Document:

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                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT made as of this 30th day of June, 1998, by
and between PROMOTIONAL MARKETING, L.L.C., an Illinois limited liability company
(hereinafter, the "Company"), and JOHN R. KELLEY, JR., a resident of Illinois
(hereinafter, "Executive").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, the Company and Executive desire to enter into this Agreement
whereby the Company will receive the services, skills and expertise of Executive
for the period and on the terms and conditions hereinafter set forth;

         WHEREAS, prior to the date hereof, Executive was a manager and a member
of the Company, engaged in the advertising and promotional business;

         WHEREAS, contemporaneously with the execution hereof, the Company
merged with Upshot Acquiring Corp. ("Acquiror Sub") pursuant to that certain
Agreement and Plan of Merger and Plan of Reorganization dated as of June 30,
1998 among the Company, Acquiror Sub, HA-LO Industries, Inc. ("Acquiror"), the
Executive and the other members of the Company (the "Merger Agreement"); and

         WHEREAS, in the course of Executive's involvement with the Company,
Executive has (i) had access to and learned the confidential information and
trade secrets of the Company, and (ii) established relationships with the
Company's customers and personnel, all of the foregoing being a part of the
goodwill of the Company.

         NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants contained in this Agreement, and as a material inducement to the
Company's execution, delivery and performance of the Merger Agreement, the
Company and Executive hereby agree as follows:

         1. ENGAGEMENT. Subject to all the terms and conditions of this
Agreement, the Company hereby employs Executive as one of the Managers of the
Company and Executive hereby accepts such employment.

         2. TERM. The engagement of Executive hereunder shall, except upon
earlier termination, be for a term (the "Term") commencing on the date of this
Agreement (the "Effective Date"), and ending on December 31, 2002. The Term
shall be extended beyond such date only upon the express written consent of the
parties.

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         3. EMPLOYMENT SERVICES. During the Term of his employment pursuant to
this Agreement, Executive shall render his services to the Company, or otherwise
as Executive and Company shall mutually agree. In the performance of his duties
hereunder, Executive shall report to the Managers of the Company (other than
Executive) or to such other executive officer of the Company or its affiliates
as the Majority of the Managers of the Company directs. Executive shall devote
all of his working time, efforts and his energy and skill to promote the
interests of the Company (which shall include all subsidiaries and affiliates of
the Company and Acquiror), and agrees that during the Term he will not engage in
any other business activity or have business pursuits or interests except
activities or interests which the Majority of the Managers reasonably determines
do not conflict or interfere with the performance of the Executive's duties and
obligations hereunder.

         4. SALARY.

                  (a) BASE SALARY. In consideration of the services to be
         rendered by Executive to the Company pursuant to this Agreement, the
         Company agrees to pay to Executive during the Term, and Executive
         agrees to accept a base salary ("Base Salary") of one-hundred fifty
         thousand dollars ($150,000) per annum during calendar year 1998
         (prorated to reflect that Executive will only be employed for a portion
         of 1998) and, thereafter at the rate of two-hundred thousand dollars
         ($200,000) per annum (subject to applicable withholdings) payable in
         accordance with the Company's normal payroll practices). If and to the
         extent the Executive receives payments under any disability plans or
         policies maintained by the Company, the Base Salary shall be reduced
         dollar for dollar by the amount of payments so made to the Executive or
         for his benefit.

                  (b) Intentionally Omitted.

                  (c) BONUS. For the period commencing the date hereof and
         ending December 31, 1998, Executive may receive a bonus as the Majority
         of the Managers of the Company shall determine in its sole discretion.
         With respect to each remaining calendar year of the Term (each, a
         "Measurement Period"), Executive shall be entitled to receive a bonus
         (hereinafter, the "Bonus") determined as follows:

                         (i) For each Measurement Period, the Company shall
determine its pre-tax income (each, a "Measurement Period Pre-Tax Income"). In
the event the Measurement Period Pre-Tax Income for any Measurement Period is
equal to or greater than the Measurement Period Pre-Tax Income for the
immediately preceding Measurement Period (or, in the case of the first
Measurement Period, is equal to or greater than the pre-tax income for the
Company's fiscal year ended December 31, 1998

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(the "1998 Pre-Tax Income")), the Company shall pay Executive a Bonus in an
amount determined as follows:

                  (A) If the ratio of the Measurement Period Pre-Tax Income for
         any Measurement Period to the Measurement Period Pre-Tax Income for the
         immediately preceding Measurement Period (or, in the case of the first
         Measurement Period, the 1998 Pre-Tax Income) (the "Pre-Tax Income
         Growth Ratio") is equal to or greater than 1.30 but less than 1.40, the
         Bonus for such Measurement Period shall equal twenty-five thousand
         dollars ($25,000) plus the product of (a) the ratio of (y) the Pre-Tax
         Income Growth Ratio less 1.30 to (z) one-tenth (.10) and (b) fifty
         thousand dollars ($50,000);

                  (B) If the Pre-Tax Income Growth Ratio is equal to or greater
         than 1.40 but less than 1.50, the Bonus for such Measurement Period
         shall equal seventy-five thousand dollars ($75,000) plus the product of
         (a) the ratio of (y) the Pre-Tax Income Growth Ratio less 1.40 to (z)
         one-tenth (.10) and (b) seventy-five-thousand dollars ($75,000); and

                  (C) If the Pre-Tax Income Growth Ratio is equal to or greater
         than 1.50, the Bonus for such Measurement Period shall equal
         one-hundred and fifty thousand dollars ($150,000).

                           (ii) For purposes hereof, pre-tax income shall be (a)
determined in accordance with United States generally accepted accounting
principles and standards ("GAAP"), applied on a basis consistent with those of
prior periods and (b) incorporate the accounting methods, policies, practices
and procedures, and classification, judgments and estimation methodology used by
the Company in determining the 1998 Pre-Tax Income to the extent consistent with
GAAP.

                           (iii) In the event the Company, directly or
indirectly acquires one or more entities which requires Executive to devote
substantial time as an employee, then the pre-tax income of such other entities
shall be included in the calculation of Measurement Period Pre-Tax Income
provided, however, that as a condition of such inclusion the Company and
Executive shall mutually agree to revise the Pre-Tax Income Growth Ratio
calculations set forth in paragraphs (i)(A), (B) and (C) hereof to reflect such
acquisition or acquisitions.

                           (iv) The Bonus shall be paid to Executive by the
Company as soon as practicable following the close of each calendar year of the
Term (commencing with the end of the first Measurement Period) and the Company's
determination of the Measurement Period Pre-Tax Income for the Measurement
Period then ended.

         5.       EMPLOYEE BENEFITS; EXPENSE REIMBURSEMENT.

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                  (a) During the Term of this Agreement, Executive shall be
         entitled to participate in any tax-qualified profit sharing, pension,
         retirement or insurance (including life and medical insurance) plan
         maintained by the Company and made generally available to employees of
         the Company.

                  (b) Subject to the rules, policies and regulations of the
         Company in effect from time to time and applicable to its employees,
         Executive shall be entitled to reimbursement by the Company for
         reasonable and customary travel, business, entertainment and other
         business related expenses incurred by him in carrying out his duties
         under this Agreement in a manner consistent with past practices.

         6. OTHER ACKNOWLEDGMENTS; ACCEPTANCE OF ORDERS. Except to the extent
expressly inconsistent with the provisions of this Agreement, Executive shall
strictly adhere to all policies and procedures established by the Company from
time to time in its sole and exclusive discretion, generally applicable to all
executive's of the Company and disclosed to Executive.

         7.       TERMINATION.

                  (a) GENERALLY. Except as otherwise provided herein, the Term
         of this Agreement and Executive's employment hereunder shall terminate
         upon the first to occur of the following events: (1) stated expiration
         in accordance with Section 2 hereof, (2) the mutual agreement of the
         Company and Executive to so terminate this Agreement, (3) the Company's
         election to terminate this Agreement or Executive's employment
         hereunder "For Cause" (as hereinafter defined) or (4) the death or
         Disability of Executive. The term "Disability" shall mean any mental,
         physical or emotional disability or condition which lasts for one
         hundred eighty (180) days or more within any nine (9) month period, and
         which prevents Executive from fully performing his duties hereunder.
         Disability shall be determined by a Chicago-area physician mutually
         selected by the Company and Executive.

                  (b) FOR CAUSE. The term "For Cause" shall mean any one of the
         following: (1) notice by the Company of the commission by Executive of
         a breach of any material covenant, provision, term or condition set
         forth in this Agreement and the failure to cure such breach (or
         persuade the Company that no such breach occurred) within thirty (30)
         days following notice thereof from the Company; (2) the conviction by
         Executive of, or plea of NOLO CONTENDERE to, a felony or crime
         involving moral turpitude; (3) the conviction by Executive of, or plea
         of NOLO CONTENDERE an act of personal dishonesty or fraud involving
         personal profit, including, without limitation, theft, embezzlement,
         fraud or other misappropriation of property; (4) the commission by
         Executive of an act which a majority of the Company's Managers has
         reasonably found to have involved willful misconduct or gross
         negligence on the part of Executive, and which has or may reasonably
         have a

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         material adverse affect on the revenues, profits or reputation of the
         Company; or (5) after notice and seven (7) days to cure, Executive's
         continued exhibition of habitual absenteeism (without explanation
         satisfactory to the majority of the Managers of the Company), or
         Executive's continued inability or repeated failure to perform any
         lawful and reasonable directives or rules required in connection with
         Executive's employment and position with the Company.

                  (c) CHANGE OF CONTROL. Executive shall be entitled to
         terminate this Agreement, without liability or obligation to the
         Company in respect of such early termination, at any time during the
         twelve month period following any Change of Control (as hereinafter
         defined) provided Executive provides the Company with at least six
         months advance notice of Executive's exercise of such right of
         termination pursuant to this Section7(c). As used herein, a "Change of
         Control" shall mean any transaction or series of related transactions
         pursuant to any single person, entity or group of related entities
         acquires fifty percent (50%) or more of the issued and outstanding
         shares of common stock of Acquiror.

                  (d)      EFFECT UPON TERMINATION.

                           (i) In the event the Term of this Employment
         Agreement is terminated pursuant to Section 7(a), (b) or (c) hereof,
         except as otherwise provided herein, all rights, duties and obligations
         of the parties pursuant to this Employment Agreement shall terminate,
         except to the extent that Executive's compensation earned through the
         date of termination.

                           (ii) In the event Executive's employment shall
         terminate pursuant to the terms of this Agreement, Executive shall not
         be entitled to severance pay notwithstanding any contrary policies and
         practices of the Company.

                  (e) SURVIVAL OF COVENANTS. Notwithstanding anything herein to
         the contrary, upon termination of the Term of this Employment Agreement
         for any reason, the provisions of this Section 7 and the terms and
         conditions of Sections 8 through 13 of this Employment Agreement shall
         remain in full force and effect and shall be binding on and enforceable
         against Executive and the Company as though such termination had not
         occurred. Executive hereby acknowledges that his agreement to the
         survival to the terms and conditions of Sections 8 through 13 of this
         Employment Agreement constitute a material inducement to the Company to
         enter into this Agreement.

         8. EXECUTIVE'S REPRESENTATION. Executive hereby represents and warrants
to and with the Company that he is not subject to any covenants, agreements or
restrictions, including without limitation any covenants, agreement or
restrictions arising out of Executive's prior employment or independent
contractor relationships, which would be

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breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder.

         9. CONFIDENTIALITY. Executive acknowledges that by virtue of his
employment with the Company he will be or has been exposed to or has access to
confidential information regarding the Company's and Acquiror's business of the
most sensitive nature, including but not limited to, trade secrets and
proprietary information, all of which are proprietary to the Company or
Acquiror, as the case may be. Executive further acknowledges that it would be
possible for an employee, upon termination of his association with the Company,
to use the knowledge or information obtained while working for or with the
Company or Acquiror to benefit other individuals or entities. Executive
acknowledges that the Company and Acquiror has expended, and in reliance on this
Agreement is willing to consummate the transactions contemplated by the Merger
Agreement and to continue to expend considerable time and resources in the
development of certain confidential information used in connection with their
business and in the acquisition of analogous information of Acquiror pursuant to
the Merger Agreement, including without limitation business strategies and
goals, accounting methodology, pricing systems, advertising brochures and
materials, graphic and other designs, marketing programs and techniques,
copyrighted and non-copyrighted software source codes or object codes,
technology applications and advances, customer, client, and customer and client
prospect lists or records, customer information, customer mark-ups, information
regarding independent contractors and vendors, confidential information and
trade secrets of third parties, supplier information, and, generally, the
confidential information of the Company or Acquiror which gives, or may give,
the Company or Acquiror an advantage in the marketplace against their respective
competitors (all of the foregoing [including, expressly such similar information
of Acquiror] being herein referred to collectively as "Proprietary
Information"), and which will be (or had been) disclosed to or learned by
Executive solely for the purpose of Executive's employment with the Company or
Acquiror; PROVIDED, HOWEVER, the term "Proprietary Information" shall not
include information which (a) has been publicly disclosed by the Company or
Acquiror, (b) is independently developed by a party other than the Company,
Acquiror or Executive other than on the Company's or Acquiror's behalf, (c) is
generally known without breach of an agreement with the Company or Acquiror
within the industry or lines of business engaged in by the Company or Acquiror,
or (d) constitutes Executive's general business knowledge. Executive
acknowledges that the Proprietary Information constitutes a proprietary and
exclusive interest of the Company and Acquiror and, therefore, agrees that
during the Term and thereafter, for any reason whatsoever, he shall hold and
keep secret the Proprietary Information as described herein and the confidential
information of the customers or clients of the Company or of Acquiror which
Executive learns or had learned in his capacity as an employee of the Company or
Acquiror (the "Customer Information"), as to which Executive at any time during
his employment shall become informed, and Executive shall not directly or
indirectly disclose any Proprietary Information or Customer Information to any
person, firm or corporation or use the same except in connection with the
business and affairs of the Company.

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         10. NON-DISTURBANCE; NON-DISPARAGEMENT. Executive covenants that for a
period equal to (the "Restricted Period") the greater of (a) five (5) years from
the date hereof and (b) the Term and for a period to three (3) years thereafter,
Executive shall not, directly or indirectly, as an employee, agent, salesman or
member of any person, corporation, firm or otherwise (a) solicit any employee,
agent or independent contractor, account executive, sales representative of the
Company or Acquiror or make such other contact with the employees, agents or
independent contractors, account executives or sales representatives of the
Company or Acquiror, the product of which contact will or may yield a
termination of the employment, agency or independent contractor, account
executive or sales representative relationship of such employees, agents or
independent contractor sales representative from the Company or Acquiror, or (b)
make, whether in writing or orally, disparaging statements or inferences with
respect to the Company or Acquiror, their respective businesses, officers or
shareholders (other than statements required in connection with matters asserted
by the Executive in the enforcement of his rights hereunder).

         11. NON-COMPETITIVE COVENANTS. Executive covenants that during the
Restricted Period, Executive shall not, directly or indirectly, in the
continental United States, and in any province or other political jurisdiction
of any other foreign jurisdiction within which the Company engages in business
and derives revenues (collectively, the "Subject Jurisdictions"), for his own
account, or as an employee, consultant, agent, partner, joint venturer,
beneficiary of a trust or trustee of a trust, owner or officer of any other
person, firm, partnership, corporation, trust or other entity, or in any other
capacity, in any way conduct or engage in a business (a) which directly competes
with the business as engaged in by the Company as of the date hereof and as of
the date of termination of Executive's employment (collectively, the "Business")
for any reason or (b) in which Executive, directly or indirectly, uses or
discloses Proprietary Information; provided, however, that Executive's ownership
of less than five percent (5%) of the issued and outstanding securities of any
corporation or other entity whose securities are listed and traded on a
nationally registered securities exchange or market (a "Public Company") for
whom the Executive is not actively involved in any capacity shall not constitute
a violation of this Section 11.

         12. NON-SOLICITATION. Executive hereby covenants and agrees that,
during the Restricted Period, for any reason whatsoever, he shall not, directly
or indirectly, as an employee, consultant, agent, partner, beneficiary of a
trust or trustee of a trust, joint venturer, owner or officer of any other
person, firm, partnership, trust, corporation or other entity, or in any other
capacity, in any way call upon or solicit, any person or entity which was or is,
a Customer or Client or Prospective Customer or Client of the Company or
Acquiror to sell products or render services which compete with the Business as
now or hereafter conducted; provided, however, that Executive's ownership of
less than five percent (5%) of the issued and outstanding securities of any
Public Company for whom the Executive is not actively involved in any capacity
shall not constitute a violation of this

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Section 12. For purposes of this Agreement, (i) the term "Customer or Client"
shall mean any person, firm, partnership, corporation, trust or other entity to
whom the Company or Acquiror has sold goods or services within the twelve (12)
month period prior to the date of Executive's termination of employment with the
Company and (ii) the term "Prospective Customer or Client" shall mean any
person, firm, partnership, trust, corporation or other entity to whom the
Company, has made a written presentation or proposal, or presented written
materials at a meeting, within the twelve (12) month period prior to the date of
Executive's termination of employment with the Company.

         13. RETURN OF MATERIALS. Executive will, at any time upon the request
of the Company, and in any event upon the termination of his employment, for
whatever reason, immediately return and surrender to the Company originals and
all copies of all records, notes, memoranda, electronic files, personal
computers, computer discs, computer equipment, software, telephones, price
lists, customer and customer prospect lists, business plans, recordings and
other documents and other property belonging to the Company, created or obtained
by Executive as a result of or in the course of or in connection with
Executive's employment with the Company or Acquiror; provided, however, if the
Company shall request that such records and other documents be returned prior to
the termination of this Agreement, the Company will afford the Employee access
to such records and other documents as are reasonably required in the
performance of the Employee's duties hereunder. Executive acknowledges that all
such materials are, and will always remain, the exclusive property of the
Company.

         14.      REMEDIES.

                  (a) Executive further acknowledges that in the event his
         employment with the Company terminates for any reason, he will be able
         to earn such a livelihood without violating the foregoing restrictions
         and that his ability to earn a livelihood without violating such
         restrictions is a material condition to his continued employment with
         the Company.

                  (b) Executive acknowledges that compliance with the
         restrictive covenants set forth in Sections 10 through 13 herein is
         necessary to protect the business, goodwill and Proprietary Information
         of the Company and that a breach of these restrictions will irreparably
         and continually damage the Company for which money damages may not be
         adequate. Consequently, Executive agrees that, in the event that he
         breaches or threatens to breach any of these covenants, the Company
         shall be entitled to both (1) a temporary, preliminary or permanent
         injunction in order to prevent the continuation of such harm, and (2)
         money damages insofar as they can be determined. Nothing in this
         Agreement, however, shall be construed to prohibit the Company from
         also pursuing any other remedy, the parties having agreed that all
         remedies are to be cumulative. The parties expressly agree that the
         Company may choose to enforce the restrictive covenants

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         in Sections 10 through 13 hereof, in part, or to enforce any of said
         restrictive covenants to a lesser extent than that set forth herein.

                  (c) REVISION. In the event that any of the provisions,
         covenants, warranties or agreements in this Agreement are held to be in
         any respect an unreasonable restriction upon or are otherwise invalid,
         for whatsoever cause, then the court so holding shall reduce and is so
         authorized to reduce, the territory to which it pertains and/or the
         period of time in which it operates, or the scope of activity to which
         it pertains or effect any other change to the extent necessary to
         render any of the restrictions of this Agreement enforceable.

         15. GENERAL PROVISIONS.

                  (a) SEVERABILITY. Each of the terms and provisions of this
         Agreement is to be deemed severable in whole or in part and, if any
         term or provision of the application thereof in any circumstances
         should be invalid, illegal or unenforceable, the remaining terms and
         provisions or the application thereof to circumstances other than those
         as to which it is held invalid, illegal or unenforceable, shall not be
         affected thereby and shall remain in full force and effect.

                  (b) BINDING AGREEMENT. This Agreement shall be binding upon
         the parties, their heirs, successors, personal representatives and
         assigns. The Company may assign this Agreement to any successor in
         interest to the business, or part thereof, of the Company including,
         but not limited to, Acquiror or any of its subsidiaries or affiliates.
         Executive may not assign any of his obligations or duties hereunder.

                  (c) CONTROLLING LAW AND JURISDICTION. This Agreement shall be
         governed by and interpreted and construed according to the laws of the
         State of Illinois. Executive hereby consents to the jurisdiction of the
         state and federal courts in Illinois in the event that any disputes
         arise under this Agreement.

                  (d) ENTIRE AGREEMENT. This instrument contains the entire
         agreement of the parties with regard to the subject matter hereof, and
         may not be changed orally, but only by an agreement in writing signed
         by the parties hereto.

                  (e) FAILURE TO ENFORCE. The failure to enforce any of the
         provisions of this Agreement shall not be construed as a waiver of such
         provisions. Further, any express waiver by any party with respect to
         any breach of any provision hereunder by any other party shall not
         constitute a waiver of such party's right to thereafter fully enforce
         each and every provision of the Agreement.

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                  (f) SURVIVAL. The obligations contained in this Agreement
         shall survive the termination, for any reason whatsoever, for cause or
         otherwise, of Executive's employment with the Company.

                  (g) HEADINGS. All numbers and heading of sections are for
         reference only and are not intended to qualify, limit or otherwise
         affect the meaning or interpretation of any Section.

                  (h) NOTICES. All notices which are required, permitted or
         contemplated hereunder to be given or made shall be given or made in
         writing by certified mail (return receipt requested) to Executive at
         3134 North Orchard, #3, Chicago, Illinois 60657 and to the Company at
         5980 West Touhy Avenue, Niles, Illinois, 60714, Attention: Mr. Lou
         Weisbach.

                  (i) GENDER. The masculine, feminine or neuter pronouns used
         herein shall be interpreted without regard to gender, and the use of
         the singular or plural shall be deemed to include the other whenever
         the context so requires.

                  (j) LEGAL FEES. In the case of any legal action taken by any
         party hereto against any one or more of the other parties hereto, the
         prevailing party or parties to such action shall be entitled to
         reimbursement of all reasonable costs and expenses (including but not
         limited to reasonable attorneys fees and expenses) incurred by the
         prevailing party in connection with such action.

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         WHEREFORE, the parties have executed this Agreement on the date and
year first above written.

PROMOTIONAL MARKETING, L.L.C.          EXECUTIVE:

By:_________________________________   ____________________________________
  Its:______________________________   John R. Kelley, Jr.

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                                 AMENDMENT NO. 1
                                       TO
                              EMPLOYMENT AGREEMENT

         This Amendment No. 1 to Employment Agreement (the "Amendment") is made
and entered into as of the 9th day of November, 1999, by and between HA-LO
INDUSTRIES, INC., an Illinois corporation ("Employer'), and RICHARD A. MAGID
("Employee").

         WHEREAS, Employer and Employee are parties to that certain Employment
Agreement, dated as of January 1, 1998 (the "Employment Agreement"); and

         WHEREAS, Employer and Employee desire to amend the Employment Agreement
in the manner set forth herein;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, Employer and Employee
hereby agree as follows:

         1. DEFINED TERMS. All terms defined in the Employment Agreement shall
have the same meanings when used herein.

         2. RESIGNATION. Concurrently with the execution of this Amendment,
Employee is delivering to Employer his resignation, in the form of Exhibit A
attached hereto, as an officer and director of Employer and each of its direct
and indirect subsidiaries, which resignation shall be effective immediately.

         3. TERM. Notwithstanding anything to the contrary contained in the
Employment Agreement, and in particular Section 3 thereof, effective as of the
date of this Amendment the term of the Employment Agreement shall be extended
through November 8, 2003. The four-year period from November 9, 1999 through
November 8, 2003 is hereinafter referred to as the "Remaining Term." The
Remaining Term shall not be subject to automatic extension.

         4. EMPLOYMENT; DUTIES OF EMPLOYEE. Notwithstanding anything to the
contrary contained in the Employment Agreement, and in particular Section 2
thereof, during the Remaining Term (i) Employee's position with Employer shall
be Consultant to the Chief Executive Officer, which position shall be a
non-officer position, and (ii) Employee's duties in such position shall be to
provide key insights to the Chief Executive Officer relative to both new and
existing initiatives and to perform such other duties as are commensurate with
his experience, skills and abilities. Employee's services shall be rendered on
an "as needed" basis to the best of Employee's abilities. Employee's services
shall be performed in the Chicago metropolitan area and elsewhere, consistent
with past performance of services by Employee. In addition to the foregoing,
Section 4 of the Employment Agreement is hereby deleted in its entirety.

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         5. COMPENSATION AND BENEFITS. Notwithstanding anything to the contrary
contained in the Employment Agreement, and in particular Section 5 thereof,
during the Remaining Term:

            (a) Employee's Base Pay shall be at the annual rate of Three
         Hundred Thousand Dollars ($300,000), payable in accordance with the
         normal payroll practices of Employer. Payment of all Base Pay for the
         remainder of the Remaining Term shall accelerate and become immediately
         due and payable upon the filing by or on behalf of Employer of a
         bankruptcy petition pursuant to Chapter 7 of the United States
         Bankruptcy Code or a conversion of any bankruptcy proceeding to a
         Chapter 7 proceeding.

            (b) In lieu of any other bonus compensation contemplated by
         Section 5(b) of the Employment Agreement, Employee shall be paid a
         bonus in the amount of One Hundred Thousand Dollars ($100,000) if he is
         employed by Employer on May 8, 2000, payable in full within two (2)
         days after such date.

            (c) Employee's existing fringe benefits (including, without
         limitation, current and future plans for non-officers of Employer for
         which Employee is eligible to participate, automobile lease, car phone
         and medical) shall continue in full force and effect.

         6. TERMINATION. Notwithstanding anything to the contrary contained in
the Employment Agreement, and in particular Section 7 thereof, during the
Remaining Term:

            (a) If, for any reason other than termination for Cause on or
         prior to May 8, 2000 or a voluntary termination by Employee, Employee
         ceases to be employed by Employer, then Employee shall be entitled to
         continue to receive the remainder of his Base Pay for the entire
         Remaining Term, which amounts shall be payable (subject to normal
         withholdings within seven (7) days after Employee ceases to be employed
         by Employer.

            (b) If Employee voluntarily ceases to be employed by Employer
         on or after May 9, 2000 or is terminated for Cause on or prior to May
         8, 2000, then Employee shall be entitled to continue to receive the
         Base Pay to which he would have otherwise been entitled to receive for
         a period of eighteen (18) months from the date of ceasation of
         employment (subject to normal withholdings and in accordance with the
         normal payroll practices of Employer), payable in equal installments
         over the nine (9)-month period immediately following such ceasation of
         employment.

            (c) Upon Employee ceasing to be employed by Employer pursuant
         to Section 6(a) or 6(b), Employee shall be entitled to continue to
         receive the fringe benefits referred to in Section 5(c) during the
         remainder of the Remaining Term (in the case of Section 6(a)) or the
         eighteen (18)-month period immediately following such ceasation of
         employment (in the case of Section 6(b)), as applicable.

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         7. OPTIONS. Notwithstanding anything to the contrary contained in any
option or other agreements between Employer and Employee, all options to
purchase shares of common stock of Employer currently held by Employee shall,
concurrently with the execution of this Amendment, be fully vested (and not
subject to forfeiture) and shall be exercisable until the expiration of their
respective terms notwithstanding Employee's earlier termination as an employee
of Employer or otherwise.

         8. COVENANT NOT TO COMPETE; CONFIDENTIALITY. Employee hereby
acknowledges the continuing effectiveness of Sections 8 and 9 of the Employment
Agreement. Notwithstanding anything to the contrary contained in said Section 8,
the restrictions set forth therein shall survive the termination of Employee's
employment with Employer, for any reason, for a period of one (1) year.

         9. INDEMNITY; DIRECTORS AND OFFICERS INSURANCE. Employer shall, during
and after the Remaining Term, indemnify Employee in the manner provided in the
By-Laws of Employer (as set forth as of the date hereof) to the fullest extent
provided by law. Employer shall purchase and maintain tail coverage relative to
its existing directors and officers insurance policy covering Employee during
the Remaining Term and for two (2) years thereafter, so long as such coverage
continues to be available to Employer during each insurance year at a premium
not in excess of 150% of the immediately prior insurance year's premium for such
coverage.

         10. MUTUAL RELEASE. Employer, on behalf of itself and its officers,
directors, employees, shareholders, representatives, agents, affiliates,
successors and assigns, and Employee, on behalf of himself and his legal
representatives, beneficiaries, heirs, legatees, executors, administrators,
successors and assigns, each remise, release and forever discharge the other of
and from any and all manner of actions, proceedings, causes of action, suits,
debts, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, controversies, contracts, leases, agreements, promises, variances,
trespasses, damages, judgments, executions, claims and demands, of any nature
whatsoever, and of every kind or description, choate or inchoate, known or
unknown, at law or in equity (collectively, the "Claims"), which the releasing
parties, or any of them, now have or ever had, or hereafter can, shall or may
have, for, upon or by reason of any matter, cause or thing whatsoever, against
the released parties, and each of them, from the beginning of time through the
date hereof, including, but not limited to, any claims related to, arising out
of or in connection with that certain Agreement, dated November 30, 1997,
between Employer and Employee regarding a "change of control" of Employer, which
Agreement is hereby terminated in its entirety and of no further force or
effect; provided, however, that nothing herein shall be construed as a release
of any rights of Employer or Employee arising after the date hereof under the
Employment Agreement, as amended hereby.

         11. LEGAL FEES. Employer shall promptly reimburse Employee for all
reasonable attorney's fees and related expenses incurred by Employee in
connection with the negotiation and execution of this Amendment.

                                       -3-

<PAGE>

         12. CONTINUED EFFECTIVENESS. Except as contemplated by this Amendment,
the Employment Agreement shall continue in full force and effect in accordance
with its terms.

         IN WITNESS WHEREOF, the parties have executed this Amendment on the
date and year first above written.

EMPLOYER:                                   EMPLOYER:

HA-LO INDUSTRIES, INC.

By:_____________________________________    ___________________________________
   Its:_________________________________    Richard A. Magid

                                       -4-

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