Document:

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                                                                   EXHIBIT 10.13

                                    AGREEMENT

This Agreement (the "Agreement") is made and entered into on the 30th day of
June, 1998, by and between Beacon Education Management LLC, a Tennessee limited
liability company ("Beacon"), Ledyard McFadden, an individual residing in
Boston, Massachusetts ("McFadden"), Alan Fraker, an individual residing in
Massachusetts ("Fraker") and SchoolWorks LLC, a Delaware limited liability
company ("SchoolWorks").

                                    RECITALS

WHEREAS McFadden is currently employed by Beacon under the terms of an
employment letter agreement dated August 10, 1997 and a related confidentiality
and non-compete agreement dated August 15, 1997 (together the "McFadden
Employment Agreement"); and

WHEREAS Fraker is currently employed by Beacon under the terms of an employment
agreement dated March 31, 1998 ("Fraker Employment Agreement"); and

WHEREAS Beacon and McFadden desire to terminate McFadden's employment with
Beacon in a manner that allows McFadden to continue providing consulting
services in the K-12 market; and

WHEREAS Beacon and Fraker desire to terminate Fraker's employment with Beacon in
a manner that allows Fraker to continue providing consulting services in the
K-12 market; and

WHEREAS McFadden has established SchoolWorks to provide consulting services in
the K-12 market, including certain services to Beacon; and

WHEREAS SchoolWorks desires to employ Fraker and McFadden,

THEREFORE, for good and sufficient consideration, receipt of which is hereby
acknowledged, the parties agree as follows:

         1.       Upon execution of this Agreement by Beacon, for good and
valuable consideration, including without limitation, the sale, assignment of
transfer of all Beacon's right, title and interest in and to SchoolWorks
Start-up Schedule and Guide, as set forth in Section 13, the receipt and
sufficiency of which are hereby acknowledged, SchoolWorks will pay to Beacon one
hundred thousand dollars ($100,000).

         2.       Beacon and McFadden hereby mutually agree to terminate the
McFadden Employment Agreement, effective June 30, 1998. No representation,
warranty, covenant or obligation contained in the McFadden Employment Agreement
or in any exhibit, schedule, letter, certificate or other instrument referred to
in the McFadden Employment Agreement, or delivered or made by or on behalf of
any party to the McFadden Employment Agreement, or in connection with any
transactions contemplated by the McFadden Employment Agreement, shall survive
the termination of the McFadden Employment Agreement.

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         3.       Beacon and Fraker hereby mutually agree to terminate the
Fraker Employment Agreement effective June 30, 1998. No representation,
warranty, covenant or obligation contained in the Fraker Employment Agreement or
in any exhibit, schedule, letter, certificate or other instrument referred to in
the Fraker Employment Agreement, or delivered or made by or on behalf of any
party to the Fraker Employment Agreement, or in connection with any transactions
contemplated by the Fraker Employment Agreement, or contained in any engagement
of Fraker by Beacon as a consultant shall survive the termination of the Fraker
Employment Agreement.

         4.       McFadden does hereby release, acquit and forever discharge
Beacon and any and all of its affiliates, subsidiaries, agents, assigns,
servants, employees, officers, divisions and/or successors, from any and all
claims, demands, causes of actions, debts, dues and obligations of every kind
and nature that he has or may have against Beacon, its affiliates, subsidiaries,
agents, assigns, servants, employees, officers, divisions and/or successors,
arising out of or relating to any aspect of McFadden's employment at Beacon or
the McFadden Employment Agreement.

         5.       Fraker does hereby release, acquit and forever discharge
Beacon and any and all of its affiliates, subsidiaries, agents, assigns,
servants, employees, officers, divisions and/or successors, from any and all
claims, demands, causes of actions, debts, dues and obligations of every kind
and nature that he has or may have against Beacon, its affiliates, subsidiaries,
agents, assigns, servants, employees, officers, divisions and/or successors,
arising out of or relating to any aspect of Fraker's employment at Beacon and
arising out of or relating to any aspect of Fraker's engagement as a consultant
to Beacon or the Fraker Employment Agreement.

         6.       Beacon agrees to reimburse, in accordance with Beacon policy,
McFadden and Fraker for reasonable, properly documented and valid expenses,
including prepaid car payments made by McFadden, incurred as of June 30, 1998,
by each of them on behalf of Beacon in the normal course of business. McFadden
and Fraker shall each submit such expenses, and the necessary support
documentation, to Beacon on or before July 20, 1998.

         7.       Beacon does hereby release, acquit and forever discharge
McFadden and SchoolWorks from any and all claims, demands, causes of actions,
debts, dues and obligations of every kind and nature that it has or may have
against McFadden or SchoolWorks, arising out of or relating to any aspect of
McFadden's employment at Beacon.

         8.       Notwithstanding anything herein, Beacon does hereby release,
acquit and forever discharge McFadden and SchoolWorks from any and all claims,
demands, causes of actions, debts, dues and obligations of every kind and nature
that it has or may have against McFadden or SchoolWorks, arising out of or
relating to any solicitation of employment or any employment of Alan Fraker by
McFadden or SchoolWorks, and arising out of or relating to any solicitation of
employment or any employment of McFadden by SchoolWorks.

         9.       Beacon does hereby release, acquit and forever discharge
Fraker from any and all claims, demands, causes of actions, debts, dues and
obligations of every kind and nature that it has or may have against Fraker,
arising out of or relating to any aspect of Fraker's employment at Beacon and
arising out of or relating to any aspect of Fraker's engagement as a consultant
to Beacon or the Fraker Employment Agreement.

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         10.      McFadden warrants that he has returned to Beacon all Beacon
property previously in his possession, including but not limited to, equipment,
supplies, hard copy files, computer software, and computer files, except certain
equipment listed in Exhibit A. Fraker warrants that he has returned to Beacon
all Beacon property previously in his possession, including but not limited to,
equipment, supplies, hard copy files, computer software, and computer files,
except certain equipment listed in Exhibit A. Beacon hereby sells, assigns and
transfers to SchoolWorks all of its right, title and interest in and to the
items listed in Exhibit A free and clear of any liens, claims and encumbrances,
in exchange for payment by SchoolWorks to Beacon of seven thousand dollars
($7,000.00) on June 30, 1998, which payment shall be in addition to the payment
due under Section 1 of this Agreement.

         11.      McFadden, Fraker and SchoolWorks agree not to disclose to any
person, firm, corporation or other entity, or use for their own benefit whether
or not for monetary gain, any confidential information ("Confidential
Information") concerning the conduct or the business affairs of Beacon,
including, without limitation, trade secrets, know-how, inventions, curricula,
customer and supplier lists, business plans, operational records, pricing
policies, referral sources or organizations, marketing and sales plans,
financial information, names, addresses, positions, salaries and other terms of
employment of other employees of Beacon. For the purposes of this Agreement,
Confidential Information does not include information that is or becomes part of
the public domain, other than through McFadden's, Fraker's or SchoolWorks's
actions or inaction. Nothing in this section shall be construed to derogate from
the McFadden or Fraker's right to use general knowledge, know-how, or skills
that they have acquired prior to or during their employment or consultancy with
Beacon or to use the SchoolWorks Start-Up Schedule and Guide.

         12.      As it relates to the business of Beacon, Beacon shall own, and
McFadden and Fraker hereby transfer and assign to Beacon (to the extent
proprietary), all rights of, in and to any material and/or ideas and all results
and proceeds of their services to Beacon, or conceived of or produced during
their employment or engagement as a consultant, including but not limited to,
any data, creations or other work product (collectively, "Work Product").
Nothing in this section shall be construed to derogate from the McFadden or
Fraker's right to use general knowledge, know-how, or skills that they have
acquired prior to or during their employment or consultancy with Beacon.

         13.      Notwithstanding Section 12, Beacon hereby sells, assigns and
transfers all of its right, title and interest in and to a charter school
checklist start-up schedule and guide developed by McFadden and other Beacon
employees and consultants during 1997-98 and called SchoolWorks Start-Up
Schedule and Guide ("SchoolWorks Start-Up Schedule and Guide"), which is
attached as Exhibit D, including, without limitation, all trade names,
trademarks, copyrights and other intellectual property rights relating thereto.
Beacon grants to SchoolWorks only such rights as Beacon holds in SchoolWorks
Start-Up Schedule and Guide, and Beacon warrants only that it has not
transferred its interest in, nor has granted any security interest or lien on
SchoolWorks Start-up Schedule and Guide to any other party. SchoolWorks hereby
grants to Beacon a permanent license to use SchoolWorks Start-Up Schedule and
Guide, at no cost to Beacon, both internally within Beacon and with outside
parties in conjunction with Beacon's management of or services to schools, but
Beacon shall not sublicense, sell or otherwise transfer any rights to
SchoolWorks Start-Up Schedule and Guide to any third party. SchoolWorks grants

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to Beacon only such rights as SchoolWorks holds in SchoolWorks Start-Up Schedule
and Guide, and SchoolWorks does not warrant the extent or validity of such
rights in any way. SchoolWorks shall deliver to Beacon, in electronic form in
Microsoft Project 98 format, on or before July 15, a completed, updated copy of
SchoolWorks Start-Up Schedule and Guide. During the period July 1, 1998 through
June 30, 2002, SchoolWorks shall deliver to Beacon, within 10 days of
completion, all upgrades made to the to SchoolWorks Start-Up Schedule and Guide
by SchoolWorks or by any other party in any form or format (print or electronic)
on behalf of SchoolWorks. Beacon shall have the right to modify SchoolWorks
Start-Up Schedule and Guide for its own use, but shall, in all cases, continue
to refer to it as SchoolWorks Start-Up Schedule and Guide and shall provide
SchoolWorks access to the modifications made by Beacon. Beacon and SchoolWorks
shall cooperate with each in other in the continuing improvement of SchoolWorks
Start-Up Schedule and Guide. All modifications to of SchoolWorks Start-Up
Schedule and Guide by SchoolWorks or Beacon shall become the property of
SchoolWorks. The parties acknowledge that SchoolWorks intends in the future to
create separate aspects of the SchoolWorks product, which will encompass school
operating details, such as student handbooks, curriculum guides, employee
handbooks, etc. SchoolWorks has not agreed to license these parts of SchoolWorks
to Beacon. The parties also acknowledge that Beacon has, or intends in the
future to create products which encompass school operating details, such as
student handbooks, curriculum guides, employee handbooks, etc. Nothing in this
Agreement shall restrict Beacon from producing, using or selling such products,
and SchoolWorks shall have no rights to such products.

         14.      SchoolWorks shall develop and deliver to Beacon, according to
the schedule set forth on Exhibit B, a prototype education program for general
use in Beacon's schools. SchoolWorks shall cause Alan Fraker to oversee the
development of such education programs. SchoolWorks shall perform its services
in developing the education programs with the skill and care which would be
exercised by comparable qualified professionals performing similar services.
SchoolWorks shall work cooperatively with Beacon to develop the education
programs in a manner that meets Beacon's needs and standards. The scope and
format of the education programs delivered by SchoolWorks to Beacon shall be
meet the standards outlined in Exhibit B. The specific content of the education
programs delivered by SchoolWorks to Beacon shall be unique to this project. The
parties agree that the education programs, to the extent proprietary, shall be
the sole and absolute property of Beacon. Beacon shall reimburse SchoolWorks for
its reasonable, documented out-of-pocket costs such as mileage, travel and long
distance telephone costs associated with the delivery of such services.

         15,      SchoolWorks shall provide to Beacon, during the period July 1,
1998 through October 1, 1998, school development services as reasonably
necessary and appropriate for the start up of Rising Tide Charter School in
Plymouth, MA. SchoolWorks shall cause Ledyard McFadden to provide the services
to Rising Tide Charter School. SchoolWorks and McFadden shall perform these
services with the skill and care which would be exercised by comparable
qualified professionals performing similar services. SchoolWorks and McFadden
shall work cooperatively with Beacon to develop Rising Tide Charter School in a
manner that meets Beacon's reasonable needs and standards. Beacon shall, in
accordance with standard Beacon policy, reimburse SchoolWorks for its
reasonable, documented out-of-pocket costs such as mileage, travel and long
distance telephone costs associated with the delivery of such services. Until
October 1, 1998, Beacon shall also pay for McFadden's reasonable, basic monthly

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telephone, Internet service fees and car payments. SchoolWorks shall have
reasonable access to and support from Beacon staff in order to complete these
tasks.

         16.      SchoolWorks shall provide to Beacon, during the period July 1,
1998 through October 1, 1998, the following support services related to Beacon's
operation of Chelmsford Public Charter School in Chelmsford, MA: (a) completion
of the report to the Inspector General and (b) preparation of a draft document
to facilitate the search for a new facility for the school. SchoolWorks shall
cause Ledyard McFadden to provide these services to Chelmsford Public Charter
School. SchoolWorks and McFadden shall perform these services with the skill and
care which would be exercised by comparable qualified professionals performing
similar services. SchoolWorks and McFadden shall work cooperatively with Beacon
to assist Chelmsford Public Charter School. Beacon shall reimburse SchoolWorks
for its reasonable, documented out-of-pocket costs such as mileage, travel and
long distance telephone costs associated with the delivery of such services.

         17.      SchoolWorks shall assist Beacon during August 1998, with the
preparation of student scheduling at City on a Hill Charter School in Boston for
the 1998-99 school year. SchoolWorks shall perform these services with the skill
and care which would be exercised by comparable qualified professionals
performing similar services. SchoolWorks shall work cooperatively with Beacon to
assist City on a Hill Charter School. Beacon shall reimburse SchoolWorks for its
reasonable, documented out-of-pocket costs such as mileage, travel and long
distance telephone costs associated with the delivery of such services.
SchoolWorks shall have reasonable access to and support from Beacon staff in
order to complete these tasks.

         18.      Beacon hereby engages SchoolWorks, and SchoolWorks accepts
such engagement, as a subcontractor, to provide the services required under
Beacon's contract with Sojourner School, Inc. dated February 2, 1998. The
parties acknowledge that this arrangement does not constitute an assignment of
this contract (the Sojourner Contract) to SchoolWorks. All revenues received by
Beacon from the contract listed hereinabove shall be immediately paid from
Beacon to SchoolWorks without set-off or reduction. Beacon shall not be
responsible for any entity's failure to make payments to Beacon required under
this contract. SchoolWorks shall be responsible for all of its out-of-pocket and
other costs related to the provision of services under these contracts, except
to the extent that such costs are reimbursed by third parties in accordance with
the Sojourner Contract. SchoolWorks shall perform the services required under
the contract with the skill and care which would be exercised by comparable
qualified professionals performing similar services, and shall indemnify Beacon
against all claims related to this contract, except in the case of gross
negligence by Beacon. SchoolWorks shall have the right to list Sojourner School
as a client of SchoolWorks's through Beacon, provided that Sojourner School
agrees.

         19.      SchoolWorks shall have the right to list Beacon as a client in
SchoolWorks's marketing materials, and to inform potential customers that
SchoolWorks contributed to the creation of Beacon's prototype education program.
Notwithstanding the foregoing, Beacon shall own, and SchoolWorks does hereby
transfer and assign to Beacon (to the extent proprietary), all rights of, in and
to any material and/or ideas and all results and proceeds of SchoolWorks's
services to Beacon, or conceived of or produced under Section 14 of this
Agreement. The parties acknowledge that some of the individual elements of the
prototype education program (e.g. the

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concept of an accountability plan) produced for Beacon by SchoolWorks under
Section 14 of this Agreement are part of the public domain and therefore will
not be proprietary to Beacon and may be utilized hereinafter by SchoolWorks.
Notwithstanding the foregoing, SchoolWorks assigns to Beacon all SchoolWorks's
rights to the prototype education program considered as a whole.

         20.      Beacon and SchoolWorks agree to work together to develop
charter schools in Holyoke, MA and one other site in MA to be mutually agreed
upon by November 1, 1998, such schools to be opened in 1999. SchoolWorks shall
identify potential parties to organize such charter schools and shall assist
such entities with organizational activities, and with writing, presenting and
promoting the charter application. The applications shall be written by
SchoolWorks in a manner that facilitates Beacon's objective of obtaining a
contract to manage the schools and in accordance with the prototype education
program developed by SchoolWorks for Beacon in accordance with Section 10 herein
SchoolWorks shall perform these services with the skill and care which would be
exercised by comparable qualified professionals performing similar services. If,
after making diligent efforts to identify applicant groups and to secure
charters for these groups during the period from July 1, 1998 through March 31,
1999, SchoolWorks is unable to establish such organizations or to secure such
charters, then SchoolWorks shall not be required to continue its efforts on
behalf of Beacon to establish such organizations or secure such charters.
SchoolWorks shall not be required to deliver a completed charter application on
behalf of charter organization identifies herein that has not contracted with
Beacon, and shall not deliver such application without beacon's permission.
Beacon shall pay SchoolWorks a charter development fee of ten thousand dollars
($10,000) for each school if and when the school and Beacon enter into a Beacon
school management contract for charter school management services, and Beacon
shall pay SchoolWorks an additional charter development fee of thirty thousand
dollars ($30,000) if and when a charter is granted and the school has contracted
with Beacon to provide charter school management services. SchoolWorks shall not
enter into any contractual agreement with the applicant groups or charter
schools organized under this Section 20 without the written consent of Beacon
during the period July 1, 1998 through June 30, 2000.

         21.      For a period of eighteen months after execution of this
Agreement, SchoolWorks and McFadden shall not engage in as a principal, agent,
trustee, employee or stockholder or through the agency of any person,
corporation, partnership, association or agent or agency, in any business in
competition with the business of School Management conducted by the Beacon or
any of its affiliates. As used herein, the term School Management shall mean the
ongoing, general operation of any K- 12 school, but shall not encompass
consulting services in regard to discrete, limited aspects of a K-12 school's
operation, such as curriculum development or preparation of a charter
application or utilizing SchoolWorks Start-up Schedule and Guide in connection
with the opening of a school. Operations deemed to be School Management shall
include employment by SchoolWorks a majority of the staff at a school or the
assumption of responsibility by SchoolWorks, directly or indirectly, for a
majority of the day-to-day operating decisions at a school after the school is
in operation. Notwithstanding anything herein, SchoolWorks and McFadden shall
not be precluded from owning up to 5% of the outstanding capital stock of a
competing business whose stock is traded on a national securities exchange or
over the counter.

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         22.      SchoolWorks shall not take any action that causes Beacon to be
in violation of its agreement with Beacon Educational Resources dated June 16,
1998, which agreement stipulates, among other things, that until June 15, 2000,
no affiliate of Beacon shall market products and services specifically designed
for integrating instructional technology into the curriculum in the states of
Massachusetts, Connecticut, Rhode Island, Vermont, New Hampshire or Maine,
whether by paid advertisements, direct mail or any other form of advertising.
This section shall not be deemed to imply that SchoolWorks is, in any way, an
affiliate of Beacon.

         23.      For a period of eighteen (18) months after execution of this
Agreement, Beacon shall not engage in as a principal, agent, trustee, employee
or stockholder or through the agency of any person, corporation, partnership,
association or agent or agency, in any business in competition with the business
of K-12 Education Consulting conducted by the SchoolWorks or any of its
affiliates in Massachusetts, Connecticut, Rhode Island, New Jersey, New York,
Pennsylvania, New Hampshire, Vermont and Maine without the written consent of
SchoolWorks. As used herein, the term K-12 Education Consulting shall mean
limited consulting services in regard to discrete aspects of a K-12 school's
operation, such as curriculum development or preparation of a charter
application, but the term K-12 Education Consulting shall not encompass the
ongoing, general operation of any K-12 school. Notwithstanding anything herein,
Beacon shall not be precluded from providing any level or type of consulting
services to City on a Hill Charter School in Boston, Massachusetts.
Notwithstanding anything herein, Beacon shall not be precluded from owning up to
5% of the outstanding capital stock of a competing business whose stock is
traded on a national securities exchange or over the counter.

         24.      McFadden and SchoolWorks agree that for eighteen (18) months
after execution of this Agreement, McFadden and SchoolWorks shall not, directly
or indirectly, individually or on behalf of any other person or entity, do any
of the following:

                  (a)      Call upon, solicit, or attempt to solicit customers
         to transfer their patronage from Beacon to any other business, firm or
         entity engaged in activities which are directly or indirectly
         competitive with those conducted by Beacon;

                  (b)      Call upon, solicit, or attempt to solicit any
         employee of Beacon in an attempt to hire such employee or to induce
         such employee to resign;

                  (c)      Aid or agree to aid any competitor, customer or
         supplier of Beacon in any attempt to hire any employee of Beacon

         For the purposes of this section, "Customer" means any individual or
entity (including, without limitation, any school, educational board, or
educational institution, Employee, or Employee consulting group) to whom Beacon
is engaged under active contract, directly or indirectly, to provide any
management services (without regard as to whom is billed for such services).
"Customer" shall also include the entities listed on Exhibit C.

         25.      Beacon agrees that for eighteen (18) months after execution of
this Agreement, Beacon shall not, directly or indirectly, individually or on
behalf of any other person or entity, do any of the following:

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                  (a)      Call upon, solicit, or attempt to solicit customers
         to transfer their patronage from SchoolWorks to any other business,
         firm or entity engaged in activities which are directly or indirectly
         competitive with those conducted by SchoolWorks;

                  (b)      Call upon, solicit, or attempt to solicit any
         employee of SchoolWorks in an attempt to hire such employee or to
         induce such employee to resign;

                  (c)      Aid or agree to aid any competitor, customer or
         supplier of SchoolWorks in any attempt to hire any employee of
         SchoolWorks

For the purposes of this section, "Customer" means any individual or entity
(including, without limitation, any school, educational board, or educational
institution, Employee, or Employee consulting group) to whom SchoolWorks
directly or indirectly provides any consulting services (without regard as to
whom is billed for such services).

         26.      The parties acknowledge that (a) no inducement other than
those stated in this Agreement have been made in entering into this Agreement;
(b) they have not relied upon representations, warranties, promises or
conditions made by the other party not set forth in this Agreement; (c) they
have executed this Agreement after independent investigation and without fraud,
duress or undue influence; and (d) they have been represented independently by
legal counsel during the negotiation of this Agreement and have executed this
Agreement after consulting with their legal counsel.

         27.      The parties shall keep the terms and conditions of this
Agreement confidential and shall not publicize its existence or disclose its
terms or conditions to any third party without the consent of the other.
Notwithstanding the foregoing, the parties may disclose the terms of this
Agreement as required by statue, regulation or court order, to their respective
insurers, auditors, accountants, attorneys, regulators, representatives of the
Internal Revenue Service or any other agency responsible for the collection of
local, state or federal taxes to the extent reasonably necessary for tax or
related purposes. Notwithstanding anything herein, Beacon and SchoolWorks shall
jointly issue a mutually agreeable press release on or about October 1, 1998,
which shall generally describe the relationship of Beacon and SchoolWorks, and
their respective plans going forward. Nothing in this section shall at any time
preclude SchoolWorks from describing its operations to potential customers.

         28.      This Agreement, together with Exhibits A, B, C and D, is the
only agreement between the parties concerning its subject matter. There are no
oral agreements or understandings. This Agreement cannot be amended, modified or
supplemented except by a writing executed by both parties. No provision of this
Agreement may be waived except in writing executed by the party granting the
waiver. Notwithstanding the foregoing, Beacon and McFadden acknowledge that, by
separate agreements, McFadden is simultaneously making an equity investment of
$275,000 in Beacon.

         29.      This Agreement shall be subject to, governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts without regard
to any choice of law principle that would dictate the application of the law of
another jurisdiction.

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         30.      Each party shall bear its own costs and attorneys' fees
arising out of or related to the preparation, review and execution of this
Agreement.

         31.      This Agreement shall be binding upon and inure to the benefits
of the parties, their successors, assigns, subsidiaries, licenses and
affiliates. The Agreement may not be assigned by either party without he prior
written consent of the other party.

         32.      The parties will attempt in good faith to resolve any
controversy or claim arising out of this Agreement promptly by negotiations
between the parties.

                  (a)      The disputing party shall give the other party
         written notice of the dispute. Within 20 days after receipt of the
         notice, the receiving party shall submit to the disputing party a
         written response. The notice and response shall include a statement of
         each party's position and a summary of the evidence and argument
         supporting its position.

                  (b)      The parties shall meet at a mutually acceptable time
         and place within 30 days after the date of the disputing party's notice
         and thereafter as often as they reasonably deem necessary to exchange
         relevant information and to attempt to resolve the dispute.

                  (c)      If the matter has not been resolved within 60 days
         after the disputing party's notice, or if the receiving party does not
         submit a written response within 20 days or will not meet with the
         disputing party within 30 days after the date of the disputing party's
         notice, the matter shall be settled by arbitration in accordance with
         whatever procedures upon which the parties agree, provided, however,
         that if the parties cannot agree upon a procedure for the arbitration
         within 30 days after the date of the disputing party's notice, the
         matter shall be submitted for arbitration in accordance with the
         Commercial Arbitration Rules of the American Arbitration Association
         ("AAA"), as amended and in effect on the date that demand for
         arbitration is filed with the AAA. Each party shall select one
         arbitrator. The arbitrators' ruling shall be binding and conclusive
         upon the parties to the arbitration to the fullest extend permitted by
         law. Any arbitration shall occur in Boston, Massachusetts, and judgment
         upon the award rendered may be entered in any court having
         jurisdiction. The arbitrators shall be governed by and shall apply the
         substantive law of the Commonwealth of Massachusetts in making their
         award and their ruling shall be binding and conclusive upon the
         parties. In addition to actual damages, the arbitrators are empowered
         to award reasonable attorney's fees and costs, including but not
         limited to the expenses of the arbitration, to the prevailing party. In
         the absence of an award to the prevailing party, the expenses of the
         arbitration shall be borne equally by the parties to the arbitration.

                  (d)      The procedures specified in this paragraph shall be
         the sole and exclusive procedures for the resolution of disputes
         between the parties arising out of or relating to this Agreement,
         provided, however, that a party may seek a preliminary injunction or
         other preliminary judicial relief if, in its judgment, that action is
         necessary to avoid irreparable damage. Despite the seeking of
         preliminary judicial relief, the parties will continue to participate
         in good faith in the procedures specified in this paragraph. All

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         applicable statues of limitation shall be tolled while the procedures
         specified in this paragraph are pending. The parties will take any
         actions required to effectuate the tolling.

         33.      All notices required by this Agreement shall be in writing
and shall be served by sending the notice first class mail, postage prepaid to
the address of each party specified at the beginning of this Agreement or to any
other address designated by either party in writing. In the alternative, a copy
of any notice may be sent by electronic mail or by facsimile with a confirming
copy by first class mail, postage prepaid. Notices sent by first class mail
shall be effective on the third day after mailing. Notices sent by facsimile or
electronic mail shall be effective on the date they are sent if they are sent
between 12:00:01 a.m. and 5:00 p.m. in the recipient's time zone and shall be
effective the following day if sent between 5:00 p.m. and Midnight.

         34.      If any provision of this Agreement shall be held to be invalid
or unenforceable to any extent, the remainder of this Agreement shall not be
affected by the invalidity or unenforceability and shall be enforced to the
greatest extent permitted by law consistent with the intention of the parties.

         35.      Each party represents and warrants that the person executing
this Agreement on its behalf has the full right, power and authority to do so
and to bind the company by his signature.

         36.      This Agreement may be executed in counterparts, all of which,
when taken together, should constitute one agreement with the same force and
effect as if all signatures had been entered on one document.

         37.      Beacon, McFadden, Fraker and SchoolWorks hereby agree that any
liability of McFadden, Fraker or SchoolWorks hereunder for any point of any
provision of this Agreement shall be several and not joint and several.

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BEACON EDUCATION MANAGEMENT, LLC             SCHOOLWORKS, LLC.

By:   /s/ William R. DeLoache, Jr.           By:   /s/ Ledyard McFadden
    -------------------------------------        ------------------------------
      William R. DeLoache, Jr., Chairman           Ledyard McFadden, President

LEDYARD MCFADDEN, INDIVIDUALLY

      /s/ Ledyard McFadden
-----------------------------------------
Ledyard McFadden

ALAN FRAKER, INDIVIDUALLY

      /s/ Alan Fraker
-----------------------------------------
Alan Fraker

                                       11<PAGE>   1
                                                                EXHIBIT 10.31-04

EMPLOYMENT AGREEMENT DATED AS OF MAY 16, 2001 BETWEEN THE COMPANY
AND ROBERT F. MECREDY

CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE

                  This Confidential Separation Agreement and General Release
(this "Agreement") is entered into as of May 16, 2001 (the "Effective Date")
between FATS, Inc., a Delaware corporation (the "Company"), and Robert F.
Mecredy (the "Executive").

                  WHEREAS, the Company is the operating subsidiary of Firearms
Training Systems, Inc., a Delaware corporation (the "Parent");

                  WHEREAS, the Executive currently serves as President and Chief
Executive Officer of the Company and the Parent and as a member of the Board of
Directors of the Company and the Parent; and

                  WHEREAS, the Company and the Executive desire to set forth
herein their mutual agreement with respect to all matters relating to the
Executive's resignation and cessation of employment with the Company and its
affiliates and the Executive's release of claims upon the terms set forth
herein.

                  NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the adequacy and sufficiency of which are hereby
acknowledged, the Company and the Executive hereby agree as follows:

Resignation; Termination of Employment. The Executive hereby resigns as
President and Chief Executive Officer and as a member of the Board of Directors
of the Company, the Parent and all subsidiaries of the Company and the Parent,
and from all other positions (if any) with the Company, the Parent and their
respective subsidiaries and affiliates as of the Effective Date. The Executive
shall continue to be employed by the Company for the period commencing on the
Effective Date and ending on the date which is 60 days thereafter (the
"Employment Termination Date"), at which time the Executive shall cease to be an
employee of, or have any other position with, the Company, its subsidiaries, the
Parent or their affiliates. During such 60-day period of continued employment,
the Executive shall assist in the transition of his duties and responsibilities
to a new management team, assist in the maintenance of the Company's customer
relationships and perform such other duties as the Chairman of the Board of
Directors of the Parent (the "Chairman") may reasonably assign to the Executive.
The Executive shall devote such time, if any, to the foregoing duties as the
Chairman shall reasonably request. In exchange for his services during this
60-day period, the Company shall pay to the Executive an aggregate amount equal
to $12,500, payable in installments in accordance with the Company's regular
payroll procedures, and the Executive shall continue to participate in those
employee benefit plans and programs of the Company in which he participated
immediately prior to the Effective Date.

Payment of Accrued Amounts. The Company shall pay to the Executive within 10
days following the Employment Termination Date all amounts due to the Executive
for salary accrued for services rendered through the Employment Termination Date
and an amount equal to $61,854.26 for accrued and unused vacation as of the
Employment Termination Date.

Bonus Payment. The Company shall on or before May 31, 2001 pay to the Executive
an incentive bonus in the amount of $50,000 for services performed during the
Company's fiscal year ended March 31, 2001.

Separation Payments. Provided that the Executive complies with the covenants
contained in Sections 9, 10, 11, 12 and 13 hereof, the Company shall pay to the
Executive an amount equal to $200,000, payable in substantially equal bi-weekly
installments during the 24-month period immediately following the Employment
Termination Date.

Additional Payment. Provided that the Executive remains employed with the
Company through the Employment Termination Date and the Executive executes a
general release in the form of Exhibit A hereto (the "Release") on or promptly
following the Employment Termination Date and has not revoked the Release, the
Company shall pay to the Executive, not less than eight and no more than 15 days
following the date of the Executive's execution of the Release, a lump sum cash
amount equal to $37,500.

Federal and State Withholding. The Company shall deduct from the amounts payable
to the Executive pursuant to Sections 2, 3, 4 and 5 hereof the amount of all
required federal and state withholding taxes in accordance with the Executive's
Form W-4 on file with the Company and all applicable social security taxes.

Stock Options. The treatment of all stock options granted to the Executive which
shall be outstanding on the Employment Termination Date, including, but not
limited to, the vesting, exercisability and termination thereof, shall be
governed by the terms of the stock option plans and stock option agreements
pursuant to which such options were granted to the Executive; provided, however,
that the Parent and the Executive shall prior to the Employment Termination Date
enter into (i) an amendment in the form of Exhibit B hereto to the Stock Option
Agreement, Series F, dated as of April 1, 2000, representing a non-qualified
option to purchase 240,000 shares of the Parent's Class A Common Stock at an
exercise price of $0.50 per share and (ii) an amendment in the form of Exhibit C
hereto to the Stock Option Agreement, Series H, dated as of April 1, 2000,
representing a non-qualified option to purchase 240,000 shares of the Parent's
Class A Common Stock at an exercise price of $0.01 per share.

Employee Benefits. As of the Employment Termination Date, the Executive shall be
entitled to those employee benefits, if any, as may be provided under the terms
and conditions of the applicable employee benefit plans and programs of the
Company. Pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), the Executive may elect to continue coverage for the Executive and
his dependents under the Company's medical and dental plans for a period of up
to 18 months following the Executive's termination of employment or as otherwise
provided by COBRA. Provided that the Executive timely elects continuation of
coverage under COBRA, the Company will pay or reimburse the Executive for the
full cost of such coverage.

Noncompetition; Nonsolicitation. (a) General. The Executive acknowledges that in
the course of the Executive's employment with the Company the Executive has
become familiar with trade secrets and other confidential information concerning
the Company, its subsidiaries and the Parent and that the Executive's services
have been of special, unique and extraordinary value to the Company, its
subsidiaries and the Parent.

                  (b)      Noncompetition. The Executive agrees that during the
period of the Executive's employment with the Company, the period during which
the Executive is receiving payments from the Company pursuant to Section 4
hereof, and for a period of one year thereafter, the Executive shall not assist,
seek to acquire or assist others in seeking to acquire an interest in, Advanced
Interactive Systems (AIS), ECC International Corp. (ECC), Israeli Electronic
Systems (IES) or Thales Training and Simulation, or their respective
subsidiaries or

<PAGE>   2

affiliates, or the successors thereof, whether as an officer, director,
employee, stockholder, partner, investor, consultant, advisor, agent or in any
other capacity, in engaging in or being engaged in, or bidding or competing for
the opportunity to bid for, the design, development, manufacture, sale or other
distribution of interactive small arms training simulation systems for military
and law enforcement training with respect to any of the following products:

                  (i) Small arms marksmanship and gunnery training products for
handguns, rifles, light and heavy machine guns, anti-armor weapons and fire
fighting simulation.

                  (ii) Tactical and judgmental training products for tactical
training for individuals, teams, crews and squads of trainees using Distributed
Interactive Simulation/High Level Architecture (DIS/HLA) compatible platforms in
connection with the training of dismounted or mounted personnel in basic through
advanced infantry and mechanized tactics.

                  (iii) Indirect fire training products, including, without
limitation, simulated mortars, binoculars and laser range finders.

                  (c)      Nonsolicitation. The Executive further agrees that
during the period of the Executive's employment with the Company, the period
during which the Executive is receiving payments from the Company pursuant to
Section 4 hereof, and for a period of one year thereafter, the Executive shall
not (i) in any manner, directly or indirectly, induce or attempt to induce any
employee of the Company, any of its subsidiaries or the Parent to terminate or
abandon his or her employment for any purpose whatsoever or (ii) in connection
with any business to which Section 9(b) applies, call on, service, solicit or
otherwise do business with any customer of the Company, any of its subsidiaries
or the Parent; provided, however, the Executive may solicit business with any
customer of the Company, any of its subsidiaries or the Parent to the extent
that such business is unrelated to the business conducted or contemplated being
conducted between the Company, its subsidiaries or the Parent and their
customers.

                  (d)      Exceptions. Nothing in this Section 9 shall prohibit
the Executive from being (i) a stockholder in a mutual fund or a diversified
investment company or (ii) an owner of not more than two percent of the
outstanding stock of any class of a corporation, any securities of which are
publicly traded, so long as the Executive has no active participation in the
business of such corporation.

                  (e)      Reformation. If, at any time of enforcement of this
Section 9, a court or an arbitrator holds that the restrictions stated herein
are unreasonable under circumstances then existing, the parties hereto agree
that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court or arbitrator shall be allowed to revise the restrictions contained
herein to cover the maximum period, scope and area permitted by law. This
Agreement shall not authorize a court or arbitrator to increase or broaden any
of the restrictions in this Section 9.

<PAGE>   3

Nondisparagement. The Executive agrees that during the Executive's employment
with the Company and thereafter, the Executive shall not directly (or through
any other person or entity) make any public or private statements (whether oral
or in writing) that are derogatory or damaging to the Company, any of its
subsidiaries or the Parent, including, but not limited to, its businesses,
activities, operations, affairs, reputation or prospects or any of their
officers, employees, or current or former directors or shareholders. The Company
also agrees that during the Executive's employment with the Company and
thereafter, the Company shall not at any time make any defamatory public or
private statements, whether oral or in writing, concerning the Executive. Except
for confirming the Executive's dates of employment and job title or as otherwise
required by any law, regulation or order of any court or regulatory commission,
department or agency, the Company shall respond to any inquiry regarding the
Executive's cessation of employment with the Company in a manner which is in
substantial conformity with the letter of resignation dated the date hereof from
the Executive to the Company. Promptly following the execution of this
Agreement, the Company and the Executive agree that the Company shall issue a
press release substantially in the form of Exhibit D hereto.

Confidentiality. The Executive shall not, at any time during the Executive's
employment with the Company or thereafter, make use of or disclose, directly or
indirectly, any (i) trade secret or other confidential or secret information of
the Company, any of its subsidiaries or the Parent or (ii) other technical,
business, proprietary or financial information of the Company, any of its
subsidiaries or the Parent not available to the public generally ("Confidential
Information"), except to the extent that such Confidential Information (a)
becomes a matter of public record or is published in a newspaper, magazine or
other periodical or on electronic or other media available to the general
public, other than as a result of any act or omission of the Executive, (b) is
required to be disclosed by any law, regulation or order of any court or
regulatory commission, department or agency, provided that the Executive gives
prompt notice of such requirement to the Company to enable the Company to seek
an appropriate protective order, or (c) is required to be used or disclosed by
the Executive to perform properly the Executive's duties under this Agreement.
Within five days following the Employment Termination Date, the Executive shall
surrender to the Company all records, memoranda, notes, plans, reports, computer
tapes and software and other documents and data which constitute Confidential
Information which the Executive may then possess or have under the Executive's
control (together with all copies thereof).

Standstill. The Executive hereby agrees that, unless specifically requested in
writing in advance by the Chairman, the Executive will not at any time during
the period of the Executive's employment with the Company, the period during
which the Executive is receiving payments from the Company pursuant to Section 4
hereof, and for a period of three years thereafter (and the Executive will not
at any time during such period assist or encourage others to) participate,
directly or indirectly in any activity that, if consummated, would result in a
Change in Control of the Parent. For purposes of this Section 12, a Change in
Control of the Parent shall mean (a) any sale or other disposition of all or
substantially all of the assets of the Parent, (b) any acquisition of more than
40% of the then outstanding shares of common stock of the Parent, (c) any merger
in which the existing stockholders of the Parent fail to own 50% or more of the
corporation resulting from such merger or (d) any change in the membership of
the Board of Directors of the Parent (the "Board") such that the individuals
who, as of the date of this Agreement, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of such Board;
provided, however, that any individual who becomes a director of the Parent
subsequent to the date of this Agreement whose election, or nomination for
election by the Parent's stockholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall be deemed a
member of the Incumbent Board; and provided further, that no individual who was
initially elected as a director of the Parent as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any other actual or threatened solicitation of proxies or
consents by or on behalf of any individual, entity or group, including any
"person" within the meaning of Section 13(d) of the Exchange Act, other than the
Board shall be deemed a member of the Incumbent Board.

Inventions. The Executive agrees to disclose fully and promptly to the Company
in writing, upon the Company's request, all discoveries and improvements,
patentable or otherwise, trade secrets and ideas, writings and copyrightable
material which may be conceived by the Executive or developed or acquired by the
Executive during the Executive's employment with the Company or the six-month
period following the Employment Termination Date and which may pertain directly
or indirectly to the business of the Company, any of its subsidiaries or the
Parent (collectively, "Inventions"). All Inventions shall constitute works made
for hire owned by the Company and shall be the exclusive property of the
Company. To the extent any Invention does not constitute a work made for hire,
the Executive hereby assigns to the Company, without further consideration, the
Executive's entire right, title and interest in and to such Invention, under
patent, copyright, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law. The Executive shall, upon the
Company's request, execute, acknowledge and deliver to the Company all
instruments and do all other acts which are necessary or in the Company's
opinion desirable to evidence more fully transfer of ownership of any Invention
to the Company, or to enable the Company, any of its subsidiaries or the Parent,
to file and prosecute applications for, and to acquire, maintain and enforce,
all patents, trademarks and copyrights in all countries.

Scope of Covenants; Remedies. The following provisions shall apply to the
covenants of the Executive contained in Sections 9, 10, 11, 12 and 13 hereof:

                  (a) without limiting the right of the Company to pursue all
other legal and equitable remedies available for violation by the Executive of
the covenants contained in Sections 9, 10, 11, 12 and 13 hereof, it is expressly
agreed by the Executive and the Company that such other remedies cannot fully
compensate the Company for any such violation and that the Company shall be
entitled to a restraining order and injunctive relief to prevent any such
violation or any continuing violation thereof; and

                  (b) the Executive agrees that he will submit himself to the
personal jurisdiction of the courts of the State of Delaware in any action by
the Company to enforce an arbitration award against him or to obtain injunctive
or other relief.

General Release. The Executive, on behalf of himself and anyone claiming through
him, hereby agrees not to sue the Company or the Parent or any of their
divisions, subsidiaries, affiliates or other related entities of the above
specified entities (whether or not such entities are wholly owned) or any of the
past, present or future directors, officers, administrators, trustees,
fiduciaries, employees, agents, attorneys or shareholders of the Company, the
Parent or any of such other entities, or the predecessors, successors or assigns
of any of them (hereinafter referred to as the "Released Parties"), and agrees
to release and discharge, fully, finally and forever, the Released Parties from
any and all claims, causes of action, lawsuits, liabilities, debts, accounts,
covenants, contracts, controversies, agreements, promises, sums of money,
damages, judgments and demands of any nature whatsoever, in law or in equity,
both known and unknown, asserted or not asserted, foreseen or unforeseen, which
the Executive ever had or may presently have against any of the Released Parties
arising from the beginning of time up to and including the effective date of
this Agreement, including, without limitation, all matters in any way related to
the Executive's employment by the Company, the terms and conditions thereof, any
failure to promote the Executive and the termination or cessation of the
Executive's employment with the Company, and including, without limitation, any
and all claims arising under the Civil Rights Act of 1964, as amended, the Civil
Rights Act of 1991, the Civil Rights Act of 1866, the Age Discrimination in
Employment Act, the Older Workers' Benefit Protection Act, the Family and
Medical Leave Act, the Americans With Disabilities Act, the Employee Retirement
Income Security Act of 1974, the Georgia Minimum Wage Law, the Georgia Common
Day of Rest Act, the Georgia Equal Employment for Persons with Disabilities
Code, the Georgia Equal Pay for Equal Work Act, the Georgia law governing wage
payment (O.C.G.A. 34-7-1, et seq.), the Georgia law prohibiting discrimination
based on age (O.C.G.A. 34-1-2), the

<PAGE>   4

Georgia law governing safety in the workplace (O.C.G.A. 34-2-10) or any other
federal, state, local or foreign statute, regulation, ordinance or order, or
pursuant to any common law doctrine; provided, however, that nothing contained
in this Section 15 (i) shall apply to, or release the Company from, any
obligation of the Company contained in this Agreement or any vested or accrued
benefit pursuant to any employee benefit plan of the Company, or (ii) shall
apply to, or release the Parent from, any obligation of the Parent contained in
the stock option agreements between the Parent and the Executive. The
consideration offered herein is accepted by the Executive as being in full
accord, satisfaction, compromise and settlement of any and all claims or
potential claims, and the Executive expressly agrees that he is not entitled to,
and shall not receive, any further recovery of any kind from the Company or any
of the other Released Parties, and that in the event of any further proceedings
whatsoever based upon any matter released herein, neither the Company nor any of
the other Released Parties shall have any further monetary or other obligation
of any kind to the Executive, including any obligation for any costs, expenses
or attorneys' fees incurred by or on behalf of the Executive. The Executive
agrees that he has no present or future right to employment with the Company or
any of the other Released Parties and that he will not apply for or otherwise
seek employment with any of them.

                  16.      Authority. The Executive expressly represents and
warrants that he is the sole owner of the actual and alleged claims, demands,
rights, causes of action and other matters that are released herein; that the
same have not been transferred or assigned or caused to be transferred or
assigned to any other person, firm, corporation or other legal entity; and that
he has the full right and power to grant, execute and deliver the general
release, undertakings and agreements contained herein.

                  17.      Indemnification of Executive. (a) The Company agrees
that the limitation of liability now existing in favor of the Executive
contained in Article Eleventh of the Parent's Restated Certificate of
Incorporation and all rights to indemnification now existing in favor of the
Executive contained in Article Eleventh of the Parent's Restated Certificate of
Incorporation and in Article VI of the Parent's By-laws, in each case as in
effect on the date hereof, shall not be amended in any manner that would
adversely affect the rights of the Executive, unless such amendment is required
by law.

                  (b) Pursuant to the rights to indemnification referred to in
Section 17(a) hereof, the Company agrees to indemnify and hold harmless the
Executive and his legal representatives and successors to the fullest extent
permitted by the laws of the State of Delaware with respect to any claim arising
at any time out of any event, action or omission related to or in connection
with the Executive having been a director, officer or employee of the Company or
having served as a director or officer of another corporation or other
organization at the request of the Company. This indemnification shall continue
in full force and effect for a period of not less than the duration of all
statutes of limitations applicable to such matters (or in the case of events,
actions or omissions giving rise to matters which have not been resolved prior
to the expiration of such period, until such matters are finally resolved).
Without limiting the foregoing, the Company shall periodically advance all
reasonable expenses (including reasonable attorneys' and paralegals' fees and
other costs and expenses) as incurred with respect to the foregoing to the
fullest extent permitted by the laws of the State of Delaware. The Executive
shall not unreasonably withhold his consent to the settlement of any claim for
which he is entitled to be fully indemnified hereunder. To the extent that the
Company shall maintain in effect a policy of directors' and officers' liability
insurance, the Executive shall be covered by such policy for his actions or
omissions as a director or officer in accordance with the terms of such policy
to the maximum extent of coverage provided for any other director or officer of
the Company, subject to policy exceptions applicable to directors and officers
generally.

                  18.      Reimbursement of Legal Expenses. The Company shall
reimburse the Executive, up to a maximum of $5,000, for legal fees and expenses
incurred by the Executive in connection with the negotiation and preparation of
this Agreement.

                  19.      Arbitration. Except as provided in Section 14(a)
hereof, any dispute or controversy between the Company and the Executive,
whether arising out of or relating to this Agreement, the breach of this
Agreement, or otherwise, shall be settled by arbitration in the State of
Delaware, administered by the American Arbitration Association, with any such
dispute or controversy arising under this Agreement being so administered in
accordance with its Commercial Rules then in effect, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall have the authority to award any remedy or relief
that a court of competent jurisdiction could order or grant, including, without
limitation, the issuance of an injunction. However, either party may, without
inconsistency with this arbitration provision, apply to any court having
jurisdiction over such dispute or controversy and seek interim provisional,
injunctive or other equitable relief until the arbitration award is rendered or
the controversy is otherwise resolved. Except as necessary in court proceedings
to enforce this arbitration provision or an award rendered hereunder, or to
obtain interim relief, neither a party nor an arbitrator may disclose the
existence, content or results of any arbitration hereunder without the prior
written consent of the Company and the Executive. The Company and the Executive
acknowledge that this Agreement evidences a transaction involving interstate
commerce. Notwithstanding any choice of law provision included in this
Agreement, the United States Federal Arbitration Act shall govern the
interpretation and enforcement of this arbitration provision.

                  20.      Successors; Binding Agreement. This Agreement shall
inure to the benefit of and be enforceable by the Executive and by his personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. In the event of the death of the Executive
while any amounts are payable to the Executive hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to such person or persons designated in writing by the Executive
to receive such amounts or, if no person is so designated, to the Executive's
estate.

                  21.      Notices. All notices and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given by a party hereto when delivered personally or by
overnight courier or five days after deposit in the United States mail, postage
prepaid to the following address of the other party hereto (or to such other
address of such other party as shall be furnished in accordance herewith):

<PAGE>   5

                  If to the Company, to:

                           FATS, Inc.
                           7340 McGinnis Ferry Road
                           Suwanee, Georgia 30174
                           Attention: Chairman of the Board of Directors of
                                      Firearms Training Systems, Inc

                  With a copy to:

                           Michael S. Sigal, Esq.
                           Sidley Austin Brown & Wood
                           Bank One Plaza
                           10 South Dearborn Street
                           Chicago, Illinois 60603

                  If to the Executive, to:

                           Robert F. Mecredy
                           1545 Lockridge Drive
                           Cumming, GA  30141

                  With a copy to:

                           Harry J. Winograd, Esq.
                           Bodker, Ramsey & Andrews
                           1800 Peachtree Street, N.W.
                           Suite 615
                           Atlanta, Georgia 30309

                  22.      Governing Law; Validity. The interpretation,
construction and performance of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without regard to the principle of conflicts of laws.

                  23.      Entire Agreement. This Agreement, and the agreements
referenced herein, constitute the entire agreement and understanding between the
parties with respect to the subject matter hereof and supersedes and preempts
any prior understandings, agreements or representations by or between the
parties, written or oral, which may have related in any manner to the subject
matter hereof, including, but not limited to, the Employment Agreement, dated
November 1, 2000, entered into by and between the Company and the Executive.

                  24.      Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.

                  25.      Miscellaneous. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and executed by the Executive and by a duly authorized officer of the Company.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by the Executive or the Company to insist upon strict compliance
with any provision of this Agreement or to assert any right which the Executive
or the Company may have hereunder shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.

                  26.      No Admission. Nothing in this Agreement or the
Release is intended to, or shall be construed as, an admission by the Company or
any of the other Released Parties that it violated any law, interfered with any
right, breached any obligation or otherwise engaged in any improper or illegal
conduct with respect to the Executive or otherwise. The Company, for itself and
the other Released Parties, hereby expressly denies any such illegal or wrongful
conduct

                  27.      ACKNOWLEDGMENT BY EXECUTIVE. BY EXECUTING THIS
AGREEMENT, THE EXECUTIVE EXPRESSLY ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT
CAREFULLY, THAT HE FULLY UNDERSTANDS ITS TERMS AND CONDITIONS, THAT HE HAS BEEN
ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT, THAT HE
HAS BEEN ADVISED THAT HE HAS 21 DAYS WITHIN WHICH TO DECIDE WHETHER OR NOT TO
EXECUTE THIS AGREEMENT AND THAT HE INTENDS TO BE LEGALLY BOUND BY IT. DURING A
PERIOD OF SEVEN DAYS FOLLOWING THE DATE OF HIS EXECUTION OF THIS AGREEMENT, THE
EXECUTIVE SHALL HAVE THE RIGHT TO REVOKE THE RELEASE CONTAINED IN SECTION 15 OF
THIS AGREEMENT OF CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT BY
SERVING WITHIN SUCH PERIOD WRITTEN NOTICE OF REVOCATION. IF THE EXECUTIVE
EXERCISES HIS RIGHTS UNDER THE PRECEDING SENTENCE, HE SHALL FORFEIT THE AMOUNT
PAYABLE TO HIM PURSUANT TO SECTION 5 OF THIS AGREEMENT.

<PAGE>   6

                  IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and the Executive has
executed this Agreement as of the day and year first above written.

                                       FATS, INC.

                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------

                                       ROBERT F. MECREDY

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

<PAGE>   7

EXHIBIT A

GENERAL RELEASE

                  This General Release (this "Release") is executed by Robert F.
Mecredy (the "Executive") pursuant to Section 5 of the Confidential Separation
Agreement and General Release dated as of May 16, 2001 (the "Separation
Agreement") between FATS, Inc., a Delaware corporation (the "Company"), and the
Executive.

                  WHEREAS, the Executive's employment with the Company is
terminating;

                  WHEREAS, the Company and the Executive intend that the terms
and conditions of the Separation Agreement and this Release shall govern all
issues related to the Executive's employment and termination of employment with
the Company;

                  WHEREAS, the Executive has had 21 days to consider the form of
this Release;

                  WHEREAS, the Company advised the Executive in writing to
consult with an attorney before signing this Release;

                  WHEREAS, the Executive acknowledges that the consideration to
be provided to the Executive under the Separation Agreement is sufficient to
support this Release; and

                  WHEREAS, the Executive understands that the Company regards
the representations by the Executive in the Separation Agreement and this
Release as material and that the Company is relying on such representations in
paying amounts to the Executive pursuant to the Separation Agreement.

                  THE EXECUTIVE THEREFORE AGREES AS FOLLOWS:

                  1.       The Executive's employment with the Company shall
terminate on July 15, 2001, and the Executive shall receive the termination
payments set forth in Sections 4 and 5 of the Separation Agreement and the
benefits set forth in Section 8 of the Separation Agreement in accordance with
the terms and subject to the conditions thereof.

                  2.       The Executive, on behalf of himself and anyone
claiming through him, hereby agrees not to sue the Company or Firearms Training
Systems, Inc. or any of their divisions, subsidiaries, affiliates or other
related entities of the above specified entities (whether or not such entities
are wholly owned) or any of the past, present or future directors, officers,
administrators, trustees, fiduciaries, employees, agents, attorneys or
shareholders of the Company or Firearms Training Systems, Inc. or any of such
other entities, or the predecessors, successors or assigns of any of them
(hereinafter referred to as the "Released Parties"), and agrees to release and
discharge, fully, finally and forever, the Released Parties from any and all
claims, causes of action, lawsuits, liabilities, debts, accounts, covenants,
contracts, controversies, agreements, promises, sums of money, damages,
judgments and demands of any nature whatsoever, in law or in equity, both known
and unknown, asserted or not asserted, foreseen or unforeseen, which the
Executive ever had or may presently have against any of the Released Parties
arising from the beginning of time up to and including the effective date of
this Release, including, without limitation, all matters in any way related to
the Executive's employment by the Company, the terms and conditions thereof, any
failure to promote the Executive and the termination or cessation of the
Executive's employment with the Company, and including, without limitation, any
and all claims arising under the Civil Rights Act of 1964, as amended, the Civil
Rights Act of 1991, the Civil Rights Act of 1866, the Age Discrimination in
Employment Act, the Older Workers' Benefit Protection Act, the Family and
Medical Leave Act, the Americans With Disabilities Act, the Employee Retirement
Income Security Act of 1974, the Georgia Minimum Wage Law, the Georgia Common
Day of Rest Act, the Georgia Equal Employment for Persons with Disabilities
Code, the Georgia Equal Pay for Equal Work Act, the Georgia law governing wage
payment (O.C.G.A. 34-7-1, et seq.), the Georgia law prohibiting discrimination
based on age (O.C.G.A. 34-1-2), the Georgia law governing safety in the
workplace (O.C.G.A. 34-2-10) or any other federal, state, local or foreign
statute, regulation, ordinance or order, or pursuant to any common law doctrine;
provided, however, that nothing contained in this Release (i) shall apply to, or
release the Company from, any obligation of the Company contained in the
Separation Agreement or any vested or accrued benefit pursuant to any employee
benefit plan of the Company, or (ii) shall apply to, or release the Parent from,
any obligation of the Parent contained in the stock option agreements between
the Parent and the Executive. The consideration offered in the Separation
Agreement is accepted by the Executive as being in full accord, satisfaction,
compromise and settlement of any and all claims or potential claims, and the
Executive expressly agrees that he is not entitled to, and shall not receive,
any further recovery of any kind from the Company or any of the other Released
Parties, and that in the event of any further proceedings whatsoever based upon
any matter released herein, neither the Company nor any of the other Released
Parties shall have any further monetary or other obligation of any kind to the
Executive, including any obligation for any costs, expenses or attorneys' fees
incurred by or on behalf of the Executive. The Executive agrees that he has no
present or future right to employment with the Company or any of the other
Released Parties and that he will not apply for or otherwise seek employment
with any of them.

                  3.       The Executive expressly represents and warrants that
he is the sole owner of the actual and alleged claims, demands, rights, causes
of action and other matters that are released herein; that the same have not
been transferred or assigned or caused to be transferred or assigned to any
other person, firm, corporation or other legal entity; and that he has the full
right and power to grant, execute and deliver the general release, undertakings
and agreements contained herein.

<PAGE>   8

                  4.       ACKNOWLEDGMENT BY EXECUTIVE. BY EXECUTING THIS
RELEASE, THE EXECUTIVE EXPRESSLY ACKNOWLEDGES THAT HE HAS READ THIS RELEASE
CAREFULLY, THAT HE FULLY UNDERSTANDS ITS TERMS AND CONDITIONS, THAT HE HAS BEEN
ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE, THAT HE HAS
BEEN ADVISED THAT HE HAS 21 DAYS WITHIN WHICH TO DECIDE WHETHER OR NOT TO
EXECUTE THIS RELEASE AND THAT HE INTENDS TO BE LEGALLY BOUND BY IT. DURING A
PERIOD OF SEVEN DAYS FOLLOWING THE DATE OF HIS EXECUTION OF THIS RELEASE, THE
EXECUTIVE SHALL HAVE THE RIGHT TO REVOKE THE RELEASE OF CLAIMS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT BY SERVING WITHIN SUCH PERIOD WRITTEN NOTICE OF
REVOCATION. IF THE EXECUTIVE EXERCISES HIS RIGHTS UNDER THE PRECEDING SENTENCE,
HE SHALL FORFEIT THE AMOUNT PAYABLE TO HIM PURSUANT TO SECTION 5 OF THE
SEPARATION AGREEMENT.

                  5.       The Separation Agreement and this Release constitute
the entire understanding between the parties. The Executive has not relied on
any oral statements that are not included in the Separation Agreement or this
Release.

                  6.       This Release shall be construed, interpreted and
applied in accordance with the internal laws of the State of Delaware without
regard to the principle of conflicts of laws.

                                       EXECUTIVE

                                       -----------------------------------------
                                       Robert F. Mecredy

                                       Date:
                                            ------------------------------------

<PAGE>   9

EXHIBIT B

FIRST AMENDMENT TO THE
FIREARMS TRAINING SYSTEMS, INC. STOCK OPTION AGREEMENT
SERIES F

         WHEREAS, Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), previously granted to Robert Mecredy (the "Optionee"), as of April
1, 2000, an option to purchase 240,000 shares of its Class A Common Stock,
$0.000006 per share par value, pursuant to the provisions of the Firearms
Training Systems, Inc. Stock Option Plan (the "Plan") and upon and subject to
the terms and conditions set forth in the Series F Stock Option Agreement (the
"Option Agreement");

         WHEREAS, pursuant to Section 1.2 of the Plan, the Stock Option
Sub-Committee of the Compensation Committee of the Board of Directors of the
Company (the "Committee") has been appointed by the Board of Directors of the
Company to administer the Plan;

         WHEREAS, pursuant to Section 1.2 of the Plan, the Committee has the
power and authority to determine terms and conditions of the options granted
under the Plan, including the number of shares subject to each option, the time
and conditions of exercise of such option and the form of the option agreement;

         WHEREAS, the Committee has determined that it is advisable to amend the
Option Agreement in certain respects; and

         WHEREAS, the Optionee has agreed that it is advisable to amend the
Option Agreement in certain respects.

         NOW, THEREFORE, the Option Agreement hereby is amended in the following
respects:

         1. Subsection (a) of Section 2.2 is amended by deleting "subsections
(b) - (d)" and substituting therefor "subsection (b)".

         2. Subsections (b) and (c) of Section 2.2 are deleted in their
entirety.

         3. Subsection (d) of Section 2.2 is amended by deleting such subsection
in its entirety and substituting the following in lieu thereof:

                  "(b) If the Optionee's employment with the Company
                  terminates for any reason, the Option shall continue
                  to become exercisable in accordance with Section
                  2.2(a) above and may thereafter be exercised by the
                  Optionee or the Optionee's Legal Representative
                  until the earlier to occur of (i) the date which is
                  the second anniversary of the Optionee's termination
                  of employment and (ii) the Expiration Date; provided
                  that if the Optionee's employment is terminated by
                  the Company for Cause prior to the "Employment
                  Termination Date," as such term is defined in
                  Section 1 of the Confidential Separation Agreement
                  and General Release dated as of May 16, 2001 between
                  FATS, Inc. and the Optionee (the "Separation
                  Agreement"), the Option shall terminate
                  automatically on the date the Board authorizes the
                  Optionee's termination for Cause, and the Optionee
                  shall be subject to the provisions of Section 2.5."

         4. Subsection (e) of Section 2.2 is relettered as subsection (c).

         5. Subsection (a) of Section 2.5 is amended by deleting the words
"Sections 6, 7, 8, 9, or 10 of the Employment Agreement or the Optionee is
terminated for Cause," and substituting therefor the words "Sections 9, 10, 11,
12 or 13 of the Separation Agreement or the Optionee is terminated for Cause
prior to the "Employment Termination Date," as such term is defined in the
Separation Agreement,".

                  IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company and the Optionee has
executed this Amendment as of May 16, 2001.

                                       FIREARMS TRAINING SYSTEMS, INC.

                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------

                                       ROBERT F. MECREDY

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

<PAGE>   10

EXHIBIT C

FIRST AMENDMENT TO THE
FIREARMS TRAINING SYSTEMS, INC. STOCK OPTION AGREEMENT
SERIES H

         WHEREAS, Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), previously granted to Robert Mecredy (the "Optionee"), as of April
1, 2000, an option to purchase 240,000 shares of its Class A Common Stock,
$0.000006 per share par value, pursuant to the provisions of the Firearms
Training Systems, Inc. Stock Option Plan (the "Plan") and upon and subject to
the terms and conditions set forth in the Series H Stock Option Agreement (the
"Option Agreement");

         WHEREAS, pursuant to Section 1.2 of the Plan, the Stock Option
Sub-Committee of the Compensation Committee of the Board of Directors of the
Company (the "Committee") has been appointed by the Board of Directors of the
Company to administer the Plan;

         WHEREAS, pursuant to Section 1.2 of the Plan, the Committee has the
power and authority to determine terms and conditions of the options granted
under the Plan, including the number of shares subject to each option, the time
and conditions of exercise of such option and the form of the option agreement;

         WHEREAS, the Committee has determined that it is advisable to amend the
Option Agreement in certain respects; and

         WHEREAS, the Optionee has agreed that it is advisable to amend the
Option Agreement in certain respects.

         NOW, THEREFORE, the Option Agreement hereby is amended in the following
respects:

         1. Section 2.1 is amended by deleting the word "seventh" and replacing
it with the word "third".

         2. The first sentence of clause (i) of subsection (a) of Section 2.2 is
amended by deleting the phrase "(i) Except as provided in Section 2.2(a)(ii)
below,".

         3. Clauses (ii) and (iii) of subsection (a) of Section 2.2 and
subsections (b) and (c) of Section 2.2 are deleted in their entirety.

         4. Subsection (d) of Section 2.2 is amended by deleting such subsection
in its entirety and substituting the following in lieu thereof:

                  "(b) If the Optionee's employment with the Company
                  terminates for any reason, the Option shall continue
                  to become exercisable in accordance with Section
                  2.2(a) above and may thereafter be exercised by the
                  Optionee or the Optionee's Legal Representative
                  until the Expiration Date; provided that if the
                  Optionee's employment is terminated by the Company
                  for Cause prior to the "Employment Termination
                  Date," as such term is defined in Section 1 of the
                  Confidential Separation Agreement and General
                  Release dated as of May 16, 2001 between FATS, Inc.
                  and the Optionee (the "Separation Agreement"), the
                  Option shall terminate automatically on the date the
                  Board authorizes the Optionee's termination for
                  Cause, and the Optionee shall be subject to the
                  provisions of Section 2.5."

         5. Subsection (e) of Section 2.2 is amended by deleting such subsection
in its entirety and substituting the following in lieu thereof:

                  "(c) For purposes of this Agreement, "Cause" shall
                  have the meaning contained in Section 4(c) of the
                  Employment Agreement between the Optionee and FATS,
                  Inc. dated November 1, 2000 (the "Employment
                  Agreement")."

         6. Subsection (a) of Section 2.5 is amended by deleting the words
"Sections 6, 7, 8, 9, or 10 of the Employment Agreement or the Optionee is
terminated for Cause," and substituting therefor the words "Sections 9, 10, 11,
12 or 13 of the Separation Agreement or the Optionee is terminated for Cause
prior to the "Employment Termination Date," as such term is defined in the
Separation Agreement,".

                  IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company and the Optionee has
executed this Amendment as of May 16, 2001.

                                       FIREARMS TRAINING SYSTEMS, INC.

                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------

                                       ROBERT F. MECREDY

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

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