in the
                        Domestic Territory or exploitation in the Foreign
                        Territory of such Record(s); provided, however, as such
                        third party's right(s) expire, such Record(s) shall be
                        subject to all of the provisions of this Agreement; and
                        (D) which constitute soundtracks of motion pictures and
                        which would otherwise be deemed Owner's Product solely
                        because such motion picture is produced by Field or an
                        affiliate of Field, provided, however, that during the
                        Term neither Field nor an entity controlled by Field
                        will establish a separate Soundtrack Label (as defined
                        in the next sentence). For purposes of this paragraph, a
                        Soundtrack Label will be a label created for the purpose
                        of creating and releasing (either through its own or
                        third party distribution) more than one (1) motion
                        picture soundtrack album. (For purposes of
                        clarification, to the extent that Owner or ADI own or
                        control the soundtrack album rights for a motion
                        picture, such soundtrack album(s) shall be an Owner's
                        Product hereunder).

                                      -4-
<PAGE>

                (ii)    Owner's Product(s) shall not include Record(s) of
                        "heritage" type recording artists released on the ADI
                        owned record label currently known as "ARTISTdirect
                        Digital".

4.      DISTRIBUTION FEE

        (a)     For the Distribution Services rendered hereunder, BMG will
                retain a distribution fee of [***]* ("Distribution Fee") of "Net
                Sales" (as defined herein).

        (b)     Notwithstanding the foregoing, for Net Sales that are in excess
                of [***]* in the aggregate, BMG will retain a Distribution Fee
                of [***]*.

        (c)     Notwithstanding the foregoing, Net Sales that are in excess of
                [***]* in the aggregate, BMG will retain a Distribution Fee of
                [***]*.

        (d)     Notwithstanding the foregoing, for Net Sales that are in excess
                of [***]* in the aggregate BMG will retain a Distribution Fee of
                [***]* and such [***]* Distribution Fee shall be applied to all
                of Owner's cumulative Net Sales retroactive to the first unit
                comprising Owner's Product(s). If such threshold is achieved,
                BMG shall render an adjusted accounting and payment, if any, to
                Owner in respect of such retroactive application of the [***]*
                Distribution Fee at the same time BMG renders the monthly
                accounting for the month in which such threshold is reached.

5.      ADVANCES

        (A)     Execution Advances

                (1)     As a recoupable, non-returnable distribution Advance BMG
                        will pay Owner the sum of [***]* payable as follows:

                        (a)     [***]* promptly upon the full execution of this
                                agreement; and

                        (b)     [***]* promptly upon the full execution the
                                Supplemental Agreement.

                (2)     As a recoupable, non-returnable foreign license Advance,
                        BMG will pay Owner the sum of [***]* (the "First Foreign
                        License Advance") payable as follows:

                        (a)     [***]* promptly upon the full execution of this
                                Agreement; and

                        (b)     [***]* promptly following the full execution of
                                the Supplemental Agreement.

        (B)     Foreign License Agreement Advance

----------------------
* Confidential treatment is requested for confidential information enclosed in
  the brackets and underlined.

                                      -5-
<PAGE>

                Promptly after the commencement of the Second Contract Year, BMG
                will pay Owner a recoupable non-returnable Advance in the sum of
                [***]* (the "Second Foreign License Advance").

        (C)     Threshold Advance

                (1)     As a recoupable non-returnable Advance, BMG will pay
        Owner the sum of [***]* (the "Threshold Advance") payable promptly
        following the expiration of the first consecutive nine (9) months of the
        Term, if and only if:

                        (a)     Net Sales in respect of such nine (9) month
                                period (as determined by reference to the
                                statements reflecting sales through the ninth
                                such month) exceed [***]* (excluding reserves
                                then being held); and

                        (b)     All Advances payable in subparagraph 5(A) above
                                are then being fully recouped in accordance with
                                the recoupment schedule therefor (i.e. a minimum
                                of [***]* has been recouped from Net Proceeds.

        (D)     Option Advances

                (1)     If BMG timely exercises its option for the Option Period
                        pursuant to subparagraph 1(b) above, then promptly
                        following the end of the third month of the Second
                        Contract Year, BMG will pay Owner the sum of [***]* as
                        follows:

                                (a)    a recoupable, non-returnable Advance in
                                       the sum of [***]* (the "Optional Contract
                                       Advance") for the Domestic Territory; and

                                (b)    a recoupable, non-returnable Advance in
                                       the sum of [***]* (the "Foreign License
                                       Option Advance").

        (E)     Recoupment of Advances

                (1)     The Advances payable under subparagraphs 5(A), 5(B) and
                        5(C) above shall be recouped from Net Proceeds (as
                        defined in paragraph 6 below) as follows:

                                (a)    In respect of each month of the first
                                       Contract Year, in an amount which is the
                                       greater of: (i) [***]*; OR (ii) [***]* of
                                       Net Proceeds;

                                (b)    In respect of the first three months of
                                       the second Contract Year of the Term in
                                       an amount which is the greater of: (i)
                                       [***]*; OR (ii) [***]* of Net Proceeds;

                                (c)    In respect of each month of the second
                                       Contract Year, other than the first three
                                       months of such Contract Year:

----------------------
* Confidential treatment is requested for confidential information enclosed in
  the brackets and underlined.

                                      -6-
<PAGE>

                                                (i)     If the Threshold Advance
                                        has NOT been paid, in an amount which is
                                        the greater of: (A) [***]*; or (B)
                                        [***]* of Net Proceeds; OR

                                                (ii)    If the Threshold Advance
                                        has been paid, in an amount which is the
                                        greater of: (A) [***]*; OR (B) [***]* of
                                        Net Proceeds.

                                (d)     The applicable amount specified in
                                subsection (i) of each of (a), (b) and
                                subsection (A) of (c)(i) and (c)(ii)above, shall
                                be known as the "Scheduled Minimum Monthly
                                Recoupment" or "SMMR" for the applicable month.

                (2)     If BMG exercises its Option pursuant to subparagraph
                        1(b) above, then the Optional Contract Advance and the
                        Foreign License Option Advance payable pursuant to
                        subparagraph 5(D) above will be recoupable from Net
                        Proceeds in eighteen (18) equal, consecutive monthly
                        installments of [***]* (the "Option Recoupable Amount"
                        or "ORA." Recoupment of the Advances payable pursuant to
                        subparagraph 5(D) shall commence in month sixteen (16)
                        of the Term. Notwithstanding anything to the contrary
                        contained herein, the ORA is in addition to the SMMR for
                        month sixteen (16) and each subsequent month of the
                        Term. For the avoidance of doubt, the amount of
                        recoupment from month sixteen (16) of the Term onward
                        shall be an amount which is the greater of the total sum
                        of the (i) ORA PLUS the applicable SMMR for the
                        particular month concerned OR (ii) [***]* of Net
                        Proceeds.

                (3)     Notwithstanding anything to the contrary contained
                        herein, if in any given month of the Term, Net Proceeds
                        are less than the sum of the SMMR plus the applicable
                        ORA, (e.g. insufficient for recoupment purposes) then
                        the difference between the sum of the SMMR plus the
                        applicable ORA, and the amount of Net Proceeds (the
                        "Roll Forward Amount" or "RFA") shall be rolled forward
                        to and shall increase the subsequent months' SMMR
                        payment on a cumulative and continuous basis. (By way of
                        example ONLY, if the amount of Net Proceeds in month
                        three of the Term is $100,000, which is $250,000 less
                        than the SMMR of $350,000, then, the RFA is $250,000.
                        The Scheduled Minimum Monthly Recoupment for month four
                        of the Term shall be the sum the RFA and the otherwise
                        applicable SMMR, for a total SMMR of $600,000). If the
                        amount of Net Proceeds for month four of the Term is
                        then $300,000, the RFA for month four shall be $300,000
                        and the SMMR for month five of the Term will be
                        increased to $650,000.

----------------------
* Confidential treatment is requested for confidential information enclosed in
  the brackets and underlined.

                                      -7-
<PAGE>

        (F)     Foreign Royalties

        Notwithstanding anything to the contrary contained herein, at all times
        the entire First Foreign License Advance, the entire Second Foreign
        License Advance and the entire Foreign License Option Advance
        (collectively, the "Foreign Advances") will also be fully recoupable
        from all FRR (as defined in paragraph 11 below). (For the avoidance of
        doubt, (i) while the Foreign Advances are recoupable from Net Proceeds
        as indicated above and FRR, such Foreign Advances shall only be
        recoupable once, (ii) Foreign Royalties shall not be used to recoup the
        Domestic Advances herein and, (iii) Foreign Advances recouped from FRR
        shall in no way reduce the SMMR and/or ORA above unless and until all
        Advances have been recouped hereunder.

6.      NET PROCEEDS

        (a)     "Net Proceeds" means Net Sales less the Distribution Fee and any
                other amounts, including without limitation manufacturing,
                warehouse and advertising costs, which BMG shall be entitled to
                offset or otherwise deduct therefrom hereunder. BMG will account
                for Net Proceeds within sixty (60) days after the last day of
                each calendar month of the Term, except Net Proceeds in respect
                of a "new release" will be accounted five (5) business days
                following the end of the month in which payment is due to BMG
                from "Customer(s)" (subject to any additional dating authorized
                by Owner and approved by BMG). For purposes of clarification,
                the accounting for "new releases" in the immediately preceding
                sentence only applies to the initial shipments of such "new
                release" (i.e., shipments made prior to the street date of the
                release concerned all subsequent shipments of such release will
                be in accordance with BMG's standard accounting practices and
                the accounting for such "new releases" may be rendered up to
                ninety (90) business days following the last day of the month of
                the "street date" for such "new release.".

        (b)     Manufacturing and Miscellaneous Invoices. BMG shall deduct all
                invoices, except coop advertising, from Net Proceeds sixty (60)
                days following the end of the month of each calendar month of
                the Term in which such invoice is billed. By way of example, an
                invoice generated by BMG during the month of January, shall be
                deducted from the accounting of Net Proceeds rendered to Owner
                at the end of March.

        (c)     Coop Advertising. BMG shall invoice Owner for coop advertising
                commitment(s) ("CAC") during the month immediately following the
                start date for such CAC. Invoices for CACs shall be deducted
                from Net Proceeds thirty (30) days following the end of the
                month in which the invoice is billed by BMG to Owner. By way of
                example, a CAC with a start date during the month of January
                will be invoiced to Owner in February and shall be deducted from
                Net Proceeds due to Owner at the end of March. Notwithstanding
                the foregoing, from time to time BMG may be required to make
                adjustments or other administrative tasks which prevent BMG from
                generating an invoice in a timely manner. In such instances,
                Owner remains responsible for such invoiced costs whether or not
                Owner receives the invoice in a timely manner or otherwise,
                provided however, that BMG evidences to Owner, upon Owner's
                request that BMG has paid the amount which would have been
                invoiced to Owner.

                                      -8-
<PAGE>

        (d)     Except as otherwise expressly provided herein, BMG will bear the
                costs and expenses associated with Customer(s) bad debt risk and
                cash discounts offered by BMG for timely payment in respect of
                Owner's Product(s) sold and distributed by BMG to Customer(s).
                Accordingly, Owner will bear the costs and expenses associated
                with bad debt risk related to Owner's Export Product(s) (if
                authorized or approved by Owner) and other Owner's Product(s),
                if any, which is not distributed by BMG hereunder or which for
                any reason is distributed by BMG, on behalf of Owner, to a
                person other than a Customer(s).

7.      RETURNS RESERVES

                (a)     (i)     With respect to Owner's Product(s) sold in the
                       Domestic Territory and each calendar month of the Term,
                       BMG will be entitled to establish a reserve against
                       returns at the rate of twenty (20%) percent (except forty
                       (40%) percent with respect to Gross Sales of Owner's
                       Product(s) as so-called "singles" Record(s)) of Gross
                       Sales for Owner's Product(s) sold in the Domestic
                       Territory. The reserve will be maintained for a period of
                       four (4) months.

                       (ii)    Notwithstanding the foregoing, (1) following the
                       first Contract Year, BMG will be entitled to adjust
                       (increase and/or decrease) the reserves to reflect the
                       level, value and timing of the returns anticipated by BMG
                       in respect of Owner's Product(s) returnable to BMG
                       hereunder. In making any such adjustment, the types of
                       factors which BMG will consider will include BMG's
                       so-called weighted, historical "returns-running rate"
                       experience (i.e., the percentage rate of returns
                       applicable to particular Owner's Product(s) during a
                       given period (except that with respect to the Singles
                       Record(s) it will be the percentage rate of returns
                       applicable to Owner's Product(s) distributed as Singles
                       Record(s) during such period)), which BMG determines (in
                       its reasonable sound commercial judgment) are likely to
                       be returned to BMG, (2) BMG will adjust (on a monthly
                       basis) the amount of reserves held with respect to a
                       particular Owner's Product(s) ("POP") (If the reserves
                       maintained for a POP exceed the difference between gross
                       shipments for the POP and the sum of one hundred and
                       fifteen percent (115%) of Soundscan's reported sales of
                       the POP and actual units returned of such POP, then BMG
                       shall liquidate such difference.

                       (iii)   Notwithstanding the foregoing, (x) BMG shall not
                       be required to compute said calculation and accelerate
                       reserves liquidation for a POP with a gross shipment of
                       less than forty thousand (40,000) units); and (y) for
                       each of the final nine (9) calendar months of the Term,
                       the amount of the reserve will be the applicable
                       percentage of the higher of (A) Gross Sales for the month
                       concerned, or (B) the average monthly Gross Sales for the
                       twelve months immediately preceding the final twelve (12)
                       months of the Term and such reserve will be maintained
                       until nine (9) months following the expiration or
                       termination of the Term, (the "Post-Term Returns
                       Period").

        (b)     Notwithstanding anything to the contrary contained herein, BMG
                will retain all reserves established in respect of the nine (9)
                month period preceding the last day of the Term and apply such
                reserves against credits issued during such period

                                      -9-
<PAGE>

                and/or the Post-Term Returns Period. Within thirty (30) days
                following the end of the Post-term Returns Period, a
                determination of returns and credits issued will be made by BMG.
                If credits issued by BMG exceed reserves retained by BMG, Owner
                promptly will pay BMG the value of Net Proceeds of that
                difference, and if at the end of the Post-Term Returns Period
                such reserves exceed credits issued, BMG promptly will pay Owner
                the value of the Net Proceeds of that difference.

        (c)     Paragraph 7(b) above will not be applicable hereunder if:

                        (1)     Owner enters into a written agreement ("New
                                Distributor Agreement") with a "New Distributor"
                                (as defined below) pursuant to which the New
                                Distributor agrees (a) to accept all returns of
                                Owner's Product(s) upon and after the expiration
                                or termination of the Term; (b) to be fully
                                responsible for crediting Customer(s) therefor
                                at the prices applicable pursuant to (and
                                otherwise in accordance with) the terms of the
                                then applicable BMG Returns Policy; and (c) to
                                fully indemnify BMG (d) and hold BMG harmless
                                from any and all claims against BMG and from any
                                losses, claims, costs, liabilities or damages
                                (including attorney's fees) arising out of or
                                connected with a breach by New Distributor of
                                its obligations under the New Distributor
                                Agreement; and

                        (2)     Owner causes New Distributor to furnish BMG with
                                written notification of the New Distribution
                                Agreement which complies with the provisions of
                                subparagraph 7(c)(1) (e.g. a copy of the letter
                                sent by New Distributor to Customer(s) which is
                                consistent with the provisions of paragraph
                                7(c)(1) ("New Distributor Customer(s) Letter")).

                If the conditions set forth in subsections 7(c)(1) and 7(c)(2)
                above are met, BMG will liquidate the unliquidated reserves
                established hereunder in accordance with the provisions hereof
                promptly following BMG's receipt of the New Distributor
                Customer(s) Letter (BMG retaining only a reasonable reserve in
                respect of foreseeable returns to BMG (e.g. so-called "pipeline"
                returns)) provided that prior to any such liquidation Owner has
                paid (or made specific arrangements with BMG to pay) all
                outstanding amounts due (or to become due thereafter). "New
                Distributor" means a so-called "Major" third party distribution
                company or other third party distributor reasonably approved by
                BMG which operates in the prerecorded record business segment of
                the record industry, is ordinarily regularly engaged in
                distributing to Customer(s) product(s) similar to Owner's
                Product(s), agrees to render Distribution Services as Owner's
                new distributor, and agrees, upon and after the expiration of
                the Term, to accept all returns of Owner's Product(s) and to be
                solely and fully responsible for crediting BMG's Customer(s) in
                accordance with the terms hereof and otherwise fulfilling the
                obligations contemplated by this paragraph.

        (d)     For returns received by the New Distributor during the first
                four and one-half (4 1/2) months of the Post-Term Returns Period
                of units of Records distributed by BMG hereunder, BMG shall
                remit to Owner the Distribution Fee taken by BMG in respect
                thereof provided that (1) the New Distributor has not released
                the Record concerned with the same selection number, and (2) the
                New Distributor provides BMG with a

                                      -10-
<PAGE>

                detailed inventory control report evidencing such returns to
                BMG's reasonable satisfaction.

        (e)     Notwithstanding the foregoing, if Owner evidences to BMG in the
                form of a guaranty or bank letter of credit in form and
                substance reasonably satisfactory to BMG (BMG employing its
                reasonable commercial judgment in making a determination in this
                regard) that Owner is then and will continue to be in a position
                to timely fulfill its financial obligations and responsibilities
                due to BMG hereunder, then BMG shall not withhold reserves for
                the remainder of the Term in respect of sales of Owner's
                Product(s) in the Domestic Territory.

8.      MANUFACTURING SERVICES

        BMG will render and charge Owner for "manufacturing" services at the
        prices set forth in Exhibit D of the Standard Agreement.

                Notwithstanding the foregoing, if Owner determines the prices
        charged by BMG for manufacturing services related to Owner's Product(s)
        in the Domestic Territory are no longer so-called "competitive prices,"
        Owner, subject to not unreasonably disrupting the business of Owner or
        of BMG and further subject to the reasonable scheduling and component
        requirements necessary to maintain BMG's efficient administration of
        BMG's manufacturing services, shall have the right not more than once
        within any twelve (12) month period of the Term to request that BMG
        match the terms of a written bona fide third party offer ("Competitive
        Offer") to manufacture a particular configuration of Owner's Product(s)
        for no less than a consecutive twelve (12) month period. Owner shall
        provide BMG with a written Competitive Offer to Owner from at least two
        (2) reputable manufacturers (other than Sonopress or any affiliate of
        Sonopress) offering at least the same quality of services as BMG
        provides. BMG's match, if any, shall be the average of the two
        Competitive Offers. If within ten (10) business days of BMG's receipt of
        Owner's written Competitive Offer, BMG fails to respond to Owner's
        request or notifies Owner that BMG is not willing to match such offer,
        then and only then may Owner utilize the services of those third-party
        manufacturers from which the Competitive Offer were secured for the
        particular configuration concerned.

9.      DELIVERY COMMITMENT

        In respect of the Territory, Owner shall deliver a minimum of six (6)
        "Qualifying Albums" (as defined below) during the first Contract Year of
        the Term, at least eight (8) Qualifying Albums during the second
        Contract Year of the Term and at least ten (10) Qualifying Albums during
        the Option Period, if any.

        If at any time during the Term Owner delivers less than the minimum
        number of Qualifying Albums during any Contract Year, such Contract Year
        shall be extended and shall continue until Owner has delivered the
        minimum number of Qualifying Albums for such Contract Year. If any
        extension continues for a period of nine (9) months or more, BMG shall
        also have the option, in its sole discretion, to terminate the Term of
        this Agreement and to require Owner to repay Advances on a pro-rata
        basis with the number of Qualifying Albums Owner has not delivered,
        provided, however, that Owner shall not be required to repay BMG more
        than the then outstanding amount of unrecouped Advances hereunder. By
        way of

                                      -11-
<PAGE>

        example, if during the First Contract Year Owner delivers five (5)
        Qualifying Albums, and following the nine (9) month period of extension
        of the Term, BMG terminates the Term, Owner shall repay one-sixth (1/6)
        of all Advances made hereunder to the date of Termination.

        Owner shall not deliver albums for the primary purpose of satisfying the
        foregoing delivery commitment (i.e., Owner shall act in good faith in
        delivering albums hereunder).

        A Qualifying Album means a single-disc album:

                (a) which is recorded in the pop, rock, rap, urban or country
        genres;

                (b) for which Owner controls distribution rights in all of the
        Territory; and

                (c) which is comprised of newly recorded, previously unreleased
        studio recordings featuring the performances of a single artist (whether
        an individual or group) or which is a non-score soundtrack album to a
        motion picture with a budget in excess of $20 Million.

        Notwithstanding the foregoing: (i) up to one (1) "live" album per
        Contract Year shall count as a Qualifying Album, provided such live
        album (A) otherwise satisfies the criteria for a Qualifying Album and
        (B) embodies compositions previously unreleased by the applicable artist
        on 65% or more of the total playing time of such album; and (ii) up to
        one (1) album per Contract Year shall count as a Qualifying Album even
        though Owner does not control the distribution rights therefor for all
        of the Territory, provided such album otherwise satisfies the criteria
        for a Qualifying Album and provided that owner does control the
        distribution rights for the Domestic Territory and a substantial portion
        of the Foreign Territory.

10.     MARKETING/PROMOTION/SALES

        (a)     Owner will be responsible in the Domestic Territory for:

                (i)     all marketing, advertising and promotion of Owner's
                        Product(s); and

                (ii)    all BMG approved special sales programs, dating, special
                        sales discounts and campaigns in connection with Owner's
                        Product(s). (Owner shall have the right to request or
                        consent to any such "special terms" in accordance with
                        paragraph 8(c) of the Standard Agreement.)
                        Notwithstanding the foregoing, BMG, will facilitate the
                        placement and verification (at Owner's sole cost and
                        expense (on a so-called "commit" basis in lieu of the
                        so-called "street" date)) of Owner's coop advertising
                        commitments. For purposes of clarification, Owner shall
                        have the right to pre-approve Coop Advertising
                        hereunder.

        (b)     In consultation with BMG, Owner will establish an initial
                release schedule for each specific Owner's Product(s) in the
                Domestic Territory in accordance with

                                      -12-
<PAGE>

                subparagraph 9(c) of the Standard Agreement. Notwithstanding the
                foregoing, it is hereby understood and agreed that Owner's
                Product(s) for recording artist p/k/a "Custom" scheduled to be
                released in October of 2001 shall be released in a so-called
                "off-cycle" and ONLY for said first "Custom" release BMG shall
                not charge Owner the customary off-cycle charges therefor.

        (c)     BMG will not edit, re-mix or recompile or, with respect to the
                Domestic territory, otherwise alter Owner's Products without
                Owner's prior consent.

11.     FOREIGN LICENSE

        (a)     During the Term, Owner hereby grants BMG the exclusive rights to
                exploit all of Owner's Product throughout the Foreign Territory.

        (b)     BMG's rights in the Foreign Territory shall be extended with
                respect to any Owner's Product(s) delivered in the last nine (9)
                months of the Term so that BMG's rights hereunder shall continue
                for nine (9) months from delivery with respect to each such
                Owner's Product(s).

        (c)     BMG shall have a six (6) month non-exclusive sell-off period
                following (a) or (b), as applicable. There shall be no excessive
                build-up of inventory in anticipation of the sell-off period and
                during the sell-off period no Record shall be sold on a price
                line lower than the lowest price line on which such Record was
                rightfully sold hereunder during the Term.

        (d)     Owner and BMG shall negotiate in good faith with respect to
                appropriate foreign release provisions to be included in the
                Supplemental Agreement. Owner and BMG agree that such provision
                shall contain the following elements:

                        (1) the release provision shall apply to the United
                        Kingdom, Australia, France, Germany, Japan, Canada and
                        Mexico only;

                        (2) the release provision shall not apply until the
                        applicable album has been released in the United States
                        and has had some quantifiable sales success, provided
                        that Owner shall have the right to have the provision
                        apply to one album per year which has not had such
                        success and as may be necessary to comply with
                        reasonable release provisions in applicable artist
                        agreements;

                        (3) a provision which provides for exceptions to
                        sections (1) and (2) above to the extent necessary to
                        comply with reasonable release provisions in applicable
                        artist agreements; and

                        (4) the release commitment shall not apply until BMG has
                        been given notice and a cure period to be negotiated and
                        if BMG fails to release the applicable album within the
                        applicable cure period the sole remedy shall be that
                        Owner shall be free to license such Owner's Product to a
                        third party with respect to such territory, provided
                        however, that any revenue from such license will be paid
                        to BMG and will be deemed FRR hereunder until such time
                        as BMG has recouped the Foreign Advances hereunder.

                                      -13-
<PAGE>

        (e)     With respect to sales of Owner's Product(s) in the Foreign
                Territory BMG will accrue to Owner's account an all-inclusive,
                comprehensive (including, without limitation MPTF, SPP, artist,
                producer and all other Owner obligations to third parties)
                royalty at the applicable rate(s) set forth below on 100% of
                Owner's Product(s) (excluding Digital Records) hereunder sold
                (i.e. neither returned nor exchanged) by BMG or its licensees
                through normal retail channels, less container deductions and
                taxes (stated as part of or included in the price), and
                calculated (on a published price to dealers ("PPD") basis) at
                the following rates in respect of such Owner's Product(s):

                        (1)     Albums: (i)     at Top Price Line, [***]*;
                                        (ii)    at Mid-Price-Line, [***]*;
                                        (iii)   at Budget Price Line, [***]* and
                                        (iv)    at Superbudget Price Line,
                                                [***]*;

                        (2)     Singles: [***]* for all Price Lines;

                        (3)     EPs: [***]* for all Price Lines;

                        (4)     Price Line Definitions:

                                (a)     Mid Price-Line: Records sold at a price
                                list or category which is equal to or less than
                                [***]* and equal to, or in excess of, [***]* of
                                the applicable Top Price Line for Records of a
                                particular type and embodying a particular
                                repertoire line release by the applicable
                                releasing party in the applicable country or
                                territory;

                                (b)     Budget Price Line: Records sold at a
                                price list or category which is less than [***]*
                                and equal to, or in excess of, [***]* of the
                                applicable Top Price Line for Records of a
                                particular type and embodying a particular
                                repertoire line release by the applicable
                                releasing party in the applicable country or
                                territory.

                                (c)     Superbudget Price Line: Records sold at
                                a price list or category which is less than
                                [***]* of the applicable Top Price Line for
                                Records of a particular type and embodying a
                                particular repertoire line release by the
                                applicable releasing party in the applicable
                                country or territory.

                                (d)     Digital Records: [***]* of the
                                applicable rate(s) set forth above. ("Digital
                                Records" does not include compact discs or
                                digital transmission for the purposes of
                                calculating royalties hereunder).

----------------------
* Confidential treatment is requested for confidential information enclosed in
  the brackets and underlined.

                                      -14-
<PAGE>

                        (5)     Club Operations: The royalty base for the sale
                        of Records through club operations shall be the club
                        operation's actual selling price of such Records to its
                        members less actual third-party shipping and handling
                        charges separately stated and paid by such member and
                        the applicable royalty shall be [***]* of such royalty
                        base for records sold at a Top Price Line; or [***]* of
                        such royalty base for Records sold at less than a Top
                        Price Line.

                        (6)     Videograms (including DVD-Videos):

                                        (i)     CD-V 3" and 5": [***]*;

                                        (ii)    CD-V 8": [***]* if 30 minutes or
                                shorter, [***]* if longer than 30 minutes;

                                        (iii)   Video cassette, DVD video and
                                other CD-V at Top Price Line: [***]* if 30
                                minutes or shorter and [***]* if longer than
                                over 30 minutes; and

                                        (iv)    Video cassette, DVD video and
                                other CD-V at Mid-Price-Line: [***]* if 30
                                minutes or shorter and [***]* if longer than
                                thirty minutes.

                        (7)     Third Party Licensing: [***]* of monies received
                        by BMG solely attributable to the exploitation of the
                        Master Recordings by third parties within the Foreign
                        Territory.

                        (8)     The following container charges equal to the
                        following percentage of the PPD net of any consumer
                        taxes included therein shall apply:

                                        [***]* with respect to black vinyl;

                                        [***]* with respect to pre-recorded
                                        analog tapes;

                                        [***]* with respect to compact discs and
                                        all other records, including without
                                        limitation all audiovisual records.

        (f)     Royalty Accounting: Accountings for sales hereunder will be
                rendered within 120 days following the end of each calendar
                quarter and shall reflect sales made in the applicable quarter.
                Except as otherwise provided herein, the royalties applicable
                hereunder shall be computed on the same basis and in
                substantially the same manner as BMG accounts to its
                wholly-owned affiliates (including, without limitation,
                calculation and liquidation of reserves, free goods and
                treatment of returns). All royalties payable to or on behalf of
                Owner pursuant to the Foreign License portion of this Agreement
                shall be referred to herein as "Foreign Royalties Received" or
                "FRR".

        (g)     In connection with the Supplemental Agreement, Owner and BMG
                will negotiate in good faith with respect to reasonable
                marketing approvals and other similar terms for the Foreign
                Territory as are customary for deals of this nature.

----------------------
* Confidential treatment is requested for confidential information enclosed in
  the brackets and underlined.

                                      -15-
<PAGE>

12.     KEY MAN

        If for any reason Field shall cease to be actively engaged in the day to
        day management of Owner during the Term, then BMG shall have the right,
        by written notice to Owner and without liability, to terminate the Term
        of this agreement, in which event Owner shall promptly pay to BMG an
        amount equal to the amount of any unrecouped Advances hereunder.

13.     MISCELLANEOUS

        (a)     Promptly following the execution hereof, BMG, upon Owner's
                request, will introduce Owner to BMG's Information Systems and
                Technology ("IS&T") in order to afford Owner the option of using
                the available support services of such IS&T unit in connection
                with the tracking of Owner's exploitation of Owner's Product(s)
                in the Domestic Territory. Except as otherwise provided herein,
                if at any time after the date hereof, IS&T no longer charges a
                fee to BMG's distributed labels for the support services it
                offers, or BMG absorbs said IS&T charges for all of its third
                party distributed labels, then Owner shall be a beneficiary of
                such policy(ies).

        (b)     Within the sixty (60) day period immediately following the full
                execution of this Agreement, the parties hereto agree to
                continue negotiating in good faith with respect to the
                Supplemental Agreement mentioned hereinabove (including, without
                limitation, with respect to the foreign license) consistent with
                the foregoing terms and conditions and containing such other
                terms and conditions as are contained in Standard Agreement,
                inclusive of, but not limited to, terms and conditions related
                to ordering, title and ownership, audit rights, warranties and
                representations, indemnification, excess inventory, deletions,
                force majeure, governing law, sale of products, processing and
                quantities, price increases, key personnel).

                                      -16-
<PAGE>

        (c)     Paragraphs 17 and 20 through 28 of the Standard Agreement are
                hereby incorporated by reference, and shall be part of this
                Agreement. Notwithstanding the foregoing, BMG shall, at Owner's
                request, negotiate such provisions in good faith in connection
                with the Supplemental Agreement in accordance with its usual
                business practices.

ARTISTdirect Records, LLC                            BMG Distribution,
                                                     a unit of BMG Music,
                                                     d/b/a BMG Entertainment

By:/s/ Marc P. Geiger                                By:/s/ Pete Jones
-------------------------                            -------------------------
Date: October 29, 2001                               Date: October 31, 2001

To the limited extent applicable to him:

/s/ Ted Field
-------------------------
Ted Field

Date: October 29, 2001

                                      -17-
<PAGE>

                                    EXHIBIT 1
           TO THE SHORTFORM DISTRIBUTION AND FOREIGN LICENSE AGREEMENT
         BETWEEN BMG MUSIC AND ARTISTDIRECT RECORDS, LLC, AND TED FIELD

                              "STANDARD AGREEMENT"

                             DISTRIBUTION AGREEMENT

                                 by and between

                        BMG MUSIC D/B/A BMG ENTERTAINMENT

                                       and

                            ARTISTDIRECT RECORDS, LLC

                         DATED AS OF ____________, 200_

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
PART I - DISTRIBUTION.....................................................    1

         1.    TERM.......................................................    1

         2.    BASIC SERVICES.............................................    1

         3.    ORDERING/TITLE/OWNERSHIP...................................    4

         4.    DISTRIBUTION FEE/NET SALES/NET PROCEEDS/RESERVES/PAYMENT...    6

         5.    RETURNS/PROCEDURE/NON-BMG PRODUCT(S).......................    9

         6.    EXCESS INVENTORY...........................................   12

         7.    DELETED PRODUCTS...........................................   13

         8.    SALE OF PRODUCTS BY BMG....................................   13

         9.    MARKETING/ADVERTISING/PROMOTION............................   17

         10.   TRADEMARKS.................................................   18

PART II - MANUFACTURING...................................................   19

         11.   PURCHASE/PROCESSING/QUANTITIES.............................   19

         12.   PRICES/ADDITIONAL TERMS....................................   21

PART III - GENERAL........................................................   21

         13.   APPLICABILITY..............................................   21

         14.   STATEMENTS/ACCOUNTING/AUDIT/PAYMENTS/COLLATERAL............   21

         15.   FORCE MAJEURE..............................................   23

         16.   TERMINATION................................................   23

         17.   OWNER'S REPRESENTATIONS, WARRANTIES, COVENANTS AND
               INDEMNIFICATION............................................   25

         18.   OWNER'S RELATIONSHIP TO BMG................................   28

         19.   KEY PERSONNEL..............................................   29

         20.   NOTICES....................................................   29
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                         <C>
         21.   ASSIGNMENT................................................... 29

         22.   WAIVERS AND REMEDIES......................................... 30

         23.   HEADINGS..................................................... 30

         24.   INVESTIGATION................................................ 30

         25.   ENTIRE AGREEMENT............................................. 30

         26.   SEVERABILITY................................................. 30

         27.   GOVERNING LAW................................................ 31

         28.   COUNTERPARTS................................................. 31

         29.   INTERNATIONAL CATALOG LICENSING AGREEMENT ("ICLA")........... 31

SCHEDULES AND EXHIBITS

Schedule 1 - Owner's Products............................................... 33
Schedule 2 - Non-BMG Product(s)............................................. 34
Exhibit A - Price Schedule for Warehouse Services........................... 35
Exhibit B - Parental Advisory Logo.......................................... 36
Exhibit C - Trademark Requirements.......................................... 37
Exhibit C-1 - Designation of Origin......................................... 39
Exhibit D - Price Schedule for Audio Manufacturing Services................. 40
Exhibit E - Pride Schedule for Video Duplication Services................... 43
Exhibit F - Security Agreement.............................................. 44
Exhibit G - Short Form Security Agreement................................... 45
Exhibit H - ICLA Terms...................................................... 55
</TABLE>

                                       ii
<PAGE>

                             DISTRIBUTION AGREEMENT

AGREEMENT made as of the _____ day of _____________, 200_, by and between BMG
Music, d/b/a BMG Entertainment, a New York general partnership, having an office
at 1540 Broadway, New York, New York 10036-4098 ("BMG") and
_______________________ a ________________________ its units and divisions and
its affiliated and associated labels, having an office at
___________________________________ ("Owner").

In consideration of the representations, warranties, covenants and mutual
promises contained herein and subject to the terms and conditions hereinafter
set out, the parties hereto agree as follows:

                             PART I - DISTRIBUTION

1. TERM

      (a) The "Term" of this Agreement is the ___________ (___)-year period
commencing on the date first written hereinabove ("Initial Period"), unless
terminated or extended as provided herein.

      (b) Owner grants BMG two (2) separate, consecutive options to extend the
Term ("First Option" and "Second Option," respectively). The First Option and
the Second Option are sometimes herein referred to as the "Option(s)." Each
"Option(s)" is for one (1) additional one (1)-year period(s) ("Additional
Period(s)"). The First Option is to extend the Initial Period for an additional
one (1)-year period commencing immediately following the expiration of the
Initial Period ("First Additional Period") and the Second Option is to extend
the First Additional Period for an additional one (1)-year period commencing
immediately following the expiration of the First Additional Period ("Second
Additional Period"). Each Option(s) will be exercised, if at all, by written
notice from BMG to Owner. The First Option will be exercised, if at all, prior
to the expiration of the Initial Period and the Second Option will be exercised,
if at all, prior to the expiration of the First Additional Period.

      (c) The Initial Period and any Additional Period(s) constitute the "Term."
As used herein, "Contract Year" means the twelve (12)-month period commencing on
the month and day first written hereinabove of any year of the Term and ending
on the day immediately preceding such day of the following year of the Term.

2. BASIC SERVICES

      (a) As used herein -

            (i) (A) "Owner's Product(s)" means any and all so-called "sound
recordings" including, without limitation, "Record(s)" configured as enhanced
and/or other types of compact discs ("CD(s)"), "DVD(s)" cassettes, tapes, tape
cartridges, soundtracks, digital audio (and/or video) discs, black vinyl records
and all other Record(s) forms, now or hereafter known or developed, and
"audio-visual recordings," now or hereafter known or developed, derived from
"Master(s)" owned or controlled, in whole or in part, directly or indirectly by
Owner and/or an Affiliate(s), currently or at any time during the Term. Attached
hereto and by

                                       1
<PAGE>

this reference incorporated herein as Schedule 1 is a list of Owners Product(s)
as of the date first written hereinabove.

                  (B) "Affiliates" means any person or entity engaged in the
so-called media/entertainment industry" that directly or indirectly owns or
controls Owner, is owned or controlled by Owner or "Key Personnel" (or any
combination of them), or is under common ownership or control with Owner; "own"
(including the terms "owned by" and "under common ownership with") means the
possession, directly or indirectly, of a majority of the indicia of ownership of
an entity (i.e., a majority of the stock in the case of a corporate entity or a
majority interest in the case of a partnership); and "control" (including the
terms "controlled by" and under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of an entity, for example in the case of a corporate
entity through the power to elect a majority of the board of directors, whether
through the ownership of voting securities, by contract, or otherwise.

            (ii) "Master(s)" means the original material object, form or basis
in which sounds (with and without images) and/or images (with and without
sounds) are fixed or otherwise established by any method now known or later
developed and from which sounds and/or images can be perceived, reproduced or
otherwise communicated, either directly or with the aid of a machine, device or
process (including, without limitation, "Sony 1610/1630" master(s) CD(s), DVD(s)
and "encoded" digital masters(s)).

            (iii) "Record(s)" means any reproduction of a Master(s) in any form
now known or later developed in which sounds (with and without visual images)
are fixed or otherwise established by any method now known or later developed,
and from which such sounds can be perceived, reproduced or otherwise
communicated, either directly or with the aid of a machine, device or process,
and include the objects in which such sounds are fixed, inclusive of, but not
limited to, CD(s), DVD(s), cassettes, tapes, tape cartridges, soundtracks,
digital audio (and/or video) discs, digital phonograph records and black vinyl
record(s).

      (b) (i) (A) During the Term, BMG will perform for Owner "Distribution
Services" (as more fully described herein, including, without limitation, in
Paragraph 2(c) hereof) related to the distribution of Owner's Product(s) within
the fifty United States, its territories and possessions and Puerto Rico
("Territory ") by customary means through any and all channels now or hereafter
known including, without limitation, all normal wholesale and retail channels,
(e.g., all traditional music retailers, chains, mass merchants, super stores,
consumer electronic stores, one-stops, independent stops and rack jobbers,
so-called "duty free" channels and military channels (including the Army Air
Force Exchange Services "AAFES" (the central distribution point in Dallas,
Texas)), so-called "alternative," "non-traditional" and "special market"
channels, "direct" to consumer and "direct mail" channels, the Internet, any and
all electronic and on-line mediums, channels or transmissions (in any and all
forms with and without other data) now or hereafter known or developed, any
"direct transmission" and "indirect transmission" to consumer over wire or
through the air (including, without limitation, via telephone, satellite
(inclusive of, but not limited to, point to multipoint satellite and direct
broadcast satellite) or cable), and any and all point of sale manufacturing
channels and any and all other channels in which BMG performs distribution
services on behalf of other persons ("Distributee(s)") with respect to products
comparable to Owner's Product(s) ("Distributee(s)

                                       2
<PAGE>

Product(s)") and Owner will rely exclusively on BMG therefor. During the Term
and throughout the Territory, Owner will use its best efforts to acquire the
right for BMG to exclusively perform Distribution Services with respect to the
product(s) described in the definition of Owner's Product(s) provided that such
right and said product(s) are available to Owner for inclusion hereunder. In
addition, Owner will use its best efforts to retain such rights, during the Term
and in the Territory, with respect to each Owner's Product(s).

                  (B) If BMG determines (in its sound commercial judgment) that
a particular Owner's Product(s) distributed hereunder through a secondary
channel has achieved the level of success which warrants its being distributed
through BMG's primary traditional distribution channel, BMG will be entitled to
distribute the particular Owner's Product(s) concerned through such traditional
channel and will furnish Owner with written notice to such effect.

            (ii) If from time to time during the Term Owner requests that BMG
export a reasonable number of Owner's Product(s) ("Owner's Export Product(s)")
outside of the Territory, BMG will retain a distribution fee therefor,
calculated in the manner in which the Distribution Fee is calculated hereunder
in respect of Owner's Product(s) sold to Customer(s) in the Territory. BMG,
solely as an accommodation to Owner and subject to Owner having fulfilled all of
its obligations to BMG hereunder (e.g., paying to BMG the manufacturing costs
associated therewith), will export the Owner's Export Product(s) in accordance
with BMG's then current export policy ("Export Policy"). Following the
commencement of the Term, BMG will familiarize Owner with the Export Policy. BMG
will invoice Owner for such export services (including, without limitation, the
charges listed in Exhibit A attached hereto and by this reference incorporated
herein) and Owner will pay such invoice in accordance with Paragraphs 14(b) and
(c) hereof. As between BMG and Owner, Owner will be solely responsible both for
invoicing and collecting from third parties any and all sums due in connection
with Owner's Export Product(s) (including, without limitation, monies payable to
Owner in respect of the sale of Owner's Export Product(s) and withholding taxes)
as well as for the payment of any and all monies payable to third parties
(including, without limitation, music publishers in respect of mechanical
royalties and any other copyright payments due and owing).

      (c) (iii) Without limiting any provision hereunder, as used in Paragraph
2(b)(i) "Distribution Services" include the following: (A) coordination of the
delivery of Owner's Product(s) to the "Warehouse" (as defined herein); (B)
inventory control and management of Owner's Product(s); (C) receiving Owner's
Product(s) at the Warehouse; (D) stocking and storing the delivered Owner's
Product(s) at the Warehouse; (E) solicitation and servicing of "Customer(s)" (as
defined herein); (F) acceptance, processing and fulfillment of orders from
Customer(s); (G) picking Owner's Product(s) from BMG's inventory for shipment to
Customer(s); (H) packing the picked Owner's Product(s) for shipment to
Customer(s); (I) preparing Owner's Product(s) for transmission or communication
to Customer(s); (J) physically transporting Owner's Product(s) from the
Warehouse to Customer(s) (K) transmitting or otherwise communicating Owner's
Product(s) to Customer(s); (L) invoicing Customer(s); collecting from
Customer(s); (M) processing returns of Owner's Product(s) for scrap or return to
inventory; (N) crediting Customer(s) (e.g., credits in respect of returns, and
failed transmissions, communications and other forms of delivery); (O)
restocking Owner's Product(s) which have been returned in a saleable condition
(or refurbished to a saleable condition); (P) subject to

                                       3
<PAGE>

marketing the terms and conditions contained herein, handling, processing and
administering of certain Owner authorized or approved "cooperative-advertising"
expenditures made in connection with Owner's Product(s) (including, without
limitation, all related "Advertising Commitments" and "claims" for reimbursement
(as such terms are more fully described in the Advertising Policy)) which have
been approved by BMG beforehand; and (Q) performing such other services in
connection with the exploitation of such rights herein granted to BMG, as are
customarily performed by BMG with respect to its exploitation of such rights
through channels and any mediums now or hereafter known or developed.

            (ii) (A) In addition to the Distribution Services, BMG will furnish
Owner, gratis, with such so-called "management information reports" as are
customarily furnished by BMG to Distributee(s) at no charge ("MIS Reports").
Moreover, BMG, upon Owner's request, will also introduce Owner to BMG's
Information and Systems Technology and Media Systems units ("IS&T" & "MS,"
respectively) which will afford Owner the option of using the services of IS&T
and MS (at the prices charged by MS and IS&T therefor) to support Owner's end
user computing needs for the purpose of accessing the MIS Reports and otherwise
communicating with BMG through BMG's so-called "computer network connectivity
setup" (e.g., services related to hardware and software procurement, hardware
and software installation, hardware maintenance, software support and consulting
services, E-mail and file and print services, internet access, infrastructure
services (LAN & WAN), leased lines (T1 etc.) and software licensing).

                  (B) Upon any such request from Owner, BMG will arrange for
IS&T and MS to furnish Owner with the current schedule of prices charged by IS&T
and MS with respect to the services described in Paragraph 2(c)(ii)(A) of this
Agreement.

3. ORDERING/TITLE/OWNERSHIP

      (a) Except as otherwise expressly provided herein, either: -

            (i) (A) BMG from time to time will order from Owner such quantities
of Owner's Product(s) as BMG requires hereunder to meet the demand therefor
(Owner is entitled to approve such order (such approval not to be unreasonably
withheld and such approval will be evidenced by Owner's issuance of a purchase
order ("PO") to BMG for the quantities concerned) and BMG will manufacture such
quantities and deliver the applicable Owner's Product(s) (freight prepaid) to
BMG's "Warehouse" (as defined herein). As used herein "Warehouse" means any
facility (or its equivalent (including so-called "lockers")) reasonably
designated by BMG for Owner's Product(s) (e.g., Duncan, South Carolina) or

                  (B) Owner from time to time will order from BMG such
quantities of Owner's Product(s) as Owner requires to meet the demand therefor
(BMG is entitled to approve such order) such approval not to be unreasonably
withheld and such approval (or the extent of such approval) will be evidenced by
BMG's manufacture and delivery to the Warehouse of the BMG approved percentage
of the quantities specified in Owner's P0 therefor).

            (ii) (A) Owner's disapproval of any BMG initiated order will be by
written notice (within twenty-four (24) hours of BMG's advising Owner that BMG
has initiated such order) to the Director, National Inventory Management (BMG
Distribution, 6550 East 30th

                                       4
<PAGE>

Street, Indianapolis, Indiana 46219), with a copy to Vice President Field
Operations and Vice President Legal and Business Affairs (BMG Distribution)) of
Owner's reasonable objections to such order (specifying the nature of each such
objection). If BMG inadvertently or otherwise manufactures a quantity of Owner's
Product(s) in excess of the quantity which Owner approves, BMG will bear the
direct manufacturing costs and expenses associated therewith only until such
time as BMG determines that the particular Owner's Product(s) is sold, whereupon
BMG will invoice Owner in respect of such costs and expenses and Owner will pay
such invoice in accordance with Paragraphs 14(b) and (c) hereof. Owner will be
deemed to have approved any BMG initiated order in respect of which Owner fails
to furnish the aforesaid notice in a timely manner. Notwithstanding anything to
the contrary contained herein, it is understood and agreed that Owner is deemed
to have approved at all times BMG's manufacture of such quantities of Owner(s)
Product(s) in respect of which BMG reasonably anticipates orders from
Customer(s).

                  (B) BMG's disapproval of any Owner initiated order will be by
written notice to Owner (within the twenty-four (24) hours of Owner's advising
BMG that Owner is desirous of initiating a particular order) of BMG's reasonable
objections (specifying the nature of any objection) to such order. If at any
time Owner requests that BMG manufacture a quantity of Owner's Product(s) in
excess of the quantity in respect of which BMG has orders from Customer(s) or
which BMG determines (in its sound commercial judgment) is required to meet the
demand therefor, BMG will be entitled to offset all of the costs and expenses in
respect of such excess from any and all monies otherwise payable to Owner in the
month in which such excess order is placed (and subsequent months) provided that
if there are insufficient monies against which to offset same, BMG will not be
obligated to manufacture such excess unless Owner pays BMG therefor in advance.

                  (C) Faxes and/or emails are appropriate mediums for
expeditiously giving disapproval notices pursuant to Paragraph 3(a)(ii).

                  (D) Any manufacturing performed pursuant to this Paragraph
will be performed in accordance with the manufacturing provisions of this
Agreement.

            (iii) BMG will hold Owner's Product(s) at the Warehouse in inventory
until the applicable Owner's Product(s) is sold or otherwise disposed of in
accordance with the provisions hereof. Owner's Product(s) will be deemed sold at
the time that Owner's Product(s) is shipped, transmitted or otherwise made
available by BMG from the Warehouse (or other storage facility as applicable) to
its sub-distributors, distributors, retailers, agents, merchants, consumers or
other persons with whom BMG may do business (individually and collectively,
"Customer(s)"), except that with respect to any Owner's Product(s) which
constitutes a so-called "new release" (as more dully described hereinbelow), the
particular Owner's Product(s) will be deemed sold as of the actual so-called
"street date" therefor.

      (b) Subject to the terms and conditions hereof, Owner will retain title
to, and ownership of, Owner's Product(s) delivered to the Warehouse until sold
(as described in Paragraph 3(a) hereof) or otherwise disposed of by BMG in
accordance with the provisions hereof. While Owner's Product(s) is in BMG's
possession at the Warehouse, BMG will assume the risk of loss or damage to
Owner's Product(s). The risk assumed by BMG will be limited to the cost of
manufacturing replacements of the applicable Owner's Product(s).

                                       5
<PAGE>

4. DISTRIBUTION FEE/NET SALES/NET PROCEEDS/RESERVES/PAYMENT

      (a) (i) (A) For the Distribution Services rendered pursuant to Paragraph
(2c)(i) hereof, BMG will retain a distribution fee of _________ (%) percent
("Distribution Fee") of "Net Sales," (as defined herein) before any and all
deductions or other adjustments for "Special Terms" (as defined herein), if any,
offered by Owner or authorized by Owner (all such Special Terms discounts will
be at Owner's sole cost and expense) and approved by BMG. As used herein, "Gross
Sales" means the "Purchase Price" multiplied by the number of units of Owner's
Product(s) sold hereunder; "Net Sales" means Gross Sales (i) less any and all
credits issued, and reserves established, in respect of returns of Owner's
Product(s) sold hereunder, (ii) plus such reserves as are liquidated hereunder;
and "Purchase Price" means the price at which the Customer(s) is invoiced by BMG
in respect of the cost of the particular Owner's Product(s) concerned and in
respect of which payment is due from Customer(s) to BMG therefor (e.g., the Net
Effective Cost" price listed in BMG's Price Card(s) or the equivalent thereof).

                  (B) Notwithstanding anything to the contrary contained in
Paragraph 4(a)(i)(A) hereinabove, with respect to Distribution Services rendered
by BMG in respect of the distribution of Owner's Product(s) through "special
market" channels, "direct to consumer" and "direct mail" channels, the Internet,
any and all electronic and on-line mediums, channels or transmissions (in any
and all forms with and without other data) now or hereafter known or developed,
any "direct transmission" and "indirect transmission" to consumer over wire or
through the air (including, without limitation, via telephone, satellite
(inclusive of, but not limited to, point to multipoint satellite and direct
broadcast satellite) or cable), and any and all point of sale manufacturing
channels, BMG will retain a Distribution Fee equal to (TBA).

                  (C) Notwithstanding anything to the contrary contained herein:
(a) the Distribution Fee with respect to those Net Sales of Owner's Product(s)
sold, by BMG, through a commissioned BMG agency model, as so-called "digital
download" sales will be _______ percent of those Net Sales, after any and all
deductions or other adjustments for "Special Terms" and commissions in
connection therewith, calculated in the manner set forth above; (b) the
Distribution Fee with respect to those Net Sales of Owner's Product(s) sold by
BMG through BMG's wholesale model or a so-called "digital download" sales will
be ________ percent of those Net Sales, after any and all deductions or other
adjustments for "Special Terms" , calculated in the manner set forth above and
(c) the Distribution Fee with respect to those Net Sales of Owner's Product(s)
sold by BMG, as a so-called "Kiosk" sales will be ________ percent of those Net
Sales, after any and all deductions or other adjustments for "Special Terms" and
commissions in connection therewith (in lieu of _________ percent), calculated
in the manner set forth above.

            (ii) Except as otherwise expressly provided herein, BMG will bear
the costs and expenses associated with Customer(s) bad debt risk and cash
discounts offered by BMG for timely payment in respect of Owner's Product(s)
sold and distributed by BMG to Customer(s). Accordingly, Owner will bear the
costs and expenses associated with bad debt risk related to Owner's Export
Product(s) and other Owner's Product(s), if any, which is not distributed by BMG
hereunder or which for any reason is distributed by BMG, on behalf of Owner, to
a person other than a Customer(s).

                                       6
<PAGE>

            (iii) Notwithstanding anything to the contrary contained in
Paragraphs 4(a)(i) and (ii) above:

                  (A) The Distribution Fee with respect to cumulative Net Sales
in excess of _______________ dollars will be ___________ (___%) percent of those
Net Sales in lieu of ________ (___%) percent, calculated in the manner set forth
in Paragraphs 4(a)(i) and (ii) above;

                  (B) The Distribution Fee with respect to cumulative Net Sales
in excess of __________ dollars will be ___________ (___%) percent of those Net
Sales in lieu of _________ (___%) percent, calculated in the manner set forth in
Paragraphs 4(a)(i) and (ii) above;

                  (C) The Distribution Fee with respect to cumulative Net Sales
in excess of __________________ Dollars will be ___________ (___%) percent of
those Net Sales in lieu of _________ (___%) percent, calculated in the manner
set forth in Paragraphs 4(a)(i) and (ii) above;

                  (D) The Distribution Fee with respect to cumulative Net Sales
in excess of _________ dollars will be ___________ (___%) percent of those Net
Sales in lieu of _________ (___%) percent, calculated in the manner set forth in
Paragraphs 4(a)(i) and (ii) above;

            (iv) Notwithstanding anything to the contrary contained in
Paragraphs 4(a)(i), (ii) and (iii) above, the initial application of the
Distribution Fee set forth in Paragraph 4(a)(iii) will be in respect of the Net
Proceeds accounting with respect to the calendar month ("Implementation Month")
immediately following the calendar month during which the applicable cumulative
Net Sales threshold is achieved which triggers such Distribution Fee ("Threshold
Month") and will be applied only in respect of the applicable excess cumulative
Net Sales in the Implementation Month and applicable month(s) of the particular
Contract Year concerned subsequent to the Implementation Month. For the
avoidance of doubt, Owner's Export Product(s) and any other sale or distribution
of Owner's Product(s) which has not been solicited or distributed by BMG to
Customer(s) are excluded from the cumulative Net Sales calculation pursuant to
Paragraph 4(a)(iii).

      (b) "Net Proceeds" means Net Sales less the Distribution Fee and any other
amounts which BMG is entitled to offset or otherwise deduct therefrom hereunder.

      (c) Except as otherwise expressly provided herein, Net Proceeds will be
payable by BMG to Owner sixty (60) days after the last day of the calendar month
during which the applicable Owner's Product(s) is sold by BMG provided that in
respect of the sale of each Owner's Product(s) which constitutes a "new release"
(i.e., Owner's Product(s) subject to a new release street date) any Net Proceeds
payable in respect thereof will be payable within five (5) business days
following the end of the calendar month during which payment is due from
Customer(s). Net Proceeds payments will be accompanied by a statement rendered
in accordance with BMG's regular accounting practices. Notwithstanding anything
to the contrary contained herein, BMG, during and subsequent to the Post-Term
Returns Period, is not obligated

                                       7
<PAGE>

to render an accounting statement with respect to any calendar months in respect
of which there is no significant (as determined by BMG in its sound commercial
judgment) change between the accounting rendered with respect to the calendar
month immediately preceding such particular calendar month and the accounting
which would otherwise be rendered with respect to such particular calendar
months unless Owner requests, in writing, on accounting statement for one or
more particular months. Any such requests will be made at least thirty (30) days
prior to the commencement of the month in respect of which an accounting
statement is sought.

      (d) (i) With respect to each calendar month of the Term, BMG will be
entitled to establish a reserve at the rate of twenty percent (20%) of the Gross
Sales for that month, except forty percent (40%) with respect to the Gross Sales
of Owner's Product(s) sold as so-called "Singles" Record(s) (any and all
configurations). The reserve established with respect to each month will be
maintained for a period of four (4) months and liquidated at the end of the
applicable four (4)-month period hereunder. Liquidated reserves will be
accounted and credited to Owner at the same time and in the same manner as Net
Proceeds are accounted and paid to Owner for sales of Owner's Product(s) in the
month in which such reserves are liquidated. Notwithstanding the immediately
preceding provisions of this Paragraph 4(d)(i), BMG from time to time will be
entitled to adjust (increase and/or decrease) the reserves (and the duration of
any liquidation period) to reflect the level, value and timing of the returns
anticipated by BMG in respect of Owner's Product(s) and/or any Non-BMG
Product(s) returnable to BMG hereunder. In making any such adjustment, the types
of factors which BMG will consider will include BMG's so-called weighted,
historical "returns-running rate" experience (i.e., the percentage rate of
returns applicable to particular Owner's Product(s) during a given period
(except that with respect to the Singles Record(s) it will be the percentage
rate of returns applicable to Owner's Product(s) distributed as Singles
Record(s) during such period)), the level, value and timing of Soundscan
reported sales of Owner's Product(s) which BMG determines (in its reasonable
sound commercial judgment) are likely to be returned to BMG, and BMG's good
faith estimate with respect to the number of Non-BMG Product(s) likely to be
returned to BMG.

            (ii) Notwithstanding anything to the contrary contained herein, for
each of the final twelve (12) calendar months of the Term, the amount of the
reserve will be the percentage established pursuant to Paragraph 4(d)(i) of the
higher of (A) Gross Sales for the month concerned, or (B) the average monthly
Gross Sales for the twelve months immediately preceding the final twelve (12)
months of the Term provided that the amount of reserve will be such amount as is
determined by BMG (in its sound commercial judgment) in the event that the final
twelve (12) months of the Term is any period other than the period comprising
the last twelve (12) months of the Initial Period (or other than the period
comprising the Additional Period(s)) or that for any reason the duration of the
Term is a period less than twelve (12) months.

      (e) With respect to mechanical royalties, BMG will be entitled to
establish a reserve in accordance with the provisions of Paragraph 8(d) hereof.

5A. ADVANCE

      (a) As an advance recoupable from and against Net Proceeds, BMG will pay
Owner the sum of ______________________ ($______) Dollars ("Advance") payable
(i) ___________ ($________) Dollars following the full execution of this
Agreement; (ii) ________________ ($________) Dollars following (TBA) .

                                       8
<PAGE>

      (b) The Advance will be fully recoupable from Net proceeds otherwise
payable in respect of Owner's Product(s) sold hereunder provided that if the
Gross Sales of same of Owner's Product(s) and BMG's projected Gross Sales during
the then remaining portion of the Term will not be sufficient to afford BMG an
opportunity to fully recoup the then unrecouped portion of the Advance, BMG will
be entitled to fully recoup the Advance at any time from any and all monies
otherwise payable to Owner. For purposes of this subparagraph and any
determination by BMG with respect to whether such projections are sufficient,
BMG, in good faith, will employ its sound commercial judgment to determine the
Net Proceeds likely to be payable in respect of the sale of the Owner's
Product(s) during such period.

5. RETURNS/PROCEDURE/NON-BMG PRODUCT(S)

      (a) Notwithstanding anything to the contrary contained herein, Owner will
accept from BMG any and all returns of Owner's Product(s) which are returned for
any reason (in accordance with BMG's Returns Policy), during the Term and during
the period ending nine (9) months (except ten (10) months if the Term is
terminated) after the last day of the Term ("Post-Term Returns Period").

      (b) Any services rendered by BMG in connection with returned Owner's
Product(s) will be at the applicable per unit price set forth in Exhibit A
attached hereto and by this reference incorporated herein. BMG shall not charge
Owner, for any of the costs and expenses incurred by BMG to merely handle and
process (as opposed to refurbish etc.) a reasonable number of returns from
Customer(s) of Owner's Product(s) (excluding Owner's Export Product(s) which
will be distributed on a non-returnable basis in accordance with the provisions
hereof) distributed by BMG hereunder and "Non-BMG Product(s)" (as defined
herein). With respect to the handling and processing returns in excess of the
number of units which BMG determines, in good faith, to be reasonable and
returns of units which BMG determines are Non-BMG Product(s), BMG will be
entitled to a "Returns Handling Charge." The "Returns Handling Charge" means the
per unit dollar equivalent of the "Excess Inventory Charge" (as defined herein).
BMG will invoice Owner for any Returns Handling Charge and Owner will pay such
invoice in accordance with Paragraphs 14(b) and (c) hereof. For the avoidance of
doubt, the Distribution Fee does not include any amounts in respect of Exhibit A
charges for such services or the Returns Handling Charge, (i.e., all of such
charges are in addition to the Distribution Fee). BMG will invoice Owner for
such services and charges and Owner will pay such invoice in accordance with
Paragraphs 14(b) and (c) hereof.

      (c) Owner's Product(s) returned to BMG will be returned to the inventory
of Owner's Product(s) in BMG's custody, except that, unless BMG and Owner
otherwise agree, in writing, BMG will be entitled to scrap (i) any "singles"
record(s) returned; (ii) any other Owner's Product(s) returned with the
shrinkwrap, container or other packaging material breached to the extent that
Owner's Product(s) could have been removed therefrom; (iii) any Owner's
Product(s) which in BMG's judgment is not in saleable condition; and (iv) any
other Owner's Product(s) which Owner instructs BMG to scrap. BMG will scrap
Owner's Product(s) at the applicable per unit price set forth in Exhibit A. BMG
will invoice Owner for such scrapping and Owner will pay such invoice in
accordance with Paragraphs 14(b) and (c) hereof.

                                       9
<PAGE>

      (d) (i) (A) As used herein, "Non-BMG Product(s)" means any and all Owner's
Product(s) existing prior to the commencement of the Term which was not
manufactured or distributed by BMG hereunder and any and all Owner's Product(s)
existing during the Term which, for any reason, is not manufactured or
distributed by BMG to Customer(s) hereunder (including, without limitation
Owner's Export Product(s)). Each Non-BMG Product(s) existing as of the date
first written hereinabove is listed in Schedule 2 attached hereto and by this
reference incorporated herein. Non-BMG Products, which have been distributed by
Owner or one or more third party(ies) distributors prior to BMG's distribution
of Owner's Product(s) hereunder ("Prior Distributor") is indicated by an
asterisk in Schedule 2.

                  (B) As between Owner and BMG, Owner (directly or indirectly
through Prior Distributor) will be solely responsible for returns of Non-BMG
Product(s), the issuance of any credits to any and all customers (including
Customer(s)) in connection therewith and the value of any credit(s) issued or to
be issued. Upon BMG's request, Owner (at Owner's sole cost and expense) will
notify all such customers and any other relevant third party(ies) (or cause all
such customers and third party(ies) to be notified by Prior Distributor or
otherwise), in writing, to such effect.

                  (C) BMG will consider a written request from Owner that Owner
be permitted to notify such customer(s) who are Customer(s) (or cause such
customers to be notified by Prior Distributor) that returns of Non-BMG
Product(s) may be sent to the Warehouse in accordance with BMG's "Returns
PolicyTM in effect with respect to any such returns and that with respect to
Non-BMG Product(s), BMG issue credits therefor at the Net Effective Cost price
(or its equivalent) set forth in Schedule 2 or the price at which BMG would
issue credits in respect of such Non-BMG Product(s) (or substantially similar
products) which are being (or had been or will be) distributed by BMG hereunder
in the absence of any price(s) in Schedule 2 or if any Schedule 2 prices are
incompatible with the prices or manner in which BMG otherwise issues credits or
administers returns from Customer(s) (or in the absence of a new UPC and
selection number in Schedule 2). If BMG agrees to honor any such request, BMG
will furnish Owner with written notice to such effect. For the avoidance of
doubt, if Non-BMG Product(s) is not readily distinguishable as a returned
product from Owner's Product(s) distributed by BMG and returned to BMG, BMG (in
its sole discretion) is entitled to determine which, if any, Non-BMG Products
will be accepted by BMG as returns for credit purposes hereunder and the prices
at which credits will be issued in connection therewith. The provisions of
Paragraphs 5(a), 5(b), 5(c) and 5(d)(ii) will also apply to Non-BMG Product(s)
as if Non-BMG Product(s) constituted Owner's Product(s) hereunder. Once BMG
credits Customer(s) in respect of these returns, BMG will invoice Owner for the
value of such credits and Owner will pay such invoice in accordance with
Paragraphs 14(b) and (c) hereof.

                  (D) If BMG honors such request, the provisions of this
Agreement (including, without limitation, the provisions embodied in Paragraphs
5(a), 5(b), 5(c) and 5(d)(ii)(A), 5(e) and 5(g) applicable to Owner's Product(s)
will apply to Non-BMG Product(s) returned in accordance with the provisions
hereof.

            (ii) In order to enable BMG to distinguish Owner's Product(s) (and
returns of Owner's Product(s)) manufactured and distributed hereunder from any
Non-BMG Product(s), (and returns of Non-BMG Product(s)), Owner will ensure that
each Owner's Product(s)

                                       10
<PAGE>

distributed hereunder is readily distinguishable as a returned product from
Non-BMG Product(s). BMG will advise Owner of, and Owner will incorporate, such
elements (including, without limitation, separate UPC and selection numbers for
such Owner's Product(s) hereunder) or make such modifications to Owner's
Product(s) hereunder as BMG deems reasonably necessary for such purposes.

      (e) BMG will perform refurbishing services with respect to Owner's
Product(s) at the applicable per unit prices set forth in Exhibit A. BMG will
invoice Owner for such services and Owner will pay such invoice in accordance
with Paragraphs 14(b) and (c) hereof.

      (f) (i) Notwithstanding anything to the contrary contained herein, BMG
will retain all reserves established in respect of the twelve (12) month period
preceding the last day of the Term (or any other period selected by BMG (in its
sound commercial judgment) in the event that the final twelve (12) months of the
Term is any period other than the period comprising the last twelve (12) months
of the Initial Period (or any period other than the period comprising an
Additional Period(s)) or that for any reason the duration of the Term is a
period less than twelve (12) months) and apply such reserves against credits
issued during such period and/or the Post-Term Returns Period. Within thirty
(30) days following the end of the Post-Term Returns Period, a determination of
returns and credits issued will be made by BMG. If credits issued by BMG exceed
reserves retained by BMG, Owner promptly will pay BMG the value of the Net
Proceeds of that difference, and if at the end of the Post-Term Returns Period
such reserves exceed credits issued, BMG promptly will pay Owner the value of
the Net Proceeds of that difference.

            (ii) The provisions of Paragraph 5(f)(i) will not be applicable
hereunder if no less than ninety (90) days prior to the expiration of the Term
Owner enters into a written agreement ("New Distributor Agreement") with a "New
Distributor" (as defined herein) pursuant to which the New Distributor agrees to
accept all returns of Owner's Product(s) and Non-BMG Product(s); to be fully
responsible for crediting Customer(s) therefor at the prices applicable pursuant
to (and otherwise in accordance with) the terms of the then applicable BMG
Returns Policy; and to fully indemnify BMG and hold BMG harmless from any and
all claims against BMG and from any losses, claims, costs, liabilities or
damages (including attorney's fees) arising out of or connected with a breach by
New Distributor of its obligations under the New Distributor Agreement.
Following the full execution of the New Distributor Agreement, Owner will
furnish BMG with a redacted copy of the New Distributor Agreement sufficient to
evidence that same comports favorably with the terms of this Paragraph
(5)(f)(ii). If BMG approves the New Distributor Agreement, BMG will liquidate
the reserves established hereunder in accordance with the provisions hereof (BMG
retaining only a reasonable reserve in respect of foreseeable returns to BMG
(e.g., so-called "pipeline" returns)) and the provisions of the New Distributor
Agreement which are consistent herewith provided that prior to any such
liquidation Owner has paid all outstanding amounts due (or to become due within
the next ninety (90) days) to BMG and evidenced to BMG that Owner will be in a
position to pay any and all other amounts due and owing to BMG. "New
Distributor" means a BMG approved "major third party distribution company"
(other than a Customer(s)) which operates in the prerecorded record business
segment of the media/entertainment industry, is ordinarily and regularly engaged
in distributing to Customer(s) a product(s) which is substantially similar to
Owner's Product(s), agrees to render Distribution Services as Owner's new
distributor, and which further agrees,

                                       11
<PAGE>

upon and after the expiration of the Term, to accept all returns of Owner's
Product(s) and Non-BMG Product(s) and to be solely and fully responsible for
crediting BMG's Customer(s) and otherwise fulfilling the obligations
contemplated by this Paragraph.

      (g) BMG will not be obligated to accept returns of Owner's Product(s)
after the expiration of the Post-Term Returns Period. If BMG elects to accept
any returns of Owner's Product(s) subsequent to the expiration of the Post-Term
Returns Period, BMG will invoice Owner for the value of the Net Proceeds of such
returns and for all applicable per unit charges hereunder in connection
therewith and Owner promptly will pay such invoice in accordance with Paragraphs
14(b) and (c) hereof.

6. EXCESS INVENTORY

      (a) On or about the last day of each month (the "Last Day") after the
first six months of the Term, BMG will determine from BMG's books and record(s)
on a selection-by-selection basis and by each configuration thereof the amount
of any excess inventory (i.e., more than a one (1) year supply, as determined in
accordance with BMG's standard business practices) in BMG's possession or
control as of each Last Day and will report such determination to Owner ("Excess
Inventory"). Owner, at Owner's election, will either remove Excess Inventory for
storage purposes only (at Owner's sole cost and expense of removal and storage)
within thirty (30) days of BMG's report under this Paragraph, or promptly pay
BMG for each month that any Excess Inventory is retained or controlled by BMG an
amount equal to the number of units of Excess Inventory multiplied by Ten ($.10)
Cents (the "Excess Inventory Charge"). Any Excess Inventory which is removed
must be marked, drilled or otherwise modified by BMG (at Owner's sole cost and
expense) beforehand to adequately distinguish it from all other Owner's
Product(s). If Owner fails to remove any Excess Inventory or pay the Excess
Inventory Charge on a timely basis, BMG, subject to the provisions embodied in
Paragraph 11(a)(v)(8) and 14(g) hereof, will scrap the Excess Inventory at the
applicable per unit price set forth in Exhibit A for scrapping. BMG will invoice
Owner for such scrapping and any applicable Excess Inventory charges and Owner
will pay such invoice in accordance with Paragraphs 14(b) and (c) hereof.

      (b) Owner will be afforded access once per each Contract Year and during
regular business hours to BMG's catalog Warehouse in Duncan, South Carolina to
conduct a physical stock count of the inventory of Owner's Product(s) in the
Warehouse at the time that BMG conducts its annual physical inventory
(currently, circa April/May of each calendar year) of all products including
Owner's Product(s).

      (c) Notwithstanding anything to the contrary contained herein, with
respect to any so-called "stock shrinkage" of Owner's Product(s) in the
Warehouse, BMG will bear the manufacturing cost of replacing the missing stock
of Owner's Product(s) in excess of one percent (1%) of the number of units of
Owner's Product(s) manufactured by BMG and delivered to BMG's Warehouse, and one
(1%) percent of the number of units of any graphics and components delivered to
BMG's Warehouses, in a given Contract Year.

      (d) Upon Owner's written request from time to time during the Term, BMG
will evidence to Owner (no more frequently than once per each calendar quarter
of a given Contract Year and then only in connection with requests made, no
sooner than thirty (30) days before (and no later than forty-five (45) days
after) a scrapping occurrence and in the form of the so-called

                                       12
<PAGE>

"destruction report" or "certificate" for scrapping customarily employed by BMG
for this purpose) that Owner's Product(s) have been removed from inventory in
BMG's Warehouse and scrapped. Such request must be sent to Vice President,
National Distribution & Transportation, 112 Hidden Lake Circle, Duncan, South
Carolina, 29334 with a copy to Vice President Legal and Business Affairs (BMG
Distribution) at the address indicated in Paragraph 20.

7. DELETED PRODUCTS

      (a) (i) From time to time during the Term on no less than thirty (30) days
prior written notice to BMG, Owner will be entitled to delete particular Owner's
Product(s) from Owners catalog of Owner's Product(s) distributed by BMG
hereunder ("Deleted Owner's Product(s)"). Subject to Owner having fulfilled all
of its then outstanding and reasonably foreseeable obligations to BMG hereunder,
Owner will also be entitled to make the deleted Owner's Product(s) available for
sale through BMG as so-called "cut-outs." Owner will give BMG notice of the date
on which a particular Owner's Product(s) is to be deleted from Owners catalog.
Owner will have thirty (30) days from such date to remove, at Owner's sole cost
and expense, deleted Owner's Product(s) from the Warehouse. Prior to any such
removal, the deleted Owner's Product(s) will be appropriately marked by BMG (at
Owner's sole cost and expense) as cut-outs in a manner consistent with BMG's
then applicable practices to distinguish the inventory of deleted and cut-out
Owner's Product(s) from Owner's Product(s) (including, BMG's inventory of same)
which has not been deleted and cut-out or which is otherwise returnable to BMG.
Upon such deletion, marking and removal, the applicable Owner's Product(s) will
no longer be subject to the terms and conditions of this Agreement.

            (ii) Notwithstanding anything to the contrary contained herein, if
for any reason and by any means any Owner's Product(s) (including, without
limitation, Deleted Owner's Product(s) and Excess Inventory) is removed from the
Warehouse by Owner without being appropriately marked and/or, if Deleted Owner's
Product(s) is made available for sale as cut-outs other than through BMG, BMG
will be entitled to retain an amount equivalent to the value of the Net Proceeds
and the Distribution Fee in respect thereof or if such Owner's Product(s) has
been sold by BMG on a non-returnable basis hereunder and invoice Owner therefore
at the applicable card price for each such unit of Owner's Product(s). Owner
will pay such invoice in accordance with Paragraph 14(b) and (c) hereof.

      (b) If Owner does not remove any Owner's Product(s) deleted pursuant to
the immediately preceding Paragraph 7(a), BMG will have the right to scrap same
(without any further obligation to Owner) at the applicable per unit price set
forth in Exhibit A for scrapping. BMG will invoice Owner for such scrapping and
Owner will pay such invoice in accordance with Paragraphs 14(b) and (c) hereof.

8. SALE OF PRODUCTS BY BMG

      (a) The suggested retail list price ("SRLP") (or its equivalent (e.g., any
BMG pricing in respect of on-line, electronic, Internet medium or channels on a
basis other than SRLP)) or "list category" of Owner's Product(s) will be
established by Owner, in Owner's sole discretion, from time to time from the BMG
designated SRLPs (or the BMG designated equivalent). However, in order to permit
necessary efficiencies in day-to-day operations, Owner will not establish or
change the SRLP (or its equivalent) or "list category" of any specific Owners
Product(s) without giving BMG written notice at least one (1) calendar month
prior to the

                                       13
<PAGE>

effective date of the applicable SRLP. As and if reasonably necessary to denote
such establishment or change, BMG will modify (by stickering or destickering,
restickering and reshrinkwrapping) the particular Owner's Product(s) concerned
at the applicable per unit prices for stickering or destickering, restickering
and reshrinkwrapping set forth in Exhibit A (or at the applicable per unit price
established by BMG for any other type of alteration and repackaging required by
BMG). BMG will invoice Owner for such charges and Owner will pay such invoice in
accordance with Paragraphs 14(b) and (c) hereof.

      (b) The Customer(s) to whom and, except as otherwise provided in Paragraph
8(c) hereof, all of the terms and conditions of sale (including prices to
Customer(s), discounts, free goods, credit and dating, Returns Policy (including
any percentage limitations on returns) at which BMG distributes and sells
Owner's Product(s) hereunder, and the advertising allowances (if any) made by
BMG (at BMG's sole cost and expense) and as allowances additional to the
advertising allowances made by Owner (at Owner's sole cost and expense)) will be
established by BMG in its sole discretion. Following the commencement of the
Term, BMG will familiarize Owner with BMG's current Returns Policy, BMG's
current advertising policy ("Advertising Policy") and BMG's current terms and
conditions of sale ("Sales Policy").

      (c) From time to time, Owner may request that BMG offer (or authorize BMG
to offer) to Customer(s) discounts and dating greater than the so-called
"standard discounts" (if any) and dating (if any) then offered by BMG
(individually and collectively, "Special Terms"). BMG will give good faith
consideration to all such requests and authorizations but will have no
obligation to honor same if, BMG determines that BMG cannot lawfully offer
and/or administer the particular Special Term(s) concerned, that such Special
Term(s) is inconsistent with and doesn't otherwise comport favorably with BMG's
programs, standards, policies and limitations or that (in BMG's sound commercial
judgment) such Special Term(s) is not in the best interest of Owner and BMG
(e.g., extending dating to an insolvent Customer(s) or a Customer(s) whose
account is past due). If BMG offers Special Terms as discounts and/or dating to
its Customer(s), such offer will be made on Owner's behalf, and Owner will bear
all costs and expenses associated therewith, Owner will give BMG such reasonable
advance written notice of the Special Terms discounts or dating which Owner is
desirous of having BMG offer so as to afford BMG an opportunity to consider and,
as applicable, implement same in an efficient manner consistent with BMG's
administration of sales. BMG's "standard" discounts are indicated in the BMG
price cards ("Price Card(s)") incorporated in BMG's Sales Policy (i.e., as of
the date first written hereinabove and in respect of the United States, the
standard discount is twenty-three and eight-hundredths (23.08%) percent for a
singles Record(s), twenty (20%) percent for a CD(s), and fifteen (15%) percent
for certain other Record(s)).

      (d) (i) Owner will be solely responsible for securing (and Owner agrees to
timely secure) any and all permissions, authorizations, clearances, licenses,
releases and other rights required (or reasonably deemed necessary by BMG) to
enable BMG to distribute Owner's Product(s) without infringing upon the rights
of, or incurring any liability to, any third party(ies) including, without
limitation, music publishers and their agents. In addition, Owner will be solely
responsible for timely paying (and Owner agrees to timely pay) any and all sums
due or otherwise required to be paid to any and all third party(ies) in respect
of any such permissions, authorizations, clearances, licenses, releases and
other rights (including, without limitation,

                                       14
<PAGE>

payments to developers, copyright proprietors, music publishers, writers,
artists, producers and engineers).

            (ii) Within thirty (30) days following the expiration of each
calendar quarter of the Term, Owner will furnish BMG with written evidence (such
evidence to be in a form satisfactory to BMG) (A) that Owner has entered into
written mechanical license agreements, as required, with the appropriate persons
in respect of each and every musical composition embodied in Owner's Product(s)
theretofor distributed hereunder (and/or which is scheduled to be distributed
hereunder in the calendar quarter in which such evidence is furnished)
("Mechanical License") and (B) that Owner has accounted and paid hereunder (such
evidence to be in a form satisfactory to BMG ( any such form including, without
limitation, the following information: name of the publisher, the payee, date,
catalogue number, title (of musical composition and of Owner's Product(s)), type
of sale (bonus, free club etc.), rate, quantity, total royalty payable per
musical composition)) all mechanical royalties due in this regard pursuant to
such license agreement (or pursuant to the compulsory statutory provisions of
the U.S. Copyright Art) ("Mechanical Royalty"). Such evidence will be furnished
to BMG (Attn: Director, Sales Accounting, at BMG (Distribution), 210 Clay
Avenue, Lyndhurst, New Jersey 07071) Failure to timely evidence such license and
payments constitutes a breach of this Agreement.

            (iii) With respect to any failure by Owner to evidence the
Mechanical License and/or the Mechanical Royalty payment in respect thereof, BMG
is entitled to retain a reserve in respect of such Mechanical Royalty payment
obligation at the rate of, whichever is greater, one ($1.00) dollar per each
unit of Owner's Product(s) in respect of which there are Gross Sales during the
applicable calendar quarter or ten (10%) percent of the applicable Gross Sales
in connection therewith (or, in the absence of any Gross Sales, the applicable
card price therefor). Such reserve will be maintained until the end of the month
following the month in which Owner furnishes BMG with written evidence that
Owner has paid the Mechanical Royalty to which such reserve pertains. Any such
liquidated reserve will be accounted and credited to Owner at the same time as
BMG accounts to Owner for sales of Owner's Product(s) in the month in which such
reserves are liquidated.

            (iv) BMG will give good faith consideration to any written proposal
from Owner to secure for BMG's benefit, as a named beneficiary, errors and
omission or other insurance in respect of Owner's mechanical royalty obligations
and any written agreement reached in this regard will be substituted for the
provisions embodied in Paragraphs 8(d)(ii) and (iii) above.

      (e) Owner agrees to identify and label any and all applicable Owner's
Product(s) described hereunder with "explicit contents" by affixing the Parental
Advisory Logo ("Logo") to same and related materials in accordance with the
standards established by the Recording Industry Association of America ("RIAA")
under the Parental Advisory Program ("Program").

      (f) The current standards applicable to records are set forth in Exhibit B
attached hereto and by this reference incorporated herein. The initial decision
to identify and label a particular Owner's Product(s) and related materials
rests with Owner. If BMG determines that Owner has failed to affix the Logo,
when appropriate, BMG, at Owner's sole cost and expense,

                                       15
<PAGE>

will be entitled to affix the Logo to Owner's Product(s) and related materials
or to recall and cease further distribution of Owner's Product(s). Any such
determination by BMG will be based solely on the good faith opinion of BMG's
counsel applying the same standards used when making such types of determination
with respect to other products distributed by BMG).

      (g) (i) Without prejudice to any other rights which BMG may possess at law
or hereunder, BMG may reject a particular Owner's Product(s) for distribution
hereunder if BMG determines (in its sole discretion) that: (A) such Owner's
Product(s) advocates an illegal activity; (B) such Owner's Product(s) is
patently offensive or obscene; (C) such Owner's Product(s) violates any
governmental regulation or law (including, without limitation, a regulation or
law relating to ethical, religious, moral or political conception); (D) such
Owner's Product(s) violates the personal property or other rights of a person,
firm or corporation; or (E) the distribution of Owner's Product(s) would
constitute a breach of any of Owner's warrantees, representations or covenants
herein or constitute the potential defamation or libel of any person.

            (ii) Any such determination by BMG will be based on the good faith
opinion of BMG's counsel applying the same standards used in making such types
of determination with respect to other products distributed by BMG. To
facilitate BMG's determination under this Paragraph, Owner may furnish BMG with
a sample of Owner's Product(s) prior to same being distributed hereunder. Such
sample is to be sent to Vice President, Legal and Business Affairs (BMG
Distribution) at the address indicated in Paragraph 20.

            (iii) BMG will furnish Owner with written notice of any
determination to reject (specifying the basis therefor) Owner's Product(s) under
this Paragraph ("Rejected Owner's Product(s)"). If within fourteen (14) days
after such notice Owner fails to furnish BMG with a modified sample of the
Rejected Owner's Product(s) satisfactory to BMG, BMG will have no obligation to
distribute the Rejected Owner's Product(s).

      (h) (i) Upon Owner's written request and to the extent available pursuant
to BMG's agreements with Soundscan, Inc. ("Soundscan") and/or Broadcast Data
Systems, L.P. ("BDS"), BMG will afford Owner access to Soundscan's computerized
on-line management information system and BDS' "Record Track" service,
respectively provided that BMG determines that Owner has no agreement or other
obligation to secure (and pay for) such access directly from Soundscan or BDS.
The charge for such access will be determined by BMG in respect of each calendar
quarter of the Term. BMG will invoice Owner each calendar quarter therefor
(based on the Applicable Percentage of the amount payable by BMG to Soundscan
and/or BDS for BMG's access to the system and/or service, plus any additional
charges levied by Soundscan and/or BDS against BMG in connection with Owner's
accessing the system (including any set-up and connect charges and charges for
special reports). The Applicable Percentage will be determined by dividing the
Gross Sales of Owner's Product(s) in record(s) configurations hereunder during
the relevant quarter by the total gross sales of all applicable products (in
record(s) configurations) distributed by BMG during such quarter.

            (ii) As of the date first written hereinabove, BMG represents that
BDS is not available to Owner under the current agreement between BDS and BMG.

                                       16
<PAGE>

9. MARKETING/ADVERTISING/PROMOTION

      (a) Owner will be solely responsible for developing, planning,
undertaking, implementing and otherwise performing all marketing, advertising
(including, without limitation, so-called "co-op" advertising) and promotion in
connection with Owner's Product(s) and for timely paying all of the costs and
expenses related thereto. Owner agrees and warrants that Owner will timely
undertake the marketing, promotion and advertising of each Owner's Product(s)
and, upon BMG's request, will evidence same, in part, by consulting with BMG and
furnishing BMG with a written marketing plan and budget therefor prior to the
distribution of particular Owner's Product(s) ("Marketing Plan"). At least
fifteen (15) days prior to the "street date" for the first Owner's Product(s) to
be distributed hereunder and at least thirty (30) days prior to the commencement
of each Contract Year subsequent to the first Contract Year, Owner will furnish
BMG with any requested Marketing Plan for the Owner's Product(s) to be
distributed during the Contract Year concerned."). The Marketing Plan should be
sent to Vice President Sales & Marketing, Distributed Labels (BMG Distribution)
1540 Broadway, 37th Floor, New York, New York 10036-4098. If Owner fails to
furnish BMG with such Marketing Plan, BMG will furnish Owner with written notice
of such failure and Owner will have thirty (30) days after such written notice
to cure such failure. Notwithstanding anything to the contrary contained herein,
BMG, on behalf of Owner and at Owner's request (or with Owner's authorization),
agrees to facilitate the placement and verification of Owner requested or
authorized marketing and advertising commitments (including, without limitation,
"co-op ads" and "in-store promotions") (such placement, verification and
commitments being at Owner's sole cost and expense) provided that upon BMG's
request, from time to time, Owner evidences to BMG's satisfaction that Owner
will timely defray all of the costs and expenses related thereto. If BMG pays
any such costs and expenses for which Owner is responsible BMG will invoice
Owner for same and Owner will pay same in accordance with Paragraphs 14(b) and
(c) hereof provided that deductions in respect of any invoice amount and/or such
costs and expenses as are related to a particular commitment will be made as of
the so- called "use date" (i.e., the date (sometimes referred to as the "start
date") which represents the date upon which the particular advertisement or
promotion underlying such commitment is to commence in accordance with BMG's
Advertising Policy) provided further that if BMG determines at any time that the
monies payable to Owner hereunder are insufficient to enable BMG to make a
related deduction or offset ("Commitment Shortfall"), BMG will be entitled to
(i) elect not to facilitate the placement and verification of any particular
advertising commitments (or any outstanding advertising commitments in respect
of which the related advertising occurrence has not taken place); (ii) require
payment from Owner in respect of unreimbursed payments in respect of prior
commitments (or offset such unreimbursed payments against any and all sums due
to Owner hereunder); and (iii) elect not to honor such commitments unless Owner
pays BMG therefor prior to BMG's honoring such commitment.

      (b) At no cost to BMG Owner will deliver (or cause to be delivered) to BMG
reasonable quantities of promotional copies of Owner's Product(s).

      (c) In consultation with BMG, Owner will establish an initial release
schedule for each specific Owner's Product(s). Owner will schedule all releases
of Owner's Product(s) in accordance with BMG's release schedules (singles each
week and albums semi-monthly) and BMG will release not more than two (2) Owner's
Product(s) during any thirty (30)-day period of the Term (excluding Owner's
Product(s) in Single Record(s) configuration and Owner's

                                       17
<PAGE>

Product(s) which constitute Owner's catalog as of the date first written
hereinabove ("Existing Catalog")) provided that BMG will give good faith
consideration to requests from Owner from time to time for additional releases
with respect to Owner's Product(s) other than the Existing Catalog.

      (d) In the performance of its services hereunder, BMG will have the right
(but not the obligation):

            (i) to advertise, promote and otherwise market (and to cause others
to do so) Owner's Product(s) during the Term and throughout the Territory and
through any mediums and channels by any means whatsoever (now and/or hereafter
known) related to the channels in respect of which BMG is entitled to perform
Distribution Services;

            (ii) to use and to authorize others to use the names, likenesses,
sobriquets, photographs, biographies and facsimile signatures of each of the
artists and characters whose performances or characters are embodied in Owner's
Product(s), the producers of Owner's Product(s) and Owner ("Identification")
provided, however, that to the extent that Owner notifies BMG, in writing, that
Owner's rights to use any particular Identification in connection with Owner's
Product(s) are limited or otherwise restricted, BMG's use pursuant to this
Paragraph 9(d)(ii) will be limited or so restricted to the same extent following
such notice;

            (iii) to perform Owner's Products(s) publicly and to permit public
performances thereof in any medium and by any means whatsoever, (now and/or
hereafter known); and

            (iv) to cause Owner to link (in a form satisfactory to BMG and for
any reasonable period of time as selected by BMG in its sole and absolute
discretion) any BMG related web site to any and all web site(s) (as selected by
BMG in its sole and absolute discretion) operated by (or on behalf of) Owner or
any artist in respect of which Owner has the right to exploit artist's
performances hereunder.

10. TRADEMARKS

      (a) Owner hereby represents and warrants that Owner is the exclusive owner
or licensee of all trademarks, trade names, service marks and logos used by
Owner in connection with Owner's Product(s) and that no other person or entity
has any interest, adverse or otherwise therein. BMG hereby recognizes the rights
of Owner to all such trademarks, trade names and logos and BMG agrees not to use
any such trademarks, trade names, service marks and logos other than in
connection with BMG's rendering Distribution Services hereunder. Owner's
submission of any "Materials" which includes trademarks, trade names and logos
will be deemed to be instructions to BMG for BMG to use such trademarks, trade
names and logos as submitted.

      (b) No trademark, trade name, service mark or logo (including, without
limitation, the "BMG Logo" (as depicted herein)) owned and/or exclusively
controlled by BMG will be used by Owner without BMG's express written consent
and license to use same and then only in accordance with BMG's specific
instructions and requirements (e.g., the following trademark legend must appear
(in the place and in the size and prominence specified by BMG) if and when BMG
consents to Owner's use of the BMG trademark: "BMG (or the "BMG logo," whichever
is

                                       18
<PAGE>

applicable) is a trademark of BMG Music"). BMG (in its absolute and sole
discretion) may require that owner use the BMG trademark "BMG" or the "BMG Logo"
(as applicable) in connection with BMG approved marketing materials and
advertisements related to the distribution of Owner's Product(s) hereunder or on
Owner's Product(s) in the manner described in Exhibit C attached hereto by this
reference incorporated herein provided that such use is in strict compliance
with the trademark requirements set forth on Exhibit C.

      (c) Any unauthorized manufacture, duplication or distribution of BMG's
property (including, without limitation, its copyrights and trademark rights and
interests) will be considered nothing less than copyright infringement,
trademark infringement, misrepresentation and unfair competition in violation of
federal and state laws and BMG will seek the appropriate judicial relief.

                            PART II - MANUFACTURING

11. PURCHASE/PROCESSING/QUANTITIES

      (a) Owner grants to BMG the exclusive right and option(s) to manufacture
(or cause the manufacture of) and sell to Owner all of Owner's requirements of
Owner's Product(s) which include, without limitation, the quantities of Owner's
Product(s) required to be manufactured and delivered under Paragraph 3(a). If
BMG exercises such option(s), Owner will purchase exclusively from BMG all such
requirements. BMG will exercise such option(s) by placing BMG's order for the
particular Owner's Product(s) concerned. For purposes hereof, the term
manufacture" means any and all forms of duplication including, without
limitation, pressing in the case of Record(s) and duplication in the case of
audio-visual recordings in video configuration. If and when BMG elects to
manufacture Owner's Product(s), then:-

            (i) Notwithstanding anything to the contrary stated herein (other
than in Exhibits D & E), the minimum order quantity for each configuration of
each specific catalogue number of Owner's Product(s) manufactured as Record(s)
hereunder will be the applicable number of units ("Minimum Order Quantity")
specified in Exhibits D & E attached hereto and by this reference incorporated
herein. BMG may increase the Minimum Order Quantity by notice to Owner if BMG's
suppliers increase the Minimum Order Quantity which BMG must order. If any other
Minimum Quantity Order is to apply to other Owner's Product(s) (other than
Record(s) manufactured by BMG for Owner hereunder), BMG will notify Owner
beforehand.

            (ii) All orders for the manufacture of Owner's Product(s) will be
made by BMG through BMG's order service and inventory control departments and in
compliance with BMG's inventory management policies ("Inventory Policy(ies)").
Following the commencement of the Term, BMG will familiarize Owner with BMG's
current Inventory Policy(ies).

            (iii) If after the initial release of any particular Owner's
Product(s) BMG receives orders for such Owner's Product(s) from its Customer(s)
in excess of the existing inventory of Owner's Product(s) by at least two
hundred (200) units (or the equivalent of same) then Owner will be deemed to
order a quantity of Owner's Product(s) equal to the higher of such excess or the
Minimum Order Quantity.

                                       19
<PAGE>

            (iv) Such orders as are placed hereunder will be deemed fulfilled by
BMG by the manufacture of any quantity of Owner's Product(s) between ninety
(90%) percent and one hundred ten (110%) percent of the quantity of Owner's
Product(s) ordered.

            (v) (A) Owner, at Owners cost and expense, will deliver (or cause to
be delivered) to BMG (or its designee) (i) all duplicate Master(s) (including,
without limitation, all applicable master recordings and lacquers (all of which
will be of quality suitable to comply with BMG's performance standards) required
by BMG to manufacture Owner's Product(s); and (ii) all necessary containers
(including jackets), other packaging materials not supplied by BMG or its
manufacturers, graphics, booklets, inserts, tray and inlay cards (four color
separations), stickers, posters and other components (herein collectively called
the "Materials")."

                  (B) BMG will store (or cause to be stored), during the Term, a
reasonable inventory of the Materials free of charge. From time to time during
the Term, BMG will determine the amount of any excess inventory (i.e., more than
a six (6) months supply as determined by BMG in accordance with BMG's standard
practices) of Materials in BMG's possession or control and report such
determination to Owner. Owner, at Owner's expense, will remove (for storage
purposes only at Owner's sole cost and expense of removal and storage) such
excess inventory within thirty (30) days of BMG's report to Owner under this
Paragraph. Notwithstanding the two immediately preceding sentences, if Owner
fails to remove such excess inventory BMG may scrap (at Owner's sole cost and
expense) such excess inventory of Materials. BMG will invoice Owner for such
scrapping charges and Owner will pay such invoice in accordance with Paragraphs
14(b) and (c) hereof.

      (b) (i) If for any reason there are orders placed (at the request of BMG
or Owner (with BMG's prior written consent)) directly by Owner with third
party(ies) for the manufacture of a number of units of Owner's Product(s) and
Materials, the costs and expenses associated with such order will be billed
directly to Owner and paid directly by Owner (and no part of the payment for
such manufacture will be BMG's responsibility) and all Owner's Product(s) and
Material(s) so manufactured will be delivered to BMG to be held in the Warehouse
in accordance with this Agreement. If any Owner's Product(s) which is
manufactured by third party(ies) pursuant to orders placed directly by Owner are
not physically suitable for shipment to, and acceptance by, Customer(s), then
Owner will promptly reimburse BMG for all of the costs and expenses arising from
such unsuitability. The provisions embodied in Paragraphs 10(b), 11(c), and
11(d) apply to Owner's Product(s) manufactured pursuant to 11(b) hereof.

            (ii) Owner will consult with BMG in advance in respect of the
quantities of Owner's Product(s) and Material(s) which Owner is desirous of
having delivered to the Warehouse and the allocation of such quantities as among
BMG's Warehouse locations and, except as otherwise provided herein with respect
to manufacturing, the final allocation decision will rest with BMG. Deliveries
will be made f.o.b. the Warehouse location(s) so determined.

      (c) At Owner's sole cost and expense Owner will have printed (as and where
designated by BMG) or stickered on all jackets, containers and graphics on
Owner's Product(s) manufactured and/or distributed hereunder or otherwise placed
in inventory hereunder) the language "Manufactured and Distributed in the United
States by BMG Distribution, a unit of

                                       20
<PAGE>

BMG Entertainments 1540 Broadway, New York, New York 10036" "BMG (or the "BMG
logo," whichever is applicable) is a trademark of BMG Music.

      (d) BMG will place Owner's Product(s) manufactured and/or delivered
pursuant to this Paragraph in the location in the Warehouse where BMG holds the
Owner's Product(s) pursuant to Part 1 of this Agreement. Such placement of
Owner's Product(s) will be deemed "delivery" for purposes of this Agreement.

      (e) Notwithstanding anything and the contrary contained herein, all of
Owner's Product(s) (including related Materials) delivered hereunder will be
available for release and will not be subject to any restrictions which would
prohibit the manufacture, distribution and sale of Owner's Product(s) at any
time during the Term, except to the extent that Owner furnishes BMG with written
notice to the contrary (any such notice to be furnished promptly following the
date that any such restriction comes into existence). Following such notice, the
applicable Owner's Product(s) will be subject to such restrictions.

      (f) Prior to the duplication of Owner's Product(s) in video configuration,
BMG, upon request, will apprise Owner of any other terms and conditions
applicable to the duplication of videos hereunder.

12. PRICES/ADDITIONAL TERMS

      (a) Owner will pay to BMG for Owner's Product(s) manufactured hereunder,
the prices, f.o.b. Warehouse, set forth in Exhibits A, D and E attached hereto
and by this reference incorporated herein. Exhibits A, D and E also set forth in
specificity certain obligations of the parties and additional prices for certain
services (including, without limitation, BMG's distribution of Owner's
Product(s) supplied by Owner to third party(ies) for promotional purposes). BMG
will invoice Owner for rendering such Manufacturing and Warehouse Services and
Owner will pay such invoice in accordance with Paragraphs 14(b) and (c) hereof.

      (b) BMG will have the right, not more than once within any twelve
(12)-month period of the Term, to increase the prices charged hereunder,
however, no such increase will exceed one hundred (100%) percent of the amount
by which BMG's costs (fairly allocated per configuration and per unit)
including, without limitation, the costs of purchasing and/or obtaining finished
goods, raw materials, labor, services and/or power, will have increased (using
the date first written hereinabove as the benchmark for the first increase, if
any, and the date of the subsequent increase as the benchmark for any subsequent
increase(s)).

                               PART III - GENERAL

13. APPLICABILITY

The provisions of this Part Ill will apply to the provisions of Parts I and II
hereof.

14. STATEMENTS/ACCOUNTING/AUDIT/PAYMENTS/COLLATERAL

      (a) All statements and other accountings rendered by BMG will be binding
upon Owner and not subject to any objections by Owner for any reason whatsoever,
unless such specific objection is made in writing, stating the basis thereof and
delivered to BMG within two (2) years from the date such statement is rendered.

                                       21
<PAGE>

      (b) Except as otherwise expressly provided herein, BMG will invoice Owner
(in full or in part) monthly for all amounts due hereunder and Owner will pay
BMG within thirty (30) days of the date of each invoice.

      (c) Notwithstanding any contrary provision contained herein, BMG is
entitled to deduct (in full or in part) any amounts invoiced (or to be invoiced)
or otherwise due and owing hereunder from any and all sums owed by BMG to Owner
under this Agreement including, without limitation, any Net Proceeds otherwise
payable to Owner hereunder.

      (d) At any time that Net Proceeds are reported, if such Net Proceeds are
in a negative amount, then Owner promptly will pay BMG such Net Proceeds, plus
any other amounts then due.

      (e) Owner may, at Owners own expense, appoint an independent certified
public accountant to inspect, examine and audit BMG's books and record(s)
insofar as such books and record(s) relate to the accountings and payments
rendered by BMG to Owner hereunder. Such inspection will be made on not less
than thirty (30) days prior written notice during normal business hours, but not
more than once in any twelve (12)-month period during the Term hereof and no
more than once with respect to any statement rendered hereunder, and not between
November 1 and February 28 of any Contract Year. Owner will propose to BMG, in
writing, accompanied by appropriate documentation any adjustments to such
payments which Owner in good faith believes to be necessary no later than ninety
(90) days after completion of the auditor's field work. Any audit (including all
of the auditor's field work and the submission of Owner's proposed adjustments)
conducted by Owner will be completed within the time-frame agreed by Owner and
BMG (in good faith) prior to the commencement of the audit, but in no event
later than one (1) year following such commencement - unless and to the extent
delays are occasioned solely by BMG's action or inaction.

      (f) Any amount determined to be due from either party hereunder, if not
paid or offset within thirty (30) days of the applicable invoice or other due
date, will bear interest at a rate per annum equal to the "Prime Rate." Any such
amount as is due including interest, will be (i) in the case of Owner as the
delinquent party, deductible from and against any and all sums including Net
Proceeds otherwise payable by BMG hereunder (but, if Net Proceeds are in a
negative amount, then such amount will also be due and payable on demand (in
whole or in part) or (ii) in the case of BMG as the delinquent party, any such
amount as is due (including interest) will be payable on or before the date of
the next payment due to Owner from BMG hereunder. "Prime Rate" for any monthly
period will mean the interest rate for such period as announced on the first
"Business Day" of each month by The Chase Manhattan Bank N.A. or successors
thereto, at its principal office in New York City as its prime or base
commercial lending rate. The "Prime Rate" is a reference rate and does not
necessarily represent the lowest rate actually charged to any customer.
"Business Day" means any day other than Saturday, Sunday or other day on which
commercial banks are required or permitted to close by law in the State of New
York.

      (g) Owner will execute and deliver the "Security Agreement" attached
hereto and by this reference incorporated herein as Exhibit F at the same time
that Owner signs this Agreement.

                                       22
<PAGE>

15. FORCE MAJEURE

In the event of any act of God or force majeure, such as strikes, lock-outs,
accidents, fires, delays in manufacturing, delays of carriers, delays in
delivery of materials, labor controversy, government actions, war or any other
causes beyond their control, neither party will be responsible for any delay in
performance hereunder nor will incur liability to the other due to the resulting
inability to perform provided that the party relying on such events of force
majeure gives notice to the other party of the cause and anticipated duration,
within thirty (30) days of the occurrence.

16. TERMINATION

      (a) Either party hereto will have the right, in addition to any other
rights it may have at law or hereunder, to terminate the Term with immediate
effect by prior written notice to the other party ("Termination Notice"): (i) in
the event of a material breach or default (e.g., default by failure to promptly
pay any amounts due hereunder) by the other party of any representation,
warranty, covenant or obligation under this Agreement which, in the good faith
judgment of the party seeking to terminate the Term, would interfere with the
exercise of its rights hereunder and which breach or monetary default has not
been cured (if and to the extent curable) within thirty (30) days after prompt
written notice (specifying the nature of such breach or default) has been given
to such breaching or defaulting party by the party seeking to terminate the
Term; or (ii) in the event of a force majeure as set out above which continues
for a period in excess of one hundred eighty (180) days.

      (b) Notwithstanding anything to the contrary contained herein, BMG will
have the right (in addition to any other rights BMG may have at law or
hereunder) to terminate the Term, with immediate effect, by prior written notice
to Owner:

            (i) If any of the following occur: (A) the dissolution of Owner or
the liquidation of Owner's assets; (B) the filing by or against Owner of a
petition for liquidation or reorganization under Title 11 or 7 of the United
States Code as now or hereafter in effect or under any similar statute relating
to insolvency, bankruptcy, liquidation or reorganization; (C) the appointment of
a trustee, receiver or custodian for Owner or for any of Owner's property; (D)
Owner's making of an assignment for the benefit of creditors; (E) Owner's
commission of any act for or in bankruptcy; (F) or Owner's becoming insolvent.

            (ii) (A) if Owner fails to furnish BMG with the written evidence (or
any other BMG approved form of assurance), if any, requested by BMG that Owner
has fulfilled all of Owner's obligations hereunder (including, without
limitation, Owner's obligation to secure the appropriate form of license or
authorization from, and make timely corresponding payments to, and third
party(ies) hereunder) and that Owner is solvent (and will continue to be
solvent) and otherwise ready and able to fulfill all of its then current and
future obligations to BMG and/or third party(ies) hereunder in a timely manner.

                  (B) If Owner (A) fails to use its best efforts to acquire
exclusive distribution rights during the Term and throughout the Territory with
respect to the types of goods categorized within the definition of Owner's
Product(s) which are available to Owner for inclusion hereunder or (B) fails to
retain such rights during the Term and throughout the

                                       23
<PAGE>

Territory with respect to each Owner's Product(s) provided, however, that
Owner's failure to acquire or retain such rights shall not be deemed a material
breach of this Agreement.

            (iii) If Gross Sales of Owner's Product(s) hereunder are less than
(TBA) Dollars in respect any subsequent Contract Year ("Minimum Sales
Threshold"). In determining whether the Minimum Sales Threshold has been
achieved (or will be achieved), BMG may estimate (in good faith) the Gross Sales
of Owner's Product(s) in respect of the applicable period (or Contract Year). If
taking such estimate into consideration, BMG determines that the Minimum Sales
Threshold has not been achieved (or will not be achieved), BMG may terminate the
Term prior to the expiration of the particular period (or Contract Year)
concerned. Any termination under this Paragraph will be effective, whichever
occurs first, the expiration of such particular period (or Contract Year) or the
expiration of the fourteen (14)-day period following BMG's notice of
termination.

            (iv) Upon the occurrence of any event which entitles BMG to
terminate the Term (including, without limitation, Owner's insolvency), BMG, in
addition to any rights it may have at law or hereunder will be entitled to
offset and otherwise deduct and withhold from any and all monies otherwise
payable by BMG to Owner such amounts as are due and owing (or which BMG
determines will become due and owing) to BMG hereunder.

            (v) "Default" (as defined in the Security Agreement).

            (vi) Owner materially breaches any of BMG's Policies.

      (c) Subject to the provision embodied in Paragraph 2(b)(i)(B) hereof, will
if for any reason product(s) comparable to Owner's product(s) are no longer
being distributed through the _______ channel and/or the _____ channel ceases to
exist, the Term will expire automatically.

      (d) Unless otherwise expressly agreed by BMG and Owner, in writing, upon
the expiration or termination of the Term for any reason whatsoever:

            (i) Owner will remove (at Owner's sole cost and expense) from BMG's
Warehouse and/or any other applicable location designated by BMG all of Owner's
Product(s), including without limitation, finished goods (e.g., Records (in all
configurations)), Masters, graphics, promotional items and related materials and
Materials (collectively "Residual Materials") in BMG's possession and/or control
within thirty (30) days following the effective date of such expiration or
termination ("Termination Date") and, notwithstanding the expiration or
termination of the Term, Owner will purchase (as and if not theretofor purchased
by Owner) all of BMG's inventory of Owner's Product(s) (including, without
limitation, Materials). Owner will accept the return of all Owner's Product(s)
returned by BMG's Customer(s) from time to time thereafter and repurchase from
BMG such Owner's Product(s) for an amount equal to the value of Net Proceeds of
the credit given by BMG to its Customer(s) for such returned Owner's Product(s)
returned. Owner's Product(s) returned to BMG's Warehouse after the initial
removal of Owner's Product(s) by the Owner, will be removed by the Owner, at
Owner's sole cost and expense, within thirty (30) days following BMG's written
request to Owner to do so. Prior to such removal of Owner's Product(s) by Owner
the particular Owner's Product(s) concerned will be appropriately marked or
otherwise modified by BMG (at Owner's sole cost and expense) in a

                                       24
<PAGE>

manner consistent with BMG's current practices to remove BMG's name therefrom
and otherwise preclude same being returned to BMG. BMG will be entitled to scrap
any and all of the Residual Materials not so removed or paid for by Owner. Such
scrapping will be at the applicable per unit price set forth in Exhibit A. BMG
will invoice Owner therefor and Owner will pay such invoice in accordance with
Paragraphs 14(b) and (c) hereof;

            (ii) all unshipped orders for Owner's Product(s) will be canceled
without liability, except that Owner will remain liable for work-in-progress
under Part II;

            (iii) BMG will cease soliciting orders for and thereafter
distributing Owner's Product(s);

            (iv) the expiration, termination or cancellation of the Term or the
revocation of this Agreement will not discharge Owner or BMG from their
obligation to pay any amounts due and owing hereunder (and any amounts which are
likely to become due and owing). As long as any amount so owing to BMG by the
Owner has not been paid in full, BMG will have the right to reimburse itself
from amounts owed to the Owner hereunder, without prejudice to the other rights
of BMG.

17. OWNER'S REPRESENTATIONS, WARRANTIES, COVENANTS AND INDEMNIFICATION

      (a) Owner represents, warrants and covenants as follows:

            (i) (A) Owner has the exclusive right to produce, mechanically
record, promote, advertise, manufacture, distribute and sell Owner's Product(s)
during the Term and in the Territory;

                  (B) Owner is possessed of the full right to enter into this
Agreement and to grant BMG all of the rights herein granted;

                  (C) Any and all pressing and distribution agreements between
Owner and a third party(ies) (including, without limitation, "Prior
Distributor") for the manufacture and/or distribution of any of Owner's
Product(s) and/or Non-BMG Product(s) in the Territory (excluding agreements with
artists and producers whose performances are embodied in Owner's Product(s) and
production companies, record labels and licensors of the Materials, copyrights
and trademarks related thereto) have expired or have been lawfully terminated
and Owner has paid any and all amounts due to third party(ies) in connection
therewith (and no third party(ies) claims any amounts are due and owing from
Owner);

                  (D) All Owner's Product(s) delivered hereunder are available
for release and are not subject to any restrictions which prohibit the
manufacture, distribution and sale of Owner's Product(s) in accordance with the
terms and conditions including, without limitation, Paragraph 11(e) hereof;

                  (E) Owner will promptly furnish BMG with any and all materials
and elements reasonably required for BMG in connection with its exercise of the
rights herein granted to BMG in any and all channels and mediums now or
hereafter known or developed; and

                                       25
<PAGE>

                  (F) Owner will not exploit or otherwise permit the
exploitation of the Master(s) from which Owner's Product(s) derive or Owner's
Product(s) in any manner which impairs, diminishes or otherwise adversely
impacts the exclusive rights afforded to BMG hereunder.

            (ii) In performing services in accordance with the provisions of
this Agreement, BMG will not violate the rights of any third person or entity;

            (iii) No other person whatsoever has (or will have) the right,
during the Term and in the Territory, to perform any of the services (including,
without limitation, Distribution Services) to be performed by BMG hereunder;

            (iv) Owner has paid all costs and expenses (including, without
limitation, the costs and expenses of development, production, creation and
recording of the Master(s) and Owner will timely pay all costs and expenses
related to the manufacturing, printing and marketing of Owner's Product(s)
Product(s);

            (v) There is no claim or legal proceeding in respect of Owner and/or
any of Owner's Product(s);

            (vi) Owner is the owner or licensee of all rights relating to
Owner's Product(s) by virtue of valid contracts;

            (vii) Owner has not sold, assigned, transferred, leased, conveyed or
granted a security interest in, or otherwise disposed of, and will not sell,
assign, transfer, lease, convey or grant a security interest in and to any of
Owner's Product(s), adverse to or derogatory to the rights of BMG herein, nor is
there any lien or encumbrance upon any of Owner's Product(s);

            (viii) Owner is and will continue to be the owner or licensee of all
rights relating to the Owner's Product(s) and Materials (including, without
limitation, copyrights and trademarks) during the Term and throughout the
Territory;

            (ix) Owner owns or possesses the right to use and to authorize
others to use the Identification in the manner provided herein;

            (x) During the Term, Owner (and any person which derives rights from
Owner and/or which is controlled by Owner and from whom Owner derives rights)
will not do or authorize any person to do anything inconsistent with, or which
might diminish or impair, any of BMG's rights hereunder or violate the rights of
any third parties;

            (xi) With respect to the production, manufacture, distribution and
sale of Owner's Product(s) and all amounts paid by BMG to Owner hereunder, Owner
will pay all taxes and all third party obligations required to be paid by Owner
inclusive of, but not limited to, obligations to artists, producers, developers,
writers, composers, lyricists and publishers, and all federal and state sales
and use taxes, property taxes and all other applicable taxes of any nature. With
respect to any payments that may become due to any union having jurisdiction or
under any collective bargaining agreement, including, without limitation,
A.F.T.R.A., the A.F. of M., and their Music Performance Trust Fund and Special
Payments Fund, which payments arise out of

                                       26
<PAGE>

the production, manufacture, distribution and sale of Owner's Product(s)
hereunder, BMG will not be responsible therefor and any and all obligations for
such payments will be satisfied by Owner; and

            (xii) Owner has fully tested any applicable Master(s) from which
Owner's Product(s) derive and same will operate in accordance with commonly
accepted standards for operation of such products, will be free from any
significant errors or anomalies, and will operate and run in a reasonable and
efficient business manner. Should any significant error or anomaly or
nonconformity be detected, Owner, at Owner's sole cost and expense, will
promptly correct such programming error or anomaly and provide BMG with a new
Master(s) to enable BMG to reproduce and/or distribute a corrected version of
Owner's Product(s), or to continue to manufacture and/or distribute Owner's
Product(s), as the case may be. Owner will use its best efforts to complete such
repairs and to provide a new Master(s) to BMG in a timely manner. In the event
BMG is required to replace copies of Owner's Product(s) which have been
distributed with copies which do not contain a significant error or anomaly or
nonconformity, or to refund any part of any fees or costs in connection with the
use of copies of Owner's Product(s), Owner will promptly reimburse BMG for all
reasonable costs incurred in replacing copies of the Owner's Product(s) or for
all refunds given, as well as all reasonable costs of removing all copies of the
Owner's Product(s) from the channels of distribution. BMG will be entitled to
offset from and against any payments due to Owner under this Agreement (or any
other agreement) any sums owed to BMG pursuant to this Paragraph."

      (b) BMG and Owner each ("the Indemnitor") does hereby indemnify and agree
to hold the other, it successors and assigns and any of its officers, directors,
employees, representatives and/or agents or each of them ("the Indemnitee")
harmless at all times from and against any and all losses, claims, costs,
expenses, liabilities and damages (including, without limitation, reasonable
fees and disbursements of counsel incurred by Indemnitee in any action or
proceeding between Owner and BMG or between BMG and any third party or
otherwise) arising out of or connected with any breach or alleged breach by the
Indemnitor of this Agreement or any agreement, warranty, representation,
promise, covenant or any obligation by the Indemnitor (including, without
limitation, in the case of Owner, all of Owner's obligations under Paragraphs
8(d) and 17(a)(xi)). Prompt written notice will be given to the Indemnitor of
any claim, action or proceeding to which the foregoing indemnity relates and the
Indemnitor will have the right to participate in the defense thereof at the
Indemnitor's expense. The Indemnitor will reimburse the Indemnitee on demand for
any payment made by the Indemnitee at any time in connection with any liability
or claim to which the foregoing indemnity relates, provided that such liability
results from a judgment on the merits against the Indemnitee or a settlement
entered into by the Indemnitee with the consent (not to be unreasonably
withheld) of the Indemnitor. Pending the determination of any such claim,
without limitation of BMG's remedies and rights, BMG, as Indemnitee, may
withhold payments and deduct sums from any monies accruing or payable to Owner
hereunder in an amount reasonably related to such claim, provided, however, that
if Owner will obtain and post an undertaking (as defined, as of the date of this
Agreement in Section 2501(1) of the Civil Practice Law and Rules (CPLR) of the
State of New York) in an amount which BMG, in its sole judgment but in good
faith, deems reasonably sufficient to secure BMG for Owner's liabilities
hereunder, then BMG will not withhold and reserve monies as set forth in this
Paragraph. If BMG has withheld and reserved any monies pursuant to this
Paragraph with respect to any claim and if said claim has not been followed by

                                       27
<PAGE>

commencement of an action or proceeding within twelve (12) months or if a claim
is dismissed, defeated or discharged within twelve (12) months, BMG will release
such monies without prejudice to its rights to again withhold and reserve monies
in the future if any action or proceeding is later commenced.

18. OWNER'S RELATIONSHIP TO BMG

      (a) In performing Owner's obligations hereunder and in performing any
services in connection herewith, Owner is and will be deemed an independent
contractor, and nothing herein contained will in any way constitute Owner, or
any of Owner's officers, directors or employees, an agent or employee of BMG.

      (b) (i) Without the other party's express prior written consent, neither
party shall disclose or authorize the disclosure of any information of a
confidential nature learned as a result of this Agreement or the operation
thereof, nor in any way or in any form publicize or advertise in any manner any
of the terms, conditions or obligations contained in this Agreement except as
provided in Paragraphs 18(b)(ii) (A), (B) and (C) below.

            (ii) Each party will keep strictly confidential any and all
information with respect to the terms, conditions and obligations of this
Agreement, except that each party may disclose same:

                  (A) to the extent required by law, regulation or legal process
or any regulatory agency, subject to the terms and conditions contained in
Paragraph 18(b)(iii);

                  (B) to each party's employees, representatives, legal,
professional advisors and affiliates who need to know the information for the
purpose of performing their duties and obligations hereunder (provided each
party requires its employees, advisors, and representatives (including, without
limitation, legal representatives) to keep same strictly confidential); or

                  (C) if at the time of disclosure it is in the public domain
other than as a result of Owner's breach of this Agreement.

            (iii) In the event that any of one party's employees, advisors, or
representatives are requested pursuant to, or become compelled by, applicable
law, regulation or legal process to disclose this Agreement, any of its terms,
or any confidential information learned as a result of this Agreement or the
operation thereof, such party will provide the other party with prompt written
notice so that the other party may seek a protective order or other appropriate
remedy or, in the sole discretion of the other party, waive compliance with the
terms of this Agreement. In the event that no such protective order or other
remedy is obtained, or that the other party waives compliance with the terms of
this Agreement, such party will furnish (or permit to be furnished) only that
portion of this Agreement or its terms which such party is advised by counsel
that such party is legally required to furnish (or have furnished) and such
party will cooperate with the other party's efforts to obtain reliable assurance
that confidential treatment will be accorded this Agreements terms and all such
confidential information.

                                       28
<PAGE>

19. KEY PERSONNEL

      BMG has entered into this Agreement because of its trust and confidence in
_________________ and ______________ (individually and collectively the "Key
Personnel"). It is understood and agreed that the bearing of continuing and
primary responsibility on a full-time basis by the Key Personnel for Owner's
management, development, A&R, marketing and promotion activities throughout the
Term is a vital part of this Agreement. In the event of the death or incapacity
of the Key Personnel, or in the event that the Key Personnel will cease for
whatever reason (or no reason at all) such continuing and primary responsibility
for said A&R, marketing and promotion, BMG will have the right, without
prejudice to any other rights it may have, to terminate the Term of this
Agreement by giving written notice to Owner, effective immediately.

20. NOTICES

      (a) All notices from one party to the other hereunder will, unless herein
indicated to the contrary, be in writing and will be addressed as follows:

      To OWNER:

      To BMG:  BMG MUSIC
               d/b/a BMG Entertainment
               1540 Broadway
               New York, New York 10036-6758
               Attn: Vice President, Legal & Business Affairs (BMG Distribution)
               with a copy to Senior Vice President, Finance (BMG Distribution)

or to such other address as the addressee designates by written notice. Any
notice hereunder will be sent either by regular mail, certified or registered
mail (return receipt requested), or by personal delivery or air express or
telefax (to the telefax number of the party to be served) and will be deemed
complete when same (containing whatever information may be required hereunder)
is deposited in any United States mail box addressed as aforesaid, except that
(a) all materials personally delivered or sent by telefax will be deemed served
when actually received by the party to whom addressed, (b) air express materials
will be deemed served on the day of delivery to the air express company, (c)
notices of change of address will be effective only from the date of its
receipt, and (d) accounting statements will be sent by regular mail and will be
deemed rendered when deposited in any United States mail box.

      (b) During the Term, Owner will at all times designate an employee of
Owner as Owner's representative and agent with whom BMG can primarily liase for
purposes of this Agreement (e.g., manufacturing, sales, marketing, advertising,
etc.). Currently, Owner designates ________________ (and any employee of Owner
designated, in writing, by him) as its representative and agent for purposes of
this Agreement.

21. ASSIGNMENT

      Owner will not have the right to assign the Agreement or any of its rights
or obligations hereunder. BMG may, at its election, assign the Agreement or any
of its rights or obligations hereunder to its parent, subsidiary or affiliated
company or any person acquiring all or substantially all of its assets or with
whom BMG may merge. The foregoing will in no way limit

                                       29
<PAGE>

BMG's right to assign or license in the ordinary course of business. Any
assignment of this Agreement by Owner will be null and void.

22. WAIVERS AND REMEDIES

      No waiver of any provision of or default under this Agreement will affect
Owner's or BMG's right, as the case may be, thereafter to enforce such provision
or to exercise any right or remedy in the event of any other default, whether or
not similar. To the extent permitted by, and subject to the mandatory
requirements of all applicable laws, rules and regulations, each and every
right, power and remedy herein specifically given to either party or otherwise
in this agreement will be cumulative and will be in addition to every other
right, power and remedy herein specifically given or now or hereafter existing
at law, in equity or by statute, and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised from
time to time and as often and in such order as may be deemed expedient by such
party, and the exercise or the beginning of the exercise of any power or remedy
will not be construed to be a waiver of the right to exercise at the same time
or thereafter any other right, power or remedy. No delay or omission by either
party in the exercise of any right, remedy or power or in the pursuit of any
remedy will impair any such right, remedy or power or be construed to be a
waiver of any default on the part of such party or to be an acquiescence
therein. No express or implied waiver by either party of any breach or default
hereunder by the other party will in any way be, or be construed to be, a waiver
of any future or subsequent breach or default hereunder by such other party.

23. HEADINGS

      The headings and captions preceding the text of the various provisions of
this Agreement are inserted solely for reference and will not constitute a part
of this Agreement nor affect its meaning, construction or effect. Every word or
phrase defined herein will, unless herein specified to the contrary, have the
same meaning throughout this Agreement. As used herein, wherever applicable, the
singular will include the plural and the plural will include the singular, the
masculine will include the feminine and the feminine will include the masculine.

24. INVESTIGATION

      BMG will have no obligation whatsoever to make any investigation of the
facts relevant to any agreement, warranty or representation made by Owner
herein. Neither the furnishing by Owner nor the receipt by BMG of any document
will impair BMG's absolute rights to rely, to have relied, and to continue to
rely on any warranties or representations made by Owner herein in connection
with such document or the contents thereof.

25. ENTIRE AGREEMENT

      This Agreement contains the entire and only agreement between the parties
with respect to the subject matter hereof. This Agreement supersedes all
previous agreements or arrangements between the parties relating to the subject
matter hereof. No amendment, modification, waiver or discharge of this Agreement
or any provision hereof will be binding unless signed by BMG's and Owner's
authorized signatories.

26. SEVERABILITY

      If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this

                                       30
<PAGE>

Agreement will nevertheless remain in full force and effect, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto will negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.

27. GOVERNING LAW

      This Agreement will be construed under the internal laws of the State of
New York applicable to contracts to be performed wholly therein, and both
parties agree that only the New York courts will have jurisdiction over this
contract and any controversies arising out of this contract will be brought by
the parties to the Supreme Court of the State of New York, County of New York,
and they hereby grant jurisdiction to that Court. THE PARTIES HERETO EXPRESSLY
AND IRREVOCABLY WAIVE THEIR RIGHT TO TRIAL BY JURY AND ANY OBJECTION,
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
GROUNDS OF FORUM NON CONVENIENS WHICH THEY MAY NOW OR HEREINAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION) IN CONNECTION WITH
ANY CLAIM, DEMAND OR ACTION ARISING OUT OF THIS AGREEMENT.

28. COUNTERPARTS

      This agreement may be executed in one or more counterparts and by the
different parties hereto in separate counterparts, each of which when executed
will be deemed to be an original but all of which taken together will constitute
one and the same agreement. Facsimile signatures on this Agreement will be
deemed original for all purposes.

29. INTERNATIONAL CATALOG LICENSING AGREEMENT ("ICLA")

      The terms and conditions applicable to the exploitation of Owner's
Products outside of the Territory ("Rest of World" or "ROW") are set forth in
Exhibit H attached hereto and by this reference incorporated herein.

                                       31
<PAGE>

IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
mentioned.

BMG MUSIC, a New York general partnership __________________, a ________________
d/b/a BMG Entertainment                        (Owner)

By: BERTELSMANN MUSIC GROUP, INC.,
a Delaware corporation, a general partner

By: __________________________________    By: __________________________________
    Name:                                     Name:
    Title:                                    Title:

Date: ______________________, 200__       Date: ______________________, 200__

                                          ______________________________________
                                          Federal Tax ID #

                                       32
<PAGE>

                                   SCHEDULE I
                  TO THE AGREEMENT DATED AS OF __________,200_
                  BETWEEN BMG MUSIC AND________________________

Owner's Product(s) As of_________, 200_

(To Be Completed By Owner)

                                       33
<PAGE>

                                   SCHEDULE 2
                 TO THE AGREEMENT DATED AS OF ___________, 200_
                  BETWEEN BMG MUSIC AND _______________________

(To Be Completed By Owner)

Non-BMG Product(s) As of_________ 200

<TABLE>
<CAPTION>
(*)*              Artist         Title        Release        Old UPC        New UPC        Prior        Prior Distributor
                                                Date         Code &         Code &      Distributor's     (Net Effective
                                                           Selection #    Selection #      (Name)          Returns Price)
<S>               <C>            <C>          <C>          <C>            <C>           <C>             <C>

</TABLE>

----------
*     Insert an asterisk (*) to indicate each Non BMG Product(s) which has been
      distributed by Prior Distributor.

                                       34
<PAGE>

                                                            (Third Party Prices)

                                    EXHIBIT A
                  TO THE AGREEMENT DATED AS OF __________,200_
                  BETWEEN BMG MUSIC AND ______________________

                      PRICE SCHEDULE FOR WAREHOUSE SERVICES

                           PRICE PER UNIT (US DOLLARS)

                                  TO BE ADVISED

                                       35
<PAGE>

                                    EXHIBIT B
                 TO THE AGREEMENT DATED AS OF ____________,200__
                  BETWEEN BMG MUSIC AND ______________________

                         STANDARD PARENTAL ADVISORY LOGO

                                 (UNITED STATES)

Wording :         PARENTAL ADVISORY: EXPLICIT CONTENTS

Color:            Black and white

Placement:        Front of the permanent packaging (under the shrinkwrap) of the
                  particular Owner's Product(s) concerned (e.g., CD, cassette,
                  vinyl record and video)

Size:             1" x 5/8"

                  Example:

                               (ATTACH LOGO HERE)

                                       36
<PAGE>

                                    EXHIBIT C
                 TO THE AGREEMENT DATED AS OF ___________,200__
                   BETWEEN BMG MUSIC AND _____________________

                             TRADEMARK REQUIREMENTS

BMG LOGO:

                               (ATTACH LOGO HERE)

APPEARANCE:       -     BMG letters in black and the solid triangle and rule in
                        BMG Red (PMS200 - Pantone(R) 200C for coated stock,
                        Pantone(R) 200U for uncoated stock) or

                  -     Entire BMG Logo in solid black or other BMG approved,
                        solid dark color on a light background or

                  -     Entire BMG Logo in white on a dark background.

TYPEFACE:         Futura Bold Condensed

OWNER'S PRODUCT(S) PLACEMENT:

                  AUDIO

                        - Compact Disc - The BMG Logo must appear on the back of
                        the tray card (visible to the consumer at time of
                        purchase), in the booklet and on the compact disc.

                        - Cassette - The BMG Logo must appear on the back of the
                        J card (visible to the consumer at time of purchase) and
                        on the cassette (c-zero cartridge).

                        - Vinyl - The BMG Logo must appear on the back of the
                        jacket (visible to the consumer at time of purchase) and
                        on the label.

                  VIDEO - The BMG Logo must appear on the back of the slipcase
                  (visible to the consumer at time of purchase) and on the face
                  label of the video cassette.

                  OTHER - The BMG Logo must appear on the back of the applicable
                  product container (visible to the consumer at time of
                  purchase) and on the product.

                                       37
<PAGE>

                              EXHIBIT C (continued)

SIZE:             Under no circumstances may the size of the BMG Logo be smaller
                  than the size of the BMG Logo depicted below or any other logo
                  depicted in connection with Owner's Product(s).

                   Example of smallest size (19/32" or 15mm):

                               (ATTACH LOGO HERE)

LEGEND:           The following Legend must appear wherever the BMG Logo
                  appears:

                   "The BMG Logo is a trademark of BMG Music,"

----------
*     THE BMG LOGO MAY ONLY APPEAR IN THE MANNER DEPICTED ABOVE.

                                       38
<PAGE>

                                   EXHIBIT C-1
                 TO THE AGREEMENT DATED AS OF____________ _____
                  BETWEEN BMG MUSIC AND ______________________

                              DESIGNATION OF ORIGIN

          Printed or stickered on all jackets, containers and graphics
                             on Owner's Product(s)

WORDING:    "Manufactured and Distributed in the United States by BMG
            Distribution, a unit of BMG Entertainment, 1540 Broadway, New York,
            New York 10036"

                                       39
<PAGE>

                                    EXHIBIT D
                TO THE AGREEMENT DATED AS OF ____________, 200__
               BETWEEN BMG MUSIC AND _____________________________

                 PRICE SCHEDULE FOR AUDIO MANUFACTURING SERVICES

                                  (US DOLLARS)

<TABLE>
<CAPTION>
Configuration                               Price Per Unit         Elements
-------------                               --------------         --------
<S>                                  <C>                           <C>
7" Records                                      $0.43              Generic craft sleeve - 1 color
                                                                   Flexograph printing.

12" Records                                     $0.87              White sleeve
                                                                   Jacket supplied by Owner.
                                                                   Standard Shrinkwrap.
                                                                   (Black generic jacket supplied by BMG
                                                                   ($0.30).

Cassettes                                       $0.42              Tape housed in a standard white
(full-length)                               (ferric tape)          C-zero cartridge or clear C-zero
                                                $0.49              cartridge, includes 1 color direct
                                             (Cr02 tape)           imprint. Insertion into a black or
                                                                   clear Norelco Box with 4 panel J card.

                                     plus $0.0040 for each         Standard shrinkwrap
                                     minute or portion thereof
                                     in excess of 45 minutes

Cassette Singles                                $0.33
                                     (ferric tape)
                                     plus $0.004 for each minute
                                     or portion thereof in
                                     excess of 20 minutes

                                                $0.37
                                     (chrome tape)
                                     plus $0.004 for each minute
                                     or portion thereof in
                                     excess of 20 minutes

Compact Discs                                   $0.55              Disc (includes up to 3 color screen
(full-length or single)                                            print), top spine and inbound
                                                                   freight, tray and jewel case.
                                                                   Insertion of booklet and tray card,
                                                                   as supplied by Owner. Overwrapped.

                                                                   A $0.15 credit will be applied when
                                                                   the Jewel case is not used.
                                                                   Additional charges for other
                                                                   packaging elements shall be as
                                                                   specified by BMG.
</TABLE>

                                       40
<PAGE>

                              EXHIBIT D (continued)
                 PRICE SCHEDULE FOR AUDIO MANUFACTURING SERVICES

In addition to the elements listed above, the elements for each configuration
shall include a commercial quality pressing and boxing in BMG's standard count
box,

ADDITIONAL PROVISIONS

7" AND 12" RECORDS

7" and 12" records will be manufactured in various locations. With respect
thereto:

      -     7" records Minimum Initial Order 1000 units, reorder minimum 500
            units.

      -     12" records - Minimum Initial Order 500 units, reorder minimum 500
            units.

      -     Owner will furnish BMG with Sony 1610 master tape and lacquers for
            manufacturing.

      -     If Direct Metal Mastering (DMM) is used, Owner will furnish BMG with
            molds at Owner's expense.

      -     Owner will supply BMG with printed polylined inner sleeves. Owner
            will send printed jackets, inserts and polylined inner sleeves to
            the location(s) designated by BMG, Owner will supply label
            background separations. BMG will print the backgrounds. Owner will
            provide that all jackets shall bear the new selection numbers and
            UPC barcodes and that BMG jackets, graphics and labels background
            separations shall bear the language "Distributed (or `Manufactured
            and Distributed,' whichever is appropriate) in the United States by
            BMG Distribution, a unit of BMG Entertainment, 1540 Broadway, New
            York, New York 10035." "BMG (or the `BMG logo,' whichever is
            applicable) is a trademark of BMG Music."

CASSETTES

Caasettes will be manufactured by BMG in various locations. With respect
thereto:

      -     Minimum Initial Order 1000 units, reorder minimum 500 units,

      -     Owner will supply BMG with a Sony 1630 master tape.

      -     Owner will supply BMG with label copy film for direct imprint on
            cassettes.

At Owner's sole cost and expense, Owner will provide BMG with artwork and all
related mechanicals and will supply BMG with cassette J-Cards sufficient to
allow BMG, (at Owner's sale cost and expense), to provide printed, 4-color,
scored insert cards which shall bear the new selection numbers and UPC barcodes
and the language "Manufactured and Distributed" in the United States by BMG
Distribution, a unit of BMG Entertainment, 1540 Broadway, New York. New York
10036." "BMG (or the `BMG logo,' whichever is applicable) is a trademark of BMG
Music." Owner shall be solely responsible for all coordination, costs and
expenses, including, without limitation, freight to BMG's manufacturing
facilities, associated with ensuring that the

                                       41
<PAGE>

                              EXHIBIT D (continued)
                 PRICE SCHEDULE FOR AUDIO MANUFACTURING SERVICES

Owner-supplied J-Cards are received by BMG in a manner and form suitable to BMG
to allow BMG to incorporate Owner's J-Cards in an efficient and timely manner.

      -     BMG will collate the cassettes and J-cards into Norelco cases and
            shrinkwrap.

CAMPACT DISCS

Compact discs will be manufactured and packaged in various locations. With
respect thereto;

      -     Minimum Initial Order 1,000 units, reorder minimum 500 units.

      -     At Owner's sole cost and expense, Owner will supply a technically
            satisfactory Sony 1630 master tape accompanied by the appropriate
            digital tracking Information. In the alternative, Owner shall pay
            BMG its standard compact disc mastering charge for each compact disc
            selection mastered hereunder.

      -     At Owner's sole cost and expense, Owner will supply label background
            film and artwork for each selection with tracking sequences and
            timings.

      -     At Owner's sole cost and expense, Owner will supply printed booklets
            and Inlay cards which will bear the new selection numbers, UPC
            barcodes and the language "Manufactured and Distributed" in the
            United States by BMG Distribution, a unit of BMG Entertainment, 154
            Broadway, New York, New York 10036." "BMG (or the "BMG logo,"
            whichever is applicable) is a trademark of BMG Music."

      -     BMG will collate the discs, booklets and inlay cards into jewel
            cases and overwrap them..

BMG will designate the location(s) to which Owner is required to deliver the
various items Owner is to supply.

DIGITAL DOWNLOADS AND KIOSKS

Owner will be solely responsible for certain costs and expenses associated with
digital downloads and kiosk sales (including, without limitation, the costs and
expenses for the digitalization or other creation of the necessary Master(s) for
the particular Owner's Product(s) concerned, for the so-called "context
preparation" associated with the particular Owner's Product(s) concerned and for
the download or either delivery of the particular Owner's Product(s) concerned),
except that BMG will be responsible for the so-called "storage costs" and
"rights clearing house costs" associated with same.

Notwithstanding anything to the contrary contained herein, BMG, with respect to
the distribution of Owner's Product(s) as so-called digital download or kiosk
sales, will apprise Owner from time to time of such specific costs and expenses
for the particular Owner's Product(s) concerned and/or for all Owner's
Product(s) in respect of which Owner is responsible and any other terms and
conditions applicable thereto.

                                       42
<PAGE>

                                    EXHIBIT E
                  TO THE AGREEMENT DATED AS OF ___________, 200
                  BETWEEN BMG MUSIC AND ______________________

        PRICE SCHEDULE FOR SP (STANDARD PLAY) VIDEO DUPLICATION SERVICES

                                  TO BE ADVISED

                                       43
<PAGE>

                                    EXHIBIT F
                  TO THE AGREEMENT DATED AS OF __________, 200_
                  BETWEEN BMG MUSIC AND ______________________

                               SECURITY AGREEMENT

(See Attached)

                                       44
<PAGE>

                               SECURITY AGREEMENT

THIS SECURITY AGREEMENT is made as of this day of _________, 200_, by and
between BMG Music d/b/a BMG Entertainment (herein referred to as "Distributor")
on the one hand, and (herein referred to as "Company"), on the other hand, with
reference to the following:

A. Distributor and Company are entering into a Distribution Agreement (herein
referred to as "the Distribution Agreement") dated as of ________________, 200_.
In connection with the Distribution Agreement, Distributor will advance certain
monies on behalf of Company, and Distributor will incur additional
administrative and overhead costs in order to assist Company in the operation of
its business.

B. As an inducement and precondition to Distributor entering into the
Distribution Agreement, and as security for Company's performance pursuant to
the Distribution Agreement, Company has agreed to grant a security interest in
certain of its assets to Distributor (hereinafter sometimes referred to as
"Secured Party") under this Security Agreement.

NOW THEREFORE, for and in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:

1. GRANT OF SECURITY INTEREST

      (a) In order to secure the prompt and punctual payment, performance and
observance of all indebtedness, obligations, liabilities and agreements of any
kind of Company to Secured Party under this Agreement and the Distribution
Agreement (collectively, the "Obligations"), Company hereby grants to the
Secured Party a continuing first priority security interest in and to and to all
of its right, title and interest in and to:

            (i) all existing and after-acquired Inventory of Company in
"Company's Product(s)" (as hereafter defined) subject to the Distribution
Agreement and all "Masters" (as hereinafter defined) from which the same derive,
all of Company's rights, title and interest in and to all copyrights, whether or
not now in existence, which are or will relate to the Masters and Company's
Product(s) which are subject to the Distribution Agreement; and all documents
covering such Inventory, Company Product(s) and Master(s), and all proceeds of
the sale or other disposition of the same, wherever located.

            (ii) all existing and after-acquired licenses, copyrights, service
marks, trademarks, trade names and contract rights, documents and instruments
associated with and necessary for the manufacture and distribution of all
Company Product(s);

            (iii) all existing and after-acquired licenses, copyrights and other
contract rights associated with the Master(s) and necessary for the manufacture
and distribution of all Company Product(s);

            (iv) all accounts due from Distributor to Company under the
Distribution Agreement and all books, ledger cards, computer programs, databases
and other property and general intangibles at any time evidencing or relating to
the accounts;

                                       45
<PAGE>

            (v) all insurance proceeds or claims by the Company against third
parties for loss or damage to or destruction of any or all of the Collateral;
and

            (vi) any and all products and proceeds of any of the foregoing in
any form whatsoever.

All items set forth in Paragraphs (i) through and including (vi) above
hereinafter will be collectively referred to as the "Collateral."

2. REPRESENTATIONS AND WARRANTIES

      Company represents, warrants and agrees that:

      (a) no financing statement naming Company as debtor has been filed in any
public office;

      (b) it has not and will not grant a security interest to any third party
in the Collateral without Secured Party's prior express written consent;

      (c) Company has and will continue to have good and marketable, legal and
beneficial title to all Collateral, free of all liens, claims, security or other
interests, defenses, offsets, pledges, mortgages, hypothecations, charges and
encumbrances (collectively, "Encumbrances") whatsoever, other than the lien and
security interests granted hereunder;

      (d) on and after the date hereof, this Agreement will create a valid and
enforceable first priority and, upon filing of the appropriate financing
statements, perfected security interests in and to the Collateral in favor of
the Secured Party, superior and prior to the rights of all persons and entities
and subject to no other Encumbrance whatsoever other than the lien and security
interest granted hereunder. The Collateral is being used, and will continue to
be used, in Company's business and not for personal, family, household or
farming use. The Collateral is now personal property and not a fixture.

      (e) Company has and will have full power and authority to execute this
Agreement and to perform its obligations hereunder and this Agreement is a valid
and binding obligation of Company, enforceable in accordance with its terms;

      (f) Company has and will have full power and authority to subject the
Collateral to the lien and security interest granted hereunder;

      (g) all information with respect to the Collateral set forth in any
schedule, certificate or other writing at any time heretofore or hereafter
furnished by Company to the Secured Party and all other written information
heretofore or hereafter furnished by Company to the Secured Party, is and will
be true and correct in all material respects as of the date furnished;

      (h) the execution and delivery of this Agreement and the performance of
its terms does not and will not result in any violation of any provision of the
Articles of Incorporation or By-laws of Company or violate or constitute a
default under the terms of any agreement, instrument, license, judgment, decree,
order, law, statute, or other governmental rule or regulation applicable to
Company or its assets or properties;

                                       46
<PAGE>

      (i) the chief executive office of Company and the office where Company
keeps its books and records relating to the Collateral is and all locations of
Collateral are at the addresses set forth on Schedule 1 hereto and, except as
otherwise specified on Schedule 1, have been located at such addresses at all
times prior to the date hereof.

3. PERFECTION OF SECURITY INTEREST

      Company will execute and deliver to the Secured Party, at its request, but
also hereby appoints the Secured Party, with full power of substitution, as its
attorney-in-fact and agent to execute and file on Company's behalf, financing
statements copyright, trademark or service mark filings, assignments, mortgages
and pledges covering the Collateral. The Secured Party is authorized, at its
option, and Company hereby appoints the Secured Party, as its attorney-in-fact
and agent, to file any additional financing statement(s) and/or continuation
statement(s) with or without its signature with respect to any of all of the
Collateral; Company agrees to pay the costs in excess of Two Hundred ($200)
Dollars of any such filing and recording in all public offices deemed necessary
by Secured Party and to sign upon request any instruments, documents or other
papers which Secured Party may require to perfect its security interest in the
Collateral.

4. COVENANTS

      Company agrees:

      (a) to do such other acts and things, all as the Secured Party may from
time to time reasonably requests to establish and maintain a valid security
interest in the Collateral, free of all other Encumbrances, other than the
Secured Party.

      (b) to keep, at Company's address specified in Paragraph 2(i) hereof, the
records concerning Collateral, which records will be of such character as will
enable the Secured Party or its designees to determine at any time the status
thereof;

      (c) to permit Secured Party or its representative after reasonable notice
at any time during normal business hours to visit Company's offices and to
inspect, audit and make copies of and extracts from all records and all other
papers in the possession of Company, and upon request of the Secured Party, to
deliver to the Secured Party all of such records and papers which pertain to the
Collateral;

      (d) upon request of the Secured Party, to clearly indicate on its records
concerning the Collateral a notation, in form satisfactory to the Secured Party,
of the security interest of the Secured Party hereunder;

      (e) at all times to keep all Collateral which constitutes tangible
personal property fully insured to the extent insurable, against loss, damage,
theft and other risks, naming Secured Party as an additional insured, from such
insurance companies, under such policies and in such form as required by Secured
Party and to deliver to Secured Party a certificate of such insurance within
fifteen (15) days of the date of this Agreement;

      (f) to reimburse the Secured Party for all expenses (including, without
limitation, attorneys' fees) incurred by them in seeking to collect or enforce
any rights in the Collateral:

                                       47
<PAGE>

      (g) appear in and defend any action or proceeding, affecting or purporting
to affect the Collateral, and pay all costs and expenses thereof and all costs
and expenses in any such action or proceeding in which Secured Party may appear;

      (h) to provide Secured Party at least forty-five (45) days' advance
written notice of (i) any change in the location of its chief place of business
or chief executive office, and to inform Secured Party of the address of such
new location; (ii) any change in the location of its books and records relating
to the Collateral, and to inform Secured Party of the address of such new
location: and (iii) each new location of any office or warehouse (excluding
locations of Collateral in the possession or under the control of the Secured
Party).

      (i) to file mortgages of copyright and assignments of trademarks with the
appropriate recording office simultaneously with the filing of any applications
for copyright and trademark registrations as are necessary in order to fulfill
the covenant contained in Paragraph 1(a) hereof, which filings will be performed
at least quarterly.

      (j) to give written notice to the Secured Party promptly after it becomes
aware of (i) the occurrence of any Event of Default or of any fact, condition,
or event which, with lapse of time or the giving of notice, or both, would
constitute an Event of Default hereunder, which notice will specify the nature
thereof, the period of existence thereof, and (ii) the commencement of, or the
written threat of, or any significant development in, any litigation or
governmental proceeding pending against Company which is likely to have a
material adverse effect on the Collateral, or on the business or assets of
Company.

      (k) to cause all Company Products to comply in all respects with all
labeling requirements of Secured Party as set forth in the Distribution
Agreement, relating to trademarks, copyrights or other notice elements of the
artwork or background thereof, including, without limitation, UPC symbols (i.e.,
bar-coding), PMRC and other similar advisory stickers, or any disclosures deemed
advisable by Secured Party's attorneys;

      (l) not to change Company's name or conduct Company's business under any
trade name or style other than as set forth herein without providing Secured
Party with thirty (30) days prior written notice of such proposed change or new
trade name or style; and

      (m) not to voluntarily transfer or permit any involuntary transfer of the
Collateral or any interest therein, by way of sale (other than sales of
Inventory in the ordinary course of business), creation of an Encumbrance, levy
or other judicial process without first obtaining the written consent of Secured
Party;

5. EVENTS OF DEFAULT

      (a) The occurrence of any one of the following events will constitute an
event of default (an "Event of Default") hereunder if not cured within thirty
(30) days after written notice from Distributor to Company in the manner
provided for notices in the Distribution Agreement; PROVIDED HOWEVER, that
Secured Party will have the right to terminate this Agreement upon written
notice to Company, without a cure period, if Secured Party determines that the
nature of the breach or default is such that it cannot be cured by Company
within such thirty (30)-day period:

                                       48
<PAGE>

            (i) if any amount due to Distributor from Company under the
Distribution Agreement is not paid when due;

            (ii) if Company will fail to duly perform any of its respective
covenants, agreements or obligations contained in the Distribution Agreement or
this Agreement;

            (iii) if Company will fail to duly perform any of its obligations to
third parties identified in Distribution Agreement;

            (iv) if Company will commence any case, proceeding or other action
under any bankruptcy, insolvency or similar law for the protection of creditors
or the relief of debtors, or will have any such case, proceeding or other action
commenced which seeks an order for relief or an adjudication of insolvency or an
appointment of a receiver or similar official where such action commenced
against it is not dismissed or discharged within thirty (30) days;

            (v) if Company will make a general assignment for the benefit of its
creditors;

            (vi) if Company will be dissolved or liquidated or will be party to
any merger or consolidation with a third party, or will sell all or any
substantial part of its capital stock, business or assets other than by a public
offering of securities;

            (vii) if Company has made a representation or warranty herein or in
the Distribution Agreement which will have been materially untrue at or as of
the date made or misleading in light of the circumstances under which it was
made;

            (viii) if Key Personnel no longer performs in accordance with the
Key Personnel provisions of the Distribution Agreement; and

            (ix) if Company will be in default, or an event of default has
occurred, under the Distribution Agreement.

6. REMEDIES

      (a) General - Upon the occurrence of an Event of Default, the Secured
Party will have, in addition to any rights it has under the Distribution
Agreement, all rights and remedies afforded a Secured Party under applicable law
including, without limitation, all rights and remedies of a Secured Party under
the New York Uniform Commercial Code, as amended from time to time, the right to
exploit the Collateral, in any media, and in any commercially reasonable manner
available to Secured Party and the right to sell the Collateral at public or
private sale at the location or locations then specified by the Secured Party.
Company agrees upon the occurrence of an Event of Default, at the request of the
Secured Party, to assemble the Collateral, at the expense of Company, at a
convenient place acceptable to the Secured Party. All reasonable attorneys' fees
and disbursements and all other costs, charges, premiums and other expenses
incurred in connection with any such sale will be charges against and deducted
from the proceeds thereof, with the balance, if any, applied in reduction of the
respective obligations of Company under the Distribution Agreement, whether or
not then due, with any surplus remaining being payable to Company, and in the
event there is a deficiency, said deficiency will be payable forthwith by
Company. Notice of public or private sale, if given, will be sufficiently given
for all purposes if sent to Company at its last known address, and if a public
sale, if

                                       49
<PAGE>

published once in any newspaper of general circulation in the country in which
such sale is to be held, not less than five (5) days prior to sale.

      (b) Sale of Inventory - In addition to any other rights or remedies
Secured Party may have, upon such thirty (30) days written notice to Company,
Secured Party may sell the Collateral, at a private sale to a distributor,
dealer or other person or entity at Secured Party's customary "cut-out" or
"close out" prices, which Company acknowledges and agrees will constitute
disposition thereof in a commercially reasonable manner.

      (c) With respect to an Event of Default under Paragraph 5(iv) above, all
obligations will immediately and automatically be due and payable without
further presentment, demand, protest, notice of any kind, all of which are
hereby expressly waived by Company.

      (d) All rights and remedies provided in this Agreement are cumulative, not
exclusive and enforceable, alternatively, successively or concurrently.

7. REASONABLE CARE

      The Secured Party will be deemed to have exercised reasonable care in the
custody and preservation of any of the Collateral in its possession if it takes
such action for that purpose as Company reasonably requests, in writing, but
failure of the Secured Party to comply with any such request will not of itself
be deemed a failure to exercise reasonable care, and no failure of the Secured
Party to preserve or protect any rights with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by Company, will be deemed a failure to exercise
reasonable care in the custody or preservation of such Collateral.

8. RELEASE OF THE COLLATERAL AND TERMINATION

      Upon receipt by the Secured Party of evidence acceptable to it of the
satisfaction of all Obligations of Company under this Agreement and the
Distribution Agreement, this Agreement will terminate and the Secured Party, at
the request and expense of Company, will execute and deliver to Company
appropriate instruments acknowledging such termination. If, as a result of any
bankruptcy, dissolution, reorganization, intervention, arrangement, or
liquidation proceedings (or proceedings similar in purpose or effect), or if for
any other reason, any payment received by Secured Party in respect of the
Obligations is rescinded or must be returned by Secured Party, this Agreement
will continue to be effective as if such payment had not been made.

9. WAIVER: CUMULATIVE RIGHTS: SETOFF

      (a) No failure or delay on the part of the Secured Party in the exercise
of any power or right hereunder, or with respect to the Collateral, will operate
as a waiver thereof, nor will any single or partial exercise of any other right,
power or privilege hereunder, or with respect to the Collateral, preclude any
other or further exercise or the exercise of any other right, power or
privilege, it being understood that the rights and remedies of the Secured Party
under and in respect of this Agreement and the Collateral are cumulative and
will be in addition to any and all other rights and remedies now or hereafter
existing in law or in equity or available to the Secured Party under the
Distribution Agreement, or otherwise. No modification or waiver of any provision
of this Agreement, nor consent to any departure herefrom by Company will, in any

                                       50
<PAGE>

event, be effective unless such waiver or modification will be in writing signed
by an officer of the Secured Party and then will be effective only for the
period, and on the conditions, an for the specific instance and purpose for
which given. No notice to or demand on Company in any case will entitle Company
to any other or further notice of demand in similar or other circumstances.

      (b) Upon the occurrence of an Event of Default, in addition to its rights
under Paragraph 6, the Secured Party will have the right to set off against any
amount which it owes Company, whether hereunder or under the Distribution
Agreement, or otherwise.

10. SURVIVAL; ASSIGNMENT

      All representations, covenants and warranties contained herein will
survive the execution hereof and any investigation made by the Secured Party or
its representatives. Company may not assign this Agreement or any of its rights
or Obligations hereunder without the prior written consent of Secured Party. All
representations, covenants and warranties made by Company in this Agreement and
in the Distribution Agreement will be binding upon Company, its permitted
successors and permitted assigns and will inure to the benefit of the Secured
Party, its successors, endorsees, transferees and assignees.

11. CERTAIN DEFINITIONS

      When used herein, the following terms will have the following meanings:

      (a) "Inventory" means: (i) all raw materials, work in progress, finished
goods and inventory of whatsoever kind or nature and all wrapping, packaging,
advertising, marketing, promotional and shipping materials, and any documents
relating thereto, and all labels and other devices, names and marks affixed or
to be affixed thereto for purposes of selling or of identifying the same of the
seller or manufacturer thereof, and all right, title and interest of Company
therein and thereto, wherever located, whether now owned or hereafter acquired
by Company and (ii) all books, records and other property relating to the
foregoing.

      (b) "Master(s)" means the original material object in which sounds, with
or without visual images, are fixed by any method now known or hereafter
developed and from which sounds, with or without visual images, can be
perceived, reproduced or otherwise communicated, either directly or with the aid
of a machine, device or process including out takes, unused portions and similar
material relating to the above.

      (c) "Record(s)" means any form of reproduction, transmission and/or
communication, now or hereafter known, embodying sound alone or sound
accompanied by visual images, manufactured, distributed, transmitted or
communicated primarily for home use, school use, juke box use, and/or use in
means of transportation; however, such term will not include any reproduction
that is not intended for perception by human beings, including but not limited
to, data carriers. Terms not otherwise defined in this Agreement will have the
meanings given to them in the Distribution Agreement.

      (d) "Company's Product(s)" means any and all so-called "sound recordings"
including, without limitation, "Record(s)" configured as enhanced and/or other
types of compact discs ("CD(s)"), cassettes, tapes, tape cartridges,
soundtracks, digital audio (and/or video) discs, black vinyl records and all
other Record(s) forms, now or hereafter known or developed, and "audio-

                                       51
<PAGE>

visual recordings," now or hereafter known or developed, derived from
"Master(s)" owned or controlled, in whole or in part, directly or indirectly by
Owner and/or an Affiliate(s), currently or at any time during the Term. Attached
hereto and by this reference incorporated herein as Schedule 2 is a list of
Owner's Product(s) as of the date first written hereinabove. "Affiliates" means
any person or entity engaged in the so-called media/entertainment industry that
directly or indirectly owns or controls Owner, is owned or controlled by Owner
or "Key Personnel" (or any combination of them), or is under common ownership or
control with Owner; own" (including the terms "owned by" and "under common
ownership with") means the possession, directly or indirectly, of a majority of
the indicia of ownership of an entity (i.e., a majority of the stock in the case
of a corporate entity or a majority interest in the case of a partnership); and
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of an entity, for example in the
case of a corporate entity through the power to elect a majority of the board of
directors, whether through the ownership of voting securities, by contract, or
otherwise. "Key Personnel" means the person(s) identified as "Key Personnel"
under the Distribution Agreement.

12. NOTICES

      All notices from one party to the other hereunder will, unless herein
indicated to the contrary, be in writing and will be addressed as follows:

      To COMPANY:

<TABLE>
<S>                     <C>
      To DISTRIBUTOR:   BMG MUSIC
                        d/b/a BMG Entertainment
                        1540 Broadway
                        New York, New York 10036-6758
                        Attn: Vice President, Legal & Business Affairs (BMG Distribution)
                        with a copy to Senior Vice President, Finance (BMG Distribution)
</TABLE>

or to such other address as the addressee designates by written notice. Any
notice hereunder will be sent either by regular mail, certified or registered
mail (return receipt requested), or by personal delivery or air express or
telefax to the telefax number of the party to be served and will be deemed
complete when same (containing whatever information may be required hereunder)
is deposited in any United states mail box addressed as aforesaid, except that
(a) all materials personally delivered or sent by telefax will be deemed served
when actually received by the party to whom addressed, (b) air express materials
will be deemed served on the day of delivery to the air express company, (c)
notices of change of address will be effective only from the date of its
receipt, and (d) accounting statements will be sent by regular mail and will be
deemed rendered when deposited in any United States mail box.

                                       52
<PAGE>

13. MISCELLANEOUS

      (a) All notices to be given hereunder will be deemed served upon receipt
by the addressee, or if mailed, upon the first to occur of receipt of the
expiration of five (5) days after deposit in United States Postal Service
certified or registered mail, postage prepaid, addressed to the address of
Company or Distributor appearing below. Such addresses may be changed by notice
given in the same manner.

      (b) The Secured Party will not be liable for failure to collect or to
demand payment of, or to protest, or to give notice of non-payment of, any
amounts due under the Distribution Agreement, or for any delay in so doing, nor
will the Secured Party be under any obligation to foreclose on or sell any
Collateral or any part thereof. If an Event of Default will occur, the Secured
Party will be entitled to reimbursement of all out-of-pocket expenses incurred
by it, including attorneys' fees and disbursements in connection with such Event
of Default and collection and other enforcement proceedings resulting therefrom.

      (c) Company agrees to execute and deliver to the Secured Party, upon the
Secured Party's request, such other instruments and documents as may be
reasonable necessary to effectuate the purposes hereof including, without
limitation, notices to third parties, endorsements on or assignments of the
Collateral, financing statements, continuation statements, mortgages and
assignments of any security agreements securing the Collateral.

      (d) The Paragraph headings in this Agreement are for convenience of
reference only and will not affect the construction or interpretation of any
provision hereof.

      (e) This Agreement will be governed by and construed in accordance with
the laws of the State of New York, without giving effect to principles of
conflicts of law.

      (f) Company agrees that any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, or otherwise relating to the
Agreement, may be brought against Company only in a state or federal court
located in New York City, and Company hereby submits to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein except
that, if in Secured Party's judgment, it is preferable to join in any such
action or proceeding a third party that cannot be joined in any such state or
federal court, Secured Party may bring or seek to transfer such action or
proceeding to a court in such place where jurisdiction can be obtained and the
parties hereto consent to the jurisdiction of such court and the transfer
thereto. Notwithstanding anything herein to the contrary, however, a judgment
creditor may bring and action to enforce any judgment arising out of this
Agreement made by such court against the judgment debtor in any court having
jurisdiction over the judgment debtor or its possessions. Process in any action
or proceeding referred to in the Paragraph 13(f) will be served on Company by
personal service on the Secretary of state of New York together with service by
registered mail on the office of the Secretary of Company (Company hereby
irrevocably designates such office as its agent for such service). Company will
at all times maintain an agent in New York for receipt of process and keep
Secured Party informed as to the name and address of such agent. Nothing herein
will affect the right of secured Party to serve process in any other manner
permitted by law or to commence any legal action or proceeding against Company
in any other jurisdiction. EACH OF COMPANY AND SECURED PARTY HEREBY IRREVOCABLY

                                       53
<PAGE>

WAIVES TRIAL BY JURY AND ANY OBJECTION INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING
IN SUCH JURISDICTION.

      (g) As used herein, the singular, plural, masculine, feminine and neuter
will be deemed to include the other whenever and wherever appropriate.

      (h) Time is of the essence.

IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
mentioned.

BMG MUSIC, a New York general partnership ____________, a ______________________
d/b/a BMG Entertainment                     (Company)

By: BERTELSMANN MUSIC GROUP, INC.,
a Delaware corporation, a general partner

By: __________________________________    By: __________________________________
    Name:                                     Name:
    Title:                                    Title:

Date: ______________________, 200__       Date: ______________________, 200__

                                          ______________________________________
                                          Federal Tax ID #

                                       54
<PAGE>

                                   SCHEDULE 1
            TO THE SECURITY AGREEMENT DATED AS OF ____________, 200_
                  BETWEEN BMG MUSIC AND _______________________

Location of:

1.    Chief Executive office of Company                   ) To Be Completed
                                                          ) by Company

2.    Collateral                                          ) To Be Completed
                                                          ) by Company

3.    Books and Records Relating to Collateral            ) To Be Completed
                                                          ) by Company

                                       55
<PAGE>

                                   SCHEDULE 2
             TO THE SECURITY AGREEMENT DATED AS OF __________, 200_
                    BETWEEN BMG MUSIC AND __________________

Company's Product(s):

                                       56
<PAGE>

                                    EXHIBIT H
                 TO THE AGREEMENT DATED AS OF ____________, 200_
                  BETWEEN BMG MUSIC AND ______________________

          INTERNATIONAL CATALOG LICENSE AGREEMENT TERMS AND CONDITIONS

GRANT       During the Term, Owner also grants during the Term the exclusive
            right and license to exploit outside of the Territory ("Rest of the
            World") all of Owner's Product(s) ("International Sales").

            Owner will use its best efforts to acquire exclusive exploitation
            rights with respect to Owner's Product(s) throughout the Rest of
            World.

ROYALTIES   General

(all in)    Owner is entitled to receive royalties with respect to the
            International Sales of the Owner's Product(s), calculated in
            accordance with the provisions of the BMG intercompany license
            agreement with BMG's wholly-owned affiliates (the so-called
            "BMG-ICLA' agreement) or such royalties as are otherwise agreed, and
            subject to all of the other terms and conditions of the BMG ICLA.

            RATES FOR RECORD(S) configurations including Digital Phonorecord
            Delivery ("DPDs") Record(s) and Enhanced CDs.

            Royalties are paid at the applicable rate(s) set forth below on 100%
            of record(s) sold (e.g., neither returned nor exchanged), less
            container deductions and taxes.

            Royalties shall be calculated (on a published price to dealers
            ("PPD") basis) at the following rates in respect of records:

            Albums:

            Thirty and one-half percent (30.5%) for the Top-Price-Line

            Twenty and one-fifth percent (20.5%) for the Mid-Price-Line

            Sixteen and one-half percent (16.5%) for the Budget-Price-Line

            Twelve and one-fifth percent (12.5%) for the Superbudget-Price-Line

            Singles:

            Twenty and one-fifth percent (20.5%) for all Price-Lines

            Eps:

            Twenty-three and one-half percent (23.5%) for all Price-Lines

                                       57
<PAGE>

            Mid-Price-Line - Price list or category which is equal to or less
            than eighty-six percent (86%) and equal to or in excess of
            sixty-five percent (65%) of the applicable Top Priced Line for
            records of a particular type and embodying a particular repertoire
            line released by the applicable releasing party in the applicable
            particular country or territory.

            Budget-Price-Line - Price list or category which is less than
            sixty-five percent (65%) and in excess of fifty percent (50%) of the
            applicable Top-Priced Line for records of a particular type and
            embodying a particular repertoire line released by the applicable
            releasing party in the applicable particular country or territory.

            Superbudget -- Price Line -- Price list or category which is equal
            to or less than fifty percent (50%) of the applicable Top Priced
            Line for records of a particular type and embodying a particular
            repertoire line released by the applicable releasing party in the
            applicable particular country or territory.

            RATES FOR DIGITAL RECORD(S)

            Royalties are paid at 85% of the applicable rate(s) set forth above.

            Digital Record(s) are records in tape configuration made for digital
            playback, including, without limitation, Digital Audio Tape ("DAT").

            NOTE: Compact Discs, DPDs and enhanced Compact Discs are not digital
            records for these purposes.

<TABLE>
<CAPTION>
            RATES FOR CLUB
            --------------
<S>                                                <C>
            Top-Price                              12%
            Lower than Top-Price line               9%
</TABLE>

<TABLE>
<CAPTION>
            RATES FOR VIDEOCIRAMS AND DVD VIDEOS:

                                  0-30 MINUTES              OVER 30 MINUTES
                                  ------------              ---------------
<S>                               <C>                       <C>
            Top-Price             22 2/3 %                  29 1/3%
            Mid-Price*            15%                       20%

            (*Defined as 75% of Top-Price)
</TABLE>

ROYALTY
ACCOUNTING        Accountings will be rendered 120 days after the end of the
                  calendar quarter.

THIRD-PARTY       Licensing of masters to third parties [in licensed territory]
LICENSES          within the Territory will be subject to consent [via Schedule
                  E (form used for intra-company consent)] and are subject to
                  payment of 75% of royalties received by company from such
                  license.

                                       58
<PAGE>

CONTAINER DEDUCTIONS /
EXCESS PACKAGING COSTS

                  5% black vinyl records of any size (excluding Compact Discs,
                  DPDs, pre-recorded tapes and Digital Records)

                  10% Pre-recorded analog tapes of any size (excluding Compact
                  Discs, DPDs, black vinyl and Digital Records)

                  25% Compact Discs, DPDs, Digital Records and Videograms of any
                  size (excluding black vinyl and pre-recorded analog tapes).

WARRANTIES        Owner agrees, represents, warrants and covenants that Owner
                  has the right to grant BMG all of the exclusive rights herein
                  granted with respect to International Sales and that the
                  agreements, representations, warranties, covenants and
                  indemnities embodied in Paragraph 17 of the Agreement in
                  connection with Owner's Product(s) in the Territory will apply
                  with full force and effect to Owner's Product(s) in the Rest
                  of the World.

                                       59

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}]]