Employment Agreement

EMPLOYMENT AGREEMENT



This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of October 15, 1996 (the "Effective Date") between N2K Inc. ("Company") and Phil Ramone ("Employee").





A. Company, through its N2K ENCODED MUSIC division (the "Division"), is engaged in the business of producing, manufacturing, distributing, marketing and selling audio and audiovisual recordings and enhanced compact discs (collectively, "Products") embodying the musical performances and audiovisual creations of recording, multimedia and other artists ("Company Artists").



B. Company desires to employ Employee, and Employee desires to be employed by Company, on the terms and subject to the conditions set forth in this Agreement.



TERMS AND CONDITIONS



1. TERM



The term of this Agreement shall commence on the Effective Date and shall continue for three (3) years (the "Initial Term"). Company shall have the option (the "Option"), in its sole discretion, to extend the term for an additional two (2) year period (the "Option Period"). Company may exercise the Option at any time during the Initial Term by providing written notice to Employee of its intent to do so. Notwithstanding the foregoing, in the event that Company and Employee are unable to agree on the amount of Employee's annual salary during the Option Period after thirty (30) days good faith negotiations pursuant to Section 4.1 below, then the Option shall be treated as if it had not been exercised by Company.



As used herein, the "Term" shall signify both the Initial Term and, if Company exercises the Option, the Option Period. "Contract Year" shall signify the one-year period commencing on the Effective Date and each successive one-year period commencing on the anniversary thereof occurring in 1997 and 1998 and, if Company exercises the Option, in 1999 and 2000. "Fiscal Year" shall mean Company's fiscal year.



2. DUTIES OF EMPLOYEE



2.1 Title



Employee shall be employed by Company as President of the Division, subject to and consistent with the policies and budgets set by Company's Chief Executive Officer (the "CEO") and/or Company's Board of Directors (the "Board"). As used herein, "Company's Consent" shall mean the express consent of the CEO or the Board, in his or its reasonable discretion.



Employee shall have his principal business office in New York, New York. Except for the CEO, no other person employed by the Company in the Division shall have a superior title than that held by Employee. Notwithstanding the foregoing, the Company has employed a General Manager of the Division who shall report to the Company's President and Chief Operating Officer and who shall have day-to-day responsibility for financial management, control, and operations of the Division but not for management of the Division's recording artists and record production, which shall be the responsibility of Employee. Employee shall report directly and only to the CEO and shall perform such duties as are assigned to him from time to time by the CEO. Such duties shall include, but not be limited to, the following:



a. Securing agreements with recording artists,

loanout companies or production companies

granting Company the right to manufacture

and sell Products embodying such artists'

performances (such recording artists,

loanout companies and production companies

shall be referred to herein collectively as

"Company Artists").



b. Supervising all recordings and record

production on behalf of the Division.



c. If requested by the Board, attending

meetings outside New York, New York, for the

purposes of consultation with the Board or

with the officers of Company or any of

Company's parents, subsidiaries or



d. Securing agreements with Company Artists to

acquire the copyrights for the Company in

and to musical compositions written, owned

or controlled, in whole or in part, by

Company Artists (hereinafter such musical

compositions shall be referred to as

"Compositions").



2.2 Prohibited Actions



Employee shall not do, authorize or contract to do any of the following without Company's Consent:



a. Borrow money on behalf of Company or loan

any of Company's monies.



b. Assign, mortgage, encumber, transfer or sell

any of Company's assets or property.



c. Execute any agreement for a third party to

distribute, sell or manufacture Products.



d. Execute any agreements with any of Company

Artists in excess of the budgets approved by

the CEO or the Board.





e. Execute any agreements with any Company

Artist to acquire Compositions in excess of

the budgets approved by the CEO or the



f. Purchase capital equipment (other than as

may be needed on an emergency basis and then

not to exceed $1,000 per item).



g. Purchase any real estate or enter into any

lease agreement with respect to buildings,

real property or equipment.



h. Purchase any other company or business, or

any interest or stock in any other company

or business.



i. Make any expenditures in excess of the

budgets approved by the CEO or the Board.



j. Enter into any agreement for the employment

or engagement by Company of any employee,

agent or contractor.



k. Obligate Company to pay any employee, agent

or contractor compensation based on the net

profits, revenues or gross sales of either

Company or the Division, or on any other

percentage-type basis.



2.3 Confidentiality



At no time during the Term or at any time thereafter shall Employee use or disclose to any person any confidential, proprietary or trade secret information of Company or its parents, subsidiaries or affiliates. No casual or inadvertent violation of this subsection, if non-material, shall be deemed a breach of this Agreement.



2.4 No Solicitation



At no time during the Term or within two years following the expiration or termination of this Agreement shall Employee, or any agent acting on behalf of Employee, directly or indirectly approach, solicit or enter into any agreement with (a) any Company Artist or other artist, loanout company or production company who is party to any agreement with Company or its parents, subsidiaries or affiliates, or (b) any employee of Company or its parents, subsidiaries or affiliates, for the purpose of procuring the services or employment of such person, without Company's Consent.





2.5 Selection of Professionals



Notwithstanding any other provision of this Agreement, the CEO and the Board shall have the right to designate the independent public accountants and the attorneys who will service the Division.



3. OUTSIDE ACTIVITIES



3.1 Exclusive Services



Except as otherwise expressly provided in this Agreement, Employee shall devote his full time and best efforts exclusively to Company, and shall not render any business or professional services to any third party without Company's Consent. Except as otherwise expressly provided in this Agreement, Employee shall not serve as a director, officer or employee of, or as consultant to, any entity save Company during the Term.



3.2 Permissible Outside Activities



a. Company acknowledges that Employee is the

owner of a music publishing company called

"Ramone Music, Inc." Company consents to

Employee's continued involvement in the

operation of Ramone Music, Inc., provided

that Employee's involvement with Ramone

Music, Inc. does not materially interfere

with the performance of Employee's duties

under this Agreement, and provided further

that Ramone Music, Inc. shall not, during

the Term, compete with Company in any

manner, or acquire any new or additional

music publishing rights with respect to any

composition, catalog of compositions or the

work of any songwriter.



b. Employee shall be permitted to sit on the

board of directors of ED Net; provided,

however, that if the CEO or the Board

reasonably concludes that (i) ED Net has

become, or has acquired or been merged with,

consolidated into or acquired by, a

competitor of Company or (ii) Employee's

service on the board of directors of ED Net

materially interferes with Employee's

performance of his duties under this

Agreement, then Employee shall resign his

position on the ED Net board of directors

promptly following receipt of a written

request from Company, setting forth the

reason for such request, that he resign such

position. If the Company requests such

resignation from ED Net, then Company shall

reimburse Employee on a going forward basis

for the cost of one T-1 fiberoptic line to

Employee's principal residence that is

currently provided at the expense of ED Net.





c. Employee shall be permitted to produce

master recordings intended to be embodied

primarily on standard audio records for

recording artists other than Company

Artists; provided, however, that (a)

Employee shall devote no more than four

weeks (which need not be consecutive) to

such activities during any twelve-month

period; and (b) no such activities shall be

inconsistent with or interfere in any

material respect with Employee's duties

under this Agreement. Notwithstanding the

foregoing, Employee shall not be permitted

to pursue such activities in the fiscal year

which immediately follows a fiscal year in

which his total compensation from Company,

including any and all salary, bonus,

royalties (including advances against

royalties) and profit participations paid or

payable to Employee or to Phil Ramone, Inc.

("Lender") pursuant to this Agreement or

that producer's agreement between Company

and Lender executed concurrently herewith

(the "Producer's Agreement") equals or

exceeds $750,000.00, except with Company's



d. For purposes of this Section 3, a person or

entity that engages in the business of

producing, manufacturing, distributing,

marketing or selling audio or audiovisual

recordings, dvd's or enhanced compact discs

shall be deemed to compete with and be a

competitor of Company.



4. COMPENSATION



As full and complete compensation for all of Employee's services, all of the results and proceeds of Employee's services, all rights granted or to be granted to Company and all representations, warranties, indemnities and agreements made or given by Employee in connection with this Agreement, Company shall pay to Employee the following compensation:



4.1 Salary



Employee shall be paid an annual salary of $450,000.00 for the first Contract Year and $550,000.00 for the second and third Contract Years. If Company exercises the Option, Employee shall be paid $650,000 in annual salary for the fourth Contract Year, and such annual salary for the fifth Contract Year as the parties shall determine after good faith negotiations (which negotiations the parties shall use best efforts to conclude within thirty (30) days after Company's exercise of the Option). Employee's salary shall be paid in approximately equal installments in accordance with Company's then-prevailing payroll policy.





4.2 Benefits and Perquisites



a. Employee shall be entitled to annual vacation time on

such terms as are afforded to Company's senior

executives, but in no event less than four (4) weeks

per annum.



b. Employee shall be entitled to a car

allowance in such amount and on such terms

as are afforded to Company's senior

executives, but in no event less than

$800.00 per month.



c. Company agrees to procure and maintain

medical and hospital, dental, life and

long-term disability insurance and to

include Employee thereunder during the Term,

on such terms and subject to such conditions

as shall apply to Company's senior



d. If Employee is required by Company business

to travel to a location outside of the New

York metropolitan area that is more than

seventy-five (75) miles from Company's

executive office, then Company shall (i) in

Company's discretion, furnish and pay for or

reimburse Employee for the cost of,

round-trip transportation, first-class if

available, by air if appropriate, between

Employee's residence or Company's office (or

wherever Employee may then be, if closer)

and such location; and (ii) reimburse

Employee for the cost of first-class lodging

and meal expenses incurred by Employee in

connection therewith. For the avoidance of

doubt, this provision shall not apply to

travel between Employee's residence and

Company's executive office. To facilitate

Company's compliance with its obligations to

reimburse Employee under this subsection,

Employee shall obtain a credit card to be

used solely for reimbursable business

expenses, the annual fee for which Company

shall reimburse Employee.



e. If Employee is required by Company business

to stay overnight in New York, New York,

then Company shall reimburse Employee for

reasonable hotel expenses incurred by

Employee, not to exceed $350 per night,

subject to cost of living adjustments as

determined by the CEO or the Board in his or

its reasonable discretion.



f. Company's obligation to reimburse Employee

for any expenses shall be subject to

Company's usual expense accounting





4.3 Bonus



a. On October 1, 1997, Employee shall be entitled to a

bonus of $100,000, payable in the form of a loan

whose principal and interest thereon will be forgiven

(provided that Employee has not been terminated by

the Company for cause as set forth in this agreement)

over a twelve (12) month period at a rate of

one-twelfth of the outstanding indebtedness on the

first day of each month beginning on October 1, 1998

and ending on September 1, 1999,. This loan shall be

evidenced by a promissory note substantially in the

form of Exhibit "A" attached hereto and incorporated

herein by reference.



b. If the gross revenues of the Division

(calculated in accordance with generally

accepted accounting principles ("Gross

Revenues")) are at least $8 million but not

in excess of $10 million in any Fiscal Year

during the Term, then Employee shall be paid

a bonus of $50,000.00 for any such Fiscal

Year. If Gross Revenues are in excess of $10

million in any Fiscal Year during the Term,

then Employee shall be paid a bonus of

$100,000.00 for any such Fiscal Year. In no

event shall Employee's bonus exceed

$100,000.00 with respect to any given Fiscal

Year. Any such bonus shall be paid within

ninety (90) days of the end of the relevant

Fiscal Year. If Employee is no longer in

Company's employ at the conclusion of any

given Fiscal Year, then Employee's bonus

shall be prorated by a ratio equal to the

number of days during the Fiscal Year that

Employee was employed by Company divided by



c. For purposes of calculating any bonus due to

Employee under section 4.3(b), the

Division's Gross Revenues shall include only

gross revenues from Products produced,

manufactured, distributed and sold by the

Division or other divisions of the Company

that report directly to Employee (including

revenues received from the exploitation of

any master use license with respect to the

sound recording copyrights in such Products

and any licensing of the visual or other

nonmusical aspects of enhanced compact

discs). For the avoidance of doubt, gross

revenues shall not include:



(i) revenues generated by merchandising

or the exploitation of music

publishing rights with respect to

musical compositions, including

without limitation print rights,

mechanical rights, synchronization

rights, transcription rights and

public performance rights,

provided, however, that



if, as reasonably concluded by the

CEO or the Board, Employee was

substantially responsible for a

transaction leading to the

acquisition by Company of music

publishing rights, then gross

revenues (for purposes of this

section 4.3. only) shall include

twenty-five percent (25%) of the

net publisher's share earned by

such music publishing rights during

the relevant Fiscal Year; and



(ii) revenues generated by any business

of Company, including but not

limited to any business involving

the production, manufacture,

distribution, marketing or sale of

sound recordings and enhanced

compact discs, that is not within

Employee's purview as President of

the Division; provided, however,

that gross revenues (for purposes

of this section 4.3. only) shall

include an imputed fair-market

value transfer price or usage fee

for such assets of the Division as

may be used to generate revenue by

any other business of Company.



d. For purposes of calculating any bonus due to

Employee, the gross revenues of any business

of Company which is acquired by, merged into

or consolidated with Company subsequent to

the Effective Date and is thereafter within

Employee's purview as President of the

Division (the "Acquired Business") shall be

added to the gross revenues of the Division

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