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                                                                    EXHIBIT 10.7


                         SECOND MODIFICATION AGREEMENT

     This SECOND MODIFICATION AGREEMENT entered into as of March 31, 1999,
between Video City, Inc., a Delaware corporation with its principal executive
offices at 370 Amapola Avenue, Suite 208, Torrance, California, 90501, (as a
"Borrower"  and "Agent Borrower") and its wholly owned subsidiaries listed as "a
Borrower" below ("Subsidiaries", and together with Video City, Inc., the
"Borrowers") and BankBoston Retail Finance Inc., a Delaware corporation with an
address of 40 Broad Street, Boston 02109 (the "Lender").

     WHEREAS, the Lender established a revolving line of credit pursuant to a
certain Loan and Security Agreement by and between the Lender and the Borrowers
dated as of December 29, 1998, as amended by that certain Modification Agreement
dated as of January 8, 1999 (the "Loan Agreement") whereby Lender agreed to lend
to Borrowers upon Borrowers' request, but subject to the terms and conditions
set forth in the Loan Agreement, up to Thirty Million Dollars and Zero Cents
($30,000,000).

     WHEREAS, the Borrowers intend to acquire 100% of the issued and outstanding
stock of Video Galaxy, Inc., a Delaware corporation ("Video Galaxy"), pursuant
to an Agreement of Merger and Plan of Reorganization by and among Video City,
Inc., Video Galaxy, Inc. and James G. Howard, George M. Peloso and Kurt Peterson
dated as of March 30, 1999 (the "Galaxy Purchase Agreement").

     WHEREAS, the Loan Agreement prohibits the Borrowers from consummating the
transactions contemplated by the Galaxy Purchase Agreement absent the consent of
the Lender.

     WHEREAS, the Borrowers have requested that the Lender consent to the
consummation the transactions contemplated by the Galaxy Purchase Agreement by
the Borrowers.

     WHEREAS, the Lender is willing to consent to the consummation of the
transactions contemplated by the Galaxy Purchase Agreement on the terms and
conditions set forth herein.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lender and the Borrowers
mutually agree as follows:

     1.  Definitions.  All capitalized terms used herein shall have the same
         ------------
meaning as set forth in the Loan Agreement, unless otherwise defined herein.

     2.  Effective Date.  This Modification Agreement shall be effective upon
         ---------------
receipt by the Lender of each of the following documents in a form acceptable to
Lender in its sole discretion: (i) an original executed copy of this Agreement
signed by the Borrowers and Lender; (ii) evidence that the transactions
contemplated by the Galaxy Purchase Agreement, including the funding of at least
$1,700,000 of the cash purchase price by Ingram Entertainment, Inc., have closed
and been fully consummated; (iii) an Amended and Restated Revolving Credit Note
in the form attached hereto as Exhibit 1; (iv) an agreement executed by Ingram
Entertainment, Inc., modifying its Subordination Agreement dated as of December
28, 1998 to
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increase the minimum availability requirement in Section 4 thereof to
$3,000,000; and (v) such other documents as it may require in its sole
discretion.

     3.  Modifications to Loan Agreement.
         -------------------------------

               (a)  Schedule 1 to the Loan Agreement shall be deleted and
                    Schedule 1 attached hereto shall be substituted therefor.

               (b)  The words "Video Galaxy, Inc." shall be added to the list of
                    Related Entities attached as Exhibit 4-2 to the Loan
                    Agreement.

               (c)  The words "Video Galaxy, Inc. - Video Galaxy" shall be added
                    to the list of Trade Names attached as Exhibit 4-3 to the
                    Loan Agreement.

               (d)  Exhibit 4-5(i) attached hereto, scheduling the new locations
                    to be acquired by the Borrowers, shall be incorporated by
                    reference into Exhibit 4-5 to the Loan Agreement.

               (e)  The following shall be added to the schedule of Indebtedness
                    attached as Exhibit 4-7 to the Loan Agreement: "Ingram
                    Entertainment Inc. (Video Galaxy, Inc.) $1,700,000"

               (f)  The figure "$1,250,000" shall be substituted for the figure
                    "$500,000" in the "Excess Availability" provision of Exhibit
                    5-12(a) Financial Performance Covenants.

               (g)  The Video City Deposit Accounts listed on the attached Annex
                                                                           -----
                    G shall be added to the list of deposit accounts set forth
                    -
                    on Exhibit 7-1 to the Loan Agreement.

               (h)  The Credit Card Numbers listed on the attached Annex H shall
                                                                   -------
                    be added to the list of credit card accounts set forth on
                    Exhibit 7-2 to the Loan Agreement.

     4.  Modification to Agented Borrowing Agreement.
         -------------------------------------------

               (a)  Schedule 1 of the Agented Borrowing Agreement shall be
                    deleted and Schedule 1 attached hereto shall be substituted
                    therefor.

     5.  Representations and Warranties.  In addition to all other
         ------------------------------
         representations, warranties, and covenants made by the Borrowers in the
         Loan Agreement, the Borrowers hereby represent and warrant to the
         Lender as follows:

               (a)  Acquisition.
                    -----------

                    (i)  The Galaxy Purchase Agreement has been duly authorized,
                         executed and delivered by each of the parties thereto
                         and constitutes a complete legal, valid and binding
                         obligation of each of the parties thereto, in
                         accordance with its terms.

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                   (ii)  All necessary governmental and third party consents,
                         approvals, releases and filings required to be obtained
                         to effect the transactions contemplated by the Galaxy
                         Purchase Agreement have been obtained and are in full
                         force and effect.

                   (iii) The closing pursuant to the Galaxy Purchase Agreement,
                         including the funding of at least $1,700,000 of the
                         cash purchase price by Ingram Entertainment, Inc., has
                         occurred, or will occur simultaneously with the
                         execution of this Modification Agreement and Video
                         City, Inc. has acquired all of the right, title, and
                         interest in and to all of the capital stock of Video
                         Galaxy in accordance with the terms of the Galaxy
                         Purchase Agreement.

                   (iv)  All representations and warranties of the parties to
                         the Galaxy Purchase Agreement are, to the best of the
                         Borrowers' knowledge, including the schedules and
                         exhibits thereto, were, at the time of the closing,
                         true and correct in all material respects.

                   (v)   The Borrowers have delivered to the Lender a true,
                         correct and complete copy of the Galaxy Purchase
                         Agreement, including all exhibits and schedules
                         thereto.

              (b)   Unrelated Entities.   The Borrowers hereby represent and
                    --------------------
                    warrant that the following entities are not and have never
                    been a Related Entity of any of the Borrowers: Macat
                    Enterprises, Inc. And Franklin Design, and the Collateral is
                    not subject to any liens by the Town of Rocky Hill or the
                    Town of Plainsfield, Connecticut.

              (c)   Representations and Warranties: No Event of Default.  The
                    ---------------------------------------------------
                    representations and warranties herein, in the Loan Agreement
                    and in each other Loan Document and certificate or other
                    writing delivered to the Lender pursuant to the Loan
                    Agreement on or prior to the Effective Date of this
                    Modification Agreement shall be correct and accurate as to
                    each Borrower on and as of the Effective Date of this
                    Modification Agreement as though made on and as of such
                    date; and no Default or Event of Default shall have occurred
                    and be continuing as of the Effective Date of this Agreement
                    or would result from this Agreement becoming effective in
                    accordance with its terms.

              (d)   Organization, Good Standing, Etc. Each Borrower (i) is a
                    ---------------------------------
                    corporation, duly organized, validly existing and in good
                    standing under the laws of its state of organization, (ii)
                    has all requisite power and authority to execute, deliver
                    and perform this Agreement, and to perform the Loan
                    Agreement, as amended hereby, and (iii) is duly qualified to
                    do business and is in good standing in each jurisdiction in
                    which the character of the properties owned or leased by it
                    or in which the transaction of its business makes such
                    qualification necessary.

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               (e)  Authorization, Etc.  The execution, delivery and performance
                    -------------------
                    by the Borrowers of this Agreement, and the performance by
                    the Borrowers of the Loan Agreement, as amended hereby, (i)
                    have been duly authorized by all necessary action, (ii) do
                    not and will not contravene the Borrowers' charter or by-
                    laws, any applicable law or any contractual restriction
                    binding on or otherwise affecting it or any of its
                    properties, (iii) do not and will not result in or require
                    the creation of any lien or other encumbrance (other than
                    pursuant to any Loan Documents) upon or with respect to any
                    of its properties, and (iv) do not and will not result in
                    any suspension, revocation, impairment, forfeiture or
                    nonrenewal of any permit, license, authorization or approval
                    applicable to its operations or any of its properties.

               (f)  Governmental Approvals.  No authorization or approval of
                    ----------------------
                    other action by, and no notice to or filing with, any
                    governmental authority or agency or other regulatory body is
                    required in connection with the due execution, delivery and
                    performance by the Borrowers of this Agreement, or for the
                    performance of the Loan Agreement, as amended hereby.

               (g)  Enforceability of Loan Documents.  This Agreement, the Loan
                    --------------------------------
                    Agreement, as amended hereby, and each other Loan Document
                    to which each Borrower is a party is a legal, valid and
                    binding obligation of such Borrower, enforceable against
                    such Borrower in accordance with its terms, except as such
                    enforceability may be limited by or subject to any
                    bankruptcy, insolvency, reorganization, moratorium or other
                    similar laws affecting creditors' rights generally.

     6.   Miscellaneous.
          -------------

               (a)  Continued Effectiveness of the Loan Documents.  Except as
                    ---------------------------------------------
                    otherwise expressly provided herein, the Loan Agreement and
                    the other Loan Documents are, and shall continue to be, in
                    full force and effect and are hereby ratified and confirmed
                    in all respects, except that on and after the date hereof
                    (i) all references in the Loan Agreement to "this
                    Agreement", "hereto", "hereof", "hereunder" or words of like
                    import referring to the Loan Agreement shall mean the Loan
                    Agreement as amended by this Agreement and (ii) all
                    references in the other Loan Documents to the "Loan
                    Agreement", "thereto", "thereof", "thereunder" or words of
                    like import referring to the Loan Agreement shall mean the
                    Loan Agreement as amended by this Agreement.  Except as
                    expressly provided herein, the execution, delivery and
                    effectiveness of this Agreement shall not operate as an
                    amendment of any right, power or remedy of the Lenders under
                    the Loan Agreement or any other Loan Document, nor
                    constitute an amendment of any provision of the Loan
                    Agreement or any other Loan Documents.

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               (b)  Counterparts.  This Agreement may be executed in any number
                    ------------
                    of counterparts and by different parties hereto in separate
                    counterparts (including, without limitation, by telecopy),
                    each of which shall be deemed to be an original, but all of
                    which taken together shall constitute one and the same
                    agreement.

               (c)  Headings.  Section headings herein are included for
                    --------
                    convenience of reference only and shall not constitute a
                    part of this Agreement for any other purpose.

               (d)  Governing Law.  This Agreement shall be governed by, and
                    -------------
                    construed in accordance with, the law of the Commonwealth of
                    Massachusetts.

               (e)  Costs and Expenses.  The Borrowers agree to pay on demand
                    ------------------
                    all fees, costs and expenses of the Lender (including,
                    without limitation, the reasonable fees, costs and other
                    client charges of legal counsel to the Lender) in connection
                    with the preparation, execution and delivery of this
                    Agreement and the other related agreements, instruments and
                    documents.

               (f)  Modification Agreement as Loan Document.  The Borrowers
                    ---------------------------------------
                    hereby acknowledge and agree that this Agreement constitutes
                    a "Loan Document" under the Loan Agreement.  Accordingly, it
                    shall be an Event of  Default under the Loan Agreement if
                    (i) any representation or warranty made by the Borrowers
                    under or in connection with this Agreement shall have been
                    untrue, false or misleading in any material respect when
                    made, or (ii) the Borrowers shall fail to perform or observe
                    any term, covenant or agreement contained in this Agreement.

               (g)  Waiver of Jury Trial.  EACH BORROWER AND THE LENDER EACH
                    --------------------
                    HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY
                    ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
                    CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
                    THIS AGREEMENT OR THE ACTIONS OF THE LENDER IN THE
                    NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
                    HEREOF.


                            INTENTIONALLY LEFT BLANK

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     Executed under seal as of the date written above.


Video City, Inc. ("Borrower" and "Agent       Old Republic Entertainment, Inc.
Borrower")                                    ("Borrower")

/s/  Timothy J. Denari                        /s/  Timothy J. Denari
----------------------                        ----------------------
By:  Timothy J. Denari                        By:  Timothy J. Denari
Title:  Chief Financial Officer               Title:  Chief Financial Officer

Sulpizio One, Inc. ("Borrower")               Video Tyme, Inc. ("Borrower")

/s/  Timothy J. Denari                        /s/  Timothy J. Denari
----------------------                        ----------------------
By:  Timothy J. Denari                        By:  Timothy J. Denari
Title:  Chief Financial Officer               Title:  Chief Financial Officer

Videoland, Inc. ("Borrower")                  Video Galaxy, Inc. ("Borrower")

/s/  Timothy J. Denari                        /s/  Timothy J. Denari
----------------------                        ----------------------
By:  Timothy J. Denari                        By:  Timothy J. Denari
Title:  Chief Financial Officer               Title:  Chief Financial Officer

BANKBOSTON RETAIL FINANCE INC.
("Lender")

/s/  Robert DeAngelis
---------------------
By:  Robert DeAngelis
Title:  Senior Vice President


Signature Page to Second Modification Agreement

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