EXHIBIT 10.63

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT  AGREEMENT (this  "AGREEMENT") is made and entered into
as of June 1, 2003,  by and between  BRILLIANT  DIGITAL  ENTERTAINMENT,  Inc., a
Delaware corporation (the "COMPANY"),  located at 6355 Topanga Canyon Boulevard,
Suite  120,   Woodland   Hills,   CA  91367,   and  Tyler  Tarr,  an  individual
("EXECUTIVE").

                                     RECITAL

         A.       The  Company and  Executive  desire to assure that the Company
retains the services of Executive, whose experience, knowledge and abilities are
extremely valuable to the Company.

         NOW, THEREFORE, in consideration of the terms,  conditions,  covenants,
representations,  warranties  and  promises  contained  in this  Agreement,  the
parties hereto agree as follows:

         1.       EMPLOYMENT. The Company hereby employs Executive and Executive
hereby accepts employment with the Company on the terms and conditions set forth
herein.  Throughout the Term (as defined below),  Executive shall faithfully and
diligently perform  Executive's duties in conformity with the directions of each
of the Chief  Executive  Officer and the Board of  Directors of the Company (the
"Board"),  and serve the Company to the best of Executive's  ability.  Executive
shall devote all of  Executive's  working  time,  attention  and energies to the
business  and affairs of the  Company.  Executive  shall have the title of Chief
Financial Officer, and shall report to the Chief Executive Officer. At all times
while Executive is an employee of the company,  Executive shall be headquartered
in  California.  Executive  is  expressly  restricted  from  being,  directly or
indirectly,  employed,  participating  in, or being connected in any manner with
the ownership,  management, operation or control of any business, similar to, or
competitive  with, the business of the Company in which the Company is presently
involved or becomes  engaged  during the Term.  Notwithstanding  anything to the
contrary  contained herein,  the Company recognizes that Executive may engage in
non-competitive,  separate business or professional  activities and that Company
shall  have no right,  claim or  interest  in or to the output or product of any
such activities by Executive.  Executive has or may have non-competing  business
interests in (a) the Entertainment  Industry in the areas of (i) Pre-Production,
(ii)  Production,  (iii)  Post-Production,  and (iv)  Distribution  (non-peer to
peer), (b) the Video Game and Software Industries, and (c) the Consumer Products
and Electronics  Industry.  Executive shall promptly disclose to the Company all
of Executive's additional business and professional activities, and any material
change in such  activities,  and shall provide the Company with such information
about these activities as reasonably  requested by the Company from time to time
to ensure Executive's compliance with this Agreement.

         2.       TERM. The initial term of this Agreement (the "INITIAL  TERM")
shall  commence  upon  the  date  hereof  and  shall  terminate  two  (2)  years
thereafter,  unless  sooner  terminated  as  provided  herein.  The Term of this
Agreement  shall  automatically  renew for  additional  one year periods (each a
"RENEWAL  TERM"  and,  together  with  the  Initial  Term,  the  "TERM")  unless
terminated as provided herein.


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         3.       COMPENSATION.

                  3.1.     ANNUAL  BASE   SALARY.   For   Executive's   services
hereunder,  the Company  shall  initially pay Executive an annual base salary of
two hundred thousand United States dollars  ($200,000) (the "BASE SALARY").  The
Base Salary shall be paid in accordance with the Company's normal procedures for
paying salaried employees, but in no event less frequently than semi-monthly.

                  3.2.     MANDATORY  BASE  SALARY  INCREASES.  The Base  Salary
shall be increased each January 1st (the  "ADJUSTMENT  DATE"),  commencing  with
January  1, 2004,  by an amount  equal to the  increase  in the  Consumer  Price
Index-U.S.  City Average, or any substantially equivalent successor thereto, for
the month of the  then-current  Adjustment  Date,  as published by the Bureau of
Labor Statistics of the United States Department of Labor.

                  3.3.     EXECUTIVE  BONUS  POOL.  Commencing  with fiscal year
2003 and for each fiscal year during the Term thereafter  during which Executive
is employed by the Company, the Company shall establish and fund a bonus pool in
accordance  with the terms set forth on EXHIBIT A for  distribution to Executive
and certain other senior management personnel (the "EXECUTIVE BONUS POOL"). With
respect to any fiscal  year  during the Term,  Executive  shall be  entitled  to
receive that portion of amounts paid out of the Executive Bonus Pool as provided
in Exhibit A, and the Company shall pay Executive such amount in cash within 110
days after the end of such fiscal year. The portion of the Executive  Bonus Pool
allocated  and paid to  Executive  shall be pro rated for the first  fiscal year
during the Term based on the portion of the fiscal year during  which  Executive
was  actually  employed by the Company or providing  consulting  services to the
Company.  The Company  acknowledges that Executive has been providing consulting
services to the Company  since  before  January 1, 2003,  which makes  Executive
eligible  for 100% of his  portion of the  Executive  Bonus Pool for fiscal year
2003 if he remains employed with the Company through December 31, 2003.

                  3.4.     TAXES. All amounts paid to Executive  hereunder shall
be subject to the applicable withholding of social security, federal, state, and
other taxes and deductions as required by law.

         4.       BENEFITS.  Executive  shall be entitled to  participate in the
following benefits:

                  4.1.     GROUP  MEDICAL  AND  DISABILITY  INSURANCE  BENEFITS.
During the Term,  Executive shall be eligible to  participate,  and the premiums
shall be paid by the Company on behalf of the  Executive,  in any group  medical
and  disability  insurance  programs  as provided  generally  to officers of the
Company.

                  4.2.     VACATION.  Executive  shall be  entitled  to four (4)
weeks paid vacation for each year of full employment,  pro-rated on a sub-annual
basis and accruable over the term of the agreement, exclusive of legal holidays,
in accordance with the Company's standard practices and policies.  Company shall
pay Executive for any unused vacation time at the termination of this Agreement.

                  4.3.     HOLIDAYS.  Executive shall be entitled paid leave for
all US legal holidays and other holidays as observed by the Company.


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                  4.4.     RETIREMENT PLANS. During the Term, Executive shall be
eligible  to  participate  in any  retirement,  pension,  or other  deferred  or
supplemental  compensation  plans  operated by the Company and any subsequent or
additional  retirement  plans  established  by the  Board to the same  extent as
similarly situated executives.

                  4.5.     EXPENSE REIMBURSEMENT. Upon presentment of verifiable
invoices and other documentation as may be requested by the Company, and subject
to the Company's expense reimbursement policies applicable to similarly situated
executives,  the Company shall reimburse  Executive for the reasonable costs and
expenses  which he incurs in connection  with the  performance of his duties and
obligations under this Agreement including;  auto, Internet access, and relevant
periodical and other  subscriptions  up to a monthly  maximum of six-hundred and
fifty dollars ($650)

                  4.6.     EQUIPMENT AND  SUPPLIES.  The Company  shall,  at its
expense,  provide  Executive  with  equipment  and  supplies  that  the  Company
determines,  in its reasonable judgment, are customarily necessary for Executive
to perform his duties hereunder.

         5.       STOCK  OPTIONS.  Pursuant to the terms and  conditions  of the
Brilliant Digital Entertainment, Inc. 1996 Stock Option Plan, as amended to date
(the "PLAN"),  subject to the approval of the Board or Compensation Committee of
the Board, which approval shall not be unreasonably  withheld, the Company shall
grant  Executive an option (the  "OPTION") to purchase up to seven hundred fifty
thousand  (750,000) shares of the Common Stock of the Company,  which shall vest
and become  exercisable  as to one hundred  eighty seven  thousand  five hundred
(187,500) of the shares  underlying  the option on the first  anniversary of the
date hereof  (the "FIRST  ANNIVERSARY  DATE") and fifteen  thousand  six hundred
twenty  five  (15,625)  of the shares  underlying  the Option at the end of each
month following the month in which the First Anniversary Date occurs. The option
agreement  for the Option  shall  provide  that,  in the event that the  Company
undergoes a change of control, then, on the occurrence of such event, the Option
shall immediately  accelerate and vest entirely. A change of control shall mean:
(a) a sale to a single  entity  of more  than 50% of the  Company's  outstanding
Common Stock in a single  transaction or series of related  transactions;  (b) a
merger in which the Company's stockholders  immediately prior to the merger hold
less than 50% of the surviving entity's voting securities  immediately following
the merger; or (c) a sale of all or substantially all of the Company's assets.

         6.       TERMINATION AND EXPIRATION.

                  6.1.     TERMINATION AT WILL.

                           6.1.1.   BY THE COMPANY. Subject to the provisions of
this SECTION 6, the Company may terminate  this  Agreement at any time,  for any
reason, or for no reason, either with or without Cause (as defined below).

                           6.1.2.   BY EXECUTIVE.  Subject to the  provisions of
this SECTION 6,  Executive may  terminate  this  Agreement at any time,  for any
reason, or for no reason, either with or without Good Reason (as defined below),
by delivering  ninety (90) days' prior written notice


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to the Company; PROVIDED,  HOWEVER, that the Company may reduce such ninety (90)
day period in its sole discretion.

                  6.2.     TERMINATION   BY  THE   COMPANY   WITHOUT   CAUSE  OR
TERMINATION BY EXECUTIVE WITH GOOD REASON. If the Company terminates Executive's
employment  hereunder  without Cause, or if Executive  terminates his employment
hereunder  for Good Reason (as defined  blow),  then,  in addition to payment of
Executive's  accrued  portion  of  the  Base  Salary,   accrued  vacation,   and
reimbursable  expenses as of the date of  termination,  Executive or Executive's
representative shall be entitled to the following:

                           6.2.1.   SEVERANCE  PAY.  The  Company  shall  pay to
Executive,  in the manner and subject to the conditions  provided herein, and in
addition  to any other  amounts to which  Executive  is entitled  hereunder,  an
amount (the "SEVERANCE PAY") equal to one (1) year of Base Salary. Fifty percent
(50%) of the  Severance  Pay shall be paid to Executive  within ten (10) days of
termination  of  employment  or at the next  company  pay period,  whichever  is
earlier. The remaining fifty percent (50%) of the Severance Pay shall be paid in
six (6) equal consecutive  monthly  installments on the last day of the calendar
month,  commencing  on the last day of the first full calendar  month  following
termination,  so long as (i) Executive does not breach his obligations under the
Proprietary  Rights Agreement (as defined below),  or (ii) Engage in a Competing
Business (as defined below).

                           6.2.2.   CONTINUATION COVERAGE. Except in the case of
termination  of  Executive's  employment  as a result of his death,  the Company
shall pay on behalf of Executive,  the premiums payable in order to continue the
same medical  coverage for Executive and Executive's  family under the Company's
health  insurance  plan existing as of the date of  termination,  which payments
shall  be made for a period  ending  on the  earlier  of (a)  expiration  of the
maximum period for which COBRA  coverage is available to Executive,  and (b) the
date  Executive and  Executive's  family is otherwise  covered by another health
insurance plan (the "CONTINUATION COVERAGE").

                           6.2.3.   ACCELERATED   VESTING.   The  Option   shall
immediately   accelerate  and  vest  entirely  on  the  termination   date  (the
"ACCELERATED VESTING").

                           6.2.4.   EXECUTIVE BONUS POOL. Executive shall remain
eligible  to receive a pro rata  amount of his  portion of the  Executive  Bonus
Pool,  if any,  funded for the fiscal year during which  Executive's  employment
with the Company  terminates.  The portion of the Executive  Bonus Pool, if any,
allocated  and paid to Executive  for the fiscal year during  which  Executive's
employment  with the  Company  terminates  shall be based on the  portion of the
fiscal year during which Executive was actually employed by the Company. The pro
rata amount of Executive's portion of the Executive Bonus Pool, if any (the "PRO
RATA BONUS  AMOUNT"),  shall be paid to  Executive at the time and in the manner
provided for in SECTION 3.3 above.

                  6.3.     TERMINATION BY THE COMPANY WITH CAUSE; TERMINATION BY
EXECUTIVE WITHOUT GOOD REASON. If the Company terminates  Executive's employment
with Cause,  or if Executive  terminates his employment with the Company without
Good  Reason,  Executive  shall be  entitled to payment of  Executive's  accrued
portion of the Base Salary,  accrued vacation,  and reimbursable  expenses as of
the date of termination. Executive shall not be entitled to any of the


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Severance Pay, Continuation Coverage,  Accelerated Vesting, Executive Bonus Pool
for the fiscal year preceding the fiscal year in which such  termination  occurs
(to the extent unpaid at the time of termination),  or Pro Rata Bonus Amount for
the fiscal year in which such termination occurs.

                  6.4.     TERMINATION  OF  EXECUTIVE  AS A  RESULT  OF DEATH OR
DISABILITY.  If  Executive's  employment  terminates as a result of his death or
Disability (as defined below), Executive or Executive's  representative shall be
entitled to payment of Executive's  accrued portion of the Base Salary,  accrued
vacation,  and  reimbursable  expenses as of the date of termination,  Executive
Bonus  Pool  for the  fiscal  year  preceding  the  fiscal  year in  which  such
termination  occurs (to the extent unpaid at the time of  termination),  and the
Pro Rata Bonus Amount for the fiscal year in which such termination occurs.

         7.       DEFINITIONS.

                  7.1.     CAUSE.  For  purposes  of this  Agreement,  the  term
"CAUSE" shall mean termination of Executive by the Company for the following, as
determined by a majority vote of the Compensation  Committee of the Board: (a) a
willful  breach by Executive of any material  provision of this  Agreement  that
remains  uncured by Executive  within thirty (30) days of written notice of such
breach from the Board or the  Compensation  Committee of the Board; (b) repeated
and willful failure or refusal to perform Executive's  material duties hereunder
or repeated and gross  negligence in the  performance by Executive of his duties
hereunder that remains  uncured by Executive  within thirty (30) days of written
notice  from the  Board;  PROVIDED,  HOWEVER,  that the  Company  shall  only be
required to give notice one time, or (c) if Executive is convicted of a felony.

                  7.2.     DISABILITY.  For  the  purposes  of  this  Agreement,
"DISABILITY" shall mean any physical or mental disability which causes Executive
to be unable to substantially  perform  Executive's normal duties as an employee
of the  Company;  PROVIDED,  HOWEVER,  that  Executive  shall not be  considered
disabled  until (i) Executive has been so disabled for one hundred  eighty (180)
days; (ii) Executive's  attending  physician shall have furnished to the Company
certification  that the return of  Executive to his duties as an employee of the
Company is impossible  or  improbable;  and (iii)  Executive is determined to be
totally disabled by the disability insurer then insuring Executive, if any.

                  7.3.     ENGAGE IN A COMPETING BUSINESS.  For purposes of this
Agreement,  "ENGAGE IN A COMPETING  BUSINESS" shall mean directly or indirectly,
either  individually  or as a principal,  partner,  agent,  employee,  employer,
consultant, stockholder, joint venture, or investor, or as a director or officer
of  any  corporation  or  association,  or  in  any  other  manner  or  capacity
whatsoever,  engaging in,  assisting or having any active interest in a business
operating  anywhere  in the world that  utilizes  peer-to-peer  and  distributed
computing  including but not limited to  distributed  use of CPU,  bandwidth and
storage of a client (peer) PC, distribution of digital content, and 3D real time
animation for use with the Internet.  Notwithstanding  the above, this paragraph
shall not be construed to prohibit  Executive  from owning less than one percent
(1%) of the securities of a publicly held corporation.

                  7.4.     GOOD REASON. For purposes of this Agreement, the term
"GOOD REASON" shall mean  Executive's  termination  of his  employment  with the
Company for one or more of the


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following reasons:  (a) the material reduction of Executive's title,  authority,
duties or responsibilities,  or the assignment to Executive of duties materially
inconsistent with Executive's  position with the Company as set forth in SECTION
1 hereof that remains  uncured by the Company within thirty (30) days of written
notice from  Executive to the Chief  Executive  Officer of the Company;  (b) the
relocation of more than 100 miles from the Company's  executive  offices at 6355
Topanga  Canyon  Boulevard,   Suite  120,  Woodland  Hills,  CA  91367,  without
Executive's concurrence; or (c) any other material breach by the Company of this
Agreement that remains uncured by the Company within thirty (30) days of written
notice from Executive to the Chief Executive Officer of the Company.

         8.       CONFIDENTIALITY   AND   NON-SOLICITATION.   During  the  Term,
Executive will have access to and become  acquainted with what Executive and the
Company  acknowledge are trade secrets and other  confidential  information (the
"CONFIDENTIAL  INFORMATION") which are the exclusive property of the Company. In
light of the sensitive and proprietary  nature of the Confidential  Information,
notwithstanding any provision in this Agreement, Executive agrees to execute and
be bound by the Company's Employee Confidential Information and Non-Solicitation
Agreement attached hereto as EXHIBIT B.

         9.       MISCELLANEOUS PROVISIONS.

                  9.1.     NOTICES.   Except  as  otherwise   provided  in  this
Agreement, all notices,  requests,  demands, and other communications under this
Agreement  shall be given in writing and shall be served either  personally,  by
facsimile or delivered by first class mail,  registered  or  certified,  postage
prepaid, and properly addressed as follows:

                  If to the Company:

                  c/o Brilliant Digital Entertainment, Inc.
                  6355 Topanga Canyon Boulevard, Suite 120
                  Woodland Hills, California 91367
                  Attention:  Chief Executive Officer
                  Facsimile:  (818) 615-0995

                  If to Executive:

                  At  Executives  primary  residence  address  as  shown  on the
                  records of the Company.

Notices shall be deemed  received at the earliest of actual  receipt,  confirmed
facsimile or three (3) days following mailing.

                  9.2.     ENTIRE  AGREEMENT.  This  Agreement  constitutes  the
entire  agreement  among the parties  hereto  pertaining  to the subject  matter
contained  herein and  supersedes  all prior  agreements,  representations,  and
understandings of the parties.

                  9.3.     AMENDMENTS.   This  Agreement  may  not  be  amended,
supplemented,  canceled,  or discharged except by written instrument executed by
the parties hereto.


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                  9.4.     WAIVERS.  All waivers  hereunder shall be in writing.
No waiver  by any  party  hereto  of any  breach  or  anticipated  breach of any
provision  of this  Agreement by any other party shall be deemed a waiver of any
other  contemporaneous,  preceding,  or succeeding breach or anticipated breach,
whether or not similar, on the part of the same or any other party.

                  9.5.     SEVERABILITY. In the event that any provision of this
Agreement  shall  be  unenforceable  or  inoperative  as a  matter  of law,  the
remaining portions or provisions shall remain in full force and effect.

                  9.6.     SUCCESSORS  AND  ASSIGNS.  This  Agreement  shall  be
binding upon and inure to the benefit of the parties hereto and their respective
heirs,  representatives,  executors,  administrators,  successors,  and assigns,
provided,  however,  that  Executive  may not assign any or all of his rights or
duties hereunder except following the prior written consent of the Company.

                  9.7.     COUNTERPARTS.  This  Agreement may be executed in two
(2) or more  counterparts,  each of which shall be deemed an  original,  but all
such counterparts together shall constitute one and the same Agreement.

                  9.8.     SECTION  HEADINGS.  The section headings used in this
Agreement  are inserted  for  reference  purposes  only and shall not in any way
affect the meaning or interpretation of this Agreement.

                  9.9.     GOVERNING LAW. Except where otherwise indicated, this
Agreement  shall be construed  and enforced in  accordance  with the laws of the
State of California,  County of Los Angeles,  without regard to conflicts of law
principles of such state.

                  9.10.    ARBITRATION.  The  parties  agree  that they will use
their best efforts to amicably resolve any dispute arising out of or relating to
this  Agreement.  Any  controversy,  claim or dispute that cannot be so resolved
shall be settled by final binding  arbitration  in accordance  with the rules of
the American Arbitration Association and judgment upon the award rendered by the
arbitrator  or  arbitrators  may be  entered  in any court  having  jurisdiction
thereof. Any such arbitration shall be conducted in Los Angeles,  California, or
such other place as may be mutually  agreed upon by the parties.  Within fifteen
(15) days after the commencement of the arbitration, each party shall select one
person to act  arbitrator,  and the two  arbitrators  so selected shall select a
third  arbitrator  within ten (10) days of their  appointment.  Each party shall
bear its own costs and expenses and an equal share of the arbitrator's  expenses
and administrative fees of arbitration.

                  9.11.    AUTHORITY.  The Company  represents  that the officer
executing this Agreement on the Company's  behalf has full right,  authority and
power to enter into this Agreement on behalf of Company.

                  9.12.    BOOKS OF  ACCOUNT.  Executive  shall  have the right,
personally  or through his agent,  to examine the  Company's  relevant  books of
account at any  reasonable  time  designated  by  Executive  for the  purpose of
auditing the Company's  revenues and payments due to Executive  hereunder  based
thereon.  The  Company  agrees that it shall  maintain  such books of account in
accordance with Generally Accepted Accounting Principles.


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                  9.13.    ADVICE OF COUNSEL. Executive acknowledges that he has
been advised to seek  independent  legal counsel for advice regarding the effect
of the terms and  provisions  hereof,  and has either  obtained  such  advice of
independent legal counsel,  or has voluntarily and without compulsion elected to
enter into and be bound by the terms of this  Agreement  without  such advice of
independent legal counsel.


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         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Employment Agreement as of the date first above written.

                      BRILLIANT DIGITAL ENTERTAINMENT, INC.

                      By:        /S/ KEVIN BERMEISTER
                               ------------------------------------
                      Name:    KEVIN BERMEISTER
                      Title:   CHIEF EXECUTIVE OFFICER


                      EXECUTIVE:

                        /S/ TYLER TARR
                      ---------------------------------
                      Tyler Tarr


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                                    EXHIBIT A

                              EXECUTIVE BONUS POOL

A.       SUMMARY:

         1.       The Executive  Bonus Pool will be based upon the  Contribution
                  Margin (as defined below).

         2.       The percentage of Contribution Margin that will be funded into
                  the Executive Bonus Pool in any fiscal year and distributed to
                  participants will be determined by the amount of the Company's
                  EBITDA for the immediately  preceding fiscal year, as shown on
                  the Company's audited financial statements.

         3.       Achieving  a  Contribution  Margin  equal to at  least  85% of
                  Budgeted  Contribution Margin is required before any Executive
                  Bonus Pool amount will be awarded.

         4.       Each  participant in the Executive Bonus Pool will be entitled
                  to that portion of the amount paid out of the Executive  Bonus
                  Pool as is equal to the ratio  determined  by dividing (a) the
                  participant's  annual Base Salary by (b) the aggregate  amount
                  of all participants' annual Base Salary.

B.       EXECUTIVE BONUS POOL CALCULATIONS:

         If the  Contribution  Margin  for a fiscal  year is equal to or greater
         than 85% of the Budget Contribution Margin for that fiscal year, then:

         1.       If EBITDA in a fiscal  year is less than  $3,000,000  million,
                  then the amount funded into the  Executive  Bonus Pool will be
                  3% of the Contribution Margin for that fiscal year.

         2.       If  EBITDA  in  a  fiscal  year  is  between   $3,000,000  and
                  $4,999,999,  inclusive,  the amount  funded into the Executive
                  Bonus  Pool  will be 4% of the  Contribution  Margin  for that
                  fiscal year.

         3.       If  EBITDA  in  a  fiscal  year  is  between   $5,000,000  and
                  $8,999,999,  inclusive,  the amount  funded into the Executive
                  Bonus  Pool  will be 5% of the  Contribution  Margin  for that
                  fiscal year.

         4.       If EBITDA in a fiscal  year is  $9,000,000  or more,  then the
                  Executive Bonus Pool will be 8% of the Contribution Margin for
                  that fiscal year.

         In no event, however,  shall the amount funded into the Executive Bonus
         Pool for any fiscal year exceed two (2) times the  aggregate  amount of
         all participants' Base Salary (the "MAXIMUM EXECUTIVE BONUS POOL").


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C.       EXECUTIVE BONUS POOL PAYOUTS:

         1.       If the Contribution  Margin for a fiscal year is less than 85%
                  of the Budgeted  Contribution Margin for the same fiscal year,
                  then no amount shall be paid to  participants in the Executive
                  Bonus Pool.

         2.       If the  Contribution  Margin for a fiscal  year is between 85%
                  and 89.99%, inclusive, of the Budgeted Contribution Margin for
                  the  same  fiscal  year,  then an  amount  equal to 25% of the
                  amount funded into the  Executive  Bonus Pool shall be paid to
                  participants in the Executive Bonus Pool.

         3.       If the  Contribution  Margin for a fiscal  year is between 90%
                  and 94.99%, inclusive, of the Budgeted Contribution Margin for
                  the  same  fiscal  year,  then an  amount  equal to 50% of the
                  amount funded into the  Executive  Bonus Pool shall be paid to
                  participants in the Executive Bonus Pool.

         4.       If the  Contribution  Margin for a fiscal  year is between 95%
                  and 99.99%, inclusive, of the Budgeted Contribution Margin for
                  the  same  fiscal  year,  then an  amount  equal to 75% of the
                  amount funded into the  Executive  Bonus Pool shall be paid to
                  participants in the Executive Bonus Pool.

         5.       If the  Contribution  Margin for a fiscal  year is equal to or
                  greater than 100% of the Budgeted  Contribution Margin for the
                  same fiscal  year,  then an amount equal to 100% of the amount
                  funded  into  the  Executive  Bonus  Pool  shall  be  paid  to
                  participants in the Executive Bonus Pool.

         Amounts funded into the Executive  Bonus Pool which are not paid out of
         the Executive Bonus Pool shall be forfeited,  and no participant  shall
         be entitled to all or any portion of such amounts during any present or
         future period.

D.       EXAMPLES:

         If the EBITDA for a given  fiscal year was greater  than $9m,  then the
         amount funded into the Executive Bonus Pool would be 8% of Contribution
         Margin. If the Budgeted  Contribution  Margin was $20 million,  and the
         Contribution   Margin  was  $17  million  (or  85%  of  budget),   then
         participants  in  the  Executive  Bonus  Pool  would  receive,  in  the
         aggregate,   $340,000,  calculated  as  follows:  an  amount  equal  to
         $17,000,000 multiplied by 8% (or $1,360,000),  would be funded into the
         Executive  Bonus Pool, of which 25% of that amount (or $340,000)  would
         be distributed to all participants and $1,020,000 would be forfeited.

         If a Contribution Margin of $15 million was achieved  (representing 75%
         of budget), no payout would be made.

         If a Contribution Margin of $20 million was achieved (representing 100%
         of  budget),  then  participants  in the  Executive  Bonus  Pool  would
         receive, in the aggregate, $1,600,000, calculated as follows: an amount
         equal to $20,000,000 multiplied by 8% (or $1,600,000),  would be funded
         into the  Executive  Bonus Pool,  of which 100% of that


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         amount would be distributed to all  participants.  Notwithstanding  the
         foregoing,  if $1,600,000  exceeded the Maximum  Executive  Bonus Pool,
         then the $1,600,000  would be reduced to an amount equal to the Maximum
         Executive Bonus Pool.

E.       DEFINITIONS:

         For  purposes  of  calculating  the  Executive  Bonus Pool and  amounts
         payable to participants  hereunder,  the following terms shall have the
         following meanings:

         The term  "CONTRIBUTION  MARGIN" shall mean, with respect to any fiscal
         year, an amount equal to the Company's  Gross Revenue (other than Gross
         Revenue  attributable  to  eNewMedia)  for such fiscal  year,  LESS the
         following  third party costs  accrued  during such fiscal year,  all as
         determined  in accordance  with GAAP:  (a) all costs related to payment
         processing  by the Company  including  but not limited to;  third party
         credit card/payment processing charges, charge backs, disputed charges,
         and credits  issued,  (b) fees paid to host browse  channels  and serve
         digital  files to "seed" the files into a  peer-to-peer  network and to
         serve as a quality  of  service  backup  to  ensure  that the files are
         always available, (c) fees paid to convert and digitally encode content
         into the proper  format,  (d) fees paid to DRM content and provide HTML
         and database entry services associated with publishing content, (e) all
         costs and fees  associated  with the license of content and  technology
         from a content and/or technology provider, and (f) any Company internal
         employment costs associated with any of the foregoing costs.

         The Term "BUDGETED CONTRIBUTION MARGIN" shall mean, with respect to any
         fiscal  year,  an estimate of the  Contribution  Margin for such fiscal
         year as determined in good faith by the Company's Board of Directors or
         Compensation  Committee of the Board of Directors.  Executive  shall be
         entitled to participate in discussions relating to determination of the
         Budgeted  Contribution  Margin, and the Board shall consider (but shall
         not be  obligated  to  adopt)  Executive's  input  in  determining  the
         Budgeted Contribution Margin.


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