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                                                                    EXHIBIT 10.1

                      CHANGE IN CONTROL SEVERANCE AGREEMENT

                  THIS AGREEMENT is entered into as of the ______ day of June,
2000 by and between PFSweb, Inc., a Delaware corporation (the "Company"), and
__________________________________ ("Executive").

                               W I T N E S S E T H

                  WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders; and

                  WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may arise and
that such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and

                  WHEREAS, the Board (as defined in Section 1) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued and undivided
dedication to his duties in the event of any threat or occurrence of a Change in
Control (as defined in Section 1) of the Company; and

                  WHEREAS, the Board has authorized the Company to enter into
this Agreement.

                  NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:

                  1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below:

                  "Board" means the Board of Directors of the Company.

                  "Bonus Amount" means the greater of (i) the highest annual
incentive bonus earned by Executive from the Company (or its affiliates) during
the last three (3) completed fiscal years of the Company immediately preceding
Executive's Date of Termination (annualized in the event Executive was not
employed by the Company (or its affiliates) for the whole of any such fiscal
year) or (ii) the Executive's target bonus for the fiscal year of the Company
which includes the Executive's Date of Termination.

                  "Cause" means (i) the willful and continued failure of
Executive to perform substantially his duties with the Company (other than any
such failure resulting from Executive's incapacity due to physical or mental
illness or any such failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Company or

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delivering a Notice of Termination for Good Reason to the Company) after a
written demand for substantial performance is delivered to Executive by the
Board which specifically identifies the manner in which the Board believes that
Executive has not substantially performed Executive's duties, or (ii) the
willful engaging by Executive in illegal conduct or gross misconduct which is
demonstrably and materially injurious to the Company or its affiliates. For
purpose of the preceding sentence, no act or failure to act by Executive shall
be considered "willful" unless done or omitted to be done by Executive in bad
faith and without reasonable belief that Executive's action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board, based upon
the advice of counsel for the Company (or upon the instructions of the Company's
chief executive officer or another senior officer of the Company) shall be
conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. Cause shall not exist unless and
until the Company has delivered to Executive a copy of a resolution duly adopted
by a majority of the entire Board (excluding Executive if Executive is a Board
member) at a meeting of the Board called and held for such purpose (after
reasonable notice to Executive and an opportunity for Executive, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board an event set forth in clauses (1) or (2) has occurred and
specifying the particulars thereof in detail. The Company must notify Executive
of any event constituting Cause within ninety (90) days following the Company's
knowledge of its existence or such event shall not constitute Cause under this
Agreement.

                  "Change in Control" means the occurrence of any one of the
following events:

                           (1) individuals who, on the date of this Agreement,
constitute the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a
director subsequent to the date of this Agreement, whose election or nomination
for election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an Incumbent
Director; provided, however, that no individual initially elected or nominated
as a director of the Company as a result of an actual or threatened election
contest with respect to directors or as a result of any other actual or
threatened solicitation of proxies (or consents) by or on behalf of any person
other than the Board shall be deemed to be an Incumbent Director;

                           (2) any "Person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities eligible to
vote for the election of the Board (the "Company Voting Securities"); provided,
however, that the event described in this paragraph (ii) shall not be deemed to
be a Change in Control by virtue of any of the following acquisitions: (A) by
the Company or any Subsidiary, (B) by any employee benefit plan (or related
trust) sponsored or maintained by the

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Company or any Subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying
Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition
by Executive or any group of persons including Executive (or any entity
controlled by Executive or any group of persons including Executive);

                           (3) the consummation of a merger, consolidation,
statutory share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of securities in the
transaction (a "Business Combination"), unless immediately following such
Business Combination: (A) more than 50% of the total voting power of (x) the
corporation resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Company Voting Securities that were outstanding
immediately prior to such Business Combination (or, if applicable, is
represented by shares into which such Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of such
Company Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly or indirectly,
of 30% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority of the
members of the board of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board's
approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria
specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying
Transaction); or

                           (4) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 30% of the Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur.

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                  "Date of Termination" means (1) the effective date on which
Executive's employment by the Company terminates as specified in a prior written
notice by the Company or Executive, as the case may be, to the other, delivered
pursuant to Section 10 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.

                  "Disability" means termination of Executive's employment by
the Company due to Executive's absence from Executive's duties with the Company
on a full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive's incapacity due to physical or mental illness.

                  "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:

                           (1) (A) any change in the duties or responsibilities
(including reporting responsibilities) of Executive that is inconsistent in any
material and adverse respect with Executive's position(s), duties,
responsibilities or status with the Company immediately prior to such Change in
Control (including any material and adverse diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be deemed to
occur upon a change in duties or responsibilities (other than reporting
responsibilities) that is solely and directly a result of the Company no longer
being a publicly traded entity and does not involve any other event set forth in
this paragraph (g) or (B) a material and adverse change in Executive's titles or
offices (including, if applicable, membership on the Board) with the Company as
in effect immediately prior to such Change in Control;

                           (2) a reduction by the Company in Executive's rate of
annual base salary or annual target bonus opportunity (including any material
and adverse change in the formula for such annual bonus target) as in effect
immediately prior to such Change in Control or as the same may be increased from
time to time thereafter;

                           (3) any requirement of the Company that Executive (A)
be based anywhere more than thirty-five (35) miles from the office where
Executive is located at the time of the Change in Control, if such relocation
increases Executive's commute by more than twenty (20) miles, or (B) travel on
Company business to an extent substantially greater than the travel obligations
of Executive immediately prior to such Change in Control;

                           (4) the failure of the Company to (A) continue in
effect any employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which Executive is participating immediately
prior to such Change in Control or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce Executive's
benefits under any such plan, unless Executive is permitted to participate in
other plans providing Executive with substantially equivalent benefits in the
aggregate (at substantially equivalent cost with respect to welfare benefit
plans), or (B) provide Executive with paid vacation in accordance with the most
favorable vacation policies of the Company as in effect for Executive
immediately prior to such Change in Control, including the crediting of

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all service for which Executive had been credited under such vacation policies
prior to the Change in Control;

                           (5) any refusal by the Company to continue to permit
Executive to engage in activities not directly related to the business of the
Company which Executive was permitted to engage in prior to the Change in
Control;

                           (6) any purported termination of Executive's
employment which is not effectuated pursuant to Section 10(b) (and which will
not constitute a termination hereunder); or

                           (7) the failure of the Company to obtain the
assumption (and, if applicable, guarantee) agreement from any successor (and, if
applicable, Parent Corporation) as contemplated in Section 9(b).

An isolated, insubstantial and inadvertent action taken in good faith and which
is remedied by the Company within ten (10) days after receipt of notice thereof
given by Executive shall not constitute Good Reason. Executive's right to
terminate employment for Good Reason shall not be affected by Executive's
incapacity due to mental or physical illness and Executive's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any event or condition constituting Good Reason; provided, however, that
Executive must provide notice of termination of employment within ninety (90)
days following Executive's knowledge of an event constituting Good Reason or
such event shall not constitute Good Reason under this Agreement).

                  "Qualifying Termination" means a termination of Executive's
employment (i) by the Company other than for Cause or (ii) by Executive for Good
Reason. Termination of Executive's employment on account of death, Disability or
Retirement shall not be treated as a Qualifying Termination.

                  "Subsidiary" means any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests of
such corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets upon liquidation or dissolution.

                  "Termination Period" means the period of time beginning with a
Change in Control and ending two (2) years following such Change in Control.
Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date

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immediately prior to the date of such termination of employment or event
constituting Good Reason shall be treated as a Change in Control. For purposes
of determining the timing of payments and benefits to Executive under Section 4,
the date of the actual Change in Control shall of treated as Executive's Date of
Termination under Section l(e).

                  2. Obligation of Executive. In the event of a tender or
exchange offer, proxy contest, or the execution of any agreement which, if
consummated, would constitute a Change in Control, Executive agrees not to
voluntarily leave the employ of the Company, other than as a result of
Disability or an event which would constitute Good Reason if a Change in Control
had occurred, until the Change in Control occurs or, if earlier, such tender or
exchange offer, proxy contest, or agreement is terminated or abandoned.

                  3. Term of Agreement. This Agreement shall be effective on the
date hereof and shall continue in effect until the Company shall have given
three (3) years' written notice of cancellation; provided, that, notwithstanding
the delivery of any such notice, this Agreement shall continue in effect for a
period of two (2) years after a Change in Control, if such Change in Control
shall have occurred during the term of this Agreement. Notwithstanding anything
in this Section to the contrary, this Agreement shall terminate if Executive or
the Company terminates Executive's employment prior to a Change in Control
except as provided in Section l(j).

                  4. Payments and Benefits

                           (a) Qualifying Termination - Severance. If during the
Termination Period the employment of Executive shall terminate pursuant to a
Qualifying Termination, then the Company shall pay to Executive:

                           (1) within ten (10) days following the Date of
Termination a lump-sum cash amount equal to the sum of (A) Executive's base
salary through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, (B) a pro rata portion
of Executive's annual bonus for the fiscal year in which Executive's Date of
Termination occurs in an amount at least equal to (1) Executive's Bonus Amount,
multiplied by (2) a fraction, the numerator of which is the number of days in
the fiscal year in which the Date of Termination occurs through the Date of
Termination and the denominator of which is three hundred sixty-five (365), and
reduced by (3) any amounts paid from the Company's annual incentive plan for the
fiscal year in which Executive's Date of Termination occurs, and (C), any
compensation previously deferred by Executive other than pursuant to a
tax-qualified plan (together with any interest and earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid; plus

                           (2) within ten (10) days following the Date of
Termination, a lump-sum cash amount equal to (i) two (2) times Executive's
highest annual rate of base salary during the 12-month period immediately prior
to Executive's Date of Termination, plus (ii) two (2) times Executive's Bonus
Amount, plus (iii) the value of any Company-provided benefits under the
Company's 401(k) Plan which Executive would have accrued in the two (2) years
following

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the Date of Termination had he remained employed by the Company during such
period, calculated assuming that both the Executive and the Company contributed
the highest permissible amounts to the plans during such period.

                           (b) Qualifying Termination - Benefits. If during the
Termination Period the employment of Executive shall terminate pursuant to a
Qualifying Termination, the Company shall continue to provide, for a period of
two (2) years following Executive's Date of Termination, Executive (and
Executive's dependents, if applicable) with the same level of medical, dental,
accident, disability and life insurance benefits upon substantially the same
terms and conditions (including contributions required by Executive for such
benefits) as existed immediately prior to Executive's Date of Termination (or,
if more favorable to Executive, as such benefits and terms and conditions
existed immediately prior to the Change in Control); provided, that, if
Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder.

                           (c) Nonqualifying Termination. If during the
Termination Period the employment of Executive shall terminate other than by
reason of a Qualifying Termination, then the Company shall pay to Executive
within thirty (30) days following the Date of Termination, a lump-sum cash
amount equal to the sum of (1) Executive's base salary through the Date of
Termination and any bonus amounts which have become payable, to the extent not
theretofore paid or deferred, and (2) any compensation previously deferred by
Executive other than pursuant to a tax-qualified plan (together with any
interest and earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid. The Company may make such additional payments, and
provide such additional benefits, to Executive as the Company and Executive may
agree in writing.

                           (d) Stock Options. In the event of a Change in
Control, all options to purchase Company stock held by Executive ("Options")
which are not fully vested and exercisable shall become fully vested and
exercisable as of a time established by the Board, which shall be no later than
a time preceding the Change in Control which allows Executive to exercise the
Options and cause the stock acquired thereby to participate in the Change in
Control transaction. If the Change in Control transaction is structured such
that stock participating therein at one time is or may be treated differently
than stock participating therein at a different time (e.g., a tender offer
followed by a squeeze-out merger, with differing forms or amounts of
consideration), the Board shall interpret this paragraph (d) to provide for the
required vesting acceleration in a manner designed to allow Executive to
exercise the Options and cause the stock acquired thereby to participate in the
earliest portion of the Change in Control transaction. If the consummation of a
pending or threatened Change in Control transaction is uncertain (e.g., a tender
offer in which the tender of a minimum number of

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shares is a condition to closing, or a voted merger or proxy contest in which a
minimum number of votes is a condition to closing), the Board shall apply this
paragraph (d) by using its best efforts to determine if and when the Change in
Control transaction is likely to occur, and proceeding accordingly. To the
extent necessary to implement this Section 4(d), each stock option agreement
reflecting the Options, and each stock option plan relating to each such stock
option agreement, if any, shall be deemed amended.

                  5. Certain Additional Payments by the Company.

                           (a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") 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 are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the
Gross-Up Payment in Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to (I) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (iii) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income.

                           (b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive may appoint

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another nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company and the Company shall enter into any agreement
requested by the Accounting Firm in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 5 with respect to
any Payments shall be made no later than thirty (30) days following such
Payment. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish Executive with a written opinion to such effect, and
to the effect that failure to report the Excise Tax, if any, on Executive's
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. The Determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-Up Payments are made by the
Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the Executive
thereafter is required to make payment of any Excise Tax or additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to
or for the benefit of Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.

                  6. Withholding Taxes. The Company may withhold from all
payments due to Executive (or his beneficiary or estate) hereunder all taxes
which, by applicable federal, state, local or other law, the Company is required
to withhold therefrom.

                  7. Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement involving termination of Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all reasonable legal fees and expenses, if any, incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the Chase Manhattan Bank
prime rate from time to time in effect, but in no event higher than the maximum
legal rate permissible under applicable law, such interest to accrue from the
date the Company receives Executive's statement for such fees and expenses
through the date of payment thereof, regardless of whether or not Executive's
claim is upheld by a court of competent jurisdiction; provided, however,
Executive shall be required to repay any such amounts to the Company to the
extent that a court issues a final order from which no appeal can be taken, or
with respect

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to which the time period to appeal has expired, setting forth the determination
that the position taken by Executive was frivolous or advanced by Executive in
bad faith.

                  8. Scope of Agreement. Nothing in this Agreement shall be
deemed to entitle Executive to continued employment with the Company or its
Subsidiaries, and if Executive's employment with the Company shall terminate
prior to a Change in Control, Executive shall have no further rights under this
Agreement (except as otherwise provided hereunder); provided, however, that any
termination of Executive's employment during the Termination Period shall be
subject to all of the provisions of this Agreement.

                  9. Successors; Binding Agreement.

                           (a) This Agreement shall not be terminated by any
Business Combination. In the event of any Business Combination, the provisions
of this Agreement shall be binding upon the Surviving Corporation, and such
Surviving Corporation shall be treated as the Company hereunder.

                           (b) The Company agrees that in connection with any
Business Combination, it will cause any successor entity to the Company
unconditionally to assume (and for any Parent Corporation in such Business
Combination to guarantee), by written instrument delivered to Executive (or his
beneficiary or estate), all of the obligations of the Company hereunder. Failure
of the Company to obtain such assumption and guarantee prior to the
effectiveness of any such Business Combination that constitutes a Change in
Control, shall be a breach of this Agreement and shall constitute Good Reason
hereunder and shall entitle Executive to compensation and other benefits from
the Company in the same amount and on the same terms as Executive would be
entitled hereunder if Executive's employment were terminated following a Change
in Control by reason of a Qualifying Termination. For purposes of implementing
the foregoing, the date on which any such Business Combination becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by Executive.

                           (c) This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.

                  10. Notice. (a) For purposes of this Agreement, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:

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If to the Executive to the most recent address of such Executive on the books
and records of the Company; and

If to the Company:

PFSweb, Inc.
500 North Central Expressway
Plano, Texas 75074
Attention: Secretary

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

                           (b) A written notice of Executive's Date of
Termination by the Company or Executive, as the case may be, to the other, shall
(i) indicate the specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) specify the termination
date (which date shall be not less than fifteen (15) (thirty (30), if
termination is by the Company for Disability) nor more than sixty (60) days
after the giving of such notice). The failure by Executive or the Company to set
forth in such notice any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of Executive or the Company
hereunder or preclude Executive or the Company from asserting such fact or
circumstance in enforcing Executive's or the Company's rights hereunder.

                  11. Full Settlement; Resolution of Disputes. The Company's
obligation to make any payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall be in lieu and in full settlement of all
other severance payments to Executive under any other severance or employment
agreement between Executive and the Company, and any severance plan of the
Company. The Company's obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and, except as provided in Section 4(b), such amounts shall not be reduced
whether or not Executive obtains other employment.

                  12. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any Subsidiary.

                  13. Survival. The respective obligations and benefits afforded
to the Company and Executive as provided in Sections 4 (to the extent that
payments or benefits are owed as a result of a termination of employment that
occurs during the term of this Agreement), 5 (to the extent that Payments are
made to Executive as a result of a Change in Control that occurs

                                       11
<PAGE>   12
during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the
termination of this Agreement.

                  14. 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 PRINCIPLES OF CONFLICTS OF LAWS THEREOF, OF SUCH PRINCIPLES OF ANY
OTHER JURISDICTION WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE. THE INVALIDITY OR
UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE
VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER
PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.

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

                  16. Miscellaneous. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by 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 Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including, without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. Except as
otherwise specifically provided herein, the rights of, and benefits payable to,
Executive, his estate or his beneficiaries pursuant to this Agreement are in
addition to any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.

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

                                       PFSweb, Inc.

                                       By:
                                          --------------------------------
                                       Title: Chairman

                                       -----------------------------------
                                       [EXECUTIVE]

                                       12<PAGE>   1
                                                                   EXHIBIT 10.1

                   AMENDED AND RESTATED EMPLOYMENT AGREEMENT
                   -----------------------------------------
                                 (Gary W. Cage)

         This AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") effective
as of January 1, 2000 by and between Monarch Dental Corporation. a Delaware
corporation whose principal executive offices are in Dallas, Texas ("Company")
and Gary W. Cage ("Executive").

                                   RECITALS:

         Company recognizes that Executive has made significant contributions
to the financial success of the Company, and that Executive has certain
knowledge and business contacts in Company's business.

         Company desires to continue Executive's employment and to obtain the
benefit of Executive's contacts and knowledge in the business as well as his
valuable judgment, extensive experience, good counsel and advice.

         To award Executive for his contributions to the financial success of
the Company, to induce Executive to continue his employment with the Company,
and to encourage Executive to exert his very best efforts toward the completion
of a Transaction, the Company has agreed to provide Executive certain
compensation, management arrangements, and incentives as set forth in this
Agreement.

         The Board of Directors of the Company has determined that it is in the
best interests of the Company to retain the Executive's services and to
reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction in potentially disturbing circumstances arising from the
possibility of a change in control of the Company or the assertion of claims
and actions against employees.

         The Company desires to assure itself of the services of the Executive
for the period provided in this Agreement and the Executive desires to stay in
the employ of the Company on the terms and conditions hereinafter provided.

                                   AGREEMENT

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:

<PAGE>   2

                                   ARTICLE I
                                   EMPLOYMENT

         1.1 Employment. The Company hereby employs the Executive and the
Executive hereby accepts employment by the Company for the period and upon the
terms and conditions contained in this Agreement.

         1.2 Office and Duties.

                  (a) Position. The Executive shall serve the Company as Chief
         Executive Officer, with authority, duties and responsibilities not
         less than the Executive has on the date of this Agreement, with his
         actions at all times subject to the direction of the Board of
         Directors of the Company.

                  (b) Commitment. Throughout the term of this Agreement, the
         Executive shall devote substantially all of his time, energy, skill
         and best efforts to the performance of his duties hereunder in a
         manner that will, faithfully and diligently further the business and
         interests of the Company. Subject to the foregoing, the Executive may
         serve, or continue to serve, on the boards of directors of, and hold
         any other offices or positions in, companies or organizations that are
         disclosed to the Board of Directors and that will not materially
         affect the performance of the Executive's duties pursuant to this
         Agreement.

         1.3 Term. Subject to the provisions hereof, the term of this Agreement
shall be for a period ending on December 31, 2000, ("Initial Term"), and shall
be automatically renewed thereafter for successive one year terms (each a
"Renewal Term") unless either party gives to the other written notice of
termination no fewer than 60 days prior to the expiration of the Initial Term
or any Renewal Term that it does not desire to extend this Agreement (the
Initial Term and any Renewal Term(s) shall be collectively referred to herein
as the "Term").

         1.4 Compensation.

                  (a) Base Salary. The Company shall pay the Executive as
         compensation an aggregate salary ("Base Salary") of $300,000 per year
         during the Term retroactive to January 1, 1999, or such greater amount
         as shall be approved by the Compensation Committee of the Company's
         Board of Directors. The Compensation Committee shall review the
         Executive's Base Salary at least annually. The Base Salary for each
         year shall be paid by the Company in accordance with the regular
         payroll practices of the Company. To effect such retroactivity,
         Executive is being paid in cash by the Company contemporaneously with
         the execution of the Agreement the amount of $111,153.84 (net of
         withholding taxes).

                  (b) Bonus Compensation. The Executive shall be paid by the
         Company annual bonus compensation ("Bonus Compensation") for the
         periods set forth below as follows:

                                      -2-
<PAGE>   3

<TABLE>
<CAPTION>

            Bonus                                                               Date of
            Year       Amount                                                   Payment
            -----      ------                                                   -------
<S>                    <C>                                     <C>
          2000 And     $12,500 x Number of Months Executive    To be Paid on earlier of Closing Date or
          After        is employed by the Company during       December 31 of year in which Bonus earned
                       such calendar year (Full and Partial)
                       prior to Closing Date
</TABLE>

                  (c) Retention Payment. The Executive shall be paid by the
         Company, retroactively to January 1, 2000, on the first day of each
         month, provided Executive is employed by the Company on such date, a
         monthly retention payment of $15,000 until the earlier to occur of the
         Closing Date or December 31 of the year in which earned. To effect
         such retroactivity, Executive is being paid in cash by the Company
         contemporaneously with the execution of this Agreement the amount of
         $60,000 (net of withholding taxes).

                  (d) Transaction Fee. Contemporaneously with, as a part of,
         and as a condition to, the Transaction and, except as set forth in
         Section 1.7(d) hereto, provided Executive is employed by the Company
         on such date, Executive shall be paid a transaction incentive fee
         ("Transaction Fee") in lump sum, cash as provided below (with linear
         interpolation between share points):

<TABLE>
<CAPTION>

                                                                    Transaction Incentive Fee
                      Price Per Share                          (bps below times Total Equity Value)
                      ---------------                          ------------------------------------
<S>                                                            <C>
                           $7.00                                                60 bps

                           $7.50                                                65 bps

                           $8.00                                                70 bps

                           $8.50                                                75 bps

                           $9.00                                                80 bps
</TABLE>

         The Transaction Fee will be equal to the Total Equity Value times the
         applicable basis point figure. For any Transaction below $7.00, the
         Transaction Fee will be equal to 50 basis points multiplied by the
         Total Equity Value.

                  (e) Stock Options. In addition to options heretofore granted
         to Executive, the Company hereby grants the Executive stock options to
         purchase 100,000 shares of the Company's common stock at a per share
         price of $2.719 in accordance with the terms and conditions of that
         certain Stock Option Agreement dated as of February 10, 2000.

                  (f) Certain Additional Payments by the Company.
         Notwithstanding anything to the contrary in this Agreement, in the
         event that any payment or distribution to or for

                                      -3-
<PAGE>   4

         the benefit of the Executive, whether paid or payable or distributed
         or distributable pursuant to the terms of 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 or any interest
         or penalties with respect to such excise tax (such excise tax,
         together with any such interest or penalties, are hereinafter
         collectively referred to as the "Excise Tax"), the Company shall pay
         to the Executive an additional payment (a "Gross-up Payment") in an
         amount such that after payment by the Executive of all taxes upon such
         Gross-up Payment (including any interest or penalties imposed with
         respect to such taxes), including any Excise Tax imposed on any
         Gross-up Payment, the Executive retains an amount of the Gross-up
         Payment equal to the Excise Tax imposed upon the Payments. (The
         Gross-Up Payment is not intended to compensate the Executive for any
         income taxes payable with respect to the Payment.) All determinations
         required to be made under this Section 1.4(f), including whether a
         Gross-up Payment is required and the amount of such Gross-up Payment,
         shall be made by Arthur Andersen LLP or any other nationally
         recognized accounting firm selected by the Company and Executive (the
         "Accounting Firm"), which shall provide detailed supporting
         calculations both to the Company and the Executive as is reasonably
         requested by the Company or the Executive. Any determination by the
         Accounting Firm shall be binding upon the Company and the Executive.
         The amount of the Gross-up Payment shall be paid (in estimate)
         contemporaneously with, as a part of and as a condition, to the
         Closing, with the actual amount finally to be determined, settled and
         paid by the Company to Executive or by Executive to the Company, as
         the case may be, upon at the time of filing of the applicable federal
         income tax return. The Executive shall notify the Company immediately
         in writing of any claim by the Internal Revenue Service which, if
         successful, would require the Company to make a Gross-up Payment (or a
         Gross-up Payment in excess of that, if any, initially determined by
         the Accounting Firm) within five days of the receipt of such claim.
         The Company shall notify the Executive in writing at least five days
         prior to the due date of any response required with respect to such
         claim if it plans to contest the claim. If the Company decides to
         contest such claim, the Executive shall cooperate fully with the
         Company in such action; provided, however, the Company shall bear and
         pay directly or indirectly all costs and expenses (including
         additional interest and penalties) incurred in connection with such
         action 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 the
         Company's action. If, as a result of the Company's action with respect
         to a claim, the Executive receives a refund of any amount paid by the
         Company with respect to such claim, the Executive shall promptly pay
         such refund to the Company. If the Company fails to timely notify the
         Executive whether it will contest such claim or the Company determines
         not to contest such claim, then the Company shall immediately pay to
         the Executive the portion of such claim, if any, which it has not
         previously paid to the Executive.

                                      -4-
<PAGE>   5

         1.5 Employment Benefits. In addition to any other compensation payable
to Executive hereunder, Executive shall be entitled to the following benefits
upon satisfaction by Executive of the eligibility requirements therefor, if
any, subject to the following limitations:

                  (a) Health and Dental Insurance. During the Term, the
         Company, at its own expense, shall provide Executive (and all
         dependents of Executive at the request of Executive) with welfare
         benefits which shall include health and dental insurance in amounts
         and with coverage comparable to the coverage currently provided to
         officers of the Company as of the date of this Agreement.

                  (b) Vacations. Executive shall be entitled to a paid vacation
         of not less than 20 business days each year during the Term of this
         Agreement, exclusive of holidays and weekends, which vacation shall be
         taken by Executive in accordance with the business requirements of the
         Company at the time and its personnel policies then in effect relative
         to this subject. Executive shall also be entitled to all paid holidays
         given by the Company to its employees.

                  (c) Working Facilities. During the Term of this Agreement,
         the Company shall provide, at its expense, adequate office space,
         furniture, equipment, supplies and personnel (including professional,
         clerical, support and other personnel) as shall be suitable to
         Executive's position and adequate for Executive's use in performing
         his duties and responsibilities under this Agreement.

                  (d) Fringe Benefits and Perquisites. During the Term, the
         Executive shall be entitled to participate in or receive benefits
         under any plan or arrangement made available by the Company to its
         senior executive officers, subject to and on a basis consistent with
         the terms, conditions and overall administration of such plans and
         arrangements. Nothing paid to the Executive under any plan or
         arrangement made available to the Executive shall be deemed to be in
         lieu of compensation hereunder.

                  (e) Payment and Reimbursement of Expenses. During the Term,
         the Company shall pay or reimburse the Executive for all reasonable
         travel and other expenses incurred by the Executive in performing his
         obligations under this Agreement in accordance with the policies and
         procedures of the Company for its senior executive officers, provided
         that the Executive properly accounts therefor in accordance with the
         regular policies of the Company.

         1.6 Termination.

                  (a) Disability. The Company may terminate this Agreement for
         Disability, "Disability" shall exist if because of ill health,
         physical or mental disability, or my other reason beyond his control,
         and notwithstanding reasonable accommodations made by the Company, the
         Executive shall have been unable, unwilling or shall have failed to
         perform

                                      -5-
<PAGE>   6

         his duties under this Agreement, as determined in good faith by the
         Compensation Committee of the Company's Board of Directors. or, if a
         Compensation Committee is not appointed, by the Board of Directors,
         for a period of 180 consecutive days, or if, in any 12-month period,
         the Executive shall have been unable or unwilling or shall have failed
         to perform his duties for a. period of 270 days, irrespective of
         whether or not such days are consecutive.

                  (b) Cause. The Company may terminate the Executive's
         employment for Cause. Termination for "Cause" shall mean termination
         because of the Executive's (i) willful gross misconduct that causes
         material economic harm to the Company or that brings substantial
         discredit to the Company's reputation, (ii) final, nonappealable
         conviction of a felony involving moral turpitude, or (iii) material
         breach of any provision of this Agreement. Item (iii) of this
         subsection shall not constitute Cause unless the Company notifies the
         Executive thereof, in writing, specifying in reasonable detail the
         basis therefor and stating that it is grounds for Cause, and unless
         the Executive fails to cure such matter within 60 days after such
         notice is sent or given under this Agreement. The Executive shall be
         permitted to respond and to defend himself before the Board of
         Directors or any appropriate committee thereof within a reasonable
         time after written notification of any proposed termination for Cause
         under item (i) or (iii) of this subsection.

                  (c) Without Cause. During the Term, the Company may terminate
         the Executive's employment Without Cause, subject to the provisions of
         subsection 1.7(d) (Termination Without Clause or for Good Reason).
         Termination "Without Cause" shall mean termination of the Executive's
         employment by the Company other than termination for Cause or for
         Disability or by reason of the non-renewal of this Agreement, by
         either party, at the end of the Term.

                  (d) Good Reason. During the Term, the Executive may terminate
         his employment hereunder for Good Reason. For purposes of this
         Agreement, the termination of Executive's employment hereunder by
         Executive because of the occurrence of one or more of the following
         events shall be deemed to have occurred for "Good Reason":

                           (i) any material breach of this Agreement by the
                  Company; provided, however, that a material breach of this
                  Agreement by the Company shall not constitute Good Reason
                  unless the Executive notifies the Company in writing of the
                  breach, specifying in reasonable detail the nature of the
                  breach and stating that such breach is grounds for Good
                  Reason, and unless the Company fails to cure such breach
                  within 60 days after such notice is sent or given under this
                  Agreement;

                           (ii) a relocation of the Company's principal
                  executive offices to any county other than Dallas County or
                  Collin County, Texas; provided, however, that

                                      -6-
<PAGE>   7

                  no relocation shall constitute Good Reason unless the
                  Executive advises the Board of Directors, in writing and
                  prior to the relocation, of the Executive's objection to such
                  relocation;

                           (iii) a material change in the nature or scope of
                  Executive's authorities, powers, functions, duties or
                  responsibilities that the Executive has on the date of this
                  Agreement and that is reasonably determined by Executive in
                  good faith to be adverse to Executive (specifically
                  including, but not limited to a material increase in travel);
                  or

                           (iv) any reduction in Executive's Base Salary or
                  Bonus Compensation or any other failure by the Company to
                  comply with Sections 1.4 or 1.5 hereof that is not consented
                  to or approved by Executive.

                  (e) Change in Control. If, within 12 months of a Change in
         Control, either (i) the Executive's employment is terminated by the
         Company Without Cause, or (ii) the Executive terminates his employment
         for Good Reason, then, the provisions of subsection 1.7(e)
         (Termination Upon a Change in Control) shall apply. For purposes of
         this Agreement "Change in Control" shall mean any of the following:

                           (i) any consolidation or merger of the Company in
                  which the Company is not the continuing or surviving
                  corporation or pursuant to which shares of the Company's
                  common stock would be converted into cash securities or other
                  property, other than a merger of the Company in which the
                  holders of the Company's common stock immediately prior to
                  the merger, own more than 50% of the combined voting power of
                  the merged or consolidated company's then outstanding voting
                  securities entitled to vote generally in the election of
                  directors;

                           (ii) any sale, lease, exchange or other transfer (in
                  one transaction or a series of related transactions) of more
                  than 50% of the assets of the Company;

                           (iii) any approval by the stockholders of the
                  Company of any plan or proposal for the liquidation or
                  dissolution of the Company;

                           (iv) the cessation of control (by virtue of their
                  not constituting a majority of directors) of the Company's
                  Board of Directors by the individuals (the "Continuing
                  Directors") who (x) at the date of this Agreement were
                  directors or (y) become directors after the date of this
                  Agreement and whose election or nomination for election by
                  the Company's stockholders, was approved by a vote of at
                  least two-thirds of the directors then in office who were
                  directors at the date of this Agreement or whose election or
                  nomination for election was previously so approved); or

                                      -7-
<PAGE>   8

                           (v) the acquisition of beneficial ownership (within
                  the meaning of Rule l3d-3 under the Securities Exchange Act
                  of 1934, as amended) of an aggregate of 50% or more of the
                  voting power of the Company's outstanding voting securities
                  by any person or group (as such term is used in Rule l3d-5
                  under such Act); provided, however, that notwithstanding the
                  foregoing, an acquisition shall not constitute a Change in
                  Control hereunder if the acquiror is (w) the Executive, (x) a
                  trustee or other fiduciary holding securities under an
                  employee benefit plan of the Company and acting in such
                  capacity, or (y) a corporation owned, directly or indirectly,
                  by the stockholders of the Company in substantially the same
                  proportions as their ownership of voting securities of the
                  Company.

                           (vi) subject to applicable law, in a Chapter 11
                  bankruptcy proceeding, the appointment of a trustee or the
                  conversion of a case involving the Company to a case under
                  Chapter 7.

                  (f) Without Good Reason. During the Term, the Executive may
         terminate his employment Without Good Reason. Termination "Without
         Good Reason" shall mean, termination of the Executive's employment by
         the Executive other than termination for Good Reason.

                  (g) Explanation of Termination of Employment. Any party
         terminating this Agreement shall give prompt written notice ("Notice
         of Termination") to the other party hereto advising such other party
         of the termination of this Agreement. Within 5 days after notification
         that the Agreement has been terminated, the terminating party shall
         deliver to the other party hereto a written explanation (the
         "Explanation of Termination of Employment"), which shall state in
         reasonable detail the basis for such termination and shall indicate
         whether termination is being made for Cause, Without Cause or for
         Disability (if the Company has terminated the Agreement) or for Good
         Reason, upon a Change in Control, or Without Good Reason (if the
         Executive has terminated the Agreement).

                  (h) Date of Termination. "Date of Termination" shall mean the
         date on which Notice of Termination is sent or given under this
         Agreement.

         1.7 Compensation During Disability or Upon Termination.

                  (a) During Disability. During any period that the Executive
         fails to perform his duties hereunder because of ill health, physical
         or mental disability, or any other reason beyond his control, he shall
         continue to receive his full compensation and benefits pursuant to
         Sections 1.4 (Compensation) and 1.5 (Employment Benefits) until the
         Date of Termination.

                                      -8-
<PAGE>   9

                  (b) Termination for Disability. If the Company shall
         terminate the Executive's employment for Disability, the Company's
         obligation to pay compensation and benefits pursuant to Sections 1.4
         (Compensation) and 1.5 (Employment Benefits) shall terminate, except
         that the Company shall pay the Executive (i) accrued but unpaid
         compensation and benefits pursuant to Sections 1.4 (Compensation) and
         1.5 (Employment Benefits) through the Date of Termination, and (ii)
         the benefits set forth in subsection 1.7(f) (Employee Benefits).

                  (c) Termination for Cause or Without Good Reason. If the
         Company shall terminate the Executive's employment for Cause or if the
         Executive shall terminate his employment Without Good Reason, then the
         Company's obligation to pay compensation and benefits pursuant to
         Sections 1.4 (Compensation) and 1.5 (Employment Benefits) shall
         terminate, except that the Company shall pay the Executive his accrued
         but unpaid compensation and benefits pursuant to Sections 1.4
         (Compensation) and 1.5 Employment Benefits) through the Date of
         Termination.

                  (d) Termination Without Cause or for Good Reason. If the
         Company shall terminate the Executive's employment Without Cause or if
         the Executive shall terminate his employment for Good Reason, then the
         Company shall pay to the Executive as severance pay in a lump sum
         within 15 days following the Date of Termination, in cash, an amount
         equal to the greater of: (i) the Executive's total Compensation
         hereunder for the remainder of the Initial Term or Renewal Term then
         in effect beginning on the date upon which such termination takes
         place including without limitation under subsections 1.4(a) (Base
         Salary) and, 1.4(b) (Bonus Compensation), but excluding compensation
         under subsections 1.4(c) (Retention Payment) and 1.4(d) (Transaction
         Incentive Fee); or (ii) 2 years average total compensation including
         without limitation under subsections 1.4(a) (Base Salary) and 1.4(b)
         (Bonus Compensation), but excluding compensation under subsections
         1.4(c) (Retention Payment) and 1.4(d) (Transaction Incentive Fee),
         paid to Executive by the Company over the 3 most recently completed
         years. Notwithstanding the foregoing, if, at the time of such
         termination by the Company Without Cause or termination by the
         Executive for Good Reason, the Company is in discussion with a person
         or an entity regarding a Transaction, and such discussion results in
         the consummation of a Transaction, or execution of a definitive
         agreement regarding a Transaction within 15 months of such
         termination, then the Executive shall also receive the Transaction Fee
         under subsection 1.4(d) upon the closing of the Transaction.

                  (e) Termination Upon a Change in Control. If, within twelve
         (12) months of a Change of Control pursuant to subsection 1.6(e)
         (Change in Control), either (i) the Executive's employment is
         terminated by the Company Without Cause, or (ii) if the Executive
         terminates his employment for Good Reason, then the Company shall pay
         to the Executive as severance pay either in accordance with the
         provisions of Section 1.4 (Compensation) or in a lump sum within 15
         days following the Date of Termination (at the Company's option), in
         cash, an amount equal to the greater of:

                                      -9-
<PAGE>   10

                           (i) the Executive's total compensation including
                  without limitation under subsections 1.4(a) (Base Salary) and
                  1.4(b) (Bonus Compensation) (for this purpose, the Bonus
                  Compensation shall be deemed to be the avenge Bonus
                  Compensation paid to Executive by the Company over the 3 most
                  recently completed years beginning with fiscal 1996 (or such
                  shorter period as may be applicable)) but excluding
                  compensation under subsections 1.4(c) and 1.4(d) for the
                  balance of the Term up to a maximum of 3 years; or

                           (ii) 2 years average total compensation including
                  without limitation under subsections 1.4(a) (Base Salary) and
                  1.4(b) (Bonus Compensation) but excluding compensation under
                  subsections 1.4(c) and 1.4(d) paid to Executive by the
                  Company over the 3 most recently completed years beginning
                  with fiscal 1996 (or such shorter period as may be
                  applicable).

                  (f) Employee Benefits. Unless the Company terminates the
         Executive's employment for Cause or the Executive terminates his
         employment Without Good Reason, the Company shall maintain in full
         force and effect (to the extent consistent with past practice), for
         the continued benefit of the Executive and, if applicable, his wife
         and children, the employee benefits set forth in subsections 1.5(a)
         (Health and Dental Insurance), and 1.5(d) (Fringe Benefits and
         Perquisites) above that he was entitled to receive immediately prior
         to the Date of Termination (subject to the general terms and
         conditions of the plans and programs under which he receives such
         benefits) for the balance of the applicable period set forth in
         subsections 1.7(d) (Termination Without Cause or for Good Reason) or
         1.7(e) (Termination Upon a Change in Control), as applicable, or for
         the period provided for under the terms and conditions of such plans
         and programs, whichever is longer, provided that his continued
         participation or, if applicable, the participation of his wife and
         children, is possible under the general terms and conditions of such
         plans and programs.

                  (g) No Mitigation. The Executive shall not be required to
         mitigate the amount of any payment provided for in this Section 1.7
         (Compensation During Disability or Upon Termination) by seeking other
         employment or otherwise.

                  (h) Reduction in Compensation. If the Executive terminates
         his employment for Good Reason or upon a Change in Control based upon
         a reduction by the Company of the Executive's Base Salary, then for
         purposes of subsections 1.7(d) (Termination Without Cause or for Good
         Reason) and 1.7(e) (Termination Upon a Change in Control), the
         Executive's Base Salary as of the Date of Termination shall be deemed
         to be the Executive's Base Salary immediately prior to the reduction
         that the Executive claims as grounds for Good Reason.

                                     -10-
<PAGE>   11

         1.8 Death of Executive. If the Executive dies prior to the expiration
of this Agreement, the Executive's employment and other obligations under this
Agreement shall automatically terminate and all compensation to which the
Executive is or would have been entitled hereunder including without limitation
under subsections 1.4(a) (Base Salary) and 1.4(b) (Bonus Compensation), but
excluding compensation under subsections 1.4(c) (Retention Payment) and 1.4(d)
(Transaction Incentive Fee), shall terminate as of the end of the month in
which the Executive's death occurs; provided, however, that (i) for the balance
of the Initial Term or Renewal Term then in effect, the Executive's wife shall
be entitled to receive benefits under Section 1.5(a) (Health and Dental
Insurance), and (ii) the Executive's named beneficiary or beneficiaries shall
receive such reimbursement as may have been due to the Executive pursuant to
subsection 1.5(e) (Payment and Reimbursement of Expenses) hereof.
Notwithstanding the foregoing, if, at the time of Executive's death, the
Company is in discussion with a person or an entity regarding a Transaction,
and such discussion results in the consummation of a Transaction, or execution
of a definitive agreement regarding a Transaction within 15 months after the
Executive's death, then the Executive shall also receive the Transaction Fee
under subsection 1.4(d) upon the closing of the Transaction.

                                   ARTICLE 2
                      NON-COMPETITION AND CONFIDENTIALITY

         2.1 Non-Competition Agreement. The Company and the Executive
acknowledge that they have entered into that certain Non-Competition Agreement
dated July 1, 1997, and they hereby reaffirm and readopt all the terms and
conditions of that Non-Competition Agreement as if it was completely restated
herein.

         2.2 Confidentiality. Executive shall not, directly or indirectly, at
any time following termination of his employment with the Company, reveal,
divulge or make known to any person or entity, or use for Executive's personal
benefit (including without limitation for the purpose of soliciting business,
whether or not competitive with any business of the Company or any of its
subsidiaries), any information acquired during the course of employment
hereunder with regard to the financial. business or other affairs of the
Company or any of its subsidiaries (including without limitation any list or
record of persons or entities with which the Company or any of its subsidiaries
has any dealings), other than (1) material already in the public domain, (2)
information of a type not considered confidential by persons engaged in the
same business or a business similar to that conducted by the Company, or (3)
material that Executive is required to disclose under the following
circumstances: (A) at the express direction of any authorized governmental
entity; (B) pursuant to a subpoena or other court process; (C) as otherwise
required by law or the rules, regulations, or orders of any applicable
regulatory body; or (D) as otherwise necessary, in the opinion of counsel for
Executive, to be disclosed by Executive in connection with the prosecution of
any legal action or proceeding initiated by Executive against the Company or
any of its subsidiaries or the defense of any legal action or proceeding
initiated against Executive in his capacity as an employee or director of the
Company of any of its subsidiaries. Executive shall, at any time requested by
the Company (either during or after his

                                     -11-
<PAGE>   12

employment with the Company), promptly deliver to the Company all memoranda,
notes, reports, lists and other documents (and all copies thereof) relating to
the business of the Company or any of its subsidiaries that he may then possess
or have under his control.

                                   ARTICLE 3
                                INDEMNIFICATION

         3.1 Indemnification Arrangement. The Company and the Executive
acknowledge that they have entered into that certain Indemnification Agreement
dated as of March 11, 1996, and they hereby reaffirm and readopt all the terms
and conditions of that Indemnification Agreement as if it was completely
restated herein.

                                   ARTICLE 4
                                 MISCELLANEOUS

         4.1 Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Company or any
affiliate of the Company against the Executive, the Executive's spouse, heirs,
executors or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, and any claim or cause
of action of the Company or any affiliate shall be extinguished and deemed
released unless asserted by the timely filling of a legal action within such
two-year period; provided, however, that if any shorter period of limitations
is otherwise applicable to any such cause of action such shorter period shall
govern.

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

         4.3 Indulgences, Etc. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any right, remedy, power or privilege, nor shall any
waiver of any right, remedy, power, or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence.

         4.4 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement and the transactions contemplated
herein shall be in writing and shall be deemed to have been duly given, made
and received when sent by telecopy (with a copy sent by mail) or when
personally delivered or one business day after it is sent by overnight service,
addressed as set forth below:

                                     -12-
<PAGE>   13

                  If to the Executive:

                           Gary W. Cage
                           17671 Addison Road, #2902
                           Dallas, TX 75287

                  With a copy to:

                           Steven K. Cochran
                           Thompson & Knight L.L.P.
                           1700 Pacific Avenue, Suite 3300
                           Dallas, TX  75201

                  If to the Company:

                           Monarch Dental Corporation
                           4201 Spring Valley, Suite 320
                           Dallas, Texas 75244
                           Attn:  President

                  With a copy to:

                           John R. LeClaire, P.C.
                           Goodwin, Procter & Hoar LLP
                           Exchange Place
                           Boston, MA  02109

Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this subsection for the giving of notice. which shall be
effective only upon receipt.

         4.5 Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part.

         4.6 Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions. express or implied, oral or written, except as
herein contained, which shall be deemed terminated effective immediately. The
express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement
may not be modified or amended other than by an agreement in writing.

                                     -13-
<PAGE>   14

         4.7 Headings; Index. The headings of paragraphs are included solely
for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.

         4.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without giving effect to
principles of conflict of laws; provided, however, that questions regarding the
Company's ability to indemnify and advance expenses pursuant to Article, 3
(Indemnification) shall be governed by the Delaware General Corporation Law.

         4.9 Dispute Resolution. Any dispute, controversy or claim arising out
of or in relation to or connection to this Agreement, including without
limitation any dispute as to the construction, validity, interpretation,
enforceability or breach of this Agreement, shall be exclusively and finally
settled by arbitration, and any party may submit such dispute, controversy or
claim to arbitration (Dispute Resolution).

                  (a) Arbitrators. The arbitration shall be heard and
         determined by one arbitrator, who shall be impartial and who shall be
         selected by mutual agreement of the parties; provided, however, that
         if the dispute involves more than $2,000,000, then the arbitration
         shall be heard and determined by three (3) arbitrators. If three (3)
         arbitrators are necessary as provided above, then (i) each side shall
         appoint an arbitrator of its choice within thirty (30) days of the
         submission of a notice of arbitration and (ii) the party-appointed
         arbitrators shall in turn appoint a presiding arbitrator of the
         tribunal within thirty (30) days following the appointment of the last
         party-appointed arbitrator. If (x) the parties cannot agree on the
         sole arbitrator, (y) one party refuses to appoint its party-appointed
         arbitrator within said thirty (30) day period or (z) the
         party-appointed arbitrators cannot reach agreement on a presiding
         arbitrator of the tribunal, then the appointing authority for the
         implementation of such procedure shall be the Senior United States
         District Judge for the Northern District of Texas, who shall appoint
         an independent arbitrator who does not have any financial interest in
         the dispute, controversy or claim. If the Senior United States
         District Judge for the Northern District of Texas refuses or fails to
         act as the appointing authority within ninety (90) days after being
         requested to do so, then the appointing authority shall be the Chief
         Executive Officer of the American Arbitration Association, who shall
         appoint an independent arbitrator who does not have any financial
         interest in the dispute, controversy or claim. All decisions and
         awards by the arbitration tribunal shall be made by majority vote.

                  (b) Proceedings. Unless otherwise expressly agreed in writing
         by the parties to the, arbitration proceedings:

                           (i) The arbitration proceedings shall be hold in
                  Dallas, Texas, at a site chosen by mutual agreement of the
                  parties, or if the parties can-not reach

                                     -14-
<PAGE>   15

                  agreement on a location within thirty (30) days of the
                  appointment of the last arbitrator, then at a site chosen by
                  the arbitrators;

                           (ii) The arbitrators shall be and remain at all
                  times wholly independent and impartial;

                           (iii) The arbitration proceedings shall be conducted
                  in accordance with the Commercial Arbitration Rules of the
                  American Arbitration Association, as amended from time to
                  time;

                           (iv) Any procedural issues not determined under the
                  arbitral rules selected pursuant to item (iii) above shall be
                  determined by the law of the place of arbitration, other than
                  those laws which would refer the matter to another
                  jurisdiction;

                           (v) The costs of the arbitration proceedings
                  (including attorneys' fees and costs) shall be borne in the
                  manner determined by the arbitrators;

                           (vi) The decision of the arbitrators shall be
                  reduced to writing; final and binding without the right of
                  appeal; the able and exclusive remedy regarding any claims,
                  counterclaims, issues or accounting presented to the
                  arbitrators; made and promptly paid in United States dollars
                  free of any deduction or offset; and any costs or fees
                  incident to enforcing the award shall, to the maximum extent
                  permitted by law, be charged against the party resisting such
                  enforcement;

                           (vii) The award shall include interest from the date
                  of any breach or violation of this Agreement, as determined
                  by the arbitral award, and from the date of the award until
                  paid in full, at 7% per annum; and

                           (viii) Judgment upon the award may be entered in any
                  court having jurisdiction ever the person or the assets of
                  the party owing the judgment or application nay be made to
                  such court for a judicial acceptance of the award and an
                  order of enforcement, as the case may be.

         4.10 Survival. The covenants and agreements of the parties set forth
in Article 4 (Miscellaneous) are of a continuing nature and shall survive the
expiration, termination or cancellation of this Agreement, regardless of the
reason therefor.

         4.11 Binding Effect, Etc. This Agreement shall be binding upon and
inure to the benefit of, and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial

                                     -15-
<PAGE>   16

part, of the business or assets of the Company, by written agreement in form
and substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.

         4.12 Legal Fees. If Executive in good faith seeks to enforce the
provisions of subsections 1.4, 1.5 or 1.7 hereof, then all of his reasonable
legal fees and expense shall be paid and indemnified by the Company to
Executive as they come due upon presentation thereof (with supporting detail)
by Executive to the Company. All reasonable legal fees and expense incurred by
Executive in connection with this Agreement shall be paid or reimbursed to
Executive by the Company.

         4.13 1997 Employment Agreement. This Agreement shall supercede and
replace in all respects the 1997 Employment Agreement.

         4.14 Notice, participation, and Accessability. Executive shall be
given notice of each potential Transaction that the Company may have under
consideration and shall be kept apprised of all aspects of such proposed
Transaction as it proceeds. Executive shall be provided a copy of each
Transaction document relating to such proposed Transaction and shall
participate in negotiations and decisions relating thereto, as requested.

                                   ARTICLE 5
                                 DEFINED TERMS

         5.1 Defined Terms. As used herein, the following terms shall have the
following meanings.

         "1997 Employment Agreement" shall mean that Employment Agreement
between Monarch Dental Corporation and Gary W. Cage dated as of July 1, 1997.

         "Closing Date" shall mean the date upon which a Transaction is closed.

         "Total Equity Value", for purposes of calculating the Transaction Fee
with respect to a Transaction, shall mean:

                  V = W times X, where:
                  V means the Total Equity Value;
                  W means total number of shares of the Company's equity
                           securities outstanding at the time of the
                           Transaction on a fully diluted basis to be
                           determined by the Accounting Firm in accordance with
                           Generally Accepted Accounting Principles under the
                           terms of the second sentence of Section 1.4(f)
                           hereof; and

                                     -16-
<PAGE>   17

                  X means the per share value received by any holder of
                           the Company's equity securities who sells,
                           exchanges, converts, or otherwise disposes of shares
                           held thereby under and/or pursuant to the
                           Transaction.

         "Transaction" shall mean any transaction described in Subsection
1.6(e)(i), (ii) or (v).

                                     -17-
<PAGE>   18

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

                                       MONARCH DENTAL CORPORATION

                                       By. /s/  GLENN HEMMERLE
                                           -------------------------------------
                                           Glenn Hemmerle, By Direction of the
                                           Special Committee of the Board of
                                           Directors

                                       /s/   GARY W. CAGE
                                       -----------------------------------------
                                       Gary W. Cage

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