Document:

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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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                                                                  EXHIBIT 10.17

                         AMENDED EMPLOYMENT AGREEMENT

   This Agreement is made and entered into effective June 12, 2000, and
amended on March 8, 2001, by and between Valley Media, Inc. (the "Company")
and Lewis Garrett ("Employee").

   1. Employment.

   1.1 The Company agrees to employ Employee on the terms and conditions of
this Agreement commencing on the above date and continuing until terminated as
provided in Sections 2 or 7 below.

   1.2 The Company and Employee acknowledge that Employee's job title, duties
and compensation may be changed by the Company from time to time as determined
by the Company in its sole discretion. The Company and Employee acknowledge
that neither this Agreement, nor the Company's Employee Handbook ("Handbook"),
nor any of the Company's other policies, procedures or practices, nor any
statement or representation by any other employee of the Company shall be
construed as a contract of employment for a specified position or specified
term extending past June 12, 2002.

   2. Term of Employment.

   The term of the Employee's employment shall commence on June 12, 2000, and
continue until June 12, 2002, unless terminated earlier as provided in Section
7 below.

   3. Duties of Employee.

   3.1 Employee agrees to accept employment on the terms set forth in this
Agreement. Employee will be the Senior Vice President, Purchasing and
Marketing, and will perform all services customarily required for such a
position.

Amended: Effective February 4th, 2001, Employee will be the Executive Vice
President, and will perform all services customarily required for such a
position.

   3.2 Employee will consult with and secure the approval of the Company's
President prior to the hiring or termination of employment of any personnel.
Employee agrees to keep the Company informed of the activities of Employee's
department and the status of all research, business efforts and other
activities being developed, conducted or monitored by that department.
Employee acknowledges and agrees that performance of Employee's duties will
require travel at such times and for such periods as may be necessary or
appropriate.

   3.3 Employee agrees to devote Employee's full time, attention, skill, and
efforts to the performance of duties for the Company, its parent,
subsidiaries, and affiliates.

   Employee shall perform such additional duties as the Company may assign
during the term of this Agreement, including services for any subsidiary or
affiliated entities.

   3.4 Employment during the term of this Agreement shall be on a full-time
basis. Employee will not enter into any employment or independent contractor
relationship with any other person or entity without the advance written
consent of the Company's President.

   4. Compensation.

   4.1 Salary. Company shall pay to Employee, in full consideration of all
services to be rendered by Employee, compensation at the rate of Seven
Thousand, One Hundred Fifteen Dollars and Thirty-Eight Cents ($7,115.38),
commencing as of the date of this Agreement, payable biweekly, in accordance
with the Company's normal pay practices, and subject to such withholding as
may be required by law, prorated for any partial employment period.

Amended: Effective February 4th, 2001 the Company shall pay to Employee, in
full consideration of all services to be rendered by Employee, compensation at
the rate of Eight Thousand, Six Hundred Fifty-Three Dollars and Eighty-Five
Cents ($8,653.85).

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   4.2 Bonus. For fiscal year 2001 (April 2000 through March 2001) Employee
will be eligible, on a prorated basis calculated on actual service during
fiscal year 2001, for a bonus. The specifics of the bonus plan will be created
after this Agreement is executed; however, the bonus plan will include
components based on the Employee's performance and the Company performance
with a target of Thirty Percent (30%) of Employee's base salary.

Amended: For fiscal year 2001 (April 2000 through March 2001) Employee will be
paid a guaranteed bonus of Thirty Thousand Dollars, ($30,000.00) on April 1st,
2001.

   4.3 Stock Options. Upon execution of this Agreement, and under the
Company's Amended and Restated 1997 Stock Option Plan (the "Plan"), Employee
shall be granted an option to purchase 15,000 shares of the Company's Common
Stock subject to the approval of the Compensation Committee of the Company's
Board of Directors.

Amended: Effective 2/8/01, Employee was granted by the Compensation Committee
of the Company's Board of Directors an Incentive Stock Option to buy 30,000
shares of Valley Media, Inc. stock at $0.875 per share to be administered
under the Amended and Restated 1997 Stock Option Plan.

   4.4 Housing and Car Allowance. Upon execution of this Agreement, the
Company agrees to provide Employee with a housing allowance of One Thousand
One Hundred Dollars ($1,100.00) per month, net of tax withholding, for the
period up to and including June 30, 2001, and a car allowance of Five Hundred
Dollars ($500.00) per month, net of tax withholding.

   4.5 Personal Time. Employee shall earn 15 days per year of Personal Time
Off (PTO) as governed by the Company's Personal Time Off Plan.

   4.6 Other Employee Benefits. Beginning on the first day of the month
following Employee's start date, and continuing during the term of this
Agreement, the Employee shall be entitled to receive all employee benefits
generally available to other employees of the same level and type as Employee.

   5. Unfair Competitive Practices.

   5.1 During the term of this Agreement, Employee shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual
or representative capacity, engage in or participate in any business that is
in competition in any manner whatsoever with the business of the Company, its
parent, subsidiaries, or affiliates.

   5.2 Employee will not at any time during or after Employee's employment,
solicit or take away, directly or indirectly, any person, entity or business
that is a customer or prospective customer of the Company or any of its
affiliates or subsidiaries.

   5.3 During the term of this Agreement, and after termination of this
Agreement, Employee agrees that Employee will not, directly or indirectly,
solicit, induce or influence any person employed or engaged by the Company to
terminate such employment or engagement.

   5.4 During the term of this Agreement, Employee will not undertake planning
for, or the organization of, any business activity competitive with the
Company's business or combine or conspire with other employees or
representatives of the Company's business with the purpose of organizing any
such competitive activity.

   5.5 During the term of this Agreement, and after termination of this
Agreement, Employee will not make any disparaging or defamatory comments to
any third party regarding the Company, its parent, subsidiaries or affiliates
concerning its or their officers, directors, employees or agents, or
concerning its or their services or methods of doing business. Further,
Employee will not at any time during or after Employee's employment do
anything that could affect to the Company's detriment any relationship of the
Company with any current, future or prospective customer, supplier or Company
employee, or which could cause any current, future or prospective client or
customer to refrain from entrusting business or additional business to the
Company.

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   5.6 Employee agrees that, where applicable, the provisions of this section
shall survive the termination of Employee's employment.

   6. Trade Secrets.

   6.1 Employee acknowledges that during the term of this Agreement, Employee
will have access to, and become acquainted with, proprietary trade secret
information belonging to the Company, its parent, subsidiaries, affiliates,
clients, and customers, including, without limitation, information concerning
their organization, business and affairs, their client lists, supplier lists,
pricing information, profit margins, referral source lists, client
presentations (actual and proposed), sales and financing projections, budget
information and procedures, computer software, techniques of operation,
employee compensation and financial structure, future promotion plans and
strategies of any kind or nature, (hereinafter referred to as "Confidential
Information"). Employee acknowledges that information may be Confidential
Information even though not expressly stamped or identified as such, and that
Employee will treat all information in the general categories identified above
as Confidential Information. Employee further acknowledges that Confidential
Information is highly confidential, a valuable trade secret, and the sole
property of the Company and its parent, subsidiaries, affiliates, clients, and
customers, as the case may be, and that the protection and preservation of
Confidential Information by Employee is absolutely vital to the continued
success of the promotion and marketing business of the Company, and the
preservation of the trust of its clients. Accordingly, Employee shall not
disclose, reveal, or divulge to any person any Confidential Information or
other trade secrets, directly or indirectly, or use them in any way, except as
required in the course of Employee's employment under this Agreement.

   6.2 Upon termination of employment with the Company for any reason, or at
any other time the Company demands, Employee shall deliver promptly to the
Company all material and documentation relating to the Company, including
without limitation, all memoranda, notes, records, reports, manuals, drawings,
blueprints, employee lists, customer lists, referral source lists, vendor
service lists, software programs, and any other documents, whether or not of a
confidential nature, belonging to the Company, including all copies of such
materials which Employee may then possess or have under Employee's control.
Employee further agrees that upon termination of employment, Employee shall
not retain any document, data or other materials containing or pertaining to
the Confidential Information.

   6.3 For a period of eighteen (18) months following the termination of
Employee's employment, Employee will not accept any employment or other
relationship, directly or indirectly, with any person or entity that provides
any type of audio and/or video wholesale distribution services to any Company
client or prospective client wherein the loyal and complete fulfillment of the
duties of the competitive employment or relationship would require or be
expected to require Employee to reveal, to make judgments on or otherwise to
use, any Confidential Information. Employee acknowledges the importance of
preserving the Company's Confidential Information, especially in the audio
and/or video wholesale distribution industry, and agrees that Employee will
not accept any employment or other relationship with any firm that provides
audio and/or video wholesale distribution services without notifying the
Company in writing in advance and without advising the prospective employer of
Employee's obligations concerning Confidential Information. Employee agrees
that the Company shall be entitled without liability to notify any prospective
or actual employer of the terms of this agreement.

   6.4 Employee agrees and acknowledges that a breach of the provisions of
paragraphs 5 or 6 will result in damage or loss to the Company which cannot be
reasonably or adequately compensated in damages and will cause the Company
irreparable injury. Employee expressly agrees that the Company shall be
entitled to injunctive and other equitable relief to prevent a breach of
paragraphs 5 or 6 of this Agreement, without the need for the posting of any
bond or other security. Resort to such equitable relief shall not be construed
to be a waiver of any other rights or remedies the Company may have for
damages or otherwise.

   6.5 Employee agrees that the provisions of this section shall survive
termination of Employee's employment.

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   7. Termination. This Agreement may be terminated prior to the expiration of
the Term as follows:

   7.1 Upon Disability or Death. If during the Term, the Employee shall become
physically or mentally disabled, whether totally or partially, either
permanently or so that the Employee, in the good faith judgment of the
Company, is unable substantially and competently to perform his duties
hereunder for a period of Ninety (90) consecutive days or for Ninety (90) days
during any six (6) month period during the Term (a "Disability"), the Company
may terminate the Employee's employment hereunder. In order to assist the
Company in making that determination, the Employee shall, as reasonably
requested by the Company,

     (i) make himself available for medical examinations by one or more
  physicians chosen by the Company, and

     (ii) grant to the Company and any such physicians access to all relevant
  medical information concerning him, arrange to furnish copies of his
  medical records to the Company and use his best efforts to cause his own
  physicians to be available to discuss his health with the Company.

   If the Employee dies during the Term, this Agreement shall automatically
terminate as of the close of business on the date of his death. Upon
termination for Disability or death, the Company shall not be obligated to
make any salary or other payments or provide any benefits under this Agreement
(other than salary payments for services already rendered, bonus payments for
fiscal years that have ended, and reimbursements for expenses incurred,
through the date of termination).

   7.2 For Cause. This Agreement may be terminated at any time by the Company,
effective immediately upon written notice to the Employee for Cause and all of
the Employee's rights to payments (other than salary payment for services
already rendered, bonus payments for fiscal years that have ended, and
reimbursements for expenses incurred, through the date of such termination)
and any other benefits otherwise due hereunder shall cease immediately. The
Company shall have "Cause" for termination of the Employee if any of the
following has occurred:

     (a) Employee continues to fail to perform substantially his duties
  hereunder (other than as a result of a Disability) following a written
  demand therefore by the Company not less than thirty (30) days prior to the
  effective date of termination, provided that a policy disagreement that
  does not involve a failure to substantially perform requested duties shall
  not constitute "Cause" hereunder;

     (b) Employee is engaged in dishonesty or gross negligence in the
  performance of Executive's duties hereunder;

     (c) Employee commits an act or acts constituting a felony under the laws
  of the United States or any state thereof;

     (d) Employee commits a willful act or omission (other than a lawful
  business decision, or an act or omission in furtherance thereof, that is
  within the scope of Employee's authority hereunder) which is materially
  injurious to the financial condition or business reputation of the Company
  or any of its subsidiaries; or

     (e) Employee breaches any provision or covenant contained in this
  Agreement, including, without limitation, the covenants contained in
  Sections 5 and 6, or any other part of this Agreement.

   7.3 Resignation. The Employee shall have the right to terminate this
Agreement upon Sixty (60) days written notice to the Company, and upon such
termination, all of the Employee's rights and payments (other than payments
for services already rendered and expenses incurred through the date of such
notice) and any other benefits otherwise due hereunder shall cease
immediately.

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Amended March 8, 2001:

 Change in Control.

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

     (a) The Company sells substantially all of its assets to a single
  purchaser 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

     (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.

   In the event of a "Change in Control" as defined above where the Employee's
employment is terminated without cause, the Company shall continue to pay
Employee's salary for six (6) months from the date of termination. Employee
will not continue to accrue vacation or sick leave. For a period of six (6)
months, Employee will continue to receive medical and dental benefits.

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

   8. Assignment.

   Employee may not, without the prior written consent of the Company, assign
this Agreement or any rights or obligations hereunder. The Company may assign
this Agreement and delegate any of its rights and duties, without the consent
of Employee, to any of its subsidiaries or affiliates or to any person or
entity who purchases the assets or stock of the Company.

   9. Ownership of Materials.

   9.1 All memoranda, reports, drawings, designs, programs, promotions,
software and other materials or documents, whether or not confidential,
created or developed by Employee pursuant to Employee's employment (whether
alone or in conjunction with any other person), or which Employee may disclose
to the Company during the term hereof shall be the sole and absolute property
of the Company for any and all purposes whatsoever, and Employee agrees that
Employee does not have, and will not claim to have, any right, title or
interest of any kind or nature whatsoever in or to such materials. Employee
further agrees to execute any and all documents reasonably required by Company
in order to evidence or perfect Company's ownership of such materials.

   9.2 Employee agrees that the provisions of this section shall survive
termination of Employee's employment.

   10. Miscellaneous.

   10.1 This Agreement supersedes any and all other agreements, either oral or
in writing, between the parties hereto with respect to the employment of
Employee by the Company, and contains all of the covenants and agreements
between the parties with respect to such employment in any manner whatsoever.
Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party or anyone acting on behalf of any party which are not expressly
contained herein.

   10.2 This Agreement may not be amended, supplemented, or modified or
extended except by a written agreement which expressly refers to this
Agreement and which is signed by each of the parties hereto.

                                       5
<PAGE>

   10.3 This Agreement is made in and shall be governed by the laws of
California.

   10.4 In the event that any provision of this Agreement is determined to be
illegal, invalid, or void for any reason, the remaining provisions hereof
shall continue in full force and effect.

   10.5 To the extent that any portion of this Agreement is deemed
unenforceable by virtue of its scope in terms of area, business activity
prohibited and/or length of time, but could be enforceable by reducing the
scope of area, business activity prohibited and/or length of time, Employee
and the Company agree that same shall be enforced to the fullest extent
permissible under the laws and public policies applied in the jurisdiction in
which enforcement is sought, and that the Company shall have the right, in its
sole discretion, to modify such invalid or unenforceable provision to the
extent required to be valid and enforceable.

   Employee agrees to be bound by any promise or covenant imposing the maximum
duty permitted by law which is subsumed within the terms of any provision
hereof, as though it were separately articulated in and made a part of this
Agreement, that may result from striking or modifying any of the provisions
hereof.

   10.6 Employee agrees to abide by the terms of the Handbook and any other
Company policies, procedures and directives. Employee understands and
acknowledges that the terms of the Handbook, and other Company policies,
procedures and directives may be amended, supplemented or modified from time
to time by the Company, with or without prior notice to the Employee. In the
event of any conflict between the terms of the Handbook, or any other
policies, procedures or directives, and the provisions of this Agreement, the
provisions of this Agreement shall govern.

   10.7 Employee represents and warrants to the Company that there is no
restriction or limitation, by reason of any agreement or otherwise, upon
Employee's right or ability to enter into this Agreement and fulfill the
obligations under this Agreement.

   10.8 Employee acknowledges, represents and agrees that Employee is not
relying on any inducement, representation, promise, or other statement not
expressly set forth herein in entering into this Agreement and accepting
employment with the Company, including without limitation any representation
regarding the term of employment or any right to continued employment, other
than what is described in this Agreement.

   10.9 The Company and Employee agree that claims or controversies arising
between them concerning this Agreement, Employee's employment or the
termination of such employment shall be resolved by binding arbitration in
accordance with the provisions of Exhibit A, except as otherwise provided
therein.

                                                    /s/ Lewis Garrett
                                          By: ________________________________
                                                 Lewis Garrett, EMPLOYEE

Date: March 19, 2001

                                          VALLEY MEDIA, INC.

                                                   /s/ James P. Miller
                                          By: ________________________________
                                           James P. Miller, President and COO

Date: March 12, 2001

                                       6

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