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                                                                    EXHIBIT 10.1

                             EMPLOYMENT AGREEMENT



     THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
1st day of January, 1998, by and between Video City, Inc., a Delaware
corporation (the "Company"), and Tim Denari ("Employee").

     1.  Term of Employment.  The Company hereby employs Employee, and Employee
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hereby agrees to serve the Company, under and subject to all of the terms,
conditions and provisions of this Agreement from the date hereof through 
January 7, 2000, in the capacity of Chief Financial Officer or Director of 
Finance of the Company, at the Company's option, or to serve in such other 
executive capacity with the Company as the Company's board of directors (the 
"Board of Directors") may from time to time designate, provided such assignment
is consistent with Employee's level of experience and expertise.  In the
performance of his duties and the exercise of his discretion, Employee shall be
under the supervision and control of, and shall report only to, the Chief
Executive Officer of the Company.  Employee's duties shall be designated by the
Chairman of the Board and shall be subject to such policies and directions as
may be established or given by the Board of Directors from time to time.

     2.  Devotion of Time to Company Business.  Employee shall devote
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substantially all of his productive time, ability and attention to the business
of the Company during the term of this Agreement.  Employee shall not, without
the prior written consent of the Board of Directors, directly or indirectly
render any services of a business, commercial or professional nature to any
other person or organization, whether for compensation or otherwise, which may
compete or conflict with the Company's business or with Employee's duties to the
Company.

     3.  Compensation.
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         3.1  Base Salary.  For all services rendered by Employee under this 
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Agreement, the Company shall pay Employee a base salary ("Base Salary"), 
payable semi-monthly, at the rate of $9,791.67 per month.


         3.2  Bonus.  In addition to the Base Salary, the Company shall pay
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Employee an annual bonus ("Bonus") with respect to any pretax profit of the
Company (any such pretax profit to be determined in accordance with the usual
and customary accounting practices of the Company and consistent with generally
accepted accounting principles) as follows (provided, however, that if Employee
has not been employed by the Company for the full period

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of a fiscal year, the bonus, if any, shall be prorated in proportion to the
percentage of such fiscal year that Employee has been employed by the Company):

             (a)  an amount equal to 2.5% of any pretax profit of the Company in
excess of $1,100,000 with respect to the fiscal year commencing in 1997;

             (b)  an amount equal to 2.5% of any pretax profit of the Company in
excess of $1,200,000 with respect to the fiscal year commencing in 1998; and

             (c)  an amount equal to 2.5% of any pretax profit of the Company in
excess of $1,300,000 with respect to the fiscal year commencing in 1999.

     4.  Benefits.
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             (a)  In addition to the Base Salary and the Bonus, if any, Employee
will be entitled to participate in all benefits of employment available to other
members of the Company's management, on a commensurate basis as they may be
offered from time to time by the Board of Directors to the Company's other
management employees.  Such benefits include, but are not limited to, full
medical, dental and long term disability insurance for Employee and his wife and
minor children, participation in group life insurance and retirement plans, and
term life insurance of $500,000 payable to Employee's designees.  During the
period of his employment hereunder, Employee will be reimbursed for reasonable
business, travel and entertainment expenses incurred in accordance with Company
policy on behalf of the Company in connection with his employment, and will be
required to submit appropriate expense reports for approval by signature of the
Chief Executive Officer as a condition of reimbursement of such expenses.

             (b)  The Company will pay up to $500 per month (including all
maintenance and operating expenses) for Employee to have the use of one Company-
provided automobile (or an equivalent expense allowance for an automobile owned
by Employee).

             (c)  Employee shall be entitled to three weeks paid vacation for 
any full fiscal year of the term of this Agreement, and a prorated portion of
three weeks vacation for any fiscal year in which Employee is not employed by
the Company for the full fiscal year.

             (d) If the Company's principal office is moved from Bakersfield,
California, such that Employee must move his residence in order to continue his
employment as provided herein,

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the Company shall pay his reasonable relocation costs, including but not limited
to moving expenses.

     5.  Authority.  So long as Employee serves as Chief Financial Officer of
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the Company under this Agreement, he shall have the authority and
responsibilities outlined in Exhibit A hereto and such other duties and
responsibilities as are specified in the Bylaws of the Company, except that he
shall not proceed with any matters, or permit the Company to take any actions,
which are prohibited by, or are in conflict with, resolutions or guidelines
adopted by the Board of Directors.

     6.  Termination.  This Agreement shall terminate in advance of the time
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specified in Section 1 above (and except as provided in Sections 6(c) and 6(e)
below, Employee shall have no right to receive any compensation not due and
payable to him or to his estate at the time of such termination) under any of
the following circumstances:

            (a)  Upon the death of Employee.

            (b)  In the event that Employee shall become either physically or
mentally incapacitated so as to not be capable of performing his duties as
required hereunder, and if such incapacity shall continue for a period of three
months consecutively, the Company may, at its option, terminate this Agreement
by written notice to Employee at that time or at any time thereafter while such
incapacity continues.  In case of termination under this Section 6(b) or under
Section 6(a), Employee or his estate shall be entitled to receive Base Salary or
any other compensation accrued or earned as of or to the date of any termination
and for six months following such termination or until expiration of this
Agreement, whichever is earlier.

            (c)  By Employee, if the Company shall have materially breached any
of the provisions of this Agreement, and such termination shall have the same
effect on the payment of Employee's Base Salary and Bonus as a termination by
the Company under Section 6(e).

            (d)  By the Company for Cause.  The term "Cause" used in this 
Section 6(e) means Employee (i) after repeated notices and warnings, fails to 
perform his reasonably assigned duties as reasonably determined by the Company,
(ii) materially breaches any of the terms or conditions of Sections 1 or 2 of 
this Agreement, or (iii) commits or engages in a felony or any intentionally
dishonest or fraudulent act which materially damages the Company or the
Company's reputation.  If the Company terminates Employee for Cause, no payments
or benefits under this Agreement shall become payable after the date of
Employee's termination.  The Company may terminate Employee's employment

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under this Section 6(e)(i) or (ii) only if written notice of the facts
constituting the basis for such termination has been given to Employee and
Employee shall have been afforded 30 days opportunity to take such action as may
be reasonable under the circumstances to furnish assurance to the Board of
Directors that such basis for termination has been corrected or cured (to the
extent susceptible to cure) and will not recur.

            (e)  By the Company at any time, without Cause; provided, that the
Company shall pay Employee his Base Salary and any Bonus which would otherwise
have become payable under Section 3.2 above through the remaining term of this
Agreement.

     7.  Loyalty, Non-Competition and Confidentiality.
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            (a)  Non-Competition.  Employee agrees and covenants that, except 
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for the benefit of the Company (and/or any successor, parent or subsidiary) 
during the Non-Competition Period (as defined in Section 7(b)) he will not 
engage, directly or indirectly (whether as an officer, director, consultant, 
employee, representative, agent, partner, owner, stockholder or otherwise), in
any business engaged in by the Company in the Non-Competition Area (as defined
on Section 7(c)).  It is the parties' express intention that if a court of
competent jurisdiction finds or holds the provisions of this Section 7 to be
excessively broad as to time, duration, geographical scope, activity or subject,
this Section 7 shall then be construed by limiting or reducing it so as to
comport with then applicable law.

            (b)  Non-Competition Period.  As used herein, the "Non-Competition
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Period" means the period beginning on the date hereof and ending on a date which
is two years after the later to occur of (i) January 7, 2002 or (ii) the date on
which Employee's employment with the Company terminates; provided, however, that
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if Employee's employment is terminated by the Company without Cause, the Non-
Competition Period shall end on the date of such termination.

            (c)  Non-Competition Area.  As used herein, the term
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"Non-Competition Area" mean anywhere in any County in which the Company conducts
business during the term of this Agreement and anywhere within a ten-mile radius
of any store operated by the Company.

            (d)  Other Employees.  Employee agrees that during the 
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Non-Competition Period he shall not, directly or indirectly, for his own account
or as agent, servant or employee of any business entity, engage, hire or offer
to hire or entice away or in any other manner persuade or attempt to persuade
any officer,

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employee or agent of the Company or any subsidiary to discontinue his or her
relationship with the Company or any subsidiary.

            (e)  Confidentiality.  Employee acknowledges that he has learned and
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will learn Confidential Information, as defined in Section 7(f), relating to the
business of the Company.  Employee agrees that he will not, except in the normal
and proper course of his duties, disclose or use or enable anyone else to
disclose or use, either during the Non-Competition Period or subsequently
thereto, any such Confidential Information without prior written approval of the
Board of Directors of the Company.

            (f)  Confidential Information.  "Confidential Information" shall
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include, but not be limited to, the following types of information regarding the
Company:  corporate information, including contractual arrangements, plans,
locations, strategies, tactics, potential acquisitions or business combinations
or joint venture possibilities, policies and negotiations; marketing
information, including sales, purchasing and inventory plans, strategies,
tactics, methods, customers, advertising, promotion or market research data;
financial information, including operating results and statistics, cost and
performance data, projections, forecasts, investors, and holdings; and
operational information, including trade secrets, secret formulae, control and
inspection practices, accounting systems and controls, computer programs and
data, personnel lists, resumes, personal data, organizational structure and
performance evaluations.  Confidential Information is limited to that
information which is not generally known in the industries in which the Company
or any subsidiary operates, and does not include skills, knowledge and
experience acquired by Employee during his employment with any prior employer.

            (g)  Corporate Documents. Employee agrees that all documents of any
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nature pertaining to activities of the Company or to any of the foregoing
matters in his possession now or at any time during the Non-Competition Period,
including, without limitation, memoranda, notebooks, notes, computer records,
disks, electronic information, data sheets, records and blueprints, are and
shall be the property of the Company and that they and all copies of them shall
be surrendered to the Company whenever requested by the Company from time to
time during the Non-Competition Period or thereafter and with or without request
upon termination of Employee's employment with the Company.

            (h)  Equitable Remedies.  In the event of a breach by Employee of 
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any of the provisions of this Section 7, the Company, in addition to any other
remedies it may have, shall be entitled to an injunction restraining Employee
from doing or continuing to do any such act in violation of this Section 7.

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      8.  Attorney Fees.  The successful party in any litigation relating to
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matters covered by this Agreement shall be entitled to an award of reasonable
attorneys' fees in such action.

      9.  Assignment.  Neither this Agreement nor any of the rights or
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obligations of either party hereunder shall be assignable by either Employee or
the Company, except that this Agreement shall be assignable by the Company to
and shall inure to the benefit of and be binding upon (i) any successor of the
Company by way of merger, consolidation or transfer of all or substantially all
of the assets of the Company to an entity other than any parent, subsidiary or
affiliate of the Company and (ii) any parent, subsidiary or affiliate of the
Company to which the Company may transfer its rights hereunder.

     10.  Binding Effect.  The terms, conditions, covenants and agreements set
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forth herein shall inure to the benefit of, and be binding upon, the heirs,
administrators, successors and assigns of each of the parties hereto, and upon
any corporation, entity or person with which the Company may become merged,
consolidated, combined or otherwise affiliated.

     11.  Amendment.  This Agreement may not be altered or modified except by
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further written agreement between the parties.

     12.  Notices.  Any notice required or permitted to be given under this
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Agreement by one party to the other shall be sufficient if given or confirmed in
writing and delivered personally or mailed by first class mail, registered or
certified, return receipt requested (if mailed from the United States), postage
prepaid, addressed to such party as respectively indicated below or as otherwise
designated by such party in writing.

     If to the Company, to:
     Video City, Inc.
     6840 District Blvd.
     Bakersfield, California 93313
     Attention:  Robert Y. Lee
     Fax: (805) 397-5982

     If to Employee, to:
     Tim Denari
     2704 Slender Oak Court
     Bakersfield, California  93311

     13.  California Law.  This Agreement is being executed and delivered and is
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intended to be performed and shall be governed by and construed in accordance
with the laws of the State of California.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.



                                          VIDEO CITY, INC.
                                          By: /s/ Robert Y. Lee
                                             -----------------------------------
                                              Robert Y. Lee
                                              Chief Executive Officer



                                              /s/ Tim Denari
                                             -----------------------------------
                                              Tim Denari

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