Exhibit 10.1
          THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of June 26,
2006 is made by and between LodgeNet Entertainment Corporation, a Delaware
corporation (the “Corporation”), and James G. Naro (“Executive”) with reference
to the following circumstances, namely:

  A.   Executive is employed by the Corporation, as its Senior Vice President
and General Counsel and has made, and is making, an important contribution to
the development and operation of the Corporation’s business.     B.   The
Corporation desires to provide for its employment of Executive as hereinafter
provided, and Executive desires such employment, upon the terms hereinafter
provided.     NOW, THEREFORE, the Corporation agrees to employ Executive, and
Executive agrees to such employment, upon the following terms and conditions:

     1. Period of Employment. The employment of Executive by the Corporation
pursuant to this Agreement shall be for a period (sometimes referred to herein
as the “period of employment”) beginning on the date hereof and continuing,
unless sooner terminated as provided in Section 6 herein, through December 31,
2006; provided, however, that on each December 31, commencing with December 31,
2006, such period of employment shall automatically be extended for an
additional year unless ninety (90) days prior thereto either party hereto has
given written notice to the other that such party does not wish to extend the
period of employment.
     2. Duties. During the period of employment, Executive shall serve as Senior
Vice President and General Counsel of the Corporation, or in such other office
or offices to which he shall be elected by the Board of Directors of the
Corporation (“Board”) with his approval, performing the duties of such office or
offices as are assigned to him by the Board or committees of the Board. During
the period of employment, Executive shall devote his full time and attention to
the business of the Corporation and the discharge of the aforementioned duties,
except for permitted vacations, absences due to illness, and reasonable time for
attention to personal affairs.

 

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          3. Office Facilities. During the period of employment, Executive shall
have his office where the Corporation’s principal executive offices are located
from time to time, which currently are at 3900 West Innovation Street, Sioux
Falls, South Dakota, and the Corporation shall furnish Executive with office
facilities reasonably suitable to his position at such location.
          4. Compensation. As compensation for his services performed hereunder,
the Corporation shall pay or provide to Executive the following:
          (a.) The Corporation shall pay Executive a salary (the “Base Salary”),
calculated at the rate of $ 260,000.00 per annum (which Base Salary may be
increased by the Corporation at any time and from time to time in its
discretion), payable monthly, semi-monthly or weekly according to the
Corporation’s general practice for its executives, for the period of employment
under this Agreement.
          (b.) During the period of employment, Executive shall be allowed to
participate in such bonus and other incentive compensation programs in
accordance with their terms as the Corporation may have in effect from time to
time for its executive personnel, and all compensation and other entitlements
earner thereunder shall be in addition to, and shall not in any way reduce, the
amount payable as Base Salary.
          (c.) During the period of employment, Executive shall be entitled to:
          (i) participate in such retirement, investment, health (medical,
hospital and/or dental) insurance, life insurance, disability insurance and
accident insurance plans and programs as are maintained in effect from time to
time by the Corporation for its salaried employees;
          (ii) participate in other non-duplicative benefit programs which the
Corporation may from time to time offer generally to executive personnel of the
Corporation; and

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          (iii) take vacations and be entitled to sick leave in accordance with
the Corporation’s policy for executive personnel of the Corporation.
          (d.) During the period of employment, the Board from time to time in
its discretion may grant to Executive stock options, and other rights related to
shares of the Corporation’s common stock.
          5. Effect of Disability and Certain Hazards. Executive shall not be
obligated to perform the services required of him by this Agreement during any
period in which he is disabled or his health impaired to an extent which would
render his performance of such services hazardous to his health or life, and
relief from such obligation shall not in any way affect his rights hereunder
except to the extent that such disability may result in termination of his
employment by the Corporation pursuant to Section 6 herein.
          6. Termination of Employment. The employment of Executive by the
Corporation pursuant to this Agreement may be terminated on or prior to
December 31, 2006, or on or prior to any subsequent December 31 to which the end
of the period of employment may have been extended under Section 1, as follows:
          (a) In the event of Executive’s death prior to said date, such
employment shall terminate on the date of death.
          (b) Such employment may be terminated prior to said date due to
Executive’s physical or mental disability which prevents the effective
performance by Executive of his duties hereunder on a full time basis, with such
termination to occur on or after the time which Executive becomes entitled to
disability compensation benefits under the Corporation’s disability benefit
program then in effect. Any dispute as to Executive’s physical or mental
disability shall be settled by the opinion of an impartial physician selected by
the parties or their representatives or, in the event of failure to make a joint
selection after request therefor by either party to the other, a physician
selected by the Corporation, with the fees and expenses of any such physician to
be borne in equal shares by the Corporation and Executive.

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          (c) The Corporation, by giving written notice of termination to
Executive, may terminate such employment at any time prior to said date for
Cause, which means that such termination must be due to (1) acts during the term
of this Agreement resulting in a felony conviction under any Federal or state
statute, (2) substantial non-performance of Executive of his employment duties
required by this Agreement or (3) Executive willfully engaging in dishonesty or
gross misconduct injurious to the Corporation during the term of this Agreement,
with “Cause” to be determined in any case by the Board after reasonable written
notice to Executive and an opportunity for Executive to be heard at a meeting of
the Board and with reasonable opportunity (of not less than 30 days) in the case
of clause (2) to cease substantial non-performance.
          (d) The Corporation may terminate such employment at any time prior to
said date without Cause (which shall be for any reason not covered by preceding
subsections (a) through (c) upon 60 days prior written notice to Executive.
          (e) In the event that a Termination Event (as that term is defined in
the Executive Severance Agreement, dated June 12, 2006) has occurred, then the
Executive may terminate such employment according to the terms and conditions
set forth in said Executive Severance Agreement, and shall then be exclusively
entitled to any and all payments and benefits provided under said Executive
Severance Agreement to the exclusion of any provisions contained herein.
          7. Payments Upon Termination.
          (a) Except as otherwise provided in Section 6(e) and subsection (b) of
this Section 7, upon termination of Executive’s employment by the Corporation,
all compensation due Executive under this Agreement and under each plan or
program of the Corporation in which he may be participating at the time shall
cease to accrue as of the date of such termination (except, in the case of any
such plan or program, if and to the extent otherwise provided in the terms of
such plan or program), and all such compensation accrued as of the date of such
termination but not previously paid shall be paid to Executive at the time such
payment otherwise would be due.

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Unless otherwise expressly provided in the terms of the bonus plan or program of
the Corporation in which the Executive is a participant at the time of his
termination, if the termination of Executive’s employment is not for Cause, then
a pro rata portion of the “target” full year’s bonus shall be deemed to have
accrued for the Executive under such bonus plan or program for the portion of
the year ended on the date of the termination, which shall be paid to the
Executive at the time such bonus payment otherwise would be due.
          (b) If Executive’s employment pursuant to this Agreement is terminated
without Cause pursuant to subsection (d) of Section 6 herein, then, in addition
to the payments required by subsection (a) of this Section 7, Executive shall be
entitled (i) to the vesting of all options previously granted but still subject
to vesting and (ii) to the extent set forth in any agreement regarding the grant
of rights related to shares of the Corporation’s common stock, the vesting (or
termination of risk of forfeiture, as appropriate) of rights or shares
previously granted but still subject to vesting. The Executive shall also
receive, subject to the mitigation provisions of Section 11(a) below, for a
period of eighteen months (the “Severance Period”) cash severance payments (the
Severance Payment”) from the Corporation. The amount of the Severance Payment
shall be equal to the Executive’s then monthly Base Salary increased by a factor
of twenty percent (20%) to account for the Executive’s loss of benefits.
Executive shall have the right to purchase health and dental coverage under the
Company’s group policies then in effect for the Severance Period. The Severance
Payment shall be due and payable on the 20th day of each month and is subject to
required withholding. The Executive shall also be entitled to the benefits under
this Section in the event the Corporation elects at any time not to renew or
extend this Agreement pursuant to Section 1. The Executive shall not be entitled
to a Severance Payment in any event if he is terminated for Cause as permitted
by Section 6(c).
          8. Confidential Information. Executive shall not at any time during
the period of employment and thereafter disclose to others or use any trade
secrets or any other confidential information belonging to the Corporation or
any of its subsidiaries, including, without limitation, drawings, plans,

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programs, specifications, code, algorithms, methods, techniques, systems,
processes, designs and diagrams and non-public information relating to
(i) customers of the Corporation or its subsidiaries, (ii) the Corporation’s
business plans and budgets, and (iii) the Corporation’s financial information,
including projections, plans and budgets, except as may be required to perform
his duties hereunder. The provisions of this Section 8 shall survive the
termination of Executive’s employment with the Corporation, provided that after
the termination of Executive’s employment with the Corporation, the restrictions
contained in this Section 8 shall not apply to any such trade secret or
confidential information which becomes generally known in the trade from a
source other than Executive.
          9. Patents, Etc. The Corporation shall be entitled to any and all
ideas, know-how and inventions, whether patentable or not, which Executive shall
conceive, make or develop during the period of his employment with the
Corporation, relating to the business of the Corporation or any of his
subsidiaries. Executive shall, from time to time, at the request of the
Corporation, execute and deliver such instruments or documents, and shall
perform or do such acts or things, as reasonably may be requested in order that
the Corporation may have the benefit of such ideas, know-how and inventions and,
in particular, so that patent applications may be prepared and filed in the
United States Patent Office, or in appropriate places in foreign countries,
covering any of the patentable ideas or inventions covered by this Agreement as
aforesaid, including appropriate assignments vesting in the Corporation or any
of its subsidiaries (or any successor to the Corporation or any of its
subsidiaries) full title to any and all such ideas, inventions and applications.
Further, Executive will cooperate and assist the Corporation in the prosecution
of any such applications in order that patents may issue thereon.
          10. Non-Competition: Non-Mitigation: Litigation Expenses.
          (a) For the first nine months following termination of his employment
with the Corporation, Executive shall not be required to mitigate the amount of
termination benefits due him under Section 7 herein, by seeking employment with
others, or otherwise, nor shall the amount of such benefits be reduced or offset
in any way by any income or benefits earned by Executive from another employer
or other source during said period; thereafter, said

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termination benefits shall be reduced by one-half of the amount Executive may
earn from any full time employment position or occupation. However, if Executive
becomes employed, as a full or part time employee, or as a consultant or
advisor, to any enterprise engaged in competition with the business then being
conducted by the Corporation in the lodging pay-per-view/guest services market,
any obligation which the Corporation otherwise would have had under Section 7,
regardless of whether such nine-month period has expired, shall thereupon
terminate and cease to be of any further force and effect other than to the
extent theretofore performed by the Corporation.
          (b) Until the period of employment expires (which for these purposes
shall be calculated without giving effect to early termination pursuant to
Section 6 but shall include any extension or renewal of the period of
employment), Executive shall not enter into endeavors that are competitive with
the business or operations of the Corporation in the lodging pay-per-view/guest
services market, and shall not own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate in
or be connected with, as an officer, employee, director, partner, stockholder,
member, venturer, advisor, consultant or otherwise (except for passive
investments of not more than a one percent interest in the securities of a
publicly held corporation regularly traded on a national securities exchange or
in an over-the-counter securities market) any individual, partnership, firm,
corporation or other business organization or entity that engages in a business
which competes with the Company in the lodging pay-per-view/guest services
market. For these purposes, employment with a vendor of cable television
services shall not be treated as competitive with the business or operations of
the Corporation in the lodging per-view/guest services market.
          (c) The Corporation shall pay Executive’s out-of-pocket expenses,
including attorneys’ fees, but not to exceed a total of $10,000 for any
proceeding or group of related proceedings to enforce, construe or determine the
validity of the provisions for

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termination benefits in Section 7 herein, provided, however, that if any
arbitration or litigation results in a finding in favor of Executive contrary to
the position of the Corporation, then Executive will be reimbursed for all
reasonable legal and related costs regardless of the limitation set forth above;
and further provided that in no event will Executive be held liable for the
legal and related costs of the Corporation in an event of a finding in favor of
the Corporation.
          11. Arbitration. Any dispute or controversy arising under or in
connection with the Agreement shall be settled exclusively by arbitration in the
city where the principal executive offices of the Corporation are then located,
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction. Notwithstanding the foregoing, the Corporation shall be entitled
to seek equitable remedies, including injunction and constructive trust, with
respect to a breach or threatened breach of Sections 8, 9 and 10 hereof, without
the requirement to post any bond or other security.
          12. Miscellaneous.
          (a) This Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Corporation, including any party with
which the Corporation may merge or consolidate or to which it may transfer
substantially all of its assets.
          (b) The rights and obligations of Executive under this Agreement are
expressly declared and agreed to be personal, nonassignable and nontransferable
during his life, but upon his death this Agreement shall inure to the benefit of
his heirs, legatees and legal representatives of his estate, but only to the
extent of any remaining financial obligations of the Corporation.
          (c) The waiver by either party hereto of its rights with respect to a
breach of any provision of this Agreement by the other shall not operate or be
construed as a waiver of any rights with respect to any subsequent breach.

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          (d) No modification, amendment, addition, alteration or waiver of any
of the terms, covenants or conditions hereof shall be effective unless made in
writing and duly executed by the Corporation and Executive.
          (e) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together will constitute
but one and the same agreement.
          (f) This Agreement shall be construed according to the laws of the
State of South Dakota.
          (g) If any provision of this Agreement is determined to be invalid or
unenforceable under any applicable statute or rule of law, it is to that extent
to be deemed omitted and it shall not affect the validity or enforceability of
any other provision.
          (h) Any notice required or permitted to be given under this Agreement
shall be in writing, and shall be deemed given when sent by registered or
certified mail, postage prepaid, addressed as follows:

        If to Executive:   James G. Naro
4 East Twin Oaks Est.
Sioux Falls, SD 57105

        If to the Corporation:   LodgeNet Entertainment Corporation
3900 West Innovation Street
Sioux Falls, SD 57107
Attn: President

or mailed to such other person and/or address as the party to be notified may
hereafter have designated by notice given to the other party in a similar
manner.
          13. Prior Agreements Superseded. This agreement supersedes all prior
agreements, if any, between the parties hereto with respect to the subject
matter hereof including any prior employment agreements, provided however, that
the Executive Severance Agreement, dated June 26, 2006, shall remain in full
force and effect and shall exclusively govern any payments and benefits in the
event that a Termination Event (as that term is defined in said Agreement) has
occurred.

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          IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date and year first above written.

              LodgeNet Entertainment Corporation
 
       
 
  By:      /s/ Gary H. Ritondaro
 
       
 
           Senior Vice President and Chief Financial Officer
 
       
 
         /s/ James G. Naro
 
       
 
           James G. Naro

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