Document:

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                                                                EXHIBIT 10.31-03
FORM OF SERIES H STOCK OPTION AGREEMENT DATED APRIL 1, 2000
BETWEEN THE COMPANY AND ROBERT F. MECREDY

                         FIREARMS TRAINING SYSTEMS, INC.
                             STOCK OPTION AGREEMENT
                                    SERIES H

Firearms Training Systems, Inc., a Delaware corporation (the "Company"), hereby
grants to John Morelli (the "Optionee") as of April 1, 2000 (the "Option Date"),
pursuant to the provisions of the Firearms Training Systems, Inc. Stock Option
Plan (the "Plan"), a non-qualified option to purchase from the Company (the
"Option") 150,000 shares of its Class A Common Stock, $0.000006 par value
("Stock"), at the price of $0.01 per share upon and subject to the terms and
conditions set forth below. References to employment shall also mean an agency
or independent contractor relationship and references to employment by the
Company shall also mean employment by a Subsidiary. Capitalized terms not
defined herein shall have the meanings specified in the Plan.

1.       Option Subject to Acceptance of Agreement. The Option shall be null and
void unless the Optionee shall accept this Agreement by executing it in the
space provided below and returning such original execution copy to the Company.

2.       Time and Manner of Exercise of Option.

2.1.     Maximum Term of Option. In no event may the Option be exercised, in
whole or in part, after the seventh anniversary of the Option Date (the
"Expiration Date").

2.2.     Exercise of Option. (a) (i)Except as provided in Section 2.2(a)(ii)
below, the Option shall become exercisable upon a Sale of the Company (as
defined below) with respect to:

(A)      if the Fair Market Value per share consideration received by all
holders of Stock (the "Per Share Consideration") is less than $.75, 0 shares;

(B)      if the Per Share Consideration equals or exceeds $1.50, 150,000 shares;

(C)      if the Per Share Consideration equals or exceeds $.75 but is less than
$1.50, the number of shares determined by multiplying (I) 150,000 by (II)(a) the
Per Share Consideration minus $.75, divided by (b) $.75.

"Sale of the Company" shall mean any transaction pursuant to which all of the
shareholders of the Company receive cash or Marketable Securities in exchange
for all of each such shareholder's shares of Stock. For purposes of the
foregoing, "Marketable Securities" shall mean stock or other securities that are
determined by the Board in its good faith discretion to be readily saleable by
the shareholders of the Company (subject to any lock-up restrictions that are
determined by the Board, in its sole discretion, to be reasonable) without
causing a significant discount or decrease in the price of such securities.

(ii)     In the event that the Optionee's employment is terminated by the
Company not for Cause or the Optionee terminates employment for Good Reason
between the first anniversary and the third anniversary of the Option Date and
the Stock is traded on the OTC Bulletin Board under the supervision of the
National Association of Securities Dealers or any major national stock exchange
at that time, the Option shall become exercisable with respect to:

(A)      if the average of the closing price for a share of Stock for the 20
trading days immediately preceding the Optionee's termination of employment (the
"20-Day Trading Average") is less than or equal to $.75, 0 shares;

(B)      if the 20-Day Trading Average equals or exceeds $1.50, 50,000 shares
(if the termination occurs on or after the first anniversary of the Option Date
and before the second anniversary of the Option Date) or 100,000 shares (if the
termination occurs on or after the second anniversary of the Option Date and
before the third anniversary of the Option Date);

(C)      if the 20-Day Trading Average exceeds $.75 but is less than $1.50, the
number of shares determined by multiplying (I) 50,000 (if the termination occurs
on or after the first anniversary of the Option Date and before the second
anniversary of the Option Date) or 100,000 shares (if the termination occurs on
or after the second anniversary of the Option Date and before the third
anniversary of the Option Date) by (II)(a) the 20-Day Trading Average minus
$.75, divided by (b) $.75.

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(iii)    Any shares of Stock subject to the Option that do not become
exercisable in accordance with the provisions of this Section 2.2(a) shall be
forfeited upon the earlier of the Optionee's termination of employment or the
third anniversary of the Option Date.

(b)      If the Optionee terminates employment with the Company by reason of
Disability, the Option shall be exercisable only to the extent it is exercisable
on the effective date of the Optionee's termination of employment and may
thereafter be exercised by the Optionee or the Optionee's Legal Representative
until the earlier of the first anniversary of the Optionee's termination of
employment and the Expiration Date.

(c)      If the Optionee's employment with the Company terminates by reason of
the Optionee's death, the Option shall be exercisable only to the extent it is
exercisable on the date of death and may thereafter be exercised by the
Optionee's Legal Representative or Permitted Transferees, as the case may be,
until the earlier of the first anniversary of the Optionee's death and the
Expiration Date.

(d)      If the Optionee's employment with the Company terminates for any reason
other than as described in subsection (b) or (c) above, the Option shall be
exercisable only to the extent it is exercisable on the effective date of the
Optionee's termination of employment and may thereafter be exercised by the
Optionee or the Optionee's Legal Representative until and including the earliest
to occur of (i) the date which is 90 days after the effective date of the
Optionee's termination of employment and (ii) the Expiration Date; provided that
if the Optionee's employment is terminated by the Company for Cause, the Option
shall terminate automatically on the date the Board authorizes the Optionee's
termination for Cause, and the Optionee shall be subject to the provisions of
Section 2.5.

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

2.3.     Method of Exercise. Subject to the limitations set forth in this
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company on the form provided by the Company specifying the number
of whole shares of Stock to be purchased and accompanied by payment therefor in
full (or arrangement made for such payment to the Company's satisfaction) either
(i) in cash, (ii) by delivery of previously owned whole shares of Stock (which
the Optionee has held for at least six months prior to the delivery of such
shares or which the Optionee purchased on the open market and in each case for
which the Optionee has good title, free and clear of all liens and encumbrances)
having a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable pursuant to the Option by reason of such
exercise, (iii) in cash by a broker-dealer acceptable to the Company to whom the
Optionee has submitted an irrevocable notice of exercise or (iv) a combination
of (i), (ii) and (iii), and (2) by executing such documents as the Company may
reasonably request. The Committee shall have sole discretion to disapprove of an
election pursuant to any of clauses (ii) - (iv). Any fraction of a share of
Stock which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the Optionee. No
certificate representing a share of Stock shall be delivered until the full
purchase price therefor has been paid.

2.4.     Termination of Option. (a) In no event may the Option be exercised
after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2 or Section 2.5, on the Expiration Date.

(b)      In the event that rights to purchase all or a portion of the shares of
Stock subject to the Option expire or are exercised, cancelled or forfeited, the
Optionee shall, upon the Company's request, promptly return this Agreement to
the Company for full or partial cancellation, as the case may be. Such
cancellation shall be effective regardless of whether the Optionee returns this
Agreement. If the Optionee continues to have rights to purchase shares of Stock
hereunder, the Company shall, within 10 business days of the Optionee's delivery
of this Agreement to the Company, either (i) mark this Agreement to indicate the
extent to which the Option has expired or been exercised, cancelled or forfeited
or (ii) issue to the Optionee a substitute option agreement applicable to such
rights, which agreement shall otherwise be substantially similar to this
Agreement in form and substance.

2.5      Termination of Option and Forfeiture of Option Gain. (a) If the Board
determines in its sole discretion that the Optionee has breached the covenants
contained in Sections 6, 7, 8, 9, or 10 of the Employment Agreement or the
Optionee is terminated for Cause, then (i) the Option shall terminate
automatically on the date the Board determines that the Optionee has breached
any such covenant or authorizes the Optionee's termination for Cause (as
applicable), (ii) within five business days of receipt by the Optionee of a
written demand from the Company or FATS, Inc., the Optionee shall sell to the
Company or FATS, Inc. (at the Company's election) any shares of Stock acquired
and held by the Optionee (or on the Optionee's behalf) as a result of the
exercise of the Option for a per share price equal to the lesser of (A) the Fair
Market Value of a share of Stock on the date the Board makes such determination
or the date the Optionee is notified of his termination for Cause by the Company
(as applicable), and (B) $0.50; and (iii) within five business days of receipt
by the Optionee of a written demand from the Company or FATS, Inc., the Optionee
shall pay the Company or FATS, Inc. (at the Company's election) an amount in
cash equal to the aggregate gain realized by the Optionee upon the sale or sales
of Stock acquired by the Optionee as a result of the exercise of an option
granted under the Plan.

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3.       Additional Terms and Conditions of Option.

Nontransferability of Option. The Option may not be transferred by the Optionee
other than (i) by will or the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company or (ii) as otherwise
permitted under Rule 16b-3 under the Exchange Act. Except to the extent
permitted by the foregoing sentence, during the Optionee's lifetime the Option
is exercisable only by the Optionee or the Optionee's Legal Representative.
Except to the extent permitted by the foregoing, the Option may not be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and
all rights hereunder shall immediately become null and void.

3.2.     Investment Representation and Restrictions. The Optionee hereby
represents and covenants that (a) any share of Stock purchased upon exercise of
the Option will be purchased for investment and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), unless such purchase has been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; (c) to the extent required by an
agreement between one or more underwriters and the Company in connection with an
offering of shares of Stock pursuant to a registration statement under the
Securities Act, the Optionee shall not offer, sell, contract to sell or
otherwise dispose of any shares of Stock purchased upon exercise of the Option
for the period specified in such agreement; and (d) if requested by the Company,
the Optionee shall submit a written statement, in form satisfactory to the
Company, to the effect that such representation (x) is true and correct as of
the date of purchase of any shares hereunder or (y) is true and correct as of
the date of any sale of any such shares, as applicable. As a further condition
precedent to any exercise of the Option, the Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance or delivery of the shares and, in connection
therewith, shall execute any documents which the Board or the Committee shall in
its sole discretion deem necessary or advisable.

3.3.     Withholding Taxes. (a) As a condition precedent to the delivery of
Stock upon exercise of the Option, the Optionee shall, upon request by the
Company, pay to the Company in addition to the purchase price of the shares,
such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.

(b)      The Optionee may elect to satisfy his or her obligation to advance the
Required Tax Payments by any of the following means: (1) a cash payment to the
Company pursuant to Section 3.3(a), (2) delivery to the Company of previously
owned whole shares of Stock (which the Optionee has held for at least six months
prior to the delivery of such shares or which the Optionee purchased on the open
market and in each case for which the Optionee has good title, free and clear of
all liens and encumbrances) having a Fair Market Value, determined as of the
date the obligation to withhold or pay taxes first arises in connection with the
Option (the "Tax Date"), equal to the Required Tax Payments, (3) authorizing the
Company to withhold whole shares of Stock which would otherwise be delivered to
the Optionee upon exercise of the Option having a Fair Market Value, determined
as of the Tax Date, equal to the Required Tax Payments, (4) a cash payment by a
broker-dealer acceptable to the Company to whom the Optionee has submitted an
irrevocable notice of exercise or (5) any combination of (1), (2) and (3). The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (2)-(5); provided, however, that if the Optionee exercises the
option on the Expiration Date, is employed as of such date, and the shares of
Stock are not traded on a national securities exchange or are not quoted on the
Nasdaq National Market as of such date, the Company shall take reasonable
efforts to permit an Optionee to use, in whole or in part, the method described
in clause (3) above. Shares of Stock to be delivered or withheld may not have a
Fair Market Value in excess of the minimum amount of the Required Tax Payments.
Any fraction of a share of Stock which would be required to satisfy any such
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the Optionee. No certificate representing a share of Stock shall be
delivered until the Required Tax Payments have been satisfied in full.

3.4.     Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the excess,
if any, of (A) the Fair Market Value on the exercise date over (B) the exercise
price of

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the Option. The decision of the Committee regarding any such adjustment shall be
final, binding and conclusive.

3.5.     Compliance with Applicable Law. The Option is subject to the condition
that if the listing, registration or qualification of the shares subject to the
Option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the purchase or delivery of
shares hereunder, the Option may not be exercised, in whole or in part, unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company agrees to use reasonable efforts to effect or obtain any such listing,
registration, qualification, consent or approval.

3.6.     Delivery of Information to Optionee. The Company shall forward to the
Optionee annual reports to shareholders and annual or quarterly financial
statements of the Company, including the consolidated balance sheet and related
consolidated statements of operations and cash flows for a fiscal year, fiscal
quarter or period of a fiscal year, as applicable, as soon as administratively
practicable after such materials are prepared and distributed or filed, as the
case may be, by the Company. The Optionees shall have the same rights as holders
of shares of Stock to notice with respect to annual or special meetings of
shareholders of the Company, and shall have the right to attend any such
meetings.

3.7.     Delivery of Certificates. Upon the exercise of the Option, in whole or
in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.

3.8.     Option Confers No Rights as Stockholder. The Optionee shall not be
entitled to any privileges of ownership with respect to shares of Stock subject
to the Option unless and until purchased and delivered upon the exercise of the
Option, in whole or in part, and the Optionee becomes a stockholder of record
with respect to such delivered shares; and the Optionee shall not be considered
a stockholder of the Company with respect to any such shares not so purchased
and delivered.

3.9.     Option Confers No Rights to Continued Employment. In no event shall the
granting of the Option or its acceptance by the Optionee give or be deemed to
give the Optionee any right to continued employment by the Company or any
affiliate of the Company.

3.10.    Decisions of Board or Committee. The Board or the Committee shall have
the right to resolve all questions which may arise in connection with the Option
or its exercise. Any interpretation, determination or other action made or taken
by the Board or the Committee regarding the Plan or this Agreement shall be
final, binding and conclusive.

3.11.    Company to Reserve Shares. The Company shall at all times prior to the
expiration or termination of the Option reserve and keep available, either in
its treasury or out of its authorized but unissued shares of Stock, the full
number of shares subject to the Option from time to time.

3.12.    Agreement Subject to the Plan. This Agreement is subje ct to the
provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.

4.       Miscellaneous Provisions.

4.1.     Designation as Nonqualified Stock Option. The Option is hereby
designated as not constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.

4.2.     Meaning of Certain Terms. (a) As used herein, employment by the Company
shall include employment by an affiliate of the Company. References in this
Agreement to sections of the Code shall be deemed to refer to any successor
section of the Code or any successor internal revenue law.

(b)      As used herein, the term "Legal Representative" shall include an
executor, administrator, legal representative, guardian or similar person and
the term "Permitted Transferee" shall include any transferee (i) pursuant to a
transfer permitted under Section 3.4 of the Plan and Section 3.1 hereof or (ii)
designated pursuant to beneficiary designation procedures approved by the
Company.

4.3.     Successors. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights hereunder in
accordance with this Agreement or the Plan.

4.4.     Notices. All notices, requests or other communications provided for in
this Agreement shall be made, if to the Company, to Firearms Training Systems,
Inc., 7340 McGinnis Ferry Road, Suwanee, Georgia 30174, Attention: Corporate
Secretary, and if to the Optionee, to the Optionee c/o Firearms Training
Systems, Inc., 7340 McGinnis Ferry Road, Suwanee, Georgia 30174. All notices,
requests or other communications provided for in this Agreement shall be made in
writing either (a) by personal delivery to the party entitled thereto, (b) by
facsimile with confirmation of receipt, (c) by mailing in the

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United States mails to the last known address of the party entitled thereto or
(d) by express courier service. The notice, request or other communication shall
be deemed to be received upon personal delivery, upon confirmation of receipt of
facsimile transmission or upon receipt by the party entitled thereto if by
United States mail or express courier service; provided, however, that if a
notice, request or other communication sent to the Company is not received
during regular business hours, it shall be deemed to be received on the next
succeeding business day of the Company.

4.5.     Governing Law. This Agreement, the Option and all determinations made
and actions taken pursuant hereto and thereto, to the extent not governed by the
laws of the United States, shall be governed by the laws of the State of
Delaware and construed in accordance therewith without giving effect to
principles of conflicts of laws.

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

FIREARMS TRAINING SYSTEMS, INC.

By:
   -------------------------------
   Name:
   Title:

Accepted this _______ day of ________________, 2000.

Optionee

                                    Page 57<PAGE>   1
                                                                 EXHIBIT - 10.85

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                          GOODY'S FAMILY CLOTHING, INC.

                                       AND

                                  MAX W. JONES

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                  <C>
1.       Definitions.............................................................................................     1

2.       Employment..............................................................................................     5

3.       Term....................................................................................................     5

4.       Position and Duties; Business Time......................................................................     5

5.       Compensation............................................................................................     6

6.       Termination of Employment...............................................................................    10

7.       Obligations of the Company Upon Termination.............................................................    11

8.       Change of Control.......................................................................................    13

9.       Non-exclusivity of Rights...............................................................................    13

10.      Full Settlement.........................................................................................    13

11.      Arbitration of Disputes.................................................................................    13

12.      Confidential Information and Nonsolicitation............................................................    14

13.      Limited Indemnity.......................................................................................    14

14.      Successors..............................................................................................    15

15.      Miscellaneous...........................................................................................    15
</TABLE>

<PAGE>   3

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement"), by and between GOODY'S
FAMILY CLOTHING, INC., a Tennessee corporation (the "Company"), and MAX W. JONES
(the "Executive"), shall be effective as of the 31st day of July, 2000.

                                    RECITALS:

         WHEREAS, the Company plans to hire the Executive as the Executive Vice
President, Merchandising of the Company and Executive desires to accept such
employment, upon the terms and subject to the conditions set forth in this
Agreement.

         NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the Company and the
Executive do hereby agree as follows:

                  1.       Definitions.

                  (a)      "Accrued Obligations" shall mean (i) the Base Salary
through the Date of Termination, (ii) any amounts deferred by the Executive and
not yet paid by the Company pursuant to a valid election to defer the receipt of
all or a portion of such payments made in accordance with any plan of deferred
compensation sponsored by the Company and any earned but unpaid vacation pay for
the current year, (iii) any amounts or benefits owing to the Executive or to the
Executive's beneficiaries under the then applicable employee benefit plans or
policies of the Company and (iv) any amounts owing to the Executive for
reimbursement of expenses properly incurred by the Executive through the Date of
Termination and which are reimbursable in accordance with the reimbursement
policy of the Company described in Section 5(f).

                  (b)      "Base Salary" shall have the meaning set forth in
 Section 5(a).

                  (c)      "Board" shall mean the Board of Directors of the
Company.

                  (d)      "Cause" shall mean that the Executive has, in the
judgment of a majority of the Board (i) committed a felony, or committed an act
of fraud, embezzlement or theft in connection with his duties with the Company
or in the course of his employment with the Company; (ii) willfully caused
damage to property of the Company; (iii) been convicted of a criminal offense
(either a misdemeanor involving acts of dishonesty, theft or moral turpitude, or
a felony); or (iv) engaged in a willful and material breach of his obligations
under Section 4 of this Agreement which breach (under this clause iv) has been
communicated to the Executive with specificity by written notice, and which has
not been cured to the reasonable satisfaction of the Board within a reasonable
period of time, which shall not be less than ten (10) days, nor more than thirty
(30) days, following receipt of such written notice by the

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Executive. The Board shall provide the Executive with an opportunity to meet
with the Board in order to provide the Executive an opportunity to refute or
explain acts or omissions referred to in such written notice. For the purpose of
this Section, no act or omission shall be considered willful unless done or
omitted to be done in bad faith and without reasonable belief that such act or
omission was done in the best interest of the Company.

                  (e)      A "Change of Control" of the Company shall mean and
shall be deemed to have occurred if (i) any person or group (within the meaning
of Rule 13d-3 of the rules and regulations promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act Rules")), other than Robert M.
Goodfriend, members of his immediate family, his affiliates, trusts or private
foundations established by or on his behalf, and the heirs, executors or
administrators of Robert M. Goodfriend, shall acquire in one or a series of
transactions, whether through sale of stock or merger, more than 50% of the
outstanding voting securities of the Company or any successor entity of the
Company, (ii) all or substantially all of the Company's assets are sold, or
(iii) the shareholders of the Company shall approve a complete liquidation or
dissolution of the Company.

                  (f)      "Change of Control Date" shall mean (i) the closing
date on which a Change of Control shall have occurred, (ii) in the case of a
sale of all or substantially all of the Company's assets, the closing date on
which a Change of Control shall have occurred after shareholder approval is
obtained, or (iii) in the case of a complete liquidation or dissolution of the
Company, the date on which shareholder approval is obtained.

                  (g)      "Constructive Termination" shall mean a material
breach by the Company of its obligations under Section 4(a) or another material
obligation of the Company under this Agreement which failure has been
communicated to the Company with specificity by written notice, and which has
not been cured within a reasonable period of time, which shall not be less than
ten (10) days, nor more than thirty (30) days, following receipt of such written
notice by the Company.

                  (h)      "Date of Termination" shall have the meaning set
forth in Section 6(f).

                  (i)      "Disability" shall mean disability whereby the
Executive is unable to perform the essential functions of the position provided
for by this Agreement by reason of illness, injury or incapacity (whether
physical, mental, emotional or psychological), which cannot be reasonably
accommodated, for a period of either (i) ninety (90) consecutive days or (ii)
one hundred eighty (180) days in any consecutive three hundred sixty-five (365)
day period.

                  (j)      "Incentive Bonus" shall have the meaning as set forth
in Section 5(b).

                  (k)      "Incentive Plan" shall have the meaning as set forth
in Section 5(b).

                  (l)      "Notice of Termination" shall have the meaning as set
forth in Section 6(e).

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<PAGE>   5

                  (m)      "Qualified Plan" shall mean any retirement plan
maintained by the Company which is intended to meet the requirements of the
Internal Revenue Code of 1986, as amended.

                  (n)      "Subsidiary" shall mean any majority-owned subsidiary
of the Company.

                  2.       Employment. The Company hereby employs the Executive
as Executive Vice President, Merchandising of the Company and the Executive
hereby accepts such employment.

                  3.       Term. The Executive's employment will commence on the
effective date of this Agreement. The Executive shall be considered an at-will
employee and his employment may be terminated by either party subject to the
obligations of the parties upon such termination as set forth in this Agreement.

                  4.       Position and Duties; Business Time.

                  (a)      Position and Duties. The Executive shall serve as
Executive Vice President, Merchandising of the Company or another position which
shall be either of comparable rank or a promotion and shall continue to have
such responsibilities and duties as assigned to him by the Chief Executive
Officer of the Company, the President of the Company, the Chief Operating
Officer of the Company, the President and Special Assistant to the Chairman of
the Company, or the Board from time to time, provided: (i) such assignment of
such responsibilities and duties are those which are customarily associated with
the responsibilities of an executive vice president; (ii) the position in which
the Executive shall serve, if different from the position specified in this
Subsection (a), shall not have materially diminished responsibilities or
authority as compared with those of the position expressly set forth in this
Subsection (a); provided, that the expansion into other store concepts, whether
acquired or developed, and the staffing of such concepts by other employees
shall not be deemed a breach of this provision; and (iii) the Executive shall
not be required to relocate by reason of a change in the location of the
Company's principal executive offices of more than fifty (50) miles from its
then current location.

                  (b)      Business Time. The Executive agrees to devote his
full business time to the business and affairs of the Company and to use his
best efforts to perform faithfully and efficiently the responsibilities assigned
to him hereunder, to the extent necessary to discharge such responsibilities,
except for:

                           (i)      time spent in managing  his  personal,
financial and legal affairs and serving on corporate, civic or charitable boards
or committees, in each case only if and to the extent not substantially
interfering with the performance of such responsibilities, and

                                       5
<PAGE>   6

                           (ii)     periods of vacation to which he is entitled,
periods of illness and other absences beyond his control.

It is expressly understood and agreed that the continued service by the
Executive on any boards and committees on which he is serving or with which he
is otherwise associated immediately preceding the date hereof, or his service on
any other boards and committees shall not be deemed to interfere with the
performance of the Executive's services to the Company; provided, that in the
case of boards or committees on which the Executive is not currently serving the
Executive provides written notice of his intention to serve and the Board
thereafter approves such service (other than non-compensatory positions with
local boards or committees, e.g. charitable, chamber of commerce or homeowner
associations which shall not require approval).

                  5.       Compensation.  The Executive shall be entitled to the
following compensation and benefits for as long as the Executive remains an
employee of the Company:

                   (a)     Base Salary. The Executive shall receive a base
salary (the "Base Salary") payable in equal bi-weekly installments (or such
other installments as are provided by the Company for employees generally) at
an annual rate of $310,000. The Company shall review the Base Salary
periodically and in light of such review may, in its sole discretion, increase
(but not decrease) the Base Salary taking into account any change in the
Executive's responsibilities, increases in compensation of other executives
with comparable responsibilities, performance of the Executive and other
pertinent factors, and such adjusted Base Salary shall then constitute the
"Base Salary" for purposes of this Agreement. Notwithstanding anything to the
contrary in this paragraph, the Employee's Base Salary shall also be reviewed
Nine (9) calendar months after the effective date of this Agreement.

                   (b)     Short Term Incentive Plan Bonus;. The Company has
established a "Short Term Incentive Plan" (the "Incentive Plan") under which the
Executive shall be eligible to participate for each fiscal year he holds the
position stated in Section 2 and shall be eligible to receive an annual
incentive target bonus of not less than 60% of Base Salary and shall be based on
performance and other specific objectives adopted by the Compensation Committee
of the Board (the "Incentive Bonus"). The annual Incentive Bonus shall be
reduced by the amount of any guaranteed annual bonus paid by the Company to the
Executive (as described in Section 5(c)) for each applicable fiscal year.

                   (c)     Guaranteed Bonus. For each fiscal year of the Company
during the term of this Agreement, the Executive shall also be entitled to a
guaranteed annual bonus equal to twenty percent (20%) of the Executive's Base
Salary for each fiscal year payable in full on the last Friday in March for the
most recently completed fiscal year, provided Executive is employed by the
Company on the last Friday in March of the then applicable fiscal year. The
Executive's guaranteed bonus for the Company's fiscal year 2000 (beginning
January 30, 2000 and ending February 3, 2001) shall be based on the Executive's
actual Base Salary earned in

                                       6
<PAGE>   7

fiscal year 2000 and shall be calculated and pro-rated based on the number of
days the Executive was employed by the Company during fiscal year 2000.

                  (d)      Incentive and Savings Plans; Retirement and Death
Benefit Programs. The Executive shall be entitled to participate in all
incentive and savings plans and programs, including stock option plans and other
equity-based compensation plans, and in all employee retirement, executive
retirement and executive death benefit plans on a basis no less favorable than
that basis generally available to executives of the Company holding comparable
positions or having comparable responsibilities.

                  (e)      Other Benefit Plans. The Executive, his spouse and
their eligible dependents (as defined in, and to the extent permitted by, the
applicable plan), as the case may be, shall be entitled to participate in or be
covered under all medical, dental, group disability, group life, severance,
accidental death and travel accident insurance plans and programs of the Company
to the extent such plans and programs are generally available to executives of
the Company holding comparable positions or having comparable responsibilities.
In addition, the Company shall pay for and provide to the Executive the
following additional benefits (provided the Executive is insurable and such
policies can be purchased at standard rates consistent with the rates paid by
the Company for other Company executives):

                           (i)      An individual life insurance policy on the
life of the Executive in the amount of $310,000, the beneficiary or
beneficiaries of which are designated by the Executive, without cost to the
Executive; and

                           (ii)     An individual disability insurance policy or
policies providing a monthly benefit of no less than $10,500 per month, the
annual premium for such policy or policies to be shared between the Company and
the Executive in such proportion as is consistent with the Company's past
practice in respect of individual disability insurance policies provided by the
Company to executives of the Company holding comparable positions or having
comparable responsibilities.

                  (f)      Other Perquisites. The Executive shall also be
entitled to:

                           (i)      prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the policies and
procedures of the Company;

                           (ii)     three (3) weeks paid vacation, such paid
vacation time to be increased (but not decreased) in accordance with Company
policy;

                           (iii)    an automobile shall be provided by the
Company with expenses to be paid in accordance with the Company's policies and
procedures with respect thereto; and

                                       7
<PAGE>   8

                           (iv)     an office or offices suitable for an
executive officer with secretarial and other assistance as shall reasonably be
required by the Executive.

                  (g)      Relocation Expenses. The Company will reimburse the
Executive (upon presentation of appropriate vouchers or receipts in accordance
with the Company's expense reimbursement policies) for, or pay directly, the
following costs and expenses relating to his relocation (the "Relocation
Allowance"):

                           (i)      all reasonable expenses of moving the
                           Executive's possessions from his St. Cloud, Minnesota
                           residence (the "St. Cloud Residence") to the
                           Executive's new permanent residence in the Knoxville
                           (the "Knoxville Residence") metropolitan area;

                            (ii)    all reasonable standard fees, commissions,
                           closing costs and brokerage fees associated with the
                           sale of the St. Cloud Residence (including reasonable
                           attorney's fees); and

                           (iii)    all reasonable standard closing costs
                           associated with the purchase of the Executive's
                           Knoxville Residence (including reasonable attorney's
                           fees), as well as $5,000 for miscellaneous expenses
                           for the Knoxville Residence.

         In the event the actual selling price of the St. Cloud Residence is
less than $367,000, the Company will pay the Executive the difference
(immediately after the sale and closing of the St. Cloud Residence) between the
actual selling price and $367,000, it being understood that the Company shall
have the right on or after the effective date of this Agreement to (a) contact
the third party administrator who executed the residential relocation contract
(the "Relocation Contract") with the Executive to facilitate and manage the sale
of the St. Cloud Residence, and (b) arrange for the sale and closing of the
St. Cloud Residence pursuant to such Relocation Contract or to arrange or
contract with a sale and closing of the St. Cloud Residence with another third
party residential relocation broker designated by the Company. The Executive
shall execute and deliver to the Company any documents requested by the Company
to sell the St. Cloud Residence.

         In the event the actual selling price of the St. Cloud Residence
exceeds $367,000, the Executive shall be entitled to retain such excess, less
any fees or expenses (such as mortgage payments, insurance premium payments,
maintenance fees, and utility bills, all such payments, fees and bills being
hereafter collectively referred to as the "St. Cloud Maintenance Fees") incurred
or paid, directly or indirectly, by the Company in arranging or contracting for
the sale and closing of the St. Cloud Residence.

                                       8
<PAGE>   9

         The maximum amounts to be reimbursed by the Company under this clause
(g) shall be in accordance with its relocation policy (except where otherwise
expressly provided herein). Upon termination of the Executive's employment
during the first three (3) years of Executive's employment with the Company,
either by the Executive's voluntarily termination or by the Company for Cause,
the Executive shall promptly repay to the Company all of the Relocation
Allowance items described in this subsection (g), including the St. Cloud
Maintenance Fees (if any). On each anniversary of the date hereof, the amount of
the Relocation Allowance required to be so repaid shall be reduced by one-third
(1/3).

                  (h)      Equity Opportunity. The Executive shall be granted a
non-qualified stock option under the Company's 1997 Stock Option Plan on the
date of commencement of his employment with the Company to purchase an aggregate
of fifty thousand (50,000) shares of common stock of the Company at an exercise
price equal to the closing sales price of the common stock on the business day
immediately preceding the date of grant, which option shall vest at 40% one (1)
year after the date of the grant and at 20% each at the end of years 2, 3 and 4
from the date of grant and expire ten (10) years from the date of grant, and
shall be upon such other terms and conditions as contained in the Company's
standard form of option agreement annexed hereto.

                  (i)      Sign-on Bonus. As additional compensation, the
Company shall pay the Executive a sign-on bonus of $60,000, payable within five
(5) days after the date his employment with the Company commences.

                  6.       Termination of Employment.

                  (a)      Disability; Death. The Company may terminate the
Executive's employment after having established the Executive's Disability, by
giving to the Executive written notice of its intention to terminate his
employment, and his employment with the Company shall terminate effective on the
thirtieth (30th) day after receipt of such notice if the Executive shall fail to
return to full-time performance of his duties within thirty (30) days after such
receipt. If the Executive dies during the term of this Agreement, his employment
hereunder shall be deemed to cease as of the date of his death.

                  (b)      Voluntary Termination by the Executive.
Notwithstanding anything in this Agreement to the contrary, the Executive may,
upon not less than thirty (30) days' written notice to the Company, voluntarily
terminate employment for any reason (including retirement under the terms of the
Company's retirement plan as in effect from time to time), provided that any
termination by the Executive pursuant to Section 6(d) on account of Constructive
Termination shall not be treated as a voluntary termination under this Section
6(b).

                  (c)      Termination by the Company. The Company at any time
may terminate the Executive's employment for Cause or without Cause.

                                       9
<PAGE>   10

                  (d)      Constructive Termination. The Executive may terminate
his employment for Constructive Termination.

                  (e)      Notice of Termination. Any termination by the Company
for Cause or by the Executive for Constructive Termination shall be communicated
by a written Notice of Termination to the other party hereto given in accordance
with Section 15(c). For purposes of this Agreement, a "Notice of Termination"
means a written notice given in the case of a termination for Cause and in the
case of Constructive Termination which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if the
termination date is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty (30) days after the
receipt of such notice).

                  (f)      Date of Termination. For the purpose of this
Agreement, the term "Date of Termination" means (i) in the case of a termination
for which a Notice of Termination is required, the date of receipt of such
Notice of Termination or, if later, the date specified therein, as the case may
be, and (ii) in all other cases, the actual date on which the Executive's
employment terminates.

                  7.       Obligations of the Company Upon Termination. Upon
termination of the Executive's employment with the Company, the Company shall
have the following obligations:

                  (a)      Death, Disability and Retirement. If the Executive's
employment is terminated by reason of the Executive's death, Disability, or
retirement on or after the attainment of age sixty-five (65), the Company shall
have no further obligations to the Executive's legal representatives under this
Agreement other than payment of the Accrued Obligations. If the Executive's
employment is terminated by reason of the Executive's death or Disability, the
Company shall have the additional obligation, subject to the terms of the
Incentive Plan and further provided that the Executive has been employed by the
Company for the first six (6) months of the then applicable fiscal year, to pay
a cash amount equal to a portion of the Incentive Bonus, the product of a
fraction, the numerator of which is the number of days elapsed since the date
the Incentive Plan began for the applicable fiscal year through the date of the
Disability or the date of death of the Executive, and the denominator of which
is the total number of days of the applicable fiscal year for such Incentive
Plan. Unless otherwise directed by the Executive (or, in the case of the
Incentive Plan or a Qualified Plan, as may be required by such Incentive Plan or
Qualified Plan) all Accrued Obligations shall be paid to the Executive, his
beneficiaries or his estate, as applicable, in a lump sum in cash within thirty
(30) days of the Date of Termination. In the event of the termination of the
Executive by reason of death or Disability, he and/or his named beneficiaries,
as the case may be, shall be entitled to the benefits available through the
Company sponsored plans and programs designated for such category of termination
on Schedule A. With regard to the termination of

                                       10
<PAGE>   11

the Executive's employment by reason of retirement on or after the attainment of
age sixty-five (65) or Disability, the Company shall pay the premiums (to the
same extent paid prior to the termination of employment) for the continued
participation of the Executive for a period of twelve (12) months after the Date
of Termination in any individual life insurance policy on the same terms as the
Executive and the Company were participating prior to the Date of Termination.
Further, with regard to the termination of the Executive's employment by reason
of the Executive's death, retirement on or after the attainment of age
sixty-five (65) or Disability, the Company shall, for a period of twelve (12)
months after the Executive's Date of Termination, pay the entire COBRA premium
under any Company medical and dental program that the Executive (and his spouse
and eligible dependents) was participating in prior to the termination of
employment. The Company's premium obligations in the preceding two sentences
shall exclude normal employee contributions paid by the Executive prior to the
Date of Termination. In addition to the foregoing, in the event of termination
of the Executive's employment by reason of the death or Disability of the
Executive, all unvested stock options held by the Executive shall become fully
vested, effective on the Date of Termination, and shall thereafter be
exercisable in accordance with the provisions of the applicable Option Plan
(including, without limitation, Sections 5 and 6 thereof) and Option Agreement.

                  (b)      Termination by the Company for Cause and Voluntary
Termination by the Executive. If the Executive's employment shall be terminated
for Cause or voluntarily terminated by the Executive (other than on account of
Constructive Termination), the Company shall pay the Executive the Accrued
Obligations. The Executive shall be paid all such Accrued Obligations in a lump
sum in cash within thirty (30) days of the Date of Termination and the Company
shall have no further obligations to the Executive under this Agreement, unless
otherwise required by a Qualified Plan or specified pursuant to a valid election
to defer the receipt of all or a portion of such payments made in accordance
with any plan of deferred compensation sponsored by the Company.

                  (c)      Other Termination of Employment. If the Company
terminates the Executive's employment other than for Cause, death or Disability,
or the Executive terminates his employment for Constructive Termination, the
Company shall pay and provide to the Executive the following:

                           (i)      Severance Payment. The Company shall pay to
the Executive in a lump sum in cash or certified check within fifteen (15) days
after the Date of Termination a severance payment equal to the sum of the
following amounts (other than amounts payable from the Incentive Plan or
Qualified Plans, non-qualified retirement plans and deferred compensation plans,
which amounts shall be paid in accordance with the terms of such plans):

                                    (A)     all Accrued Obligations;

                                       11
<PAGE>   12

                                    (B)     a cash amount equal to twelve (12)
months of the Executive's Base Salary at the rate in effect as of the date when
the Notice of Termination was given;

                                    (C)     subject to the terms of the
Incentive Plan and further provided that the Executive has been employed by the
Company for the first six (6) months of the then applicable fiscal year, a cash
amount equal to a portion of the Incentive Bonus, the product of a fraction, the
numerator of which is the number of days elapsed since the date the Incentive
Plan began for the applicable fiscal year through the date of such Constructive
Termination or termination without Cause, and the denominator of which is the
total number of days of the applicable fiscal year for such Incentive Plan.

                           (ii)     Acceleration of Option Vesting.  In the case
of a Constructive Termination, all unvested stock options held by the Executive
shall become fully vested, effective on the Date of Termination, and shall be
thereafter exercisable in accordance with the provisions of the applicable
Option Plan (including, without limitation, Sections 5 and 6 thereof) and Option
Agreement.

                  (d)      Release. As a condition precedent to the receipt of
any termination benefits payable to the Executive under this Section 7, the
Executive agrees to execute a general release among other things releasing the
Company from any obligation or liability (other than those contained in Sections
7, 8, 9, 10, 11, 13 and 14 hereof, to the extent an obligation under any such
section arose at or prior to the Date of Termination and remains unfulfilled).
Such release shall exclude the Executive's rights under any Qualified Plan.

                  (e)      Discharge of Company's Obligations. Subject to the
performance of its obligations under Sections 7, 8, 9, 10, 11, 13, 14, and 15
(and then, only to the extent an obligation under any such section arose at or
prior to the Date of Termination and remains unfulfilled), the Company shall
have no further obligations to the Executive under this Agreement in respect of
any termination of employment.

                  8.       Change of Control. Upon the occurrence of a Change of
Control, the Company shall pay the Executive, as consideration for assisting the
Company in bringing about a successful transaction, an amount equal to eighteen
(18) months of the Executive's Base Salary at the rate in effect as of the
Change of Control Date. Such amount shall be payable in a lump sum in cash or
certified check within five (5) days after the Change of Control Date.

                  9.       Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company and
for which the Executive may qualify, nor shall anything herein limit or
otherwise prejudice such rights as the Executive may have under any other
agreements with the Company, including, but not limited to stock option
agreements. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive

                                       12
<PAGE>   13

under any plan or program of the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan or program.

                  10.      Full Settlement. The Executive shall not be obligated
to seek other employment by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement. In the event that the
Executive shall in good faith give a Notice of Termination for Constructive
Termination and it shall thereafter be determined that Constructive Termination
did not take place, the employment of the Executive shall, unless the Company
and the Executive otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual consent of the
Company and the Executive and the Executive shall be entitled to receive only
those payments and benefits which he would have been entitled to receive at such
date had he terminated his employment voluntarily at such date under this
Agreement.

                  11.      Arbitration of Disputes. In the event that a claim
for payment or benefits under this Agreement is disputed, the Company and the
Executive agree to submit such dispute to final and binding arbitration with
United States Arbitration and Mediation, Inc. ("USAM") in Knoxville, Tennessee
or such other arbitration firm as the Company and the Executive shall mutually
agree. Either party wishing to arbitrate any claim hereunder shall notify the
other party and USAM in writing whereupon USAM shall select a neutral arbitrator
and shall schedule an arbitration hearing within thirty (30) days of receipt of
such notice of arbitration. The arbitration shall be conducted in accordance
with the rules and procedures of USAM. The parties agree that any arbitrator's
award may be presented to a court of competent jurisdiction and judgment entered
thereon.

                  12.      Confidential Information and Nonsolicitation.

                  (a)      The Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or
data, including without limitation all trade secrets, relating to the Company,
and its business, (i) obtained by the Executive during his employment by the
Company, and (ii) which is not otherwise publicly known (other than by reason of
an unauthorized act by the Executive) and is subject to efforts that are
reasonable under the circumstances to maintain its secrecy. After termination of
the Executive's employment with the Company, the Executive shall not, without
the prior written consent of the Company, unless compelled pursuant to an order
of a court or other body having jurisdiction over such matter, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.

                  (b)      Upon termination of the Executive's employment for
any reason, the Executive, for the twelve (12) month period following the Notice
of Termination, shall not, on his own behalf or on behalf of any person or
entity, directly or indirectly solicit or aid in the solicitation of any
employees of the Company to leave their employment. In the event the Executive
violates the terms of Section 12(a) or this Section 12(b), the Employee shall
forfeit

                                       13
<PAGE>   14

the right to all salary and benefits that the Executive and/or his family
members were otherwise entitled pursuant to the terms of Section 7. Also, in the
event that this Section 12 is determined to be unenforceable in part, it shall
be construed to be enforceable to the maximum extent permitted by law.

                  (c)      The Executive agrees that the covenants of
confidentiality and non-solicitation contained in this Section 12 are reasonable
covenants under the circumstances and necessary to protect the business
interests and properties of the Company. The Executive agrees that irreparable
loss and damage will be suffered by the Company should the Executive breach any
of the covenants contained in this Section 12. Accordingly, the Executive agrees
that the Company, in addition to all remedies provided at law or in equity,
shall be entitled to a temporary restraining order and temporary and permanent
injunctions to prevent a breach or contemplated breach of any of the covenants
contained in this Section 12.

                  13.      Limited Indemnity. The Executive has represented to
the Company that he may have signed an employment agreement (the "Former
Agreement") with his former employer. The Company agrees to indemnify the
Executive for the legal fees and legal expenses related to any claim, demand or
cause of action asserted against the Executive by his former employer (or its
subsidiaries or affiliates) based on an allegation that the Executive breached
his Former Agreement with his former employer. The Company's indemnity to the
Executive is expressly contingent on the following:

                           (i)      the Executive must notify the Company in
writing within five (5) days of any such claim, demand or cause of action; and

                           (ii)     the Executive agrees that the Company may
direct and fully participate in the defense (including, without limitation, the
right to choose legal counsel to represent the Executive in any such claim,
demand, or cause of action) and settlement of any such claim, demand or cause of
action.

                           Notwithstanding anything to the contrary, the
Company's maximum aggregate indemnification to the Executive shall be limited
solely to the legal fees and legal expenses incurred directly by the Executive
arising from any claim, demand or cause of action related to the Former
Agreement. Except for the foregoing indemnity for legal fees and legal expenses,
in no event shall the Company be liable to the Executive or any other party for
any claim or damage related to the Executive's Former Agreement.

                  14.      Successors.

                  (a)      This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

                                       14
<PAGE>   15

                  (b)      This Agreement shall inure to the benefit of and be
binding upon the Company and its successors. The Company shall require any
successor to all or substantially all of the business and/or assets of the
Company, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the Company would be
required to perform if no such succession had taken place.

                  15.      Miscellaneous.

                  (a)      Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee, applied
without reference to principles of conflict of laws.

                  (b)      Amendments. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.

                  (c)      Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the other
party, by overnight delivery or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

                  If to the Executive:      at the address listed on the last
                                            page hereof

                  If to the Company:        Goody's Family Clothing, Inc.
                                            400 Goody's Lane
                                            P.O. Box 22000
                                            Knoxville, Tennessee 37933-2000
                                            Attention: General Counsel

(with a copy to the attention of the Secretary or to such other address as
either party shall have furnished to the other in writing in accordance
herewith). Communications delivered by hand or by overnight delivery shall be
deemed received on the date of delivery and communications sent by registered or
certified mail shall be deemed received three (3) business days after the
sending thereof.

                  (d)      Tax Withholding. The Company may withhold from any
amounts payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.

                  (e)      Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.

                                       15
<PAGE>   16

                  (f)      Captions. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.

                  (g)      Entire Agreement. This Agreement expresses the entire
understanding and agreement of the parties regarding the terms and conditions
governing the Executive's employment with the Company, and all prior agreements
governing the Executive's employment with the Company shall have no further
effect.

                  IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Company has caused this Agreement to be executed in its name on its
behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary, all effective as of the day and year first above written.

                                   GOODY'S FAMILY CLOTHING, INC.

                                   By:
                                        --------------------------------------
                                          Robert M. Goodfriend
                                   Title: Chairman and Chief Executive Officer
ATTEST:                            Date:  September 11, 2000

---------------------------
Title:  Assistant Secretary

(CORPORATE SEAL)

                                   EXECUTIVE:

                                   -------------------------------------------
                                   Max W. Jones

                                   Address: 8949 Hemingway Grove Circle
                                            Knoxville, TN  37922

                                       16
<PAGE>   17

                            SCHEDULE A --MAX W. JONES

                  The following is a summary list of benefits available to the
Executive upon termination of the Executive's employment by reason of retirement
on or after the attainment of age sixty-five (65), death or Disability through
Company sponsored plans and programs as of the date of this Agreement. Nothing
herein shall preclude the Company from amending, altering, suspending,
discontinuing or terminating any of such plans and programs in compliance with
applicable law and regulation.

COVERAGE TYPE

Group Life Insurance                --      Basic
                                            High Option

Group Disability Insurance          --      Basic 2 year
                                            High Option
                                            (benefit for 5 years)

Coverage by group life and disability insurance policies terminates upon
termination of the Executive's employment for any reason, except death (in the
case of life insurance) and disability (in the case of disability insurance).
The Executive's beneficiaries are entitled to benefits under the group life
insurance policy if the Executive dies during the period he is receiving
disability payments as a result of such disability.

In addition, the Company has a 401(k) plan in which the Executive may
participate on a voluntary basis. Company contributions therein on his behalf
vest in accordance with the terms of the 401(k) plan, which provides that such
contributions become immediately vested in the event of death during the term of
employment. Upon termination for any reason, the Executive must withdraw his
vested funds by the end of the following fiscal quarter.

                                       17

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