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").


RECITALS


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 2 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
affiliates.


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.


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e. Execute any agreements with any Company
Artist to acquire Compositions in excess of
the budgets approved by the CEO or the
Board.


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.


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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.


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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
Consent.


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.


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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
executives.


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
procedures.


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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
365.


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


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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
solely to the extent that, during the
relevant accounting period, the gross
revenues of the Acquired Business exceed a
baseline gross revenue figure equal to the
gross revenues of the Acquired Business in
the twelve calendar months immediately
preceding its acquisition, merger or
consolidation, calculated according to
generally accepted accounting principles.


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