HOLLYWOOD ENTERTAINMENT CORPORATION
1997 EMPLOYEE NONQUALIFIED STOCK OPTION PLAN


1. Purpose.  The purpose of this 1997 Employee Nonqualified Stock
Option Plan (the "Employee Plan") is to enable Hollywood Entertainment
Corporation (the "Company") to attract and retain the services of selected
employees of the Company or of any subsidiary of the Company.

2. Shares Subject to the Employee Plan.  Subject to adjustment as
provided below and in paragraph7, the shares to be offered under the Employee
Plan shall consist of Common Stock of the Company, and the total number of
shares of Common Stock that may be issued under the Employee Plan shall not
exceed 5,000,000 shares.  The shares issued under the Employee Plan may be
authorized and unissued shares or reacquired shares.  If an option granted
under the Employee Plan expires, terminates or is canceled, the unissued
shares subject to such option shall again be available under the Employee
Plan.

3. Effective Date and Duration of Employee Plan.

(a) Effective Date.  The Employee Plan shall become effective
as of May 28, 1997.  Options may be granted at any time after the effective
date and before termination of the Employee Plan.

(b) Duration.  The Employee Plan shall continue in effect until
all shares available for issuance under the Employee Plan have been issued
and all restrictions on such shares have lapsed.  The Board of Directors may
suspend or terminate the Employee Plan at any time except with respect to
options then outstanding under the Employee Plan.  Termination shall not
affect any outstanding options under the Employee Plan.

4. Administration.

(a) Board of Directors.  The Employee Plan shall be
administered by the Board of Directors of the Company, which shall determine
and designate from time to time the individuals to whom awards shall be made,
the amount of the awards and the other terms and conditions of the awards.
Subject to the provisions of the Employee Plan, the Board of Directors may
from time to time adopt and amend rules and regulations relating to
administration of the Employee Plan, advance the lapse of any waiting period,
accelerate any exercise date, waive or modify any restriction applicable to
shares (except those restrictions imposed by law) and make all other
determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Employee Plan.  The interpretation
and construction of the provisions of the Employee Plan and related
agreements by the Board of Directors shall be final and conclusive.  The
Board of Directors may correct any defect or supply any omission or reconcile
any inconsistency in the Employee Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Employee Plan
into effect, and it shall be the sole and final judge of such expediency.

(b) Committee.  The Board of Directors may delegate to a
committee of the Board of Directors or specified officers of the Company, or
both (the "Committee"), any or all authority for administration of the
Employee Plan.  If authority is delegated to a Committee, all references to
the Board of Directors in the Employee Plan shall mean and relate to the
Committee except (i)as otherwise provided by the Board of Directors, and
(ii)that only the Board of Directors may amend or terminate the Employee Plan
as provided in paragraphs3 and 15.

5. Types of Awards; Eligibility.  The Board of Directors may, from
time to time, grant Non-Statutory Stock Options as provided in paragraphs
6(a) through 6(e).  Any such awards may be made to employees (excluding
employees who are officers or directors of the Company) who the Board of
Directors believes have made or will make an important contribution to the
Company or any subsidiary of the Company.  The Board of Directors shall
select the individuals to whom awards shall be made and shall specify the
action taken with respect to each individual to whom an award is made.  At
the discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new award.

6. General Rules Relating to Option Grants.

(a) Terms of Grant.  The Board of Directors may grant options
under the Employee Plan.  With respect to each option grant, the Board of
Directors at the time of grant shall determine the number of shares subject
to the option, the option price, the period of the option, and the time or
times at which the option may be exercised.  The option exercise price may be
any amount determined by the Board of Directors.  At the time of the grant of
an option or at any time thereafter, the Board of Directors may provide that
an optionee who exercised an option with Common Stock of the Company shall
automatically receive a new option to purchase additional shares equal to the
number of shares surrendered and may specify the terms and conditions of such
new options.

(b) Exercise of Options.  Except as provided in paragraph6(d)
or as determined by the Board of Directors, no option granted under the
Employee Plan may be exercised unless at the time of such exercise the
optionee is employed by or in the service of the Company or any subsidiary of
the Company and shall have been so employed or provided such service
continuously since the date such option was granted.  Absence on leave or on
account of illness or disability under rules established by the Board of
Directors shall not, however, be deemed an interruption of employment or
service for this purpose.  Unless otherwise determined by the Board of
Directors, vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability.  Except as
provided in paragraphs6(d) and 7, options granted under the Employee Plan may
be exercised from time to time over the period stated in each option in such
amounts and at such times as shall be prescribed by the Board of Directors,
provided that options shall not be exercised for fractional shares.  Unless
otherwise determined by the Board of Directors, if the optionee does not
exercise an option in any one year with respect to the full number of shares
to which the optionee is entitled in that year, the optionee's rights shall
be cumulative and the optionee may purchase those shares in any subsequent
year during the term of the option.

(c) Nontransferability.  Unless otherwise determined by the
Board of Directors, each option granted under the Employee Plan by its terms
shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of descent
and distribution of the state or country of the optionee's domicile at the
time of death or pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act.

(d) Termination of Employment or Service.

(i) General Rule.  Unless otherwise determined by the
Board of Directors, in the event the employment or service of the
optionee with the Company or a subsidiary terminates for any reason
other than because of physical disability or death as provided in
subparagraphs 6(d)(ii) and (iii), the option may be exercised at any
time prior to the expiration date of the option or the expiration of
30days after the date of such termination, whichever is the shorter
period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination.

(ii) Termination Because of Total Disability.  Unless
otherwise determined by the Board of Directors, in the event of the
termination of employment or service because of total disability, the
option may be exercised at any time prior to the expiration date of the
option or the expiration of 12months after the date of such
termination, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option at the date of
such termination.  The term "total disability" means a mental or
physical impairment which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or
more and which causes the optionee to be unable, in the opinion of the
Company and two independent physicians, to perform his or her duties as
an employee and to be engaged in any substantial gainful activity.
Total disability shall be deemed to have occurred on the first day
after the Company and the two independent physicians have furnished
their opinion of total disability to the Company.

(iii) Termination Because of Death.  Unless otherwise
determined by the Board of Directors, in the event of the death of an
optionee while employed by or providing service to the Company or a
subsidiary, the option may be exercised at any time prior to the
expiration date of the option or the expiration of 12 months after the
date of death, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option at the date of
death and only by the person or persons to whom such optionee's rights
under the option shall pass by the optionee's will or by the laws of
descent and distribution of the state or country of domicile at the
time of death.

(iv) Amendment of Exercise Period Applicable to
Termination.  The Board of Directors, at the time of grant or at any
time thereafter, may extend the 30-day and 12-month exercise periods
any length of time not longer than the original expiration date of the
option, and may increase the portion of an option that is exercisable,
subject to such terms and conditions as the Board of Directors may
determine.

(v) Failure to Exercise Option.  To the extent that the
option of any deceased optionee or of any optionee whose employment or
service terminates is not exercised within the applicable period, all
further rights to purchase shares pursuant to such option shall cease
and terminate.

(e) Purchase of Shares.  Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option granted
under the Employee Plan only upon receipt by the Company of notice in writing
from the optionee of the optionee's intention to exercise, specifying the
number of shares as to which the optionee desires to exercise the option and
the date on which the optionee desires to complete the transaction, and if
required in order to comply with the Securities Act of 1933, as amended,
containing a representation that it is the optionee's present intention to
acquire the shares for investment and not with a view to distribution.
Unless the Board of Directors determines otherwise, on or before the date
specified for completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of such shares in
cash (including, with the consent of the Board of Directors, cash that may be
the proceeds of a loan from the Company) or, with the consent of the Board of
Directors, in whole or in part, in Common Stock of the Company valued at fair
market value, restricted stock, performance units or other contingent awards
denominated in either stock or cash, promissory notes and other forms of
consideration.  The fair market value of Common Stock provided in payment of
the purchase price shall be determined by the Board of Directors.  If the
Common Stock of the Company is not publicly traded on the date the option is
exercised, the Board of Directors may consider any valuation methods it deems
appropriate and may, but is not required to, obtain one or more independent
appraisals of the Company.  If the Common Stock of the Company is publicly
traded on the date the option is exercised, the fair market value of Common
Stock provided in payment of the purchase price shall be the closing price of
the Common Stock as reported in The Wall Street Journal on the trading day
preceding the date the option is exercised, or such other reported value of
the Common Stock as shall be specified by the Board of Directors.  No shares
shall be issued until full payment for the shares has been made.  With the
consent of the Board of Directors, an optionee may request the Company to
apply automatically the shares to be received upon the exercise of a portion
of a stock option (even though stock certificates have not yet been issued)
to satisfy the purchase price for additional portions of the option.  Each
optionee who has exercised an option shall immediately upon notification of
the amount due, if any, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local tax withholding requirements.
If additional withholding is or becomes required beyond any amount deposited
before delivery of the certificates, the optionee shall pay such amount to
the Company on demand.  If the optionee fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the Company to
the optionee, including salary, subject to applicable law.  With the consent
of the Board of Directors an optionee may satisfy this obligation, in whole
or in part, by having the Company withhold from the shares to be issued upon
the exercise that number of shares that would satisfy the withholding amount
due or by delivering to the Company Common Stock to satisfy the withholding
amount.  Upon the exercise of an option, the number of shares reserved for
issuance under the Employee Plan shall be reduced by the number of shares
issued upon exercise of the option.

7. Changes in Capital Structure.

(a) Stock Splits; Stock Dividends.  If the outstanding Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of any stock split, combination of shares or dividend
payable in shares, recapitalization or reclassification appropriate
adjustment shall be made by the Board of Directors in the number and kind of
shares available for grants under the Employee Plan.  In addition, the Board
of Directors shall make appropriate adjustment in the number and kind of
shares as to which outstanding options, or portions thereof then unexercised,
shall be exercisable, so that the optionee's proportionate interest before
and after the occurrence of the event is maintained.  Notwithstanding the
foregoing, the Board of Directors shall have no obligation to effect any
adjustment that would or might result in the issuance of fractional shares,
and any fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors.  Any such
adjustments made by the Board of Directors shall be conclusive.

(b) Mergers, Reorganizations, Etc.  In the event of a merger,
consolidation or plan of exchange to which the Company is a party or a sale
of all or substantially all of the Company's assets (each, a "Transaction"),
the Board of Directors shall, in its sole discretion and to the extent
possible under the structure of the Transaction, select one of the following
alternatives for treating outstanding options under the Employee Plan:

(i) Outstanding options shall remain in effect in
accordance with their terms.

(ii) Outstanding options shall be converted into options
to purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction.  The amount, type of securities subject
thereto and exercise price of the converted options shall be determined
by the Board of Directors of the Company, taking into account the
relative values of the companies involved in the Transaction and the
exchange rate, if any, used in determining shares of the surviving
corporation to be issued to holders of shares of the Company.  Unless
otherwise determined by the Board of Directors, the converted options
shall be vested only to the extent that the vesting requirements
relating to options granted hereunder have been satisfied.

(iii) The Board of Directors provides a 30-day period prior
to the consummation of the Transaction during which outstanding options
shall be exercisable to the extent vested without regard to whether an
Exercisability Event has occurred and upon the expiration of such 30-
day period, all unexercised options shall immediately terminate.  The
Board of Directors may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full during
such 30-day period.

(c) Dissolution of the Company.  In the event of the
dissolution of the Company, options shall be treated in accordance with
paragraph7(b)(iii).

8. Corporate Mergers, Acquisitions, Etc.  The Board of Directors may
also grant options under the Employee Plan having terms, conditions and
provisions that vary from those specified in this Employee Plan provided that
any such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, stock bonuses,
cash bonuses, restricted stock and performance units granted, awarded or
issued by another corporation and assumed or otherwise agreed to be provided
for by the Company pursuant to or by reason of a transaction involving a
corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation to which the Company or a
subsidiary is a party.

9. Amendment of Employee Plan.  The Board of Directors may at any
time, and from time to time, modify or amend the Employee Plan in such
respects as it shall deem advisable because of changes in the law while the
Employee Plan is in effect or for any other reason.  Except as provided in
paragraphs6(d) and 7, however, no change in an award already granted shall be
made without the written consent of the holder of such award.

10. Approvals.  The obligations of the Company under the Employee
Plan are subject to the approval of state and federal authorities or agencies
with jurisdiction in the matter.  The Company will use its best efforts to
take steps required by state or federal law or applicable regulations,
including rules and regulations of the Securities and Exchange Commission and
any stock exchange on which the Company's shares may then be listed, in
connection with the grants under the Employee Plan.  The foregoing
notwithstanding, the Company shall not be obligated to issue or deliver
Common Stock under the Employee Plan if such issuance or delivery would
violate applicable state or federal securities laws.

11. Employment and Service Rights.  Nothing in the Employee Plan or
any award pursuant to the Employee Plan shall (i)confer upon any employee any
right to be continued in the employment of the Company or any subsidiary or
interfere in any way with the right of the Company or any subsidiary by whom
such employee is employed to terminate such employee's employment at any
time, for any reason, with or without cause, or to decrease such employee's
compensation or benefits, or (ii)confer upon any person engaged by the
Company any right to be retained or employed by the Company or to the
continuation, extension, renewal, or modification of any compensation,
contract, or arrangement with or by the Company.

12. Rights as a Shareholder.  The recipient of any award under the
Employee Plan shall have no rights as a shareholder with respect to any
Common Stock until the date of issue to the recipient of a stock certificate
for such shares.  Except as otherwise expressly provided in the Employee
Plan, no adjustment shall be made for dividends or other rights for which the
record date occurs prior to the date such stock certificate is issued.