The Employment Agreement shall be fully documented in a formal agreement to be
signed by both parties, however, the following term sheet will be fully binding
upon the Company upon its acceptance by Mark Wattles.

Title:   As President and Chief Executive Officer

Salary:  975,000.00 annual to be effective January, 2001


To be determined by board tied to the same performance criteria as other
executives as well as additional bonuses based on certain key goals, such as
completion of the amended bank facility.

Stock and Options:

-3,000,000 share grant as approved by the full board.  Wattles will sign a
Lock-Up Agreement to not sell the any of the shares granted for 360 days from
the date of grant with a performance review at 180 days to consider releasing
50% of the shares from the lock-up.  The shares will also be subject to the
normal restrictions under rule 144.

-3,000,000 options are hereby granted to Wattles as part of the options being
granted to senior management under the management retention program.  The
exercise price will be at today's closing price (01-25-01).  1/3 vesting on
2/25/02 and 1/6 vesting every six months thereafter.  Once options have vested
they will not expire until end of the 10-year option term regardless of whether
or not Wattles is still employed by Hollywood.  The option grant is effective
today at today's price, but will be contingent upon the approval by the
shareholders of the 2001 Stock Incentive Plan adopted by the Board today.
There can be no assurance that the shareholders will approve the plan in which
case the options will not be issued.


Use of company owned or leased aircraft for travel between Las Vegas and
Portland and all business related travel.

Las Vegas Office:

Continuation in Las Vegas, NV of office space and required equipment and
services to conduct business on behalf of Hollywood as Mr. Wattles primary


For a minimum of one year from the date of this term sheet and if the 3,000,000
options are finalized upon the approval of the option plan by shareholders, for
a period of two years from the end of Wattles employment with the Company, Mr.
Wattles may not be employed by any competitor, unless such competition operates
as a franchisee of the Company. Wattles and the Company will enter into a
franchise agreement with financial terms to be agreed upon but at least
sufficient to cover the Company's costs associated with the franchisee which
allows for the building of a video chain which does not compete with the
Company's locations and adds to the Company's leverage and brands.
Competition would be defined as any company that owns or operates video
specialty stores where 10% or more of such company's video stores operate
within 2 miles of the Company's stores.


The Employment Agreement with Mr. Wattles shall be for 1 year if only the
3,000,000-share grant is effective.  The Employment Agreement will increase to
3 years upon approval of the 2001 Stock Incentive Plan by the shareholders and
completion of documentation and issuance of the 3,000,000 options.

Change of Control:

Upon a change in control all options will immediately vest, any lock-up
remaining up will be cancelled and the remaining pay for the term remaining
under the Employment Agreement will paid at the time of the Change of Control.
If the term remaining on the Employment Agreement is less than two years then
an amount equal to two years' pay will be paid.   If the 3,000,000 options were
not yet granted or could not be granted then Wattles will receive an amount in
cash equal to the in the money value of the options had they been granted and
vested as outlined above.

"Change of Control" for the Employment Agreement shall, in addition to the
definition contained in the Company's Change of Control Plan, include change of
ownership of 25% or more of the Company's common stock or securities
convertible into common or other changes in securities causing 25% or more of
the vote to be under the control of an entity or related group or a change in
the board causing the current members or remaining current members as a group
to not compose a majority of the board.

Entered into this 25th day of January 2001

Hollywood Entertainment Corporation
Compensation Committee of the Board of Directors

__________________________________  		______________________________
James N. Cutler Jr.					Doug Glendenning

William P. Zebe

Accepted by Mark Wattles effective this 25th day of January 2001

Mark Wattles

Source: OneCLE Business Contracts.