FORM OF EMPLOYMENT AGREEMENT
                       FOR OTHER SENIOR EXECUTIVE OFFICERS

         This Agreement is made as of July 26, 1999 by and between The Musicland
Group,   Inc.,  a  Delaware  corporation   (the  "Company"),   Musicland  Stores
Corporation,  a Delaware  corporation  (the "Parent") and  _______________  (the
"Executive").

         WHEREAS the Company  and the Parent have employed Executive pursuant to
the terms of  Employment and Change of Control Agreements dated August 25, 1988,
as amended December 3, 1996 (the "Prior Agreements");

         WHEREAS  the  Company  and the  Parent  desire to  continue  to  employ
Executive in  accordance with the terms and conditions stated in this Agreement,
which shall replace and supersede the Prior Agreements; and

         WHEREAS Executive desires to continue  employment pursuant to the terms
and conditions of this Agreement and acknowledges  that this Agreement  replaces
and supersedes the Prior Agreements;

         NOW,  THEREFORE,  for the  consideration  described below, the  parties
agree as follows:

I.  EMPLOYMENT

    1.1  Employment  As  Executive. During the Period of Employment described in
Section 1.3 below,  the Company and the Parent hereby agree to employ  Executive
as ____________________ or in such other executive officer position as the Board
of  Directors  of the  Company  and the Parent may from time to time  determine,
unless terminated  earlier pursuant to Article III of this Agreement.  Executive
accepts such employment pursuant to the terms of this Agreement. Executive shall
perform such duties and  responsibilities as may be determined from time to time
by the  Board  of  Directors  of the  Company  and the  Parent,  which  shall be
consistent  with his position as an executive  officer.  Executive  shall not be
required to perform his duties  hereunder  for more than 60 working  days in any
year,  or for more  than 21  consecutive  days at any one  time,  at any  office
located in any place other than the Minneapolis, Minnesota metropolitan area.

    1.2  Exclusive  Services.   Executive  agrees  to  devote  his  full   time,
attention,  and energy to  performing  his duties  and  responsibilities  to the
Company  and the  Parent  under  this  Agreement  during  the  period  that this
Agreement is in effect, except for reasonable vacations, illness, or incapacity,
provided that nothing in this Agreement  shall preclude  Executive from devoting
time during reasonable  periods required for (i) serving as a director or member
of a committee of any organization or company  involving no conflict of interest
with the Company or the Parent;  (ii) delivering  lectures,


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fulfilling speaking  engagements;  (iii)  engaging  in charitable  and community
activities;  and (iv) managing  personal  or  family  finances and  investments;
provided  that such activities do not materially interfere with the  performance
of his duties hereunder.

    1.3  Period of Employment.  The  Period of Employment shall be determined as
follows:

    (a)  Except  as  provided in  subsection (b)  in the  event  of a  Change of
         Control as defined in  Section 4.1, the Period of  Employment hereunder
         shall be from July 26, 1999 through July 26, 2001, subject to extension
         or  termination as  hereinafter provided.  The then-existing  Period of
         Employment  shall be automatically  extended by one additional year (to
         the next  subsequent  July 26,  but  in no  event shall  the  Period of
         Employment extend beyond the first day of the month next succeeding the
         month in  which  Executive  attains  age 65) unless  the  Company shall
         deliver to Executive or  Executive shall deliver to the Company written
         notice at least 18 months prior to the expiration of the  then-existing
         Period  of  Employment  that  the  Period of  Employment  will  not  be
         extended.  In  such  case, the Period of  Employment  will  end  at the
         expiration  of   the  then-existing  Period  of  Employment  hereunder,
         including any previous  extension, and  shall not  be further  extended
         except  by agreement  of the  Company and  Executive.  (For example, in
         order to avoid the automatic extension of the expiration  of the Period
         of Employment from July 26, 2001 to July 26, 2002, notice must be given
         by January 26, 2000.)

    (b)  If upon an event constituting a Change of  Control the remaining period
         in   the  then-existing  Period  of  Employment  (as  determined  under
         subsection (a) above) is less than 24 months, the Period  of Employment
         shall be extended so that the expiration is on the last business day of
         the 24th calendar month following such Change in Control. No adjustment
         will be made if the remaining period is more than 24 months at the time
         of the  Change in Control.  In  either  case,  the  automatic  one year
         extensions shall continue to apply as provided in subsection (a) above.
         (For  example,  if a  Change of  Control  occurs  January 1, 2000,  the
         remaining period in the Period of Employment (ending  July 26, 2001) is
         less than 24 months and would be extended to expire January 1, 2002. In
         order to avoid automatic extension of the adjusted Period of Employment
         to January 1, 2003, notice must be given by July 1, 2000.)

    (c)  The Period of Employment  shall  continue  until the expiration  of all
         automatic extensions effected as aforesaid,  unless and until it sooner
         ceases or is terminated as provided in Article III.

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<PAGE>


II. COMPENSATION, BENEFITS, AND PERQUISITES

    2.1  Salary.  During  the  Period of  Employment,   the  Company  shall  pay
Executive a base salary at the annual rate of  $__________  commencing  February
21, 1999. The base salary shall be payable in equal bi-weekly installments.  The
Compensation  Committee  of the Board of Directors of the Company may review the
salary  periodically  and may in its  sole  discretion  increase  it to  reflect
performance  and  other  factors  in  accordance  with the  Company's  customary
procedures and practices regarding the salaries of senior officers.

    2.2  Disability Pay. In the event of the disability of Executive (within the
meaning of the Company's  disability  benefit  plans in  effect  at the  time of
Executive's  disability),  the  obligation  of the  Company to make  payments of
salary under Section 2.1 shall cease as of the date Executive  begins  receiving
benefits under the Company's  short-term salary continuation plan, and Executive
shall be entitled to benefits  under the Company's  disability  benefit plans in
accordance  with the  terms of such  plans.  Notwithstanding  the  terms of this
Agreement,  the Company  retains  the right to amend,  reduce or  terminate  its
disability  benefit plans at any time so long as such amendments,  reductions or
terminations apply equally to all senior officers.

    2.3  Employee Benefits.  Executive  shall be  entitled to  the  benefits and
perquisites  which the Company  generally  provides to its other senior officers
under the applicable  Company plans and policies.  Executive's  participation in
such  benefit  plans  shall be on the  same  basis as  applies  to other  senior
officers  of the  Company  and  subject  to the terms of  applicable  law,  plan
documents,  and insurance policies.  Executive shall pay contributions,  if any,
which are  generally  required  of the  Company's  senior  officers  in order to
receive any such benefits. Specifically, Executive shall:

    (a)  participate  in the Company's  Management  Incentive Plan and Long-Term
         Incentive Plan, or, if applicable,  the shareholder approved  Alternate
         Incentive  Plan for  Designated Senior Officers (the "Alternate Plan");

    (b)  be  considered by the  Compensation Committee of the Board of Directors
         for  possible  grants  of  stock  options,  stock appreciation  rights,
         restricted stock and deferred stock awards, under  the Company's  stock
         option plans, stock incentive plans, or any similar plan adopted by the
         Company or the Parent during the Period of Employment;

    (c)  participate to the permitted extent  he wishes in the Company's Capital
         Accumulation Plan;

    (d)  participate   in  the   Company's  Employees'   Retirement   Plan   and
         Supplemental Executive Retirement Plan;


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<PAGE>

    (e)  participate in  the Company's  death benefit plans  (consisting  of its
         Group Life  Insurance Plan,  and  accidental  death  and  dismemberment
         insurance);

    (f)  participate in the  Company's disability  benefit plans  (consisting of
         its short-term salary continuation, short-term disability and long-term
         disability plans);

    (g)  participate in its senior officer  medical, dental, health  and welfare
         plans; and

    (h)  participate in  equivalent  successor  plans of the  Company for  which
         officers are eligible.

Notwithstanding  the  foregoing,  nothing in this  agreement  shall preclude any
amendment  or  termination  by the  Company  of any  employee  benefit  plan  or
practice,  provided such  amendment or  termination  is applicable to all of the
Company's senior officers generally;  provided,  however, that in the event of a
Change of Control as defined in Section 4.1 and through the Period of Employment
described in Section  1.3(b),  Executive  shall be entitled to  perquisites  and
benefits  at  least as  favorable  as those  to  which  Executive  was  entitled
immediately  prior to the Change of Control,  and to the extent such perquisites
or benefits  are not  payable or provided  under any such plan of the Company by
reason of the amendment or termination  thereof, the Company itself shall pay or
provide therefor.

    2.4  Incentive Compensation  Following Change of Control.  In the event of a
Change of Control as defined in Section 4.1 and through the Period of Employment
described in Section 1.3(b),  Executive shall receive an annual award  under the
Company's Management Incentive Plan, or, if applicable, the Alternate Plan, or a
plan with substantially  equivalent  incentives and benefits that may be adopted
by the Company, for each calendar year, or portion thereof, during the Period of
Employment,  which shall be payable as soon as practicable after the end of such
calendar year and shall be equal to a percentage of  Executive's base salary for
such calendar year. Such percentage shall be no less than the percentage at plan
target  in effect preceding the Change of Control. Furthermore, Executive  shall
continue  to  be  a  full participant in the performance awards of the Company's
Long-Term Incentive Plan,  or if applicable,  the Alternate Plan,  and any other
long-term incentive plans of the Company,  and any and all  executive  incentive
plans  in  which  executives  of the  Company  participate  that  are in  effect
immediately prior to a Change of Control, or any amended or successor plans with
at  least  as  favorable terms that may be substituted and that may hereafter be
adopted,  including,  without  limitation,  any plan relating to  stock options,
stock  appreciation  rights,  restricted  stock  and deferred  stock  awards, or
equivalent  successor plans that may be adopted by the Company with at least the
same reward  opportunities  that have  heretofore  been  provided  and with such
improvements  in such plans or other plans as may  from  time to time be made in
accordance with the present practices of the Company.


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<PAGE>

    2.5  Employment  Taxes  and  Withholding.   Executive  recognizes  that  the
compensation,  benefits,  and other  amounts  provided by the Company under this
Agreement  may be subject to federal,  state,  or local income  taxes.  All such
taxes shall be the responsibility of the Executive.  To the extent that federal,
state, or local law requires withholding of taxes on compensation,  benefits, or
other amounts  provided  under this  Agreement,  the Company shall  withhold the
necessary amounts from the amounts payable to Executive under this Agreement.

    2.6  Company Not Responsible for Insured  Benefits.  In this Article II, the
Company  is agreeing  to provide certain  benefits  in the form  of premiums for
insurance coverage.  The Company and the Parent are not themselves  promising to
pay the benefit an  insurance  company is  obligated to pay under the policy the
insurance  company has issued.  If an  insurance  company does not or cannot pay
benefits it owes to Executive or his  beneficiaries  under the insurance policy,
neither Executive nor his personal  representative or beneficiary shall have any
claim for benefits against the Company or the Parent.

    2.7  Expenses. Executive shall be entitled to receive reimbursement from the
Company (in accordance  with the policies and procedures  then in effect for the
Company's  employees) for all reasonable  travel and other expenses incurred  by
him in connection with his services under this Employment Agreement.

III.TERMINATION OF EXECUTIVE'S EMPLOYMENT

    3.1  Termination of Employment.  Notwithstanding any other provision of this
Agreement, Executive's employment and the Period of Employment may be terminated
pursuant to the following:

    (a)  Executive's employment may be terminated by the Company or the  Parent,
         on not less than  60 days' notice in writing, for Cause  as defined  in
         Section  3.2.  After  payment  of  all  amounts  accrued  to  Executive
         hereunder through the date of such notice, the Company  and the  Parent
         shall  have no further obligation to the Executive hereunder except for
         the payment  of benefits under the Company's Employees' Retirement Plan
         and  Supplemental Executive  Retirement  Plan and Capital  Accumulation
         Plan vested on such date.

    (b)  Executive's employment may be terminated by the Company at any time for
         any reason other than Cause as defined in Section 3.2, or Executive may
         terminate  his  employment  with the  Company  and the  Parent for Good
         Reason as  defined in  Section  3.3.  In the  event of  termination  of
         employment  by  the  Company  without  Cause,  or  termination  by  the
         Executive  for  Good Reason,  the Company  shall pay to  Executive,  as
         liquidated damages or  severance  pay or both, the amounts described in
         Section 3.4.


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<PAGE>


    (c)  Executive may terminate  his employment with the Company and the Parent
         for other than Good  Reason.  In such event, the Executive's employment
         shall  terminate  as of the  90th day  following the giving  of written
         notice by the Executive to the Company  of his  decision  to  terminate
         other  than for Good Reason,  or such  earlier  date as the Company may
         specify in written  notice to  Executive.  After such  termination, the
         Company  and  the  Parent  shall  have  no  further  obligation  to the
         Executive  hereunder  except  for  the  payment of  benefits  under the
         Company's  Employees'   Retirement  Plan   and  Supplemental  Executive
         Retirement Plan and Capital Accumulation Plan vested on such date.

    3.2  Termination for Cause.

    (a)  For  purposes  of  this  Article  III,  "Cause"  shall  mean  only  the
following:

         (1)  an  intentional  act or  acts of dishonesty by the Executive or an
              act or  acts by  him  resulting  or intended to result directly or
              indirectly in gain to or personal enrichment  of the Executive  at
              the Company's expense;

         (2)  a conviction  of the Executive or an admission by the Executive of
              committing a felony  or any  crime involving moral  turpitude,  or
              any other criminal activity  or  unethical  conduct which,  in the
              good  faith  opinion  of  the  Company,  would  impair Executive's
              ability to perform his duties or impair the business reputation of
              the Company;

         (3)  a deliberate  and intentional  refusal by the Executive  to comply
              with Sections 1.1 and 1.2 of this Agreement  (other than any  such
              failure to comply resulting from the Executive's incapacity due to
              illness  or  accident)  and which  failure  to comply  results  in
              demonstrably material injury to  the  Company, provided,  however,
              that the Executive shall have either failed to remedy such failure
              to comply within 30 days from his  receipt of written  notice from
              the Secretary of the Company demanding that he remedy such failure
              to comply,  or shall  have failed to take all  reasonable steps to
              that end during such 30-day period and thereafter; or

         (4)  a determination by the Chief Executive  Officer or an  affirmative
              vote of  at least a  majority of the  entire  membership  (whether
              present or  not) of the  Company's Board of Directors  (other than
              the Executive if also a director) at a meeting called and held for
              that purpose and at which the Executive is given an opportunity to
              be heard, that, in the judgment of the Chief Executive  Officer or
              the Board,  the Executive  has,  over an extended  period of time,
              consistently failed to satisfactorily  perform the material duties
              of his


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<PAGE>



              office assigned to him, and such failure has had an adverse impact
              upon the Company; provided, however, that such  determination  may
              be made only after a period of at least 90 days following the last
              of two formal reviews (which are at least six months apart) of the
              Executive's  performance  by the Chief Executive Officer, at which
              the Executive was informed of the most significant deficiencies in
              performance,   and  during  such 90-day period the Executive shall
              have failed to correct,  or failed to take all reasonable steps to
              correct,  such  significant  deficiencies.  For  purposes  of  the
              minimum number  of  directors required  in the preceding sentence,
              any  fraction shall be  rounded up to the next higher whole number
              of directors.

    (b)  Anything   herein  to  the contrary notwithstanding, the employment  of
         Executive  shall  not  be  considered  to have been  terminated  by the
         Company for Cause if  termination of his employment  took place  solely
         because of one or more of the following:

         (1)  as  a  result  of  bad  judgment  or  negligence  on  the  part of
              Executive, or

         (2)  as the  result  of an act or  omission  without intent of  gaining
              therefrom  directly or indirectly a profit to  which Executive was
              not legally  entitled;  provided,  however,  that this  subsection
              (b)(2) shall not  apply  to a termination  pursuant to  subsection
              (a)(3) above, or

         (3)  because of an act or omission believed by Executive  in good faith
              to have been in or not opposed to the interests of the Company, or

         (4)  as the result of an act or  omission  which  occurred more than 12
              calendar  months prior to Executive's having been given  notice of
              the termination of his employment for such act or omission  unless
              the commission of such act or such omission  could not at the time
              of such  commission or omission have been known to a member of the
              Board of Directors of the Company (other than Executive), in which
              case more  than 12  calendar  months  prior  to the  date that the
              commission  of such act or such  omission was or could  reasonably
              have been so known; provided, however, that this subsection (b)(4)
              shall  not apply to a  termination  pursuant to  subsection (a)(3)
              above, or

         (5)  as a result of a  continuing  course of action which commenced and
              was or could reasonably have been known  to a member of  the Board
              of  Directors of the Company (other than  Executive)  more than 12
              calendar months prior to notice having been given to the Executive
              of the termination of his employment; provided, however,


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<PAGE>


              that  this  subsection  (b)(5)  shall  not apply to a  termination
              pursuant to subsection (a)(3) above.

    3.3  Good Reason.

    (a)  For the purposes of this Article III, "Good Reason" shall mean:

         (1)  the  authority,  powers,  functions,  responsibilities  or  duties
              assigned to Executive pursuant  to  this Agreement are  materially
              and  adversely  diminished without his written consent (except any
              diminution  that  occurs  solely as a result  of the fact that the
              Company or Parent ceases to be a public company);

         (2)  a  breach of  Article II  of this  Agreement with  respect to  the
              salary, incentive compensation and benefits of Executive; or

         (3)  after a Change of  Control  (as defined in Section 4.1), Executive
              is  required,  without  his written consent,  to locate his office
              more  than  35 miles  distant  by  public  highway from his office
              immediately  prior  to the  Change  in  Control  (but  only if the
              distance between  Executive's  residence  and such new  office  is
              greater  than  the  distance  between  his  residence  and  office
              immediately  prior  to  the  Change  of  Control)  or to travel on
              business  more than 60  working days  in any year  or more than 21
              consecutive days at any one time.

    (b)  Executive  shall give written notice to the Company of  termination for
         Good  Reason  within six months of the event giving rise to such notice
         and  allow the  Company 30  days after  the Company's  receipt of  such
         notice to cure such breach.  If the Company  disputes any contention by
         Executive  that there  has been  Good  Reason,  such  dispute  shall be
         resolved  by binding   arbitration  held  in Minneapolis, Minnesota  in
         accordance with the Employment Dispute Resolution Rules of The American
         Arbitration Association  then  in  effect.  The arbitrator  shall be an
         attorney  with  experience  in  employment  disputes  who  is  mutually
         selected by the parties. Judgment may  be  entered  on the  arbitration
         award in any court having jurisdiction.

    (c)  In the event of the liquidation,  dissolution, consolidation  or merger
         of  the  Company  or  transfer  (in  one  transaction  or a  series  of
         transactions) of 70% or more of its assets  (regardless of whether such
         event is not a Change of  Control within the  meaning of Section 4.1(c)
         because it is approved by the  Continuing Directors), and the successor
         entity does not assume all duties and  obligations of the Company under
         this   Agreement  or   otherwise  make   arrangements  with   Executive
         satisfactory  to  Executive  for  employment  of  the  Executive by the
         successor, then Executive may


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<PAGE>

         within 90 days following such event give written  notice to the Company
         of his  termination  of employment  (effective as of 90  days following
         such notice or such earlier date as specified by the Company in written
         notice  to  Executive), which  shall be  deemed  termination  for  Good
         Reason.

    3.4  Severance  Benefits.  In   the  event  of  termination  of  Executive's
employment by the Company  without  Cause,  or  termination by the Executive for
Good Reason, the Company shall provide Executive with the following compensation
and benefits;  provided, that, the Company shall not be obligated to provide any
severance  benefits  unless and until the  Executive  (if he is then so serving)
resigns as a director of the Parent or the Company or any subsidiaries:

    (a)  Salary.  The Company shall  pay Executive  during the remainder  of the
         Period  of  Employment   as  in  effect   immediately  prior   to  such
         termination,  as if such termination had not occurred, an amount  equal
         to the base  salary  provided  in  Section 2.1, including any increases
         therein provided, at  the times therein  stated, for the month in which
         termination shall have occurred  and for each month  thereafter  during
         such Period,  less in respect of each such month the  amounts,  if any,
         paid to him pursuant to the  Company's  Employees' Retirement  Plan and
         Supplemental  Executive  Retirement  Plan and the amounts the Executive
         would have paid in cash in respect of employee benefits provided for in
         Section 2.3, if Executive were still employed.

         Notwithstanding the foregoing,  in the event of a termination following
         a Change of  Control,  the salary  amount  described above shall be (i)
         determined  based on a remaining  Period of Employment of not less than
         24 months (even if the actual Period of Employment is shorter) and (ii)
         paid in a single lump sum within 20 days after such termination.

    (b)  Annual  Incentive.  The Company  shall  pay the  Executive  during  the
         remainder of the Period of Employment as in effect immediately prior to
         such  termination,  as if such  termination  had not occurred,  in full
         substitution  for his rights under the Company's  Management  Incentive
         Plan, or, if applicable, the Alternate Plan, or any successor plan then
         in  effect,  a  substitute  incentive  award, for  the  year  in  which
         termination occurred and for each  subsequent calendar year, or portion
         thereof  (in  which  case  such  substitute  award  shall  be  only  in
         proportion to such portion), during such Period which shall be equal to
         the  then  current percentage at plan target of Executive's base salary
         for the applicable calendar year as described in Section 2.1 (including
         any increases therein provided).

         The substitute  incentive award shall be  paid in a single lump  sum on
         the first day of February  of each year,  except that a  pro rata award
         for that

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<PAGE>

         portion  of the calendar  year in which the  Period of  Employment ends
         shall be paid  in a single lump  sum on the last  day of the  Period of
         Employment.

         Notwithstanding  the foregoing, in the event of a termination following
         a Change of Control, the substitute  incentive awards  described  above
         shall be (i) determined  based on a  remaining Period of  Employment of
         not less than 24 months  (even if the  actual  Period of  Employment is
         shorter)  and  (ii)  paid  at  one  time  within  20  days  after  such
         termination in an amount equal  to the aggregate lump sum value of such
         substitute awards.

    (c)  Long-Term  Incentive.  The   Company  shall   pay  Executive  in   full
         substitution for any rights  under all outstanding  performance  awards
         under the Long-Term  Incentive Plan,  or, if applicable,  the Alternate
         Plan, or any  successor plan  then in effect, held by  Executive at the
         time of such  termination,  for each year  during the  remainder of the
         Period of Employment a substitute long-term award as follows:

         (1)  If the termination occurs after the completion of any  performance
              cycle  under  the  applicable  plan  but before the award for such
              cycle has been  paid,  the substitute award  for the year in which
              termination  occurs will equal the percentage of Executive's  base
              salary actually earned under the terms of  the applicable plan for
              such  completed  cycles  and will be  paid at the same  time other
              participants are  paid for such  completed  cycles.  Otherwise,  a
              substitute  long-term  award  will  not  be  paid  in the  year of
              termination  if Executive  has  already  received in  such  year a
              long-term incentive payment pursuant to the applicable plan.

         (2)  The  substitute long-term award for all other years will equal the
              then  current  percentage   (of  salary)  at  plan  target   times
              Executive's  then  current  annual  base  salary  as  provided  in
              subsection  (a) above and will be paid by February 1st of the year
              for which the payment is being made.

         (3)  If the final  year of the Period of  Employment is a partial year,
              the substitute  long-term award for such  year  (determined  as in
              subparagraph (2) above) will be prorated  based  on the  number of
              days in such partial year.

              For example: If the Executive is terminated in January 2001 before
              payment is made for  the completed 1999 - 2000  performance cycle,
              the  Executive's  substitute  long-term  award  for  the  year  of
              termination  (2001) will be  equal  to  the  award  earned  by the
              Executive  under such completed cycle and will be paid at the same
              time  as  other  participants  are  paid.   If  the  Executive  is
              terminated  in the year  2001 after the payment for the  1999-2000
              performance

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<PAGE>

              cycle has been made, the first  substitute long-term award will be
              paid in the year 2002.  In either case, the Executive's substitute
              long-term award for the year 2002 will be paid by February 1, 2002
              and will equal the  then  current  percentage (of  salary) at plan
              target times Executive's then current annual base.

         Notwithstanding  the foregoing, in the event of a termination following
         a  Change  of  Control,  the  substitute  long  term  incentive  awards
         described above shall be (i) determined based  on a remaining Period of
         Employment of  not less  than 24 months  (even if the actual  Period of
         Employment is shorter) and (ii)  paid at one time  within 20 days after
         such termination in an amount equal to the aggregate lump sum  value of
         such substitute awards.

    (d)  Stock Awards. Each outstanding stock option to  purchase shares  of the
         Company's or the Parent's common stock and any stock appreciation right
         that is held by  Executive at the time of such termination shall become
         vested and exercisable in full. Each stock option to purchase shares of
         the  Company's or the Parent's  common stock granted to Executive on or
         after the date hereof shall contain the following provision:

              In the event that the  Optionee's  Period of Employment
              under his  Employment  Agreement with the Company dated
              as of July 26, 1999 is  terminated  pursuant to Section
              3.1(b) thereof, this Option shall become exercisable in
              full.

         In  addition,  all  restrictions upon  any  restricted stock previously
         granted to  Executive by the Company  or the Parent  shall be deemed to
         have lapsed and Executive shall be entitled to receive all such  shares
         of  restricted stock. Similarly, Executive shall be entitled to receive
         all shares  covered by  outstanding  deferred  stock  awards previously
         granted to Executive by the  Company or the  Parent as if the  deferral
         period  and  all  conditions  pertaining  thereto had  expired or  been
         satisfied, as the case may be.

    (e)  Death, Disability and  Medical Benefits.  During the  remainder of  the
         Period  of   Employment  as  in   effect  immediately  prior  to   such
         termination,  as if  such termination  had not occurred,  the Executive
         shall continue to be entitled to  all employee benefits provided for in
         Section 2.3(f),  (g),  and (h),  as if  Executive were  still  employed
         during such  period under  this Agreement, with benefits based upon the
         compensation and  increases provided in  subsection (a), and  upon  the
         assumption  that Executive  was continuing  to pay or  continued to  be
         deemed to have  paid in cash  in respect  of such benefits  the amounts
         (and only the amounts)  by which the  payments otherwise  due Executive
         under subsection  (a) were reduced in respect to such benefits,  and if
         and to the extent the said benefits shall

                                      11
<PAGE>


         not be payable or  provided under any  plan by  reason of  Executive no
         longer  being  an employee  of the Company  as a result  of Executive's
         termination,  the  Company  itself  shall  pay  or  provider  therefor.
         Notwithstanding  the  foregoing,  if  Executive is  entitled to  death,
         disability or medical benefit coverage of the kind described in Section
         2.3(f), (g) or  (h) from  other  employment or  a  consulting  position
         during  the  Period  of  Employment, such benefits  provided under this
         Agreement shall be reduced or coordinated as provided in subsection (g)
         below.

    (f)  Retirement  Benefits.  The Company  shall pay to  Executive during  the
         remainder  of his  life  following  the  expiration  of  the  Period of
         Employment as in effect  immediately  prior to such  termination,  and,
         after his death,  to his  surviving  spouse  (subject to  such optional
         method  of  payment  election  as  may  be  made  under  the  Company's
         Employees' Retirement Plan  and Supplemental  Executive Retirement Plan
         and  as further described  below),  a  supplemental  retirement benefit
         which shall be equal to the excess of:

         (1)  an aggregate benefit at least equal to the benefit that would have
              been  paid  under the  Employees' Retirement Plan and Supplemental
              Executive  Retirement  Plan,  subject  to  any  plan amendments or
              terminations generally  applicable to all of the Company's  senior
              officers  which are adopted prior to the date of such termination,
              if the  Executive  had continued to be employed and to be entitled
              to service credit for benefits during the remainder of such Period
              of  Employment at  an annual  rate of  compensation  equal to  his
              compensation  and  increases provided  in  subsections (a) and (b)
              (unless  during  such  remainder  the  Executive  dies or  becomes
              disabled,  in which event such benefit shall be reduced to reflect
              application of the last two sentences of subsection (e), over

         (2)  the  aggregate benefit actually payable to the Executive under the
              Employees'  Retirement  Plan and Supplemental Executive Retirement
              Plan.

         In clarification of the foregoing paragraph (1), in determining whether
         any actuarial reduction would apply (and the amount of such  reduction,
         if  any)  under  the  early  retirement  provisions  of the  Employees'
         Retirement  Plan and Supplemental Executive Retirement Plan (to reflect
         the early commencements of benefits), the age which the Executive would
         have  attained  at the  expiration  of  such Period, and the accredited
         service he would have had at such time, shall be used. An election made
         by  Executive  under the  Employees'  Retirement Plan and  Supplemental
         Executive Retirement Plan as to a joint and  survivor or other optional
         method of payment  and as to the  time  for  commencement  of  payments
         shall be applicable  to  such  supplemental  retirement  benefit,  with
         application of  discount  factors no less  favorable to Executive  than
         those in

                                      12
<PAGE>


         effect under the Employees'  Retirement Plan and Supplemental Executive
         Retirement  Plan on the  date of such termination.  Notwithstanding the
         foregoing,  Executive may, by  a notice in writing  filed with the Plan
         Administrator  for the  Employees'  Retirement  Plan  and  Supplemental
         Executive Retirement Plan, designate any person as the payee of amounts
         due  hereunder  after his death (in the  manner,  and with the  effect,
         described in the Company's Employees' Retirement Plan  and Supplemental
         Executive Retirement Plan).

         Notwithstanding  the foregoing, in the event of a termination following
         a Change of  Control,  the  supplemental  retirement  benefit described
         above  shall  be (i)  calculated based  upon the  Executive's  years of
         service  at the time of the  termination  plus an additional five years
         and disregarding the requirement of five years of participation  in the
         Supplemental  Executive Retirement  Plan, and (ii) paid in a single sum
         within 20 days after  such  termination  in an amount equal to the lump
         sum value of such benefit.

    (g)  Subsequent Employment.  Executive shall be required to minimize damages
         or severance  payments under  this Agreement by  seeking and  accepting
         other executive employment or a comparable consulting position.  To the
         extent  that the  Executive shall  receive  cash  compensation  that is
         subject to federal income taxation in respect of other employment  or a
         consulting  position  with  another  company  and  that  is  payable to
         Executive  solely  in  respect  of  the  remainder  of  the  Period  of
         Employment  as  in  effect  immediately prior to such termination, or a
         portion  thereof,  the  payments  to  be  made  by  the  Company  under
         subsections  (a), (b),  and (c)  for the  remainder  of the  Period  of
         Employment as in  effect immediately prior  to such termination or such
         portion thereof, as the case may be, shall be correspondingly  reduced,
         and any supplemental retirement benefit payments pursuant to subsection
         (f) shall be  calculated after  taking such reduction into account.  In
         the  event Executive has received lump sum  payments following a Change
         in Control as provided above, Executive agrees to re-pay the Company in
         quarterly payments the reductions described in the foregoing sentence.

         Furthermore,  to the  extent  that  benefits of  the kind provided  for
         in Section 2.3 (f),  (g)  and (h) are payable in respect of  such other
         employment  or consulting position, any death or disability benefits so
         payable  under subsequent employment shall reduce benefits of such kind
         otherwise  payable  under subsection (e) above and any  medical/dental/
         welfare benefits so payable under subsequent employment shall be deemed
         the primary  coverage  for  purposes of  coordination of benefits under
         subsection (e) above and avoiding duplication of benefits.


                                      13
<PAGE>

    (h)  After  Death or  Disability.  Upon the  death of  Executive during  the
         period  that payment of  the amounts  specified in subsection (a) above
         are required to be made, the obligation of the Company to make payments
         to the  Executive  under this Section 3.4 shall cease as of the date of
         death  and the  benefits described in Section 3.6 shall become payable.
         In the event of the disability of the Executive during such Period, the
         obligation  to make  payments under subsections (a) and (b) above shall
         be suspended  as of the date specified in Section 2.2 for the cessation
         of  payments  of salary and Executive shall be entitled to the benefits
         described in Section 3.5, and such obligation shall be reinstated again
         only if during such period Executive ceases to be disabled.

    3.5  Disability. If Executive has become disabled from performing his duties
under  this  Agreement  and the  disability has  continued for  a period of  six
consecutive  months or for an  aggregate  of 180 days  during  nine  consecutive
months,  the Period of Employment  under this Agreement  shall  terminate.  Such
termination  shall not result in payments  pursuant  to Section  3.4 above,  the
disability  benefits  provided by the Company being in full  satisfaction of the
Company's obligation to Executive.

    3.6  Death. Upon the death of Executive during the Period of Employment, the
Period of  Employment  and the  obligation of the Company to make payments under
Section 2.1  shall  cease as  of the date  of death,  and benefits  shall become
payable under the death benefit plans  described in Section 2.3(f) in accordance
with their  terms,  exclusive  of any plan  amendments  that reduce or terminate
benefits  thereunder  not generally  applicable  to all of the Company's  senior
officers.

    3.7  Non-Competition and Confidentiality.  In consideration for the payments
and  benefits to be provided to Executive under this Agreement, Executive agrees
to comply with the following requirements:

    (a)  Agreement Not to Compete. Executive agrees that, on or before the first
         anniversary of the date  Executive's  employment  under this  Agreement
         terminates under Section 3.1, he will not, unless he receives the prior
         written  approval  of  the Chief  Executive  Officer  of  the  Company,
         directly or indirectly engage in any of the following actions:

         (1)  Own an  interest  in (except  as provided below), manage, operate,
              join,  control, lend money or render financial or other assistance
              to, or participate  in  or  be  connected  with,  as  an  officer,
              director, employee, partner, stockholder, consultant or otherwise,
              any entity  that is a competitor of  the  Company if the amount of
              competition  is significant, i.e., the competition is in a line of
              business or products that constitute more than five percent of the
              gross   revenues  of   both  the  Company  and  its   consolidated
              subsidiaries  and  the  competitor.   However,  nothing  in   this
              subsection (a) shall preclude Executive from (i) holding less than
              one  percent  of the outstanding  capital stock of any corporation
              required

                                      14
<PAGE>


              to  file  periodic  reports  with  the   Securities  and  Exchange
              Commission  under  Section  13 or 15(d) of the Securities Exchange
              Act of 1934, as amended, the securities of which are listed on any
              securities  exchange,  quoted  on  the   National  Association  of
              Securities  Dealers  Automated  Quotation System or traded in  the
              over-the-counter  market  or  (ii)  continuing to  engage  in  any
              activities or investments that the Executive participated in prior
              to his termination of employment if such activities or investments
              did not violate Company policy.

         (2)  Intentionally  solicit, endeavor to entice away from the Parent or
              the  Company, or any of their subsidiaries, or otherwise interfere
              with the  relationship  of the Parent or  the Company,  or  any of
              their  subsidiaries  with,  any  person  who  is  employed  by  or
              otherwise  engaged  to  perform  services  for the  Parent or  the
              Company,  or any of their subsidiaries (including, but not limited
              to,  any  independent  sales representatives or organizations), or
              any persons or entity  who is, or was within the then most  recent
              12-month  period,  a  customer  or client  of the  Parent  or  the
              Company, or any of their subsidiaries, whether for Executive's own
              account or  for the account of any other individual,  partnership,
              firm, corporation or other business organization.

         If the scope of the restrictions in this subsection are determined by a
         court of  competent  jurisdiction to be too broad to permit enforcement
         of such restrictions to their full extent, then such restrictions shall
         be construed or rewritten (blue-lined) so as to be  enforceable  to the
         maximum  extent permitted by law, and Executive hereby consents, to the
         extent he may lawfully do so, to the judicial modification of the scope
         of such restrictions in any proceeding brought to enforce them.

    (b)  Non-Disclosure of Information.  During  the  period  of  his employment
         hereunder, and at  all times thereafter, Executive  shall not,  without
         the written  consent  of the  Chief  Executive  Officer of the  Parent,
         disclose to any  person, other than  an employee  of the  Parent or the
         Company, or any of their subsidiaries or a person to whom disclosure is
         reasonably  necessary or appropriate in connection with the performance
         by  Executive of  his  duties as  an executive  of the  Parent  or  the
         Company, except  where such  disclosure  may be  required  by law,  any
         material confidential information  obtained by him  while in the employ
         of the  Parent or  the Company  with respect  to any of their products,
         technology,  know-how  or the  like, services,  customers,  methods  or
         future plans, all of which Executive acknowledges are valuable, special
         and unique assets the disclosure of which Executive acknowledges may be
         materially damaging to the Parent or the Company.

    (c)  Remedies.  Executive acknowledges  that the  Parent's or the  Company's
         remedy  at law  for any  breach or  threatened  breach by  Executive of
         subsection (a) or (b) will be inadequate.  Therefore, the Parent or the

                                      15
<PAGE>



         Company  shall be entitled  to  injunctive  and  other equitable relief
         restraining Executive from violating those requirements, in addition to
         any  other  remedies that may be available to the Parent or the Company
         under this Agreement or applicable law.

IV. CHANGE OF CONTROL

    4.1  Change of Control Defined.  For purposes of  this Agreement, "Change of
Control" means the occurrence of any of the following:

    (a)  The  acquisition by any person, entity or "group" within the meaning of
         Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
         amended ("the 1934 Act"),  other than the Company, the Parent or any of
         their  affiliates,  or any  employee benefit plan of the Company and/or
         its affiliates, of  beneficial ownership  (within  the meaning  of Rule
         13(d)-3 under  the 1934 Act) of  shares of stock of the  Company or the
         Parent having  twenty five percent (25%) or more of the total number of
         votes that may be cast for  election of the Directors of the Company or
         the  Parent in a transaction or series of transactions not approved  in
         advance  by  a  vote  of  at  least  three-quarters  of the  Continuing
         Directors (as defined below).

    (b)  A change in the composition of the Board of Directors of the Company or
         the Parent  such that  at  any time  a  majority  of the  Board are not
         Continuing Directors.  "Continuing Directors" refers to the individuals
         who  serve as Directors at the effective date of this Agreement and any
         individual whose term  of office as a Director begins thereafter if the
         nomination or  election of such Director was approved  in advance  by a
         vote of  at  least   three-quarters  of  the  then  serving  Continuing
         Directors  (other than a  nomination  of an  individual  whose  initial
         assumption  of office  is in connection  with an actual  or  threatened
         solicitation  with respect to the election or removal of the Directors,
         as such  terms are used in Rule 14a-11 of Regulation 14A under the 1934
         Act).

    (c)  The approval by the  shareholders  of the  Company  or the Parent  of a
         reorganization,  merger,  consolidation,  liquidation or dissolution of
         the Company or the Parent,  or of the  sale (in  one  transaction  or a
         series  of  transactions)  of all or substantially all of the assets of
         the  Company  or  the  Parent  other  than  a  reorganization,  merger,
         consolidation,  liquidation, dissolution or sale approved in advance by
         a vote of at least three-quarters of the Continuing Directors.

    (d)  Any other occurrence if at least a majority of the Continuing Directors
         determine in their  discretion that there has been a  Change of Control
         of the Company or the Parent.


                                      16
<PAGE>

    4.2  Vesting of  Stock  Options and  Restricted  Stock.  Upon  a  Change  of
Control,  the  right of  Executive  to  exercise  any and all stock  options  to
purchase   shares  of  the  Company's  or  the  Parent's  stock  and  any  stock
appreciation rights held by Executive shall, to the extent that such options and
rights  shall not  theretofore  have been  exercised,  become  fully  vested and
exercisable  immediately,  all restrictions upon any restricted stock previously
granted to Executive  shall be deemed to have lapsed and the deferral period and
all  conditions  pertaining to any deferred stock awards  previously  granted to
Executive  shall be deemed to have expired or have been  satisfied,  as the case
may be, and Executive shall be entitled to receive all such shares of restricted
or deferred stock. All restricted stock and all deferred stock awards granted to
Executive on or after the date hereof shall be awarded subject to the conditions
described in the immediately  preceding sentence.  All options issued or awarded
to the  Executive  on or after  the date  hereof  shall  contain  the  following
provision:

         Notwithstanding anything herein contained to the contrary, in the event
         that a Change of Control,  as defined in Section 4.1  of the Optionee's
         Employment Agreement with the Company dated as  of July 26, 1999 should
         occur,  this Option shall  immediately thereafter become exercisable in
         full.

    4.3  Trust Requirement After Change of Control. To assure the performance of
the  Company  and the  Parent of their  obligations  under this Agreement in the
event of a Change of Control,  the Company or the Parent shall, upon the request
of Executive immediately prior to a Change of Control, deposit in an irrevocable
trust with a trustee  designated by Executive,  an amount of liquid assets equal
to the  present  value of the  maximum amount of all lump amounts which could be
paid to  Executive under Section 3.4 in the event of a termination of employment
of Executive  without  Cause  following a Change of Control. Such trust shall be
established  and funded only if and to the extent that the establishment of such
trust does not contravene the provisions of any loan  agreement  under which the
Company or the Parent is  obligated;  provided,  however,  that the Company  and
Parent (as opposed to the lender  under any such loan agreement) may not seek to
preclude  the  establishment  of such trust by  initiating  the  entering  into,
renegotiating  or amending of any such loan agreement, a principal purpose which
entering into, renegotiating or amendment is such preclusion. The trust shall be
reasonably  satisfactory in form and substance to the Executive, with no greater
rights  in  Executive  than an unsecured  creditor of the Company and Parent. To
the extent there are not amounts in trust sufficient to pay Executive under this
Agreement, the Company and Parent shall be and remain liable therefore.

V.  MISCELLANEOUS

    5.1  Amendment.  This Agreement  may be  amended only  in a writing  that is
signed by all parties.


                                      17
<PAGE>

    5.2  Entire Agreement.  This Agreement contains the entire understanding  of
the parties with regard to  the employment of  the Executive by the Company  and
the Parent. There are no other agreements, conditions, or representations,  oral
or written, expressed or implied, with regard thereto. This Agreement supersedes
all prior agreements,  promises, and representations  relating to the employment
of Executive by the Company and the Parent.

    5.3  Assignment.  The  Company  may  in  its  sole  discretion  assign  this
Agreement  to any entity  which  succeeds to some or all of the  business of the
Company  through merger,  consolidation,  a sale of some or all of the assets of
the  Company,  or any  similar  transaction.  Executive  acknowledges  that  the
services to be rendered by him are unique and personal.  Accordingly,  Executive
may not assign any of his rights or obligations under this Agreement.

    5.4  Successors.  Subject  to  Section 5.3, the provisions of this Agreement
shall be binding upon the parties hereto, upon any successor to or assign of the
Company  and   the  Parent,  and  upon  Executive's  heirs   and  the   personal
representative of Executive or Executive's estate.

    5.5  Notices. Any notice required to be given under this Agreement shall  be
in writing and shall be delivered either in person or by certified or registered
mail,  return  receipt  requested.  Any  notice by  mail shall  be addressed  as
follows:

         If to the Company, to:

         The Musicland Group, Inc.
         10400 Yellow Circle Drive
         Minnetonka, Minnesota 55343

         Attention:  Secretary

         If to Executive, to:

         The Musicland Group, Inc.
         10400 Yellow Circle Drive
         Minnetonka, Minnesota 55343

         Attention:  ______________

         With an additional copy to (home address):

         -----------------------
         -----------------------
         -----------------------

                                      18
<PAGE>

or to such other  addresses  as either  party may be designate in writing to the
other party from time to time.

    5.6  Waiver of Breach.  Any waiver by either  party of  compliance with  any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any other provision of this Agreement or of any subsequent breach
by such party of a provision of this Agreement.

    5.7  Potential Excise Taxes.

    (a)  Gross-Up Payment.  Anything  to the  contrary  notwithstanding,  in the
         event it shall be determined that any payment,  distribution or benefit
         made or provided by or on behalf of the Company or Parent to or for the
         benefit  of the  Executive  (whether  pursuant  to  this  Agreement  or
         otherwise) (a "Payment"), would be subject to the excise tax imposed by
         Section 4999 of the  Internal Revenue Code  of 1986.  as amended  (the
         "Code"), or any interest or penalties  with respect  to such excise tax
         (such excise tax, together with any such interest and penalties, being,
         collectively  referred to as the  "Excise Tax"), then the Company shall
         pay the Executive in cash an additional amount (the "Gross-Up Payment")
         such that, after payment by the Executive  of all taxes  (including any
         interest or penalties  imposed with  respect to such taxes),  including
         but not limited to income taxes (and any interest and penalties imposed
         with respect  thereto) and  the Excise  Tax  imposed upon  the Gross-Up
         Payment, the Executive retains an amount  of the Gross-Up Payment equal
         to  the  Excise  Tax  imposed  on  the  Payments.  Notwithstanding  the
         foregoing, no amount  shall be  paid  under this  Section 5.7,  and the
         amounts payable to  Executive under  this Agreement shall be reduced to
         the amount at which  no such  Excise Tax is  payable, if the  result of
         such reduction is to place Executive in the same  or a better after-tax
         position than would result from making the additional payments provided
         under this Section.


    (b)  Determination of Gross-Up Payment.  Subject to sub-paragraph (c) below,
         all  determinations  required  to  be  made  under  this  Section  5.7,
         including whether a Gross-Up Payment is  required and the amount of the
         Gross-Up  Payment,  shall  be  made  by the  firm of independent public
         accountants selected by the Company to  audit its financial  statements
         for  the  year  immediately   preceding  the  Change  in  Control  (the
         "Accounting Firm") which shall provide detailed supporting calculations
         to the Company  and the Executive within  30 days after the date of the
         Executive's termination of employment. In the event that the Accounting
         Firm is serving as accountant or auditor for the individual,  entity or
         group  affecting  the Change  in Control,  the  Executive  may  appoint
         another   nationally   recognized   accounting   firm   to   make   the
         determinations required under  this Section 5.7 (which  accounting firm
         shall then be referred to as the

                                      19
<PAGE>


         "Accounting Firm").  All  fees and expenses  of the Accounting Firm  in
         connection with the work it performs pursuant to this Section 5.7 shall
         be promptly paid by the Company.  Any Gross-Up Payment shall be paid by
         the  Company to the  Executive  within 5 days  of the  receipt  of  the
         Accounting Firm's determination. If the Accounting Firm determines that
         no  Excise  Tax  is  payable  by the  Executive, it  shall  furnish the
         Executive with a written opinion that failure  to report the Excise Tax
         on the  Executive's  applicable  federal income  tax return  would  not
         result  in the  imposition  of a  penalty.  Any  determination  by  the
         Accounting Firm shall be binding upon the Company and the Executive. As
         a  result of the uncertainty in the  application of Section 4999 of the
         Code at the time of the  initial determination by  the Accounting Firm,
         it is possible that Gross-Up Payments  which will not have been made by
         the Company should have  been made ("Underpayment").  In the event that
         the Company exhausts its remedies pursuant to sub-paragraph (c)  below,
         and the Executive  is thereafter  required to make a  payment of Excise
         Tax,  the  Accounting  Firm shall promptly  determine the amount of the
         Underpayment that has occurred and any  such Underpayment shall be paid
         by the Company to the Executive within 5 days after such determination.

    (c)  Contest. The Executive shall notify the Company in writing of any claim
         made by the Internal Revenue Service that  if successful, would require
         the Company to pay a Gross-Up Payment. Such notification shall be given
         as soon as  practicable  but no  later than  10 business days after the
         Executive  knows of such  claim and shall  apprise the  Company  of the
         nature of such claim  and the date on which  such claim is requested to
         be paid. The Executive shall not pay such claim prior to the expiration
         of the 30-day  period following the date  on which the Executive  gives
         such notice  to the Company (or such shorter  period ending on the date
         that any payment of taxes with  respect to such claim is  due).  If the
         Company notifies the  Executive in writing  prior to the  expiration of
         such period that it desires to contest such claim, the Employee shall:

         (1)  give the  Company any  information  reasonably  requested  by  the
              Company relating to such claim;

         (2)  take such action in connection  with  contesting such claim as the
              Company  shall  reasonably request in waiting  from time  to time,
              without limitation, accepting legal representation with respect to
              such claim by an  attorney  selected by the Company and reasonably
              acceptable to the Executive;

         (3)  cooperate with the Company in  good faith in  order to effectively
              contest such claim; and


                                      20
<PAGE>

         (4)  permit the Company to participate in any  proceedings relating  to
              such  claim, provided that the Company shall bear and pay directly
              all costs and expenses (including interest and penalties) incurred
              in connection  with such contest and shall indemnify and  hold the
              Executive  harmless,  on an after-tax basis, for any Excise Tax or
              income tax, including interest and penalties with respect thereto,
              imposed as a result of such  representation  and  payment of costs
              and expenses.

         Without  limitation  on  the foregoing provisions  of this subparagraph
         (c), the Company shall control all proceedings taken in connection with
         such contest. At its sole option, the Company  may pursue or forego any
         and  all  administrative appeals, proceedings, hearings and conferences
         with the  taxing  authority  in respect of such  claim and  may  either
         direct the Executive  to pay the tax  claimed  and  sue for a refund or
         contest the claim in any  permissible  manner.  The Executive agrees to
         prosecute  such contest to a  determination  before any  administrative
         tribunal,  in  a  court of  initial  jurisdiction  and in  one  or more
         appellate  courts,  as the  Company  shall determine, provided that any
         extension  of the  statute of limitations  relating to payment of taxes
         for  the  taxable year  of the Executive  with  respect to  which  such
         contested  amount  is  claimed  to be  due is  limited  solely  to such
         contested amount. The Company's control of the contest shall be limited
         to issues with  respect to which a Gross-Up  Payment  would be  payable
         hereunder,  and the  Executive  shall be entitled to settle or contest,
         as the case  may be, any other  issue  raised  by the Internal  Revenue
         Service or any other taxing authority. Furthermore,  the Company agrees
         to hold in confidence and not  to disclose,  without  Executive's prior
         written  consent,  any  information  with  regard  to  Executive's  tax
         position which the Company obtains pursuant to this Section 5.7.

    (d)  Suit for Refund.  If the Company directs the Executive to pay any claim
         and sue  for a  refund, the  Company shall  advance the amount of  such
         payment to the Executive, on an  interest-free basis.  If the Executive
         becomes entitled  to receive any refund with respect to such claim, the
         Executive shall promptly pay to  the Company the amount of such  refund
         (together  with  any  interest  paid  or  credited  thereon after taxes
         applicable thereto).  If a  determination is  made that  the  Executive
         shall not be entitled to any  refund with respect to such claim and the
         Company  does not  notify the  Executive  in writing  of its  intent to
         contest such denial of refund prior to the expiration of 30 days  after
         such determination, then  such advance shall be  forgiven and shall not
         be required to be repaid  and the amount  of such advance shall offset,
         to the extent thereof,  the amount  of Gross-Up  Payment required to be
         paid.


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<PAGE>

    5.8  Indemnification.  The Company will  indemnify Executive  (and his legal
representatives  or other successors) to the fullest extent permitted (including
payment of expenses in advance of final disposition of a proceeding) by the laws
of the  State of  Delaware,  as in  effect  at the time  of the  subject  act or
omission,  or by the Restated  Certificate of  Incorporation and  By-Laws of the
Company,  as in  effect at such time or on the effective date of this Agreement,
or by  the  terms  of any  indemnification  agreement  between  the Company  and
Executive,  whichever  affords or afforded greater  protection to Executive, and
the Executive shall be entitled to the protection of any insurance  policies the
Company may elect to  maintain  generally for  the benefit  of its directors and
officers (and to the extent the Company  maintains  such an insurance  policy or
policies,  Executive shall be covered by such policy or policies,  in accordance
with its or their terms,  to the maximum  extent of the coverage  affordable for
any  Company  officer or  director),  against all costs,  charges  and  expenses
whatsoever incurred or sustained by him or his legal representatives at the time
such costs,  charges and expenses are incurred or sustained,  in connection with
any actions,  suit or  proceeding to which he (or his legal  representatives  or
their  successors)  may be made a party by reason of his being or having  been a
director,  officer or employee of the Company,  the Parent or any  subsidiary of
either of them,  or his  serving  or having  served  any other  enterprise  as a
director, officer or employee at the request of the Company.

    5.9  Attorney's  Fees. In the event of any litigation, arbitration, or other
proceeding  between  the Company and Executive with respect to this Agreement or
the enforcement of Executive's  rights hereunder,  if the Executive  prevails on
any issue  which is a  material  part of such  litigation,  arbitration or other
proceeding,  the Company shall  periodically  reimburse Executive for all of the
reasonable  costs  and  expenses  relating to  such  litigation,  arbitration or
proceeding  (including,  without limitation,  reasonable attorneys' fees). In no
event shall Executive be required to reimburse the Company or the Parent for any
of  the  costs  or  expenses  relating  to  such  litigation,   arbitration,  or
proceeding.

    5.10 Joint and Several Liability. All duties, undertakings, obligations, and
liabilities of the Company and the Parent  arising under this Agreement shall be
the joint and several liability of the Company and the Parent.

    5.11 Severability.  If any one  or  more  of  the  provisions  (or  portions
thereof) of this Agreement shall for any reason be held by a final determination
of a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity,  illegality,  or unenforceability shall not affect
any other provisions (or portions of the provisions) of this Agreement,  and the
invalid,  illegal,  or  unenforceable  provision  shall be deemed  replaced by a
provision  that is valid,  legal,  and  enforceable  and that  comes  closest to
expressing intention of the parties.

    5.12 Governing Law.  This  Agreement  shall be  interpreted  and enforced in
accordance  with  the laws of  the State of Minnesota, without  giving effect to
conflict of law principles.

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<PAGE>

    5.13 Headings.  The  headings  of  articles and sections herein are included
solely  for  convenience  and  reference  and  shall  not control the meaning of
interpretation of any of the provisions of this Agreement.

    5.14 Counterparts.  This  Agreement may be executed by either of the parties
in counterparts,  each of which  shall be deemed to be an original, but all such
counterparts shall constitute a single instrument.

    IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the date set forth above.

                                       MUSICLAND STORES CORPORATION

                                       THE MUSICLAND GROUP, INC.


                                       By:--------------------------------------
                                              Jack W. Eugster
                                              Chairman and CEO

                                       EXECUTIVE


                                       -----------------------------------------





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