Document:

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                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT (the "Agreement") between Zany Brainy, Inc., a
Pennsylvania corporation formerly known as Children's Concept, Inc. (the
"Company") and Keith C. Spurgeon (the "Employee").

          WHEREAS, the Company desires to employ the Employee;

          NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:

          1. Employment. The Company hereby employs the Employee, and the
Employee accepts such employment and agrees to perform his duties and
responsibilities under this Agreement, in accordance with the following terms
and conditions.

          1.1. Duties and Responsibilities.

               (a) For a period of three (3) years, beginning as of the date the
     Employee executes this Agreement, and thereafter until this Agreement
     terminates, the Employee shall be employed by the Company and serve as
     Chairman of the Board of Directors and Chief Executive Officer of the
     Company, and he shall perform all duties and accept all responsibilities
     reasonably related to and consistent with such position as may be assigned
     to him by the Company's Board of Directors, and he shall cooperate fully
     with the Board of Directors and other executive officers of the Company,
     including, without limitation, overall responsibility for the sales,
     marketing and financial performance of the Company.  The Employee shall
     report directly to the Board of Directors.

               (b) The Employee represents to the Company that he is not subject
     to or a party to any employment agreement, non-competition covenant,
     understanding or restriction which would prohibit the Employee from
     executing this Agreement and performing fully his duties and
     responsibilities hereunder, or which would in any manner, directly or
     indirectly, limit or affect the duties and responsibilities which may now
     or in the future be assigned to the Employee by the Company or the scope of
     assistance to which he may now or in the future provide to affiliates of
     the Company.

               (c) The Employee shall at all times comply with policies and
     procedures adopted by the Company for its employees, not inconsistent with
     the terms of this Agreement, including, without limitation, any procedures
     and policies adopted by the Company regarding conflicts of interest.
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               (d) The duties and responsibilities and reporting relationship
     set forth in this Agreement shall not be substantially changed without the
     mutual agreement of the parties.

          1.2. Extent of Service. The Employee agrees to use his best efforts to
carry out his duties and responsibilities under Section 1.1 of this Agreement
and to devote his full business time, attention and energy thereto. Except as
provided in Section 4 below, the foregoing shall not be construed as preventing
Employee from making investments in other businesses or enterprises, provided
that Employee agrees not to serve as a director, officer or advisor of, or to
work either on a part-time or independent contracting basis for, any other
business or enterprise during his employment with the Company without the prior
written approval of the Board of Directors of the Company. Notwithstanding the
foregoing, the Employee may provide services as a volunteer or director to
charitable, educational or civic organizations, act as a member, director or
officer of any industry trade association or group, and he may serve as a
trustee, director or advisor to any family companies or trusts, provided that
such service does not materially interfere with the performance of his duties to
the Company as required under this Agreement.

          1.3. Salary. For all of the services rendered by the Employee
hereunder, the Company shall pay Employee, for the fiscal year ended January 31,
2000, an annual salary of $307,500.00, less withholdings required by law or
agreed to by Employee, payable in installments at such times as the Company
customarily pays its other senior officers (but in any event no less often than
monthly). The Company agrees that the Employee's base salary and performance
will thereafter be reviewed at least annually by the Company on the same basis
as other senior level executives to determine if an increase in compensation is
appropriate, which increase shall be in the sole discretion of the Company.
Except as otherwise provided in this Agreement, and except for the Company's tax
withholding obligations required by applicable law, the Employee alone and not
the Company shall be responsible for the payment of all federal, state and local
taxes in respect of the payments to be made and benefits to be provided under
this Agreement or otherwise.

          1.4. Benefits. During the term of employment the Employee shall be
provided such benefits and be permitted to participate in all fringe benefit
plans made available to employees of the Company generally and to executives of
the Company which, from time to time at the Company's discretion may be
provided.

          1.5.  Incentive Compensation.  In addition to the Employee's base
salary pursuant to Section 1.3, the Employee shall be entitled to an annual
incentive bonus (the "Incentive Bonus") during the term of his employment based
upon a plan and targets to be established jointly by the Employee and the Board
of Directors of the Company.  The annual target bonus will be a percentage of
annual base salary, up to 45% of the annual base salary, commencing with the
1999 calendar year.  The Incentive Bonus determined pursuant to this Section 1.5
will be due and payable not later than April 1 after the end of each calendar
year, provided that the Employee was actively employed by the Company on the
last day of the calendar year, except that any Incentive Bonus payable for 1999
shall be payable not later than
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May 1, 2000. In the event that Employee's employment is terminated by the
Company without cause or by the Employee for Good Reason (as defined below)
before the end of any calendar year, then the Incentive Bonus shall be pro rated
for such year, and paid not later than April 1 after the end of the year in
which termination occurs. If the Employee's employment is terminated by the
Company for Cause before the end of any calendar year, then the Employee shall
not be entitled to any Incentive Bonus amount for the year in which his
employment was terminated.

          1.6. Vacation. The Employee shall be entitled to up to four (4) weeks
of vacation per year, to be taken in accordance with the Company's vacation
policy as it may be established or amended by the Company from time to time.

          1.7. Stock Incentive Plan and Incentive Stock Option Agreements. The
Employee shall be entitled to participate in the Company's Equity Incentive
Plan, as modified by this Agreement. In the event of any conflict between the
provisions of this Agreement and any existing or future stock option plan or
agreement which is applicable to the Employee, the provisions of this Agreement
shall control but only as to the Employee, and the Board of Directors, by
approval of this Agreement, hereby agrees only to the Employee that the
provisions of this Agreement regarding stock options and other equity awards or
interests granted to the Employee shall supersede any conflicting provisions of
the Company's 1993 Stock Incentive Plan, the Company's 1998 Equity Incentive
Plan and future plans or agreements under which any options or other equity
incentives are granted or awarded to the Employee, and the Company will take any
and all actions necessary to adopt, confirm and ratify the foregoing.
Accordingly, the 1993 Stock Incentive Plan, the 1998 Equity Incentive Plan, the
agreements and grants under those plans, and future plans and agreements under
which stock options or other equity incentives are granted or award by the
Company to the Employee:

     a.   a termination for "Cause" shall be deemed to have occurred only if the
          Employee is terminated for "Cause" as set forth in Section 7.3 of this
          Agreement;

     b.   a "Change of Control" shall be deemed to have occurred only upon the
          occurrence of any of the events defined as a Change of Control under
          Section 7.6 of this Agreement;

     c.   the provisions of Sections 3, 4, 5 and 6 of this Agreement are the
          only restrictive covenants binding upon the Employee and shall
          supersede any other restrictive covenant provisions;

     d.   all determinations made by the Board of Directors of the Company or
          any option committee designated by the Board relating to questions of
          interpretation and application of the Company's 1993 Stock Incentive
          Plan, the 1998 Equity Incentive Plan and agreements or grants under
          those plans and any future equity incentive plans corresponding and
          agreements and grants shall be made reasonably, in good faith, and
          consistent with the requirements and provisions of this Agreement; and
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     e.   any controversy, dispute or claim between the Employee and the Company
          arising out of or related to the 1993 Stock Incentive Plan, the 1998
          Equity Incentive Plan, any agreements or grants under those plans
          and/or any future equity incentive plans and corresponding agreements
          and grants shall be resolved in accordance with the dispute resolution
          provisions set forth in Section 13 of this Agreement.

          2. Expenses. The Company shall reimburse the Employee on a timely
basis for all ordinary and necessary business expenses incurred in the discharge
of his duties and responsibilities under this Agreement, in line with Company
policy and in accordance with the Company's expense approval procedures then in
effect upon presentation to the Company of an itemized account and appropriate
written proof of such expenses.

          3. Confidential Information. The Employee acknowledges that he will
have access to confidential information of the Company and its affiliates,
including, without limitation, information and knowledge pertaining to research
activities, products and services offered, inventions, innovations, designs,
ideas, plans, trade secrets, proprietary information, advertising, sales methods
and systems, sales and profit figures, customer lists, and relationships between
the Company and its customers, suppliers and others who have had or will have
business dealings with the Company ("Confidential Information"). Employee
acknowledges that such Confidential Information is a valuable and unique asset
of the Company and covenants that he will not, either during or after his
employment with the Company, disclose any such Confidential Information to, or
use of any such Confidential Information for the benefit of, any person or
entity other than the Company and/or its affiliates for any reason whatsoever
(except as may be required or appropriate for the proper discharge of his duties
and responsibilities under this Agreement) without the prior written
authorization of the Company's Board of Directors, except as may be required by
law. In the event that the Employee is subject to a subpoena or other order of
any governmental entity which might seek disclosure of Confidential Information,
the Employee shall furnish a copy of such subpoena or order to the Company's
General Counsel, or in the General Counsel's absence, to Stephen Goodman,
Esquire, as soon as practicable but in no event no later than forty-eight (48)
hours after his receipt of such subpoena or order. Confidential Information
shall not include (i) information known to Employee before he became employed by
the Company, (ii) information in the public domain or known generally in the
industry through no fault of Employee, and (iii) information that is not treated
by the Company as confidential or is disclosed by the Company to third parties
without a duty of confidentiality imposed on such third parties.

          4. Non-Competition.

          4.1. The Employee agrees that during his employment by the Company and
for a period ending one (1) year after the last date on which Employee last
performs services for the Company (whether or not such services are rendered
pursuant to this Agreement), the Employee shall not, directly or indirectly,
engage in (as principal, partner, director, officer, agent, employee,
consultant, owner, independent contractor or otherwise, with or without
compensation) or hold a financial interest in any retailing business that
constitutes a competing business operating in the North American continent as
defined below. The restrictive period
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referred to in the preceding sentence shall in no event exceed the length of the
Severance Benefit Period (defined below) if the Employee is terminated by the
Company without cause or resigns for Good Reason.

          4.2. As used in this Section 4, a "competing business" shall be (i)
any business that, at the time of the termination, primarily engages in, or
plans to engage primarily in, the sale of any combination of the following
children's merchandise: multimedia/educational merchandise, books,
educationally-oriented or specialty market games and toys, audio tapes,
videotapes, computer software products and/or arts and crafts supplies (the
"Company's Merchandise Assortment") or (ii) any retailing business that, at the
time of the termination, dedicates more than 7,500 square feet of its retail
selling space to any combination of the Company's Merchandise Assortment in any
one store. The 7,500 square foot calculation in subparagraph (ii) of this
Section 4.2 shall exclude mass merchant products of a type not sold by the
Company at the time of the determination. The phrase "primarily engages in" used
in subparagraph (i) of this Section 4.2 shall mean that sixty-six and two-
thirds percent (66.67%) of the merchandise sold by the entity engaged, or to be
engaged, in such business is substantially similar to and directly competitive
with the children's merchandise sold by the Company.

          4.3. The definition of "competing business" contained in Section
4.2(ii) shall not apply if either (i) the Employee is terminated without cause
or (ii) the Employee resigns for Good Reason.

          4.4. Notwithstanding the restrictions contained in this Section 4, the
Employee shall be permitted to own no more than five percent (5%) of the shares
of any class of equity securities of a company whose securities are traded on a
national securities exchange or The NASDAQ Stock Market.

          5. No Solicitation. The Employee agrees that during the term of this
Agreement and for a period ending two (2) years after the Employee last performs
services for the Company (whether or not such services are rendered pursuant to
this Agreement), he will not, either directly or indirectly, solicit the
employment of any person who was employed by the Company on a full or part-time
basis at the time the Employee last was employed by the Company unless such
person (i) was involuntarily discharged by the Company or such affiliate; or
(ii) voluntarily terminated his or her relationship with the Company or such
affiliate prior to the Employee's termination of employment.

          6. Equitable Relief.

          6.1. Employee acknowledges that the restrictions contained in Sections
3, 4 and 5 of this Agreement, individually and collectively, are reasonable and
necessary to protect the legitimate interests of the Company, that the Company
would not have entered into this Agreement in the absence of such restrictions,
and that any material violation of any provision of those Sections will result
in irreparable injury to the Company. The Employee further represents and
acknowledges that (i) he has been advised by the Company to consult his own
legal counsel
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in respect to this Agreement; and (ii) that he has, prior to execution of this
Agreement, reviewed thoroughly this Agreement with his counsel.

          6.2. The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as to an equitable accounting of all earnings, profits
and other benefits arising from any violation of Sections 3, 4 or 5 above, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled. In the event that any of the provisions of
Sections 3, 4 or 5 above should ever be adjudicated to exceed the time,
geographic, product or service, or other limitations permitted by applicable law
in any jurisdiction, then such provisions shall be deemed reformed in such
jurisdiction to the maximum time, geographic, product or service, or other
limitations permitted by applicable law.

          6.3.  Subject to Section 13 of this Agreement, the parties irrevocably
and unconditionally agree that any (i) suit, action or other legal proceeding
arising out of this Agreement, including, without limitation, any action
commenced by the Company for preliminary and/or permanent injunctive relief
and/or other equitable relief, may be brought in any court of competent
jurisdiction in Pennsylvania; (ii) consent to the jurisdiction of any such court
in any such suit, action or proceeding; and (iii) waive any objection which such
party may have to the laying of venue of any such suit, action or proceeding in
any such court.  The parties also irrevocably and unconditionally consent to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 10 of this Agreement.

          7. Term and Termination.

          7.1. Generally. The initial term of this Agreement shall be for a term
of three (3) years, beginning as of the date the Employee executes this
Agreement, and shall thereafter be automatically renewed on an indefinite basis,
unless and until this Agreement is sooner terminated pursuant to the provisions
of this Section. Notwithstanding the foregoing, this Agreement and the
Employee's employment hereunder may be terminated at the will of either party at
any time and for any reason with or without cause, except that the Employee
agrees to give the Company at least thirty (30) days written notice of
termination prior to the last date on which he performs services for the
Company.

          7.2. Death or Disability of Employee. This Agreement and the
Employee's employment hereunder shall automatically terminate upon the
Employee's death or, at the option of the Company by written notice to the
Employee, upon the Employee's Disability. "Disability" shall mean the disability
of the Employee, within the meaning of subsection 22(e)(3) of the Internal
Revenue Code of 1986, as amended, and where the Employee is unable to work for a
period of one hundred and eighty (180) days in any 12 month period. Such
termination shall take effect the last day of the month following the date of
death or the date such notice of termination for Employee's Disability is given.
Employee's compensation and other benefits shall continue during the term of the
disability through the effective date of termination as set forth above, except
that such compensation and benefits shall be reduced by any amounts the
<PAGE>

Employee receives through any Company-provided disability insurance policy
applicable to him.

          7.3. Termination by Company for Cause.

          (a) Definition of Cause. The Company shall have the right to terminate
the Employee's employment for Cause. For purposes of this paragraph "Cause"
shall be limited to the following:

          (i)       The Employee's indictment, or conviction for, or plea of
                    nolo contendere to a felony or other crime involving moral
                    turpitude (excluding traffic offenses);

          (ii)      The Employee's dishonesty or misappropriation of funds;

          (iii)     A willful and continued failure of the Employee to
                    substantially perform his duties, or to comply with any of
                    the lawful directives of the Board of Directors of the
                    Company, or to observe any material terms or provisions of
                    this Agreement if such failure is not corrected within
                    twenty (20) days after written notice from the Board to the
                    Employee. Any notice given under this subsection shall
                    specifically state the manner in which the Employee has not
                    substantially performed his duties, complied with lawful
                    directives of the Board of Directors, or observed material
                    terms or provisions of this Agreement, that the notice is
                    given under this subsection, and that failure to correct
                    such breach will result in termination of employment under
                    this Agreement; and/or

          (iv)      A willful breach by the Employee of any of the material
                    terms of this Agreement, or of his fiduciary duty to the
                    Company; and/or

          (v)       The Employee's unlawful and habitual use or abuse of
                    substances.

     For the purpose of the above definition of Cause, no act, or failure to
     act, on Employee's part shall be deemed "willful" unless done, or omitted
     to be done, by the Employee not in good faith and without reasonable belief
     that his action or omission was in the best interest of the Company.

          (b) Procedure Upon Termination by Company for Cause. Notwithstanding
the foregoing, termination by the Company for Cause shall not be effective until
and unless (i) notice of intention to terminate for Cause has been given by the
Company within 90 days after the Company learns of the act, failure or event
constituting "Cause" under this Section 7.3 (which is not cured by the Employee
within any time period permitted for such cure above), and (ii) the Board of
Directors has voted (at a meeting of the Board duly called and held as to which
termination of Employee is an agenda item) by a majority vote to terminate
Employee for Cause, and (iii) if Employee has commenced arbitration in the
manner prescribed in this Agreement
<PAGE>

within 15 days after receipt of such notice of termination disputing the
Company's right under this Agreement to terminate for Cause, the Arbitrator
shall thereafter have determined that the Employee was terminated for Cause. If
the Arbitrator rules that the Employee was not terminated for Cause, the
Employee shall be treated as having been terminated without cause and the
Employee shall be entitled to receive the Severance Benefit pursuant to Section
7.6.

          7.4. Termination by Employee for Good Reason.

          (a) Definition of Good Reason. The Employee shall have the right to
immediately terminate his employment for Good Reason. For purposes of this
Section 7.4 "Good Reason" shall be limited to the following (unless the Employee
and the Company shall execute a written agreement specifically stating that the
occurrence of such event shall not constitute "Good Reason" under this
Agreement):

          (i)       The failure to elect and continue Employee as Chief
                    Executive Officer of the Company, or if the scope of
                    Employee's duties and responsibilities as Chief Executive
                    Officer of the Company are in the aggregate materially
                    reduced.

          (ii)      A requirement by the Company or the Board that the Employee
                    be relocated to a Company office more than fifty (50) miles
                    from the current executive offices of the Company, or the
                    Company requiring the Employee to be based anywhere other
                    than the principal executive offices of the Company, other
                    than on travel reasonably required to carry out Employee's
                    obligations under this Agreement.

          (iii)     A Change of Control as defined in this Section 7 occurs,
                    unless following a Change of Control the successor
                    organization offers to continue this Agreement for two (2)
                    years following such Change of Control or offers the
                    Employee a two (2) year contract incorporating substantially
                    all of the terms of this Agreement and maintaining, at
                    least, his then current salary and benefits.

          (iv)      A material breach by the Company of any of the terms of this
                    Agreement if the breach is not corrected within twenty (20)
                    days after written notice of such breach is given to the
                    Company. Any notice provided under this subsection shall be
                    in writing and shall specifically describe the Company's
                    alleged material breach, that such notice is given under
                    this subsection, and that failure to correct such breach
                    will result in the Employee's resignation for Good Reason
                    under this Agreement.

          (b)  Procedure Upon Termination by Employee for Good Reason.
Notwithstanding the foregoing, termination by the Employee for Good Reason shall
not be
<PAGE>

effective until and unless (i) notice of intention to terminate for Good Reason
has been given by the Employee within 90 days after the Employee learns of the
act, failure or event constituting "Good Reason" under this Section 7.4 (which
was not cured by the Company within any time period permitted for such cure
above), and (ii) if the Company has commenced an arbitration in the manner
prescribed below within 15 days after receipt of the Employee's notice of
termination, such termination shall be effective as a termination of employment
and shall be deemed a termination by Employee for "Good Reason" and Employee
shall immediately be eligible to receive the payments and benefits set forth in
Section 7.5 (i) and (iii) in accordance with the conditions established in
Section 7.5, unless and until the arbitrator shall have determined that the
termination was not for Good Reason. If the Company fails to file a demand for
arbitration with the American Arbitration Association and file the requisite
fees within fifteen (15) days after receipt of Employee's notice of termination
for Good Reason, Employee's termination of employment from the Company shall be
deemed to have been a termination by the Employee for Good Reason. If the
Company files a demand for arbitration and the arbitrator rules that the
Employee's termination was not for Good Reason, then Employee shall, within
thirty (30) days of the issuance of such ruling, reimburse the Company for any
and all monetary payments made to or on behalf of the Employee by the Company
pursuant to Section 7.5(i) and (iii) hereof.

          7.5. Severance. If this Agreement is terminated (a) by the Employee
for Good Reason, pursuant to Section 7.4; or (b) by the Company without cause
(other than by reason of the Employee's death or Disability under Section 7.2),
the Employee shall be entitled to receive the following severance payments and
benefits (the "Severance Benefit") upon his execution of the Severance Agreement
and General Release attached hereto as addendum 1:

          (i)       continuation of his base salary, less applicable
                    withholdings, at the salary rate in effect at the time of
                    the termination of his employment, payable in the ordinary
                    course of the Company's business as if Employee were
                    remaining in the employ of the Company, for a period (the
                    "Severance Benefit Period") of twelve (12) months from the
                    date of termination;

          (ii)      payment of any Incentive Bonus payable with respect to the
                    calendar year prior to the calendar year in which
                    termination occurs (if not previously paid), and payment of
                    any prorated Incentive Bonus for the year in which
                    termination occurs, which payments shall be made in
                    accordance with the provisions of Section 1.5 of this
                    Agreement;

          (iii)     continuation for the Severance Benefit Period of all health
                    insurance, life insurance and disability insurance fringe
                    benefits (or until such earlier date that substantially
                    equivalent or better benefits are provided by a subsequent
                    employer of the Employee); and, if such benefits cannot be
                    continued for Employee's benefit under the benefit plan
                    provisions because of the termination of Employee's
                    employment with the Company, then Employee will be paid an
                    amount sufficient to enable him to purchase at least
                    equivalent benefits from the same or other insurers.
<PAGE>

          7.6. Definition of Change of Control. A "Change of Control" with
respect to the Company shall be deemed to have occurred at the time of the
earliest to occur of the following:

          (a) Any "person" as such term is used in Sections 13(d) and 14(d) of
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any company owned, directly or indirectly, by
the share owners of the company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities;

          (b) The share owners of the Company approve a merger or consolidation
of the Company with any other company, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the company or such surviving entity outstanding immediately after such merger
or consolidation, or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as defined in subsection (a) above) acquires more than 50% of the combined
voting power of the Company's then outstanding securities; or

          (c) The share owners of the Company approve a plan of liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.

          8.  Survival.  Notwithstanding the termination of this Agreement
pursuant to Section 7 or otherwise, the Employee's obligations under Sections 3,
4 and 5 hereof shall survive and remain in full force and effect for the periods
therein provided, and the provisions for equitable relief against Employee in
Section 6 hereof shall continue in force.

          9.  Governing Law.  This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania, without giving
effect to the principles of conflicts of laws thereof.

          10. Notices. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand-delivered, mailed by
registered or certified mail (three days after deposited), faxed (with
confirmation received) or sent by a nationally recognized courier service, as
follows (provided that notice of change of address shall be deemed given only
when received):
<PAGE>

                    If to the Company, to:

                    Board of Directors
                    Zany Brainy, Inc.
                    2520 Renaissance Blvd.
                    King of Prussia, PA  19406

                    With a required copy to:

                    Morgan, Lewis & Bockius LLP
                    1701 Market Street
                    Philadelphia, PA 19103-6993
                    Attention: Stephen M. Goodman, Esquire

                    If to Employee, to:

                    Keith C. Spurgeon
                    260 Ithan Creek Road
                    Villanova, PA 19085

                    With a required copy to:

                    Stephen M. Foxman, Esquire
                    Eckert Seamans
                    1515 Market Street - 9th Floor
                    Philadelphia, PA 19102

or to such other names and addresses as the Company or the Employee, as the case
may be, shall designate by notice to each other person entitled to receive
notices in the manner specified in this Section.

          11. Contents of Agreement.

          11.1. This Agreement supersedes all prior employment agreements,
including, without limitation, the employment agreement dated August 28, 1996
between the Company and Employee, and sets forth the entire understanding
between the parties hereto with respect to the subject matter hereof except that
this Agreement may not be changed, modified, extended or terminated except upon
written amendment executed by the Employee and by the duly appointed
representative of the Board of Directors of the Company.

          11.2. Employee acknowledges that from time to time the Company or its
affiliates may establish, maintain and distribute employee manuals or handbooks
or personnel policy manuals, and officers or other representatives of the
Company may make written or oral statements relating to personnel policies and
procedures. Such manuals, handbooks and statements are intended only for general
guidance. No policies, procedures or statements of any
<PAGE>

nature by or on behalf of the Company (whether written or oral, and whether or
not contained in any employee manual or handbook, including the Company's
Associate Handbook, as the same may exist from time to time, or personnel policy
manual), and no acts or practices of any nature, shall be construed to modify
this Agreement or to create express or implied obligations of any nature to the
Employee or to impose any such obligations on the Employee in conflict with or
in any manner inconsistent with the provisions of this Agreement.

          11.3. All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, legal representatives, successors and assigns
of the parties hereto, except that the duties and responsibilities of the
Employee hereunder are of a personal nature and shall not be assignable or
delegable in whole or in part by the Employee, and the Company may not transfer
or convey its rights hereunder to any third party other than an affiliate of the
Company without the prior express written consent of the Employee.

          11.4. The language of this Agreement shall be construed in accordance
with its fair meaning and not for or against any party. The parties acknowledge
that each party and its counsel have reviewed and had the opportunity to
participate in the drafting of this Agreement and, accordingly, that the rule of
construction that would resolve ambiguities in favor of non-drafting parties
shall not apply to the interpretation of this Agreement or any portion of this
Agreement.

          12. Severability. If any provision of this Agreement or application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder of this Agreement, and the application of such
provision to such person or circumstances in any jurisdiction, shall not be
affected thereby, and to this end the provisions of this Agreement shall be
severable.

          13. Arbitration. In the event of any controversy, dispute or claim
arising out of or related to this Agreement or the Employee's employment by the
Company, the parties shall negotiate in good faith in an attempt to reach a
mutually acceptable settlement of such dispute. If negotiations in good faith do
not result in a settlement of any such controversy, dispute or claim, it shall
be finally resolved by expedited binding arbitration, conducted in Philadelphia,
Pennsylvania, in accordance with the National Rules of the American Arbitration
Association governing employment disputes. Nothing is this Section 13 shall be
deemed to limit, compromise or affect the Company's right to seek and/or obtain
injunctive and/or other equitable relief from a court of competent jurisdiction
pursuant to Section 6 above.

          14. Remedies Cumulative; No Waiver. No remedy conferred upon the
Company or the Employee by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to any other remedy given hereunder or now or hereafter existing at law
or in equity. Except as specifically provided in this Agreement, no delay or
omission by the Company in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
<PAGE>

such right, remedy or power may be exercised by the Company from time to time
and as often as may be deemed expedient or necessary by the Company in its sole
discretion.

          15. Insurance and Indemnity. The Company shall, to the extent
permitted by law, indemnify the Employee in connection with his status as set
forth herein. The Company shall also provide the Employee with coverage as a
named insured under any directors and officers liability insurance policy
maintained for the Company's directors and officers, and the Company shall
continue to maintain directors and officers liability insurance for the benefit
of Employee during the term of this Agreement and for at least three (3) years
following the termination of Employee's employment with the Company, provided
that such insurance is available commercially. This obligation to provide
insurance and indemnify the Employee shall survive expiration or termination of
this Agreement with respect to proceedings or threatened proceedings based on
acts or omissions of the Employee occurring during the Employee's employment
with the Company or with any affiliated company. Such obligations shall be
binding upon the Company's successors and assigns and shall inure to the benefit
of the Employee's heirs and personal representatives.

          16. Mutual Non-Disparagement: During the term of this Agreement and
thereafter, the Employee agrees: (A) not to participate or engage in any trade
or commercial disparagement of the business or operations of the Company and/or
any other related entity; and/or (B) not to disparage the professional and/or
personal lives of any individual officer, director, or employee of the Company
and/or its related entities. During the term of this Agreement and thereafter,
the Company agrees: (A) not to participate or engage in any trade or commercial
disparagement of the business or operations of the Employee; and/or (B) not to
disparage the professional and/or personal life of the Employee.

          17. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.

          IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Employment Agreement as of the date(s) written below.

Attest                              ZANY BRAINY, INC.

                 , Secretary        By:
-----------------                      ------------------

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

Witness:                            EMPLOYEE

---------------------               --------------------
                                    Keith C. Spurgeon

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

Acknowledged:

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

Gerald R. Gallagher, as Chairman of the Compensation Committee
Date:
     ------------<PAGE>

                                                                    EXHIBIT 10.2

                             EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT (the "Agreement") between Zany Brainy, Inc., a
Pennsylvania corporation formerly known as Children's Concept, Inc. (the
"Company") and Thomas G. Vellios (the "Employee").

          WHEREAS, the Company desires to employ the Employee;

          NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound, agree as follows:

          1.  Employment.  The Company hereby employs the Employee, and the
Employee accepts such employment and agrees to perform his duties and
responsibilities under this Agreement, in accordance with the following terms
and conditions.

          1.1.    Duties and Responsibilities.

               (a) For a period of three (3) years, beginning as of the date the
     Employee executes this Agreement, and thereafter until this Agreement
     terminates, the Employee shall be employed by the Company as President of
     the Company, and he shall perform all duties and accept all
     responsibilities reasonably related to and consistent with such position as
     may be assigned to him by the Company's Chief Executive Officer or  Board
     of Directors, and he shall cooperate fully with the Board of Directors and
     other executive officers of the Company.  The Employee shall report
     directly to the Chief Executive Officer of the Company.

               (b) The Employee represents to the Company that he is not subject
     to or a party to any employment agreement, non-competition covenant,
     understanding or restriction which would prohibit the Employee from
     executing this Agreement and performing fully his duties and
     responsibilities hereunder, or which would in any manner, directly or
     indirectly, limit or affect the duties and responsibilities which may now
     or in the future be assigned to the Employee by the Company or the scope of
     assistance to which he may now or in the future provide to affiliates of
     the Company.

               (c) The Employee shall at all times comply with policies and
     procedures adopted by the Company for its employees, not inconsistent with
     the terms of this Agreement, including, without limitation, any procedures
     and policies adopted by the Company regarding conflicts of interest.

               (d) The duties and responsibilities and reporting relationship
     set forth in this Agreement shall not be substantially changed without the
     mutual agreement of the parties.
<PAGE>

          1.2.  Extent of Service.  The Employee agrees to use his best efforts
to carry out his duties and responsibilities under Section 1.1 of this Agreement
and to devote his full business time, attention and energy thereto.  Except as
provided in Section 4 below, the foregoing shall not be construed as preventing
Employee from making investments in other businesses or enterprises, provided
that Employee agrees not to serve as a director, officer or advisor of, or to
work either on a part-time or independent contracting basis for, any other
business or enterprise during his employment with the Company without the prior
written approval of the Board of Directors of the Company.  Notwithstanding the
foregoing, the Employee may provide services as a volunteer or director to
charitable, educational or civic organizations, act as a member, director or
officer of any industry trade association or group, and he may serve as a
trustee, director or advisor to any family companies or trusts, provided that
such service does not materially interfere with the performance of his duties to
the Company as required under this Agreement.

          1.3.  Salary.  For all of the services rendered by the Employee
hereunder, the Company shall pay Employee, for the fiscal year ended January 31,
2000, an annual salary of $307,500.00, less withholdings required by law or
agreed to by Employee, payable in installments at such times as the Company
customarily pays its other senior officers (but in any event no less often than
monthly).  The Company agrees that the Employee's base salary and performance
will thereafter be reviewed at least annually by the Company on the same basis
as other senior level executives to determine if an increase in compensation is
appropriate, which increase shall be in the sole discretion of the Company.
Except as otherwise provided in this Agreement, and except for the Company's tax
withholding obligations required by applicable law, the Employee alone and not
the Company shall be responsible for the payment of all federal, state and local
taxes in respect of the payments to be made and benefits to be provided under
this Agreement or otherwise.

          1.4.  Benefits.  During the term of employment the Employee shall be
provided such benefits and be permitted to participate in all fringe benefit
plans made available to employees of the Company generally and to executives of
the Company which, from time to time at the Company's discretion may be
provided.

          1.5.  Incentive Compensation.  In addition to the Employee's base
salary pursuant to Section 1.3, the Employee shall be entitled to an annual
incentive bonus (the "Incentive Bonus") during the term of his employment based
upon a plan and targets to be established jointly by the Employee and the Board
of Directors of the Company.  The annual target bonus will be a percentage of
annual base salary, up to 40% of the annual base salary, commencing with the
1999 calendar year.  The Incentive Bonus determined pursuant to this Section 1.5
will be due and payable not later than April 1 after the end of each calendar
year, provided that the Employee was actively employed by the Company on the
last day of the calendar year, except that any Incentive Bonus payable for 1999
shall be payable not later than May 1, 2000.  In the event that Employee's
employment is terminated by the Company without cause or by the Employee for
Good Reason (as defined below) before the end of any calendar year, then the
Incentive Bonus shall be pro rated for such year, and paid not later than April
1 after the end of the year in which termination occurs.  If the Employee's
employment is
<PAGE>

terminated by the Company for Cause before the end of any calendar year, then
the Employee shall not be entitled to any Incentive Bonus amount for the year in
which his employment was terminated.

          1.6.  Vacation.  The Employee shall be entitled to up to four (4)
weeks of vacation per year, to be taken in accordance with the Company's
vacation policy as it may be established or amended by the Company from time to
time.

          1.7.  Stock Incentive Plan and Incentive Stock Option Agreements. The
Employee shall be entitled to participate in the Company's Equity Incentive
Plan, as modified by this Agreement.  In the event of any conflict between the
provisions of this Agreement and any existing or future stock option plan or
agreement which is applicable to the Employee, the provisions of this Agreement
shall control but only as to the Employee, and the Board of Directors, by
approval of this Agreement, hereby agrees only to the Employee that the
provisions of this Agreement regarding stock options and other equity awards or
interests granted to the Employee shall supersede any conflicting provisions of
the Company's 1993 Stock Incentive Plan, the Company's 1998 Equity Incentive
Plan and future plans or agreements under which any options or other equity
incentives are granted or awarded to the Employee, and the Company will take any
and all actions necessary to adopt, confirm and ratify the foregoing.
Accordingly, the 1993 Stock Incentive Plan, the 1998 Equity Incentive Plan, the
agreements and grants under those plans, and future plans and agreements under
which stock options or other equity incentives are granted or award by the
Company to the Employee:

     a.   a termination for "Cause" shall be deemed to have occurred only if the
          Employee is terminated for "Cause" as set forth in Section 7.3 of this
          Agreement;

     b.   a "Change of Control" shall be deemed to have occurred only upon the
          occurrence of any of the events defined as a Change of Control under
          Section 7.6 of this Agreement;

     c.   the provisions of Sections 3, 4, 5 and 6 of this Agreement are the
          only restrictive covenants binding upon the Employee and shall
          supersede any other restrictive covenant provisions;

     d.   all determinations made by the Board of Directors of the Company or
          any option committee designated by the Board relating to questions of
          interpretation and application of the Company's 1993 Stock Incentive
          Plan, the 1998 Equity Incentive Plan and agreements or grants under
          those plans and any future equity incentive plans corresponding and
          agreements and grants shall be made reasonably, in good faith, and
          consistent with the requirements and provisions of this Agreement; and

     e.   any controversy, dispute or claim between the Employee and the Company
          arising out of or related to the 1993 Stock Incentive Plan, the 1998
          Equity Incentive Plan,  any agreements or grants under those plans
          and/or any future equity incentive
<PAGE>

          plans and corresponding agreements and grants shall be resolved in
          accordance with the dispute resolution provisions set forth in Section
          13 of this Agreement.

          2.  Expenses.  The Company shall reimburse the Employee on a timely
basis for all ordinary and necessary business expenses incurred in the discharge
of his duties and responsibilities under this Agreement, in line with Company
policy and in accordance with the Company's expense approval procedures then in
effect upon presentation to the Company of an itemized account and appropriate
written proof of such expenses.

          3.  Confidential Information.  The Employee acknowledges that he will
have access to confidential information of the Company and its affiliates,
including, without limitation, information and knowledge pertaining to research
activities, products and services offered, inventions, innovations, designs,
ideas, plans, trade secrets, proprietary information, advertising, sales methods
and systems, sales and profit figures, customer lists, and relationships between
the Company and its customers, suppliers and others who have had or will have
business dealings with the Company ("Confidential Information").  Employee
acknowledges that such Confidential Information is a valuable and unique asset
of the Company and covenants that he will not, either during or after his
employment with the Company, disclose any such Confidential Information to, or
use of any such Confidential Information for the benefit of, any person or
entity other than the Company and/or its affiliates for any reason whatsoever
(except as may be required or appropriate for the proper discharge of his duties
and responsibilities under this Agreement) without the prior written
authorization of the Company's Board of Directors, except as may be required by
law.  In the event that the Employee is subject to a subpoena or other order of
any governmental entity which might seek disclosure of Confidential Information,
the Employee shall furnish a copy of such subpoena or order to the Company's
General Counsel, or in the General Counsel's absence, to Stephen Goodman,
Esquire, as soon as practicable but in no event no later than forty-eight (48)
hours after his receipt of such subpoena or order.  Confidential Information
shall not include (i) information known to Employee before he became employed by
the Company, (ii) information in the public domain or known generally in the
industry through no fault of Employee, and (iii) information that is not treated
by the Company as confidential or is disclosed by the Company to third parties
without a duty of confidentiality imposed on such third parties.

          4.  Non-Competition.

          4.1.  The Employee agrees that during his employment by the Company
and for a period ending one (1) year after the last date on which Employee last
performs services for the Company (whether or not such services are rendered
pursuant to this Agreement), the Employee shall not, directly or indirectly,
engage in (as principal, partner, director, officer, agent, employee,
consultant, owner, independent contractor or otherwise, with or without
compensation) or hold a financial interest in any retailing business that
constitutes a competing business operating in the North American continent as
defined below.  The restrictive period referred to in the preceding sentence
shall in no event exceed the length of the Severance Benefit Period (defined
below) if the Employee is terminated by the Company without cause or resigns for
Good Reason.
<PAGE>

          4.2.  As used in this Section 4, a "competing business" shall be (i)
any business that, at the time of the termination, primarily engages in, or
plans to engage primarily in, the sale of any combination of the following
children's merchandise: multimedia/educational merchandise, books,
educationally-oriented or specialty market games and toys, audio tapes,
videotapes, computer software products and/or arts and crafts supplies (the
"Company's Merchandise Assortment") or (ii) any retailing business that, at the
time of the termination, dedicates more than 7,500 square feet of its retail
selling space to any combination of the Company's Merchandise Assortment in any
one store.  The 7,500 square foot calculation in subparagraph (ii) of this
Section 4.2 shall exclude mass merchant products of a type not sold by the
Company at the time of the determination.  The phrase "primarily engages in"
used in subparagraph (i) of this Section 4.2 shall mean that sixty-six and two-
thirds percent (66.67%) of the merchandise sold by the entity engaged, or to be
engaged, in such business is substantially similar to and directly competitive
with the children's merchandise sold by the Company.

          4.3.  The definition of "competing business" contained in Section
4.2(ii) shall not apply if either (i) the Employee is terminated without cause
or (ii) the Employee resigns for Good Reason.

          4.4.   Notwithstanding the restrictions contained in this Section 4,
the Employee shall be permitted to own no more than five percent (5%) of the
shares of any class of equity securities of a company whose securities are
traded on a national securities exchange or The NASDAQ Stock Market.

          5.  No Solicitation.  The Employee agrees that during the term of this
Agreement and for a period ending two (2) years after the Employee last performs
services for the Company (whether or not such services are rendered pursuant to
this Agreement), he will not, either directly or indirectly, solicit the
employment of any person who was employed by the Company on a full or part-time
basis at the time the Employee last was employed by the Company unless such
person (i) was involuntarily discharged by the Company or such affiliate; or
(ii) voluntarily terminated his or her relationship with the Company or such
affiliate prior to the Employee's termination of employment.

          6.   Equitable Relief.

          6.1.  Employee acknowledges that the restrictions contained in
Sections 3, 4 and 5 of this Agreement, individually and collectively, are
reasonable and necessary to protect the legitimate interests of the Company,
that the Company would not have entered into this Agreement in the absence of
such restrictions, and that any material violation of any provision of those
Sections will result in irreparable injury to the Company.  The Employee further
represents and acknowledges that (i) he has been advised by the Company to
consult his own legal counsel in respect to this Agreement; and (ii) that he
has, prior to execution of this Agreement, reviewed thoroughly this Agreement
with his counsel.

          6.2.  The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as to an
<PAGE>

equitable accounting of all earnings, profits and other benefits arising from
any violation of Sections 3, 4 or 5 above, which rights shall be cumulative and
in addition to any other rights or remedies to which the Company may be
entitled. In the event that any of the provisions of Sections 3, 4 or 5 above
should ever be adjudicated to exceed the time, geographic, product or service,
or other limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law.

          6.3.  Subject to Section 13 of this Agreement, the parties irrevocably
and unconditionally agree that any (i) suit, action or other legal proceeding
arising out of this Agreement, including, without limitation, any action
commenced by the Company for preliminary and/or permanent injunctive relief
and/or other equitable relief, may be brought in any court of competent
jurisdiction in Pennsylvania; (ii) consent to the jurisdiction of any such court
in any such suit, action or proceeding; and (iii) waive any objection which such
party may have to the laying of venue of any such suit, action or proceeding in
any such court.  The parties also irrevocably and unconditionally consent to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 10 of this Agreement.

          7.  Term and Termination.

          7.1.  Generally. The initial term of this Agreement shall be for a
term of three (3) years, beginning as of the date the Employee executes this
Agreement, and shall thereafter be automatically renewed on an indefinite basis,
unless and until this Agreement is sooner terminated pursuant to the provisions
of this Section.  Notwithstanding the foregoing, this Agreement and the
Employee's employment hereunder may be terminated at the will of either party at
any time and for any reason with or without cause, except that the Employee
agrees to give the Company at least thirty (30) days written notice of
termination prior to the last date on which he performs services for the
Company.

          7.2.  Death or Disability of Employee.  This Agreement and the
Employee's employment hereunder shall automatically terminate upon the
Employee's death or, at the option of the Company by written notice to the
Employee, upon the Employee's Disability.  "Disability" shall mean the
disability of the Employee, within the meaning of subsection 22(e)(3) of the
Internal Revenue Code of 1986, as amended, and where the Employee is unable to
work for a period of one hundred and eighty (180) days in any 12 month period.
Such termination shall take effect the last day of the month following the date
of death or the date such notice of termination for Employee's Disability is
given.  Employee's compensation and other benefits shall continue during the
term of the disability through the effective date of termination as set forth
above, except that such compensation and benefits shall be reduced by any
amounts the Employee receives through any Company-provided disability insurance
policy applicable to him.
<PAGE>

     7.3.  Termination by Company for Cause.

          (a)  Definition of Cause.  The Company shall have the right to
terminate the Employee's employment for Cause.  For purposes of this paragraph
"Cause" shall be limited to the following:

               (i)    The Employee's indictment, or conviction for, or plea of
                      nolo contendere to a felony or other crime involving moral
                      turpitude (excluding traffic offenses);

               (ii)   The Employee's dishonesty or misappropriation of funds;

               (iii)  A willful and continued failure of the Employee to
                      substantially perform his duties, or to comply with any of
                      the lawful directives of the Board of Directors of the
                      Company, or to observe any material terms or provisions of
                      this Agreement if such failure is not corrected within
                      twenty (20) days after written notice from the Board to
                      the Employee. Any notice given under this subsection shall
                      specifically state the manner in which the Employee has
                      not substantially performed his duties, complied with
                      lawful directives of the Board of Directors, or observed
                      material terms or provisions of this Agreement, that the
                      notice is given under this subsection, and that failure to
                      correct such breach will result in termination of
                      employment under this Agreement; and/or

               (iv)   A willful breach by the Employee of any of the material
                      terms of this Agreement, or of his fiduciary duty to the
                      Company; and/or

               (v)    The Employee's unlawful and habitual use or abuse of
                      substances.

     For the purpose of the above definition of Cause, no act, or failure to
     act, on Employee's part shall be deemed "willful" unless done, or omitted
     to be done, by the Employee not in good faith and without reasonable belief
     that his action or omission was in the best interest of the Company.

          (b)  Procedure Upon Termination by Company for Cause.  Notwithstanding
the foregoing, termination by the Company for Cause shall not be effective until
and unless (i) notice of intention to terminate for Cause has been given by the
Company within 90 days after the Company learns of the act, failure or event
constituting "Cause" under this Section 7.3 (which is not cured by the Employee
within any time period permitted for such cure above), and (ii) the Board of
Directors has voted (at a meeting of the Board duly called and held as to which
termination of Employee is an agenda item) by a majority vote to terminate
Employee for Cause, and (iii) if Employee has commenced arbitration in the
manner prescribed in this Agreement within 15 days after receipt of such notice
of termination disputing the Company's right under this Agreement to terminate
for Cause, the Arbitrator shall thereafter have determined that the
<PAGE>

Employee was terminated for Cause. If the Arbitrator rules that the Employee was
not terminated for Cause, the Employee shall be treated as having been
terminated without cause and the Employee shall be entitled to receive the
Severance Benefit pursuant to Section 7.6.

          7.4.  Termination by Employee for Good Reason.

          (a)  Definition of Good Reason.  The Employee shall have the right to
immediately terminate his employment for Good Reason.  For purposes of this
Section 7.4 "Good Reason" shall be limited to the following (unless the Employee
and the Company shall execute a written agreement specifically stating that the
occurrence of such event shall not constitute "Good Reason" under this
Agreement):

               (i)    The failure to elect and continue Employee as President of
                      the Company, or if the scope of Employee's duties and
                      responsibilities as President of the Company are in the
                      aggregate materially reduced.

               (ii)   A requirement by the Company or the Board that the
                      Employee be relocated to a Company office more than fifty
                      (50) miles from the current executive offices of the
                      Company, or the Company requiring the Employee to be based
                      anywhere other than the principal executive offices of the
                      Company, other than on travel reasonably required to carry
                      out Employee's obligations under this Agreement.

               (iii)  A Change of Control as defined in this Section 7 occurs,
                      unless following a Change of Control the successor
                      organization offers to continue this Agreement for two (2)
                      years following such Change of Control or offers the
                      Employee a two (2) year contract incorporating
                      substantially all of the terms of this Agreement and
                      maintaining, at least, his then current salary and
                      benefits.

               (iv)   A material breach by the Company of any of the terms of
                      this Agreement if the breach is not corrected within
                      twenty (20) days after written notice of such breach is
                      given to the Company. Any notice provided under this
                      subsection shall be in writing and shall specifically
                      describe the Company's alleged material breach, that such
                      notice is given under this subsection, and that failure to
                      correct such breach will result in the Employee's
                      resignation for Good Reason under this Agreement.

          (b)  Procedure Upon Termination by Employee for Good Reason.
Notwithstanding the foregoing, termination by the Employee for Good Reason shall
not be effective until and unless (i) notice of intention to terminate for Good
Reason has been given by the Employee within 90 days after the Employee learns
of the act, failure or event constituting
<PAGE>

"Good Reason" under this Section 7.4 (which was not cured by the Company within
any time period permitted for such cure above), and (ii) if the Company has
commenced an arbitration in the manner prescribed below within 15 days after
receipt of the Employee's notice of termination, such termination shall be
effective as a termination of employment and shall be deemed a termination by
Employee for "Good Reason" and Employee shall immediately be eligible to receive
the payments and benefits set forth in Section 7.5 (i) and (iii) in accordance
with the conditions established in Section 7.5, unless and until the arbitrator
shall have determined that the termination was not for Good Reason. If the
Company fails to file a demand for arbitration with the American Arbitration
Association and file the requisite fees within fifteen (15) days after receipt
of Employee's notice of termination for Good Reason, Employee's termination of
employment from the Company shall be deemed to have been a termination by the
Employee for Good Reason. If the Company files a demand for arbitration and the
arbitrator rules that the Employee's termination was not for Good Reason, then
Employee shall, within thirty (30) days of the issuance of such ruling,
reimburse the Company for any and all monetary payments made to or on behalf of
the Employee by the Company pursuant to Section 7.5(i) and (iii) hereof.

          7.5. Severance.  If this Agreement is terminated (a) by the Employee
for Good Reason, pursuant to Section 7.4; or (b) by the Company without cause
(other than by reason of the Employee's death or Disability under Section 7.2),
the Employee shall be entitled to receive the following severance payments and
benefits (the "Severance Benefit") upon his execution of the Severance Agreement
and General Release attached hereto as addendum 1:

          (i)    continuation of his base salary, less applicable withholdings,
                 at the salary rate in effect at the time of the termination of
                 his employment, payable in the ordinary course of the Company's
                 business as if Employee were remaining in the employ of the
                 Company, for a period (the "Severance Benefit Period") of
                 twelve (12) months from the date of termination;

          (ii)   payment of any Incentive Bonus payable with respect to the
                 calendar year prior to the calendar year in which termination
                 occurs (if not previously paid), and payment of any prorated
                 Incentive Bonus for the year in which termination occurs, which
                 payments shall be made in accordance with the provisions of
                 Section 1.5 of this Agreement;

          (iii)  continuation for the Severance Benefit Period of all health
                 insurance, life insurance and disability insurance fringe
                 benefits (or until such earlier date that substantially
                 equivalent or better benefits are provided by a subsequent
                 employer of the Employee); and, if such benefits cannot be
                 continued for Employee's benefit under the benefit plan
                 provisions because of the termination of Employee's employment
                 with the Company, then Employee will be paid an amount
                 sufficient to enable him to purchase at least equivalent
                 benefits from the same or other insurers.
<PAGE>

          7.6.  Definition of Change of Control.  A "Change of Control" with
respect to the Company shall be deemed to have occurred at the time of the
earliest to occur of the following:

          (a)  Any "person" as such term is used in Sections 13(d) and 14(d) of
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any company owned, directly or indirectly, by
the share owners of the company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities;

          (b)  The share owners of the Company approve a merger or consolidation
of the Company with any other company, other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the company or such surviving entity outstanding immediately after such merger
or consolidation, or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as defined in subsection (a) above) acquires more than 50% of the combined
voting power of the Company's then outstanding securities; or

          (c)  The share owners of the Company approve a plan of liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.

          8.  Survival.  Notwithstanding the termination of this Agreement
pursuant to Section 7 or otherwise, the Employee's obligations under Sections 3,
4 and 5 hereof shall survive and remain in full force and effect for the periods
therein provided, and the provisions for equitable relief against Employee in
Section 6 hereof shall continue in force.

          9.  Governing Law.  This Agreement shall be governed by and
interpreted under the laws of the Commonwealth of Pennsylvania, without giving
effect to the principles of conflicts of laws thereof.

          10.  Notices.  All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand-delivered, mailed by
registered or certified mail (three days after deposited), faxed (with
confirmation received) or sent by a nationally recognized courier service, as
follows (provided that notice of change of address shall be deemed given only
when received):
<PAGE>

                    If to the Company, to:

                    Board of Directors
                    Zany Brainy, Inc.
                    2520 Renaissance Blvd.
                    King of Prussia, PA  19406

                    With a required copy to:

                    Morgan, Lewis & Bockius LLP
                    1701 Market Street
                    Philadelphia, PA 19103-6993
                    Attention: Stephen M. Goodman, Esquire

                    If to Employee, to:

                    Thomas G. Vellios
                    737 Braeburn Lane
                    Penn Valley, PA 19072

                    With a required copy to:

                    Stephen M. Foxman, Esquire
                    Eckert Seamans
                    1515 Market Street - 9th Floor
                    Philadelphia, PA 19102

or to such other names and addresses as the Company or the Employee, as the case
may be, shall designate by notice to each other person entitled to receive
notices in the manner specified in this Section.

          11.  Contents of Agreement.

          11.1.  This Agreement supersedes all prior employment agreements,
including, without limitation, the employment agreement dated August 28, 1996
between the Company and Employee, and sets forth the entire understanding
between the parties hereto with respect to the subject matter hereof except that
this Agreement may not be changed, modified, extended or terminated except upon
written amendment executed by the Employee and by the duly appointed
representative of the Board of Directors of the Company.

          11.2.  Employee acknowledges that from time to time the Company or its
affiliates may establish, maintain and distribute employee manuals or handbooks
or personnel policy manuals, and officers or other representatives of the
Company may make written or oral
<PAGE>

statements relating to personnel policies and procedures. Such manuals,
handbooks and statements are intended only for general guidance. No policies,
procedures or statements of any nature by or on behalf of the Company (whether
written or oral, and whether or not contained in any employee manual or
handbook, including the Company's Associate Handbook, as the same may exist from
time to time, or personnel policy manual), and no acts or practices of any
nature, shall be construed to modify this Agreement or to create express or
implied obligations of any nature to the Employee or to impose any such
obligations on the Employee in conflict with or in any manner inconsistent with
the provisions of this Agreement.

          11.3.   All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, legal representatives, successors and assigns
of the parties hereto, except that the duties and responsibilities of the
Employee hereunder are of a personal nature and shall not be assignable or
delegable in whole or in part by the Employee, and the Company may not transfer
or convey its rights hereunder to any third party other than an affiliate of the
Company without the prior express written consent of the Employee.

          11.4.  The language of this Agreement shall be construed in accordance
with its fair meaning and not for or against any party.  The parties acknowledge
that each party and its counsel have reviewed and had the opportunity to
participate in the drafting of this Agreement and, accordingly, that the rule of
construction that would resolve ambiguities in favor of non-drafting parties
shall not apply to the interpretation of this Agreement or any portion of this
Agreement.

          12.  Severability. If any provision of this Agreement or application
thereof to any person or circumstance is held invalid or unenforceable in any
jurisdiction, the remainder of this Agreement, and the application of such
provision to such person or circumstances in any jurisdiction, shall not be
affected thereby, and to this end the provisions of this Agreement shall be
severable.

          13.  Arbitration. In the event of any controversy, dispute or claim
arising out of or related to this Agreement or the Employee's employment by the
Company, the parties shall negotiate in good faith in an attempt to reach a
mutually acceptable settlement of such dispute.  If negotiations in good faith
do not result in a settlement of any such controversy, dispute or claim, it
shall be finally resolved by expedited binding arbitration, conducted in
Philadelphia, Pennsylvania, in accordance with the National Rules of the
American Arbitration Association governing employment disputes.  Nothing is this
Section 13 shall be deemed to limit, compromise or affect the Company's right to
seek and/or obtain injunctive and/or other equitable relief from a court of
competent jurisdiction pursuant to Section 6 above.

          14.  Remedies Cumulative; No Waiver.  No remedy conferred upon the
Company or the Employee by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to any other remedy given hereunder or now or hereafter existing at law
or in equity.  Except as specifically provided in this Agreement, no delay or
omission by the Company in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or
<PAGE>

power may be exercised by the Company from time to time and as often as may be
deemed expedient or necessary by the Company in its sole discretion.

          15.  Insurance and Indemnity.  The Company shall, to the extent
permitted by law, indemnify the Employee in connection with his status as set
forth herein.  The Company shall also provide the Employee with coverage as a
named insured under any directors and officers liability insurance policy
maintained for the Company's directors and officers, and the Company shall
continue to maintain directors and officers liability insurance for the benefit
of Employee during the term of this Agreement and for at least three (3) years
following the termination of Employee's employment with the Company, provided
that such insurance is available commercially.  This obligation to provide
insurance and indemnify the Employee shall survive expiration or termination of
this Agreement with respect to proceedings or threatened proceedings based on
acts or omissions of the Employee occurring during the Employee's employment
with the Company or with any affiliated company.  Such obligations shall be
binding upon the Company's successors and assigns and shall inure to the benefit
of the Employee's heirs and personal representatives.

          16.  Mutual Non-Disparagement:  During the term of this Agreement and
thereafter, the Employee agrees: (A) not to participate or engage in any trade
or commercial disparagement of the business or operations of  the Company and/or
any other related entity; and/or (B) not to disparage the professional and/or
personal lives of any individual officer, director, or employee of the Company
and/or its related entities.  During the term of this Agreement and thereafter,
the Company agrees: (A) not to participate or engage in any trade or commercial
disparagement of the business or operations of the Employee; and/or (B) not to
disparage the professional and/or personal life of the Employee.

          17.  Miscellaneous.  All section headings are for convenience only.
This Agreement may be executed in several counterparts, each of which is an
original.

          IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Employment Agreement as of the date(s) written below.

Attest                              ZANY BRAINY, INC.

_________________,Secretary         By:____________________

Date: ____________                  Date: ____________

Witness:                            EMPLOYEE

_____________________               _______________________
                                    Thomas G. Vellios

Date:  _______________              Date:____________

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