CONFIDENTIAL SEPARATION AND SEVERANCE AGREEMENT


THIS CONFIDENTIAL SEPARATION AND SEVERANCE AGREEMENT (the "Agreement") is made
and entered into as of the 24th day of October, 2000, by and between Jeffrey
Yapp ("Yapp") and HOLLYWOOD ENTERTAINMENT CORPORATION, an Oregon corporation
("Hollywood").

NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, the parties hereto agree as follows:

1.	The parties agree that Yapp's separation from Hollywood shall be on the
following terms and conditions:

(a) Yapp's last day of employment by Hollywood will be October 24, 2000.
Hollywood will continue to pay Yapp under the following terms during the
following  applicable severance period (Severance Period):
(i) For the next 18 months beginning November 2000 and continuing through April
2002 on Hollywood's regular bi-monthly payroll schedule or until Yapp begins
Employment with a new company or business, whichever date is earlier.
"Employment" in this Agreement shall include being an employee, consultant,
partner or other business arrangement wherein Yapp receives on-going
compensation directly or indirectly for his services or advice.
(ii) As an exception to 1(a)(i), if Yapp obtains Employment during the next six
(6) months, he will receive a minimum of six months of severance payments
beginning November 1, 2000.
(iii) As an exception to 1(a)(i) and (ii), if Yapp begins full time Employment
with American Film Technologies ("AFT") on or before January 1, 2001, he shall
continue to be paid for the first twelve (12) months of the period set forth in
1(a)(i) of this Agreement, as long as he remains in the full time Employment of
AFT as his sole Employment.  If during this twelve (12) months he should leave
AFT and not have other Employment, his payment schedule shall revert back to 1
(a)(i) or (ii), whichever is applicable.  If he obtains Employment elsewhere
during the twelve (12) months, either upon leaving AFT or while still working
for AFT, his payments from Hollywood shall terminate subject to the six month
minimum under 1(a)(ii).

(b)	Yapp shall have until November 1, 2001, within which to exercise 25,000
vested employee's options at an exercise price of $6.6875 per share (" Yapp
Options"). All other options granted to Yapp by Hollywood, including the
remaining 277,500 vested options are hereby immediately forfeited,
notwithstanding the provisions of the Hollywood's option plan governing the
Yapp Options.

(c)	The deductions made in connection with Yapp's insurance coverage shall
continue during the time in which he continues to be paid severance payments by
Hollywood and he shall remain covered under Hollywood's health insurance plan
during the applicable severance period.  Hollywood will pay during the same
period the amount it currently contributes to the Yapp's health insurance
coverage.

 (d)	In consideration of Yapp's execution of this Agreement, Hollywood agrees
to pay Yapp severance pay as set forth in 1(a) above at the rate set forth
below until such time as Yapp starts new employment or the applicable severance
period ends, whichever occurs first.  Such severance pay shall be at a monthly
gross rate of $70,833.34, which will be paid in bi-monthly payments of
$35,416.67 (less payroll deductions). The first payment shall be payable on the
next regular payday and continue as set forth in section 1 (a) above. State,
federal, social security, and other required deductions will be deducted from
each payment. Yapp shall immediately notify Hollywood upon commencement of
Employment.

(e)	 Yapp will receive no payments from Hollywood other than the amounts set
forth in paragraphs 1(c) and 3 of this Agreement.

2.	In consideration of the severance payment set forth in Paragraph 1(d),
and in consideration of the payments and benefits described in this Agreement,
Hollywood, including its subsidiaries, affiliates, parent companies, officers
and directors, releases Yapp, and Yapp releases Hollywood, including its
subsidiaries, affiliates, parent companies, officers, directors, and employees,
from all claims and liabilities which Hollywood or Yapp have or may have
against the other as of the date on which Yapp signs this Agreement.  This
includes, but is not limited to, claims arising under the federal, state, or
local laws prohibiting employment discrimination and claims growing out of any
legal restrictions on Hollywood's right to terminate its employees (for
example, claims that may arise under various contract, tort, public policy, or
wrongful discharge theories).  Furthermore, except to enforce this Agreement,
Yapp promises he will not file a lawsuit against Hollywood in connection with
any aspect of his employment or termination.  Yapp also waives the right to all
remedies in any such action that may be brought on his behalf.

	3.	Yapp currently has loans payable to Hollywood in the principal
amount of $920,000 together with accrued interest (Yapp Loans).  These Yapp
Loans will continue to be owing to Hollywood and the payment of such loans
shall be guaranteed by the proceeds of the sale of the Yapp Options set forth
in 1(b) above.  Upon the exercise and sale of said options, the proceeds shall
first go to the tax withholdings and/or payment of applicable taxes of the
Employee for the sale of the Yapp Options and /or the forgiveness of Yapp
Loans, then to the repayment of the Yapp Loans and any remaining proceeds, if
any, shall be paid to Yapp. In the event that the proceeds from the sale of all
of the shares from the Yapp Options are insufficient to repay the Yapp Loans or
in the event that the Yapp Options are not exercised and sold prior to their
expiration, the balance of the Yapp Loans shall be forgiven.  Except as set
forth herein, Yapp shall be responsible for the payment of all taxes resulting
from the forgiveness of the Yapp Loans. Yapp understands that there have been
no taxes paid or withheld by Hollywood with respect to the Yapp Loans and that
Yapp shall be responsible for the payment of all taxes resulting from the
forgiveness of the Yapp Loans.

4. Yapp agrees, for the twelve months following the date of this Agreement,
that he will use his best efforts to maintain Hollywood's reputation and
portray Hollywood in good stead with the studios and to refrain from any action
which disrupts or damages Hollywood's operations, personnel, or products or
which is detrimental to the image of Hollywood.

5.	Yapp may retain as his own, the office equipment at his home, lap-top
computer and cell phones that he received from Hollywood.  Yapp acknowledges
that he has worked with proprietary and confidential information during his
employment with Hollywood, and nothing herein shall relieve him of his
obligations to keep such information confidential and not share or use any such
information without the express written consent of Hollywood.  During the
period for which severance payments are being received, and in no case less
than the period agreed to in the Employee Undertaking signed at the time of his
commencement of employment, Yapp agrees not to compete with or be an employee,
agent, contractor, or advisor with any business that is in competition with
Hollywood in the territory covered by Hollywood's operations. Yapp shall not
discuss any aspect of Hollywood's operations, business, or plans with any
individual without the express written permission of Hollywood, unless legally
required to do so and then only after giving notice to Hollywood so that
Hollywood may contest any such legal requirement.  Yapp may generally describe
his job duties and responsibilities at Hollywood to a prospective employer.
Yapp further agrees that he is no longer, nor will he represent himself as an
employee or affiliate of Hollywood.

6.	During the eighteen-month term of this Agreement, whether or not if it is
terminated earlier by a default by Yapp or shortened because of new employment,
Yapp will not solicit or hire for himself, his employer or any other employer
any employee of Hollywood

7. Yapp agrees to the terms of the Employee Undertaking signed at the time of
his commencement of employment with Hollywood. (A copy attached hereto as
Exhibit A)

8.	Yapp shall have the services of an administrative assistant provided by
Hollywood until January 1, 2001. During this period, Hollywood shall maintain
Yapp's phone service and voice mail at Hollywood to be used to collect incoming
calls to Yapp.

9.	In order to receive the payments and benefits described in paragraph 1(d)
above, Yapp must accept certain terms and conditions described in the attached
"Notice and General Release" and the "ADEA Waiver and Release".  Therefore,
please read and review this Agreement and the attached ADEA Waiver and Release
very carefully.

10.	Upon default by Yapp of this Agreement, any remaining severance payments
payable under Paragraph 1 after the date of the default shall no longer be
owing or payable by Hollywood. Damages to Yapp arising out of Hollywood's
default of this Agreement shall be limited to the unpaid severance payments
still owing under Paragraph 1.

 IN WITNESS WHEREOF, Yapp and Hollywood have executed this Agreement as of the
date first above written.

YAPP						HOLLYWOOD ENTERTAINMENT
CORPORATION, an Oregon corporation



____________________________			By _________________________________
Name: Jeffrey Yapp				Mark Wattles
						Chief Executive Officer

 	NOTICE

You should thoroughly review the foregoing Agreement and the following "ADEA
Waiver and Release" and understand the effect of accepting its terms before you
do so.

Before you sign this Agreement, you should consult with your attorney or other
advisor of your choice.

ADEA WAIVER AND RELEASE

In exchange for the payments and benefits described in paragraph 1(d), above,
I, Jeffrey Yapp, knowingly and voluntarily irrevocably discharge and release
Hollywood from any claim of employment discrimination arising under the Age
Discrimination in Employment Act ("ADEA"), and covenant that I will not file
any administrative charge or lawsuit under the ADEA which seeks to recover
monetary damages or seeks reinstatement of my employment with Hollywood.

As to the full release of all claims under the ADEA, I, Jeffrey Yapp, agree
that, by signing this agreement and delivering a signed copy of this Agreement
to Hollywood:

(a) 	This Release is written in language I understand, and I have carefully
read and fully understand all of the provisions of the ADEA Waiver and Release;
and

(b) 	I have been advised in writing to consult with an attorney before signing
the Release, and have had an opportunity to consult with my attorney; and

(c) 	This Release specifically releases claims under the Age Discrimination in
Employment Act of 1967; and

(d) 	This Release does not release claims under the ADEA which arise after the
date of this Release; and

(e) 	The consideration given by Hollywood in exchange for the release of ADEA
claims is in addition to that to which I am already entitled; and

(f)	I have been given a period of at least 21 days within which to consider
the agreement; and

(g) 	I have a period of  7 days following the execution of this Release to
revoke this Release, and this Release is not effective or enforceable until 8
days following the execution of this Release.

Please review this entire Agreement very carefully.

After you have thoroughly considered this Agreement, please reflect your
decision below in the Acknowledgment and Election section.
 ACKNOWLEDGMENT AND ELECTION

I have carefully read and fully understand all the provisions of the Agreement
and the "ADEA Waiver and Release" in this Agreement.  I understand that if I
accept them, they represent the entire agreement between Hollywood and me, and
I acknowledge that I have not relied upon any other representations or
statements (either written or oral).  I have been advised that I have 21 days
to consider this Release (but may sign it at any time beforehand if I so
desire), and that it is recommended that I consult with an attorney in doing
so.  I also understand that I can revoke this Release within 7 days of signing
by sending a certified letter to that effect to:

	 Donald J. Ekman, Executive Vice President
	 Hollywood Entertainment Corporation
	 9275 SW Peyton Lane
	 Wilsonville, Oregon 97070

Notwithstanding the foregoing, I understand and agree that the portion of this
Release that pertains to the release of claims under the ADEA shall not become
effective or enforceable and no funds shall be exchanged until the 7 day
revocation period has expired, but that all other provisions of this Release
will become effective upon its execution by the parties.

Please mark your choice:

_____		I wish to receive the payments and other benefits set forth in
Paragraph 1(d) of the Agreement.  In exchange, I accept the terms and
conditions of the Agreement.

_____		I do not accept the terms and conditions of the Agreement.  I
understand that I will receive only salary compensation and related benefits
through the date of termination of my employment with Hollywood as set forth in
Paragraphs 1(a), (b) and (c) of the Agreement.


Name
ACCEPTED AND APPROVED:

HOLLYWOOD ENTERTAINMENT CORPORATION,
an Oregon corporation


By:
Donald J. Ekman
Executive Vice President

Date: