TVN ENTERTAINMENT CORP
EMPLOYMENT AGREEMENT (IAN AARON)
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT (IAN AARON)
<TEXT>

<PAGE>

                                                                    Exhibit 10.1

[LETTERHEAD OF TVN ENTERTAINMENT CORPORATION]

July 14, 2000

Ian Aaron                        Personal & Confidential
649 Fremont Street               -----------------------
Menlo Park, CA 94025


Dear Ian:

We are very pleased that you have agreed to accept the position as President and
Chief Executive Officer of TVN Entertainment Corporation (referred to herein as
"the Company" or "TVN"). This position is vital to the continued development,
implementation, launch and growth of the Company, so you will be a most
important and valued member of our senior management team.

Set forth below are the terms agreed upon for your employment by the Company:

1.   Effective August 6, 2000 you will be employed on a full time basis as the
     President and Chief Executive Officer ("CEO") of the Company, reporting to
     the Company's Chairman and Board of Directors.

2.   As the CEO of the Company, your duties will include those usually attendant
     to that position, including (i) devoting your full business efforts and
     time to the oversight, planning, and management of the Company's
     businesses, including it Broadband Internet Group ("BIG"), Video-on Demand
     ("VOD") and Digital Content Express ("DCX") businesses, (ii) completion of
     TVN's annual Business Plans (including for BIG, VOD and DCX) for approval
     by TVN's Board and the implementation of each such Plan after such
     approval, (iii) oversight, direction and supervision of all TVN operations
     and personnel, and (iv) such other duties consistent with your position as
     CEO of the Company as may be assigned to you from time-to-time by the
     Chairman and/or Board of Directors, all under the overall direction and
     control of its Board of Directors. All of the Company's businesses and
     operations are and will be within your area of responsibility as CEO, and
     you will also have fiscal responsibility for TVN's investments in, and will
     interface as needed with, TVN's affiliated businesses (NetSmart, New Media
     Network, Digital Support Solutions and Chromazone) and oversee the services
     which will be provided by TVN to those affiliates.

3.   Your employment hereunder will be for an initial three (3) year term (the
     "Initial Term") beginning August 6, 2000 and continuing thereafter through
     August 5, 2003 unless earlier terminated with or without cause as set forth
     below. The Company shall have the option to renew your employment under
     this agreement for one (1) additional two (2) year term (the "Option
     Term"), by written notice exercising such option sent to you at least
     ninety (90) days prior to the expiration of the Initial Term.

4.   You will be paid a salary at the pre-tax rate of $300,000 per year (Annual
     Salary) in accordance with the Company's payroll policies (currently bi-
     weekly) for the first year of the Initial Term, with appropriate
     withholding and deductions. For each year of the initial Term
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Ian Aaron
July 14, 2000
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     thereafter, the Annual Salary payable in that year will be increased by no
     less than five percent (5%) per annum (i.e., in the second year $315,000
     and $330,750 in the third year, but that percentage increase shall not set
     a ceiling if a greater increase is merited as determined in the discretion
     of the Board of Directors. Your Annual Salary payable during the first year
     of the Option Term, if exercised by the Company, will be no less than 105%
     of your third year Annual Salary for the first option year, and during each
     subsequent option year no less than 105% of the first option year Annual
     Salary.

5.   The Company shall provide you with a $300,000 interest free loan upon
     signing this agreement to facilitate your transition to employment with the
     Company, and this loan will be forgiven in equal amounts over the term of
     this agreement on the first, second and third anniversary of your
     employment. Any unpaid balance of the loan shall be forgiven in the event
     of a change of control of the Company or termination of your employment
     without cause, or termination by you for good reason. You will also be
     eligible to receive a performance/merit bonus annually for each fiscal year
     ("Annual Bonus") in accordance with TVN's policies for its senior
     executives, for up to 100% of your Annual Salary. The amount of the Annual
     Bonus will be determined by TVN's Board of Directors based your performance
     as President and CEO of TVN, and the achievement of the goals set by TVN's
     senior management (with your participation) and the Board for each fiscal
     year (currently ending March 31). This Annual Bonus will be payable after
     TVN's financial department has compiled the relevant financial performance
     data after the end of each fiscal year, beginning with fiscal year end
     March 31, 2001, but in any event your Annual Bonus shall be guaranteed at
     no less than 50% of your Annual Salary in each such fiscal year (prorated
     for fye 2001).

6.   You will be reimbursed for reasonable out-of-pocket expenses incurred by
     you on behalf of the Company and in the conduct of its business, upon
     presentation of appropriate receipts or other suitable documentation, in
     accordance with the Company's expense reimbursement policies applicable to
     its senior executives, including (i) first class or upgraded airplane
     travel as appropriate, (ii) an auto allowance of $1,000 per month, and
     (iii) the reasonably incurred costs to move your family and possessions to
     Los Angeles, and the cost to rent a home in the Los Angeles area for six
     (6) months, to allow you adequate time to sell your existing home and to
     find and buy a new home in the greater Los Angeles area. You will not be
     required to relocate from the greater Los Angeles area for this position.

7.   You will also be included in the Company employee benefit plans then
     available to other senior executive employees. The Company provides a 401k
     Plan and a health and dental care plan that has a first complete calendar
     month waiting period for eligibility.

8.   Subject to meeting eligibility requirements, you will participate in a
     newly created Company incentive Stock Option Plan ("the new Option Plan")
     and your stock option grant shall be, to the extent permitted under the
     applicable rules of Section 422(d) of the Internal Revenue Code of 1986, as
     amended, an "incentive stock option" to purchase a total of 1,200,000
     shares of the Company's Common Stock ("Option Shares"). The Option Shares
     will be granted from a stock option pool which will be authorized pursuant
     to the new Option Plan to be adopted by the
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Ian Aaron
July 14, 2000
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     Board of Directors for this option grant, for other new hires, and for
     refresher option grants to be issued to other senior level TVN executives.
     Your per share exercise price for the Option Shares shall be equal to the
     lesser of (i) $2.75 per share, or (ii) an amount equal to ninety percent
     (90%) of the per share price set in the next round of equity financing for
     the Company in excess of $25 Million. The new Option Plan shall provide for
     repriced incentive stock options to be issued for refresher grants and for
     existing and new senior management employees, all as approved by the Board
     of Directors. Your stock option shall be exercisable for a term of ten (10)
     years (or shorter upon any termination of your employment other than for
     cause) and shall vest as follows: (i) twenty five percent (25%) of the
     Options Shares (300,000 shares) shall vest when this Agreement is mutually
     signed, and (ii) the balance of the Option Shares (900,000 shares) shall
     vest ratably over the period provided for in the new Option Plan,
     conditioned upon your continued employment with TVN as of each vesting
     date; provided, however, that all unvested Option Shares shall vest upon a
     change of control as defined herein below. This option grant will be
     subject to the terms, definitions and provisions of the new Option Plan,
     and the standard form related Stock Option Agreement which will be entered
     into by you and the Company, both of which will provided to you after
     signing this letter agreement. You will also participate in all other
     regular option grants to senior executives for an amount of shares that is
     commensurate with your position relative to the others receiving such
     option grants.

9.   You will be entitled to a total of fifteen (15) days per year of paid
     vacation, for use at your discretion upon reasonable advance notice to the
     Chairman. During the term of your employment hereunder, the Company will
     obtain and pay the premiums when due for a term life insurance policy on
     your life in the amount of $1,000,000 payable to your designated
     beneficiary. You shall be fully "grossed-up" by the Company for this life
     insurance benefit, so that the economic effects to you are the same as if
     this benefit was provided to you on a non-taxable basis. You also
     understand and agree that the Company may obtain additional term life
     insurance on you with benefits payable to the Company ("key-man life
     insurance") and you agree to cooperate with the Company in applying for
     such coverage and with respect to the medical examinations required to
     obtain such policies.

10.  If you become totally disabled during the term of this Agreement, your
     employment hereunder shall automatically terminate and you shall receive
     post-termination disability payments equal to twelve (12) months of
     continuation of your then current Annual Salary and guaranteed portion of
     your Annual Bonus, and your Option Shares shall continue to vest during
     such period of disability. You shall be deemed to have suffered a "Total
     Disability" ninety (90) days following written notice by the Company to you
     of a determination by an independent physician acceptable to the Board of
     Directors and you (which acceptance will not be unreasonably withheld) that
     your disability is such that you cannot render services as provided for
     hereunder; provided, however, that if you resume work on a regular basis
     prior to the end of such 90 day period, you shall not be deemed to have
     suffered a "Total Disability."

11.  During the term of this Agreement, if you become disabled by reason of
     illness or other incapacity extending for a period of more than three (3)
     consecutive months during which you










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Ian Aaron
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     are unable to perform your duties hereunder on a full-time basis (as
     determined by an independent physician acceptable to both you and the Board
     of Directors), but you are able to perform your duties hereunder on a part-
     time basis ("Partial Disability"), all Annual Salary and guaranteed Annual
     Bonus amounts otherwise payable shall be paid to you, and your Option
     Shares shall continue to vest, during this period of disability.

12.  If you die during the term of this Agreement, this Agreement shall
     terminate immediately; provided, however, that in such event, your spouse,
     if living, or your dependents, if your spouse is not living, shall receive
     twelve (12) months of continued Annual Salary payments hereunder.

13.  While you are employed by the Company, you agree that without first
     disclosing to and obtaining the prior written consent of the Chairman, you
     will not (i) engage in any business or be employed by any third person or
     entity, (ii) advise or consult with any person or entity which competes,
     directly or indirectly, with any of the Company's businesses or any
     businesses in which the Company maintains a financial interest, (iii)
     accept any gift, gratuity, benefit or interest of a material or substantial
     amount or nature (other than commonly accepted business practices for
     senior level executives in this industry, i.e., small gifts at holiday
     time, attending social events or seminars paid for by others), directly or
     indirectly, from any person or entity which does business with the Company,
     or its affiliates, or (iv) engage in any activity which creates or may
     create an actual or potential conflict of interest between such activity
     and your duty to act at all times in the best interests of the Company and
     not for your separate personal gain or profit; provided, however, that you
     may (a) be employed for a brief period, not to exceed three (3) months,
     from time-to-time as a consultant by your current employer, and/or (b)
     serve in any civic, educational or charitable organization without the
     approval of the Board, so long as such consulting or other activities do
     not interfere with the full-time performance of your duties and obligations
     under this Agreement. Company hereby acknowledges and agrees that you
     currently serve on the Boards of Directors of the companies listed on
     Schedule A and your continued service on such Boards is expressly permitted
     and will not be deemed a violation of this paragraph for so doing.

14.  You acknowledge and agree that the Company shall own, in perpetuity and
     throughout the universe, all creative and ownership rights in and to all
     materials created, written, produced or worked on by you, or under your
     direction, during the course of and in connection with your employment by
     the Company including, without limitation, all Company business and
     financial plans, computer systems and interfaces, technology, operating
     systems and manuals, designs and diagrams, and all sales, marketing and
     promotional materials developed or created by you or under your direction,
     and all property rights of any kind therein emanating from your work. You
     hereby assign to the Company all such rights and materials, and the
     copyright, publishing, trademark, domain name, intellectual property and
     other enumerated and related rights pertaining thereto or to the Company's
     businesses, which the Company shall own and be entitled to register, as it
     sees fit, in its or an affiliate's name, and for its sole benefit.
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Ian Aaron
July 14, 2000
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15.  Your employment may be terminated other than for "cause" as defined in
     paragraph 15 hereof, in which event the Company's sole obligations to you
     shall be a) to pay you (i) the unpaid portion of the agreed Annual Salary
     then in effect for your work performed prior to termination, (ii) your
     Annual Salary payable during each month of the remaining Initial Term (but
     not any Option Term unless the Company has exercised its renewal option and
     the Option Term has begun), plus the guaranteed portion only of your Annual
     Bonus payable during such period, less applicable payroll withholding and
     deductions, all payable ratably during the remaining Initial Term (or
     Option Term if exercised), (iii) unpaid auto allowance and reimbursable
     expenses, if any, properly incurred and documented prior to the date of
     such termination; and (iv) your auto allowance for the remaining Initial or
     Option Term, and b) to provide for the continuation of all of your then
     existing employee benefits for a period of twenty-four (24) months from
     such termination date unless you obtain substantially similar benefits with
     another employer at an earlier date. In addition, your unvested Option
     Shares shall all immediately accelerate and vest as of the date of any such
     non-cause termination.

16.  In the event of your termination by the Company for "cause" as defined
     below, you shall be entitled only to payment for the items in paragraphs
     15(i) and 15(ii) above, and the right to exercise your stock option for
     only those Option Shares which have fully vested as of the date of such
     termination, subject to offset for any material damage caused to the
     Company as a result of the conduct giving rise to such termination for
     cause. Upon any termination of your employment, whether with or without
     cause, you shall (a) return to the Company all of its materials in your
     possession or under your control, including all work in progress, work
     papers, computer discs and files, information and documents created or
     worked on by you for the Company, (b) provide a final report, if requested
     on the status of any work in progress or remaining to be done and (c)
     continue to comply with your non-disclosure and confidentiality
     obligations. For purposes of this agreement, "cause" is defined as (i) an
     act of dishonesty in connection with your duties and responsibilities as an
     employee and which either causes harm to the Company, or results in your
     substantial personal enrichment (ii) conviction of a felony, (iii) a
     material violation of the conflict of interest provisions of paragraph 12
     hereof, (iv) a willful act or gross misconduct which results in material
     damage to the Company, or (v) continued, substantial or willful failure to
     perform your employment duties after you have received one or more written
     notices, warnings or demands for performance from the Company or its Board
     of Directors which set forth the factual basis for the determination that
     you have a) continually, substantially or willfully failed to perform your
     duties, and b) had a reasonable time period in which to cure such defaults
     as are capable of being cured by subsequent curative action and you have
     failed to do so. Termination for cause shall be effective upon delivery to
     you of a notice from the Company's Board of Directors stating that you have
     engaged in any of the above described "for cause" conduct and specifying
     the particulars thereof, and for cause under Section (v) that you have not
     timely cured such defaults after such notice.

17.  You may terminate your employment for "good reason" upon written notice to
     the Company, and in such event, such employment termination shall be
     treated as a termination by the Company for reasons other than cause, and
     you shall receive the payments referred to in


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Ian Aaron
July 14, 2000
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     paragraph 15 hereof governing a termination without cause. For purposes of
     this agreement, "good reason" shall be defined as:

          (a)  A material diminution of your title, office, position
               or authority;
          (b)  The assignment to you of any duties inconsistent with
               your position, title, authority or material
               responsibilities, or the removal of your authority,
               title or material responsibilities;
          (c)  The failure of the Company to (i) timely make any
               payment due to you hereunder or (ii) comply with any of
               the material provisions of this agreement after written
               notice from you of such failure and the Company's
               failure to make such payment within five (5) business
               days of such notice, or to effect such compliance
               within a reasonable period of time.
          (d)  The occurrence of a change of control of the Company;
               and
          (e)  The failure of the Company to elect or re-elect you as
               a director of the Company, or your removal as a
               director of the Company.

18.  For purposes of this Agreement, a "change of control" shall mean (A) the
     acquisition of the Company by another equity by means of any transaction or
     series of related transactions (including, without limitation, a
     reorganization, merger or consolidation but, excluding any merger effected
     exclusively for the purpose of changing the domicile of the Company); or
     (B) a sale of all or substantially all of the assets of the Company in any
     transaction or series of related transactions, unless the Company's
     stockholders of record as constituted immediately prior to such acquisition
     or sale will, immediately after such acquisition or sale (by virtue of
     securities issued as consideration for such acquisition or sale or
     otherwise) hold at least a majority of the voting power of the surviving or
     acquiring entity; or (C) if you are required to report to a Chairman of the
     Board of the Company other than the current Chairman, or (D) one or more
     related transfers of capital stock of the Company which results, singly or
     in the aggregate, in a transfer of more than fifty percent (50%) of the
     voting power of the Company, other than transfers by any stockholder of
     voting power to any such stockholder's affiliates (as such term is defined
     in Rule 12 (b)(2) promulgated under the Securities Exchange Act of 1934, as
     amended, or such successor regulation). For the purpose of this Paragraph,
     the term "affiliates" shall include any individual, partnership,
     corporation, limited liability company, business trust, joint stock
     company, trust, unincorporated association or joint venture which directly
     or indirectly, is in control of, is controlled by, or is under common
     control with, such stockholder. For purposes of the preceding sentence, the
     term "control" shall mean the power, directly or indirectly, to (i) vote
     51% or more of the voting securities of an entity, or (ii) direct or cause
     the direction of the management or policies of an entity as the sole
     trustee, general partner or sole managing member of such entity.

19.  This contains our entire agreement for your employment by the Company; all
     prior and contemporaneous discussions, conversations and/or negotiations
     are merged herein. No representations have been made to you by the Company,
     or by any agent or representative thereof, or by you to the Company, other
     than those set forth herein and no agreements have





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Ian Aaron
July 14, 2000
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     been entered into, other than those expressly set forth herein. The terms
     of this employment agreement may not be modified or amended except by a
     document signed both by you and on behalf of the Company, and mutually
     executed fax copies shall be deemed originals, and may be used by either
     party as an original agreement. The laws of the State of California
     applicable to agreements which are to be performed wholly within such state
     shall govern this agreement, including its interpretation, construction,
     performance and enforcement.

20.  All claims, disputes or issues relating to your employment, including
     without limitation, your hiring, work, performance, compensation, bonuses,
     stock options, benefits, and/or termination for any reason, or based upon a
     claim of discrimination of any kind (each "a dispute" herein), shall be
     resolved, if mutually desired, initially by non-binding mediation efforts
     conducted by the parties with the aid of an independent impartial mediator
     or mediation service, to be paid for equally by the parties. If such
     mediation efforts are unsuccessful in resolving such dispute in a mutually
     acceptable manner, or if either party does not wish to participate in or
     continue with mediation efforts, each and every dispute shall be finally
     resolved solely by binding arbitration in Burbank, California under the
     applicable Employment Arbitration Rules of the American Arbitration
     Association then in effect. Arbitration shall be the sole and exclusive
     method for resolving any employment, hiring or termination related dispute,
     and both you and the Company acknowledge and agree that each is giving up
     any right that either otherwise might have for a judge or jury to decide
     such dispute, but neither the arbitrator nor any court which may be asked
     to enforce any arbitration award shall have jurisdiction or authority to
     award any punitive, exemplary or incidental damages; provided, however,
     either you or the Company may seek (i) equitable relief, including but not
     limited to injunctive relief, and (ii) an order compelling arbitration of
     any dispute, or enforcing any arbitration award,from a court of competent
     jurisdiction. The prevailing party in any such arbitration, as determined
     by the arbitrator(s), shall be entitled to his or its reasonable attorney's
     fees incurred in connection with, and the cost of, such arbitration
     proceeding, including the costs for the arbitrator(s).

21.  All disputes must be arbitrated pursuant to this Agreement, including, but
     not limited to, tort and negligence claims, bad faith claims, contract
     claims, wage claims, benefit claims, demands, liabilities, debts, accounts,
     obligations, damages, compensatory damages, liquidated damages, costs,
     expenses, actions and causes of action arising out of or in connection with
     your hiring, our employment relationship, the performance or non-
     performance of your duties, any disciplinary matters, including termination
     of the employment relationship, and/or retaliation and defamation claims,
     including but not limited to any claims for wrongful termination or
     discharge, breach of the covenant of good faith and fair dealing, and/or
     for violation of any and all federal and state civil rights laws,
     ordinances, regulations or orders, based on charges of discrimination or
     harassment on account of race, color, religion, sex, sexual orientation,
     age, citizenship, national origin, mental or physical disability, medical
     condition, marital status, pregnancy or any other discrimination prohibited
     by such laws, ordinances, regulations or orders (including, but not limited
     to, Title VII of the Civil Rights Act of 1964, as amended, 42 USC Section
     2000, et seq.; Americans with Disabilities Act; Civil Rights Act of 1866,
           ------
     and Civil Rights Act of 1991; 42 USC Section 1981, et seq.; Age
                                                        ------
     Discrimination in Employment Act, as amended, 29 USC Section 621, et seq.;
                                                                       ------
     Equal Pay Act, as amended.
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Ian Aaron
July 14, 2000
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     20 USC Section 206(d); regulations of the Office of Federal Contract
     Compliance, 41 CFR Section 60, et seq.; and applicable state equal
                                    -- ---
     protection and/or equal employment opportunity laws).

22.  You further understand and acknowledge that during the course of your
     employment by the Company, you have had and will continue to have access to
     its confidential business information and trade secrets, including without
     limitation: service, operations, ordering, billing and sales data, records
     and reports; customer, affiliate and vendor information; pending projects
     or proposals, business methods, systems, technology, plans and financial
     projections; the methods and techniques used in, approaches to, or results
     of market research; employee salaries, contracts and wage information;
     legal files and records; computer and engineering data, software,
     programming, diagrams and schematics; and accounting and financial
     information, whether written or verbal, or contained on paper, computer
     hardware or software, disk, tape, microfiche or other media ("Confidential
     Information"). This information is of substantial value and highly
     confidential, is not known to the general public, is the subject of Company
     efforts to maintain its secrecy, constitutes its professional and trade
     secrets, and is being provided and disclosed to you solely for use in
     connection with your employment by the Company. Since you will continue to
     have access to the Company's Confidential Information during the course of
     performing your duties, as a material condition of your continuing
     employment by the Company, concurrently with signing this Agreement you
     agree to sign the Confidentiality and Non-Disclosure Agreement which is
     attached hereto.

Welcome aboard.  We're delighted that you have agreed to take on this very
important position and we all look forward to working with you to achieve the
Company's goals.

Sincerely



/s/ Stuart Levin
Stuart Levin



Attachment - Non Disclosure Agreement


ACCEPTED AND AGREED:

The foregoing offer of employment is accepted.  I agree to the terms and
conditions of my employment by the Company contained therein and the provisions
of the attached Company Confidentiality and Non-Disclosure Agreement, both of
which I have signed after obtaining advice from my legal counsel.


/s/ Ian Aaron
---------------------------
Ian Aaron
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