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                                                                   Exhibit 10.16


                                    AGREEMENT

         THIS AGREEMENT (this "Agreement") dated as of June 28, 2001 (the
"Agreement") by and among DISCOVERY TOYS, L.L.C., a New Jersey limited liability
company, having its principal office at 330 South Street, Morristown, New Jersey
07962-1975 ("DT, LLC"), AVON PRODUCTS, INC., a New York corporation, having its
principal office at 1345 Avenue of the Americas, New York, New York 10105
("Avon"), DISCOVERY TOYS, INC., a California corporation, having its principal
office at 6400 Brisa Street, Livermore, California 94550 (the "Company") and
WILLIAM S. WALSH, located at 330 South Street, Morristown, New Jersey 07962-1975
("Walsh").

                                    RECITALS:

         A. Avon owns beneficially and of record 49,140 of the issued and
outstanding shares of capital stock of the Company (the "Avon Shares"). The
Company has determined to purchase, and Avon has agreed to sell, the Avon
Shares, upon the terms and subject to the conditions set forth in this
Agreement. As of the date hereof, there are 475,020 shares of Common Stock of
the Company (the "Common Stock") issued and outstanding.

         B. Discovery Toys has issued its note to Avon in principal amount
outstanding on the date hereof of $3,500,000 due on January 15, 2006 (the "Avon
Note"). In consideration for the purchase of the Avon Shares and other good and
valuable consideration, the Company has agreed to change the maturity of the
Avon Note to June 30, 2003 and amend other terms of the Avon Note.

         C. Walsh and DT, LLC are parties to this Agreement for the purpose,
together with the Company, of indemnifying and holding Avon harmless in
connection with any claim that may be asserted in connection with the purchase
by the Company from Avon of the Avon Shares and the Shareholder Distribution
(hereinafter defined).

         NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, the parties hereto, intending to be legally bound, agree as follows:

         ARTICLE 1.  PURCHASE OF AVON SHARES, AMENDED NOTE.

         1.1 PURCHASE OF SHARES. Avon hereby transfers and delivers to the
Company, and the Company does hereby purchase all right, title and interest to,
the Avon Shares duly endorsed in the blank and accompanied by stock powers duly
executed by Avon, free and clear of all liens, charges and encumbrances, for a
purchase price of $1,455,555.00 (the "Purchase Price"). The Purchase Price has
been wire transferred to the following account of Avon:

         Account Title:             Avon Products, Inc.
         Bank:                      Citibank, N.A.

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         ABA No.:                   021-000-089
         Account No.:               4068-2421

         1.2 CONSENT. (a) Avon in its capacity as a creditor of the Company
hereby agrees and consents to the proposed distribution by the Company to its
shareholders following the repurchase of the Avon Shares of approximately
$4,544,445 ( the "Shareholder Distribution"), should the Board of Directors of
the Company determine to make such a distribution.

         (b) The Stockholders (as defined in the Stockholders Agreement dated as
of January 16, 1999 among the Company and the Stockholders named therein (the
"Stockholders Agreement")) a party to this Agreement, representing a majority of
the issued and outstanding Common Stock of the Company, hereby expressly consent
to the sale and transfer by Avon of the Avon Shares to the Company on the terms
set forth in this Agreement. Each of the Stockholders a party to this Agreement
hereby waive the provisions of Section 10 of the Stockholders Agreement
requiring the Purchase Price (as defined in the Stockholders Agreement) of any
Common Stock at the time of the offer or deemed offer for sale be determined by
a qualified independent appraiser selected by the offeror Stockholder and
further consent to the Purchase Price to be paid for the Avon Shares as provided
by this Agreement.

         1.3 NOTE. The Company has executed and delivered to Avon an Amended
Promissory Note substantially in the form attached hereto as Exhibit 1.3 (the
"Amended Note") against receipt of the Note of the Company executed and
delivered January 15, 1999 in the principal amount of $3,500,000 (the "1999
Note"). The Amended Note amends, among other things, the maturity date and the
subordination provisions of the 1999 Note. By executing and delivering, and by
accepting, the Amended Note, respectively, each of Avon and the Company agrees
to the amendments made to the provisions of the 1999 Note set forth in Exhibit
1.3 hereto. The Company acknowledges that, to the date hereof, no interest has
been paid on the 1999 Note and that all accrued and unpaid interest on the 1999
Note remains due under the Amended Note and, together with interest that accrues
after the date hereof on the Amended Note, shall be payable on the maturity date
thereof.

         1.4 OTHER INDEBTEDNESS. Avon agrees that the Company's indebtedness to
PNC Bank, N.A. ("PNC") under the working capital facility extended on the date
hereof by PNC to the Company is Senior Debt as defined in the Amended Note. No
Senior Debt, other than this working capital facility with PNC, or with another
lender on substantially the same terms and conditions as the PNC facility, in
either case in an aggregate amount not to exceed $7,000,000, shall be incurred
by the Company without Avon's prior written consent. Loans to or from the
Company with any affiliated entity, including but not limited to DT, LLC, shall
be subject to Avon's prior written consent.

         ARTICLE 2.  REPRESENTATIONS OF THE COMPANY.

         The Company represents and warrants to Avon as follows:

         2.1 CORPORATE POWER. The Company is duly organized, validly existing
and in good standing under the laws of the State of California.
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         2.2 AUTHORITY; VALID AND BINDING. The Company has the power, authority
and legal right to enter into and execute this Agreement and the Amended Note
and the Company's execution, delivery and performance of its obligations under
this Agreement and the Amended Note have been authorized by all necessary
corporate action. This Agreement constitutes a valid and binding agreement, and
the Amended Note constitutes a valid and binding obligation, of the Company,
enforceable against the Company in accordance with their respective terms.

         2.3 COMPANY FINANCIAL STATEMENTS. All financial statements of the
Company delivered to Avon are complete, correct, present fairly the financial
condition of the Company, except as disclosed on Schedule 2.3(a), reflect every
liability (whether direct or contingent) and there has been no material adverse
change in the financial condition of the Company since the financial statements
dated March 31, 2001. Attached hereto as Schedule 2.3(b) is a complete list of
the outstanding accounts payable of the Company and the amount of the PNC
Minimum Loan balance as of the date set forth on the schedule.

         2.4 LITIGATION. There are no actions, suits or proceedings pending or,
to the best of the Company's knowledge, threatened against the Company or
affecting any of its properties or assets.

         2.5 NO REGISTRATION. Registration of the offer and sale of the Avon
Shares to the Company is exempt from the registration requirements of the U.S.
Securities Act of 1933, as amended, and the purchase of the Avon Shares by the
Company does not contravene the legend placed on the Avon Shares pursuant to
Section 18 of that certain Stockholders Agreement dated as of January 16, 1999
among the Company and the Stockholders named therein.

         ARTICLE 3.  REPRESENTATIONS BY THE COMPANY, DT, LLC AND WALSH.

         3.1 REPRESENTATIONS. Each of the Company, DT, LLC and Walsh represents
and warrants to Avon that the execution and delivery by them of this Agreement
and the performance by them of their respective obligations hereunder or of the
transactions contemplated hereby will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Company, or any
agreement or instrument binding upon any of them, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over any of
them.

         ARTICLE 4.  INDEMNIFICATION.

         4.1 INDEMNIFICATION. Each of the Company, DT, LLC and William S. Walsh
(the "Indemnifying Parties") covenant and agree that they will jointly and
severally indemnify and hold Avon and its officers, directors, employees and
stockholders (collectively, the "Indemnified Party") at all times harmless from
and against any claim asserted against (including reasonable attorneys' fees and
other reasonable costs of defense) or loss incurred by the Indemnified Party
caused by or arising out of or in connection with (i) the purchase by the
Company from Avon of the Avon Shares, including but not limited to the
distribution of the Purchase Price to Avon in connection therewith, (ii) the
Shareholder Distribution or (iii) any breach by any of them of any
representation or warranty given herein or any other provision of this
Agreement. The Indemnified Party may assert a claim that it is entitled to,
or may become entitled to,

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indemnification under this Agreement by giving written notice of its claim to
the Indemnifying Parties, providing reasonable details of the facts giving rise
to the claim and a statement of the Indemnified Party's loss in connection with
the claim, to the extent such loss is then known to the Indemnified Party. In
the case of any suit by a creditor of the Company, the Indemnifying Parties
shall control the defense of the suit, and shall be fully responsible for the
costs of counsel related thereto. The Indemnifying Party shall consult with the
Indemnified Party with respect to the suit upon the Indemnified Party's
reasonable request for consultation, and the Indemnified Party may, at its
expense, participate in (but not control) the defense and employ counsel
separate from the counsel employed by the Indemnifying Party. All parties shall
provide reasonable cooperation in the defense of the suit.

         4.2 SETTLEMENT OR COMPROMISE. Any proposed settlement or compromise of
a claim may not be made without the Indemnified Party's consent, which shall not
be unreasonably withheld or delayed; provided, that such settlement or
compromise completely resolves such claim against the Indemnified Party without
any liability of the Indemnified Party for such claim. If consent is
unreasonably withheld, the Indemnified Party shall pay or reimburse the
Indemnifying Party for the amount of any award or settlement over the rejected
settlement or compromise. Any settlement or compromise of any suit by either the
Indemnifying Party or the Indemnified Party entered into in compliance with this
4.2 shall also be binding on the other parties in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of the settlement or compromise.

         ARTICLE 5. MISCELLANEOUS.

         5.1. FURTHER ASSURANCES. Avon and the Company hereby agree to execute
and deliver such other documents and instruments, and take such other actions,
as may be necessary or desirable in order to consummate and implement the
transactions contemplated by this Agreement.

         5.2. PARTIES-IN-INTEREST; ASSIGNMENT. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective successors and assigns. No party to this Agreement may assign
its rights and obligations under this Agreement.

         5.3. GOVERNING LAW. The validity, interpretation, enforceability and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of New York.

         5.4. AMENDMENT AND MODIFICATION. The parties may amend, modify and
supplement this Agreement only by a writing signed by all parties.

         5.5. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and delivered personally or sent by express
overnight or certified mail, postage prepaid, or by facsimile transaction:


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                  If to the Company:

                           Discovery Toys, Inc.
                           6400 Brisa Street
                           Livermore, California 94550
                           Attention:  James Cascino, Chief Executive Officer
                           Facsimile:  (707) 747-2193

                  if to DT, LLC or Walsh:

                           Discovery Toys, L.L.C.
                           330 South Street
                           Morristown, New Jersey 07962
                           Attention:  Anthony R. Calandra, Manager
                           Facsimile:  (973) 540-9246

                  with a copy to:

                           Gibbons, Del Deo, Dolan, Griffinger & Vecchione
                           A Professional Corporation
                           One Riverfront Plaza
                           Newark, New Jersey 07102-5497
                           Attention:  Lawrence A. Goldman, Esq.
                           Facsimile:  (973) 639-6283

                  if to Avon:

                           Avon Products, Inc.
                           1345 Avenue of the Americas
                           New York, New York  10105
                           Attention: Dennis Ling, Group Vice President-Finance
                                      & Treasurer
                           Facsimile: (212) 282-6116

                  with a copy to:

                           Avon Products, Inc.
                           1345 Avenue of the Americas
                           New York, New York  10105
                           Attention: Gilbert L. Klemann, II, Esq., Senior Vice
                                      President, General Counsel & Secretary
                           Facsimile: (212) 282-6225

or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
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         5.7. EXPENSES. Each of the parties shall bear its own expenses
(including, without limitation, the expenses of its accountants, counsel and
other agents) in connection with the transactions contemplated hereby.

         5.8. ENTIRE AGREEMENT. This Agreement (including the Exhibit and
Schedule hereto) and the Amended Note constitute the entire agreement between
the parties hereto with respect to the transactions contemplated hereby, and
there have been and are no agreements, representations or warranties between the
parties other than those set forth or provided for herein or therein.

         5.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         5.10. CAPTIONS. The article, section and paragraph captions herein are
for convenience of reference only, do not constitute a part of this Agreement,
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.

         5.11 SURVIVAL. Article 4 and Section 1.4 shall survive the termination
of this Agreement.


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         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

                                            DISCOVERY TOYS, INC.


                                            BY
                                              ----------------------------------
                                              Name:  James M. Cascino
                                              Title: Chief Executive Officer


           NUMBER OF SHARES OF               DISCOVERY TOYS, L.L.C.
           COMMON STOCK OWNED
           ------------------

                 216,216
                                             By:
                                                --------------------------------
                                             Name:  Anthony R. Calandra
                                             Title: Manager


                  49,140                     AVON PRODUCTS, INC.


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


                                             -----------------------------------
                  54,054                     WILLIAM S. WALSH


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                                                                     Exhibit 1.3

                             AMENDED PROMISSORY NOTE
                             -----------------------

$3,500,000.00                                                      JUNE 28, 2001


         FOR VALUE RECEIVED, DISCOVERY TOYS, INC., a California corporation
("Payor") promises to pay to the order of AVON PRODUCTS, INC., a New York
corporation or subsequent holder of this Note ("Payee"), at its offices at 1345
Avenue of the Americas, New York, New York 10105 or at such other address as
Payee may specify, in lawful money of the United States of America, the sum of
THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000.00), with interest from
January 15, 1999 on the unpaid principal balance at the rate of four and
sixty-four one-hundredths of one percent (4.64%) per annum compounded annually.
This Note is the Note referred to in Sections 6.2(k) and 6.4(f) and certain
other sections of that certain Stock Transfer Agreement dated as of January 15,
1999 among Discovery Toys, L.L.C., a New Jersey limited liability company (the
"LLC"), Payor and Payee (the "Transfer Agreement") and in Section 1.3 of that
certain Agreement dated as of June 28, 2001 among the Payor, Avon Products, Inc.
and the stockholders of the Company named therein. This Note amends that Note of
Payor in the principal amount of $3,500,000 dated January 15, 1999.

         The principal and all accrued and unpaid interest on this Note shall be
payable on the earliest to occur of (i) June 30, 2003; (ii) the sale or transfer
of all or substantially all of the assets of Payor, or fifty percent (50%) or
more of the fully diluted outstanding capital stock of Payor (the "Company
Shares") other than a transfer of fifty percent (50%) or more of the outstanding
capital stock of Payor to dreamlife, inc. or (iii) the sale or transfer of fifty
percent (50%) or more of the membership interests of the LLC outstanding on
January 15, 1999 to entities not 50% or more owned directly or indirectly by the
owner on January 15, 1999 of the membership interests of the LLC.

         Each of the following events shall constitute an Event of Default (an
"Event of Default") under this Note:

                  (a) Failure of Payor to pay any amount due and payable under
this Note when due, whether at the time scheduled for payment thereof or by
reason of acceleration thereof or otherwise;

                  (b) Payor shall: (i) apply for or consent to the appointment
of a receiver, trustee or liquidator on any material part of its property; (ii)
admit in writing its inability to pay debts as they mature; (iii) make a general
assignment for the benefit of creditors; (iv) be adjudicated bankrupt or
insolvent; (v) file a voluntary petition in bankruptcy or a petition or an
answer seeking an arrangement with creditors or take advantage of any
bankruptcy, insolvency, readjustment of debt, dissolution or liquidation law, or
an answer admitting the material

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allegations of a petition filed against it in any proceeding under any such law;
or (vi) take any action for the purpose of effectuating any of the foregoing;
and

                  (c) Any order, judgment or decree shall be entered, without
Payor's application, approval or consent, by any court of competent
jurisdiction, approving a petition seeking reorganization of Payor or of all or
a substantial part of its assets, or appointing a receiver, custodian, trustee,
intervenor or liquidator therefor, or such a petition seeking reorganization or
liquidation shall be filed against Payor and such order, judgment or decree
shall continue unstayed and in effect for a period of sixty (60) days.

         Upon the occurrence of an Event of Default hereunder, at the option of
Payee: (i) Payee may declare this Note immediately due and payable in full, as
to principal, interest and any other sums payable hereunder, whereupon all such
sums shall be and become immediately due and payable in full; and (ii) Payee
shall be entitled to exercise forthwith against Payor any and all rights and
remedies that may otherwise be available to Payee hereunder and at law or in
equity.

         This Note, and any payments due hereon, shall be subordinate to Senior
Debt, now or hereafter existing, of Payor (as hereinafter defined). "Senior
Debt" shall mean and include the outstanding principal of, premium, if any, and
interest on all indebtedness of Payor (i) to PNC Bank, National Association
("PNC Bank"), as agent for the lenders, under the working capital facility
extended by PNC Bank, as lender and as agent for the lenders, to Payor, on the
terms and conditions available under such facility and up to the maximum amount
of $7,000,000, as proposed to be amended; or (ii) to other lenders under any
substitute working capital facility available to Payor on substantially the same
terms and conditions as the PNC facility described above and up to an aggregate
maximum amount of $7,000,000 for all such lenders; and any renewal, extensions
or deferrals of any such indebtedness. In the event of the distribution of
assets of Payor upon liquidation, dissolution, or reorganization of Payor, then
principal, interest, or premium on Senior Debt shall be paid before any payment
is made to Payee. In the event the Note is declared due and payable before its
stated maturity, no payment shall be made to Payee until principal, interest,
and premium on Senior Debt shall have been paid in full.

         No remedy conferred upon or reserved or available to Payee shall be
exclusive of any other remedy or remedies available to him, but each and every
remedy shall be cumulative and shall be in addition to every such remedy now or
hereafter existing at law or in equity. No delay or omission on the part of
Payee to exercise any right or power arising upon the occurrence of any Event of
Default shall impair any right or power of Payee or be construed to be a waiver
by Payee of such Event of Default. Any right or power of Payee may be exercised
from time to time and as often as may be deemed expedient by it.

         Payor hereby: (i) waives demand, presentment for payment, notice of
intention to accelerate, notice of acceleration, protest, notice of protest, and
all other notices and diligence in collecting this Note; and (ii) agrees that it
will not be necessary for Payee, in order to enforce payment of this Note, to
first institute suit or exhaust rights against Payor.
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                  Payor agrees to pay Payee's reasonable expenses to obtain,
enforce or liquidate payment or performance of any of Payor's obligations under
this Note, which expenses shall include reasonable attorneys' fees and expenses
incurred by Payee.

         No waiver or modification of the terms of this Note shall be valid
unless in writing signed by each of Payee and Payor and then only to the extent
therein set forth.

         This Note shall be governed by and construed and enforced in accordance
with the laws of the State of New York.

         This Note shall be binding upon the Payor and its respective successors
and assigns, and shall be enforceable by Payee, its successors, assigns or
subsequent holders of this Note.

                  IN WITNESS WHEREOF, Payor has executed and delivered this Note
to be effective as of the day and year first above-written.

                                                 DISCOVERY TOYS, INC.


                                                 By:
                                                    ----------------------------
                                                 Name:  James M. Cascino
                                                 Title: Chief Executive Officer
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                                 SECTION 2.3(A)
                                 --------------

                             UNDISCLOSED LIABILITIES

                  Janice Mazibrook, a former V.P. of Sales who was terminated on
May 24, 2001, has threatened various claims relating to her termination and
seeks damages in the amount of $875,000. Such claims may result in a liability
to the Company. The Company has insurance relating to this type of claim in the
amount of $10,000,000 per occurrence, subject to a $50,000 deductible. The
Company has made a claim under the insurance policy.


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                                 SECTION 2.3(B)
                                 --------------

                        Outstanding Accounts Payable and
                            PNC Minimum Loan Balance