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                                                                  EXHIBIT 10.16

                              VALLEY MEDIA, INC.

                             EMPLOYMENT AGREEMENT

                                      for

                                JAMES P. MILLER

   This Employment Agreement ("Agreement") is entered into this 27th day of
October, 2000, by and between JAMES P. MILLER ("Executive") and VALLEY MEDIA,
INC., a California corporation ("the Company").

   WHEREAS, the Company desires to employ Executive to provide personal
services to the Company and wishes to provide Executive with certain
compensation and benefits in return for his services; and

   WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits.

   NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:

   1. EMPLOYMENT BY THE COMPANY.

     1.1 This Agreement shall commence on October 1, 2000 and run for a
  period of three (3) years, and terminate on September 30, 2003.

     1.2 Subject to the terms set forth herein, the Company agrees to employ
  Executive in the position of President and Chief Operating Officer, and
  Executive hereby accepts such employment effective as of October 1, 2000
  ("the employment date"). During the term of his employment with the
  Company, Executive will devote his best efforts and substantially all of
  his business time and attention (except for vacation periods as set forth
  herein and reasonable periods of illness or other incapacities permitted by
  the Company's general employment policies) to the business of the Company.

     1.3 Executive shall serve in an executive capacity consistent with the
  Bylaws of the Company and as required by the Company's Board of Directors
  ("the Board"). Executive shall also serve as a member of the Board.

     1.4 The employment relationship between the parties shall also be
  governed by the general employment policies and practices of the Company,
  including those relating to protection of confidential information and
  assignment of inventions, except that when the terms of this Agreement
  differ from or are in conflict with the Company's general employment
  policies or practices, this Agreement shall control.

   2. COMPENSATION.

     2.1 Salary. Executive shall receive, for services to be rendered
  hereunder, an annualized base salary of $300,000, payable in equal periodic
  payments during the term of this Agreement. It is further agreed between
  the parties that the Company shall review annually, and in light of such
  review may, at the discretion of the Board, increase such annual salary.

       (a) Executive shall additionally receive a bonus in the amount of
    $60,000 payable April 1, 2001.

     2.2 Restricted Stock. On the date of this Agreement, the Company shall
  award to Executive 100,000 shares of its Common Stock. These shares shall
  be shares of Common Stock of the Company which are authorized but unissued
  shares or shares acquired by the Company and held in its treasury. The
  Company will pay to Executive the amount of any income tax liability
  arising to Executive from the transfer of this Stock to Executive. It is
  the intent of the parties that Executive will receive the Stock herein on a
  gross-up basis without income tax liability.

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     2.3 Incentive Compensation. Effective with the fiscal year beginning
  April 1, 2001, the Board of Directors shall establish an incentive
  compensation plan based on a target of one hundred percent (100%) of
  Executive's salary. This plan will be consistent with other company
  incentive plans.

     2.4 Standard Company Benefits. Executive shall be entitled to all rights
  and benefits for which he is eligible under the terms and conditions of the
  standard company benefits and compensation practices which may be in effect
  from time to time and generally provided by the Company to its employees.
  Executive will, however, be entitled to these additional benefits:

       (a) Vacation. Executive shall receive three (3) weeks paid vacation
    per year.

       (b) Medical & Dental Insurance Coverage. The Company will provide
    medical and dental benefits for Executive and his family consistent
    with the standard company benefits available. The Company will pay the
    premiums for these benefits, and Executive will pay any deductible and
    co-payments under these plans.

     2.5 Relocation Expenses. The Company shall pay to Executive the
  following expenses in connection with Executive's relocation from
  Executive's current residence in Beaverton, Oregon, to the Sacramento area:

       (a) Transportation, fares, meals and lodging for Executive and his
    spouse from Executive's present residence to any new residence located
    near the new principal place of work.

       (b) Moving of Executive's household goods and personal effects of
    Executive and Executive's family from Executive's present residence to
    the new residence.

       (c) Lodging and meals for Executive and Executive's family for a
    reasonable period while occupying temporary living quarters located
    near the new principal place of work.

       (d) Round-trip travel, meals and lodging expense for Executive and
    Executive's family for a reasonable number of house-hunting trips to
    locate a new residence.

       (e) Expenses in connection with the sale of Executive's residence,
    including realtor fees, mortgage pre-payment penalties, termite
    inspector's fees, title insurance policy and revenue stamps, escrow
    fees, fees for preparing documents, state and local taxes, mortgage
    discount points, and seller's attorneys' fees, if any. The term
    "residence" shall mean the property occupied by Executive as his
    principal residence at the time of the transfer and does not include
    vacation homes, houseboats, boats or airplanes. All such payments made
    hereunder shall be paid on a gross-up basis with the Company paying to
    Executive an amount equal to any income tax liability arising from
    Company's payment hereunder.

       (f) In the event Executive's employment is terminated during the
    term of this Agreement for any reason other than for cause as set forth
    in Section 5.3 herein, or by voluntary termination as set forth in
    section 5.4, the Company will provide relocation expenses for Executive
    and his family back to Portland, Oregon only, in the amount of the
    actual cost of movement of Executive's household goods from Portland to
    Sacramento, plus costs incurred in selling Executive's home in
    Sacramento. Should Executive desire to relocate to any other location,
    the Company will not make any contribution toward moving expenses.

     2.6 Automobile. The Company shall provide to Executive a leased
  automobile of Executive's choice, with a value not to exceed manufacturer's
  suggested retail price of $55,000. The Company shall additionally provide
  all maintenance and operating costs.

     2.7 Attorneys' Fees. The Company shall pay or reimburse to Executive the
  reasonable fees and expenses of Executive's personal counsel for
  professional services rendered to Executive in connection with this
  Agreement and related matters.

     2.8 Expense Reimbursement. The Company shall reimburse Executive for
  reasonable expenses that Executive occurs in connection with his services
  for the Company contemplated by this Agreement on presentation by Executive
  of appropriate vouchers and receipts for such expenses to the Company.

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   3. PROPRIETARY INFORMATION OBLIGATIONS.

     3.1 Agreement. Executive agrees to execute and abide by the Proprietary
  Information and Inventions Agreement attached hereto as Exhibit A.

     3.2 Remedies. Executive's duties under the Proprietary Information and
  Inventions Agreement shall survive termination of his employment with the
  Company. Executive acknowledges that a remedy at law for any breach or
  threatened breach by him of the provisions of the Proprietary Information
  and Inventions Agreement would be inadequate, and he therefore agrees that
  the Company shall be entitled to injunctive relief in case of any such
  breach or threatened breach.

   4. OUTSIDE ACTIVITIES.

     4.1 Except with the prior written consent of the Board, Executive will
  not, during the term of this Agreement, undertake or engage in any other
  employment, occupation or business enterprise other than those in which
  Executive is a passive investor. Executive may engage in civic and not-for-
  profit activities so long as such activities do not materially interfere
  with the performance of his duties hereunder.

     4.2 Except as permitted by Section 4.3, Executive agrees not to acquire,
  assume or participate in, directly or indirectly, any position, investment
  or interest known by him to be adverse or antagonistic to the Company, its
  business or prospects, financial or otherwise.

     4.3 During the term of his employment by the Company, except on behalf
  of the Company, Executive will not directly or indirectly, whether as an
  officer, director, stockholder, partner, proprietor, associate,
  representative, consultant, or in any capacity whatsoever engage in, become
  financially interested in, be employed by or have any business connection
  with any other person, corporation, firm, partnership or other entity
  whatsoever which is known by him to compete directly with the Company,
  throughout the world, in any line of business engaged in (or planned to be
  engaged in) by the Company; provided, however, that anything above to the
  contrary notwithstanding, he may own, as a passive investor, securities of
  any competitor corporation, so long as his direct holdings in any one such
  corporation shall not in the aggregate constitute more than 1% of the
  voting stock of such corporation.

   5. TERMINATION OF EMPLOYMENT.

     5.1 Termination Without Cause.

       (a) The Company shall have the right to terminate Executive's
    employment with the Company at any time without cause. For purposes of
    this section only, termination includes a significant change in job
    responsibilities, title or location.

       (b) In the event Executive's employment is terminated without cause,
    the Company shall continue to pay Executive's salary for one (1) year
    from the date of the termination. Executive will not continue to accrue
    vacation or sick leave. For a period of one (1) year, Executive will
    continue to receive medical and dental benefits.

       (c) If Executive elects to terminate his employment with the Company
    or its successor within six (6) months of a Change of Control (as
    defined below), Company or its successor shall continue to pay
    Executive's salary and medical and dental benefits for twelve (12)
    months.

     5.2 Change of Control. For purposes of this Agreement, "Change of
  Control" means the occurrence of one or more of the following events:

       (a) The Company sells substantially all of its assets to a single
    purchase or a group of associated purchasers;

       (b) At least fifty percent (50%) of the outstanding corporate shares
    of the Company are sold, exchanged or otherwise disposed of in one
    transaction; or

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       (c) There is a merger or consolidation of the Company in a
    transaction in which the Company's shareholders receive less than fifty
    percent (50%) of the outstanding voting shares of the new or continuing
    corporation.

     5.3 Termination for Cause.

       (a) The Company shall have the right to terminate Executive's
    employment with the Company at any time for cause.

       (b) "Cause" for termination shall mean: (i) indictment or conviction
    of any felony or of any crime involving dishonesty; or (ii)
    participation in any fraud against the Company.

       (c) In the event Executive's employment is terminated at any time
    for cause, he will not be entitled to severance pay, pay in lieu of
    notice or any other such compensation.

     5.4 Voluntary or Mutual Termination.

       (a) Executive may voluntarily terminate his employment with the
    Company at any time, after which no further compensation will be paid
    to Executive.

       (b) Except for a resignation as set forth in paragraph 5.1(c) above,
    in the event Executive voluntarily terminates his employment, he will
    not be entitled to severance pay, pay in lieu of notice or any other
    such compensation.

     5.5 Permanent Disability. If during the period of employment Executive
  shall become permanently disabled, the Company shall pay Executive $230,000
  for each year (and additional fractional portion of a year) from the date
  of disability to October 1, 2003, less any amounts paid or payable to
  Executive under any long-term disability plan or pension plan maintained by
  the Company providing for disability benefits. Amounts paid to Executive
  pursuant to this section shall be paid in substantially equal monthly
  payments.

     For the purposes of this section and this Agreement, "permanent
  disability" means inability to perform the services of President and Chief
  Operating Officer of the Company required under this Agreement due to
  physical or mental disability which continues for 180 consecutive days in
  any period of 12 months, and "date of disability" means the day following
  the close of such 180-day period. Evidence of such disability shall be
  certified by a physician acceptable to both the Company and Executive.
  Evidence of such disability as so certified shall be conclusive,
  notwithstanding that a disability policy, or clause in an insurance policy,
  covering employee shall contain a different definition of "permanent
  disability". If the Company and Executive cannot agree on such a physician
  or if Executive feels that he is unable to perform his duties under this
  Agreement, the question of whether Executive is "permanently disabled"
  within the meaning of this Agreement shall be submitted to a panel of three
  impartial and reputable physicians, one selected by the Company, one
  selected by Executive, and a third to be selected by the then President of
  the Medical Society for Yolo County, California. The panel's determination
  of Executive's ability to so perform shall be binding on the parties.

     For the purposes of this Agreement, the period of employment will be
  deemed to terminate on the day immediately preceding the date of
  disability.

   6. GENERAL PROVISIONS.

     6.1 Notices. Any notices provided hereunder must be in writing and shall
  be deemed effective upon the earlier of personal delivery (including
  personal delivery by facsimile) or the third day after mailing by first
  class mail to the Company at its primary office location and to Executive
  at his address as listed on the Company payroll.

     6.2 Severability. Whenever possible, each provision of this Agreement
  will be interpreted in such a manner as to be effective and valid under
  applicable law, but if any provision of this Agreement is held to be
  invalid, illegal or unenforceable in any respect under any applicable law
  or rule in any jurisdiction, such invalidity, illegality or
  unenforceability will not affect any other provision or any other
  jurisdiction, but this Agreement will be reformed, construed and enforced
  in such jurisdiction as if such invalid, illegal or unenforceable
  provisions had never been contained herein.

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     6.3 Waiver. If either party should waive any breach of any provisions of
  this Agreement, he or it shall not thereby be deemed to have waived any
  preceding or succeeding breach of the same or any other provision of this
  Agreement.

     6.4 Complete Agreement. This Agreement and its Exhibit constitute the
  entire agreement between Executive and the Company and it is the complete,
  final, and exclusive embodiment of their agreement with regard to this
  subject matter. It is entered into without reliance on any promise or
  representation other than those expressly contained herein, and it cannot
  be modified or amended except in writing signed by an officer of the
  Company.

     6.5 Counterparts. This Agreement may be executed in separate
  counterparts, any one of which need not contain signatures of more than one
  party, but all of which taken together will constitute one and the same
  Agreement.

     6.6 Headings. The headings of the sections hereof are inserted for
  convenience only and shall not be deemed to constitute a part hereof nor to
  affect the meaning thereof.

     6.7 Successors and Assigns. This Agreement is intended to bind and inure
  to the benefit of and be enforceable by Executive and the Company and their
  respective successors, assigns, heirs, executors and administrators, except
  that Executive may not assign any of his duties hereunder, and he may not
  assign any of his rights hereunder without the written consent of the
  Company, which shall not be withheld unreasonably.

     6.8 Attorneys' Fees. If either party hereto brings any action to enforce
  his or its rights hereunder, the prevailing party in any such action shall
  be entitled to recover his or its reasonable attorneys' fees and costs
  incurred in connection with such action.

     6.9 Choice of Law. All questions concerning the construction, validity
  and interpretation of this Agreement will be governed by the laws of the
  State of California.

   IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.

                                          VALLEY MEDIA, INC.

                                                   /s/ Barnet J. Cohen
                                          By: _________________________________

Date: October 27, 2000

                                                   /s/ James P. Miller
                                          By: _________________________________

Date: October 27, 2000

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