Document:

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                                                                   EXHIBIT 10.56

                        SOURCE INTERLINK COMPANIES, INC.

                             CHALLENGE GRANT PROGRAM

                             EFFECTIVE MARCH 1, 2005

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                        SOURCE INTERLINK COMPANIES, INC.

                             CHALLENGE GRANT PROGRAM

SECTION 1 - ESTABLISHMENT AND PURPOSE OF PROGRAM

1.1   ESTABLISHMENT AND DURATION OF PROGRAM. The Board of Directors of Source
      Interlink Companies, Inc., a Missouri corporation, hereby establishes the
      Source Interlink Companies, Inc. Challenge Grant Program, effective March
      1, 2005. The Program shall commence on March 1, 2005 and continue until
      all earned disbursements are made following the end of the Challenge
      Period.

1.2   PURPOSE OF PROGRAM. The Challenge Grant Program has been adopted by Source
      Interlink Companies, Inc. to motivate key executive personnel to maximize
      shareholder value resulting from the transactions contemplated by a
      certain Agreement and Plan of Merger, dated November 18, 2004, by and
      among Source Interlink Companies, Inc., Alliance Entertainment Corp. and
      Alligator Acquisition, LLC.

SECTION 2 - EFFECTIVE DATE

The effective date of the Program is March 1, 2005.

SECTION 3 - DEFINITIONS

3.1   "AGGREGATE PAYOUT" -- means the total sum payable under the Program to all
      Executives.

3.2   "CHALLENGE PERIOD" -- means the three year period commencing February 1,
      2005 and ending January 31, 2008.

3.3   "COMMITTEE" -- means the Compensation Committee of the Board of Directors
      of the Corporation.

3.4   "CHANGE OF CONTROL" -- means the occurrence of any of the following
      events:

      (a) A change in the composition of the Board of Directors occurs, as a
      result of which fewer than one-half (1/2) of the incumbent directors are
      directors who either:

            (i) Had been directors of the Corporation on the "look-back date"
            (as defined below) (hereinafter referred to as the "original
            directors"); or

            (ii) Were elected, or nominated for election, to the Board of
            Directors with the affirmative votes of at least a majority of the
            aggregate of the original directors who were still in office at the
            time of the election or nomination and the directors whose election
            or nomination was previously so approved (hereinafter referred to as
            the "continuing directors");

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or,

      (b) Any "person" (as defined below) who by the acquisition or aggregation
      of securities, is or becomes the "beneficial owner" (as defined in Rule
      13d-3 under the Securities Exchange Act of 1934, as amended), directly or
      indirectly, of securities of the Corporation representing 50% or more of
      the combined voting power of the Corporation's then outstanding securities
      ordinarily (and apart from rights accruing under special circumstances)
      having the right to vote at elections of directors (hereinafter referred
      to as the "Base Capital Stock"); except that any change in the relative
      beneficial ownership of the Corporation's securities by any person
      resulting solely from a reduction in the aggregate number of outstanding
      shares of Base Capital Stock, and any decrease thereafter in such person's
      ownership of securities, shall be disregarded until such person increases
      in any manner, directly or indirectly, such person's beneficial ownership
      of any securities of the Corporation;

or

      (c) The consummation of a merger or consolidation of the Corporation with
      or into another entity or any other corporate reorganization in which the
      Corporation is not the acquiring entity for accounting purposes;

or

      (d) The consummation of a sale, transfer or other disposition of all or
      substantially all of the Corporation's assets.

For purposes of subsection (a) above, the term "look-back" date shall mean the
later of (1) the Effective Date of the Program, or (2) the date 24 months prior
to the date of the event that may constitute a Change of Control.

For purposes of subsection (b) above, the term "person" shall have the same
meaning as when used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended, but shall exclude (1) a trustee or other fiduciary holding
securities under an employee benefit plan maintained by the Corporation or a
parent or subsidiary and (2) a corporation owned directly or indirectly by the
shareholders of the Corporation in substantially the same proportions as their
ownership of the common stock of the Corporation.

Any other provision of this Section 3.4 notwithstanding, no event shall
constitute a Change of Control if: (A) the sole purpose of the event was to
change the state of the Corporation's incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons
who held the Corporation's securities immediately before such transaction; (B)
the event was contemplated by that certain Agreement and Plan of Merger, dated
November 18, 2004, by and among Source Interlink Companies, Inc., Alliance
Entertainment Corp. and Alligator Acquisition, LLC.; or (C) following such
event, S. Leslie Flegel is employed by the Company or any successor entity with
the duties and responsibilities of such entity's principal executive officer.

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3.5   "CORPORATION" -- means Source Interlink Companies, Inc., a Missouri
      corporation, or its subsidiaries and any successor thereto.

3.6   "EXECUTIVE" -- means S. Leslie Flegel and any employee who is designated
      as eligible to participate in the Program by the Chief Executive Officer
      with, in the case of Executives that are also officers of the Corporation
      subject to the reporting requirements of Section 16 promulgated under the
      Securities Exchange Act of 1934, as amended, the approval of the
      Committee. Only management and highly-compensated employees within the
      meaning of the Employee Retirement Income Security Act of 1974, as
      amended, shall be eligible to participate in the Program.

3.7   "NOI" -- means cumulatively as to the entire Challenge Period, operating
      income as shown on the Corporation's annual audited financial statements
      plus (a) compensation expense recorded in the income statement related to
      the Program and (b) amortization expense or impairment charges
      attributable solely to intangible assets identified and recorded as a
      result of the merger (the "MERGER") effected on February 28, 2005 between
      Alliance Entertainment Corp. and Alligator Acquisition. LLC, a
      wholly-owned subsidiary of the Corporation.

3.8   "PROGRAM" -- means the Source Interlink Companies, Inc. Challenge Grant
      Program and its successors, as described herein and as the same may be
      amended from time to time.

SECTION 4 - CALCULATION OF AGGREGATE PAYOUT

4.1. CONCLUSION OF CHALLENGE PERIOD. The Aggregate Payout under the Program
shall be equal to that amount set forth in the following table opposite the
applicable range which encompasses NOI:

<TABLE>
<CAPTION>
             NOI RANGE
    MORE THAN         LESS THAN OR EQUAL TO        AGGREGATE PAYOUT
    ---------         ---------------------        ----------------
<S>                   <C>                          <C>
 $    0                  $195.2 million            $    0
 $195.2 million          $202.8 million            $ 2.50 million
 $202.8 million          $210.4 million            $ 5.00 million
 $210.4 million          $218.0 million            $ 7.50 million
 $218.0 million          $227.2 million            $10.00 million
 $227.2 million          $236.4 million            $11.00 million
 $236.4 million          $245.6 million            $12.00 million
 $245.6 million          $254.8 million            $13.00 million
 $254.8 million          $264.0 million            $14.00 million
 $264.0 million             unlimited              $15.00 million
</TABLE>

<PAGE>

4.2. UPON CHANGE OF CONTROL. If a Change of Control shall occur during the
Challenge Period, the Aggregate Payout under the Program shall be equal to that
amount set forth in the following table opposite the applicable period in which
the Change of Control occurs.

<TABLE>
<CAPTION>
TWELVE MONTH PERIOD ENDING      AGGREGATE PAYOUT
--------------------------      ----------------
<S>                             <C>
     January 31, 2006            $10.0 million
     January 31, 2007            $12.5 million
     January 31, 2008            $15.0 million
</TABLE>

4.3. ADJUSTMENT OF CALCULATION UPON ACQUISITION OR DISPOSITION. The Committee
reserves the right, but has no obligation, to adjust, upward or downward, the
NOI Ranges set forth in Section 4.1 if during the Challenge Period the
Corporation completes the acquisition or disposition of a significant amount of
assets, otherwise than in the ordinary course of business. Any such adjustment
during the Challenge Period shall be reasonably related to any increase or
decrease in the NOI projected to result from the completion of such acquisition
or disposition.

As used herein the term "ACQUISITION" means every purchase, acquisition by
lease, exchange, merger, consolidation, or succession, other than the
construction or development of property by or for the Corporation or its
subsidiaries or the acquisition of materials for such purpose. As used herein
the term "DISPOSITION" means every sale, disposition by lease exchange, merger,
consolidation, mortgage, assignment or hypothecation of assets, whether for the
benefit of creditors or otherwise, abandonment, or destruction, other than with
respect to real property held for use by or for the Corporation other than with
respect to real property held for use by or for the Company.

An acquisition or disposition shall be deemed to involve a significant amount of
assets if such transaction is required to be disclosed on a Current Report on
Form 8-K through a filing with the U.S. Securities and Exchange Commission.

SECTION 5 - PAYMENT AND ALLOCATION OF AGGREGATE PAYOUT

5.1   ALLOCATION OF AGGREGATE PAYOUT. The Aggregate Payout shall be allocated
      among the Executives in such amounts and proportions as may be determined
      by the Chief Executive Officer with, in the case of Executives that are
      also officers of the Corporation subject to the reporting requirements of
      Section 16 promulgated under the Securities Exchange Act of 1934, as
      amended, the approval of the Committee; provided however that 35% of the
      Aggregate Payout shall be allocated to S. Leslie Flegel. Nothing contained
      in this Program shall require that the entire Aggregate Payout be
      allocated or disbursed.

5.2   PAYMENT OF AGGREGATE PAYOUT. The Aggregate Payout shall be disbursed in
      cash to each Executive in such proportions as they may be allocated in
      accordance with Section 5.1 as soon as practicable after January 31, 2008,
      but in any case not later than the date on

<PAGE>

      which the Annual Report on Form 10-K for the Corporation's fiscal year
      ending January 31, 2008 is filed with the U. S. Securities and Exchange
      Commission.

5.3   PAYMENT ON CHANGE OF CONTROL. In the event of a Change of Control, the
      Aggregate Payout shall be disbursed in cash to each Executive in such
      proportions as they may be allocated in accordance with Section 5.1 not
      later than the effective date of such Change of Control.

SECTION 6 - CONDITIONS TO DISBURSEMENT

6.1   WITHHOLDING; UNEMPLOYMENT TAXES. To the extent required by the law in
      effect at the time payments are made, the Corporation shall withhold from
      payments made hereunder any taxes required to be withheld by the Federal
      or any state or local government.

6.2   NO VESTED RIGHT TO DISBURSEMENT. The Program is designed specifically as a
      bonus program in which each Executive (other than S. Leslie Flegel) have
      only a mere expectancy and not as a deferred compensation plan, retirement
      benefit plan or other entitlement program in which the Executives have or
      may acquire any vested interest of any kind or nature. Therefore, should
      any Executive cease to be employed by the Corporation for any reason
      whatsoever prior to the time at which the Aggregate Payout is actually
      disbursed, no disbursement shall be made to such Executive (or his or her
      estate), Notwithstanding the foregoing, S. Leslie Flegel shall have a vest
      right to disbursement in accordance with any then effective agreement
      between the Corporation and Mr. Flegel with respect to his employment by
      the Corporation.

SECTION 7 - ADMINISTRATION

7.1   UNSECURED CLAIM, FUNDING AND NON-ASSIGNABILITY. The right of an Executive
      to receive a distribution hereunder shall be an unsecured claim against
      the general assets of the Corporation, and no Executive shall have any
      rights in or against any amount credited to any accounts under this
      Program or any other assets of the Corporation. The Program at all times
      shall be considered entirely unfunded both for tax purposes and for
      purposes of Title I of the Employee Retirement Income Security Act of
      1974, as amended. Any disbursement which may be payable pursuant to this
      Program are not subject in any manner to anticipation, sale, alienation,
      transfer, assignment, pledge, encumbrance, attachment, or garnishment by
      creditors of an Executive. The Program constitutes a mere promise by the
      Corporation to make cash disbursements in the future. No interest or right
      to receive a disbursement may be taken, either voluntarily or
      involuntarily, for the satisfaction of the debts of, or other obligations
      or claims against, such person or entity, including claims for alimony,
      support, separate maintenance and claims in bankruptcy proceedings.

7.2   ADMINISTRATION OF PROGRAM. An integral part of the Program is the ongoing
      administration of the Program. The Program shall be administered by the
      Committee, which shall have the authority, duty and power to interpret and
      construe the provisions of the Program. The Committee shall have the duty
      and responsibility of maintaining

<PAGE>

      records, making the requisite calculations and disbursing the payments
      hereunder. The interpretations, determinations, regulations and
      calculations of the Committee shall be final and binding on all persons
      and parties concerned, absent manifest error. The Committee shall have the
      right at any time to appoint a person or committee to perform
      administrative functions delegated to it by the Committee on the
      administration of the Program.

7.3   EXPENSE OF ADMINISTRATION. Expenses of administration shall be paid by the
      Corporation. The Committee of the Corporation shall be entitled to rely on
      all tables, valuations, certificates, opinions, data and reports furnished
      by any actuary, accountant, controller, counsel or other person employed
      or retained by the Corporation with respect to the Program.

7.4   RIGHTS OF EXECUTIVE. The sole rights of an Executive under this Program
      shall be to have this Program administered according to its provisions, to
      receive whatever benefits he may be entitled to hereunder, and nothing in
      the Program shall be interpreted as a guaranty that any assets of the
      Corporation will be sufficient to pay any disbursement payable hereunder.
      Further, the adoption and maintenance of this Program shall not be
      construed as creating any contract of employment between the Corporation
      and any Executive. The Program shall not affect the right of the
      Corporation to deal with any Executives in employment respects, including
      their hiring, discharge, compensation, and conditions of employment.<PAGE>

                                                                    Exhibit 10.1

                         EXECUTIVE EMPLOYMENT AGREEMENT

      This EXECUTIVE EMPLOYMENT AGREEMENT, dated as of March 7, 2005 (the
"Effective Date") is between Loudeye Corp., a Delaware corporation (the
"Company"), and Lawrence J. Madden ("Executive"). This Agreement replaces and
supersedes any employment or compensation agreement previously in effect between
the Company and the Executive.

                                   AGREEMENTS

      1.    EMPLOYMENT

      The Company will employ Executive and Executive will accept employment by
the Company as its President, Digital Media Solutions. Executive shall report to
the Chief Executive Officer ("CEO"), and shall have such responsibilities as are
assigned from time to time by the CEO, which relate to the business of the
Company, or any business ventures in which the Company may participate.

      As a condition to the effectiveness of this Agreement, Executive has
executed a Loudeye Corp. Proprietary Information and Inventions Agreement, which
contains noncompetition and nonsolicitation obligations, in the form attached as
EXHIBIT A, which is part of this Agreement.

      2.    ATTENTION AND EFFORT

      Executive shall devote his entire productive time, ability, attention and
effort to the Company's business and shall skillfully serve its interests during
the term of this Agreement and shall not engage in any business or employment
activity that is not on Company's behalf (whether or not pursued for gain or
profit); provided, however, that Executive may devote reasonable periods of time
to (a) engaging in personal investment activities, (b) engaging in charitable or
community service activities, and (c) serving as a director, and (d) such other
activities as approved in advance by the CEO; provided, that in each case none
of the foregoing additional activities materially interferes with Executive's
duties under this Agreement or involves Executive providing any advice or
services to a business that competes with, or offers products or services that
compete with those of, the Company or any of its subsidiaries.

      3.    TERM

      Unless earlier terminated with appropriate notice of termination, the
initial term of this Agreement shall be from the date hereof until December 31,
2005; provided, however, that, unless terminated with appropriate notice, on
each January 1 following the date of this Agreement, beginning with January 1,
2006, this Agreement shall be automatically renewed for successive one-year
terms.

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      4.    COMPENSATION

      During the term of this Agreement, the Company shall pay or cause to be
paid to Executive, and Executive shall accept in exchange for the services
rendered hereunder by him, the following compensation:

            4.1   BASE SALARY

            Executive's compensation shall consist of, in part, an annual base
salary (the "Base Salary") of Two Hundred Sixty Five Thousand Dollars ($265,000)
before all customary payroll deductions. The Base Salary shall be paid to
Executive in substantially equal installments and at the same intervals as other
executive of the Company are paid. At the end of each year of employment
including the end of the initial term (or sooner if determined by the Board),
Executive's Base Salary shall be reviewed by the CEO in its sole discretion,
except that the Executive's Base Salary shall never be reduced below Two Hundred
Sixty Five Thousand Dollars ($265,000).

            4.2.  STOCK OPTION GRANTS

            Subject to stockholder approval at the annual meeting of the
Company's stockholders anticipated to be held in May 2005 for implementation of
a restricted stock plan, the Compensation Committee of the Board shall issue to
Executive an award of 100,000 shares of restricted stock. This restricted stock
award, shall vest over a four year period, 25% vesting on the one year
anniversary of the Effective Date and the remainder vesting monthly over three
years.

            Solely in the event the stockholders do not approve implementation
of a restricted stock plan, then the Compensation Committee shall cause to be
issued on January 1, 2006, a stock option to purchase 200,000 shares of the
Company's common stock at an exercise price equal to the closing price for the
Common Stock on the immediately preceding trading date and vesting 25% as of
January 1, 2006, the remainder vesting monthly over three years.

            The 100,000 share restricted stock award or additional 200,000 stock
option grant, as the case may be is referred to herein as the "Subsequent
Grant."

            If the Company elects to fail to renew the contract in accordance
with Section 3 in any year or otherwise terminates this Agreement without Cause
(as defined in Section 6.7) at any time or Executive terminates the Agreement
for "Good Reason"(as defined in Section 6.7) at any time, the Subsequent Grant
(if it has not already been made as provided above) shall nonetheless be issued
even if the Company chooses to terminate this Agreement without Cause effective
December 31, 2005 or at any time, and all options and restricted stock then held
by Executive shall accelerate vest effective December 31, 2005 (for the portion
of the options granted as of that date for failure to renew this Agreement or
otherwise terminate this Agreement) and/or the date of termination of this
Agreement.

                                        2
<PAGE>
 If, on or after a Change of Control (as defined herein), Executive's employment
with the Company terminates due to an involuntary termination of Executive by
the Company other than for "Cause" (as defined in Section 6.7) or by Executive
for "Good Reason" (as defined in Section 6.7), then all of Executive's Company
stock options and restricted stock grants shall immediately accelerate and
become fully vested and exercisable immediately upon such termination.

            For purposes of this Agreement, "Change of Control" shall mean the
occurrence of any of the following events:

            (i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended) becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company's then outstanding voting securities; or

            (ii) The consummation of the sale or disposition by the Company of
all or substantially all the Company's assets in one or a series of related
transactions; or

            (iii) The consummation of a merger or consolidation of the Company
or share exchange involving any other corporation, other than (A) a merger,
consolidation or share exchange which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (B) a merger
effected solely for purposes of changing the domicile of the Company.

            4.3   PERFORMANCE BONUS

            Executive's eligibility for a performance bonus shall be based on
the overall performance of the Company. Each year the Compensation Committee
shall set both a performance target and maximum performance goal for the Company
for the fiscal year. The performance target and maximum performance goal shall
be documented in writing and acknowledged by Executive. If, based on the
Company's audited financial statements, the performance target is met, and if
the Company is EBITDA positive (as determined in accordance with GAAP),
Executive shall be eligible for an annual bonus of up to fifty percent (50%) of
his Base Salary. If, based on the Company's audited financials, the maximum
performance goal is met, and if the Company is EBITDA positive, Executive shall
be eligible for an annual bonus of up to one hundred percent (100%) of his Base
Salary. For avoidance of doubt, executive's maximum aggregate annual bonus
potential under this Section 4.3 is 100% of his Base Salary. The parties will
negotiate in good faith to address any issues of fairness or consistency if
there are changes in GAAP between the time that the targets are established and
the calculation of eligibility for bonus.

                                       3
<PAGE>

            The actual amount of any bonus payable to Executive shall be
determined by the CEO, in consultation with the Executive Committee of the
Board. Executive understands that in any year no more than twenty five percent
(25%) of that year's total positive EBITDA balance be distributed as bonus
compensation individually or collectively to the Company's executive leadership
team (including Executive and the Company's other senior executives). Any
potential bonus amount that is not payable pursuant to the prior sentence shall
not be earned and shall not be accrued by the Company. For illustration purposes
only, if in a given year Executive meets the maximum performance goal entitling
Executive to a performance bonus of $265,000 and the Company's positive EBITDA
balance as of the applicable year end is $1,000,000, then the maximum bonus
amount distributable to the executive leadership team shall be $250,000, of
which Executive would receive a percentage to be determined by the Compensation
Committee of the Board. In this example, the remaining balance of Executive's
earned bonus would not be earned and would not be accrued by the Company.

      5.    BENEFITS

      During the term of this Agreement, the Company shall provide Executive
with the health and dental insurance provided to other senior executives.
Executive will be entitled to participate, subject to and in accordance with
applicable eligibility requirements, in fringe benefit programs that may be
established by the Company or, to the extent applicable, by the Board. During
each calendar year for the term of this Agreement, and, assuming the Agreement
is renewed, through December 31, 2007, Executive shall be entitled to four (4)
weeks paid vacation. Unused vacation time may be accrued during the term of this
Agreement, but in no event shall Executive accrue and carry over more than eight
(8) weeks of paid vacation. Any unused vacation time above the eight weeks that
may be carried over is forfeited.

      6.    PAYMENTS AND BENEFITS UPON TERMINATION

      Executive shall be entitled to the following payments and benefits
following termination of Executive's employment by Executive for Good Reason (as
defined below) or by the Company for any reason other than Cause (as defined
below), including non-renewal of this Agreement, or upon Executive's death or
Disability (as defined below), and provided that the Executive signs a release
of all claims or potential claims against the Company.

            6.1   TERMINATION PAYMENT

                  (a) Generally. The Company shall make payments in cash to
Executive as severance pay equal to twelve months of Executive's annual Base
Salary in effect immediately prior to the date of Executive's termination (the
"Cash Severance"). The Cash Severance due under this Section 6.1(a) shall be
paid in a lump sum.

                  (b) Termination Payment on Change of Control. If, on or after
a Change of Control, Executive's employment with the Company terminates due to
(i) a voluntary termination for Good Reason (as defined in Section 6.7) or (ii)
an involuntary termination by the Company other than for "Cause" (as defined in
Section 6.7), then the Company shall pay

                                       4
<PAGE>

Executive as severance an amount equal to twelve months of Executive's annual
Base Salary in effect immediately prior to the date of Executive's termination.
The severance due under this Section 6.1(b) shall be paid in a lump sum.

                  (c) Reimbursements. The Company shall reimburse employee for
any reasonable and documented expenses incurred on or prior to the termination
date in accordance with the Company's standard reimbursement practices.

            6.2   ACCRUED BENEFITS

            The Company shall pay to Executive the amount of any compensation
deferred by Executive and any accrued vacation pay for the periods of service
prior to the date of termination. Such amounts shall be paid in a lump sum on
the next regularly scheduled payroll date following the termination date.

            6.3   DEATH OR DISABILITY OF EXECUTIVE

            Executive shall be entitled to the Cash Severance in the event of
his death or Disability. In the event of Executive's death, all benefits and
payments provided for by this Section 7 shall be paid to his spouse, if any, or
otherwise to the personal representative of his estate, unless Executive has
otherwise directed the Company in writing prior to his death.

            6.4   EXCLUSIVE SOURCE OF SEVERANCE PAY

            Benefits provided under this Agreement shall replace the amount of
any severance payments to which Executive would otherwise be entitled under any
severance plan or policy generally available to executives of the Company.

            6.5   NONSEGREGATION

            No assets of the Company need be segregated or earmarked to
represent the liability for benefits payable hereunder. The rights of Executive
to receive benefits hereunder shall be only those of a general unsecured
creditor.

            6.6   WITHHOLDING

            All payments under this Section 7 are subject to applicable federal
and state payroll withholding or other applicable taxes.

            6.7   "CAUSE" AND "GOOD REASON" DEFINITIONS

            For purposes of this Agreement, "Cause" means (a) violation by
Executive of a state or federal criminal law involving the commission of a crime
against the Company, or any felony; (b) habitual or repeated misuse by Executive
of alcohol or controlled substances; (c) fraud, intentional misrepresentation or
dishonesty by Executive with respect to the business of the Company; (d) any
incident materially compromising Executive's reputation or ability to

                                       5
<PAGE>

represent the Company with the public; (e) any intentional act by Executive that
substantially impairs the Company's business, goodwill or reputation; or (f) a
determination by a majority of the Company's directors (other than the
Executive) within thirty (30) days after the end of each of two (2) consecutive
calendar quarters that the Company (or the Executive) has not substantially met
the Quarterly Goals (as defined below). For purposes of this Agreement,
"Quarterly Goals" shall mean specific targeted metrics of Company performance
(financial or otherwise) and / or Executive performance for a calendar quarter.
The Quarterly Goals shall be agreed to in writing by the Executive and the
Company within the thirty (30) day periods prior to the beginning of each
calendar quarter. The first set of Quarterly Goals shall be for the Second
Quarter of 2005.

            For purposes of this Agreement, "Good Reason" shall mean, without
Executive's express written consent: (a) the material reduction of (i)
Executive's duties, benefits, authority or responsibilities (as determined in
good faith by the Board of Directors), or (ii) compensation ; (b) the relocation
of the principal place of Executive's employment to a location that is more than
fifty (50) miles away from its current location; and (c) the uncured breach of
any material provision of this Agreement by the Company, including, without
limitation, failure by the Company to pay Executive's Base Salary or bonus;
provided, however, that the Executive shall not be deemed to have resigned for
Good Reason hereunder unless with respect to each of (a) and (b) and (c) above,
the Executive shall have provided written notice to the Company within 60
calendar days after the event that the Executive believes gives rise to the
Executive's right to terminate employment for Good Reason, describing in
reasonable detail the facts that provide the basis for such belief, and the
Company shall have thirty (30) days from the date of such notice to cure any
such material reduction, relocation or breach.

            6.8   TERMINATION FOR FAILURE TO MEET QUARTERLY GOALS

            Notwithstanding anything stated elsewhere in this Agreement, the
parties agree that if Executive is terminated by the Company for failing to
substantially meet the Quarterly Goals after the end of each of two successive
quarters, Executive shall be entitled to severance under Section 7.1(a) of this
Agreement, but shall not be entitled to any accelerated vesting of any
outstanding options.

      7.    TERMINATION

      Employment of Executive pursuant to this Agreement may be terminated as
follows:

            7.1   BY THE COMPANY

            Until December 31, 2005, the Company may terminate the employment of
Executive with or without Cause upon giving written notice of termination
("Notice of Termination"), which notice shall be effective immediately if
termination is for Cause and thirty (30) days later if termination is not for
Cause. After January 1, 2006, the Company may terminate this Agreement without
Cause upon sixty (60) days' prior written notice in the form of a Notice of
Termination. This Agreement shall terminate upon the effective date specified in

                                       6
<PAGE>

such Notice of Termination. Payments due to Executive pursuant to Section 6, if
any, shall commence on the effective date of the Notice of Termination.

            7.2   BY EXECUTIVE

            Executive may terminate this Agreement upon sixty (60) days' prior
written notice in the form of a Notice of Termination, and this Agreement shall
terminate upon the effective date specified in such Notice of Termination.
Payments due to Executive pursuant to Section 6, if any, shall commence on the
effective date of the Notice of Termination. Notwithstanding the preceding
sentence, the Company shall have the right to accelerate Executive's termination
of employment to be effective on the date that the Notice of Termination is
received by the Company, or any date of the Company's choosing between that date
and the effective date specified in the Notice of Termination.

            7.3   AUTOMATIC TERMINATION

            This Agreement and Executive's employment shall terminate
automatically upon Executive's death or Executive's inability, for any reason,
to perform his duties with the Company for 120 days in any twelve (12) month
period ("Disability").

            7.4   EFFECT OF TERMINATION

            Notwithstanding any termination or expiration of this Agreement, the
Company shall remain liable for any rights or payments arising prior to such
event to which Executive is entitled under this Agreement.

      8.    GOLDEN PARACHUTE TAXES.

      In the event that (i) any amounts paid or deemed paid to Executive under
this Agreement are deemed to constitute "excess parachute payments" as defined
in Section 280G of the Code (taking into account any other payments made to
Executive under any other agreement and any other compensation paid or deemed
paid to Executive), or if Executive is deemed to receive an "excess parachute
payment" by reason of his or her vesting in the option grants or restricted
stock grants set forth in Section 4.2, and (ii) such deemed "excess parachute
payments" would be subject to the excise tax of Section 4999 of the Code, then
at the election of the Executive, the amount of any or all of such payments or
deemed payments, as selected by Executive, may be reduced (or, alternatively the
provisions of Section 4.2 may be waived so as not act to vest options to such
Executive), so that no such payments or deemed payments shall constitute excess
parachute payments. The determination of whether a payment or deemed payment
constitutes an excess parachute payment shall be made in the sole discretion of
the Board.

      9.    MISCELLANEOUS

                                       7
<PAGE>

            9.1   AMENDMENT

            This Agreement may not be amended except by written agreement
between Executive and an authorized representative of the Company following
approval by the Compensation Committee.

            9.2   NO MITIGATION

            All payments and benefits to which Executive is entitled under this
Agreement shall be made and provided without offset, deduction or mitigation on
account of income Executive could or may receive from other employment or
otherwise.

            9.3   LEGAL EXPENSES

            In connection with any litigation, arbitration or similar
proceeding, whether or not instituted by the Company or Executive, with respect
to the interpretation or enforcement of any provision of this Agreement, the
substantially prevailing party shall be entitled to recover from the other party
all costs and expenses, including reasonable attorneys' fees and disbursements,
in connection with such litigation, arbitration or similar proceeding.

            9.4   NOTICES

            Any notices required under the terms of this Agreement shall be
effective hand delivered or when mailed, postage prepaid, by certified mail and
addressed to, in the case of the Company:

                           Loudeye Corp.
                           1130 Rainier Avenue S
                           Seattle, WA  98144
                           Attention:  General Counsel

                           with a copy to:
                           Cairncross & Hempelmann, P.S.
                           524 Second Avenue, Suite 500
                           Seattle, WA  98104
                           Attn: Rosemary Daszkiewicz

                           and to, in the case of Executive:
                           Lawrence J. Madden
                           1414 First Avenue West Apt. 601
                           Seattle, WA  98119

Either party may designate a different address by giving written notice of
change of address in the manner provided above.

                                       8
<PAGE>

            9.5   WAIVER; CURE

            No waiver or modification in whole or in part of this Agreement, or
any term or condition hereof, shall be effective against any party unless in
writing and duly signed by the party sought to be bound. Any waiver of any
breach of any provision hereof or any right or power by any party on one
occasion shall not be construed as a waiver of, or a bar to, the exercise of
such right or power on any other occasion or as a waiver of any subsequent
breach.

            9.6   BINDING EFFECT; SUCCESSORS

            This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the Company and Executive and their respective heirs, legal
representatives, successors and assigns.

            9.7   SEVERABILITY

            Any provision of this Agreement which is held to be unenforceable or
invalid in any respect in any jurisdiction shall be ineffective in such
jurisdiction to the extent that it is unenforceable or invalid without affecting
the remaining provisions hereof, which shall continue in full force and effect.
The enforceability or invalidity of a provision of this Agreement in one
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

            9.8   GOVERNING LAW

            This Agreement shall be governed by and construed in accordance with
the laws of the state of Washington applicable to contracts made and to be
performed there.

                             SIGNATURE PAGE FOLLOWS

                                       9
<PAGE>

                     SIGNATURE PAGE TO EMPLOYMENT AGREEMENT

      The Company and Executive have executed this Agreement at Seattle,
Washington as of the Effective Date.

                                             Loudeye Corp.

                                             By:/s/ Michael A. Brochu
                                                --------------------------------
                                             Michael A. Brochu
                                             Chief Executive Officer

                                             EXECUTIVE

                                             /s/ Lawrence J. Madden
                                             -----------------------------------
                                              Lawrence J. Madden

                                       1
<PAGE>

                                    EXHIBIT A

            FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

                                  LOUDEYE CORP.

      In consideration of my employment or consultancy (as the case may be) by
Loudeye Corp., a Delaware corporation (the "Company," which term includes the
Company's subsidiaries and any of its affiliates), any opportunity for
advancement or reassignment that the Company may offer me, the compensation paid
to me in connection with such employment or consultancy (as the case may be) and
any stock and/or stock options which have been or may be granted to me by the
Company, I, Larry Madden, hereby agree as follows:

      1.    Whenever used in this Agreement the following terms will have the
            following meanings:

      (a)   "Invention(s)" means designs, trademarks, discoveries, formulae,
            processes, manufacturing techniques, trade secrets, inventions,
            improvements, ideas, business plans or strategies, or copyrightable
            works, including all rights to obtain, register, perfect and enforce
            these proprietary interests; provided that the term "Inventions"
            shall not be deemed to include those inventions, if any, listed on
            the exhibit attached to this Agreement.

      (b)   "Proprietary Information" means information or physical material not
            generally known or available outside the Company or information or
            physical material entrusted to the Company by third parties. This
            includes, but is not limited to, Inventions, confidential knowledge,
            trade secrets, copyrights, product ideas, techniques, processes,
            formulas, object codes, mask works and/or any other information of
            any type relating to documentation, data, schematics, algorithms,
            flow charts, mechanisms, research, manufacture, improvements,
            assembly, installation, marketing, forecasts, pricing, customers,
            the salaries, duties, qualifications, performance levels and terms
            of compensation of other employees, and/or cost or other financial
            data concerning any of the foregoing or the Company and its
            operations. Proprietary Information may be contained in material
            such as drawings, samples, procedures, specifications, reports,
            studies, customer or supplier lists, budgets, cost or price lists,
            compilations or computer programs, or may be in the nature of
            unwritten knowledge or know-how.

      (c)   "Company Documents" means documents or other media that contain
            Proprietary Information or any other information concerning the
            business, operations or plans of the Company, whether such documents
            have been prepared by me or by others. "Company Documents" include,
            but are not limited to, blueprints, drawings, photographs, charts,
            graphs, notebooks, customer lists, computer disks,

                                       1
<PAGE>

            tapes or printouts, sound recordings and other printed, typewritten
            or handwritten documents.

      2. I understand that the Company is engaged in a continuous program of
research, development and production. I also recognize that the Company
possesses or has rights to Proprietary Information (including certain
information developed by me during my employment or consultancy (as the case may
be) by the Company) which has commercial value in the Company's business that
derives, at least in part, from not being generally known or readily
ascertainable.

      3. I understand that the Company possesses Company Documents which are
important to its business.

      4. I understand and agree that my employment or consultancy (as the case
may be) creates a relationship of confidence and trust between me and the
Company with respect to (i) all Proprietary Information, and (ii) the
confidential information of another person or entity with which the Company has
a business relationship and is required by terms of an agreement with such
entity or person to hold such information as confidential. At all times, both
during my employment or consultancy (as the case may be) by the Company and
after its termination, I will keep in confidence and trust all such information,
and I will not use or disclose any such information without the written consent
of the Company, except as may be necessary in the ordinary course of performing
my duties to the Company, in which case I shall take reasonable steps to ensure
that such information is maintained in confidence.

      5. In addition, I hereby agree as follows:

            (a) All Proprietary Information shall be the sole property of the
Company and its assigns, and the Company and its assigns shall be the sole owner
of all trade secrets, patents, copyrights and other rights in connection
therewith. I hereby assign to the Company any rights I may presently have or I
may acquire in such Proprietary Information.

            (b) All Company Documents, apparatus, equipment and other physical
property, whether or not pertaining to Proprietary Information, furnished to me
by the Company or produced by me or others in connection with my employment or
consultancy (as the case may be) shall be and remain the sole property of the
Company. I shall return to the Company all such Company Documents, materials and
property as and when requested by the Company, excepting only (i) my personal
copies of records relating to my compensation; (ii) my personal copies of any
materials previously distributed generally to stockholders of the Company; and
(iii) my copy of this Agreement (my "Personal Documents"). Even if the Company
does not so request, I shall return all such Company Documents, materials and
property upon termination of my employment or consultancy (as the case may be)
by me or by the Company for any reason, and, except for my Personal Documents, I
will not take with me any such Company Documents, material or property or any
reproduction thereof upon such termination.

            (c) I will promptly disclose to the Company, or any persons
designated by it, all Inventions relating to the subject matter of my employment
or consultancy made or conceived, reduced to practice or learned by me, either
alone or jointly with others, prior to the

                                       -2-
<PAGE>

termination of my employment or consultancy (as the case may be) and for one (1)
year thereafter.

            (d) Without further compensation, I hereby agree promptly to
disclose to the Company, and I hereby assign and agree to assign to the Company
or its designee, my entire right, title, and interest in and to all Inventions
which I may solely or jointly develop or reduce to practice during the period of
my employment or consulting relationship with the Company (i) which pertain to
any line of business activity of the Company, (ii) which are aided by the use of
time, material or facilities of the Company, whether or not during working
hours, or (iii) which relate to any of my work during the period of my
employment or consulting relationship with the Company, whether or not during
normal working hours. No rights are hereby conveyed in Inventions, if any, made
by me prior to my employment or consulting relationship with the Company which
are identified in a sheet attached to and made a part of this Agreement, if any
(which attachment contains no confidential information).

            NOTICE REQUIRED BY REVISED CODE OF WASHINGTON 49.44.140:

            ANY ASSIGNMENT OF INVENTIONS REQUIRED BY THIS AGREEMENT DOES NOT
      APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE
      SECRET INFORMATION OF THE COMPANY WAS USED AND WHICH WAS DEVELOPED
      ENTIRELY ON THE EMPLOYEE'S OR CONSULTANT'S OWN TIME, UNLESS (a) THE
      INVENTION RELATES (i) DIRECTLY TO THE BUSINESS OF THE COMPANY OR (ii) TO
      THE COMPANY'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT
      OR (b) THE INVENTION RESULTS FROM ANY WORK PERFORMED BY THE EMPLOYEE OR
      CONSULTANT FOR THE COMPANY.

            (e) During or after my employment or consultancy (as the case may
be), upon the Company's request and at the Company's expense, I will execute all
papers in a timely manner and do all acts necessary to apply for, secure,
maintain or enforce patents, copyrights and any other legal rights in the United
States and foreign countries in Inventions assigned to the Company under this
Agreement, and I will execute all papers and do any and all acts necessary to
assign and transfer to the Company or any person or party to whom the Company is
obligated to assign its rights, my entire right, title and interest in and to
such Inventions. This obligation shall survive the termination of my employment
or consultancy (as the case may be), but the Company shall compensate me at a
reasonable rate after such termination for time actually spent by me at the
Company's request on such assistance. In the event that the Company is unable
for any reason whatsoever to secure my signature to any document reasonably
necessary or appropriate for any of the foregoing purposes, (including renewals,
extensions, continuations, divisions or continuations in part), I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agents and attorneys-in-fact to act for and in my behalf and
instead of me, but only for the purpose of executing and filing any such
document and doing all other lawfully permitted acts to accomplish the foregoing
purposes with the same legal force and effect as if executed by me.

                                      -3-
<PAGE>

            (f) So that the Company may be aware of the extent of any other
demands upon my time and attention, I will disclose to the Company (such
disclosure to be held in confidence by the Company) the nature and scope of any
other business activity in which I am or become engaged during the term of my
employment or consultancy (as the case may be). During the term of my employment
or consultancy (as the case may be), I will not engage in any other business
activity which is related to the Company's business or its actual or
demonstrably anticipated business.

      6.    As a matter of record, I attach hereto as Exhibit A a complete list
of all Inventions (including patent applications and patents) relevant to the
subject matter of my employment or consultancy which have been made, conceived,
developed or first reduced to practice by me, alone or jointly with others,
prior to my employment or consultancy (as the case may be) with the Company that
I desire to remove from the operation of this Agreement, and I covenant that
such list is complete. If no such list is attached to this Agreement, I
represent that I have no such Inventions at the time of signing this Agreement.
If in the course of my employment or consultancy with the Company, I use or
incorporate into a product or process an Invention not covered by Paragraph 5(d)
of this Agreement in which I have an interest, the Company is hereby granted a
nonexclusive, fully paid-up, royalty-free, perpetual, worldwide license of my
interest to use and sublicense such Invention without restriction of any kind.

      7.I represent that my execution of this Agreement, my employment or
consultancy (as the case may be) with the Company and my performance of my
proposed duties to the Company in the development of its business will not
violate any obligations I may have to any former employer, or other person or
entity, including any obligations to keep confidential any proprietary or
confidential information of any such employer. I have not entered into, and I
will not enter into, any agreement which conflicts with or would, if performed
by me, cause me to breach this Agreement.

      8.In the course of performing my duties to the Company, I will not utilize
any proprietary or confidential information of any former employer.

      9.I agree that this Agreement does not constitute an employment or
consultancy (as the case may be) agreement for a specific duration.

      10.This Agreement shall be effective as of the first day of my employment
or consultancy (as the case may be) by the Company and the obligations hereunder
will continue beyond the termination of my employment and will be binding on my
heirs, assigns and legal representatives. This Agreement is for the benefit of
the Company, its successors and assigns (including all subsidiaries, affiliates,
joint ventures and associated companies) and is not conditioned on my employment
for any period of time or compensation arising therefrom. I agree that the
Company is entitled to communicate any obligations under this Agreement to any
future or prospective employer of mine or business retaining me as a consultant.

      11.During the term of my employment or consultancy (as the case may be)
and for tone (1) year thereafter, I will not, without the Company's written
consent, directly or indirectly be employed or involved with any business
developing or exploiting any products or services

                                      -4-
<PAGE>

that are competitive with products or services (a) being commercially developed
or exploited by the Company during my employment or consultancy (as the case may
be) and (b) on which I worked or about which I learned Proprietary Information
during my employment or consultancy (as the case may be) with the Company.
During the term of my employment or consultancy (as the case may be) and for one
year thereafter I shall not directly or indirectly contact, solicit, induce, or
attempt to induce any customer or identified prospective customer, vendor,
business relation or contractor of the Company for the purposes of diverting
sales from the Company, terminating such person or entity's relationship with
the Company, or diminishing in any respect the business being done by the
Company with such person or entity.

      12.During the term of my employment or consultancy (as the case may be)
and for one (1) year thereafter, I will not personally or through others
recruit, solicit or induce in any way any employee, advisor or consultant of the
Company to terminate his or her relationship with the Company.

      13.I acknowledge that any violation of this Agreement by me will cause
irreparable injury to the Company and I agree that the Company will be entitled
to extraordinary relief in court, including, but not limited to, temporary
restraining orders, preliminary injunctions and permanent injunctions without
the necessity of posting a bond or other security and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.

      14.I agree that any dispute in the meaning, effect or validity of this
Agreement shall be resolved in accordance with the laws of the State of
Washington without regard to the conflict of laws provisions thereof. I further
agree that if one or more provisions of this Agreement are held to be
unenforceable under applicable Washington law, such provision(s) shall be
modified solely to the extent necessary to render the same enforceable and the
balance of the Agreement shall be interpreted consistent with such provision as
modified and shall be enforceable in accordance with its terms.

                                      -5-
<PAGE>

      15.I HAVE READ AND UNDERSTOOD THIS AGREEMENT. THIS AGREEMENT MAY ONLY BE
MODIFIED BY A SUBSEQUENT WRITTEN AGREEMENT EXECUTED BY AN AUTHORIZED OFFICER OF
THE COMPANY AND APPROVED BY THE COMPENSATION COMMITTEE.

     Dated:  March 7, 2005

                                             By:/s/ Lawrence J. Madden
                                                --------------------------------
                                                  Signature

                                             Name:Lawrence J. Madden

     Accepted and Agreed to:

     LOUDEYE CORP.

     By: /s/ Michael A. Brochu
         ------------------------------------
         Michael A. Brochu
         Chief Executive Officer

                                        1
<PAGE>

                                   Exhibit A

      LOUDEYE CORP

      Ladies and Gentlemen:

      1. The following is a complete list of all inventions or improvements
relevant to the subject matter of my employment or consultancy (as the case may
be) by Loudeye Corp (the "Company") that have been made or conceived or first
reduced to practice by me, alone or jointly with others, prior to my employment
or consultancy (as the case may be) by the Company that I desire to remove from
the operation of the Proprietary Information and Inventions Agreement entered
into between the Company and me.

     _____________    No inventions or improvements.

     _____________    Any and all inventions regarding:

     _____________    Additional sheets attached.

      2. I propose to bring to my employment or consultancy (as the case may be)
the following materials and documents of a former employer:

     _____________    No materials or documents.

     _____________   See below:

                                             By:  /s/ Lawrence J. Madden
                                                  ----------------------------
                                                  Signature

                                             Name: Lawrence J. Madden
                                      A-1

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