Document:

Prepared by R.R. Donnelley Financial -- Promissory Note by Greka SMV, Inc.

  
 Exhibit 10.3 
 SECURED 
 PROMISSORY NOTE 
  
 
	 $6,000,000.00
 	 	 Santa Maria, CA
 	 	 June 26, 2002
 

 
  
 FOR VALUE RECEIVED, GREKA SMV, INC., a Colorado corporation,
(the “Borrower”), promises to pay to VINTAGE PETROLEUM CALIFORNIA, INC., an Oklahoma corporation (the “Lender”), or order, the principal sum of Six Million and No/100 dollars ($6,000,000.00) based upon the terms as provided
herein (the “Note”). 
  
 1.  Maturity and Payment.    This Note shall
be all due and payable in monthly installments of $360,000.00, plus interest from the date hereof, on or before the 10th day of each month commencing with the month of July, 2002, and continuing monthly thereafter with a final balloon payment of the
entire amount of unpaid principal and accrued but unpaid interest due and payable on June 30, 2003. 
  
 2.  Interest.    The unpaid principal amount of this Note shall accrue simple interest at the rate of seven and one half percent (7.5%) per annum, payable monthly in addition to the schedule of
payments contemplated above. 
  
 3.  Prepayment.    This Note may be prepaid at
any time or from time to time in whole or in part without penalty, premium or permission. 
  
 4.  Payment.    All payments of this Note shall be made in lawful money of the United States of America at the address of Lender at 110 West 7th Street, Suite 2300, Tulsa, OK 74119, or at such other place as Lender may direct by written notice to Borrower. 
  
 5.  Performance.    Time is of the essence. 
  

6.  Security.    This Note is secured by a second lien subordinate to a first priority lien in favor of Guggenheim Investment
Management, LLC, as Collateral Agent, against Borrower’s interest in (a) the Property and (b) that certain real property commonly referred to as the Santa Maria Asphalt Refinery in Santa Barbara County, California, as evidenced by and more
particularly described in those certain Deeds of Trust With Assignment of Rents and Acceleration In Event of Sale and Security Agreement and Fixture Filing of even date. 
  
 7.  Intercreditor Documents Govern.    The terms and provisions of this Note are subject to the terms and provisions of (i) that
certain Mortgage Subordination and Standstill Agreement (the “Mortgage Subordination”) dated as of June 26, 2002 between Beneficiary, Trustor and Guggenheim Investment Management, LLC as Collateral Agent (“Guggenheim”); and (ii)
that certain Intercreditor Agreement (the “Intercreditor Agreement”) dated as of June 26, 2002 between Beneficiary and Guggenheim. In the event of any inconsistency between the terms and provisions of this Note and the terms and provisions
of the Mortgage Subordination or between the terms and provisions of this Note and the terms and provisions of the Intercreditor Agreement, the terms and provisions of the Intercreditor Agreement shall govern and be binding. 

 8.  Costs of Collection; Governing Law.    Borrower agrees to pay all costs of
collection when incurred and all costs incurred by the Lender, or holder hereof, in exercising or preserving any rights or remedies in connection with the enforcement and administration of this Note or following a default in payment of any principal
and/or interest by Borrower, including, but not limited to, attorney’s fees. If any suit or action is instituted to enforce this Note, the prevailing party promises to pay, in addition to the costs and disbursements otherwise allowed by law,
such sum as the court may adjudge for attorney’s fees in such suit or action. This Note shall be governed by and construed in accordance with the laws of the State of California, and venue for any action shall be Santa Barbara County,
California. 
  
 
	 BORROWER:
  
 GREKA SMV, INC.
 
	 
	 By:
 	 	 /s/    RANDEEP S.
GREWAL        
 

	  	 	 Randeep S. Grewal,
 Ch., CEO
& Pres.
 

 
 

 2<PAGE>
                                                                    Exhibit 10.1

                         TERMS OF EMPLOYMENT AGREEMENT
                              FOR ROBERT G. FLYNN

     1.  AGREEMENT:  This term sheet sets forth the agreed upon terms of the
         agreement between Robert G. Flynn ("Employee") and Alliance
         Entertainment Corp. ("Alliance") in connection with the employment of
         the Employee by Liquid Audio, Inc. ("Company") after the consummation
         of the Merger contemplated in that certain Agreement and Plan of Merger
         by and among the Company, Alliance and April Acquisition Corp. dated as
         of June 11, 2002 (the "Merger Agreement").

     2.  TERM:  Three years (the "Term") from the Closing Date as defined in the
         Merger Agreement.

     3.  TITLE AND DUTIES:  To be determined, from time to time, by the Chief
         Executive Officer.

     4.  WORK LOCATION; REPORTING:  Employee's principal office and place of
         business during his employment will be at the Company's current offices
         in Los Angeles, California, or within forty miles of either such
         offices or Employee's home, or at such other locations as Employee and
         the Company shall from time to time agree. Employee will report to the
         Chief Executive Officer or his designee.

     5.  SALARY AND BONUS

         A.  ANNUAL BASE SALARY:  Annual base salary shall be no less than (i)
             Employee's annual base salary at Liquid Audio, Inc. as of January
             1, 2002 or (ii) an amount commensurate with other executives of the
             Company with similar responsibilities and expertise.

         B.  RETENTION PAYMENTS:

             (i)   As a retention payment (subject to adjustment as set forth in
                   Section 7 hereof), Employee will receive a single payment of
                   $250,000 at the Closing Date.

             (ii)  On the 1st anniversary date of Employees' employment with the
                   Company, Employee will receive a single payment of $250,000.

             (iii) On the 2nd anniversary date of the Employees' employment with
                   the Company, Employee will receive a single payment of
                   $250,000.

         C.  POSSIBLE DISCRETIONARY BONUS:  Employee may be awarded additional
             bonuses at the discretion of the Company's Board of Directors or
             the Compensation Committee of the Board of Directors in connection
             with annual compensation planning, provided however that the Board
             of

                                      -1-
<PAGE>
     Directors and the Compensation Committee may take into account the
     Retention Payments pursuant to Section B when determining any bonus.

6.   TERMINATION AND SEVERANCE BENEFITS:

     (a) Upon termination without Cause at any time during the Term, Employee
         shall receive, as a consulting fee: (i)an amount equal to two times
         (2x) Employee's then annual base salary plus (ii) an amount equal to
         any unpaid Retention Payments referred to in Section 5(B)(ii) and
         (iii), as applicable, payable over time as the payments would otherwise
         become due.

     (b) Upon termination for Cause at any time during the Term, Employee shall
         be entitled to payment of his Base Salary pursuant to Section 5(A)
         hereof through the date of termination, and shall not be entitled to
         any unpaid Retention Payments pursuant to Section 5(B) hereof or unpaid
         amounts as set forth in Section 7 hereof.

     For purposes of this Section 6, "Cause" shall mean acts or omissions on the
     part of Employee involving: (a) serious misconduct, including but not
     limited to, Employee's commitment of an act of fraud, embezzlement or
     misappropriation against the Company, unauthorized disclosure or use of
     confidential information or trade secrets, or sexual, racial or other
     actionable harassment; (b) a breach of any statutory or common law
     fiduciary duty owed to the Company; (c) conviction by a court of competent
     jurisdiction (or entry of a plea of guilty or nolo contendere) of any
     felony or crime involving moral turpitude, dishonesty or fraud (other than
     a traffic offense); (d) material failure to perform his duties pursuant to
     the Agreement or material failure to follow the reasonable instructions of
     the Chief Executive Officer of the Company to the extent of his ability to
     do so, or the material failure to comply with any other provision of the
     Agreement or Company policies, where such failure in each of the above
     cases is not cured within thirty days after receipt of written notice from
     the Company specifying such violations; or (e) repeated violations of
     clause (d) hereof.

     (c) Employee may voluntarily resign as an employee of the Company with
         fifteen days prior written notice to the Company. In such case Employee
         shall be entitled to payment of his Base Salary pursuant to Section
         5(A) through the date of termination but shall not be entitled to any
         unpaid Retention Pyaments pursuant to Section 5(B) hereof or unpaid
         amounts as set forth in Section 7 hereof.

7.  NON-COMPETE/NON-SOLICIT/NON-INTERFERENCE:  For a period of 5 years following
    the Closing Date: (1) Employee shall not (and shall cause Employee's
    affiliates not to) prepare, plan, organize, conspire, engage or have any
    equity interest in, own, manage, operate, finance, control, participate in,
    or otherwise render services or advice to any competitor of the Company
    anywhere in the world; (2) Employee shall not (and shall cause Employee's
    affiliates not to) (a) solicit business of the same or similar type being
    carried on by the Company from any

                                      -2-
<PAGE>
     person known or who should be known to be an actual or potential customer,
     client, investor or partner of the Company, (b) solicit, employ or
     otherwise engage as an employee, independent contractor or otherwise any
     person who is an employee of the Company or attempt to induce any employee
     of the Company to terminate his/her employment with Company; or (c)
     interfere with the Company's existing, expectant or potential business
     relationship with any person.

     In consideration for the foregoing, the Company shall pay Employee a sum
     total of $750,000, payable as follows: (i) $250,000 payable upon the 1st
     anniversary of the Closing Date; (ii) $250,000 payable upon the 2nd
     anniversary of the Closing Date; and (iii) $250,000 payable upon the 3rd
     anniversary of the Closing Date; provided however that in the event of a
     termination for Cause or voluntary resignation by Employee, such
     consideration shall be reduced by any amounts unpaid as of the date of
     Employee's termination; and provided further that in the event of a
     termination for Cause or voluntary resignation by Employee during the first
     year after the Effective Date, $125,000 of the Retention Payment paid on
     the Effective Date shall be allocated as consideration for the agreement
     set forth in this Section 7. The amounts described above shall remain due
     and payable on the specified payment dates if Employee's employment is
     terminated without Cause by the Company at any time during the Term. Upon
     any breach of this Section 7, Employee shall forfeit all such unpaid
     amounts.

 8.  CONFIDENTIALITY PROVISIONS. Employee agrees to sign a
     confidentiality/proprietary rights agreement with the Company protecting
     the Company's confidential information.

 9.  REIMBURSEMENT OF COSTS/PERQUISITES: Employee to receive reimbursement of
     business costs and expenses in accordance with normal Company policy.
     Perquisites comparable with other executives of the Company with similar
     responsibilities and expertise.

10.  BENEFITS: Participation in life, health, disability, other insurance
     programs and other Company benefit programs during employment. Employee
     shall be entitled to participate in other employee benefit plans or
     insurance plans offered to other executives of the Company with similar
     responsibilities and expertise.

11.  VACATION: Vacation to be in accordance with normal Company policy.

12.  LEGAL ACTION: In any legal action undertaken to enforce the terms of this
     agreement, the prevailing party shall be reimbursed by the non-prevailing
     party for such prevailing party's reasonable attorney's fees and expenses,
     including the costs of enforcing a judgment.

13.  WITHHOLDING: All payments required to be made to Employee hereunder shall
     be subject to all applicable federal, state and local tax withholding laws.

14.  SOLE REMEDY: Employee acknowledges and agrees that the payments set forth
     in this agreement, in the event of any termination of the Employee's
     employment,

                                      -3-
<PAGE>
     are fair and reasonable and shall constitute Employee's sole and exclusive
     remedy, in lieu of all rights and claims of Employee, at law or in equity,
     for a termination of his employment, including expressly, for termination
     of his employment by the Company in a manner which shall constitute a
     breach of this agreement, and for all other rights and claims of any nature
     whatsoever related to any such termination, and Employee hereby irrevocably
     waives all rights and claims of any nature whatsoever in respect of any
     such termination except for the payments agreed to in this agreement.

15.  LONG FORM:  The parties contemplate the execution of more formal long form
     documentation and/or other instruments incorporating the terms of this
     agreement and containing customary provisions for an agreement of this
     nature; provided, however, unless and until such long form documentation is
     executed, the terms of this agreement shall control.

16.  PREPARATION OF EMPLOYMENT AGREEMENT:  Munger, Tolles & Olson will prepare a
     draft of Employee's Employment Agreement. Each party will bear its own fees
     and expenses in connection with discussions, negotiations and preparation
     of the new Employment Agreement. No such fees and expenses will be charged
     back to Liquid Audio, Inc.

     This Agreement is dated as of June 12, 2002.

                                             "ALLIANCE"
                                             ALLIANCE ENTERTAINMENT CORP.

                                             By:  ______________________________
                                             Its: ______________________________

                                             "EMPLOYEE"

                                                     /s/ Robert G. Flynn
                                             ___________________________________
                                                        Robert G. Flynn

                                      -4-

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