Document:

Exhibit 10.2

ARTISTDIRECT, INC.

NOTICE OF GRANT OF STOCK OPTION

Notice
is hereby given of the following option grant (the “Option”) to purchase shares
of the Common Stock of ARTlSTdirect, Inc. (the “Corporation”):

Optionee:                                 Robert
Weingarten

Grant Date:                         August 5,
2005

Vesting Commencement Date: Varies as set forth in the “Vesting
Schedule” below.

Exercise Price: $1.55 per share

Number of Option Shares:

1.                                  275,000
shares for Time Vesting Options (the “Time Vesting Options”); and

2.                                  275,000 shares for Performance Vesting Options
(the “Performance Vesting Options”).

Expiration Date: August 5, 2010

	
  Type of Option:

  	
  o  Incentive
  Stock Option

  
	
   

  	
   

  
	
   

  	
  x  Non-Statutory
  Stock Option

  

Date Exercisable:
Immediately upon vesting.

Vesting Schedule:

 The Time
Vesting Options and Performance Vesting Options shall vest in accordance with the following Schedules:

 (a)                         Time Vesting Options. The Time Vesting Options will vest at the rate
of 1/3 per year over a three (3) year period. Vesting will occur 1/3 on July 06,
2006 and the balance will vest in quarterly
installments over the following two (2) year period.

 (b)                        Performance
Vesting Options. The Performance Vesting Options will vest on achievement of the following financial milestones by the
Company:

(i) Fifty percent (50%)
of Performance Vesting Options upon the Company
reaching EBITDA of $9 million for the year ended December 31, 2006,

$12 million for the year ended
December 31, 2007 or $15 million for the year ended December 31, 2008.
One hundred percent (100%) of Performance Vesting Options shall vest if EBITDA targets are satisfied in any
two (2) of the three (3) fiscal years referenced in the preceding
sentence;

(ii) One hundred percent
(100%) of Performance Vesting Options will vest upon the Company reaching
EBITDA of $21 million in aggregate
for the years ended December 31, 2006 and 2007, $27 million in aggregate for
the years ended December 31, 2007 and 2008
or $36 million in aggregate for the years ended December 31, 2006, 2007
and 2008;

(iii) One hundred percent
(100%) of Performance Vesting Options will vest upon a sale, merger or other “change
of control” transaction at or above a price of $3.10 per share (as adjusted for
any stock split, stock dividend, recapitalization
or the like), and in any transaction which the Company’s outstanding convertible
subordinated debt (the “Subordinated
Debt”), which was issued pursuant to the terms of that
certain Securities Purchase Agreement dated as of July 28, 2005 entered into by
and between the Company and the investors indicated on the signature page
thereto (the “Securities Purchase
Agreement”), is redeemed in full together with payment in
full of any applicable redemption premium in accordance with the terms set
forth in the Convertible Subordinated Notes issued by the Company pursuant to
the terms of the Securities Purchase Agreement (collectively, the “Subordinated Notes”); or

(iv)
One hundred percent (100%) of any unvested Performance Vesting Options will
only be subject to three (3) year time vesting (which period will begin on July
28, 2006), upon completion of a financing by the Company (in either one or a
series of related transactions) resulting in aggregate gross proceeds of $20
million or more in which the Company issues equity at or above a price of $3.10
per share (as adjusted for any stock split, stock dividend, recapitalization or
the like).

For purposes of this Vesting
Schedule, “EBITDA” shall mean for the
Company and its subsidiaries, an amount equal to (a) the sum (without
duplication) of (i) annual consolidated net income plus
(ii) to the extent deducted in determining annual consolidated net income, (A)
consolidated interest expenses, (B) income tax expenses, (C) depreciation and
amortization, (D) net losses on assets sales for such period and (E) other non-cash charges for such
period (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash expenditures in any future period)
minus (b) to the extent included
in determining annual consolidated net income, (i) net gains on asset sales for
such period, (ii) other non-cash items
increasing annual consolidated net income (excluding any non-cash gains for
such period resulting from the reversal of an accrual or reduction or
elimination of a reserve established in a prior period to the extent the
related non-cash charge was excluded in accordance with clause (a)(ii)(E) above
(and after taking any Performance Bonus earned by the Company’s Chief Executive
Officer and/or Chief Financial Officer), EBITDA shall be calculated by the
Company in accordance with

GAAP, and on the basis of the
year end audited financial statements of the Company.

Optionee
and the Corporation hereby agree to be bound by all the terms and conditions of
the Option as set forth in the Stock Option Agreement attached hereto as
Exhibit A.

All
capitalized terms in this Notice shall have the meaning assigned to them in
this Notice or in the attached Stock Option Agreement.

	
  DATED:  August     ,
  2005

  	
  ARTISTDIRECT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jonathan Diamond

  	
   

  
	
   

  	
  Name:

  	
  Jonathan Diamond

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert Weingarten

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Optionee:

  	
  Robert Weingarten

  
	
   

  	
  Address:

  	
  5439 Lockhurst Drive

  
	
   

  	
   

  	
  Woodland Hills, CA 91367

  
							

 

 

ATTACHMENT:

EXHIBIT A - NON-STATUTORY
STOCK OPTION AGREEMENTExhibit
10.3

ARTISTDIRECT, INC.

NOTICE OF GRANT OF STOCK OPTION

Notice is hereby given of the following option grant
(the “Option”) to purchase shares of the Common Stock of ARTlSTdirect,
Inc. (the “Corporation”):

	
  Optionee:

  	
  Jonathan Diamond

  
	
   

  	
   

  
	
  Grant Date:

  	
  August 5, 2005

  

 

Vesting Commencement Date: Varies as set forth in the “Vesting
Schedule” below.

Exercise Price: $1.55 per share

Number of Option Shares:

1.                     1,045,000
shares for Time Vesting Options (the “Time Vesting Options”); and

2.                     1,708,098 shares for Performance Vesting Options
(the “Performance Vesting Options”).

Expiration Date: August 5, 2010

	
  Type of Option:

  	
  o

  	
  Incentive Stock Option

  
	
   

  	
   

  	
   

  
	
   

  	
  x

  	
  Non-Statutory Stock Option

  

 

Date Exercisable: Immediately upon vesting.

Vesting Schedule:

 The
Time Vesting Options and Performance Vesting Options shall vest in accordance
with the following schedules:

 (a)  Time Vesting
Options. The Time Vesting Options will vest at the rate of 1/3 per year
over a three (3) year period. Vesting will occur 1/3 on July 28, 2006 and the balance will vest in quarterly
installments over the following two (2) year period.

 (b)  Performance
Vesting Options. The Performance Vesting Options will vest on achievement of the following financial milestones by the
Company:

(i) Fifty percent (50%)
of Performance Vesting Options upon the Company
reaching EBITDA of $9 million for the year ended December 31, 2006,

$12 million for the year ended
December 31, 2007 or $15 million
for the year ended December 31, 2008. One hundred percent (100%) of
Performance Vesting Options shall vest if
EBITDA targets are satisfied in any two (2) of the three (3) fiscal years referenced
in the preceding sentence;

(ii) One hundred percent
(100%) of Performance Vesting Options will vest upon the Company reaching
EBITDA of $21 million in aggregate for the years ended December 31, 2006 and
2007, $27 million in aggregate for the years ended
December 31, 2007 and 2008 or $36 million in aggregate for the years ended December
31, 2006, 2007 and 2008;

(iii) One hundred percent
(100%) of Performance Vesting Options will vest upon a sale, merger or other “change
of control” transaction at or above a price of $3.10 per share (as adjusted for
any stock split, stock dividend, recapitalization
or the like), and in any transaction which the Company’s outstanding convertible
subordinated debt (the “Subordinated Debt”), which
was issued pursuant to the terms of that certain Securities Purchase Agreement
dated as of July 28, 2005 entered into by and between the Company and the
investors indicated on the signature page thereto (the “Securities Purchase
Agreement”),  is
redeemed in full together with payment in full of any applicable redemption
premium in accordance with the terms set
forth in the Convertible Subordinated Notes issued by the Company
pursuant to the terms of the Securities Purchase Agreement (collectively, the “Subordinated
Notes”); or

(iv) One hundred percent
(100%) of any unvested Performance Vesting Options will only be subject to
three (3) year time vesting (which period will begin on July 28, 2006), upon
completion of a financing by the Company (in either
one or a series of related transactions) resulting in aggregate gross proceeds
of $20 million or more in which the Company issues equity at or above a price
of $3.10 per share (as adjusted for any stock split, stock dividend,
recapitalization or the like).

For purposes of this
Vesting Schedule, “EBITDA”  shall mean for the Company and its
subsidiaries, an amount equal to (a) the sum (without duplication) of (i)
annual consolidated net incomes plus
(ii) to the extent deducted in determining annual consolidated net income, (A)
consolidated interest expenses, (B) income tax expenses, (C) depreciation and
amortization, (D) net losses on assets sales for such period and (E) other non-cash charges for such period (excluding any
such non-cash charge to the extent that it represents an accrual of or
reserve for cash expenditures in any future period) minus (b) to the extent included in determining annual
consolidated net income, (i) net gains on asset sales for such period, (ii)
other non­cash items increasing annual
consolidated net income (excluding any non-cash gains for such period
resulting from the reversal of an accrual or reduction or elimination of a
reserve established in a prior period to the extent the related non-cash charge
was excluded in accordance with clause (a)(ii)(E) above (and after taking any
Performance Bonus earned by the Company’s Chief Executive Officer and/or Chief
Financial Officer). EBITDA shall be calculated by the Company in accordance
with

GAAP, and on the basis of the
year end audited financial statements of the Company.

Optionee and the Corporation hereby agree to be bound by
all the terms and conditions of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A.

All capitalized terms in this
Notice shall have the meaning assigned to them in this Notice or in the
attached Stock Option Agreement.

	
  DATED:  August
      , 2005

  	
   

  	
  ARTISTDIRECT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Robert Weingarten

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert Weingarten

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jonathan Diamond

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Optionee:  Jonathan Diamond

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
								

 

 

ATTACHMENT:

EXHIBIT A - NON-STATUTORY
STOCK OPTION AGREEMENT

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