GOODYS FAMILY CLOTHING INC /TN, DEF 14A, 2000-05-22

GOODYS FAMILY CLOTHING INC /TN
DEF 14A, 2000-05-22
FAMILY CLOTHING STORES

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
</TABLE>

GOODY'S FAMILY CLOTHING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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

(2) Form, Schedule or Registration Statement No.:

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

(3) Filing Party:

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

(4) Date Filed:

------------------------------------------------------------------------
<PAGE> 2

GOODY'S FAMILY CLOTHING, INC.
400 GOODY'S LANE
KNOXVILLE, TENNESSEE 37922

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To the Shareholders of Goody's Family Clothing, Inc.:

We are pleased to invite you to attend our 2000 annual meeting of
shareholders for the following purposes:

1. Elect two directors to serve for terms of three years; and

2. Transact such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.

In addition to the specific matters to be acted upon at the meeting as
described in detail in the accompanying Proxy Statement, there will be a review
of fiscal 1999, a report on the progress of the Company and an opportunity for
shareholders to ask management questions of general interest during the meeting.

Only shareholders of record at the close of business on April 24, 2000 are
entitled to receive notice of and to vote at the meeting.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED AS PROMPTLY AS POSSIBLE. INSTRUCTIONS ARE INCLUDED ON
YOUR PROXY CARD.

By Order of the Board of Directors,

/s/ Robert M. Goodfriend
Robert M. Goodfriend
Chairman of the Board and
Chief Executive Officer
Knoxville, Tennessee
May 19, 2000

This Proxy Statement and the enclosed proxy card are being mailed on or
about May 19, 2000 to the shareholders of record of the Company at the close of
business on April 24, 2000. The Company's 1999 Annual Report, which includes its
financial statements and is not part of the proxy solicitation material, is
being mailed with this Proxy Statement.
<PAGE> 3

-------------------------------
PROXY STATEMENT
-------------------------------

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

GENERAL

This Proxy Statement is furnished by and on behalf of the Board of
Directors (the "Board") of Goody's Family Clothing, Inc. (the "Company") in
connection with the solicitation of proxies for use at the 2000 annual meeting
of shareholders (individually, a "Shareholder" and collectively, the
"Shareholders") of the Company, or at any and all adjournment(s) or
postponement(s) thereof (the "Annual Meeting"). A copy of the notice of the
Annual Meeting accompanies this Proxy Statement.

DATE, TIME AND PLACE OF MEETING

Date: June 21, 2000
Time: 10:00 a.m. EDT
Place: 400 Goody's Lane, Knoxville, TN

SHARES ENTITLED TO VOTE

There are 32,484,630 shares of common stock, no par value, of the Company
(the "Common Stock") entitled to notice of and to vote at the Annual Meeting,
and each such share entitles its holder to one vote. April 24, 2000 has been
fixed as the record date (the "Record Date") for the determination of the
Shareholders entitled to receive notice of and to vote at the Annual Meeting.
Accordingly, only holders of Common Stock of record at the close of business on
that day will be entitled to notice of and to vote at the Annual Meeting.

VOTING YOUR PROXY

Whether or not you plan to attend the Annual Meeting, we urge you to
complete, sign and date the proxy card and return it promptly in the envelope
provided. Returning the proxy card will not affect your right to attend the
Annual Meeting and vote. The enclosed proxy card indicates the number of shares
that you own. Voting instructions are included on your proxy card. If you
properly complete your proxy card and return it as instructed in time to vote,
one of the individuals named on your proxy card will vote your shares as you
have directed. If you sign the proxy card but do not make specific choices, your
proxy will follow the Board's recommendations and vote your shares as follows:

- "FOR" the election of the 2 nominees for director (as described on page
4).

If any other matter is presented at the Annual Meeting, your proxy will
vote in accordance with the Board's recommendation. At the time this Proxy
Statement was mailed to the Shareholders, we knew of no other matters to be
acted on at the Annual Meeting.

REVOKING YOUR PROXY

You may revoke your proxy at any time before it is exercised by:

- sending in another signed proxy card with a later date;

- notifying the Company's Secretary in writing before the Annual Meeting
that you have revoked your proxy; or

- voting in person at the Annual Meeting.
<PAGE> 4

VOTING IN PERSON

If you plan to attend the Annual Meeting and vote in person, we will give
you a ballot after you arrive. However, if your shares are held in the name of
your broker, bank or other nominee, you must bring a photo identification and an
account statement or a letter from the nominee indicating that you were the
beneficial owner of the shares on the Record Date.

QUORUM REQUIREMENTS

A quorum of Shareholders is necessary to hold a meeting of the
Shareholders. The presence, in person or by proxy, at the Annual Meeting of the
holders of a majority of all the shares of Common Stock entitled to notice of
and to vote at the Annual Meeting constitutes a quorum to act upon the proposed
business. Shares as to which authority to vote is withheld, abstentions and
broker "non-votes" are counted as present for establishing a quorum. A broker
non-vote occurs on an item when a broker is not permitted to vote on that item,
absent instruction from the beneficial owner of the shares and no such
instruction is given.

VOTE NECESSARY TO APPROVE PROPOSALS

Directors are elected by the affirmative vote, in person or by proxy, of a
plurality of the shares entitled to vote in any election at a meeting at which a
quorum is present. Only votes actually cast will be counted for the purpose of
determining whether a particular nominee received more votes than another person
or persons, if any, nominated for the same seat on the Board. Accordingly, votes
withheld from director nominees, abstentions and broker non-votes will not be
included in vote totals and will not be considered in determining the outcome of
the vote.

FISCAL YEAR

The terms "fiscal 1997," "fiscal 1998," "fiscal 1999," "fiscal 2000," and
"fiscal 2001" as used herein refer to the Company's fiscal years ended January
31, 1998, January 30, 1999 and January 29, 2000, and the Company's fiscal years
ending February 3, 2001 and February 2, 2002, respectively.

2
<PAGE> 5

ITEM 1. ELECTION OF DIRECTORS

BOARD OF DIRECTORS

The Board is divided into three classes of directors with each class
holding office for a staggered three-year term. The term of the Class II
Directors, Harry M. Call and Samuel J. Furrow, will expire at the Annual
Meeting. Harry M. Call and Samuel J. Furrow are nominees for election at the
Annual Meeting as Class II Directors to serve until the 2003 annual meeting of
shareholders (or until the earlier election and qualification of their
successors). The Company's Bylaws (the "Bylaws") provide that any vacancy in the
Board created by the death, resignation or removal of a director shall be filled
by the affirmative vote of a majority of the remaining directors then in office,
though less than a quorum, for a term of office until the next annual meeting of
shareholders.

The Bylaws further provide that the Company shall have at least five and no
more than ten directors, with the Board to determine the exact number from time
to time, and, until the adjournment of the 2000 Annual Meeting of Shareholders,
that at least 51% of the Board shall be Independent Directors. For purposes of
the Bylaws, a person shall be deemed to be an "Independent Director" if he or
she (i) is not an executive officer or an employee of the Company or any
subsidiary or affiliate of the Company, (ii) has not served as an executive
officer of the Company at any time during the two years preceding his or her
election as a director of the Company and has not served in such capacity for a
period exceeding ten years, (iii) is not a family member (i.e., parent, sibling,
grandparent, mother-in-law, father-in-law, spouse, former spouse, child,
stepchild, grandchild or any other blood or legal relative) of any executive
officer or any other employee described in clause (i) or (ii) above, (iv) is not
a person, or is not a family member or Affiliate or Associate (as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), of any person, who beneficially owns 25% or more of the securities of
the Company then entitled to vote in the election of directors of the Company
and (v) is free from any relationship that, in the good faith opinion of the
other Independent Directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of an Independent Director. The
Board is currently comprised of six members and all of the directors, other than
Messrs. Goodfriend and Call, meet the requirements for being an Independent
Director.

Since the Board has only nominated two persons for election as Class II
Directors and has fixed the number of Class II Directors at two directors, the
Shareholders cannot vote for a greater number of persons than the number of
nominees named herein. The election of the Class II Directors requires the
presence, in person or by proxy, of the holders of a majority of all the shares
of Common Stock entitled to notice of and to vote at the Annual Meeting. The
Class II Directors are elected by the affirmative vote, in person or by proxy,
of a plurality of the shares entitled to vote at the Annual Meeting. The
Company's principal shareholder, Mr. Robert M. Goodfriend, owns approximately
40.8% of the outstanding shares of Common Stock and has indicated his intention
to vote his shares in favor of the election as Class II Directors of the two
nominees listed below.

In the event any of the nominees listed below refuses or is unable to serve
as a director (which is not now anticipated), the persons named as proxies in
the enclosed proxy card reserve full discretion to vote for such other person or
persons as may be nominated.

3
<PAGE> 6

BIOGRAPHIES OF DIRECTOR NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth biographical data for the last five years
for each nominee for director, for each director and for each executive officer
of the Company (based upon information supplied by him or her to the Company)
and such person's length of service as a director and/or executive officer of
the Company.

CLASS II DIRECTORS -- NOMINEES FOR ELECTION AT THE ANNUAL MEETING FOR
TERM EXPIRING AT THE 2003 ANNUAL MEETING

<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Director Officer
Name Age Occupation and Business Experience Since Since
---- --- --------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Harry M. Call 55 Director, President and Chief Operating 1995 1995
Officer of the Company since January
1995. Also, Director and President of
TREBOR of TN, Inc., a wholly-owned
subsidiary of the Company, since
October 1996 and Manager of GFCFS, LLC,
a wholly-owned subsidiary of SYDOOG,
Inc., (which itself is a wholly-owned
subsidiary of the Company) since
November 1998.
Samuel J. Furrow 58 Chairman of: Furrow Auction Company (a 1995 --
real estate and equipment sales
company) since April 1968;
Furrow-Justice Machinery Corporation (a
six-branch industrial and construction
equipment dealer) since September 1983;
and Innovo Group, Inc., (a
publicly-held manufacturer and supplier
of sports bags and apparel) since
October 1998. Director of
Southeastern-Advertising, Inc., (an
advertising agency) since April 1968
and Member of the Advisory Board of
AmSouth Bank since September 1993.
Owner of: Mercedes Benz of Knoxville
since December 1980; Land Rover of
Knoxville since July 1997; and Land
Rover of Chattanooga since September
1999.
</TABLE>

YOUR BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF THE ABOVE NOMINEES AS CLASS II DIRECTORS.

CLASS III DIRECTORS -- TERM EXPIRING AT THE 2001 ANNUAL MEETING

<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Director Officer
Name Age Occupation and Business Experience Since Since
---- --- --------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Robert M. Goodfriend 50 Chairman of the Board of Directors and 1973 1977
Chief Executive Officer of the Company.
Robert F. Koppel 53 President of East Tennessee Children's 1995 --
Hospital since August 1976.
</TABLE>

4
<PAGE> 7

CLASS I DIRECTORS -- TERM EXPIRING AT THE 2002 ANNUAL MEETING

<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Director Officer
Name Age Occupation and Business Experience Since Since
---- --- --------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Irwin L. Lowenstein 64 Director of: Full Line Sportswear (a 1996 --
publicly-held sportswear manufacturer
and distributor) since July 1994; and
The Powell Company, Inc., (a
privately-held furniture manufacturer)
since February 1999. Previously served
as Executive Vice President of
Rhodes/Heilig-Meyers Company (a
publicly-held specialty furniture
retailer) from February 1997 to
February 2000; Chief Executive Officer
of Rhodes, Inc., (a publicly-held
specialty furniture retailer) from May
1989 to January 1997, Chairman from
July 1994 to February 1997, and
Director from March 1977 to February
1997.
Cheryl L. Turnbull 39 Managing Director of Banc One Mezzanine 1995 --
Corp. (a merchant bank) since June
1999. Previously served as Director of
Banc One Capital Markets, Inc., (a
merchant bank) from January 1998 to
June 1999, Vice President from July
1996 to December 1997. A private
investor from July 1995 to July 1996.
Managing Director of Aston Limited
Partners, L.P. (a bank re-engineering
firm) from August 1992 to June 1995.
</TABLE>

EXECUTIVE OFFICERS (IN ADDITION TO MESSRS. GOODFRIEND AND CALL):

5
<PAGE> 8

<TABLE>
<CAPTION>
Executive
Position(s) With the Company, Principal Officer
Name Age Occupation and Business Experience Since
---- --- ------------------------------------------------ ---------
<S> <C> <C> <C>
Bruce E. Halverson 45 Senior Vice President, Planning and Allocation 1998
of the Company since January 1998. Previously
served as Vice President, Planning and
Allocation of the Company from November 1993 to
January 1998.
Stanley B. Latacha 49 Senior Vice President, Marketing and Advertising 1997
of the Company since July 1997. Previously
served as Senior Vice President, Marketing and
Advertising of OfficeMax, Inc., (a publicly-held
office products superstore) from June 1996 to
July 1997 and Vice President, Marketing and
Sales Promotion of Richman Gordman 1/2 Price
Stores, Inc., (a regional off-price department
store) from October 1990 to June 1996.
John J. Okvath III 55 Senior Vice President, Product Development of 1998
the Company since January 1998. Previously
served as Vice President, Product Development of
the Company from August 1995 to January 1998, as
a consultant to the Company from June 1995 to
July 1995 and as Country Manager in various
capacities of Swire & Maclaine Ltd. Hong Kong (a
privately-held import/export buying agency) from
April 1988 to May 1995.
Jay D. Scussel 56 Senior Vice President, Management Information 1998
Systems of the Company since January 1998.
Previously served as Vice President, Management
Information Systems of the Company from January
1996 to January 1998, an independent consultant
from February 1995 to January 1996 and Vice
President of Systems Development of Kmart
Corporation (a publicly-held mass market
retailer) from January 1989 to February 1995.
Marcus H. Smith, Jr. 43 Senior Vice President, Real Estate of the 1995
Company since April 1995. Previously served as
Vice President of Development of Valparaiso
Realty Company (a real estate development
company) from May 1992 to April 1995.
Bobby Whaley 55 Senior Vice President, Distribution, 1998
Transportation and Logistics of the Company
since January 1998. Previously served as Vice
President, Distribution, Transportation and
Logistics of the Company from February 1983 to
January 1998.
</TABLE>

6
<PAGE> 9

MEETINGS AND COMMITTEES OF THE BOARD

During fiscal 1999, the Board met five times and each director attended 75%
or more of the aggregate number of meetings held by the Board and its committees
on which he or she served. The Bylaws provide that the Board shall have and
maintain Audit and Compensation Committees. The Bylaws further provide that,
until the adjournment of the 2000 Annual Meeting of Shareholders, each of such
committees shall consist of not less than three directors and all members of
such committees shall be Independent Directors.

The Audit Committee, which consists of Messrs. Furrow and Koppel (Chair)
and Ms. Turnbull, is primarily responsible for (i) monitoring the integrity of
the Company's financial reporting process and systems of internal controls
regarding finance, accounting, and legal compliance, (ii) monitoring the
independence and performance of the Company's independent auditors and internal
auditing department, and (iii) providing an avenue of communication among the
independent auditors, management, the internal auditing department, and the
Board. The Audit Committee has a charter that details its duties and
responsibilities. A copy of this charter is attached to this Proxy Statement as
Appendix A. During fiscal 1999, the Audit Committee met five times.

The Compensation Committee, which consists of Messrs. Koppel and Lowenstein
and Ms. Turnbull (Chair), is responsible for reviewing the compensation,
including fringe benefits, of the Chief Executive Officer, other executive
officers and key management of the Company and making recommendations thereof to
the Board. It is also responsible for the review and administration of the
Company's stock option plans, 401(k) retirement plan, executive deferral plan,
employee payroll investment plan and short-term incentive compensation plan. In
carrying out such responsibilities, the Compensation Committee reviews the
salaries, benefits, performance and other incentive bonuses of key employees as
well as the general terms and conditions of the other benefit plans. During
fiscal 1999, the Compensation Committee met five times.

The Board also has a Nominating Committee, consisting of Messrs. Furrow
(Chair), Goodfriend and Lowenstein, which is responsible for recommending to the
Board suitable persons for election as directors of the Company. The Nominating
Committee will consider nominees recommended by shareholders provided that the
names of such persons are submitted no later than the date established for the
submission of shareholder proposals for action at the Company's next annual
meeting of shareholders. The Nominating Committee met twice during fiscal 1999.

DIRECTORS' COMPENSATION

Each non-employee director is entitled to receive the following
compensation from the Company:

- a monthly retainer of $1,000;

- a fee of $1,500 for attendance at each meeting of the Board or any of its
committees (provided, however, committee meetings that are held on the
same days as Board meetings are not counted as separate meetings and
provided further that directors are not compensated for their
participation in brief informative telephonic meetings); and

- a fee of $1,500 for each eight hours of committee work outside of formal
committee meetings, which is considered equivalent to attendance at one
committee meeting, thereby entitling such director to compensation.

In addition to receiving directors' fees, all non-employee directors are
reimbursed for expenses incurred in connection with their attendance at meetings
of the Board or any of its committees.

Non-employee directors are also entitled to receive, upon first becoming a
director of the Company, formula grants of stock options to acquire 15,000
shares of Common Stock. At each subsequent annual meeting of shareholders,
formula grants of stock options to acquire 3,000 shares of Common Stock are also
awarded to each non-employee director. These stock options are granted at an
exercise price equal to the fair market value of a share of Common Stock on the
date of grant and vest in 20% annual increments following the date of grant.

7
<PAGE> 10

Directors are also eligible to receive additional grants of stock options
under the Company's 1991 Stock Incentive Plan, 1993 Stock Option Plan and 1997
Stock Option Plan at the discretion of the Compensation Committee. The exercise
price, term and vesting of any such stock options would be determined by the
Compensation Committee at its discretion. There are 514,710 shares of Common
Stock available for future issuance under these plans as of April 29, 2000.

Non-employee directors are permitted to irrevocably elect and receive (in
lieu of cash for the director's fees otherwise earned by them) non-qualified
stock options exercisable to purchase shares of Common Stock at an exercise
price equal to 50% of the fair market value of a share of Common Stock on the
date of grant. This alternative allows the Company to eliminate the cash cost of
annual directors' fees otherwise payable to non-employee directors and to more
closely align the interests of non-employee directors with those of the
shareholders. These stock options are granted at the Board meeting following the
annual meeting of shareholders based on the number of anticipated meetings of
the Board and its committees to be held during the twelve-month period, as well
as the monthly retainer, beginning on the first day of the third quarter of the
then current fiscal year of the Company and ending on the last day of the second
quarter of the following fiscal year of the Company (the "Plan Year"). These
stock options vest on the twelve-month anniversary of the date of grant and are
subject to adjustment at the end of the Plan Year (which corresponds with the
end of the Company's second fiscal quarter) to reflect each director's actual
attendance at or participation in the meetings. At each of the Board meetings
following the respective annual meetings of shareholders for the last three
years, all non-employee directors elected to receive 100% of their directors'
fees for the Plan Years following the respective annual meetings, in the form of
discounted stock options. The non-employee directors will be permitted to make
such election for the 2000 Plan Year at the Board meeting planned for June 21,
2000 following the Annual Meeting.

No compensation is paid to executive officers of the Company for services
rendered in their capacities as directors of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Decisions on executive compensation in fiscal 1999 were made by the
Compensation Committee (and approved by the Board) upon the recommendation of
the Company's Chairman of the Board and Chief Executive Officer and its
President and Chief Operating Officer (other than, in each case, with respect to
such executive's own compensation). The Compensation Committee currently
consists of Messrs. Koppel and Lowenstein and Ms. Turnbull (Chair), none of whom
is or was an officer or other employee of the Company or had any relationship
with the Company required to be disclosed as a Compensation Committee interlock,
except that Mr. Koppel is the President of the East Tennessee Children's
Hospital (the "Hospital") and Mr. Goodfriend is a director of the Hospital and
as such participates in deliberations regarding incentive payments to officers
of the Hospital, including, without limitation, Mr. Koppel. See "Certain
Transactions with Directors and Officers."

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who beneficially own more than 10% of the Common
Stock ("Reporting Persons") to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission") on a
timely basis. Reporting Persons are required to furnish the Company with copies
of all such forms they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and certain
written representations that no other reports were required, the Company
believes that all filing requirements applicable to Reporting Persons during and
with respect to fiscal 1999 were complied with on a timely basis.

8
<PAGE> 11

OTHER MATTERS

On September 29, 1995, the Commission entered an Order Instituting Public
Proceedings Pursuant to Section 21C of the Exchange Act, Making Findings and
Imposing Relief, and Cease-and-Desist Order against the Company and Robert M.
Goodfriend, the Chairman and Chief Executive Officer of the Company, Release No.
36308, File No. 3-8852 (the "Order"). In anticipation of the Order, the Company
and Mr. Goodfriend each submitted an Offer of Settlement without admitting or
denying the findings set forth therein, and consented to the entry of the Order
by the Commission. Pursuant to the Order, the Commission found that during 1992
and 1993: (i) the Company violated Sections 13(a) and 13(b)(2)(A) and (B) of the
Exchange Act and Rules 12b-20, 13a-1, 13a-13 and 13b2-1 promulgated thereunder
and (ii) Mr. Goodfriend violated Rule 13b2-1 promulgated under the Exchange Act
and caused the Company's violation of the above-referenced Sections. In
addition, the Commission entered an order that each of the Company and Mr.
Goodfriend cease and desist from committing or causing any violation, and from
committing or causing any future violation, of Sections 13(a) and 13(b)(2)(A)
and (B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-13 and 13b2-1
promulgated thereunder.

9
<PAGE> 12

SHARE OWNERSHIP OF DIRECTORS AND CERTAIN EXECUTIVE OFFICERS

The following table sets forth information regarding the beneficial
ownership of the outstanding shares of Common Stock as of the Record Date for
(i) each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each of the executive officers of the
Company named in the "Table I -- Summary Compensation Table," (iii) each
director of the Company and (iv) all directors and executive officers of the
Company as a group. According to rules adopted by the Commission, a person is a
"beneficial owner" of securities if that person has or shares the power to vote
them or to direct their investment, or has the right to acquire beneficial
ownership of such securities within 60 days from the Record Date through the
exercise of an option, warrant or right, conversion of a security or otherwise.
As of the date of this Proxy Statement, the Company only has shares of Common
Stock outstanding. An asterisk indicates beneficial ownership of less than 1% of
the outstanding shares of Common Stock.

<TABLE>
<CAPTION>
Number of Shares and Nature of Beneficial
Ownership at April 24, 2000(1)
-----------------------------------------------------
Voting or Investment
Power Percent
--------------------- of Acquirable within
Name Sole Shared Class 60 Days(1)
- ---- ---------- ------ ------- -----------------
<S> <C> <C> <C> <C>
Robert M. Goodfriend(2)....................... 13,896,710(3) 22,500(4) 42.0% 667,000
Harry M. Call................................. 79,709 -- * 71,500
Edward R. Carlin.............................. 88,055 -- * 87,750
Thomas R. Kelly, Jr........................... 174,750 -- * 158,750
Lana Cain Krauter............................. 51,000 -- * 50,000
Samuel J. Furrow.............................. 22,300 -- * 22,300
Robert F. Koppel.............................. 22,538 -- * 22,538
Irwin L. Lowenstein........................... 33,652 -- * 33,652
Cheryl L. Turnbull............................ 61,572 -- * 61,572
All Directors and Executive Officers as a
Group
(16 Persons)(6)............................. 14,742,726(3) 23,900(5) 43.5% 1,465,512
</TABLE>

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

(1) This column lists the number of shares of Common Stock which the respective
director and/or executive officer has the right to acquire within 60 days
from the Record Date through the exercise of stock options awarded under the
Company's stock option plans. Such shares are also included in the other
columns of this table, as appropriate.
(2) The business address of Mr. Goodfriend is 400 Goody's Lane, Knoxville,
Tennessee 37922.
(3) These shares do not include 834,540 shares (2.6% of the outstanding shares
of Common Stock) held in trust for Mr. Goodfriend's children, as to which
Mr. Goodfriend disclaims beneficial ownership. Mr. Goodfriend has no voting
or investment power with respect to these shares.
(4) These shares are owned by Mr. Goodfriend's wife, with whom Mr. Goodfriend
shares voting and investment power with respect to such shares.
(5) Voting and investment power with respect to these shares are shared with
certain family members of the respective director and/or executive officer.
See footnote 4 above.
(6) Includes shares beneficially owned by Mr. Kelly who resigned on May 5, 2000.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Background. The Company currently has eleven executive officers and six
directors. Three of the non-employee directors, Messrs. Koppel and Lowenstein
and Ms. Turnbull (Chair), comprise the Compensation Committee.

Objective and Philosophy. The Compensation Committee works closely with
management to design an executive compensation program to assist the Company in
attracting and retaining outstanding executives and senior management personnel
in the retail industry. The design and implementation of such program
continually evolves as the Company grows, but is based primarily on two
elements: (i) providing compensation opportunities that are competitive with
retail companies of similar size and (ii) linking executives' compensation with
the Company's financial performance by rewarding the achievement of short-term
and long-term objectives of the Company.

10
<PAGE> 13

Compensation Program Components. Currently, the three principal components
of the Company's executive compensation program are: (i) annual base salary,
(ii) short-term incentive compensation in the form of performance bonuses
payable in cash each year, and (iii) long-term incentive compensation in the
form of stock options. These programs are structured in accordance with the
Compensation Committee's objectives and philosophy.

Base Salary. Base salary levels for the Company's executives are designed
to be reflective of competitive conditions in the marketplace for executives of
comparable talent and experience and are based upon responsibility and
performance. Base salaries are generally recommended by management for the
review and approval of the Compensation Committee and the Board (subject to
applicable employment agreements).

Short-Term Incentive Compensation. The short-term incentive compensation
component consists of target performance bonuses for eligible executives which
are calculated as a percent of their base salaries (ranging between 60% and
150%). Each year, the target earnings (which are based upon prebonus and pretax
earnings) of the Company are established by the Compensation Committee with the
assistance of management and approved by the Board. Each participating executive
is eligible to receive between 0% and 150% of their respective target
performance bonus depending upon the Company's performance. Upon management's
recommendation, the Compensation Committee, with the approval of the Board, has
the discretion to award additional bonuses outside of this plan if warranted by
an executive officer's exceptional service to the Company. With respect to
fiscal 1999, because the target level of earnings was not achieved, no bonuses
were awarded to executive officers except for (i) a guaranteed bonus of $100,000
paid to Mr. Goodfriend which is discussed below, (ii) a guaranteed bonus of
$100,000 paid to each of Mr. Call, Mr. Kelly and Ms. Krauter in accordance with
their employment agreements with the Company, and (iii) certain discretionary
bonuses aggregating $25,000 to five other executive officers based on their
exceptional service to the Company.

Long-Term Incentive Compensation. The long-term incentive compensation
component consists of stock option plans under which executives may be granted
stock options exercisable to purchase shares of Common Stock. The exercise price
of stock options represents the fair market value of the Common Stock on the
date of grant, which is the closing sale price of the Common Stock on The Nasdaq
Stock Market for the business day preceding the date of grant. Generally, the
stock options become exercisable in equal annual increments over five years and
expire ten years from the date of grant. The deferred vesting provisions of the
stock options are designed to reward long-term contributions and create an
incentive for executives to remain with the Company. The Compensation Committee
believes that granting stock options creates an incentive to promote the
long-term interests of the Company and aligns the economic benefit to be derived
therefrom with those of the Company's outside shareholders. Stock options are
granted by the Compensation Committee (and approved by the Board) to key
employees based on management's recommendation, and levels of participation in
the plan generally vary based on the employee's position with the Company.

CEO Compensation. Mr. Goodfriend does not have an employment agreement
with the Company. His compensation is determined annually by the Compensation
Committee and approved by the full Board (other than Mr. Goodfriend) based on
his compensation in prior years and the compensation of CEO's of similarly-
sized companies in the retail industry.

Base Salary. From August 1996 until January 1999, Mr. Goodfriend's annual
base salary was $600,000, which was increased to $650,000 effective January 31,
1999. In addition, he also received a guaranteed annual bonus of $100,000 for
each of fiscal 1995 through fiscal 1999.

Short-term Incentive Compensation. Since fiscal 1995, Mr. Goodfriend has
been participating in the short-term incentive compensation plan discussed above
and was eligible to receive a performance bonus of up to 150% of his base salary
for fiscal 1999 (less the guaranteed bonus) if the Company met the predetermined
target levels of its earnings, as discussed above, for such fiscal year. Because
certain performance objectives for fiscal 1999 were not achieved, Mr. Goodfriend
did not receive any performance bonus for fiscal 1999.

11
<PAGE> 14

Long-term Incentive Compensation. In March 1999, in connection with the
annual review of option awards for executives, Mr. Goodfriend was granted
options exercisable to purchase 15,000 shares of Common Stock at a cash exercise
price of $9.97 per share (the closing sale price of the Common Stock on The
Nasdaq Stock Market for the day preceding the date of grant), which expire ten
years from the date of grant and vest in equal annual increments over five years
from the date of grant.

In order to provide fair and reasonable employment and compensation
arrangements for Mr. Goodfriend reflecting an increased emphasis on the
relationship between compensation and the Company's performance, the
Compensation Committee decided that the Company should formalize its employment
arrangements with Mr. Goodfriend and engaged independent compensation
consultants to advise the committee on such arrangements. Based on the
consultants' findings, the Compensation Committee has approved the material
terms of an employment agreement with Mr. Goodfriend, which include, among other
things, a three-year "evergreen" employment term; a minimum annual base salary
of $650,000; an annual guaranteed bonus of $100,000; and continued participation
in the short-term and long-term incentive compensation plans described above,
and authorized the drafting of an employment agreement and related documents
reflecting such terms. The Compensation Committee expects that the employment
agreement will be finalized during fiscal 2000.

During fiscal 1999, following extensive analysis and discussion internally
as well as with the independent compensation consultants, the Compensation
Committee approved a new split-dollar life insurance arrangement with Mr.
Goodfriend providing for the payment by the Company of the premiums for certain
second-to-die policies insuring the lives of Mr. and Mrs. Goodfriend. The full
Board (with Mr. Goodfriend abstaining) subsequently approved the arrangement as
well. The purpose of this new arrangement is two-fold: (i) to mitigate the
adverse impact on the Company and its stockholders which could result from a
forced sale of stock upon the Goodfriends' deaths in order to pay estate taxes
and (ii) to provide an employee benefit to Mr. Goodfriend. Accordingly, the
arrangement generally provides that one-half of the new coverage would terminate
should Mr. Goodfriend decrease his Company ownership below 20%. Prior to its
approval of this new arrangement, the Compensation Committee reviewed, among
other things, the compensation data of other companies in the retail apparel
business and other statistical information provided by the independent
compensation consultants. See "Certain Transactions with Directors and
Officers."

Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction for compensation over $1.0 million
paid to a company's chief executive officer and certain other highly compensated
executive officers. Qualifying performance-based compensation is not subject to
the deduction limit if certain requirements are met. The short-term incentive
compensation plan adopted by the Company and approved by the shareholders in
June 1997 complies with the requirements under Code Section 162(m) regarding
qualifying performance-based compensation to provide for the deductibility of
compensation payable thereunder. The Company and Mr. Goodfriend entered into a
deferred compensation agreement in June 1997 whereby a portion of his salary for
fiscal 1997 was deferred and paid to him in fiscal 1998 and 1999 thereby
enabling the Company to deduct a majority of the compensation paid to Mr.
Goodfriend in fiscal 1997. The total cash and non-cash compensation which Mr.
Goodfriend may receive in fiscal 2000 may exceed $1 million, however, the
Committee expects that the amount of any non-deductible compensation paid to Mr.
Goodfriend will be immaterial. It is not currently expected that any other
executive of the Company will receive compensation in excess of $1.0 million for
fiscal 2000.

COMPENSATION COMMITTEE

CHERYL L. TURNBULL (CHAIR)
ROBERT F. KOPPEL
IRWIN L. LOWENSTEIN

The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Exchange Act, and shall not otherwise be deemed filed under such
Acts.

12
<PAGE> 15

EXECUTIVE COMPENSATION AND OTHER INFORMATION

The following tables set forth certain information relating to various
forms of compensation awarded to, earned by and paid to the Company's chief
executive officer and its next four most highly compensated executive officers
who were serving as the Company's executive officers at the end of fiscal 1999.
All of such executive officers are hereinafter referred to as the "named
executive officers."

TABLE I -- SUMMARY COMPENSATION TABLE

The following table presents the total compensation awarded to, earned by
and paid to the named executive officers during the last three fiscal years.

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------- ------------
Other Securities All
Annual Underlying Other
Fiscal Salary Bonus Compensation Options Compensation
Name and Position Year ($) ($) ($)(1) (#) ($)
- ----------------- ------ ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Goodfriend.............. 1999 650,000(2) 100,000 156,379(3) 15,000 71,058(4)
Chairman of the Board and 1998 600,000(2) 100,000 174,544(3) 60,000 54,648(4)
Chief Executive Officer 1997 600,000(2) 900,000 82,838(3) -- 35,581(4)
Harry M. Call..................... 1999 350,000 100,000 -- 7,500 16,817(5)
President and 1998 325,000 100,000 -- 30,000 15,630(5)
Chief Operating Officer 1997 300,000 225,000 -- 230,000 12,178(5)
Lana Cain Krauter................. 1999 28,846(6) 465,000 -- 300,000 --
President and Special Assistant 1998 -- -- -- -- --
to the Chairman 1997 -- -- -- -- --
Thomas R. Kelly, Jr.(7)........... 1999 350,000 100,000 -- 3,750 7,854(8)
Former Executive Vice President, 1998 325,000 100,000 -- 15,000 6,517(8)
General Merchandise Manager 1997 300,000 225,000 -- 300,000 3,158(8)
Edward R. Carlin.................. 1999 260,000 5,000 -- 3,750 14,505(9)
Executive Vice President, 1998 250,000 15,000 -- 15,000 14,835(9)
Chief Financial Officer and 1997 225,000 135,000 -- 15,000 11,254(9)
Secretary
</TABLE>

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

(1) The amounts in this column include the aggregate value of certain personal
benefits to a named executive officer only where such value is greater than
the lesser of either $50,000 or 10% of such executive's salary and bonus for
the fiscal year.
(2) Fiscal 1997 salary includes $417,227 of salary earned by Mr. Goodfriend but
deferred and payable in fiscal 1998 and 1999 pursuant to the terms of a
Deferred Compensation Agreement dated June 15, 1997 between Mr. Goodfriend
and the Company. Fiscal 1998 and 1999 salary excludes $243,977 and $173,250,
respectively, paid to Mr. Goodfriend pursuant to such agreement.
(3) Consists of (i) $133,532, $63,179 and $66,267 in fiscal 1999, 1998 and 1997,
respectively, attributable to personal use of the Company's aircraft by Mr.
Goodfriend and his family, calculated using the applicable standard industry
fare level formula established by the Internal Revenue Service, (ii)
$12,324, $15,479 and $14,982 in fiscal 1999, 1998 and 1997, respectively,
for Mr. Goodfriend's personal use of the Company's automobile, (iii) $736,
$1,589 and $1,589 in fiscal 1999, 1998 and 1997 for the imputed value of
group life insurance benefits as to which Mr. Goodfriend's family is the
beneficiary in excess of specified amounts as determined by the Internal
Revenue Service, and (iv) $9,787 and $94,297 in fiscal 1999 and 1998 for
personal financial consulting and estate planning services paid by the
Company.
(4) Consists of (i) non-cash benefits of $41,929, $35,030 and $32,700 in fiscal
1999, 1998 and 1997, respectively, calculated using the applicable Internal
Revenue Service formula, deemed to have been paid to Mr. Goodfriend as a
result of the Company's payment of premiums on certain split-dollar life
insurance policies, (ii) $4,000 attributable to the Company's contributions
on Mr. Goodfriend's behalf to the Company's 401(k) Retirement Plan in each
of fiscal 1999 and 1998, (iii) $8,000 attributable to the Company's
contributions on Mr. Goodfriend's behalf to the Company's Executive Deferral
Plan in fiscal 1999, (iv) $17,129 and $12,824 for interest paid in fiscal
1999 and 1998 to Mr. Goodfriend on fiscal 1997 deferred salary (see footnote
2 above), and (v) $2,794 and $2,881 in fiscal 1998 and 1997 respectively,
attributable to the Company's contributions and allocations on Mr.
Goodfriend's behalf to the Company's Profit Sharing Plan. See "Certain
Transactions with Directors and Officers" for a detailed description of the
Company's split-dollar life insurance arrangements with Mr. Goodfriend.

13
<PAGE> 16

(5) Consists of (i) $3,308 for each of fiscal 1999, 1998 and 1997, respectively,
attributable to the Company's payment of term life insurance premiums as to
which Mr. Call's family is the beneficiary, (ii) $5,632, $5,528 and $5,435
for disability insurance premiums paid by the Company in fiscal 1999, 1998
and 1997, respectively, (iii) $4,000, $4,000 and $554 attributable to the
Company's contributions on to the Company's 401(k) Retirement Plan in fiscal
1999, 1998 and 1997, respectively, (iv) $3,877 attributable to the Company's
contributions to the Company's Executive Deferral Plan in fiscal 1999, and
(v) $2,794 and $2,881 attributable to the Company's contributions and
allocations to the Company's Profit Sharing Plan in fiscal 1998 and 1997,
respectively.
(6) Ms. Krauter was hired by the Company on January 10, 2000. Accordingly, the
amounts included in this table reflect compensation paid to Ms. Krauter for
the respective portion of fiscal 1999, including a signing bonus of $365,000
paid on February 1, 2000 and a guaranteed bonus of $100,000 paid on March
24, 2000.
(7) Mr. Kelly resigned effective May 5, 2000.
(8) Consists of (i) $4,000, $3,723 and $277 attributable to the Company's
contributions on Mr. Kelly's behalf to the Company's 401(k) Retirement Plan
in fiscal 1999, 1998 and 1997, respectively, (ii) $3,854 attributable to the
Company's contributions on Mr. Kelly's behalf to the Company's Executive
Deferral Plan in fiscal 1999, and (iii) $2,794 and $2,881 attributable to
the Company's contributions and allocations on Mr. Kelly's behalf to the
Company's Profit Sharing Plan in fiscal 1998 and 1997, respectively.
(9) Consists of (i) $939 for each of fiscal 1999, 1998 and 1997 attributable to
the Company's payment of term life insurance premiums as to which Mr.
Carlin's family is the beneficiary, (ii) $6,789, $6,502 and $6,419 for
disability insurance premiums paid by the Company in fiscal 1999, 1998 and
1997, respectively, (iii) $3,697, $4,000 and $415 attributable to the
Company's contributions on Mr. Carlin's behalf to the Company's 401(k)
Retirement Plan in fiscal 1999, 1998 and 1997, respectively, (iv) $2,880
attributable to the Company's contributions on Mr. Carlin's behalf to the
Company's Executive Deferral Plan in fiscal 1999, (v) $200, $600 and $600
received for fiscal 1999, 1998 and 1997 as a director's fee from two of the
Company's wholly-owned subsidiaries, and (vi) $2,794 and $2,881 attributable
to the Company's contributions and allocations on Mr. Carlin's behalf to the
Company's Profit Sharing Plan in fiscal 1998 and 1997, respectively.

14
<PAGE> 17

TABLE II -- OPTION GRANTS IN FISCAL 1999

The following table presents information regarding stock options to
purchase shares of Common Stock granted in fiscal 1999 to the named executive
officers. No Stock Appreciation Rights ("SARs") were granted in fiscal 1999.

<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants(1) for Option Term(2)
-------------------------------------------------------------- ----------------------
% of Total Exercise
Number of Securities Options or
Underlying Granted Base
Options Granted to Employees in Price Expiration 5% 10%
Name (#) Fiscal Year(3) ($/Sh) Date ($) ($)
---- -------------------- --------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Goodfriend(4)....... 15,000 2.78% 9.97 3/17/09 94,051 238,344
Harry M. Call(4)(5)........... 7,500 1.39% 9.97 3/17/09 47,026 119,172
Lana Cain Krauter(5)(6)....... 300,000 55.56% 4.94 1/10/10 932,022 2,361,926
Thomas R. Kelly, Jr.(4)(5).... 3,750 0.69% 9.97 3/17/09 23,513 59,586
Edward R. Carlin(4)(5)........ 3,750 0.69% 9.97 3/17/09 23,513 59,586
</TABLE>

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

(1) All stock options granted to the named executive officers as shown in the
above table have exercise prices equal to the fair market value of the
Common Stock on the date of grant, which is the closing sale price of the
Common Stock on The Nasdaq Stock Market for the business day preceding the
date of grant, and may be exercised until the earlier of (i) the tenth
anniversary of the date of grant, (ii) thirty days after the optionee ceases
to be an employee of the Company for any reason other than death or
disability and (iii) the first anniversary of the optionee's death or
disability.
(2) The dollar amounts in these columns are the result of calculations at the 5%
and 10% rates set by the Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Common Stock price.
(3) The percentage of stock options granted to each named executive officer is
based on a total number of stock options granted amounting to 539,970 during
fiscal 1999.
(4) These stock options were granted on March 17, 1999 and vest in equal annual
increments over five years from the date of grant.
(5) These stock options may be transferred pursuant to a will and the laws of
lineal descent as well as (a) to the spouse or any lineal ancestor or
descendant of the grantee, (b) to any trust, the sole beneficiaries of which
are any one or all of the grantee, the grantee's spouse or any lineal
descendants of the grantee and (c) to such other persons and/or entities as
the Compensation Committee may approve.
(6) These stock options were granted on January 10, 2000 and vest as follows:
50,000 vested immediately on the date of grant and 250,000 vest in equal
annual increments over three years from the date of grant.

TABLE III -- AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND
FISCAL YEAR-END OPTION VALUES

The following table presents information regarding the value of unexercised
stock options held by the named executive officers at January 29, 2000. There
were no stock options or SARs exercised in fiscal 1999 and there are no SARs
outstanding at January 29, 2000.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End at FY-End
(#) ($)(1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert M. Goodfriend............................. 652,000 63,000 -- --
Harry M. Call.................................... 58,000 249,500 17,500 --
Lana Cain Krauter................................ 50,000 250,000 -- --
Thomas R. Kelly, Jr.............................. 119,000 299,750 28,000 7,000
Edward R. Carlin................................. 64,000 44,750 -- --
</TABLE>

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

(1) Represents the value of unexercised, in-the-money stock options at January
28, 2000 (the last trading day of fiscal 1999), using the $4.69 closing
price of the Common Stock on that date.

15
<PAGE> 18

EMPLOYMENT AND TERMINATION ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS

Robert M. Goodfriend. The Company does not have an employment agreement
with Mr. Goodfriend. However, the Compensation Committee and Mr. Goodfriend have
agreed to the material terms of an employment agreement, and the Compensation
Committee has retained counsel to draft the employment agreement and related
documentation. Such employment agreement and related documentation are expected
to be finalized during fiscal 2000. See "Compensation Committee Report on
Executive Compensation."

Other Executive Employment Arrangements. On May 20, 1998, the Company
entered into new employment agreements with Mr. Call, its President and Chief
Operating Officer, and with each of Messrs. Carlin and Kelly, its executive vice
presidents, replacing any current employment agreements or other arrangements
with such employees. Pursuant to such employment agreements, the executive is
considered an at-will employee, and his employment may be terminated at any time
subject to the obligations set forth in the agreement.

Under the agreements, each executive is paid an annual base salary
($325,000 in the case of Messrs. Call and Kelly, which was increased to $350,000
effective January 31, 1999 in accordance with the employment agreements; and
$250,000 in the case of Mr. Carlin, which was increased to $260,000 effective
January 31, 1999), which amount may be increased by the Company in its
discretion. In addition, each executive participates in the Company's short-term
incentive compensation plan whereby he is eligible to receive an annual
incentive target bonus of a certain percentage, as set forth in the employment
agreements (50% in the case of Messrs. Call and Kelly, which was increased to
75% effective January 31, 1999, and 40% in the case of Mr. Carlin, which was
increased to 60% effective January 31, 1999), of the executive's base salary for
each fiscal year the executive is employed if the Company achieves certain
performance goals for such fiscal year. Each of Messrs. Call's and Kelly's
agreement also provides for a guaranteed annual bonus of $100,000 which reduces
any incentive bonus payable as described above. The employment agreements also
provide for a disability insurance policy and an annuity contract or life
insurance policy and contain confidentiality and non-solicitation provisions.

Under the terms of the employment agreements, if the executive's employment
is terminated by reason of his death, Disability (as defined in the agreements)
or retirement on or after the attainment of age 65 or is terminated for Cause
(as defined in the agreements) or voluntarily terminated by the executive (other
than on account of Constructive Termination, as defined in the agreements), the
Company will be obligated to pay such executive a lump sum payment equal to (i)
his base salary, and, if applicable, a pro-rata portion of his guaranteed bonus
through the date of such termination and (ii) any compensation previously
deferred by the executive, earned but unpaid vacation pay for the then current
year and amounts or benefits the executive or the executive's beneficiaries are
owed under any employee benefit plans or policies or for reimbursement of
expenses (collectively, the "Accrued Obligations"). If the executive's
employment is terminated by reason of his death or Disability, the Company will
have the additional obligation, subject to the terms of the short-term incentive
compensation plan and further provided that the executive has been employed by
the Company for the first six months of the then applicable fiscal year, to pay
an amount equal to a pro-rated portion of the performance bonus for such fiscal
year. Furthermore, if the executive's employment is terminated by reason of his
retirement on or after the attainment of age 65 or Disability, the Company will
pay the premiums (to the same extent paid prior to termination) for the
continued participation of the executive for a period of 12 months after
termination in any individual life insurance policy on the same terms as the
executive and the Company were participating prior to termination. Moreover, if
the executive's employment is terminated by reason of his death, retirement on
or after the attainment of age 65 or Disability, the Company will, for a period
of 12 months after 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 termination.

The employment agreements further provide that if the Company terminates
the executive's employment other than for Cause or his Disability or death, or
the executive terminates his employment for Constructive Termination, the
Company will pay the executive a lump sum payment equal to (i) all Accrued
Obligations, (ii) 12 months of the executive's base salary at the rate in effect
as of the date when the Notice of

16
<PAGE> 19

Termination (as defined in the agreements) was given and (iii) subject to the
terms of the short-term incentive compensation plan and further provided that
the executive has been employed by the Company for the first six months of the
then applicable fiscal year, a pro-rated portion of the performance bonus for
such fiscal year. Further, in the case of a Constructive Termination or
termination by reason of death or Disability, all unvested stock options held by
the executive will become fully vested, effective on the Date of Termination (as
defined in the agreements), and will be thereafter exercisable in accordance
with the provisions of the applicable plan and award agreement.

In addition, the employment agreements provide that upon the occurrence of
a Change of Control of the Company (as defined in the agreements), as
consideration for assisting the Company in bringing about a successful
transaction, the executive is entitled to receive a lump sum payment equal to 18
months of the executive's base salary at the rate in effect as of the Change of
Control Date (as defined in the agreements).

Mr. Kelly resigned effective May 5, 2000 and entered into a severance
agreement with the Company whereby he was paid $400,000 in severance
compensation.

On January 10, 2000, the Company entered into a three-year employment
agreement with Ms. Krauter to serve as its President and Special Assistant to
the Chairman. Under her employment agreement, Ms. Krauter is paid an annual base
salary of $500,000 (which amount may be increased by the Company in its
discretion) and received a signing bonus of $365,000. In addition, Ms. Krauter
is eligible to receive an annual incentive target bonus of not less than 100% of
her base salary under the Company's short-term incentive compensation plan if
the Company achieves certain performance goals for such fiscal year. Her
employment agreement also provides for a guaranteed annual bonus of $100,000
which reduces any incentive bonus payable as described above. In addition, her
employment agreement provides for the grant to Ms. Krauter of stock options to
purchase 300,000 shares of Common Stock as well as for reimbursement of
relocation expenses, a disability insurance policy and a life insurance policy
and contains confidentiality, non-solicitation, and non-compete provisions.

Under the terms of her employment agreement, if Ms. Krauter's employment is
terminated by reason of her death, Disability (as defined in the employment
agreement) or is terminated for Cause (as defined in the employment agreement),
the Company will be obligated to pay her a lump sum payment equal to the Accrued
Obligations (provided that she will not be entitled to receive a pro-rated
portion of her guaranteed bonus if her employment is terminated for Cause). If
Ms. Krauter's employment is terminated by reason of her death or Disability, the
Company will have the additional obligation, subject to the terms of the
short-term incentive compensation plan and further provided that she has been
employed by the Company for the first six months of the then applicable fiscal
year, to pay an amount equal to a pro-rated portion of the performance bonus for
such fiscal year. If Ms. Krauter's employment is terminated by reason of her
death or Disability, she and her named beneficiaries shall be entitled to
benefits available through Company sponsored plans and programs designated for
such category of termination. Furthermore, if Ms. Krauter's employment is
terminated by reason of Disability, the Company will pay the premiums (to the
same extent paid prior to termination) for her continued participation for a
period of 12 months after termination in any individual life insurance policy on
the same terms as Ms. Krauter and the Company were participating prior to
termination. Moreover, if Ms. Krauter's employment is terminated by reason of
her death or Disability, the Company will, for a period of 12 months after
termination, pay the entire COBRA premium under any Company medical and dental
program that she (and her spouse and eligible dependents) was participating in
prior to termination.

Ms. Krauter's employment agreement further provides that if the Company
terminates her employment other than for Cause or her Disability or death, or
she terminates her employment for Constructive Termination (as defined in the
employment agreement), the Company will pay her a lump sum payment equal to all
Accrued Obligations and she will be entitled to continue to receive her monthly
base salary, at the rate in effect as of the date when the Notice of Termination
(as defined in the employment agreement) was given, for a 12-month period from
the date of termination. In addition, subject to the terms of the short-term
incentive compensation plan and further provided that she has been employed by
the Company for the first six months of the then applicable fiscal year, she
will be entitled to receive a pro-rated portion of the performance bonus for
such fiscal year. Further, in the case of a Constructive Termination or
termination by reason of death

17
<PAGE> 20

or Disability, all unvested stock options held by Ms. Krauter will become fully
vested, effective on the Date of Termination (as defined in the employment
agreement), and will be thereafter exercisable in accordance with the provisions
of the applicable plan and award agreement.

In addition, Ms. Krauter's employment agreement provides that, upon the
occurrence of a Change of Control of the Company (as defined in the employment
agreement), as consideration for assisting the Company in bringing about a
successful transaction, Ms. Krauter is entitled to receive a lump sum payment
equal to 18 months of her base salary at the rate in effect as of the Change of
Control Date (as defined in the employment agreement).

In May 1998, the Board amended each of the Company's 1991 Stock Incentive
Plan, 1993 Stock Option Plan and 1997 Stock Option Plan to provide that, upon
the occurrence of a Change of Control (as defined in such plans), all stock
options granted under such plan that are outstanding and not yet vested will
become immediately 100% vested effective on a Change of Control Date (as defined
in such plans) and shall be thereafter exercisable in accordance with the terms
of such plan and any applicable award agreement, subject to certain exceptions.

18
<PAGE> 21

STOCK PERFORMANCE GRAPH

The following is a line graph comparing the Company's total shareholder
returns to those of the Standard & Poors 500 Index and a Comparable Company
Index for fiscal 1995 through fiscal 1999. The Comparable Company Index for
fiscal 1999 is based on information from Burlington Coat Factory Warehouse,
Catherine's Stores Corporation, Cato Corporation, Consolidated Stores
Corporation, Deb Shops, Inc., Designs, Inc., Dollar General Corp., Dress Barn
Inc., Edison Brothers Stores, Family Dollar Stores, Filene's Basement
Corporation, Fred's Inc., Gantos, Inc., Gottschalks, Inc., Jacobson Stores,
Kohl's Corporation, Ross Stores, Inc., Stein Mart, Inc. and Value City
Department Stores, Inc. Total return values were calculated based on cumulative
total return, assuming the value of the investment in shares of Common Stock and
in each index was $100 on January 29, 1995 and, in the case of the Comparable
Company Index, that all dividends paid by any of those companies were
reinvested. The Comparable Company Index for fiscal 1999 does not include
information relating to the following four companies which had been included in
the fiscal 1997 Comparable Company Index because each of Clothestime Inc.,
Jamesway Corp. and Merry-Go-Round Enterprises, Inc. went into bankruptcy
proceedings in December 1998, March 1997 and March 1997, respectively, and Mac
Frugal's Bargains Closeouts was acquired by Consolidated Stores Corporation in
February 1998.

GOODY'S FAMILY CLOTHING, INC.
COMPARISON OF CUMULATIVE TOTAL RETURN
TO S&P 500 AND PEER GROUP INDICES

<TABLE>
<CAPTION>
GOODY'S FAMILY CLOTHING S&P 500 INDEX PEER GROUP
----------------------- ------------- ----------
<S> <C> <C> <C>
1994 100 100 100
1995 91.29 138.67 105.54
1996 241.47 175.19 167.84
1997 403.43 222.33 290.33
1998 253.98 294.57 333.49
1999 114.11 325.05 324.77
</TABLE>

19
<PAGE> 22

CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS

On January 26, 1991, the Company redeemed all 2,651 shares of its then
outstanding preferred stock, all of which were owned by the Company's founder,
Mr. M. D. Goodfriend, and his wife, for their stated redemption value of
$2,651,000. Of such amount, $500,000 was paid in cash at closing and the balance
was funded by a promissory note from the Company which bears interest at 10% per
annum and is amortized over the ten-year term of the note. During fiscal 1999,
the Company paid $350,000 of principal and interest on this note. As of April
24, 2000, the principal balance due on this note was $318,000. Mr. M. D.
Goodfriend was the retiring Chairman of the Board at the time of this
transaction and is the father of Mr. Robert M. Goodfriend, the Company's current
Chairman of the Board and Chief Executive Officer.

In January 1995, the Company sold its distribution center located in
Athens, Tennessee, to Citizens National Bank of Athens, Tennessee, a local bank
of which Mr. Robert M. Goodfriend is a director and less than 5% shareholder,
for $520,000, its fair market value as determined based upon an appraisal of the
property by an arms-length third party, and realized a gain of $20,000. The
Company subsequently entered into a lease with the bank in connection with this
property which currently expires on December 31, 2001 and provides for annual
rental payments of $56,800. The rental payments to the bank for this space in
fiscal 1999 was $56,800. The Company primarily uses this space for storage.

Since 1987 the Company has leased a store in Athens, Tennessee, from an
irrevocable trust established for the benefit of the children of Mr. Robert M.
Goodfriend. During July 1998, the Company renegotiated a new ten-year lease for
this location with such trust for annual rental payments of $289,500 plus its
pro-rata share of real property taxes. The aggregate rental payments to the
trust, including real property taxes, for this space in fiscal 1999 were
$310,165.

Since 1987, the Company has, by agreement (the "Initial Agreement"), paid
premiums on certain split-dollar life insurance policies covering the life of
Mr. Goodfriend. During each of fiscal 1999, 1998 and 1997, the Company paid
premiums of $54,000 in accordance with the Initial Agreement. The Company
terminated the policies under this Initial Agreement in January 2000, and
received the cash surrender value of these policies aggregating $2,144,000 in
February 2000. During fiscal 1999, the Company entered into a new split-dollar
life insurance agreement (the "New Agreement") and therein agreed to pay the
premiums for certain second-to-die policies insuring the lives of Mr. and Mrs.
Goodfriend. These policies are owned by a trust for the benefit of the
Goodfriend's children (the "Trust"). The Company, however, has certain rights
including the right to terminate these policies at any time prior to the
occurrence of the following "restricting events" (i) a change of control (as
defined in the New Agreement), (ii) the termination of Mr. Goodfriend's
employment by the Company, or (iii) unless certain conditions are met, the death
of Mr. Goodfriend. The Company will be reimbursed for all premiums paid by it
upon the policies' termination (subject to deficiencies in the cash surrender
value from the early termination of the policies prior to a restricting event).
The New Agreement generally provides that one-half of the new coverage would
terminate should Mr. Goodfriend decrease his Company ownership below 20%. The
Trust has the right, but not the obligation, to purchase the policies from the
Company at any time for a purchase price equal to the cumulative premiums paid
by the Company on the policies; should the policies be purchased, all the
Company's future obligations would cease. The Company paid premiums aggregating
$4,195,000 in fiscal 1999 on the policies covered by the New Agreement. The cash
surrender value of all policies covered by the New Agreement at January 29, 2000
aggregated $3,823,000.

As previously noted, Mr. Koppel, a director of the Company, is the
President of the East Tennessee Children's Hospital of which Mr. Goodfriend is
also a director. The Company facilitates contributions by its employees to the
Hospital through a payroll deduction plan and matches employee contributions to
the Hospital on a 100% basis. The Company also makes additional contributions
(in cash or in kind) to the Hospital. The total amount of contributions by the
Company (including employee contributions) to the Hospital in fiscal 1999 was
$412,659. Such contributions represented less than 1% of the Hospital's total
revenues for its last fiscal year ended June 30, 1999.

20
<PAGE> 23

ITEM 2. OTHER MATTERS

GENERAL

Management does not know of any other matters to be presented at the Annual
Meeting for action by the Shareholders, other than those discussed in this proxy
statement. However, if any other matter requiring a vote of the Shareholders is
properly presented at the Annual Meeting or any adjournment(s) or
postponement(s) thereof, it is intended that votes will be cast pursuant to the
proxies with respect to such matters in accordance with the best judgment of the
persons acting under the proxies.

AUDITORS

Deloitte & Touche LLP serves as the principal accounting firm designated to
audit the Company's financial statements. The engagement of Deloitte & Touche
LLP is not being presented for approval by the Shareholders at the Annual
Meeting; however, a representative from Deloitte & Touche LLP is expected to be
available to answer questions, if any, addressed to him or her at the Annual
Meeting and will be given the opportunity to make a statement if such
representative desires to do so.

SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING

In order to present a proposal at the Company's annual meeting of
shareholders to be held in 2001, a shareholder must provide advance written
notice of the proposal to the Company at its principal executive offices no
later than the close of business on January 20, 2001. If such proposal relates
to amending the Bylaws, then advance notice must be provided to the Company at
its principal executive offices no later than the close of business on January
20, 2001 and otherwise comply with the Bylaws. A copy of the Bylaws is available
upon written request to the Secretary of the Company. If a shareholder gives
notice of a proposal after the applicable deadline, the Company's proxy holders
will have discretionary authority to vote on this proposal when and if raised at
the 2001 annual meeting. In addition, all shareholder proposals intended to be
included in the Company's proxy materials for the 2001 annual meeting must be
received by the Company at its principal executive offices no later than the
close of business on January 20, 2001 and must otherwise comply with the rules
of the Commission for inclusion in the proxy materials.

PROXY SOLICITATION COSTS

The Company will pay the cost of the Annual Meeting and the cost of
soliciting proxies in the accompanying form (including the cost of mailing the
proxy material). The Company has engaged Corporate Communications, Inc. and
Bowne of Atlanta, Inc. to distribute and solicit proxies for the Annual Meeting
at an estimated cost of $35,000 (which amount includes mailing and shipping
costs), plus reasonable expenses. The Company has requested that brokerage
houses and other custodians, nominees and fiduciaries forward proxy and other
soliciting materials to their principals, the beneficial owners of Common Stock,
and will reimburse them for their reasonable out-of-pocket expenses.

SHAREHOLDERS' LIST

A list of the Shareholders will be available at the Company's corporate
offices located at 400 Goody's Lane, Knoxville, Tennessee, for inspection by
Shareholders during regular business hours from April 24, 2000 to the date of
the Annual Meeting. The list will also be available during the Annual Meeting
for inspection by Shareholders who are present.

/s/ EDWARD R. CARLIN
Edward R. Carlin
Secretary

May 19, 2000

21
<PAGE> 24

APPENDIX A

CHARTER OF THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
GOODY'S FAMILY CLOTHING, INC.

I. AUDIT COMMITTEE PURPOSE

The Audit Committee of the Board of Directors of Goody's Family Clothing,
Inc. (the "Company") is appointed by the Board of Directors to assist the Board
of Directors in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:

- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.

- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.

- Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.

The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.

II. AUDIT COMMITTEE COMPOSITION AND MEETINGS

Audit Committee members shall meet the requirements of the National
Association of Securities Dealers, Inc. The Audit Committee shall be comprised
of three or more directors as determined by the Board of Directors, each of whom
shall be independent non-executive directors, free from any relationship that
would interfere with the exercise of his or her independent judgment. Under
certain exceptional and limited circumstances, one of the members of the Audit
Committee may not be independent as permitted by the rules of the National
Association of Securities Dealers, Inc. All members of the Audit Committee shall
have a basic understanding of finance and accounting and be able to read and
understand fundamental financial statements, and at least one member of the
Audit Committee shall have accounting or related financial management expertise.

Audit Committee members shall be appointed by the Board of Directors. If an
audit committee Chair is not designated or present, the members of the Audit
Committee may designate a Chair by majority vote of the Audit Committee
membership.

The Audit Committee shall meet as frequently as circumstances dictate. The
Audit Committee Chair shall prepare and/or approve an agenda in advance of each
meeting. The Audit Committee should consult privately with management, the
director of the internal auditing department, the independent auditors and as a
committee to discuss any matters that the Audit Committee or each of these
groups believe should be discussed.

III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES

REVIEW PROCEDURES

1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the document
published at least every three years in accordance with the Securities and
Exchange Commission regulations.

A-1
<PAGE> 25

2. Review the Company's annual audited financial statements. Review should
include discussion with management, independent auditors and internal auditing
department of significant issues regarding accounting principles, practices and
judgments. As a result of this review, recommend to the Board that the audited
financial statements be included in the Annual Report on Form 10-K.

3. In consultation with the management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control and report such exposures. Review
significant findings prepared by the independent auditors and the internal
auditing department together with management's responses including the status of
previous recommendations.

INDEPENDENT AUDITORS

4. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review the
independence, and performance of the auditors and annually recommend to the
Board of Directors the appointment of the independent auditors or approve any
discharge of auditors when circumstances warrant.

5. Approve the audit fees and other significant compensation to be paid to
the independent auditors.

6. On an annual basis, the Audit Committee shall review and discuss with
the independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.

7. Review the independent auditors audit plan -- discuss scope, staffing,
reliance upon internal audit and general audit approach.

8. Discuss the results of the year-end audit with the independent auditors.
Discuss certain matters required to be communicated to audit committees in
accordance with the American Institute of Certified Public Accountants Statement
of Auditing Standards No. 61.

9. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.

INTERNAL AUDIT DEPARTMENT AND LEGAL COMPLIANCE

10. Review and approve the budget, plan, changes in plan, activities,
organizational structure, and qualifications of the internal audit department,
as needed.

11. Review and approve the appointment, performance and replacement of the
senior internal audit executive.

12. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.

13. As the Audit Committee deems necessary or appropriate, review with the
Company's counsel any legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with applicable
laws and regulations, inquiries received from regulators or governmental
agencies.

OTHER AUDIT COMMITTEE RESPONSIBILITIES

14. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's annual
proxy statement.

15. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Audit Committee or the Board of
Directors deems necessary or appropriate.

16. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.

A-2
<PAGE> 26

(GOODY'S FAMILY CLOTHING LOGO)
<PAGE> 27
PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
GOODY'S FAMILY CLOTHING, INC.

The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated May 19, 2000, and does
hereby appoint Robert M. Goodfriend and Harry M. Call, or either of them, with
full power of substitution, as proxy or proxies of the undersigned to represent
the undersigned and to vote all shares of Common Stock of Goody's Family
Clothing, Inc. (the "Company") which the undersigned would be entitled to vote
if personally present at the Annual Meeting of Shareholders of the Company to be
held at 10:00 a.m.(EDT)on Wednesday, June 21, 2000 at the Company's corporate
headquarters located at 400 Goody's Lane, Knoxville, Tennessee, and at any
adjournment(s) or postponement(s) thereof, hereby revoking all proxies
heretofore given with respect to such stock.

This Proxy, when properly executed, will be voted in accordance with
the directions given by the undersigned shareholder. If no direction is made, it
will be voted in favor of the election of the nominees for director named
herein.

TO BE SIGNED ON OTHER SIDE

- --------------------------------------------------------------------------------
<PAGE> 28

GOODY'S FAMILY CLOTHING,INC.

<TABLE>
<S> <C> <C> <C>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE FOR all nominees WITHHOLD AUTHORITY
listed below (except as marked to vote for all nominees
to the contrary below) listed below
[ ] [ ]

1. ELECTION OF DIRECTORS 2. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE ON SUCH OTHER
NOMINEES: HARRY M. CALL BUSINESS AS MAY PROPERLY COME BEFORE
and SAMUEL J. FURROW as Class II THE MEETING OR ANY ADJOURNMENT(S) OR
Directors (for a term expiring at the 2003 Annual Meeting of POSTPONEMENT(S) THEREOF.
Shareholders)

(Instruction: to withhold authority to vote for any individual
nominee, write that nominee's name in the space provided.)

- -------------------------------------------------------------------------------
RECORD DATE SHARES:
-------------------------------
Please be sure to sign and date this Proxy. Dated: Please sign exactly as name(s) appears
- ------------------------------------------------------------------------------- hereon, and when signing as attorney,
executor, administrator, trustee or
guardian, give your full title as such.
If the signatory is a corporation, sign the
full corporate name by a duly authorized
officer. When shares are held by joint
tenants, both should sign.

Shareholder sign here Co-owner sign here PLEASE COMPLETE, SIGN, DATE AND RETURN THIS
- -- --------------------- ----------------- PROXY PROMPTLY

- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>