MEDIABAY INC
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>7
<FILENAME>v02583_ex1036.txt
<TEXT>
EXHIBIT 10.36

                              EMPLOYMENT AGREEMENT

      THIS  AGREEMENT  made as of the 28 day of  January,  2004,  by and between
MediaBay, Inc., a Florida corporation, with offices at 2 Ridgedale Avenue, Cedar
Knolls, New Jersey 07927 (the "Company"),  and Jeffrey A. Dittus residing at 600
Old Gulph Road, Penn Valley, Pennsylvania 19072 (the "Executive").

                              W I T N E S S E T H:

      WHEREAS, the Company is engaged in the audio book club, old time radio and
spoken audio digital download businesses; and

      WHEREAS, the Company desires to employ the Executive; and

      WHEREAS,  the  Executive  is willing to serve the Company on the terms and
conditions herein provided.

      NOW,  THEREFORE,  in  consideration  of the  promises  and the  respective
covenants  and  agreements of the parties  herein  contained and intending to be
legally bound hereby, the parties agree as follows:

      1. Recitals.  The Whereas clauses recited above are hereby incorporated by
reference as though they were fully set forth herein.

      2.  Employment.  The Company  shall employ the Executive and the Executive
shall  serve the  Company  on the terms and  conditions  set forth  herein.  The
employment  relationship  between  the  parties  shall also be  governed  by the
general employment  policies and practices of the Company,  except that when the
terms of this  Agreement  differ  from or are in  conflict  with  the  Company's
general employment policies and practices, this Agreement shall control.

      3. Term.  The term of this  Agreement  shall  commence on January 28, 2004
("Effective  Date") and shall end three (3) years from the Effective Date if not
terminated earlier pursuant to the termination  provisions contained herein (the
"Term"). If either the Company or the Executive wish to extend or renew the term
of this  Agreement  when it expires,  then any such extension or renewal will be
mutually agreed to in writing by the parties

      4.  Position  and  Duties.  Subject  to the terms set  forth  herein,  the
Executive  shall be  employed  by the  Company  as Chief  Executive  Officer  of
MediaBay,  Inc.  His power and  authority  shall be and  remain  subject  to the
direction and control of the Board of Directors and the Chairman of the Company.
The Executive shall have profit and loss  responsibility for the Company and its
subsidiaries   (including  Audio  Book  Club,  Inc.,  Radio  Spirits,  Inc.  and
MediaBay.com,  Inc.)  as well as  operational  and  marketing  oversight  of the
business  and  affairs  of the  Company  and its  subsidiaries,  and  any  other
businesses which the Company or its subsidiaries may acquire,  and at the option
of the  Company,  additional  lines of  business  and  products  related  to the
business.  The  Board of  Directors  has the  right to  assign  and  change  the
Executive's title, duties,  responsibilities,  and oversight at any time. During
the Term,  the Executive  shall be required to devote his best efforts and spend
his full  time and  attention,  without  other  outside  business  interests  or
activities,  in  the  performance  of his  duties  and  the  Company's  and  its
subsidiaries' business and affairs.


                                       1
<PAGE>

      5. Compensation and Related Matters.

            (A) Base Salary.  For services  rendered pursuant to this Agreement,
the  Company  shall pay to the  Executive  an annual  base salary of $225,000 in
equal  semi-monthly  installments  in  arrears  on the 15th and last day of each
month subject to applicable  withholding and other taxes.  The base salary shall
be  increased  to  $250,000  per  year  (or a  pro-rata  portion  thereof)  upon
consummation of a debt,  equity,  or combination of debt and equity financing of
$10,000,000  or more prior to June 30, 2004 (as measured  against the  Company's
balance sheet as of December 31, 2003).  The base salary may be adjusted  upward
or downward in the sole discretion of the Board of Directors,  although it shall
not be adjusted  downward other than in conjunction with a general  reduction or
other  concessionary  arrangement  affecting  all  employees  or  affecting  all
executive level employees.

            (B) Bonus. The Executive will be eligible to receive a discretionary
annual  bonus to be  determined  by the  Compensation  Committee of the Board of
Directors of the Company in its  discretion.  Eligibility for such bonus will be
based  upon  a  set  of  financial  and  non-financial  objectives  set  by  the
Compensation  Committee  of the Board of  Directors  for each fiscal year (which
ends on December 31).  Executive must remain an employee  through the end of the
applicable  fiscal  year or he will not be  eligible  to receive  any bonus.  If
Executive's  employment  terminates for any reason, no partial or prorated bonus
payments will be made.  Determinations as to whether the Executive shall receive
any bonus,  including the determination as to whether  objectives have been met,
shall be made at the sole  discretion  of the Board.  Any bonus  awarded will be
paid no later than April 15 of the following year.

            (C) Expenses.  The Executive shall receive prompt  reimbursement for
all  reasonable  travel  and  business  expenses  in  connection  with  services
performed hereunder in accordance with normal Company policy, as the same may be
determined from time to time.

            (D) Insurance and Employee Benefits. The Executive shall be eligible
to receive such medical insurance and 401k benefits as are made available to all
officers of the Company,  subject to the general  eligibility and  participation
provisions  set forth in such plans.  The Company  reserves  the right to adopt,
amend, or discontinue any employee benefit,  plan, or program in accordance with
then applicable law.

            (E) Vacation.  The Executive  shall receive during each full year of
his employment, three (3) weeks (fifteen working days) paid vacation. Scheduling
of paid vacation  must be approved one (1) month in advance of taking  vacation,
and the Executive will make every effort to schedule the vacation time at a time
most  convenient  for the  Company.  Unused  vacation  days shall not be carried
forward  into the  following  year  and the  Executive  shall  not  receive  any
compensation for unused vacation.


                                       2
<PAGE>

            (F) Stock Options.  Subject to Board approval, the Executive will be
granted stock options to acquire one million five hundred  thousand  (1,500,000)
shares of Common Stock in the Company  pursuant to and in  accordance  with (and
therefore  subject to all terms and  conditions  of) the Company's  Stock Option
Plan.  The Executive  will receive these option grants  pursuant to six separate
option agreements.  All six stock option awards will be granted on the Effective
Date. The First Option with respect to Two Hundred and Fifty Thousand  (250,000)
shares  shall vest on April 30,  2004 at a price per share of $0.99.  The Second
Option with  respect to Two Hundred and Fifty  Thousand  (250,000)  shares shall
vest on July 30,  2004 at a price  per share of $0.99.  The  Third  Option  with
respect to Two Hundred and Fifty Thousand (250,000) shares shall vest on January
30, 2005 at a price per share of $1.55.  The Fourth  Option with  respect to Two
Hundred and Fifty  Thousand  (250,000)  shares  shall vest on July 30, 2005 at a
price per share of $1.55. The Fifth Option with respect to Two Hundred and Fifty
Thousand (250,000) shares shall vest on the Jnaury30,  2006 at a price per share
of $1.86. The Sixth Option with respect to Two Hundred Fifty Thousand  (250,000)
shares shall vest April 30, 2006 at a price per share of $1.86. The options will
vest in each instance  provided that the Executive is an employee of the Company
at the time such  vesting  is to occur.  Such  options  will be on the terms and
conditions as more specifically  provided for in the Company's Stock Option Plan
and will be exercisable as set forth in the Plan.

      6. Executive's Representations and Warranties.

            (A) Authority to Enter into Agreement.  Executive hereby  represents
and  warrants  that  Executive  has full right and  authority to enter into this
Agreement and to perform Executive's obligations hereunder.

            (B)  Affirmation  of  Truthfulness  of  Representations.   Executive
represents  and warrants that all facts he has  represented  and conveyed to the
Company,  whether  contained  in  his  resume  or  other  written  materials  or
transmitted  verbally,  are true and  complete,  and are  without  consequential
omissions  of  any  kind  whatsoever.  Executive  understands  that  falsity  of
statements  or answers  or  consequential  omissions  shall be deemed a material
breach of this Agreement.

            (C) No Breach of Contract.  Executive  represents  and warrants that
the  execution  and  delivery  of  this  Agreement  by  the  Executive  and  the
performance of the Executive's  obligations  hereunder will not conflict with or
breach any  agreement,  order or decree to which the  Executive is a party or by
which the Executive is bound.

            (D) No Conflict of Interest.  Executive  warrants that  Executive is
not, to the best of Executive's knowledge and belief,  involved in any situation
that might create,  or appear to create, a conflict of interest with Executive's
loyalty to or duties for the Company.

            (E)  Notification  of Materials or Documents  from Other  Employers.
Executive  further warrants that Executive has not brought and will not bring to
the Company or use in the  performance  of Executive's  responsibilities  at the
Company any  materials or documents of a former  employer that are not generally
available  to  the  public,   unless  Executive  has  obtained  express  written
authorization from the former employer for their possession and use.

            (F)  Notification of Other  Post-Employment  Obligations.  Executive
also  understands  that,  as part of  Executive's  employment  with the Company,
Executive is not to breach any obligation of confidentiality  that Executive has
to former  employers,  and  Executive  agrees to honor all such  obligations  to
former  employers  during  Executive's  employment  with the Company.  Executive
warrants  that  Executive is subject to no employment  agreement or  restrictive
covenant preventing full performance of Executive's duties under this Agreement.


                                       3
<PAGE>

            (G)  Indemnification  for  Breach;  Survival.  In  addition to other
remedies  which the Company might have for breach of this  Agreement,  Executive
agrees  to  indemnify  and hold the  Company  harmless  from any  breach  of the
provisions  of this  Section 6. The terms of this  Section 6 shall  survive  any
termination of this Agreement.

      7. Termination by the Company.

            (A)  General.  The Company  shall have the right to  terminate  this
Agreement with or without Cause at any time during the term of this Agreement by
giving written notice to the Employee. The termination shall become effective on
the date  specified in the notice,  which  termination  date shall not be a date
prior to the date  fourteen  (14)  days  following  the  date of the  notice  of
termination  itself,  provided,  however,  that the termination of Executive may
become  effective  on the date of the notice or on any date during the  fourteen
(14) day period following the notice provided that the Company  continues to pay
the Employee's Base Salary during the fourteen-day  period following the date of
the notice.

            (B) Cause.  In the event that the Executive is terminated  for Cause
(as defined  below),  the Company shall pay the Executive any unpaid base salary
due  Executive  through  the date of  termination  and notice  pay,  if any,  as
provided  in  subparagraph  (a) above.  Executive  shall not be  entitled to any
additional salary, bonus payments, severance, or other compensation.

            (C) Without  Cause.  In the event that the  Executive is  terminated
Without  Cause,  pursuant  to this  Section  7(c),  in  addition  to paying  the
Executive  through the date of termination  and, if  applicable,  complying with
subparagraph (a) above,  provided  Executive executes a full, general release of
claims  against the Company,  the Company shall pay to the  Executive  severance
compensation  equal to a  certain  number of months  (as  defined  below) of the
Employee's Base Salary as of the date of  termination,  payable on the Company's
regular payroll dates in accordance with normal payroll practices and subject to
deductions  as  required  by law.  The  number of months of  severance  shall be
determined  as  follows:   (i)  if  the  termination  occurs  within  the  first
twenty-four  (24)  months  of this  Agreement,  then the  number  of  months  of
severance shall be the number of months worked by Executive hereunder subtracted
from  twenty-four  (24);  and (ii) if the  termination  occurs  after  the first
twenty-four  (24)  months  of this  Agreement,  then the  number  of  months  of
severance shall be the number of months worked by Executive hereunder subtracted
from thirty six (36).

            (D) Cause  Defined.  For purposes of this  Section 7, "Cause"  shall
mean that the Board of Directors has determined in its sole  discretion that the
Executive  has engaged in any of the  following:  (i) any act or omission  which
constitutes  a  material  breach of, or  material  failure or refusal to perform
duties under, this Agreement and any covenant or condition thereof, after notice
of such and failure to cure the same within fifteen  business days; (ii) any act
constituting dishonesty, fraud, immoral or disreputable conduct which is harmful
to the Company or its reputation;  (iii) any conduct which  constitutes a felony
under applicable law; (iv) any act of gross misconduct which is injurious to the
Company;  (v)  refusal  to abide by or  implement  a  directive  of the Board of
Directors after notice of such and failure to cure the same within five business
days; (vi)  negligence or incompetence in the performance of Employee's  duties;
(vii) breach of  fiduciary  duty;  or (viii)  threats or acts of violence in the
workplace  or in the  course  and  scope  of  any  business  activity,  unlawful
harassment,   actual  or  attempted   misappropriation  or  embezzlement  of  or
intentional damage to any property of the Company.


                                       4
<PAGE>

      8. Termination by the Employee.

            (A) General. The Executive may terminate this Agreement at any time,
with or without  Good Reason (as  defined  below),  by giving at least  fourteen
days' written notice to the Company. Any such termination shall become effective
on the date specified in such notice,  provided that if the Executive gives more
than fourteen days written notice the Company may elect to have such termination
become  effective  on any date on or after the  fourteenth  (14th) day after the
date  of  the  notice  and  prior  to  the  date   specified   in  the   notice.
Notwithstanding the foregoing,  at the option of the Company, the termination of
Executive's  employment may become effective on any date on or after the date of
the notice  upon notice to the  Executive  by the Company and the payment by the
Company of the Executive's base salary during the fourteen-day  period following
the date of Executive's notice of termination of employment.

            (B) Without Good Reason. In the event that the Executive  terminates
his employment without Good Reason (as defined below), the Company shall pay the
Executive any unpaid base salary due Executive  through the date of  termination
and notice pay, if any, as provided in subparagraph  (a) above.  Executive shall
not be entitled to any additional salary,  bonus payments,  severance,  or other
compensation.

            (C) Good Reason. In addition to any unpaid base salary due Executive
through  the  date of  termination  and  notice  pay,  if any,  as  provided  in
subparagraph  (a)  above,  if such  termination  is for  Good  Reason,  provided
Executive  executes a full,  general release of claims against the Company,  the
Company shall pay to the  Executive  severance  compensation  equal to a certain
number of months (as defined below) of the Employee's base salary as of the date
of  termination,  payable on the Company's  regular  payroll dates in accordance
with normal payroll  practices and subject to deductions as required by law. The
number  of  months of  severance  shall be  determined  as  follows:  (i) if the
termination  occurs within the first  twenty-four (24) months of this Agreement,
then the number of months of severance  shall be the number of months  worked by
Executive  hereunder  subtracted from twenty-four  (24), which sum shall then be
divided  by two  (2);  and  (ii)  if the  termination  occurs  after  the  first
twenty-four  (24)  months  of this  Agreement,  then the  number  of  months  of
severance shall be the number of months worked by Executive hereunder subtracted
from  thirty six (36),  which sum shall  then be  divided  by two (2).  (D) Good
Reason Defined. For purposes of this Agreement, "Good Reason" shall mean:

                  (i) a material  reduction  in the  Employee's  Base Salary not
agreed to by the Employee, except for any reduction which is a part of a general
reduction  or  other  concessionary   arrangement  affecting  all  employees  or
affecting all executive level employees; or


                                       5
<PAGE>

                  (ii) a  material  adverse  change  made by the  Company in the
Executive's core functions,  duties or responsibilities  that would constitute a
demotion and that is not agreed to by the Employee; or

                  (iii) a requirement  that the Executive  relocate to an office
more than 75 miles from the office of the Company at which the Executive  spends
the majority of his time on the date of relocation without Executive's consent.

provided  however,  that any  actions  taken by the  Company  to  accommodate  a
disability  of the  Executive  or pursuant  to the Family and Medical  Leave Act
shall not be a Good Reason for purposes of this Agreement and provided  further,
in each such event listed in (i) through (iii) above,  the Executive  shall give
the  Company  notice  thereof  which  shall  specify  in  reasonable  detail the
circumstances  constituting Good Reason,  and there shall be no Good Reason with
respect to any such  circumstances  if cured by the Company  within  thirty (30)
days after such notice.

      9. Termination by Death or Disability of the Executive.

            (A) Death. In the event of the Executive's  death during the term of
this  Agreement,  all  obligations  of the  parties  hereunder  shall  terminate
immediately,  and the Company shall pay to the Executive's legal representatives
the Base Salary (and any earned  bonuses) due the  Executive  through the day on
which Executive's death shall have occurred.

            (B)  Disability.  Subject to  applicable  state and federal law, the
Company shall at all times have the right, upon written notice to the Executive,
to terminate  this  Agreement  based on the  Executive's  Disability (as defined
below). Upon any termination  pursuant to this Section, the Company shall pay to
the Executive any unpaid Base Salary  through the effective  date of termination
specified in such notice. The Company shall have no further liability  hereunder
(other than for reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however to the provisions hereof). Termination
by the Company of the Executive's  employment  based on "Disability"  shall mean
termination  because the Executive is unable to perform the essential  functions
of Executive's  position with or without  accommodation  due to a disability (as
such term is defined in the Americans with  Disabilities  Act) for six months in
the  aggregate  during  any  twelve  month  period.  This  definition  shall  be
interpreted and applied consistent with the Americans with Disabilities Act, the
Family and Medical Leave Act and other applicable law.

      10. Termination by Mutual Consent.  If at any time during the term of this
Agreement the parties by mutual consent decide to terminate this Agreement, they
shall do so by separate agreement setting forth the terms and conditions of such
termination.

      11.  Non-Competition  and  Confidentiality  Covenant.  As a  condition  of
employment and a material term of this Agreement, the Executive hereby agrees to
execute  and  abide  by the  Confidential  Information,  Inventions  Assignment,
Non-Solicitation and Non-Competition Agreement attached hereto as EXHIBIT A. The
provisions   of   the   Confidential    Information,    Inventions   Assignment,
Non-Solicitation  and  Non-Competition  Agreement are intended by the parties to
survive and do survive termination or expiration of this Agreement.


                                       6
<PAGE>

      12.  Indemnification.  To the maximum extent permitted under the corporate
laws  of the  State  of New  Jersey  or,  if more  favorable,  the  Articles  of
Incorporation  and/or  By-Laws  of the  Company as in effect on the date of this
Agreement,  and provided the Executive acted in good faith, did not act wantonly
or recklessly,  was not grossly negligent or engaged in willful misconduct,  and
acted in a manner he  reasonably  believed  to be in or not  opposed to the best
interests if the Company, and, with respect to any criminal proceedings,  had no
reasonable  cause to  believe  his  conduct  was  unlawful,  the  Company  shall
indemnify and hold harmless the Executive from and against (i) any claim,  loss,
liability,  obligation, damage, cost, expense, action, suit, proceeding or cause
of action  (collectively,  "Claims")  arising  from or out of or relating to the
Executive's acting as an officer, director,  employee or agent of the Company or
any of its affiliates or in any other capacity,  including,  without limitation,
any  fiduciary  capacity,  in which the  Executive  serves at the request of the
Company, and (ii) any cost or expense (including,  without limitation,  fees and
disbursements of counsel)  (collectively,  "Expenses") incurred by the Executive
in  connection  with the  defense  or  investigation  thereof.  If any  Claim is
asserted or other matter arises with respect to which the Executive  believes in
good faith the Executive is entitled to indemnification as contemplated  hereby,
the Company  shall,  at its election,  to be determined in its sole and absolute
discretion,  either assume the defense or  investigation of such Claim or matter
or pay the Expenses  incurred by the Executive in connection with the defense or
investigation of such Claim or matter,  when and as incurred,  provided that the
Executive  shall  reimburse the Company for such amounts,  plus simple  interest
thereon  at the  then  current  Prime  Rate as in  effect  from  time  to  tune,
compounded  annually,  if the Executive  shall be found,  as finally  judicially
determined  by a court of competent  jurisdiction,  not to have been entitled to
indemnification hereunder.

      13. Arbitration Agreement.  The parties hereto have simultaneously entered
into an Arbitration  Agreement attached hereto as EXHIBIT B which may be amended
by the parties from time to time without regard to this  Agreement.  The parties
expressly  agree that  disputes  arising out of or  relating to the  Executive's
employment,  including  any  disputes  under  or  relating  to  this  Employment
Agreement,  will be resolved by  arbitration  under the  Arbitration  Agreement;
provided  however,  that any dispute arising out of or relating to Section 11 of
this Agreement will not be subject to arbitration.

      14.  Governing  Law.  Except as preempted by federal law,  this  Agreement
shall be executed,  construed and  performed in accordance  with the laws of the
State of New Jersey  without  reference  to  conflict  of laws  principles.  The
parties  agree  that the venue for any  dispute  hereunder  will be the state or
federal  courts in New  Jersey and the  parties  hereby  agree to the  exclusive
jurisdiction thereof:

      15.  Binding  Agreement.  This  Agreement  and all rights and  obligations
hereunder  shall inure to the benefit of and be  enforceable  by the parties and
their personal or legal representatives,  executors, administrators, successors,
heirs,  distributees,  devisees  and legatees  and  assigns,  including  without
limitation any successor to the Company whether by merger,  consolidation,  sale
of stock or otherwise.

      16. Notice.  For the purpose of this Agreement,  notices,  demands and all
other  communications  provided  for in this  Agreement  shall be in writing and
shall be deemed to have been duly given when delivered personally, or by private
overnight  courier  or  mail  service,  postage  prepaid  or  (unless  otherwise
specified)  mailed by United Stares registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:


                                       7
<PAGE>

If to the Executive:        To his home address as listed in Company  records
                            at the time notice is given

If to the Company:          To its  corporate  headquarters  at the time  notice
                            is given, "Attention:  Board of Directors"

or to such other address as the patties may furnish to each ether in writing.
Copies of all notices, demands and communications shall be sent to the home
addresses of all members of the Board of Directors of the Company.

      17. Waiver and Modification.

            (A) No  provision  of this  Agreement  may be  modified,  waived  or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the parties  hereto,  provided,  however,  that this  Agreement may be
modified, waived or discharged by mutual agreement in writing.

            (B) No delay, waiver, omission or forbearance (whether by conduct or
otherwise) by any party hereto at any time to exercise any right,  option,  duty
or power  arising  out of breach  or  default  by the other  party of any of the
terms,  conditions or provisions of this Agreement to be performed by such other
party shall constitute a waiver by such party or a waiver of such party's rights
to  enforce  any  right,  option or power as  against  the other  party or as to
subsequent  breach or default by such other party,  and no explicit waiver shall
constitute a waiver of similar or dissimilar terms,  provisions or conditions at
the same time or at any prior or subsequent time.

      18.  Severability.  The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or  enforceability of
any other provision of this Agreement, and, in the event that any one or more of
the  words,  phrases,  sentences,  clauses,  provisions,  sections  or  articles
contained in this Agreement shall be declared  invalid,  this Agreement shall be
construed  as if such  invalid  word or words,  phrase or  phrases,  sentence or
sentences, clause or clauses,  provisions or provisions,  section or sections or
article or articles had not been  inserted and the  remainder of this  Agreement
shall remain in full force and effect.

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

      20. Entire  Agreement.  This Agreement and the  Confidential  Information,
Inventions Assignment,  Non-Solicitation and Non-Competition  Agreement attached
hereto contains the entire  understanding  of the Company and the Executive with
respect to the  subject  matter  hereof.  This  Agreement  supersedes  all prior
agreements and understandings  whether written or oral between the Executive and
the Company with respect to such subject matter,  and there are no restrictions,
agreements,  promises,  warranties or covenants  other than those stated in this
Agreement.


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<PAGE>

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

                                    "COMPANY"

Date Signed:  January 28, 2004      MEDIABAY, INC., a Florida corporation

                                    By:  /s/ Carl Wolf
                                       -----------------------------
                                    Printed Name: Carl Wolf
                                                 -------------------
                                    Title:        Chairman
                                          --------------------------

                                   "EXECUTIVE"

Date Signed:  January 28, 2004      /s/ Jeffrey A. Dittus
                                    --------------------------------
                                    Jeffrey A. Dittus


                                       9
<PAGE>

                                    EXHIBIT A

                [CONFIDENTIAL INFORMATION, INVENTIONS ASSIGNMENT,
                NON-SOLICITATION AND NON-COMPETITION AGREEMENT]


                                       10
<PAGE>



                                    EXHIBIT B

                             [ARBITRATION AGREEMENT]


                                       11

</TEXT>
</DOCUMENT>
