Document:

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                                                                  EXECUTION COPY

                          AGREEMENT AND PLAN OF MERGER

                           AND PLAN OF REORGANIZATION

                                  BY AND AMONG

                             HA-LO INDUSTRIES, INC.,

                              STARBELLY.COM, INC.,

                                       AND

                             HA-LO INDUSTRIES, INC.

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         THIS AGREEMENT AND PLAN OF MERGER AND PLAN OF REORGANIZATION dated as
of January 17, 2000 (this "AGREEMENT") is by and among HA-LO Industries, Inc.,
an Illinois corporation ("Acquiror"), HA-LO Industries, Inc., a Delaware
corporation ("ACQUIROR SUB"), and Starbelly.com, Inc., a Delaware corporation
f/k/a TheZebra.com, Inc. (the "COMPANY").

                              W I T N E S S E T H:

         WHEREAS, the Company has been formed for the purpose of and is in the
start-up phase of preparing to engage in the business of the development, sale,
marketing and distribution of advertising specialty, premium and promotional
products and other products and services primarily through the Internet;

         WHEREAS, the stockholders set forth on Section 3.03(a) of the Company
Disclosure Schedules are all of the stockholders of the Company (each, a
"STOCKHOLDER" and collectively the "STOCKHOLDERS");

         WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the Delaware General Corporation Law of the State of
Delaware (the "DGCL" or "DELAWARE LAW") the Company will merge with and into
Acquiror Sub, a wholly-owned subsidiary of Acquiror (the "MERGER");

         WHEREAS, the Board of Directors and Stockholders of the Company have
determined that the Merger is in the best interest of the Company and its
stockholders, and have approved and adopted this Agreement and consented to the
transactions contemplated hereby;

         WHEREAS, the Board of Directors of Acquiror has determined that the
Merger and the transactions contemplated hereby are in the best interests of
Acquiror and its shareholders and has determined to submit and recommend the
Merger and the issuance of Acquiror Common Stock and Acquiror Series A
Convertible Preferred Stock in connection therewith (the "SHARE ISSUANCE") to
its shareholders for their approval to the extent such approval is required by
law or the rules of The New York Stock Exchange ("NYSE");

         WHEREAS, the Board of Directors and sole stockholder of Acquiror Sub
have determined that the Merger is in the best interests of Acquiror Sub and its
stockholder, and have approved and adopted this Agreement and consented to the
transactions contemplated hereby; and

         WHEREAS, the parties hereto intend for the Merger to qualify, for
federal income tax purposes, as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE").

         NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties agree as follows:

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                                  ARTICLE I

                             THE MERGER TRANSACTION

     SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law and this
Agreement, at the "Effective Time" (as hereafter defined), the Company shall
be merged with Acquiror Sub. As a result of the Merger, the separate
corporate existence of the Company shall cease and Acquiror Sub shall
continue as the surviving corporation of the Merger (hereafter, the
"SURVIVING CORPORATION").

     SECTION 1.02 EFFECTIVE TIME. At the Closing , the parties shall cause
the Merger to be consummated by filing of a certificate of merger (the
"CERTIFICATE OF MERGER") with the Delaware Secretary of State in such form as
required by, and executed in accordance with, the relevant provisions of
Delaware Law (the date and time of such filing is the "EFFECTIVE TIME").

     SECTION 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law
and this Agreement. Without limiting the generality of those laws, and
subject to their provisions, at the Effective Time, all the properties,
rights, privileges, powers and franchises of Acquiror Sub and the Company
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Acquiror Sub and the Company shall become the debts, liabilities
and duties of the Surviving Corporation.

     SECTION 1.04 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective
Time, the Certificate of Incorporation and Bylaws of Acquiror Sub shall be
the Certificate of Incorporation and Bylaws of the Surviving Corporation.
Subject to the limitations in this Agreement, Acquiror reserves the right,
exercisable in its sole discretion on and after the Effective Time, to amend,
or cause to be amended, the Certificate of Incorporation and Bylaws of the
Surviving Corporation.

     SECTION 1.05 DIRECTORS AND OFFICERS. At the Effective Time, the officers
and directors of the Surviving Corporation shall be the officers and
directors of the Company immediately prior to the Effective Time, and until
their respective successors are duly elected or appointed and qualified.

     SECTION 1.06 TAKING NECESSARY ACTION; FURTHER ACTION. The parties shall
each use reasonable efforts to take all actions as may be necessary or
appropriate to effectuate the Merger as soon as possible consistent with the
terms and conditions of this Agreement. If, at any time following the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession to all properties, rights, privileges,
immunities, powers and franchises of its constituent corporations, the
directors and officers of the Surviving Corporation are fully authorized, in
the name of each constituent corporation, to take, and shall take, all such
lawful and necessary action, to carry out the purposes of this Agreement.

     SECTION 1.07 THE CLOSING. The closing of the transactions contemplated
by this Agreement will take place at the offices of Neal, Gerber & Eisenberg,
Chicago, Illinois, and will be effective at the Effective Time. On the terms
and subject to the conditions of this Agreement and provided that this
Agreement has not been terminated pursuant to Article VIII, the closing of

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the Merger (the "CLOSING") will take place at 10:00 a.m., local time in
Chicago, Illinois, on the date which is the third business day to occur on or
after the satisfaction of the conditions set forth in Section 7.1, provided
that if all conditions set forth in Article VII are not fulfilled or waived
on such third business day, then the Closing shall be automatically extended
from time to time until the first subsequent business day on which all such
conditions are so satisfied or waived, subject to Section 8.01(e), unless
another date or place is agreed to in writing by the parties. The date on
which the Closing occurs is referred to herein as the "CLOSING DATE." At the
Closing, (a) Acquiror shall deliver, and each Stockholder will be entitled to
receive, upon surrender to Acquiror of certificates representing shares of
Company Common Stock or shares of Company Preferred Stock, as the case may
be, for cancellation, certificates representing the number of shares of
Acquiror Common Stock and/or Acquiror Series A Preferred Stock that such
Stockholder is entitled to receive pursuant to Section 2.01 hereof, , and (b)
the parties shall execute and deliver or make the deliveries set forth in
Sections 7.01 and 7.02 hereof. In the event any certificate representing
shares of Company Common Stock or shares of Company Preferred Stock shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such certificate to be lost, stolen or destroyed
and, if reasonably required by Acquiror, the posting by such Person of a bond
in such amount as Acquiror may determine is reasonably necessary as indemnity
against any claim that may be made against it with respect to such
certificate, Acquiror will issue in exchange for such lost, stolen or
destroyed certificate the shares of Acquiror Common Stock and/or Acquiror
Series A Preferred Stock and any cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.

                                 ARTICLE II

                            EXCHANGE OF CERTIFICATES

         SECTION 2.01      MERGER CONSIDERATION.

                  (a) (i) At the Effective Time, by virtue of the Merger,
         Acquiror shall pay to the Stockholders Two Hundred and Forty Million
         Dollars ($240,000,000) (the "MERGER CONSIDERATION"), payable by the
         assumption of the Company Options pursuant to Section 6.13 and as
         follows:

                  (A)      Nineteen Million Dollars ($19,000,000) in cash MINUS
                           Expenses of the Stockholders and the Company in
                           excess of $500,000 pursuant to section 8.03(a) hereof
                           (the "CASH CONSIDERATION");

                  (B)      Shares of Acquiror's Series A Convertible Preferred
                           Stock, without par value ("ACQUIROR SERIES A
                           PREFERRED STOCK"), valued at its liquidation value,
                           with an aggregate liquidation value of Fifty-One
                           Million Dollars ($51,000,000) (the "PREFERRED STOCK
                           CONSIDERATION"); and

                  (C)      Shares of Acquiror's common stock, without par value
                           ("ACQUIROR COMMON STOCK"), valued at the Acquiror
                           Share Price, with an aggregate value of the Merger
                           Consideration, MINUS Seventy Million Dollars
                           ($70,000,000).

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                  Provided, however, that, at the Effective Time, Merger
         Consideration valued at $25,000,000 (the "CAP"), shall be withheld from
         the Escrowed Stockholders and held pursuant to the Escrow Agreements
         referred to in Section 2.04 hereof;

                           (ii) "ACQUIROR SHARE PRICE" or "SHARE VALUE" shall
                  mean the lesser of (A) $10.00, or (B) the average closing
                  price of the Acquiror Common Stock as reported on the NYSE for
                  all trading days during the twenty-five (25) day period which
                  consists of the fifteen (15) calendar days prior to the date
                  hereof and the ten (10) calendar days following the date
                  hereof; provided, however, that if such average closing price
                  of the Acquiror Common Stock is less than $6.00, then Acquiror
                  Share Price shall mean $6.00;

                           (iii) "SERIES B PORTION" shall mean the Merger
                  Consideration multiplied by a fraction, the numerator of which
                  equals the number of shares of the Company's Series B
                  Preferred Stock, $.001 par value per share ("COMPANY SERIES B
                  PREFERRED STOCK") outstanding immediately prior to the
                  Effective Time multiplied by the number of shares of Company
                  Common Stock into which each share of Company Series B
                  Preferred is then convertible and the denominator of which
                  equals the total number of shares of the Company's Common
                  Stock (whether Company Class A Common Stock or Company Class B
                  Common Stock) (collectively, the "COMPANY COMMON STOCK"),
                  outstanding immediately prior to the Effective Time assuming
                  the exercise and/or conversion of the Silicon Warrant and all
                  Company Options (whether or not then exercisable) then
                  outstanding and the conversion of all Company Preferred Stock
                  (including, without limitation, the Company Series A Preferred
                  Stock and Series B Preferred Stock) into Company Common Stock
                  prior to the Effective Time (such denominator, the "COMPANY
                  FULLY DILUTED SHARES");

                           (iv) "SERIES A PORTION" shall mean the Merger
                  Consideration multiplied by a fraction, the numerator of which
                  is equal to the number of shares of the Company's Series A
                  Preferred Stock, $.001 par value per share ("COMPANY SERIES A
                  PREFERRED STOCK") outstanding immediately prior to the
                  Effective Time multiplied by the number of shares of Company
                  Common Stock into which each share of Company Series A
                  Preferred Stock is then convertible, and the denominator of
                  which equals the Company Fully Diluted Shares;

                           (v) "COMMON STOCK PORTION" shall mean the Merger
                  Consideration multiplied by a fraction, the numerator of which
                  equal the number of shares of Company Common Stock outstanding
                  immediately prior to the Effective Time and the denominator of
                  which equals the Company Fully Diluted Shares.

                  (b) EFFECT ON COMPANY STOCK. As of the Effective Time, by
         virtue of the Merger and without any action on the part of any holder
         of shares of the Company Common Stock, the Company's Preferred Stock,
         $.001 par value per share ("COMPANY PREFERRED STOCK"), Acquiror Common
         Stock or Acquiror Sub Stock:

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                           (i) CANCELLATION OF TREASURY STOCK AND COMPANY-OWNED
                  STOCK. Each share of Company Common Stock or Company Preferred
                  Stock that is owned by the Company shall automatically be
                  cancelled and retired and shall cease to exist, and no
                  consideration shall be delivered in exchange therefor;
                  provided, however, that any shares of Company Common Stock or
                  Company Preferred Stock (A) held by the Company for the
                  account of another individual or entity ("PERSON"), (B) as to
                  which the Company is or may be required to act as a fiduciary
                  or in a similar capacity or (C) the cancellation of which
                  would violate any legal duties or obligations of the Company,
                  in each case shall not be cancelled but, instead, shall be
                  treated as set forth in Section 2.01(b)(ii).

                           (ii) CONVERSION OF COMPANY SERIES B PREFERRED STOCK.
                  The issued and outstanding shares of the Company Series B
                  Preferred Stock (other than shares to be cancelled in
                  accordance with Section 2.01(a)(i)) shall be converted into
                  the right to receive, in the aggregate, the Series B Portion,
                  payable as follows: (A) cash in an amount equal to the Cash
                  Consideration multiplied by a fraction, the numerator of which
                  is sixteen (16) and the denominator of which is nineteen (19)
                  (the "SERIES B CASH AMOUNT") plus (B) shares of Acquiror
                  Series A Preferred Stock with an aggregate liquidation value
                  of an amount (the "SERIES B PREFERRED STOCK AMOUNT") equal to
                  the Series B Portion MINUS the Series B Cash Amount. Each
                  issued and outstanding share of Company Series B Preferred
                  Stock shall be entitled to its pro rata share of the Series B
                  Portion, based upon the total shares of Company Series B
                  Preferred Stock outstanding at the Effective Time.

                           (iii) CONVERSION OF COMPANY SERIES A PREFERRED STOCK.
                  The issued and outstanding shares of Company Series A
                  Preferred Stock (other than shares to be cancelled in
                  accordance with Section 2.01(a)(i)) shall be converted into
                  the right to receive, in the aggregate, an amount equal to the
                  Series A Portion, payable as follows: (A) cash in an amount
                  equal to the Cash Consideration multiplied by a fraction, the
                  numerator of which is three (3) and the denominator of which
                  is nineteen (19) (the "SERIES A CASH AMOUNT"), (B) shares of
                  Acquiror Series A Preferred Stock with an aggregate
                  liquidation value as described in the next sentence (the
                  "SERIES A PREFERRED STOCK AMOUNT"), and (C) Shares of Acquiror
                  Common Stock with an aggregate value, valued at the Acquiror
                  Share Price, of the Series A Portion MINUS the Series A Cash
                  Amount MINUS the Series A Preferred Stock Amount. The Series A
                  Preferred Stock Amount shall equal the product of (x) the
                  Preferred Stock Consideration MINUS the Series B Preferred
                  Stock Amount multiplied by (y) a fraction, the numerator of
                  which is the Series A Portion MINUS the Series A Cash Amount
                  and the denominator of which is which is the Merger
                  Consideration MINUS the Series B Portion MINUS the Series A
                  Cash Amount. Each issued and outstanding share of Company
                  Series A Preferred Stock shall be entitled to its pro rata
                  share of the Series A Portion based upon the total number of
                  shares of Company Series A Preferred Stock outstanding at the
                  Effective Time.

                           (iv) CONVERSION OF COMPANY COMMON STOCK. The issued
                  and outstanding shares of Company Common Stock (other than
                  shares to be canceled

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                  in accordance with Section 2.01(a)(i)) shall be converted
                  into the right to receive, in the aggregate an amount equal
                  to the Common Stock Portion, payable as follows: (A) shares
                  of Acquiror Series A Preferred Stock with an aggregate
                  liquidation value as described in the next sentence (the
                  "COMMON PREFERRED STOCK AMOUNT"), and (B) shares of
                  Acquiror Common Stock, with an aggregate value, valued at
                  the Acquiror Share Price, of the Common Stock Portion MINUS
                  the Common Preferred Stock Amount. The Common Preferred Stock
                  Amount equals the product of (x) the Preferred Stock
                  Consideration MINUS the Series B Preferred Stock Amount MINUS
                  the Series A Preferred Stock Amount multiplied by (y) a
                  fraction, the numerator of which is the number of shares of
                  Common Stock outstanding and the denominator of which is the
                  difference between Company Fully Diluted Shares and the number
                  of shares of Common Stock issuable upon the conversion of the
                  Preferred Shares outstanding as of the Effective Time. Each
                  issued and outstanding share of Company Common Stock shall be
                  entitled to its pro rata share of the Common Stock Portion,
                  based upon the total number of shares of Company Common Stock
                  outstanding at the Effective Time.

                           (v) CERTIFICATES. Certificates, if any, previously
                  representing Company Common Stock or Company Preferred Stock
                  shall, together with such duly executed documents and other
                  instruments of transfer as may reasonably be required by
                  Acquiror, upon presentment be immediately exchanged for
                  certificates representing whole shares of Acquiror Common
                  Stock and/or Acquiror Series A Preferred Stock, as applicable,
                  issued in consideration therefor, without interest. All shares
                  of Acquiror Common Stock and/or Acquiror Series A Preferred
                  Stock, as applicable, issued upon conversion of shares of
                  Company Common Stock and Company Preferred Stock in accordance
                  with the terms of this Agreement shall be deemed to have been
                  issued in full satisfaction of all rights pertaining to such
                  shares of Company Common Stock and Company Preferred Stock and
                  to have been issued and outstanding as of the Effective Time.

                  (c) ACQUIROR SUB STOCK. Each issued and outstanding share of
         common stock, no par value, of Acquiror Sub ("ACQUIROR SUB STOCK")
         shall be converted into one share of the common stock, no par value, of
         the Surviving Corporation ("SURVIVOR STOCK"). Certificates, if any,
         previously representing Acquiror Sub Stock shall, together with such
         duly executed documents and other instruments of transfer as may
         reasonably be required by Acquiror, upon presentment be immediately
         exchanged for certificates representing whole shares of Survivor Stock
         issued in consideration therefor, without interest.

                  (d) ACKNOWLEDGEMENT. The parties hereto agree and acknowledge
         that, notwithstanding anything to the contrary contained in this
         Section 2.01, each of (i) the Series B Portion, the Series A Portion
         and the Common Stock Portion, and (ii) the aggregate of the cash paid
         and the value of the shares of Acquiror's Series A Preferred Stock and
         Common Stock issued pursuant to Sections 2.01(b)(ii), (iii) and (iv),
         as such value is determined pursuant to such Sections, must equal the
         Merger Consisderation MINUS the sum of (A) the Expenses of the
         Stockholders and the Company in excess of $500,000 pursuant to Section
         8.03(a) hereof and (B) the aggregate value of Acquiror Common Stock and
         Acquiror Series A Preferred Stock which would be issued on

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         exercise of all Adjusted Options outstanding at the Effective Time,
         valued in accordance with this Section 2.01, less the aggregate
         exercise price of such Adjusted Options.

         SECTION 2.02   STOCK TRANSFER BOOKS. On and as of the Effective
Time, the transfer books of the Company shall be closed and thereafter, and
except as provided in Sections 2.03 and 7.02(j), there shall be no further
registration of transfers of interests in the Company on the records of the
Company.

         SECTION 2.03   OTHER COMPANY SECURITIES AND OPTIONS. As of the
Effective Time, each outstanding share of common, preferred or convertible
capital stock other than the shares of Company Common Stock and Company
Preferred Stock ("OTHER COMPANY SECURITIES"), together with all options and
warrants (other than the Company Options and the Silicon Warrant) or other
rights, agreements, arrangements or commitments (collectively, the "OTHER
COMPANY OPTIONS") to sell or purchase shares of Company Common Stock, Company
Preferred Stock or Other Company Securities, whether written, oral,
authorized, outstanding, issued, unissued, vested or unvested, shall be
cancelled and terminated, and of no further force or effect. Prior to the
Effective Time, except as provided in Section 2.03 of the Company Disclosure
Schedules, the Company shall use all reasonable efforts to take all corporate
and/or other action necessary to effectuate the cancellation and termination
of all Other Company Securities and Other Company Options.

         SECTION 2.04   ESCROW AGREEMENTS. Twenty-Five Million Dollars
($25,000,000) of the Merger Consideration, in the form of Acquiror Common
Stock and Acquiror Series A Preferred Stock and valued in accordance with
Section 2.01, rounded up to the nearest whole share (the "ESCROW SHARES")
will be deposited and held in escrow in accordance with separate Escrow
Agreements in the form of EXHIBIT A attached hereto (the "ESCROW AGREEMENTS")
with the Stockholders listed on Section 2.04 of the Company Disclosure
Schedules (the "ESCROWED STOCKHOLDERS") as the sole source of indemnification
payments that may become due to Acquiror under Article IX. The Escrow Shares
will be deposited pursuant to the Escrow Agreements from the Escrowed
Stockholders in the percentages set forth on Section 2.04 of the Company
Disclosure Schedules.

         SECTION 2.05   EMPLOYMENT ESCROW AGREEMENTS. Twenty percent (20%) of
the Merger Consideration in value (determined in accordance with Section
2.01, received by each of the Stockholders listed on Section 2.05 of the
Company Disclosures Schedules, will be deposited and held in escrow in
accordance with separate Employment Escrow Agreements in the form of EXHIBIT
A-1 attached hereto. Such deposits will be in the form of Acquiror Common
Stock, rounded up to the nearest whole share.

         SECTION 2.06   DISSENTING SHARES. Any holder of shares of Company
Common Stock or Company Preferred Stock that are outstanding on the record
date for the determination of which holders will be entitled to vote for or
against the Merger who did not vote such shares in favor of the Merger
("DISSENTING SHARES") will be entitled to exercise dissenters' rights
pursuant to Section 262 of the DGCL with respect to such Dissenting Shares,
provided that such holder meets all requirements of the DGCL with respect to
such Dissenting Shares, and will not be entitled to receive any Merger
Consideration, unless otherwise provided by the DGCL or agreed in writing by
Acquiror. The Company, the Surviving Corporation and Acquiror, as

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applicable, will, after consultation with one another, give such notices with
respect to dissenters' rights as may be required by the DGCL and other
applicable law as soon as practicable.

                                  ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The term "COMPANY ADVERSE EFFECT," as used in this Agreement, shall
mean any change or event that, individually or when taken together with all
other such changes or events, would reasonably be considered to be materially
adverse to the financial condition, business, business prospects or results of
operations of the Company, taken as a whole; provided, however, the occurrence
of any change or event (i) described in any Section of the Company Disclosure
Schedules attached to this Agreement (the "COMPANY DISCLOSURE SCHEDULES"), (ii)
resulting from the entry into this Agreement or the transactions contemplated
hereby or the public announcement thereof (in accordance with Section 6.09
hereof), or (iii) resulting from or arising in connection with (A) any
occurrence or condition affecting any of the online, e-commerce, promotional or
decorated products industries generally, (B) any changes in economic, market,
regulatory, banking, monetary, political or other similar conditions or (C) any
occurrence or condition affecting the Internet (or any particular portion
thereof) generally, shall not, individually or in the aggregate, constitute a
Company Adverse Effect.

         The term "SUBSIDIARY" (or its plural) as used in this Agreement with
respect to the Company, Stockholders, Acquiror, Acquiror Sub or any other
entity, shall mean any corporation, partnership, limited liability company,
limited liability partnership, joint venture or other entity of which the
Company, Stockholders, Acquiror, Acquiror Sub or other entity, as the case may
be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, a majority of the stock or other equity interests
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other entity.

         For purposes of this Article III, and as generally applied to the
Company, the term "KNOWLEDGE" means the actual knowledge, upon due inquiry of
Brad Keywell ("BRAD"), Eric Lefkofsky ("ERIC") (each, a "PRINCIPAL EXECUTIVE"
and together, the "PRINCIPAL EXECUTIVES") and each of Rick Surkamer, Jennifer
MacLean, Steven Scheyer, Simeon Schnapper and Jim Johnson (collectively, the
"KEY EMPLOYEES").

         The Company represents and warrants, as of the date of this Agreement,
to Acquiror and Acquiror Sub that, except as specifically described in the
Company Disclosure Schedules, the statements contained in this Article III are
true and correct with respect to the Company and its business. Any disclosure
set forth on any particular Section of the Company Disclosure Schedules shall be
deemed disclosed in reference to all Sections of the Company Disclosure
Schedules to which such disclosure may be reasonably applicable.

         SECTION 3.01   ORGANIZATION AND QUALIFICATION; EQUITY INVESTMENTS.
The Company is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware. Except as set forth on
Section 3.01 of the Company Disclosure Schedules, the Company does not own,
directly or indirectly, five percent (5%) or more of the voting stock or
other equity interests in another Person. The Company possesses all requisite

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corporate power and corporate authority to own, lease and operate its
properties and/or to carry on its business as it is now being conducted, and
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by the Company or the ownership or
leasing of its properties makes such qualification necessary, other than
where the failure to do so would not have a Company Adverse Effect. The
Company was duly incorporated on March 22, 1999; no predecessor Person
conducted the business of the Company.

         SECTION 3.02   CERTIFICATE OF INCORPORATION; BYLAWS. The Company has
furnished to Acquiror complete and correct copies of its Certificate of
Incorporation and Bylaws, as amended or restated. The Company is not in
violation of any provision of its Certificate of Incorporation or Bylaws.

         SECTION 3.03    CAPITALIZATION OF THE COMPANY.

                  (a) As of January 16, 2000, the authorized capital stock of
         the Company consists solely of:

                           (i) 40,000,000 duly authorized shares of Company
                  Common Stock, consisting of 36,895,000 shares of Class B
                  (voting) Common Stock ("COMPANY CLASS B COMMON STOCK") and
                  3,105,000 shares of Class A (non-voting) Common Stock
                  ("COMPANY CLASS A COMMON STOCK"), of which:

                                    (A) 16,500,000 shares of Company Class B
                           Common Stock are issued and outstanding, all of which
                           are held of record and beneficially by the Persons
                           and in the amounts set forth on Section 3.03(a) of
                           the Company Disclosure Schedules;

                                    (B) 3,105,000 shares of Company Class A
                           Common Stock have been duly and validly reserved for
                           issuance under the 1999 Stock Option Plan of the
                           Company (the "PLAN"), of which 395,000 shares are
                           outstanding pursuant to the exercise of such options,
                           ______ shares are subject to outstanding options and
                           _______ shares are not subject to any outstanding
                           options; such options are held of record by the
                           Persons and in the amounts set forth on Section
                           3.03(a) of the Company Disclosure Schedules (the
                           "COMPANY OPTIONS"); and

                                    (C) 8,682,080 shares of Class B Common Stock
                           are duly and validly reserved for issuance upon the
                           conversion of the Company Series A Preferred Stock
                           and the Company Series B Preferred Stock and for
                           issuance upon exercise of the Silicon Warrant.

                           (ii) 7,153,711 duly authorized shares of Company
                  Preferred Stock of which:

                                    (A) 1,500,000 shares are designated as
                           Company Series A Preferred Stock, all of which are
                           issued and outstanding, and all of which are held of
                           record and beneficially by the Persons and in the
                           amounts set forth on Section 3.03(a) of the Company
                           Disclosure Schedules; and

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                                    (B) 5,653,711 shares are designated as
                           Company Series B Preferred Stock, of which 5,653,711
                           are issued and outstanding, and which are held of
                           record by the Persons and in the amounts set forth on
                           Section 3.03(a) of the Company Disclosure Schedules.

                  (b) No Other Company Securities are issued and outstanding.
         Section 3.03(b) of the Company Disclosure Schedules contains a list of
         all outstanding warrants, options, agreements, convertible securities
         (other than Company Preferred Stock and the Silicon Warrant) and other
         commitments pursuant to which the Company is or may become obligated to
         issue, sell or otherwise transfer any Company Common Stock or Company
         Preferred Stock, which list names all Persons entitled to receive such
         Company Common Stock or Company Preferred Stock and sets forth the
         shares of Company Common Stock or Company Preferred Stock required to
         be issued thereunder. Except as described in Section 3.03(b) of the
         Company Disclosure Schedules, no shares of Company Common Stock or
         Company Preferred Stock are held in treasury or are reserved for any
         other purpose.

                  (c) All outstanding shares of Company Common Stock and Company
         Preferred Stock are, and as of the Effective Time will be, duly
         authorized, validly issued, fully paid and non-assessable, and not
         subject to preemptive rights created by statute, the Company's
         Certificate of Incorporation or Bylaws, or, except as set forth in
         Section 3.03(c) of the Company Disclosure Schedules, any agreement as
         to which the Company is party or by which it is bound.

                  (d) Except as disclosed in Section 3.03(b) of the Company
         Disclosure Schedules, there are no Other Company Options obligating the
         Company to register for sale any capital stock or other equity
         interests in the Company. Except as disclosed in Section 3.03(d) of the
         Company Disclosure Schedules, as of the date of this Agreement there
         are no obligations, contingent or otherwise, of the Company to (x)
         repurchase, redeem or otherwise acquire any Company Common Stock or
         Company Preferred Stock, or (y) provide funds to, or make any material
         investment in (in the form of a loan, capital contribution or
         otherwise), or provide any guarantee with respect to the obligations
         of, any Person.

                  (e) The Stockholders hold of record all of the outstanding
         shares of Company Common Stock and Company Preferred Stock. To the
         knowledge of the Company, all shares of the Company Common Stock and
         the Company Preferred Stock are free and clear of all liabilities,
         liens, charges, security interests, adverse claims, pledges,
         restrictions, encumbrances and demands whatsoever. To the knowledge of
         the Company, no other Person has any right, title or interest in or to
         such shares of Company Common Stock or Company Preferred Stock, whether
         by reason of any purchase agreement, Law, option, assignment, contract
         (written or oral) or otherwise. Neither the Company nor, to the
         knowledge of the Company, any Stockholder has entered into, issued or
         given, or agreed to enter into, issue or give, any person other than
         Acquiror or Acquiror Sub an option, warrant, right, put, or call
         relating to, or any security convertible into, any shares of Company
         Common Stock or Company Preferred Stock or any such convertible
         security. For the purposes of this Agreement, the terms "LAW" or "LAWS"
         shall mean any

                                       -10-
<PAGE>

         foreign, U.S. federal, state, provincial, local or municipal law,
         statute, rule, ordinance, regulation, order, writ, injunction, judgment
         or decree.

                  (f) All issued Company Common Stock and Company Preferred
         Stock has been issued in transactions exempt from registration under
         the the Securities Act of 1933, as amended, and the rules and
         regulations promulgated thereunder (the "SECURITIES ACT"), and the
         rules and regulations promulgated thereunder, and all applicable state
         securities or blue sky laws and the rules and regulations thereunder
         ("BLUE SKY LAWS"), and the Company has not violated the Securities Act
         or any Blue Sky Laws in connection with the issuance of any such stock.

         SECTION 3.04   AUTHORITY. The Company possesses the requisite
corporate power and corporate authority to execute and deliver this
Agreement, including the Exhibits attached hereto, to perform its obligations
under this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action,
including the approval by the Company's Stockholders and directors, and no
other proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly executed and delivered by the Company, and
assuming the due authorization, execution and delivery by Acquiror and
Acquiror Sub, constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms and conditions.

         SECTION 3.05   NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.

                  (a) The execution and delivery of this Agreement by the
         Company does not, and the performance of this Agreement by the Company
         will not: (i) conflict with or violate the Company's Certificate of
         Incorporation or Bylaws, (ii) subject to (x) obtaining the consents,
         authorizations, approvals and permits of, and making filings with or
         notifications to, any governmental or regulatory authority, domestic or
         foreign (collectively, "GOVERNMENTAL ENTITIES"), pursuant to the
         applicable requirements of Laws, including but not limited to the
         Securities Act, the Securities Exchange Act of 1934, as amended, and
         the rules and regulations promulgated thereunder (the "EXCHANGE ACT"),
         Blue Sky Laws, the Hart-Scott-Rodino Antitrust Improvements Act of
         1976, as amended, and the rules and regulations thereunder (the "HSR
         ACT") (including, without limitation, with respect to the acquisition
         by any Stockholder of shares of Acquiror Common Stock or Acquiror
         Series A Preferred Stock in the Merger), the Code, and the filing and
         recordation of appropriate merger documents as required by Delaware Law
         and (y) obtaining the consents, approvals, authorizations or permits
         described in Section 3.05(b) of the Company Disclosure Schedules,
         conflict with or violate any laws applicable to the Company or by which
         any of its properties is bound or affected; or (iii) except as set
         forth in Section 3.05(b) of the Company Disclosure Schedules, result in
         any breach of or constitute a default (or an event that with notice or
         lapse of time or both would become a default) under, or give to others
         any rights of termination, amendment, acceleration or cancellation of,
         or result in the creation of a lien or encumbrance on any of the
         properties or assets of the Company pursuant to, any note, bond,
         mortgage, indenture, contract,

                                       -11-
<PAGE>

         agreement, lease, license, permit, franchise or other instrument or
         obligation to which the Company is a party or by which the Company or
         any of its properties is bound or affected.

                           (b) The execution and delivery of this Agreement by
         the Company does not require, and neither the performance nor
         compliance with the terms hereof by the Company requires, any consent,
         approval, authorization or permit of, or filing with or notification
         to, any Governmental Entities or other Persons, except for (i)
         applicable requirements, if any, of the Securities Act, the Exchange
         Act, Blue Sky Laws, the HSR Act (including, without limitation, with
         respect to the acquisition by any Stockholder of shares of Acquiror
         Common Stock or Acquiror Series A Preferred Stock in the Merger), the
         NYSE and the Code, (ii) the consents, approvals, authorizations or
         permits described in Section 3.05(b) of the Company Disclosure
         Schedules, (iii) any consent or approval required for an assignment of
         a contract or agreement by operation of law pursuant to the Merger (and
         not required expressly under such contract or agreement upon a change
         of control or merger) and (iv) the filing and recordation of
         appropriate merger documents as required by Delaware Law.

         SECTION 3.06   PERMITS; COMPLIANCE. The Company is in possession of
all material franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and
orders necessary for the Company to own, lease and operate its properties or
to carry on its business as it is now being conducted (each, a "COMPANY
PERMIT") and no suspension, revocation or cancellation of any such Company
Permit is pending or, to the knowledge of the Company, threatened. The
Company is not operating in material conflict with, or in material default or
violation of (i) any Law applicable to the Company or by which its properties
are bound or affected, or (ii) any Company Permit. Each Company Permit
material to the operations of the Company is listed in Section 3.06 to the
Company Disclosure Schedules.

         SECTION 3.07   FINANCIAL STATEMENTS.

                  (a) Except as disclosed in Section 3.07(a) of the Company
         Disclosure Schedules, the unaudited Balance Sheets, Income Statements,
         Statements of Cash Flow and Statements of Equity of the Company as at
         and for the calendar eleven (11) month period ended November 30, 1999
         (collectively, the "COMPANY FINANCIAL STATEMENTS") delivered to
         Acquiror prior to the date of this Agreement (i) have been prepared
         from, and are in agreement with, the books, records and accounts of the
         Company, (ii) fairly present in all material respects the financial
         position of the Company as of the dates thereof, and (iii) fairly
         present, in all material respects, the results of operations of the
         Company for the periods indicated; PROVIDED, HOWEVER, the Company
         Financial Statements are subject to normal or recurring adjustments at
         the Company's fiscal year-end, have not necessarily been prepared in
         accordance with United States generally accepted accounting principles
         and standards ("GAAP") and do not contain footnotes and other
         presentation items that would be required by GAAP.

                  (b) The Company has no liabilities or indebtedness of any
         nature whatsoever, except for (i) liabilities and indebtedness set
         forth in the Balance Sheets included in the Company Financial
         Statements dated November 30, 1999 (the "MOST RECENT

                                       -12-
<PAGE>

         STATEMENTS"), (ii) liabilities and indebtedness which have arisen
         after the date of the Most Recent Statements in the ordinary course
         of business of the Company, (iii) liabilities and indebtedness set
         forth in Section 3.07(b) of the Company Disclosure Schedules,
         (iv) liabilities and indebtedness incurred in connection with the
         transaction contemplated herein, and (v) except as otherwise set forth
         in this Section 3.07(b), any such liability or indebtedness in each
         case less than $100,000, and less than $1,000,000 in aggregate
         liabilities or indebtedness.

         SECTION 3.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in Section 3.08 of the Company Disclosure Schedules, since the
incorporation of the Company, (i) there has not been, and the Company has no
knowledge of any facts that are not reflected in the Most Recent Statements
and are reasonably likely to result in, any event or events causing a Company
Adverse Effect, and (ii) to the date of this Agreement, there has not been
any material change by the Company in its accounting methods, principles or
practices except any such change after the date of this Agreement mandated by
a change in GAAP.

         SECTION 3.09      ABSENCE OF LITIGATION.

                  (a) There are no claims, actions, suits, litigation,
         proceedings, arbitrations or investigations of any kind affecting the
         Company, at law or in equity (including actions or proceedings seeking
         injunctive relief), which are pending or, to the knowledge of the
         Company, threatened. There is no action pending or, to the knowledge of
         the Company, threatened seeking to enjoin or restrain the Merger or any
         of the transactions contemplated by this Agreement.

                  (b) Except as set forth in Section 3.09(b) of the Company
         Disclosure Schedules, the Company is not subject to any continuing
         order of, consent decree, settlement agreement or other similar written
         agreement with any Governmental Entity, or any judgment, order, writ,
         injunction, decree or award of any Governmental Entity or arbitrator,
         including, without limitation, cease-and-desist orders.

         SECTION 3.10      CONTRACTS; NO DEFAULT.

                  (a) Section 3.10(a) of the Company Disclosure Schedules lists
         the following written undischarged contracts of the Company:

                           (i)     any written arrangement (or group of related
                  written arrangements) for the lease of tangible personal
                  property or real property from or to third parties with annual
                  payments exceeding $50,000 or with a term exceeding one year;

                           (ii)    any written arrangement concerning a
                  partnership, limited liability company, distributorship,
                  agency, marketing agreement or joint venture;

                           (iii)   contracts under which the Company has
                  created, incurred, assumed, or guaranteed (or may create,
                  incur, assume, or guarantee) indebtedness for borrowed money
                  in excess of $50,000;

                                       -13-
<PAGE>

                            (iv)   contracts which relate to inventory
                  purchases or capital expenditures involving an expenditure (or
                  series thereof) in excess of Fifty Thousand Dollars ($50,000),
                  performance of which by both parties has not been completed;

                            (v)    contracts which relate to bonus and
                  incentive plans or similar plans providing for the payment of
                  bonuses, commissions, incentive compensation or similar
                  result-based remuneration to service providers to the Company
                  other than employees;

                            (vi)   contracts with any labor union or contract
                  for the employment of any officer, individual employee or
                  other Person on a full-time, part-time or consulting basis,
                  and any written material contract for the engagement of any
                  consultants or independent contractors;

                            (vii)  contracts which by their terms limit the
                  right of any employee of the Company to engage in, or to
                  compete with the Company in, any business conducted by the
                  Company prior to the Effective Time; and contracts which by
                  their terms limit the right of the Company or, to the
                  knowledge of the Company, any employee of the Company to
                  engage in, or to compete with any Person (other than the
                  Company) in, any business conducted by the Company prior to
                  the Effective Time;

                            (viii) other than purchase orders entered into
                  in the ordinary course of the Company's business, all
                  contracts of more than $50,000 under which the work by the
                  Company is not yet complete or under which the Company
                  otherwise has on-going obligations in excess of $50,000;

                            (ix)   contracts with any Stockholder or any of
                  their respective Affiliates with respect to which the
                  consequences of a default or termination would reasonably be
                  expected to have a Company Adverse Effect;

                            (x)    contracts which constitute a guaranty of any
                  obligation for borrowed money or other financial obligation,
                  other than endorsements made for collection in the Company's
                  ordinary course of business, or any agreement with respect to
                  the lending or investing of funds to or in other Persons;

                            (xi)   other than contracts for the sale and
                  purchase of inventory entered into in the Company's ordinary
                  course of business, any contract or group of related contracts
                  with the same party (or group of related parties) for or
                  relating to the purchase or sale of products or services under
                  which the undelivered balance of products and services has a
                  selling price in excess of $250,000;

                            (xii)  any other contract or group of related
                  contracts with the same party requiring payments after the
                  date hereof to or by the Company of more than $250,000;

                                       -14-
<PAGE>

                            (xiii)   any agreement with any employee, the
                  benefits of which are contingent or the terms of which are
                  materially altered upon the occurrence of a transaction of the
                  nature contemplated by this Agreement involving the Company;

                            (xiv)    any agreement or plan the benefits of which
                  will be increased or accelerated by the occurrence of the
                  transactions contemplated by this Agreement;

                            (xv)     any other written arrangement or group of
                  related written arrangements not entered into in the Company's
                  ordinary course of business the breach, default or termination
                  of which would have a Company Adverse Effect;

                            (xvi)    any written arrangement or contract to
                  which the Company is a party which is capable of being
                  terminated by the other party expressly upon the occurrence
                  of a transaction of the nature contemplated by this Agreement;

                            (xvii)   any contract which cannot readily be
                  fulfilled or performed by the Company on time without express
                  penalty or without extraordinary expenditure of money, which
                  penalty or expenditure would reasonably be expected to have a
                  Company Adverse Effect;

                            (xviii)  concern a lease or agreement relating in
                  any manner to real estate; or

                            (ixx)    relate to royalty or licensing contracts,
                  or contracts requiring similar payments (including software
                  license agreements) involving, or which may reasonably in the
                  future involve, an amount in excess of Fifty Thousand Dollars
                  ($50,000) annually.

                  (b) The Company has made available to Acquiror a correct and
         complete copy of each agreement (including all amendments thereto)
         listed in Section 3.10(a) of the Company Disclosure Schedules. With
         respect to each agreement so listed (A) the agreement is legal, valid,
         binding, enforceable, and in full force and effect; (B) the agreement
         (excluding agreements requiring consent or approval for an assignment
         by operation of law pursuant to the Merger (and not expressly requiring
         consent or approval upon a change of control or merger)) will continue
         to be legal, valid, binding, and enforceable and in full force and
         effect on identical terms immediately after the Effective Time at the
         terms in effect immediately prior to the Effective Time; (C) neither
         the Company nor, to the knowledge of the Company, any other party to
         the arrangement, is in material breach or default (including, with
         respect to any express or implied warranty), and no event has occurred
         which with notice or lapse of time or both would constitute a material
         breach or default or permit termination, modification, or acceleration
         thereunder, except in each case for any breaches, defaults,
         terminations, modifications or accelerations which have been cured or
         waived or breaches, defaults, terminations, modifications or
         accelerations which are not reasonably likely to result in a Company
         Adverse Effect; and (D) to the Company's knowledge, no party has
         repudiated any

                                       -15-
<PAGE>

         provision of any such arrangement. Except as set forth on
         Section 3.10(b) of the Company Disclosure Schedules, the Company is
         not a party to any legally binding verbal contract which, if reduced to
         written form, would be required to be listed in the Company Disclosure
         Schedules under the terms of this Section 3.10.

                  (c) For the purpose of this Agreement, (i) the term
         "AFFILIATE," means (x) any Person that directly or indirectly, through
         one or more intermediaries, controls, is controlled by, or is under
         common control with, the first mentioned Person, and (y) with respect
         to a Principal Executive, also such Principal Executive's spouse,
         children and descendants, and the respective spouses of each, or a
         trust for the benefit of any such Person, (ii) the term "CONTROL"
         (including the terms "controlled by" and "under common control with")
         means the possession, directly or indirectly or as trustee or executor,
         of the power to direct or cause the direction of the management or
         policies of a Person, whether through the ownership of stock or as
         trustee or executor, by contract or credit arrangement or otherwise,
         and (iii) the term "CONTRACTS" means the contracts and agreements
         required to be listed in Sections 3.10(a) and 3.10(b) of the Company
         Disclosure Schedules.

         SECTION 3.11      EMPLOYEE BENEFIT PLANS; LABOR MATTERS.

                  (a) Section 3.11(a) of the Company Disclosure Schedules sets
         forth all pension, retirement, savings, disability, medical, dental,
         health, life (including any individual life insurance policy as to
         which the Company is owner, beneficiary or both of such policy), death
         benefit, group insurance, profit sharing, deferred compensation, stock
         option, bonus, incentive, vacation pay, severance pay, "cafeteria" or
         "flexible benefit" plans, or other employee benefit plans, trusts,
         arrangements, contracts, agreements, policies or commitments (including
         without limitation, any employee pension benefit plan as defined in
         Section 3(2) of the Employee Retirement Income Security Act of 1974, as
         amended ("ERISA"), and any employee welfare benefit plan as defined in
         Section 3(1) of ERISA), under which current or former employees of the
         Company or its "Plan Affiliates" are entitled to participate by reason
         of their employment with the Company or its Plan Affiliates, whether or
         not any of the foregoing is funded, and whether insured or self-funded,
         to which the Company is a party or a sponsor or a fiduciary thereof or
         by which the Company (or any of its rights, properties or assets) is
         bound, or (ii) with respect to which the Company could reasonably
         expect to have any liability (whether or not such plan, trust,
         arrangement, contract, agreement, policy or commitment is still in
         effect or frozen as to benefits or assets) (collectively, the "EMPLOYEE
         BENEFIT PLANS").

                  (b) For purposes of this Agreement, the term "PLAN AFFILIATE"
         shall mean any trade or business (whether or not incorporated) that is
         part of the same controlled group, or under common control with, or
         part of an affiliated service group that includes, the Company or
         Acquiror, as applicable, within the meaning of Section 414(b), (c), (m)
         or (o) of the Code.

                  (c) As used in this Agreement, "PENSION PLAN" means any
         Employee Benefit Plan which is an employee pension benefit plan as
         defined in ERISA, or is otherwise a

                                       -16-
<PAGE>

         pension, savings or retirement plan or a plan of deferred compensation,
         and the term "WELFARE PLAN" means any Employee Benefit Plan which is
         not a Pension Plan.

                  (d) With respect to the Employee Benefit Plans:

                                 (i) there are no Employee Benefit Plans which
                  are multiemployer plans as defined in Section 3(37) of ERISA,
                  and the Company has not (A) incurred nor reasonably expects to
                  incur, any direct or indirect liability under or by operation
                  of Title IV of ERISA, or (B) failed to make any contribution
                  when due as required by Section 412 of the Code;

                                (ii) there are no Employee Benefit Plans which
                  promise or provide health or life benefits to retirees or
                  former employees of the Company other than as required by Part
                  6 of Subtitle B of Title I of ERISA or Section 4980 of the
                  Code or other applicable state continuation coverage law, or
                  otherwise as identified in Section 3.11(d) of the Company
                  Disclosure Schedules;

                                (iii) except as disclosed in Section 3.11(d) of
                  the Company Disclosure Schedules, each Employee Benefit Plan
                  has at all times been operated and administered in material
                  compliance with the applicable requirements of ERISA, the Code
                  and any other applicable law (including regulations and
                  rulings thereunder), and its terms;

                                (iv)each Pension Plan identified in Section
                  3.11(a) of the Company Disclosure Schedules has received a
                  favorable determination letter from the Internal Revenue
                  Service ("IRS") stating that such Plan is qualified under
                  Section 401(a) of the Code, meets all the requirements of the
                  Code and that any trust or trusts associated with the plan are
                  tax exempt under Section 501(a) of the Code. Any trust or
                  trusts associated with such Pension Plans are tax exempt under
                  Section 501(a) of the Code. To the knowledge of the Company,
                  there is no reason why the tax-qualified or registered status
                  of any such Pension Plan should be revoked, whether
                  retroactively or prospectively, by any Governmental Entity
                  pursuant to applicable Laws. All amendments to the Pension
                  Plans which were required to be made through the date hereof
                  and the Effective Time under Section 401(a) of the Code
                  subsequent to the issuance of each such Plan's determination
                  letter have been made, including all amendments required to be
                  made by each respective date by the Tax Reform Act of 1986,
                  and any other Laws or legislation affecting such Employee
                  Benefit Plans;

                                (v) to the knowledge of the Company, no actual
                  or threatened disputes, lawsuits, claims (other than routine
                  claims for benefits), investigations, audits or complaints to,
                  or by, any person or Governmental Entity have been filed or
                  are pending with respect to any Employee Benefit Plan or its
                  sponsor, or such sponsor's subsidiaries or Plan Affiliates, in
                  connection with any Employee Benefit Plan, or the fiduciaries
                  responsible for such Employee Benefit Plan, and to the
                  knowledge of the Company, no state of facts or conditions
                  exist which reasonably could be expected to subject such
                  Company to any material liability

                                       -17-
<PAGE>

                  (other than routine claims for benefits) in accordance with
                  the terms of such Employee Pension Plan or pursuant to
                  applicable Laws;

                                (vi)except as disclosed in Section 3.11(d) of
                  the Company Disclosure Schedules, the following clauses are
                  true with respect to each Employee Benefit Plan:

                                    (A) all material filings required by ERISA,
                           the Code or any other applicable Laws, have been
                           timely filed and all material notices and disclosures
                           to Plan participants required by same have been
                           timely provided;

                                    (B) the Company has not made, nor has it
                           committed to make, whether in writing or orally, any
                           representation, payment, contribution or award to or
                           under any Employee Benefit Plan (other than as
                           required by its terms, the Code or ERISA;

                                    (C) all contributions and payments made or
                           accrued with respect to each Employee Benefit Plan
                           required to be disclosed in Section 3.11(a) of the
                           Company Disclosure Schedules are deductible in full
                           under the Code. All contributions, premiums or
                           payments required to be made with respect to each
                           such Employee Benefit Plan have been or will
                           hereafter be made on or before their due date(s):

                                    (D) except as disclosed in Section 3.11(d)
                           of the Company Disclosure Schedules, with respect to
                           each Employee Benefit Plan maintained with respect to
                           employees of the Company, the Company has delivered
                           to Acquiror true and complete copies of the following
                           documents:

                                            (1) plan documents, subsequent plan
                                    amendments, and any and all other documents
                                    that establish or describe the existence of
                                    the plan, trust, arrangement, contract,
                                    policy or commitment;

                                            (2) summary plan descriptions and
                                    summaries of material amendments and
                                    modifications;

                                            (3) the most recent tax-qualified
                                    determination letters received from, or
                                    applications pending with, the IRS with
                                    respect to Pension Plans;

                                            (4) the three most recent annual
                                    information returns (if applicable),
                                    including related schedules and audited
                                    financial statements and opinions of
                                    independent certified public accountants,
                                    for each Employee Benefit Plan filed on IRS
                                    Form 5500 for Employee Benefit Plans adopted
                                    by the Company; and

                                       -18-
<PAGE>

                                            (5) all related trust agreements,
                                    insurance contracts or other funding
                                    agreements that implement each such Employee
                                    Benefit Plan.

                               (vii) at no time has the Company adopted any
                  Pension Plan which is or could become subject to Title IV of
                  ERISA or the funding standards of Section 412 of the Code. The
                  Company has not incurred any liability to, or adopted any
                  Employee Benefit Plan or other arrangement which may expose it
                  to liability of any nature whatsoever, to (i) the Pension
                  Benefit Guarantee Corporation under Title IV or Section 502 of
                  ERISA, or (ii) the IRS under Chapter 43 of the Code;

                              (viii) with respect to each Employee Benefit Plan,
                  there has not occurred, and no person or entity is
                  contractually bound to enter into, any nonexempt "prohibited
                  transaction" within the meaning of Section 4975 of the Code or
                  Section 406 of ERISA, or any other transaction contrary to the
                  terms of such Employee Benefit Plan which could result in
                  material liability to the Company.

                  (e) The Company has complied in all material respects with the
         provisions of ERISA and the Code with respect to each Pension Plan and
         Welfare Plan heretofore adopted or currently in effect for the benefit
         of its employees. Each Employee Benefit Plan described in Section
         3.11(a) of the Company Disclosure Schedules may, by its express terms,
         be amended or terminated, in whole or in part.

                  (f) Except as disclosed in Section 3.11(f) of the Company
         Disclosure Schedules, no payment that is owed or may become due
         (pursuant to any agreement with the Company existing prior to the
         Effective Time) to any director, officer, employee or agent of the
         Company shall result in the imposition of, tax under Section 280G or
         4999 of the Code, nor is the Company obligated, orally or in writing,
         to "gross up" or otherwise compensate any such person due to the
         imposition of an excise or similar tax on payments made to such person
         by the Company.

                  (g) Except as disclosed in Section 3.11(g) of the Company
         Disclosure Schedules or as expressly provided by the terms of this
         Agreement, the consummation of the transactions contemplated by this
         Agreement will not accelerate or terminate, nor does there exist any
         basis for the acceleration or termination of, (i) benefits payable to
         employees of or other compensated personnel at the Company under any
         Employee Benefit Plan, Welfare Plan, or other plan, arrangement,
         contract or agreement, written or oral, (ii) a participant's vesting
         credits or years of service under any Pension Plan or Welfare Plan, or
         (iii) accruals with respect to any other benefits or amounts reserved
         under any such plan or arrangement.

                  (h) Section 3.11(h) of the Company Disclosure Schedules lists,
         as of the date of this Agreement, all collective bargaining or other
         labor union contracts to which the Company is a party and which is
         applicable to persons employed by the Company. There is no pending or,
         to the knowledge of the Company, threatened, labor dispute, strike or

                                       -19-
<PAGE>

         work stoppage against the Company which may materially interfere with
         the business activities of the Company, its revenues, profits, cash
         flows, or other results of operations. The Company has no knowledge of
         the commission of any unfair labor practices in connection with the
         operation of the Company business, and there is not now pending or, to
         the knowledge of the Company, threatened, any charge, complaint or
         other proceeding against the Company by the National Labor Relations
         Board, or comparable Governmental Entities.

                  (i) At no time has any Plan Affiliate adopted any Pension Plan
         which is or could become subject to Title IV of ERISA or the funding
         standards of Section 412 of the Code or contributed or been obligated
         to contribute to any multiemployer plans as defined in Section 3(37) of
         ERISA.

         SECTION 3.12      TAXES.

                  (a)   (i)      Except as disclosed in Section 3.12(a) of the
                  Company Disclosure Schedules, all material Returns in
                  respect of Taxes required to be filed prior to the date hereof
                  with respect to the Company have been or will be timely filed
                  (including extensions).

                        (ii)     Except as disclosed in Section 3.12(a) of
                  the Company Disclosure Schedules, all Taxes of the Company due
                  prior to the date hereof, whether or not shown on the Returns,
                  have been or will be timely paid by the party to whom
                  chargeable and all payments of estimated Taxes required to be
                  made with respect to the Company under the Code or any
                  comparable provision of foreign, federal, state, provincial or
                  local Law have been made on the basis of the applicable
                  party's good faith estimate of the required installments.

                        (iii)    Except as disclosed in Section 3.12(a) of
                  the Company Disclosure Schedules, all Returns filed by the
                  Company (or, in cases where amended Returns have been filed,
                  such Returns (as amended) are true, correct and complete in
                  all material respects.

                        (iv)     All Taxes required to have been withheld and
                  paid in connection with amounts paid or owing to any employee,
                  independent contractor, creditor, Stockholder or other third
                  party by the Company have been withheld and, to the extent
                  required, paid to the relevant taxing authority.

                        (v)      No material adjustment relating to any
                  Return has been proposed in writing by any Tax authority,
                  except proposed adjustments that have been resolved prior to
                  the date hereof.

                        (vi)     There are no outstanding subpoenas or
                  requests for information to which the Company has received
                  notice with respect to any Return of the Company, or the Taxes
                  reflected on such Returns.

                        (vii)    There are no Tax liens on any assets of
                  the Company other than liens for Taxes not yet due or payable
                  or being contested in good faith.

                                       -20-
<PAGE>

                        (viii)   Except as disclosed on Section 3.12(a) to
                  the Company Disclosure Schedules, the Company has not been at
                  any time a member or shareholder of any partnership, limited
                  liability company, corporation or joint venture or the holder
                  of a beneficial interest in any trust for any period for which
                  the statute of limitations for any Tax potentially applicable
                  as a result of such membership or holding has not expired.

                        (ix)     Except as disclosed on Section 3.12(a) to the
                  Company Disclosure Schedules and as expressly set forth by the
                  terms of this Agreement, neither the Company nor any of its
                  subsidiaries were a party to any agreement, contract, or
                  arrangement that would result, separately or in the aggregate,
                  in the payment of any "excess parachute payments" within the
                  meaning of Section 280G of the Code by reason of the Merger.

                        (x)      All material Taxes required to be withheld,
                  collected or deposited by the Company during any taxable
                  period for which the statute of limitations on an assessment
                  remains open have been timely withheld, collected or deposited
                  and to the extent required, have been paid to the relevant Tax
                  authority.

                  (b)   (i)      Except as expressly provided in this
                  subdivision (i), the Company does not have any material income
                  reportable for a period ending after the Effective Time but
                  attributable to an installment sale occurring in or a change
                  in accounting method made for a period ending at or prior to
                  the Effective Time which resulted in a deferred reporting of
                  income from such transaction or from such change in accounting
                  method (other than a deferred intercompany transaction).

                        (ii)     No written Tax sharing or allocation agreement
                  exists involving the Company.

                        (iii)    Except as disclosed on Section 3.12(b) of
                  the Company Disclosure Schedules, the Company does not have
                  any unused net operating loss, unused net capital loss, unused
                  credit, unused foreign tax credit, or excess charitable
                  contribution for federal income tax purposes as of the
                  Effective Time.

                  (c)   For purposes of this Agreement, "TAX" or "TAXES" shall
         mean any and all taxes, payable to any foreign, federal, state,
         provincial, local or foreign governmental entity or taxing authority or
         agency, including, without limitation,

                        (i)      income, franchise, net worth, profits,
                  gross receipts, minimum, alternative minimum, estimated, ad
                  valorem, value added, sales, use, goods and services, real or
                  personal property, capital stock, license, payroll,
                  withholding, FICA, FUTA, disability, employment, social
                  security, Medicare, workers compensation, unemployment
                  compensation, utility, severance, production, excise, stamp,
                  occupation, premiums, windfall profits, transfer and gains
                  taxes;

                                       -21-
<PAGE>

                        (ii)     customs duties, imposts, charges, levies or
                  other similar assessments of any kind; and

                        (iii)    interest, penalties and additions to tax
         imposed with respect thereto.

         As used herein, the term "RETURNS" shall mean any and all returns,
         reports, information returns and information statements with respect to
         Taxes required to be filed with the IRS or any U.S. state or any other
         governmental entity or tax authority or agency, whether domestic or
         foreign, including, without limitation, consolidated and combined
         Returns. For the purpose of this Section 3.12, references to the
         Company and its subsidiaries shall include former subsidiaries of the
         Company for periods during which such entities were owned, directly or
         indirectly, by the Company.

         SECTION 3.13 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in
Section 3.13 of the Company Disclosure Schedules or in the last sentence of
this Section 3.13, the Company owns or possesses the right or license to use
all patents, trademarks, service marks, trade names, domain names, slogans,
trade secrets and other tangible or intangible proprietary confidential
information (including scientific and technical information, design
processes, operating processes, schematics, procedures, formulae, data
processing techniques, software, the specialized information and technology
embodied in communications program materials, software documentation and
other program and system designs), which it has used or currently uses (the
"INTELLECTUAL PROPERTY") without any known conflict or alleged conflict with,
or infringement of, the rights of others, and the Company's public use of any
of such Intellectual Property which the Company is currently using internally
and which it currently intends to commence using publicly shall not conflict
with, or infringe upon, the rights of others. All Intellectual Property owned
by the Company is referred to herein as the "OWNED INTELLECTUAL PROPERTY."
All Intellectual Property currently licensed to the Company is referred to
herein as the "LICENSED INTELLECTUAL PROPERTY." Section 3.13 of the Company
Disclosure Schedules identifies (i) all Owned Intellectual Property
consisting of issued domestic and foreign patents and patent applications
pending, patent applications in process, domain name registrations, common
law trademarks which are material to the Company's business as currently
operated or as planned to be operated with such trademarks which the Company
is currently using internally and currently intends to commence using
publicly, domestic and foreign trademark registrations and trademark
registration applications, copyright registrations, copyright registration
applications, common law service marks which are material to the Company's
business as currently operated or as planned to be operated with such
trademarks which the Company is currently using internally and currently
intends to commence using publicly, service mark registrations, service mark
registration applications and written know-how agreements, and rights
acquired through litigation, and (ii) all of the material Licensed
Intellectual Property (other than computer software which is generally
commercially available). Except as set forth in Section 3.13 of the Company
Disclosure Schedules, the agreements for Licensed Intellectual Property
(including computer software) are in full force and effect; the rights of the
Company thereunder are free and clear of all adverse claims, options, liens,
charges, security interests and encumbrances; and no defaults exist
thereunder. The Company has not been served with any notice or summons
regarding any interference, opposition or cancellation proceedings or
infringement suits, nor to the knowledge of the Company or any of Nancy
Dugan, Paul Ivsin,

                                       -22-
<PAGE>

Nick Antista and Hugo Toledo (the "Additional IT Personnel") has the Company
received any threat of such action, with respect to any Intellectual
Property. To the knowledge of the Company and the Additional IT Personnel,
the Company has not been charged with infringing any patent, copyright,
trademark right or other intellectual property right of any person, and
neither the Company nor any of the Additional IT Personnel has any knowledge
of any third party's use of any Intellectual Property in a manner that
infringes upon the rights of the Company or any third party. The Intellectual
Property comprises all of the intellectual property rights and licenses
pertaining thereto necessary for the Company to conduct its business as
formerly operated, and as currently planned to be operated, except for such
licenses and intellectual property rights set forth in Section 3.13 of the
Company Disclosure Schedules. The Company has not taken or allowed there to
be taken any action to cause any of the material Intellectual Property to be
abandoned, or failed to take such action necessary to prevent such material
Intellectual Property from being abandoned. Section 3.13 of the Company
Disclosure Schedules identifies all parties (other than the Company's
employees) who have created any portion of the Owned Intellectual Property,
and the Company has obtained from each of such persons a valid and
enforceable written assignment of any and all rights which they would
otherwise have in the Owned Intellectual Property. The Company has obtained
written agreements or other adequate assurances from all of its current and
former employees and from each third party with whom it has shared any of its
confidential proprietary information, pursuant to which such employees and
other third parties have acknowledged that such information is confidential
proprietary information of the Company and have undertaken to maintain such
information as confidential in accordance with the terms thereof.
Notwithstanding any other provision of this Section 3.13 to the contrary, the
Company shall not be deemed to be in breach of any of its representations or
warranties set forth in this Section 3.13 as a result of any use which may be
made of the trademark STARBELLY at any time following the Effective Time, and
the terms of this Section 3.13 shall be applicable to the trademark STARBELLY
solely with respect to the use thereof prior to the Effective Time.

         SECTION 3.14   CERTAIN BUSINESS PRACTICES AND REGULATIONS. Neither
the Company nor any of its executive officers or directors has, to the
knowledge of the Company, (i) made or agreed to make any contribution,
payment or gift to any customer, client, supplier, governmental official,
employee or agent where either the contribution, payment or gift or the
purpose thereof was illegal under any applicable law, (ii) fraudulently
established or maintained any unrecorded fund or asset for any purpose or
knowingly made any false entries on its books and records for any reason, or
(iii) made or agreed to make any contribution, or reimbursed any political
gift or contribution made by any other person, to any candidate for foreign,
federal, state, provincial or local public office in violation under any
applicable law.

         SECTION 3.15   REAL PROPERTY. The Company owns no real property.
Section 3.15(1) to the Company Disclosure Schedules sets forth a complete
description of all real property leased by the Company as of the date of this
Agreement ("REAL PROPERTY"). The Company has furnished Acquiror or its
counsel true and complete copies of (i) the most recent lease with respect to
each parcel of Real Property, and (ii) a written description of each oral
contract, arrangement or understanding relating to Real Property. Except as
set forth in Section 3.15(2) to the Company Disclosure Schedules:

                                       -23-
<PAGE>

                  (a) There is no condemnation proceeding or eminent domain
         proceeding pending or, to the knowledge of the Company, threatened,
         against any Real Property.

                  (b) The Company does not have any interest in, or any right or
         obligation to acquire any interest in, any real property other than
         Real Property.

                  (c) The rental set forth in each lease for Real Property is
         the actual rental being paid, and there are no separate agreements or
         understandings with respect to the same not set forth in Section
         3.15(2) to the Company Disclosure Schedules.

                  (d) The Company and any Affiliate which is lessee under a
         lease for Real Property has, as of the date hereof, and shall have at
         the Effective Time, the full right to exercise any and all renewal
         options contained therein.

                  (e) There are no written or oral contracts between the Company
         or any Affiliate and any third party relating to any claim by such
         third party of any right to all or any part of the interest of the
         Company or Affiliate in any Real Property.

                  (f) All security deposits required under leases for Real
         Property have been made and no forfeiture with respect thereto has been
         claimed by any of the lessors.

                  (g) Each Real Property is subject to a binding written lease
         which is in full force and effect and neither the Company nor, to the
         Company's knowledge, any other party to such lease is in breach of any
         term thereunder.

                  (h) The premises with respect to each lease referenced in
         subparagraph (f) above is in a state of good repair and as of the date
         hereof and at the Effective Time, there will be no accrued obligation
         of the tenant thereunder for maintenance or repair of the premises
         which had not yet been performed.

         SECTION 3.16   ENVIRONMENTAL REPRESENTATIONS. The Company is in
material compliance with, and does not have any material liability applicable
under any Environmental Law, and to the knowledge of the Company, the Real
Property has not been used by any other person in violation of, any
Environmental Laws. For purposes of this Agreement, the term "ENVIRONMENTAL
LAWS" shall mean all foreign, federal, state, and local laws specifically
relating to protection of the environment, or to protection of the public
health from releases into the environment of hazardous substances, pollutants
or contaminants, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, and U.S.
state tort laws and common laws.

         SECTION 3.17   BROKERS. Except for matters disclosed in Section 3.17
of the Company Disclosure Schedules, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.

         SECTION 3.18   TITLE TO ASSETS. Except for matters disclosed in
Section 3.18 of the Company Disclosure Schedules, the Company is the owner of
and has good and valid title to, or

                                      -24-
<PAGE>

in the case of leased property has a valid leasehold interest in, all of its
properties and assets, including those assets and properties reflected in the
Company Financial Statements, free and clear of all liens, claims or
encumbrances.

         SECTION 3.19   RELATED PARTY TRANSACTIONS. To the knowledge of the
Company and except for any interests disclosed on Section 3.19 of the Company
Disclosure Schedules, neither the Company nor either Principal Executive has
any material direct interest in any material supplier, customer or client of
the Company or in any person from whom or to whom the Company leases any
material property, or in any other person, firm or entity with whom the
Company transacts material business of any nature. Section 3.19 to the
Company Disclosure Schedules identifies and describes all material contracts
to which the Company is a party and to which any Principal Executive is
directly also a party.

         SECTION 3.20   OFFICERS AND DIRECTORS. Section 3.20 to the Company
Disclosure Schedules sets forth a list of the names and addresses of all
executive officers and directors of the Company as of the date hereof.

         SECTION 3.21   POWERS OF ATTORNEY. Except as set forth in Section
3.21 of the Company Disclosure Schedules, the Company has not given a power
of attorney (irrevocable or otherwise) to any person or entity for any
purpose whatsoever, which is currently valid and in effect.

         SECTION 3.22   INFORMATION SUPPLIED. None of the information
supplied or to be supplied by the Company specifically for inclusion in the
Proxy Statement will, on the date such Proxy Statement is first mailed to
Acquiror's shareholders or at the time of the Shareholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be state therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.

         SECTION 3.23   OWNERSHIP OF ACQUIROR COMMON STOCK. Except as set
forth on Section 3.23 of the Company Disclosure Schedules, as of the date
hereof, neither the Company nor, to the knowledge of the Company, any
Principal Executive or his Affiliates (i) beneficially owns (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, or (ii) is party
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of Acquiror Common
Stock.

         SECTION 3.24   THE COMPANY'S WEBSITE. The Company's Internet website
(the "WEBSITE") is a reasonably stable, secure and redundant website with
regard to both bandwidth and server needs, taking into account all facts and
circumstances. The current capacity of the Website is sufficient to permit
reasonable access by at least 500 simultaneous users, and the Website has
been designed and developed such that its capacity may readily be expanded to
address currently projected increases in the Website's average daily number
of users. At all times following the date on which the Website is complete,
operational and accessible from the Internet (the "Website Launch Date") the
Website will be capable of being operational and accessible from the Internet
as described above no less than ninety-eight percent (98%) of the time,
measured with respect to semiannual periods commencing at the Effective Time,
and determined without regard to periods when the Website is not operational
and accessible from

                                      -25-
<PAGE>

the Internet due to (i) the Company's development efforts and upgrades, or
(ii) viruses transmitted over the Internet, failures of systems controlled by
third parties such as Ameritech Corp. or Level 3, Inc., or other causes
beyond the reasonable control of the Company (it being understood and agreed
that the Website is intended to be operational and accessible from the
Internet 24 hours per day, and not merely during business hours). The Company
has prepared and implemented a reasonable disaster recovery contingency plan
pursuant to which the Company or its designee will be able to restore the
Website and recover the database of information collected by the Company with
respect to users of the Website within a reasonably prompt period following
any fire or other disaster which may occur at the Company's facilities.

         SECTION 3.25    THE YEAR 2000 PROBLEM.  Except as set forth in
Section 3.25 of the Company Disclosure Schedules:

                  (a) None of the computer systems owned or operated by the
         Company or by any third party on behalf of the Company, and no
         machinery, equipment, fixtures, inventory or other system which is
         owned, leased or operated by the Company or by any third party on
         behalf of the Company and controlled by one or more computer processors
         (collectively, the "COMPUTER SYSTEMS") will result in a material
         failure or disruption of any of the Company's business, operations,
         financial reporting, tax reporting, inventory management, accounts
         receivable systems, accounts payable systems, invoicing, delivery,
         personnel management or records, benefits records or administration, or
         any other records or systems as a result of being incapable of
         recognizing and correctly calculating dates on or after January 1,
         2000, or unable to perform any of its intended functions in a proper
         and efficient manner as a result of its use with data containing any
         date on or after January 1, 2000 (the "YEAR 2000 PROBLEM")

                  (b) Section 3.25 of the Company Disclosure Schedules contains
         a true, correct and complete list of all written studies, audits,
         surveys, reports and investigations conducted by or on behalf of the
         Company with respect to the Year 2000 Problem.

         SECTION 3.26   TECHNOLOGY SYSTEMS. The Company's integrated
fulfillment systems used for inventory and production management and control,
its StoreBuilder software systems, its product information databases, its
online product configurator, its online catalog/ordering system, its computer
hardware and network systems and its security systems (collectively, the
"Technology Systems") are reasonably stable, secure and redundant with regard
to processing power, bandwidth and data storage capacity, taking into account
all facts and circumstances. The Technology Systems are adequate to perform
their intended functions for the Company assuming (i) 500 simultaneous users
of the Website, and (ii) order processing and fulfillment at the volumes
currently projected by the Company for calendar year 2000 as reflected on
Section 3.13 of the Company Disclosure Schedules, and are scalable to support
substantial growth in the numbers of such visitors, order submissions and
order fulfillments. Without limiting the generality of the foregoing, the
Technology Systems have the following characteristics and are currently
capable of performing the following functions:

                  (a)      receiving and processing customer orders from the
         Website and affiliate websites;

                                      -26-
<PAGE>

                  (b)      providing feedback to customer on order receipt;

                  (c)      providing order status information to the customer;

                  (d)      establishing an order database that can be used to
         drive operations;

                  (e) internally tracking order status from submission through
         steps of operations to product delivery;

                  (f)      evaluating the orders received so that they can be
         fulfilled;

                  (g) providing information to generate purchase orders and
         production orders in accordance with blank garment needs and
         artist/production assignments and schedules;

                  (h)      establishing and maintaining a master image database;

                  (i)      receiving images uploaded from customers for review,
         enabling improvement for production purposes, and updating a master
         image database;

                  (j)      supplying quality digital images from a master image
         database that can ultimately and efficiently be used in production;

                  (k)      processing credit card transactions for payment
         receipt/transfer  of  funds to the Company;

                  (l)      processing purchase orders to be billed as accounts
         receivable;

                  (m)      establishing and maintaining a customer database that
         supports customer service and marketing efforts; and

                  (n)      preserving and protecting the security of the
         Technology Systems, including without limitation the Website and
         affiliate websites which are hosted on the Company's servers, and
         preserving and protecting the confidentiality of all transactions
         processed using the Technology Systems, using passwords, firewalls and
         other methods which are reasonable taking into account all facts and
         circumstances.

         SECTION 3.27   LIMITATION ON WARRANTIES. Notwithstanding anything to
the contrary contained in this Agreement, the Company makes no implied
warranty of any kind whatsoever, and makes no representation with respect to
(i) any matter not expressly set forth in this Article III, or (ii) the
future profitability, future earnings or other future performance of the
Company. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.

                                      -27-
<PAGE>

                                 ARTICLE IV

         REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB

         The term "ACQUIROR ADVERSE EFFECT" as used in this Agreement shall mean
any change or event that, individually or when taken together with all other
such changes or events, would reasonably be considered to be materially adverse
to the financial condition, business, business prospects or results of
operations of Acquiror or any of its subsidiaries, taken as a whole; provided,
however, that a decline in the market value of Acquiror Common Stock in and of
itself shall not constitute an Acquiror Adverse Effect, and the occurrence of
any change or event (i) described in any Section of the Acquiror Disclosure
Schedules attached to this Agreement (the "ACQUIROR DISCLOSURE SCHEDULES"), (ii)
resulting from the entry into this Agreement or the transactions contemplated
hereby or the public announcement thereof (in accordance with Section 6.09
hereof), or (iii) resulting from or arising in connection with (A) any
occurrence or condition affecting any of the online, e-commerce, promotional or
decorated products industries generally, (B) any changes in economic, market,
regulatory, banking, monetary, political or other similar conditions or (C) any
occurrence or condition affecting the Internet (or any particular portion
thereof) generally, shall not, individually or in the aggregate, constitute an
Acquiror Adverse Effect.

         Acquiror and Acquiror Sub, jointly and severally, represent and
warrant, as of the date of this Agreement, to the Company that, except as set
forth on the Acquiror Disclosure Schedules (and making reference to the
particular section of this Agreement to which exception is being taken), the
statements contained in this Article IV are true and correct with respect to
Acquiror and Acquiror Sub, and their respective businesses. Any disclosure set
forth on any particular Section of the Acquiror Disclosure Schedules shall be
deemed disclosed in reference to all Sections of the Acquiror Disclosure
Schedules to which such disclosure may be reasonably applicable.

         SECTION 4.01   ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Acquiror and Acquiror Sub is a corporation, duly incorporated, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted and each of Acquiror and Acquiror Sub is duly qualified and in good
standing to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to do so would not
have an Acquiror Adverse Effect.

         SECTION 4.02   ARTICLES OF INCORPORATION; BYLAWS. Acquiror has
furnished to the Company a complete and correct copy of its Articles of
Incorporation and Bylaws, as amended or restated, and a complete and correct
copy of the Certificate of Incorporation and Bylaws, as amended or restated,
of Acquiror Sub. Neither Acquiror nor Acquiror Sub is in violation of any of
the provisions of its Articles of Incorporation or Certificate of
Incorporation, as applicable, or its Bylaws.

         SECTION 4.03   CAPITALIZATION OF ACQUIROR AND ACQUIROR SUB.

                                      -28-
<PAGE>

                  (a) The authorized capital stock of Acquiror consists of
         100,000,000 shares of Acquiror Common Stock, of which 48,724,790 were
         issued and outstanding as of January 14, 2000, and 10,000,000 shares of
         Preferred Stock, no par value ("ACQUIROR PREFERRED STOCK"), none of
         which are issued and outstanding. The authorized capital stock of
         Acquiror Sub consists of 1,000 shares of Common Stock, no par value per
         share ("ACQUIROR SUB COMMON STOCK"), of which, as of the date of this
         Agreement, 1,000 shares are issued and outstanding. On the date of this
         Agreement, all issued and outstanding shares of Acquiror Common Stock
         and Acquiror Sub Common Stock are, and at the Effective Time all issued
         and outstanding shares of Acquiror Common Stock, Acquiror Series A
         Preferred Stock and Acquiror Sub Common Stock will be, duly authorized,
         validly issued, fully paid and non-assessable. Acquiror is the record
         holder of all issued and outstanding shares of Acquiror Sub Common
         Stock, and such shares are owned by Acquiror free and clear of any and
         all security interests, liens, claims, pledges, agreements, limitations
         on Acquiror's voting rights, charges or other encumbrances of any
         nature whatsoever.

                  (b) 9,000,000 shares of Acquiror Common Stock have been duly
         and validly reserved for issuance under the HA-LO Industries, Inc. 1997
         Stock Plan (Amended and Restated) of Acquiror (the "1997 ACQUIROR
         PLAN"), of which, as of December 31, 1999, shares are outstanding
         pursuant to the exercise of such options, 7,491,056 shares are subject
         to outstanding options and 1,242,469 shares are not subject to any
         outstanding options; 5,834,822 shares of Acquiror Common Stock have
         been duly and validly reserved for issuance under the HA-LO Industries,
         Inc. Stock Plan of Acquiror (together with the 1997 Acquiror Plan, the
         "ACQUIROR PLANS"), of which, as of December 31, 1999, shares are
         outstanding pursuant to the exercise of such options, 2,807,765 shares
         are subject to outstanding options, 832,727 shares are not subject to
         any outstanding options, 269,056 shares are subject to outstanding
         options issued outside of the Acquiror Plans, and 486,417 shares are
         subject to outstanding warrants held by Montgomery Ward & Co.,
         Incorporated (all such options are the "ACQUIROR OPTIONS"); and

                  (c) Except as set forth on Section 4.03(c) of the Acquiror
         Disclosure Schedules, no shares of common, preferred or convertible
         capital stock (other than the shares of Acquiror Common Stock, Acquiror
         Sub Common Stock and Acquiror Preferred Stock), options (other than the
         Acquiror Options), warrants or other rights, agreements, arrangements
         or commitments to sell or purchase shares of Acquiror Common Stock,
         Acquiror Sub Common Stock or Acquiror Preferred Stock from Acquiror or
         Acquiror Sub are issued or outstanding. Section 4.03(c) of the Acquiror
         Disclosure Schedules contains a list of all outstanding warrants,
         options (other than Acquiror Options), agreements, convertible
         securities and other commitments pursuant to which Acquiror or Acquiror
         Sub is or may become obligated to issue, sell or otherwise transfer any
         Acquiror Common Stock, Acquiror Sub Common Stock or Acquiror Preferred
         Stock, which list names all Persons entitled to receive such Acquiror
         Common Stock, Acquiror Sub  Common Stock or Acquiror Preferred Stock
         and sets forth the shares of Acquiror Common Stock, Acquiror Sub Common
         Stock or Acquiror Preferred Stock required to be issued thereunder.
         Except for Acquiror Options and as described in Section 4.03(c) of the
         Acquiror Disclosure Schedules, no shares of Acquiror Common Stock,
         Acquiror Sub

                                      -29-
<PAGE>

         Common Stock or Acquiror Preferred Stock are held in treasury or are
         reserved for any other purpose.

                  (d) All outstanding shares of Acquiror Common Stock and
         Acquiror Sub Common Stock are, and as of the Effective Time will be,
         duly authorized, validly issued, fully paid and non-assessable, and not
         subject to preemptive rights created by statute, Acquiror's Articles of
         Incorporation or Bylaws, or Acquiror Sub's Certificate of Incorporation
         or Bylaws or, except as set forth in Section 4.03(d) of the Acquiror
         Disclosure Schedules, any agreement as to which Acquiror or Acquiror
         Sub is party or by which it is bound.

                  (e) Except as disclosed in Section 4.03(e) of the Acquiror
         Disclosure Schedules, other than Acquiror Options, there are no options
         outstanding obligating Acquiror or Acquiror Sub to register for sale
         any capital stock or other equity interests in Acquiror or Acquiror
         Sub. Except as disclosed in Section 4.03(e) of the Acquiror Disclosure
         Schedules, as of the date of this Agreement there are no obligations,
         contingent or otherwise, of Acquiror or Acquiror Sub to (x) repurchase,
         redeem or otherwise acquire any Acquiror Common Stock, Acquiror Sub
         Common Stock or Acquiror Preferred Stock, or (y) provide funds to, or
         make any material investment in (in the form of a loan, capital
         contribution or otherwise), or provide any guarantee with respect to
         the obligations of, any Person (other than subsidiaries of Acquiror).

         SECTION 4.04   AUTHORITY.

                  (a) Each of Acquiror and Acquiror Sub has the requisite
         corporate power and corporate authority to enter into this Agreement
         and, subject to the approval of the Share Issuance by affirmative vote
         of the holders of a majority of the shares of Acquiror Common Stock
         present and entitled to vote at the Shareholders Meeting, to consummate
         the transactions contemplated by this Agreement. The execution and
         delivery of this Agreement by Acquiror and Acquiror Sub, and the
         consummation by Acquiror and Acquiror Sub of the transactions
         contemplated by this Agreement, have been duly authorized by all
         necessary corporate action (other than the Shareholder Approval) and no
         other proceedings on the part of Acquiror or Acquiror Sub (other than
         the Shareholders Meeting) are necessary to authorize this Agreement or
         to consummate the transactions contemplated by this Agreement. This
         Agreement has been duly executed and delivered by Acquiror and Acquiror
         Sub and, assuming the due authorization, execution and delivery by the
         Company, constitutes the legal, valid and binding obligations of
         Acquiror and Acquiror Sub enforceable in accordance with its terms and
         conditions.

                  (b) The Board of Directors of Acquiror (a) has declared as
         advisable and fair to and in the best interests of Acquiror and its
         shareholders and resolved to recommend to its shareholders (i) the
         Merger and (ii) the Share Issuance, and (b) has approved this Agreement
         and all agreements and transactions contemplated hereby and thereby.

                                      -30-
<PAGE>

         SECTION 4.05   NO CONFLICT; REQUIRED FILINGS AND CONSENTS; OTHER
MATTERS.

                  (a) The execution and delivery of this Agreement by Acquiror
         and Acquiror Sub do not, and the performance of this Agreement by
         Acquiror and Acquiror Sub, will not (i) conflict with or violate the
         Articles, By-Laws or equivalent organizational documents of Acquiror or
         Acquiror Sub, (ii) subject to (x) obtaining the consents, approvals,
         authorizations and permits of, and making filings or notifications to,
         any Governmental Entities pursuant to the applicable requirements, if
         any, of Laws, including but not limited to the Securities Act, the
         Exchange Act, Blue Sky Laws, the HSR Act (including, without
         limitation, with respect to the acquisition by any Stockholder of
         shares of Acquiror Common Stock or Acquiror Series A Preferred Stock in
         the Merger), the NYSE, the Code and the filing and recordation of
         appropriate merger documents as required by Delaware Law, and (y)
         obtaining the consents, approvals, authorizations or permits described
         in Section 4.05(b) of the Acquiror Disclosure Schedules, conflict with
         or violate any Laws applicable to Acquiror or Acquiror Sub or by which
         any of their respective properties is bound or affected, or (iii)
         result in any breach of or constitute a default (or an event that with
         notice or lapse of time or both would become a default) under, or give
         to others any rights of termination, amendment, acceleration or
         cancellation of, or result in the creation of a lien or encumbrance on
         any of the properties or assets of Acquiror or Acquiror Sub pursuant
         to, any note, bond, mortgage, indenture, contract, agreement, lease,
         license, permit, franchise or other instrument or obligation to which
         Acquiror or Acquiror Sub is a party or by which Acquiror or Acquiror
         Sub or any of their respective properties is bound or affected, except
         for any such conflicts or violations described in clause (ii), or
         breaches or defaults described in clause (iii) that would not have an
         Acquiror Adverse Effect.

                  (b) The execution and delivery of this Agreement by Acquiror
         and Acquiror Sub do not, and neither the performance nor compliance
         with the terms hereof, by Acquiror and Acquiror Sub requires any
         consent, approval, authorization or permit of, or filing with or
         notification to, any Governmental Entities or other persons, except for
         (i) applicable requirements, if any, of the Securities Act, the
         Exchange Act, Blue Sky Laws, the HSR Act (including, without
         limitation, with respect to the acquisition by any Stockholder of
         shares of Acquiror Common Stock or Acquiror Series A Preferred Stock in
         the Merger), the NYSE and the Code, (ii) the consents, approvals,
         authorizations or permits described in Section 4.05(b) of the Acquiror
         Disclosure Schedules, and (iii) the filing and recordation of
         appropriate merger documents as required by Delaware Law.

         SECTION 4.06   SECURITIES REPORTS; FINANCIAL STATEMENTS.

                  (a) Since December 31, 1997, Acquiror and its subsidiaries
         have timely filed (x) all forms, reports, statements, registration
         statements and other documents required to be filed (or filed by
         reference) with (i) the Securities and Exchange Commission (the
         "COMMISSION"), including without limitation, (A) all Annual Reports on
         Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C) all Proxy
         Statements relating to meetings of shareholders, (D) all required
         current reports on Form 8-K, (E) all other reports and registration
         statements, and (F) all amendments and supplements to all such reports
         and registration statements, and (ii) any applicable state securities
         authorities, and (y) all

                                      -31-
<PAGE>

         forms, reports, statements and other documents required to be filed
         with any other applicable federal or state regulatory authorities,
         except where failure to file any such forms, reports, statements and
         other documents under this clause (y) would not have an Acquiror
         Adverse Effect (all such forms, reports, statements, registration
         statements and other documents referred to in this Subsection (a)
         are, collectively, "ACQUIROR REPORTS").

                  (b) The Acquiror Reports complied as of their respective dates
         in all material respects with the then applicable requirements of the
         Securities Act and the Exchange. As of their respective dates, the
         Acquiror Reports did not contain any untrue statement of a material
         fact or omit to state a material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading. Except as disclosed in
         Section 4.06(b) of the Acquiror Disclosure Schedules, each of
         Acquiror's consolidated financial statements (including any notes to
         such financial statements) included within the Acquiror Reports (i) has
         been prepared in all material respects in accordance with the published
         rules and regulations of GAAP and the Commission applied on a
         consistent basis throughout the periods involved, and (ii) fairly
         present in all material respects, the consolidated financial position
         of Acquiror as of the respective dates thereof and the consolidated
         results of operations and cash flows for the periods indicated;
         provided, however, the interim financial statements of Acquiror may (x)
         be subject to normal or recurring adjustments at Acquiror's fiscal
         year-end, (y) not necessarily be indicative of results for a
         full-fiscal year, and (z) contain pro-forma financial information which
         is not necessarily indicative of Acquiror's consolidated financial
         position.

                  (c) Acquiror has no liabilities or indebtedness of any nature
         whatsoever, except for (i) liabilities and indebtedness set forth in
         Acquiror Reports filed prior to January 1, 2000, (ii) liabilities and
         indebtedness which have arisen after September 30, 1999 in the ordinary
         course of business of Acquiror, (iii) liabilities and indebtedness set
         forth in Section 4.06(c) of the Acquiror Disclosure Schedules, (iv)
         liabilities and indebtedness incurred in connection with the
         transaction contemplated herein, and (v) except as otherwise set forth
         in this Section 4.06(c), any such liability in each case less than
         $1,000,000 or less than $10,000,000 in aggregate liabilities.

         SECTION 4.07   ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Acquiror Disclosure Schedules, since September 30, 1999, (i)
there has not been, and Acquiror has no knowledge of any facts that are
reasonably likely to result in, any event or events causing an Acquiror
Adverse Effect, and (ii) to the date of this Agreement, there has not been
any material change by Acquiror in its accounting methods, principles or
practices except any such change after the date of this Agreement mandated by
a change in GAAP.

          SECTION 4.08  ABSENCE OF LITIGATION.

                  (a) Except as set forth in an Acquiror Report filed with the
         Commission prior to the date hereof, there is no claim, action, suit,
         litigation, proceeding, arbitration, or, to the knowledge of Acquiror,
         investigation of any kind affecting Acquiror or any of its
         subsidiaries, at law or in equity (including actions or proceedings
         seeking injunctive relief), pending or, to the knowledge of Acquiror,
         threatened, except for claims, actions,

                                      -32-
<PAGE>

         suits, litigations, proceedings, arbitrations or investigations which
         cannot reasonably be expected to have an Acquiror Adverse Effect. There
         is no action pending or, to the best knowledge of the Acquiror or
         Acquiror Sub, threatened seeking to enjoin or restrain the Merger or
         any transaction contemplated by the Merger.

                  (b) Except as set forth in an Acquiror Report filed with the
         Commission prior to the date hereof, neither Acquiror nor any of its
         subsidiaries is subject to any continuing order of, consent decree,
         settlement agreement or other similar written agreement with, or, to
         the knowledge of Acquiror, continuing investigation by, any
         Governmental Entity, or any judgment, order, writ, injunction, decree
         or award of any Governmental Entity or arbitrator, including, without
         limitation, cease-and-desist or other orders, except for such matters
         which cannot reasonably be expected to have an Acquiror Adverse Effect.

         SECTION 4.09   OWNERSHIP OF ACQUIROR SUB. All of the outstanding
capital stock of Acquiror Sub is owned directly by Acquiror.

         SECTION 4.10   BROKERS. Except as disclosed in Section 4.10 of the
Acquiror Disclosure Schedules, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Acquiror.

         SECTION 4.11   INFORMATION SUPPLIED. The Proxy Statement will not,
on the date such Proxy Statement is first mailed to Acquiror's shareholders
and at the time of the Shareholders Meeting contain any untrue statement of a
material fact or omit to state any material fact required to be state therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.

         SECTION 4.12   OPINION OF FINANCIAL ADVISOR. The Board of Directors
of Acquiror has received the opinion of Credit Suisse First Boston
Corporation, dated the date hereof, to the effect that, as of such date, the
Merger Consideration is fair to Acquiror from a financial point of view.

         SECTION 4.13   VOTING REQUIREMENTS. The affirmative vote of the
holders of a majority of the shares of Acquiror Common Stock present and
entitled to vote at the Shareholders Meeting is the only vote of the holders
of any class or series of Acquiror's capital stock necessary to approve the
Merger, the Share Issuance and the transactions contemplated hereby.

         SECTION 4.14   NO PRIOR ACTIVITIES. Acquiror Sub has not incurred,
directly or indirectly, any liabilities or obligations, except those incurred
in connection with its incorporation or with the negotiation of this
Agreement and consummation of the transactions contemplated hereby. Acquiror
Sub has not engaged, directly or indirectly, in any business or activity of
any type or kind, or entered into any agreement or arrangement with any
person or entity, or become subject to or bound by any obligation or
undertaking, that is not contemplated by or in connection with this Agreement
and the transactions contemplated hereby.

                                      -33-
<PAGE>

         SECTION 4.15   ERISA COMPLIANCE.

                  (a) Except as disclosed in the Acquiror Reports, with respect
         to any collective bargaining agreement or any material bonus, profit
         sharing, deferred compensation, incentive compensation, stock
         ownership, stock purchase, stock option, phantom stock, retirement,
         vacation, severance, disability, death benefit, hospitalization,
         medical or other plan, arrangement or understanding providing benefits
         to any current or former employee, officer or director of Acquiror or
         any of its wholly-owned subsidiaries (collectively, the "ACQUIROR
         BENEFIT PLANS"), no event has occurred and, to the knowledge of
         Acquiror, there exists no condition or set of circumstances, in
         connection with which Acquiror or any of its subsidiaries could be
         subject to any liability that individually or in the aggregate would
         have an Acquiror Adverse Effect under ERISA, the Code or any other
         applicable Law.

                  (b) Except as disclosed in the Acquiror Reports, each Acquiror
         Benefit Plan has been administered in accordance with its terms, except
         for any failures so to administer any Acquiror Benefit Plan that
         individually or in the aggregate would not reasonably be expected to
         have an Acquiror Adverse Effect. Acquiror, its subsidiaries and all of
         the Acquiror Benefit Plans are in compliance with the applicable
         provisions of ERISA, the Code and all other applicable laws and the
         terms of all applicable collective bargaining agreements, except for
         any failures to be in such compliance that individually or in the
         aggregate would not reasonably be expected to have an Acquiror Adverse
         Effect. Each Acquiror Benefit Plan that is intended to be qualified
         under Section 401(a) or 401(k) of the Code has received a favorable
         determination letter from the IRS that it is so qualified and each
         trust established in connection with any Acquiror Benefit Plan that is
         intended to be exempt from federal income taxation under Section 501(a)
         of the Code has received a determination letter from the IRS that such
         trust is so exempt. To the knowledge of Acquiror, no fact or event has
         occurred since that date of any determination letter from the IRS which
         is reasonably likely to affect adversely the qualified status of any
         such Acquiror Benefit Plan or the exempt status of any such trust,
         except for any occurrence that individually or in the aggregate would
         not reasonably be expected to have an Acquiror Adverse Effect.

                  (c) Except as any of the following either individually or in
         the aggregate would not reasonably be expected to have an Acquiror
         Adverse Effect or as disclosed in the Acquiror Reports, (x) neither
         Acquiror nor any Plan Affiliate of Acquiror has incurred any liability
         under Title IV of ERISA and no condition exists that presents a risk to
         Acquiror or any Plan Affiliate of Acquiror of incurring any such
         liability (other than liability for benefits or premiums to the Pension
         Benefit Guaranty Corporation arising in the ordinary course), (y) no
         Acquiror Benefit Plan has incurred an "accumulated funding deficiency"
         (within the meaning of Section 302 of ERISA or Section 412 of the Code)
         whether or not waived and (z) to the knowledge of Acquiror, there are
         not any facts or circumstances that would materially change the funded
         status of any Acquiror Benefit Plan that is a "defined benefit" plan
         (as defined in Section 3(35) of ERISA) since the date of the most
         recent actuarial report for such plan. No Acquiror Benefit Plan is a
         "multi employer plan" within the meaning of Section 3(37) of ERISA.

                                      -34-
<PAGE>

                  (d) Neither Acquiror nor any of its subsidiaries is a party to
         any collective bargaining or other labor union contract applicable to
         persons employed by Acquiror or any of its subsidiaries and no
         collective bargaining agreement is being negotiated by Acquiror or any
         of its subsidiaries, in each case that is material to Acquiror and its
         subsidiaries taken as a whole. As of the date of this Agreement, there
         is no labor dispute, strike or work stoppage against Acquiror or any of
         its subsidiaries pending or, to the knowledge of Acquiror, threatened
         which may interfere with the respective business activities of Acquiror
         or any of its subsidiaries, except where such dispute, strike or work
         stoppage individually or in the aggregate would not reasonably be
         expected to have an Acquiror Adverse Effect. As of the date of this
         Agreement, to the knowledge of Acquiror, none of Acquiror, any of its
         subsidiaries or any of their respective representatives or employees
         has committed any unfair labor practice in connection with the
         operation of the respective businesses of Acquiror or any of its
         subsidiaries, and there is no charge or complaint against Acquiror or
         any of its subsidiaries by the National Labor Relations Board or any
         comparable governmental agency pending or threatened in writing, except
         for any occurrence that individually or in the aggregate would not
         reasonably be expected to have an Acquiror Adverse Effect.

                  (e) No Acquiror Benefit Plan provides medical benefits
         (whether or not insured) with respect to current or former employees
         after retirement or other termination of service the cost of which is
         material to Acquiror and its subsidiaries taken as a whole.

                  (f) No amounts payable under the Acquiror Benefit Plans solely
         as a result of the consummation of the transactions contemplated by
         this Agreement will fail to be deductible for federal income tax
         purposes by virtue of Section 280G of the Code. The consummation of the
         transactions contemplated by this Agreement will not, either alone or
         in combination with another event, (A) entitle any current or former
         employee, officer or director of Acquiror or any Plan Affiliate of
         Acquiror to severance pay, unemployment compensation or any other
         payment, except as expressly provided in this Agreement, (B) accelerate
         the time of payment or vesting, or increase the amount of compensation
         due any such employee, officer or director or (C) constitute a "change
         of control" under any Acquiror Benefit Plan, and Acquiror and its board
         of directors have taken all required actions to effect the foregoing.

         SECTION 4.16   TAXES.

                  (a) Except as disclosed in the Acquiror Reports, each of
         Acquiror and its subsidiaries has filed all material Returns and
         reports required to be filed by it and all such Returns and reports are
         complete and correct in all material respects, or requests for
         extensions to file such Returns or reports have been timely filed,
         granted and have not expired, except to the extent that such failures
         to file, to be complete or correct or to have extensions granted that
         remain in effect individually or in the aggregate would not have an
         Acquiror Adverse Effect. Acquiror and each of its subsidiaries has paid
         (or Acquiror has paid on its behalf) all Taxes shown as due on such
         Returns, and the most recent financial statements contained in the
         Acquiror Reports reflect an adequate reserve for all taxes payable by
         Acquiror and its subsidiaries for all taxable periods and portions
         thereof accrued through the date of such financial statements.

                                      -35-
<PAGE>

                  (b) Except as disclosed in the Acquiror Reports, no
         deficiencies for any taxes have been proposed, asserted or assessed
         against Acquiror or any of its subsidiaries that are not adequately
         reserved for, except for deficiencies that individually or in the
         aggregate would not have an Acquiror Adverse Effect.

                  (c) Neither Acquiror nor any of its subsidiaries has taken any
         action or knows of any fact, agreement, plan or other circumstance that
         is reasonably likely to prevent the Merger from qualifying as a
         reorganization within the meaning of Section 368(a) of the Code.

         SECTION 4.17   STATE TAKEOVER STATUTE; SHAREHOLDERS' RIGHTS PLANS.
The Board of Directors of Acquiror has approved the terms of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby and, assuming the accuracy of the Company's representation and
warranty contained in Section 3.23, such approval constitutes approval of the
Merger and the other transactions contemplated by this Agreement by the
Acquiror Board of Directors under Section 5/7.85 of the Illinois Business
Corporation Act of 1983, as amended, and represents all the actions necessary
to ensure that the super majority voting requirement of Section 5/7.85 of the
Illinois Business Corporation Act of 1983, as amended, does not apply to the
Company or the Stockholders in connection with the Merger and the other
transactions contemplated by this Agreement. To the knowledge of Acquiror, no
other state takeover statute is applicable to the Merger or the other
transactions contemplated by this Agreement. Acquiror has not adopted and
does not have in effect any shareholders rights plan, and Acquiror's board of
directors has not approved any such plan and has not authorized submission of
any such plan for shareholder approval.

         SECTION 4.18   INTELLECTUAL PROPERTY.

                  (a) Except as disclosed in the Acquiror Reports, Acquiror and
         its subsidiaries own or have a valid license to use all trademarks,
         service marks and trade names (including any registrations or
         applications for registration of any of the foregoing) (collectively,
         the "Acquiror Intellectual Property") necessary to carry on its
         business substantially as currently conducted, except for such Acquiror
         Intellectual property the failure of which to own or validly license
         individually or in the aggregate would not reasonably be expected to
         have an Acquiror Adverse Effect. Neither Acquiror nor any such
         subsidiary has received any notice of infringement of or conflict with,
         and, to Acquiror's knowledge, there are no infringements of or
         conflicts with, the rights of others with respect to the use of any
         Acquiror Intellectual property that individually or in the aggregate,
         in either such case, would reasonably be expected to have an Acquiror
         Adverse Effect.

                  (b) The consummation of the Merger and the other transactions
         contemplated by this Agreement will not result in the loss by Acquiror
         of any rights to use computer and telecommunication software including
         source and object code and documentation and any other media
         (including, without limitation, manuals, journals and reference books)
         necessary to carry on its business substantially as currently conducted
         and the loss of which would have an Acquiror Adverse Effect.

                                      -36-
<PAGE>

         SECTION 4.19   CERTAIN CONTRACTS. Except as set forth in Section
4.19 of the Acquiror Disclosure Schedule, the Acquiror Reports or as
permitted pursuant to Sections 5.03 and 5.04, neither Acquiror nor any of its
subsidiaries is a party to or bound by (i) any "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the Commission) or
any written undisclosed material contracts of Acquiror or Acquiror Sub to
lease real property (except for any such contracts copies of which have been
made available to the Company) or (ii) any non-competition agreement or any
other agreement or obligation which purports to limit in any material respect
the manner in which, or the localities in which, all or any substantial
portion of the business of Acquiror and its subsidiaries, taken as a whole,
is or would be conducted. Section 4.19 of the Acquiror Disclosure Schedules
sets forth all ongoing written agreements between Acquiror (or any of its
subsidiaries) and each of John R. Kelley, Jr., Lou Weisbach and Linden D.
Nelson.

         SECTION 4.20   ENVIRONMENTAL MATTERS. Except as would not,
individually or in the aggregate, have an Acquiror Adverse Effect or as
disclosed in the Acquiror Reports filed and publicly available prior to the
date of this Agreement, Acquiror and its subsidiaries are in material
compliance with, and do not have any material liability applicable under any
Environmental Law, and to the knowledge of Acquiror and Acquiror Sub, the
real property owned or leased by Acquiror or its subsidiaries has not been
used by any other person in violation of, any Environmental Laws.

         SECTION 4.21   RELATED PARTY TRANSACTIONS. To the knowledge of
Acquiror and except for any interests disclosed on Section 4.21 of the
Acquiror Disclosure Schedules or as disclosed in the Acquiror Reports,
neither Acquiror nor any of its directors or executive officers, have any
material direct interest in any material supplier, customer or client of
Acquiror or in any person from whom or to whom Acquiror leases any material
property, or in any other person, firm or entity with whom Acquiror transacts
material business of any nature. Section 4.21 to the Acquiror Disclosure
Schedules or the Acquiror Reports identify and describe all material
contracts to which Acquiror is a party and to which any director or executive
officer is directly also a party.

         SECTION 4.22   CERTAIN BUSINESS PRACTICES AND REGULATIONS. Neither
Acquiror nor any of its executive officers or directors has, to the knowledge
of Acquiror, (i) made or agreed to make any contribution, payment or gift to
any customer, client, supplier, governmental official, employee or agent
where either the contribution, payment or gift or the purpose thereof was
illegal under any applicable law, (ii) fraudulently established or maintained
any unrecorded fund or asset for any purpose or knowingly made any false
entries on its books and records for any reason, or (iii) made or agreed to
make any contribution, or reimbursed any political gift or contribution made
by any other person, to any candidate for foreign, federal, state, provincial
or local public office in violation under any applicable law.

         SECTION 4.23   LIMITATION ON WARRANTIES. Notwithstanding anything to
the contrary contained in this Agreement, Acquiror and Acquiror Sub make no
implied warranty of any kind whatsoever, and make no representation with
respect to (i) any matter not expressly set forth in this Article IV, or (ii)
the future profitability, future earnings or other future performance of
Acquiror or Acquiror Sub. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.

                                      -37-
<PAGE>

                                    ARTICLE V

             COVENANTS RELATING TO THE CONDUCT OF THE COMPANY BUSINESS

         SECTION 5.01   AFFIRMATIVE COVENANTS OF THE COMPANY. The Company
hereby covenants and agrees with Acquiror and Acquiror Sub that, prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to, in writing, by Acquiror, which consent shall not be
unreasonably withheld, the Company shall, subject to the limitations
contained in this Agreement:

                  (a) Operate its business in the usual and ordinary course,
         consistent with its reasonable past practice and that certain
         Confidential Private Placement Memorandum of the Company, dated
         November 1999 (the "OFFERING MEMO");

                  (b) Subject to the limitations contained in this Agreement,
         use reasonable best efforts to preserve intact its business
         organization and assets, maintain its material rights and franchises,
         retain the services of its officers, key employees and managers, and
         maintain existing good relationships with its material customers,
         clients, vendors and suppliers, all consistent with the Offering Memo;

                  (c) Use reasonable efforts to keep in full force and effect
         all liability insurance and bonds comparable in amount and scope of
         coverage to that currently maintained.

                  (d) Subject to applicable law, confer with Acquiror from
         time-to-time at Acquiror's reasonable request to report on all
         reasonable operational matters.

                  (e) File its federal and state income tax Returns, and all
         required state and local income and franchise tax Returns for the
         fiscal tax year coinciding with or ending in 1999 (if applicable), on
         or before the due date for filing such Returns (including extensions).

         SECTION 5.02   NEGATIVE COVENANTS OF THE COMPANY. Except as
expressly contemplated by this Agreement, as set forth on Section 5.02 to the
Company Disclosure Schedules or as otherwise consented to in writing by
Acquiror, which consent shall not be unreasonably withheld, from the date of
this Agreement until the Effective Time, the Company shall not do any of the
following:

                  (a) Except as consistent with the past practice of the Company
         or as contemplated by the Offering Memo or that is reasonably
         appropriate to consummate the Merger, (i) increase the compensation or
         any commission payable or to become payable to any director, officer,
         employee or independent contractor, except for increases in salary,
         bonuses or wages payable or to become payable to employees or
         independent contractors who are not directors or officers, (ii) grant
         any severance or termination pay or enter into any severance agreement
         with, any director, officer or employee, (iii) enter into any
         employment agreement of any nature whatsoever with any director,
         officer or employee that would extend beyond the Effective Time, except
         on an at-will basis, or (iv) establish, adopt, enter into or amend any
         employee benefit plan, except as may be

                                      -38-
<PAGE>

         required to comply with applicable Law (provided that the actions under
         clauses (i), (ii) and (iii) shall only require notice to, and not
         consent by, Acquiror);

                  (b) Except as contemplated by the Offering Memo or as
         contemplated by the Merger, make any material change in the overall
         nature of its business;

                  (c) Make (or commit to make) capital expenditures in an amount
         which exceeds One Million Dollars ($1,000,000) or to the extent that
         such expenditures do not relate to the conduct of the Company's
         business consistent with the Offering Memo and the Company's past
         practice;

                  (d) Declare or pay, or agree to declare or pay, any dividend
         on, or make any other distribution in respect of, outstanding Company
         Common Stock, Company Preferred Stock, Other Company Securities,
         Company Options or Other Company Options;

                  (e) (i) Redeem, purchase or otherwise acquire any of its
         capital stock or any securities or obligations convertible into or
         exchangeable for any of its capital stock, or any options, warrants or
         conversion or other rights to acquire any of its capital stock or any
         such securities or obligations, (ii) effect any reorganization or
         recapitalization, or (iii) split, combine or reclassify any of its
         capital stock or issue or authorize the issuance of any other
         securities in lieu of or in substitution for shares of its capital
         stock;

                  (f) Except pursuant to the Plan, issue, deliver, award, grant
         or sell, or authorize the issuance, delivery, award, grant or sale of
         (including the grant of any security interests, liens, claims, pledges,
         limitations in voting rights, charges or other encumbrances), any
         shares of any class of its capital stock (including shares held in
         treasury), any securities convertible into or exercisable or
         exchangeable for any such shares, or any rights, warrants or options to
         acquire any such shares, or amend or otherwise modify the terms of any
         such rights, warrants or options, the effect of which shall be to make
         such terms more favorable to the holders thereof (including without
         limitation the acceleration of the vesting of any options other than as
         contemplated by this Agreement);

                  (g) Acquire or agree to acquire, by merging or consolidating
         with, by purchasing a controlling equity interest in or all or
         substantially all of the assets of, or by any other manner, any
         material business;

                  (h) Sell, lease, exchange, mortgage, pledge, transfer or
         otherwise dispose of, or agree to sell, lease, exchange, mortgage,
         pledge, transfer or otherwise dispose of, its material assets to the
         extent not consistent with its past practice;

                  (i) Adopt any amendments to its Certificate of Incorporation
         or Bylaws;

                  (j) Incur any liability or any obligation for borrowed money
         or purchase money indebtedness, whether or not evidenced by a contract,
         note, bond, debenture or similar instrument, other than liabilities and
         obligations up to One Million Dollars

                                      -39-
<PAGE>

         ($1,000,000) which relate to the conduct of the Company's business
         consistent with the Offering Memo and the Company's past practice;

                  (k) Agree in writing or otherwise to do any of the foregoing
         unless the terms of such agreement are terminable upon closing of the
         Merger contemplated in this Agreement;

                  (l) (i) perform any act which, if performed, would prevent or
         excuse the performance of this Agreement by the Company, or (ii) fail
         to perform any act which, if omitted to be performed, would prevent or
         excuse the performance of this Agreement by the Company; or

                  (m) Initiate, solicit, continue or encourage (including by way
         of furnishing any information or assistance in connection with) any
         inquiries or the making of any offer that constitutes, or may
         reasonably be expected to lead to, any "Competing Transaction" (as such
         term is defined below), or enter into discussions or negotiations with
         any person or entity in furtherance of such inquiries or to obtain a
         Competing Transaction or enter into any agreement with respect to a
         Competing Transaction. The Company shall promptly notify Acquiror if
         any such inquiries or proposals are received by the Company or by any
         of its officers, directors, financial advisors, attorneys, accountants
         or other representatives. For purposes of this Agreement, the term
         "COMPETING TRANSACTION" shall mean any of the following involving the
         Company (other than the Merger): (i) any merger, consolidation,
         exchange, material business combination, or other similar material
         transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
         or other disposition of all or substantially all of the assets of the
         Company in a single transaction or series of related transactions;
         (iii) any sale of or exchange for any outstanding capital stock or
         equity of the Company; or (iv) any agreement to, or announcement by the
         Company of a proposal, plan or intention, to do any of the foregoing.

         SECTION 5.03   AFFIRMATIVE COVENANTS OF ACQUIROR. Acquiror hereby
covenants and agrees with the Company that, prior to the Effective Time,
unless otherwise expressly contemplated by this Agreement or consented to, in
writing, by the Company, which consent shall not be unreasonably withheld,
Acquiror shall, subject to the limitations contained in this Agreement:

                  (a) Operate its business in the usual and ordinary course,
         consistent with its reasonable past practice and its 2000 budget, a
         copy of which has been provided to the Company (the "BUDGET");

                  (b) Subject to the limitations contained in this Agreement,
         use reasonable best efforts to preserve intact its business
         organization and assets, maintain its material rights and franchises,
         retain the services of its officers, key employees and managers, and
         maintain existing good relationships with its material customers,
         clients, vendors and suppliers, all consistent with the Budget;

                  (c) Use reasonable efforts to keep in full force and effect
         all liability insurance and bonds comparable in amount and scope of
         coverage to that currently maintained.

                                      -40-
<PAGE>

                  (d) Subject to applicable law, confer with the Company from
         time-to-time at the Company's reasonable request to report on all
         reasonable operational matters.

                  (e) File its federal and state income tax Returns, and all
         required state and local income and franchise tax Returns for the
         fiscal tax year coinciding with or ending in 1999 (if applicable), on
         or before the due date for filing such Returns (including extensions).

         SECTION 5.04   NEGATIVE COVENANTS OF ACQUIROR AND ACQUIROR SUB.
Except as expressly contemplated by this Agreement or disclosed in the
Acquiror Disclosure Schedules or otherwise consented to in writing by the
Company, which consent shall not be unreasonably withheld, from the date of
this Agreement to the Effective Time, Acquiror shall not (and shall not
permit the Acquiror Sub to) and Acquiror Sub shall not:

                  (a) Except as consistent with the past practice of Acquiror or
         as contemplated by the Budget or that is reasonably appropriate to
         consummate the Merger, (i) increase the compensation or any commission
         payable or to become payable to any director, officer, employee or
         independent contractor, except for increases in salary, bonuses or
         wages payable or to become payable to employees or independent
         contractors who are not directors or officers, (ii) grant any severance
         or termination pay or enter into any severance agreement with, any
         director, officer or employee, (iii) enter into any employment
         agreement of any nature whatsoever with any director, officer or
         employee that would extend beyond the Effective Time, except on an
         at-will basis, or (iv) establish, adopt, enter into or amend any
         employee benefit plan, except as may be required to comply with
         applicable Law (provided that the actions under clauses (i), (ii) and
         (iii) shall only require notice to, and not consent by, the Company),.

                  (b) Except as contemplated by the Budget or as contemplated by
         the Merger, make any material change in the overall nature of its
         business.

                  (c) Declare or pay, or agree to declare or pay, any dividend
         on, or make any other distribution in respect of, outstanding Acquiror
         Common Stock, Acquiror Sub Common Stock or Acquiror Options;

                  (d) Make (or commit to make) capital expenditures in an amount
         which exceeds Ten Million Dollars ($10,000,000) or to the extent that
         such expenditures do not relate to the conduct of Acquiror's business
         consistent with its past practice;

                  (e) (i) Redeem, purchase or otherwise acquire any of its
         capital stock or any securities or obligations convertible into or
         exchangeable for any of its capital stock, or any options, warrants or
         conversion or other rights to acquire any of its capital stock or any
         such securities or obligations, (ii) effect any reorganization or
         recapitalization, or (iii) split, combine or reclassify any of its
         capital stock or issue or authorize the issuance of any other
         securities in lieu of or in substitution for shares of its capital
         stock;

                  (f) Except pursuant to the Acquiror Plans or as permitted by
         Section 5.04(g) hereof, issue, deliver, award, grant or sell, or
         authorize the issuance, delivery, award, grant or sale of (including
         the grant of any security interests, liens, claims, pledges,

                                      -41-
<PAGE>

         limitations in voting rights, charges or other encumbrances), any
         shares of any class of its capital stock (including shares held in
         treasury), any securities convertible into or exercisable or
         exchangeable for any such shares, or any rights, warrants or options to
         acquire any such shares, or amend or otherwise modify the terms of any
         such rights, warrants or options, the effect of which shall be to make
         such terms more favorable to the holders thereof;

                  (g) Acquire or agree to acquire, by merging or consolidating
         with, by purchasing a controlling equity interest in or all or
         substantially all of the assets of, or by any other manner, any
         material business, except for such acquisitions made in the ordinary
         course of business consistent with past practice with the consideration
         equal to less than Five Million Dollars ($5,000,000) for any such
         transaction;

                  (h) Sell, lease, exchange, mortgage, pledge, transfer or
         otherwise dispose of, or agree to sell, lease, exchange, mortgage,
         pledge, transfer or otherwise dispose of, its material assets, other
         than in the ordinary course of business consistent with past practice;

                  (i) Other than as contemplated by this Agreement, adopt any
         amendments to its Articles or Certificate of Incorporation, as
         applicable, or Bylaws;

                  (j) Other than in connection with the financing of the
         transactions contemplated by this Agreement and the effect thereof on
         Acquiror's budget, incur any liability or any obligation for borrowed
         money or purchase money indebtedness, whether or not evidenced by a
         contract, note, bond, debenture or similar instrument other than
         liabilities and obligations up to Twenty Five Million Dollars
         ($25,000,000) to the extent that they relate to the conduct of
         Acquiror's business in the ordinary course of business and consistent
         with past practice;

                  (k) Agree in writing or otherwise to do any of the foregoing
         unless the terms of such agreement are terminable upon closing of the
         Merger contemplated in this Agreement;

                  (l) (i) perform any act which, if performed, would prevent or
         excuse the performance of this Agreement by Acquiror or Acquiror Sub,
         or (ii) fail to perform any act which, if omitted to be performed,
         would prevent or excuse the performance of this Agreement by Acquiror
         or Acquiror Sub; or

                  (m) Initiate, solicit, continue or encourage (including by way
         of furnishing any information or assistance in connection with) any
         inquiries or the making of any offer that constitutes, or may
         reasonably be expected to lead to, any "Acquiror Competing Transaction"
         (as such term is defined below), or enter into discussions or
         negotiations with any person or entity in furtherance of such inquiries
         or to obtain an Acquiror Competing Transaction or enter into any
         agreement with respect to an Acquiror Competing Transaction. Acquiror
         shall promptly notify the Company if any such inquiries or proposals
         are received by Acquiror, by any material subsidiary of Acquiror or by
         any of its or their officers, directors, financial advisors, attorneys,
         accountants or other representatives. For purposes of this Agreement,
         the term "ACQUIROR COMPETING

                                      -42-
<PAGE>

         TRANSACTION") shall mean any of the following involving Acquiror or any
         material subsidiary of Acquiror (other than the Merger): (i) except as
         required by Acquiror's Board of Directors' fiduciary duties, as advised
         in writing by counsel to Acquiror, any merger, consolidation, exchange,
         material business combination, or other similar material transaction
         (except with respect to transactions permitted pursuant to
         Section 5.04(g)); (ii) except as required by Acquiror's Board of
         Directors' fiduciary duties, as advised in writing by counsel to
         Acquiror, any sale, lease, exchange, mortgage, pledge, transfer or
         other disposition of all or substantially all of the assets of Acquiror
         in a single transaction or series of related transactions; (iii) except
         as required by Acquiror's Board of Directors' fiduciary duties, as
         advised in writing by counsel to Acquiror, any sale of or exchange for
         (including, without limitation, by merger or tender offer) all of the
         outstanding capital stock or equity of Acquiror; or (iv) any agreement
         to, or announcement by Acquiror of a proposal, plan or intention, to do
         any of the foregoing. If Acquiror shall exercise its rights with
         respect to fiduciary duties, a copy of such opinion shall be furnished
         to the Company three (3) business days prior to taking any action
         required by such fiduciary duties.

         SECTION 5.05   ACCESS AND INFORMATION.

                  (a) Upon reasonable prior notice from Acquiror, the Company
         shall afford to Acquiror and its officers, employees, accountants,
         consultants, legal counsel and other representatives, reasonable access
         during business hours to (i) the properties and locations at which the
         Company is conducting business activities, (ii) the managers, officers
         and management personnel of the Company at all such locations, and
         (iii) all information (including, if available, original documents and
         Returns) concerning the business, properties, contracts, records and
         personnel of the Company. The Company shall permit Acquiror to make
         copies of such books, records and other documents as Acquiror
         reasonably considers necessary or appropriate for the purpose of
         familiarizing itself with the business, properties, contracts, records
         and personnel of the Company, and/or for obtaining any approvals,
         consents, licenses or permits for the transactions contemplated by this
         Agreement.

                  (b) Upon reasonable prior notice from the Company, Acquiror
         shall afford to the Company and its officers, employees, accountants,
         consultants, legal counsel and other representatives, reasonable access
         during business hours to (i) the properties and locations at which
         Acquiror is conducting substantially all of its business activities,
         (ii) the managers, officers and management personnel of Acquiror at all
         such locations, and (iii) all information (including, if available,
         original documents and Returns) concerning the business, properties,
         contracts, records and personnel of Acquiror. Acquiror shall permit the
         Company to make copies of such books, records and other documents as
         the Company reasonably considers necessary or appropriate for the
         purpose of familiarizing itself with the business, properties,
         contracts, records and personnel of Acquiror, and/or for obtaining any
         approvals, consents, licenses or permits for the transactions
         contemplated by this Agreement.

                                      -43-
<PAGE>

                                      ARTICLE VI

                                 ADDITIONAL AGREEMENTS

         SECTION 6.01   TAX TREATMENT. All parties shall use reasonable
efforts to cause the Merger to qualify, and shall not knowingly take any
actions which could prevent the merger from qualifying as a reorganization
and from having each of the parties to this Agreement from being parties to
such reorganization within the meaning of Section 368 of the Code. Following
the Effective Time, neither the Surviving Corporation, Acquiror nor any of
their Affiliates shall take any action, cause any action to be taken, fail to
take any action or cause any action to fail to be taken, which action or
failure to act could cause the Merger to fail to qualify as a reorganization
under Section 368(a) of the Code.

         SECTION 6.02   STOCKHOLDER AGREEMENTS. Shares of Acquiror Common
Stock and Acquiror Series A Preferred Stock are being issued by Acquiror to
the Stockholders under the Merger in reliance upon the representations,
warranties and agreements of the Stockholders set forth in a Stockholder
Agreement in the form of EXHIBIT B attached hereto (each, a "STOCKHOLDER
AGREEMENT").

         SECTION 6.03   STEP REGISTRATION OF ACQUIROR COMMON STOCK. Within
ten (10) days following the Effective Time, Acquiror shall effect the
registration for resale of twenty-five percent (25%) of the Acquiror Common
Stock issued to the Stockholders in the Merger or underlying shares of
Acquiror Series A Preferred Stock issued to the Stockholders in the Merger.
Acquiror further agrees that (i) it shall effect the registration for resale
of an additional fifteen percent (15%) of the original total number of shares
of Acquiror Common Stock issued in the Merger or underlying shares of
Acquiror Series A Preferred Stock issued to the Stockholders in the Merger on
or prior to the last day of the three (3) month period beginning at the
Effective Time, (ii) it shall effect the registration for resale of an
additional thirty-three and one-third percent (33 1/3%) of the original total
number of shares of Acquiror Common Stock issued in the Merger or underlying
shares of Acquiror Series A Preferred Stock issued in the Merger on or prior
to the last day of the nine (9) month period beginning at the Effective Time,
and (iv) it shall effect the registration for resale of the balance of such
shares of Acquiror Common Stock or Acquiror Common Stock underlying shares of
Acquiror Series A Preferred Stock issued hereunder which have not been
registered for resale under the Securities Act ("UNREGISTERED SHARES")
(including the Escrow Shares, which shares shall be the last shares of
Acquiror Common Stock registered under this Section 6.03) on or prior to the
second anniversary of the Effective Time, to the extent such shares are then
owned by the Stockholders; Acquiror shall use all reasonable efforts to
effect the registration of the shares for resale under the Securities Act, by
performing the obligations set forth in those Registration Rights Agreements,
to be entered into prior to the Effective Time between Acquiror and various
Stockholders listed on Schedule 6.03, the form of which is attached hereto as
EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENTS"). No Stockholder shall
receive the registration rights provided in this Section 6.03 until such
Stockholder has executed and delivered to Acquiror a Registration Rights
Agreement. Registration of the Escrow Shares shall not affect the terms of
the Escrow Agreements or otherwise constitute a release of such shares from
escrow. Each such shareholder listed on Schedule 6.03 shall be entitled to
enter into its own registration rights agreement with Acquiror.

                                      -44-
<PAGE>

Any stockholders not listed on Schedule 6.03 shall be entitled to enter into
a registration rights agreement in form and substance substantially similar
to the Registration Rights Agreement.

         SECTION 6.04   PREPARATION OF ACQUIROR'S PROXY STATEMENT;
SHAREHOLDERS MEETING.

                  (a) As soon as practicable following the date of this
         Agreement, Acquiror shall prepare and file with the Commission and
         cause to be cleared a proxy statement (the "PROXY STATEMENT") in
         connection with the submission of the Share Issuance and the Merger to
         Acquiror's shareholders for their approval (the "SHAREHOLDER
         APPROVAL"). Acquiror shall cause the Proxy Statement to be mailed to
         Acquiror's shareholders as soon as practicable after its review, if
         any, by the Commission. Acquiror will advise the Company, promptly
         after it receives notice thereof, of the time when the Proxy Statement
         or any amendment thereto has been filed, of any request by the
         Commission or its staff for amendment of the Proxy Statement, if any,
         or comments thereon and responses thereto or requests by the Commission
         or its staff for additional information. Drafts of the Proxy Statement
         and any amendments shall be provided to the Company and its counsel not
         less than three business days prior to filing and all filings shall be
         subject to the reasonable approval of the Company and its counsel. Each
         of the Company and Acquiror agrees that the information provided by it
         for inclusion in the Proxy Statement, and each amendment or supplement
         thereto, at the time of mailing thereof and at the time of the meeting
         of shareholders of Acquiror, will not include an untrue statement of a
         material fact or omit to state a material fact required to be stated
         therein or necessary to make the statements therein, in light of the
         circumstances under which they were made, not misleading. If at any
         time prior to the Effective Time, any information relating to Acquiror
         or the Company, or any of their respective Affiliates, officers or
         directors, should be discovered by Acquiror or the Company which should
         be set forth in an amendment to the Proxy Statement, so that such
         document would not include any misstatement of a material fact or omit
         to state any material fact necessary to make the statements therein, in
         light of the circumstances under which they were made, not misleading,
         the party which discovers such information shall promptly notify the
         other party hereto and an appropriate amendment describing such
         information shall be promptly filed with the Commission and, to the
         extent required by Law, disseminated to Acquiror's shareholders.

                  (b) Acquiror shall, as soon as possible following the date of
         this Agreement, duly call, give notice of, convene and hold a meeting
         of its shareholders (the "SHAREHOLDERS MEETING") for the purpose of
         obtaining the Shareholder Approval and shall, through its board of
         directors (if not in breach of their fiduciary duties), recommend to
         its shareholders the approval and adoption of this Agreement, the
         Merger, the Share Issuance and the other agreements and transactions
         contemplated hereby.

                  (c) Acquiror will use its best efforts to hold the
         Shareholders Meeting as soon as possible after the date hereof.

                  (d) Acquiror will use its best efforts to obtain the
         Shareholder Approval and to list the Acquiror Common Stock to be issued
         in the Merger or issuable upon the conversion of Acquiror Series A
         Preferred Stock with the NYSE.

                                      -45-
<PAGE>

         SECTION 6.05   RATIFICATION OF COMPANY APPROVAL. On the date hereof,
the Company shall have provided Acquiror with documents, in such form and
substance as reasonably requested by Acquiror, executed by the Stockholders
listed on Section 6.05 of the Company Disclosure Schedules (the "PRINCIPAL
STOCKHOLDERS") and directors of the Company, affirming and ratifying their
approval of and consent to the Merger and the other transactions contemplated
hereunder.

         SECTION 6.06   APPROPRIATE ACTION; CONSENTS; FILINGS.

                  (a) The Company and Acquiror shall use all reasonable efforts
         to (i) take, or cause to be taken, all appropriate action, and do, or
         cause to be done, all things necessary, proper or advisable under
         applicable Laws or otherwise to consummate and make effective the
         transactions contemplated by this Agreement as promptly as practicable,
         (ii) obtain from any Governmental Entities any consents, licenses,
         permits, waivers, approvals, authorizations or orders required to be
         obtained or made by the Company or Acquiror or any of their respective
         subsidiaries in connection with the authorization, execution and
         delivery of this Agreement and the consummation of the transactions
         contemplated herein, including, without limitation, the Merger, and
         (iii) make all necessary filings, and thereafter make any other
         required submissions, with respect to this Agreement and the Merger
         required under (A) the Securities Act and the Exchange Act, and any
         other applicable securities Laws, (B) the HSR Act (including, without
         limitation, with respect to the acquisition by any Stockholder of
         shares of Acquiror Common Stock or Acquiror Series A Preferred Stock in
         the Merger), and (C) any other applicable Law; provided, however, that
         the Company and Acquiror shall cooperate with each other in connection
         with the making of all such filings, including providing copies of all
         such documents to the non-filing party and its advisors prior to filing
         and, if requested, to accept all reasonable additions, deletions or
         changes suggested in connection therewith, and the Company, Acquiror
         and Acquiror Sub shall not respond to any regulatory authority without
         the consent of the other parties hereto. The Company and Acquiror shall
         (and the Company shall cause the Principal Executives to) furnish to
         each other all information required for any application or other filing
         to be made pursuant to the rules and regulations of any applicable Law
         (including, if so requested by Acquiror, all information required to be
         included in the Resale Prospectus or a proxy statement) in connection
         with the transactions contemplated by this Agreement.

                  (b) The Company and Acquiror shall give (or shall cause their
         respective subsidiaries or Affiliates to give) (and the Company shall
         cause the Principal Executives to give) any notices to third parties,
         and use, and cause their respective subsidiaries to use, all reasonable
         efforts to obtain any third party consents required to prevent a
         Company Adverse Effect from occurring prior to or after the Effective
         Time or an Acquiror Adverse Effect from occurring prior to or after the
         Effective Time (collectively, "MATERIAL CONSENTS").

                  (c) From the date of this Agreement until the Effective Time,
         the Company shall promptly notify Acquiror in writing of any pending
         or, to the knowledge of the Company, threatened action, proceeding or
         investigation by any Governmental Entity or any other person (i)
         challenging or seeking damages in connection with the Merger and

                                      -46-
<PAGE>

         conversion of the Company Common Stock and/or Company Preferred Stock
         into Acquiror Common Stock and/or Acquiror Series A Preferred Stock
         pursuant to the Merger, or (ii) seeking to restrain or prohibit the
         consummation of the Merger, the other transactions contemplated under
         this Agreement, or otherwise limit the right of Acquiror or its
         subsidiaries to own or operate all or any portion of the businesses or
         assets of the Company or the Surviving Corporation, which in either
         case is reasonably likely to have a Company Adverse Effect prior to or
         after the Effective Time, or an Acquiror Adverse Effect after the
         Effective Time.

                  (d) From the date of this Agreement until the Effective Time,
         Acquiror shall promptly notify the Company in writing of any pending
         or, to the knowledge of Acquiror, threatened action, proceeding or
         investigation by any Governmental Entity or any other person (i)
         challenging or seeking damages in connection with the Merger or the
         conversion of the Company Common Stock and/or Company Preferred Stock
         into Acquiror Common Stock and/or Acquiror Series A Preferred Stock
         pursuant to the Merger, or (ii) seeking to restrain or prohibit the
         consummation of the Merger or the other transactions contemplated under
         this Agreement, or in either case reasonably likely to have an Acquiror
         Adverse Effect prior to the Effective Time.

                  (e) Each of Acquiror and the Company shall cooperate with each
         other in obtaining the Tax Opinion. In connection therewith, each of
         Acquiror and the Company shall deliver to Altheimer & Gray (or other
         nationally recognized counsel selected by the Company) customary
         representation letters in form and substance reasonably satisfactory to
         such counsel and the Company and Acquiror shall use reasonable efforts
         to obtain any representation letters from appropriate stockholders and
         shall deliver any such letters obtained to Altheimer & Gray.

         SECTION 6.07   UPDATE DISCLOSURE; BREACHES. From and after the date
of this Agreement until the Effective Time, the Company, on the one hand, and
Acquiror and Acquiror Sub, on the other hand, shall promptly notify the other
by written update to its Disclosure Schedules of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any condition to the obligations of any party to effect
the Merger and the other transactions contemplated by this Agreement not to
be satisfied, or (ii) the failure of the Company or Acquiror or Acquiror Sub,
as the case may be, to comply with or satisfy any covenant or agreement to be
complied with or satisfied by it pursuant to this Agreement which would be
likely to result in any condition to the obligations of any party to effect
the Merger and the other transactions contemplated by this Agreement not to
be satisfied; provided, however, that, except as otherwise provided in this
Agreement, the delivery of any notice pursuant to this Section 6.07 shall not
be deemed to cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this Agreement, or otherwise
limit or affect the remedies available hereunder to the party receiving such
notice.

         SECTION 6.08   PUBLIC ANNOUNCEMENTS. Subject to applicable Law, each
of Acquiror and the Company shall obtain the other party's prior approval
(which shall not be unreasonably withheld) of the contents of all public
announcements (including press releases) with respect to the Merger or this
Agreement. The Company and Acquiror acknowledge and

                                      -47-
<PAGE>

agrees that any such press release or other public announcement respecting
the Merger or this Agreement shall be disseminated only in coordination
between the Company and Acquiror.

         SECTION 6.09   OBLIGATIONS OF ACQUIROR SUB. Acquiror shall, for the
benefit of the Company and its Stockholders, take all reasonable action
necessary to cause Acquiror Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth
in this Agreement.

         SECTION 6.10   CERTIFICATES. Each certificate representing
Unregistered Shares owned by a Stockholder shall bear legends substantially
as follows:

                  (a) All certificates representing Acquiror Common Stock and
         Acquiror Series A Preferred Stock shall bear a legend reading
         substantially as follows:

                  "The securities represented by this certificate were issued in
                  a private placement, without registration under the Securities
                  Act of 1933 and in reliance on the holder's representation
                  that such securities were being acquired for investment and
                  not for resale. No transfer of such securities may be made on
                  the books of the issuer unless accompanied by an opinion of
                  counsel reasonably satisfactory to the issuer, that such
                  transfer may properly be made without registration under the
                  Securities Act of 1933 or that such securities have been so
                  registered under a registration statement which is in effect
                  at the date of such transfer."

                  (b) Certificates delivered under the Escrow Agreements shall
         also bear the following endorsement:

                  "The securities represented by this certificate are also
                  subject to restrictions on transfer and to the rights of
                  issuer and issuer's affiliate, to cancel such securities, on
                  the terms and conditions set forth in an Agreement and Plan of
                  Merger and Plan of Reorganization dated as of January __, 2000
                  and an Escrow Agreement, dated as of ___________, 2000, a copy
                  of each of which may be obtained from the issuer or from the
                  holder of this certificate. No transfer of such securities
                  will be made on the books of issuer unless accompanied by
                  evidence of compliance with the terms of such agreements."

                  These legends shall be the only ones appearing on the
         certificates. The legend in (a) shall be removed by Acquiror upon
         request made on or after the second anniversary of the Effective Time
         and shall also be removed in connection with the resale of shares of
         Acquiror Common Stock pursuant to the Registration Rights Agreements.
         Upon release of any such certificates from the Escrow Agreements, the
         legend set forth in Section 6.10(b) shall be removed.

         SECTION 6.11   ACQUIROR BOARD REPRESENTATION. At the Effective Time,
the Board of Directors of Acquiror shall be reconstituted so that it is no
more than eleven (11) members and so that it contains as members such number
of directors as designated by the Principal Executives (the "BOARD
DESIGNEES"), rounded up to the next whole number, as shall cause such Board
Designees to represent that portion of the Board of Directors of Acquiror
equal to the

                                      -48-
<PAGE>

product of the total number of directors on such Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of shares of Acquiror Common Stock to be issued
pursuant to this Agreement (or issuable upon conversion of Acquiror Series A
Preferred Stock to be issued pursuant to this Agreement) and to be
beneficially owned by the Stockholders bears to the total number of shares of
Acquiror Common Stock to be outstanding at the Effective Time or then
issuable upon conversion of Acquiror Series A Preferred Stock to be then
outstanding. In order to satisfy its obligations hereunder, Acquiror further
agrees prior to the Effective Time to amend its Bylaws and to take such other
action as reasonably requested by the Company.

         SECTION 6.12   STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS.
During the period from the date hereof through the Effective Time, the
Company may not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party (other than
the Letter of Confidentiality pursuant to its terms or by written agreement
of the parties thereto). During such period, the Company shall enforce, to
the fullest extent permitted under applicable Law, the provisions of any such
agreement, including by reasonable efforts to obtain injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States of America or of any
state having jurisdiction.

         SECTION 6.13   COMPANY OPTIONS UNDER THE PLAN.

                  (a) As of the Effective Time, (i) each outstanding Company
         Option shall be assumed by Acquiror and become and represent an option
         (an "ADJUSTED OPTION") to purchase (A) the number of shares of Acquiror
         Common Stock decreased to the nearest whole share, determined by
         multiplying (I) the number of shares of Acquiror Common Stock to be
         issued upon conversion of one share of Company Common Stock pursuant to
         Section 2.01(b)(iv) of this Agreement by (II) a fraction (the "Option
         Number") the numerator of which is one and the denominator is the
         number of shares of Acquiror Common Stock to be issued upon conversion
         of one share of Company Common Stock pursuant to Section 2.01(b)(iv) of
         this Agreement, and (B) the number of shares of Series Preferred Stock
         to be issued upon conversion on one share of Company Common Stock
         pursuant to Section 2.01(b)(iv) of this Agreement by the Option Number,
         at an exercise price per Adjusted Option equal to the exercise price
         for each such Company Stock Option, divided by the Option Number
         (rounded down to the nearest whole cent), and all references in each
         such option to the Company shall be deemed to refer to Acquiror, where
         appropriate; provided, however, that the adjustments provided in this
         clause (i) with respect to any options which are "incentive stock
         options" (as defined in Section 422 of the Code) or which are described
         in Section 423 of the Code, shall be effected in a manner consistent
         with the requirements of Section 424(a) of the Code, and (ii) Acquiror
         shall assume the obligations of the Company under the Plan. The other
         terms of each Adjusted Option, and the plans or agreements under which
         they were issued, shall continue to apply in accordance with their
         terms. The date of grant of each Adjusted Option shall be the date on
         which the corresponding Company Option was granted.

                                      -49-
<PAGE>

                  (b) The Company and Acquiror agree that the Plan shall be
         amended, to the extent necessary, to reflect the transactions
         contemplated by this Agreement, including, but not limited to the
         conversion of shares of Company Class A Common Stock held or to be
         awarded or paid pursuant to the Plan, into shares of Acquiror Common
         Stock on a basis consistent with the transactions contemplated by this
         Agreement. The Company and Acquiror agree to submit the amendments to
         the Plan to their respective stockholders, if such submission is
         determined to be necessary by counsel to the Company or Acquiror after
         consultation with one another; provided, however that such approval
         shall not be a condition to the consummation of the Merger.

                  (c) Acquiror shall (i) reserve for issuance the number of
         shares of Acquiror Common Stock that will become subject to the Plan
         and (ii) issue or cause to be issued the appropriate number of shares
         of Acquiror Common Stock pursuant to the Plan, upon the exercise or
         maturation of rights existing thereunder on the Effective Time or
         thereafter granted or awarded. No later than the Effective Time,
         Acquiror shall prepare and file with the Commission a registration
         statement on Form S-8 (or other appropriate form) registering a number
         of shares of Acquiror Common Stock necessary to fulfill Acquiror's
         obligations under this Section 6.13(c). Such registration statement
         shall be kept effective and the current status of the prospectus
         required thereby shall be maintained for at least as long as Adjusted
         Options remain outstanding.

                  (d) As soon as practicable after the Effective Time, Acquiror
         shall deliver to the holders of Company Options appropriate notices
         setting forth such holders' rights pursuant to the Plan and the
         agreements evidencing the grants of such Company Options and that such
         Company Options and the related agreements shall be assumed by Acquiror
         and shall continue in effect on the same terms and conditions (subject
         to the adjustments required by this Section after giving effect to the
         Merger); provided that Acquiror shall make good faith efforts to so
         deliver such notices on the same day as the Effective Time.

                  (e) Prior to the Effective Time, the Company may cause (i)
         fifty percent (50%) of all Company Options held by each Key Employee to
         become fully vested at the Effective Time (and the remainder of such
         employee's Company Options shall vest on the date they would have
         otherwise vested absent such accelerated vesting), and (ii)
         thirty-three and one-third percent (33 1/3%) of all Company Options
         held by each employee of the Company (other than the Principal
         Executives or Key Employees) to become fully vested at the Effective
         Time (and the remainder of such employee's Company Options shall vest
         on the date they would have otherwise vested absent such accelerated
         vesting).

                  (f) Between the date hereof and the Effective Time, the
         Company will prohibit (in accordance with the terms of the Plan)
         exercises of Company Options to the extent that the issuance hereunder
         of the Merger Consideration would not be excempt from the Securities
         Act.

                                      -50-
<PAGE>

         SECTION 6.14   CONDITIONAL FUNDING.

                  (a) If the Effective Time shall not occur on or prior to March
         1, 2000 (and Acquiror possesses no right to terminate this Agreement
         under Article VIII), Acquiror shall on such date make an unsecured loan
         to the Company in immediately available funds in the amount of
         $5,000,000, with the Company's repayment obligation solely evidenced by
         a subordinated note substantially in the form of EXHIBIT D attached
         hereto.

                  (b) If the Effective Time shall not occur on or prior to April
         1, 2000 (and Acquiror possesses no right to terminate this Agreement
         under Article VIII), Acquiror shall on such date make an unsecured loan
         to the Company in immediately available funds in the amount of
         $5,000,000, with the Company's repayment obligation solely evidenced by
         a subordinated note substantially in the form of EXHIBIT D attached
         hereto.

                  (c) Any funding under Section 6.14(b) shall be in addition to
         any funding pursuant to Section 6.14(a). The Company shall not be
         required to issue any note to Acquiror in respect of a loan under
         Sections 6.14(a) or (b) until Acquiror has initiated the funding of
         such loans in immediately available funds. For the purposes of this
         Agreement, "FUNDING NOTES" shall mean the notes referenced in this
         Section 6.14.

         SECTION 6.15   EMPLOYEE AND RELATED MATTERS.

                  (a) For a period of one year following the Effective Time,
         Acquiror shall provide the Company's employees with retirement, health,
         welfare and other employee benefits that are substantially equivalent
         to, and no less favorable than, those provided to Acquiror's employees
         who are similarly situated. To the extent that service is relevant for
         eligibility and vesting (and, solely for purposes of calculating
         entitlement to vacation and sick days, benefit accruals) under any
         retirement plan, employee benefit plan, program or arrangement
         established or maintained by Acquiror or any of its subsidiaries for
         the benefit of employees located in the United States of Acquiror and
         any of its subsidiaries; such plan, program or arrangement shall (i)
         credit Company employees for service on or prior to the Effective Time
         with the Company, (ii) credit any pre-existing conditions, to the same
         extent eligible for coverage under a Company Benefit Plan and (iii)
         recognize, for purposes of annual deductible and out-of-pocket limits
         under its medical and dental plans, deductible and out-of-pocket
         expenses paid by the Company's employees in the calendar year in which
         the Effective Time occurs.

                  (b) For a period of three years following the Effective Time,
         other than as approved by the Principal Executives, Acquiror shall not
         relocate the Key Employees or the technology department to a location
         other than the Company's present location or a location connected to
         the UPSHOT division of Acquiror.

         SECTION 6.16   INDEMNIFICATION.

                  (a) From and after the Effective Time, the Surviving
         Corporation shall, and Acquiror shall cause the Surviving Corporation
         to, provide exculpation and indemnification for each Person who is now
         or has been at any time prior to the date hereof or who becomes prior
         to the Effective Time, an officer, agent, employee or

                                      -51-
<PAGE>

         director of the Company (the "COMPANY INDEMNIFIED PARTIES") which is
         the same as the exculpation and indemnification provided to the
         Company Indemnified Parties by the Company immediately prior to the
         Effective Time in its Certificate of Incorporation and Bylaws, as in
         effect on the date hereof; provided, that such exculpation and
         indemnification covers actions on or prior to the Effective Time,
         including, without limitation, all transactions contemplated by this
         Agreement (or that limitation of the indemnification obligations of
         the Escrowed Stockholders under Article IX hereof and excluding
         actions (other than with respect to appraisal rights pursuant to
         applicable Delaware Law) brought by Stockholders who did not vote
         for, or submit their written consent to approve, the Merger).

                  (b) In the event that the Acquiror or Surviving Corporation or
         any of their respective successors or assigns (i) consolidates with or
         merges into any other Person and shall not be the continuing or
         surviving corporation or entity of such consolidation or merger or (ii)
         transfers all or substantially all of its properties and assets to any
         Person, then, and in each such case, the successors and assigns of such
         entity shall assume the obligations set forth in this Section 6.16,
         which obligations are expressly intended to be for the irrevocable
         benefit of, and shall be enforceable by, each director and officer
         covered hereby.

                  (c) Acquiror guarantees, unconditionally and absolutely, the
         performance of Surviving Corporation's and Acquiror Sub's obligations
         under this Section 6.16.

                  (d) Acquiror shall cause to be maintained (to the extent
         commercially available) in effect for not less than six years from the
         Effective Time policies of directors' and officers' liability
         insurance, for the benefit of directors and officers of the Company
         prior to the Effective Time, with respect to matters occurring prior to
         the Effective Time in amounts and on a basis not less favorable than
         Acquiror provides for its officers and directors.

                  (e) Each of the Company Indemnified Parties shall be entitled
         to enforce the covenants contained in this Section 6.16 and Acquiror
         and Acquiror Sub acknowledge and agree that each Company Indemnified
         Party would suffer irreparable harm and that no adequate remedy at law
         exists for a breach of such covenants and such Company Indemnified
         Party shall be entitled to injunctive relief and specific performance
         in the event of any breach of any provision in this Section 6.16. This
         Section 6.16 is intended for the irrevocable benefit of, and to grant
         third party rights to, the Company Indemnified Parties and their
         successors, assigns and heirs and shall be binding on all successors
         and assigns of Acquiror and Acquiror Sub, including without limitation
         the Surviving Corporation.

         SECTION 6.17   COMMITMENT LOANS; FACILITY.

                  (a) Simultaneously herewith or on the next busineess day
         hereafter, Acquiror shall make an unsecured loan to the Company in
         immediately available funds in the amount of $5,000,000, with the
         Company's repayment obligation solely evidenced by a subordinated note
         substantially in the form of EXHIBIT D attached hereto (such note,

                                      -52-
<PAGE>

         together with that certain unsecured loan in the amount of $5,000,000
         made by Acquiror to the Company pursuant to that certain Promissory
         Note, dated January 6, 2000, are referenced hereinafter as the
         "COMMITMENT NOTES"). Acquiror and Acquiror Sub agree and acknowledge
         that such loan shall in no way reduce, modify or offset all or any
         portion of the Merger Consideration or the rights or remedies of the
         Company or the Stockholders whether under or at law or in equity.

                  (b) On or prior to February 28, 2000, Acquiror shall provide
         evidence reasonably satisfactory to the Company that Acquiror has a
         working capital facility with substantially the same terms as its
         current facility (the "FACILITY").

         SECTION 6.18   LISTING. Acquiror agrees to authorize for listing on
the NYSE the shares of Acquiror Common Stock comprising the Merger
Consideration (including shares of Acquiror Common Stock issuable upon
conversion of Acquiror Series A Preferred Stock), and those required to be
reserved for issuance upon exercise of Adjusted Options assumed in connection
with the Merger, by filing with the NYSE a Supplemental Listing Application
(or such other form as may be required by the NYSE) in a timely manner prior
to the Closing or otherwise in accordance with the rules and regulations of
the NYSE.

         SECTION 6.19   STRUCTURE OF MERGER. The parties hereto acknowledge
that, at the written request of the Company, the parties shall amend this
Agreement for the purpose of restructuring the Merger so that the Company is
the "Surviving Corporation" hereunder. Any such amendment shall contain
appropriate modifications to the provisions of this Agreement as if such
restructured Merger were originally the form of Merger contemplated by this
Agreement. Any such request shall be made at least ten (10) business days
prior to the Effective Time and only if this Agreement has not been
terminated pursuant to Article VIII hereof.

         SECTION 6.20   CERTAIN RESOLUTIONS. Prior to the consummation of the
Merger, and as a condition to the Company's obligations to close the Merger,
Acquiror agrees to take all actions reasonably necessary to secure an
exemption from Section 16(b) of the Securities Exchange Act of 1934, pursuant
to Rule 16b-3 under that Act, for all acquisitions, dispositions and
reacquisitions of equity securities of Acquiror to occur directly or
indirectly as a result of the Merger, pursuant to the Merger Agreement, the
related Escrow Agreements or otherwise, by each of the following persons (or
any entities in which they hold interest) who will become directors or
officers of Acquiror at the time the Merger is consummated; (provided,
however, that the foregoing agreement shall not limit Acquiror's rights or
remedies under the Merger Agreement, the related Escrow Agreements or other
agreements contemplated thereby): Bradley Keywell, Eric Lefkofsky, Stephen
Murray, and Richard Heise.

                                ARTICLE VII

                             CLOSING CONDITIONS

         SECTION 7.01   CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Effective

                                      -53-
<PAGE>

Time of the following conditions, any or all of which may be waived, in whole
or in part, to the extent permitted by applicable Law:

                  (a) NO ACTION OR PROCEEDING. No order of a court or an
         administrative agency shall be in effect which enjoins, restrains,
         conditions or prohibits the consummation of the transactions
         contemplated by this Agreement, and no Governmental Entity shall have
         commenced litigation to enjoin, restrain, or prevent consummation of
         the transactions contemplated by this Agreement.

                  (b) CONSENTS. All material approvals and Material Consents
         shall have been obtained from any and all Governmental Entities whose
         approval or consent is necessary to the authorization of this Agreement
         or the consummation of the Merger and where the failure to obtain such
         approval or consent would have an Acquiror Significant Adverse Effect
         or a Company Significant Adverse Effect. The applicable waiting
         periods, if any, together with any extensions thereof, under the HSR
         Act shall have expired or been terminated (including, without
         limitation, with respect to the acquisition of Acquiror Common Stock or
         Acquiror Series A Preferred Stock by any Stockholder of the Company).

                  (c) NYSE LISTING. The shares of Acquiror Common Stock issuable
         to the Stockholders as contemplated by this Agreement (including shares
         of Acquiror Common Stock issuable upon conversion of Acquiror Series A
         Preferred Stock issuable to the Stockholders as contemplated by this
         Agreement), shall have been approved for listing on the NYSE, subject
         to official notice of issuance.

         SECTION 7.02   ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND
ACQUIROR SUB. The obligations of Acquiror and Acquiror Sub to effect the
Merger and the other transactions contemplated in this Agreement are also
subject to the following conditions:

                  (a) REPRESENTATIONS AND WARRANTIES. Each of the
         representations and warranties of the Company contained in this
         Agreement shall be true and correct in all material respects, except
         where the failure to be so true and correct would not have a Company
         Significant Adverse Effect, in each case as though made on and as of
         the Effective Time, and Acquiror shall have received a certificate of
         the Chief Executive Officer (acting in such capacity) of the Company to
         that effect (which certificate shall be included in EXHIBIT E hereto).

                  (b) AGREEMENTS AND COVENANTS; OTHER MATTERS. The Company shall
         have performed or complied in all material respects with all material
         agreements and covenants required by this Agreement to be performed or
         complied with by it on or prior to the Effective Time, and Acquiror
         shall have received a certificate of the Chief Executive Officer
         (acting in such capacity) of the Company to that effect (which
         certificate shall be included in EXHIBIT E hereto).

                  (c) EMPLOYMENT AND OTHER AGREEMENTS. Acquiror, on behalf of
         the Surviving Corporation, shall have received from (i) Brad, an
         executed Employment Agreement in the form of EXHIBIT F hereto (the
         "BRAD EMPLOYMENT AGREEMENT"), and (ii) Eric, an

                                      -54-
<PAGE>

         executed Employment Agreement in the form of EXHIBIT G hereto (the
         "ERIC EMPLOYMENT AGREEMENT"), and all such Employment Agreements
         shall be in full force or become effective at and as of the
         Effective Time (the Company hereby acknowledges and agrees that the
         execution of the Employment Agreements by each Principal Executive
         and their respective promises to perform their obligations therein
         are a material inducement to the execution and performance by
         Acquiror and Acquiror Sub of their respective obligations herein).
         In addition, Acquiror shall have received from each Principal
         Executive an executed Agreement and Covenant Against Unfair
         Competition, in the form of EXHIBIT H hereto.

                  (d) STOCKHOLDER AND DIRECTOR RESOLUTIONS; CERTIFICATE OF
         INCORPORATION AND BYLAWS. Acquiror shall have received (i) resolutions
         of the Company's Stockholders and directors, dated on or prior to the
         date hereof, and certified by the Company's Chief Executive Officer,
         acting in such capacity, approving, ratifying and confirming the
         consummation of the Merger and other transactions contemplated by this
         Agreement, and (ii) copies of the Certificate of Incorporation and
         Bylaws of the Company certified by the Company's Chief Executive
         Officer, acting in such capacity, as being the true Certificate of
         Incorporation and Bylaws of the Company as of the Effective Date.

                  (e) OTHER DOCUMENTS AND INSTRUMENTS. Acquiror shall have
         received such other certificates, instruments and other documents
         reasonably required to effectuate the transactions contemplated hereby,
         or to confirm to Acquiror the effectiveness thereof.

                  (f) SATISFACTION OF DEBTS. The Principal Stockholders and all
         other officers and directors of the Company, together with their
         spouses, blood relations and affiliates, shall have taken reasonable
         efforts to pay in full, with interest if applicable, all of their
         outstanding indebtedness to the Company, whether or not then due.

                  (g) CERTIFICATES OF GOOD STANDING. Acquiror shall have
         received Certificates of Good Standing from the Secretary of State of
         Delaware and Illinois with respect to the Company dated within four (4)
         days of the Effective Time.

                  (h) SHAREHOLDER APPROVAL. The Shareholder Approval shall have
         been obtained.

                  (i) ESCROW AGREEMENTS. Acquiror shall have received from the
         Escrowed Stockholders executed Escrow Agreements.

                  (j) EXERCISE OF WARRANT. Acquiror shall have received evidence
         reasonably satisfactory to Acquiror demonstrating that Silicon Valley
         Bank ("SVB") has either (A) exercised that certain Warrant to Purchase
         Stock, issued to Silicon Valley Bank by the Company on September 16,
         1999 (the "SILICON WARRANT"), for shares of Company Series B Preferred
         Stock in accordance with its terms and converted such Company Series B
         Preferred Stock into Company Class B Common Stock or (B) consented to
         treat such Warrant as if so exercised and converted immediately prior
         to the Merger such that in the Merger SVB receives the Merger
         Consideration to be received by holders of Company Common Stock as
         provided in Section 2.01(a) hereof.

                                      -55-
<PAGE>

                  (k) SIDE LETTER. Acquiror shall have received from each
         Principal Executive a side letter in the form of EXHIBIT I attached
         hereto, whereby such Principal Executive agrees to indemnify Acquiror
         and the Surviving Corporation for liabilities incurred as a result of
         the conduct of Persons (other than the Company, Acquiror, Acquiror Sub
         and interest therein) owned, directly or indirectly, by such Principal
         Executive.

         SECTION 7.03  CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions:

                  (a) REPRESENTATIONS AND WARRANTIES. Each of the
         representations and warranties of Acquiror and Acquiror Sub contained
         in this Agreement shall be true and correct in all material respects,
         except where the failure to be so true and correct would not have an
         Acquiror Significant Adverse Effect, in each case as though made on and
         as of the Effective Time, and the Company shall have received a
         certificate of the Chief Financial Officer of Acquiror and Acquiror Sub
         to that effect (which certificate shall be included in EXHIBIT E
         hereto).

                  (b) AGREEMENTS AND COVENANTS. Acquiror and its subsidiaries
         shall have performed or complied in all material respects with all
         material agreements and covenants required by this Agreement to be
         performed or complied with by them on or prior to the Effective Time,
         and the Company shall have received a certificate of the Chief
         Financial Officer of Acquiror and Acquiror Sub to that effect (which
         certificate shall be included in EXHIBIT E hereto).

                  (c) EMPLOYMENT AND NONCOMPETITION AGREEMENTS. Each Principal
         Executive entering into an Employment Agreement and an Agreement and
         Covenant Against Unfair Competition with Acquiror and/or the Surviving
         Corporation shall have received an executed counterpart thereof from
         Acquiror and/or the Surviving Corporation.

                  (d) ESCROW AGREEMENTS. The Escrowed Stockholders shall have
         received from Acquiror and Acquiror Sub executed Escrow Agreements.

                  (e) CERTIFICATES OF GOOD STANDING. The Company shall have
         received Certificates of Good Standing from the Secretary of State of
         Delaware and Illinois with respect to Acquiror and Acquiror Sub dated
         within four (4) days of the Effective Time.

                  (f) TAX OPINION. The Company shall have received an opinion
         dated the Closing Date from Altheimer & Gray (or other nationally
         recognized counsel selected by the Company ) (the "TAX OPINION"), which
         may be based upon such certificates and letters dated the Closing Date
         as are acceptable to such counsel, to the effect that, the merger will
         qualify as a reorganization within the meaning of Code ss. 368(a) and
         each of the parties to this Agreement shall be a party to such
         reorganization and therefore, for federal income tax purposes, the
         Stockholders shall recognize no income, gain or loss upon the Merger
         except to the extent of any cash consideration actually received or
         deemed received.

                                      -56-
<PAGE>

                  (g) ACQUIROR RELEASES. Each of the Principal Executives shall
         have received from Acquiror a Release of Claims in the form of EXHIBIT
         J attached hereto.

                  (h) ACQUIROR SERIES A PREFERRED STOCK. Acquiror shall have
         filed with the Secretary of State of the State of Illinois a Statement
         of Resolution Establishing Series (or an Amendment to its Articles of
         Incorporation), which shall designate the Acquiror Series A Convertible
         Preferred Stock in accordance with the terms set forth on EXHIBIT K
         attached hereto.

                  (i) OTHER DOCUMENTS AND INSTRUMENTS. The Company shall have
         received such other certificates, instruments and other documents
         reasonably required to effectuate the transactions contemplated hereby,
         or to confirm the effectiveness thereof.

                  (j) REGISTRATION RIGHTS AGREEMENT. Each Stockholder executing
         a Registration Rights Agreement pursuant to Section 6.03 hereof shall
         have received an executed counterpart Registration Rights Agreement
         from Acquiror.

                  (k) The Shareholder Approval shall have been received.

                                   ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER

         SECTION 8.01   TERMINATION. Subject to Section 8.02 and 8.03 hereof,
this Agreement and the Merger may be terminated at any time prior to the
Effective Time in the following manner:

                  (a)      by mutual consent of Acquiror and the Company;

                  (b) by Acquiror, if (i) (A)there has been a material breach by
         the Company of any material covenant or agreement on its part to be
         performed under this Agreement, and such breach is not cured within
         thirty (30) days (or such earlier time one day before this Agreement
         may be terminated pursuant to paragraph (e) below) following receipt by
         the Company of written notice thereof from Acquiror (or is not capable
         of cure), or (B) any one or more of the representations and warranties
         of the Company contained in Article III of this Agreement is in
         material breach and such breach is not cured within thirty (30) days
         (or such earlier time one day before this Agreement may be terminated
         pursuant to paragraph (e) below) following receipt by the Company of
         written notice thereof from Acquiror (or is not capable of cure), and
         (ii) the aggregate potential Damages which would reasonably be likely
         to be sustained, directly or indirectly, by Acquiror as a result of
         such breach exceed Fourteen Million Dollars ($14,000,000) (a "COMPANY
         SIGNIFICANT ADVERSE EFFECT");

                  (c) by the Company, if (i) (A) there has been a material
         breach by Acquiror or Acquiror Sub of any material covenant or
         agreement on either of their part to be performed under this Agreement,
         and such breach is not cured within thirty (30) days (or such earlier
         time one day before this Agreement may be terminated pursuant to
         paragraph (e) below) following receipt by Acquiror of written notice
         thereof from the

                                      -57-
<PAGE>

         Company (or is not capable of cure), or (B) any one or more of the
         representations and warranties of Acquiror or Acquiror Sub contained
         in Article IV of this Agreement is in material breach and such
         breach is not cured within thirty (30) days (or such earlier time
         one day before this Agreement may be terminated pursuant to
         paragraph (e) below) following receipt by Acquiror of written notice
         thereof from the Company (or is not capable of cure), and (ii)
         (other than with respect to payment of the Merger Consideration in
         which case this clause (ii) shall not apply) the aggregate potential
         Damages which would reasonably be likely to be sustained, directly
         or indirectly, by the Company as a result of such breach exceed
         Forty Million Dollars ($40,000,000) (an "ACQUIROR SIGNIFICANT
         ADVERSE EFFECT");

                  (d) by Acquiror or the Company if any decree, permanent
         injunction, judgment, order or other action by any court of competent
         jurisdiction or any Governmental Entity preventing or prohibiting
         consummation of the Merger shall have become final and nonappealable;
         or

                  (e) by Acquiror or the Company if (i) the Shareholder Approval
         shall not have been obtained at the Shareholders Meeting duly convened
         therefor or at any adjournment or postponement thereof, or (ii) the
         Merger shall not have been consummated on or prior to April 15, 2000
         (the "OUTSIDE DATE"); PROVIDED, HOWEVER, that, at the request of any
         party, the Outside Date shall be automatically extended until April 29,
         2000.

                  (f) by the Company (i) if, by February 28, 2000, Acquiror has
         not renewed the Facility, or (ii) if Acquiror takes action pursuant to
         its fiduarciary duties as contemplated by Section 5.04(m) in connection
         with an Acquiror Competing Transaction.

         SECTION 8.02  EFFECT OF TERMINATION. Except as provided in Section
8.03, upon the proper termination of this Agreement in accordance with the
provisions of Section 8.01 hereof, this Agreement shall be null and void, and
all other rights and obligations of Acquiror, Acquiror Sub, the Company, and
the Stockholders under this Agreement shall forthwith cease and have no
further force or effect; provided that the provisions of Sections 6.14 and
6.17 shall remain in full force and effect and the payments made pursuant
thereto shall continue to be governed by the terms thereof and, to the extent
applicable, any notes delivered pursuant thereto. In the event of the
termination of this Agreement as provided in Section 8.01, each party, if so
requested by the other party, will return promptly every document furnished
to it by or on behalf of the other party in connection with the transaction
contemplated hereby, whether so obtained before or after the execution of
this Agreement, and any copies thereof (except for copies of documents
publicly available) which may have been made, and will cause its
representatives and any representatives of financial institutions and
investors and others to whom such documents were furnished promptly to return
such documents and any copies thereof any of them may have made. The
obligation of that certain Letter of Confidentiality, dated November 24, 1999
(the "LETTER OF CONFIDENTIALITY"), by and between the Company and Acquiror,
shall terminate upon any termination of this Agreement. This Section 8.02
shall survive any termination of this Agreement.

                                      -58-
<PAGE>

         SECTION 8.03   FEES AND EXPENSES; OTHER MATTERS.

                  (a) Except as specifically provided in subsections (c) and
         (d), below, all "Expenses" (as hereafter defined) incurred by the
         parties hereto shall be borne solely and entirely by the party which
         has incurred the same in the event this Agreement is terminated;
         provided, however, that if the Merger becomes effective, up to $500,000
         of the accounting and legal Expenses of the Stockholders and the
         Company shall be paid by the Company or, at the Company's option, by
         Acquiror in cash, and any Expenses above such amount shall reduce the
         payment of the Cash Consideration in accordance with Section 2.01
         hereto. Notwithstanding anything herein to the contrary, Expenses may
         be paid by a party at any time prior to the Effective Time, and if so
         paid prior to the Effective Time shall nonethless be taken into account
         in calculating such $500,000 of Expenses.

                  (b) As used in this Agreement, the term "EXPENSES" shall
         include all out-of-pocket expenses and disbursements (including,
         without limitation, all fees and expenses of counsel, accountants,
         experts and consultants to a party hereto and its affiliates) incurred
         by a party or on its behalf or on behalf of its stockholders or
         Affiliates in connection with or related to the authorization,
         preparation, negotiation and execution of this Agreement, the
         preparation of the Proxy Statement and all other matters related to the
         closing of the transactions contemplated herein.

                  (c) (i) The Company agrees that if Acquiror shall terminate
         this Agreement pursuant to Section 8.01(b) and without fault of its
         own, the Company shall, on the Payment Date , jointly and severally pay
         to Acquiror an amount equal to the sum of Acquiror's and Acquiror Sub's
         Expenses incurred in connection with this Agreement up to a maximum of
         $500,000.

                           (ii) Acquiror agrees that if the Company shall
         terminate this Agreement pursuant to Section 8.01(c) and without fault
         of its own, Acquiror shall, on the Payment Date, pay to the Company an
         amount equal to the sum of the Company's Expenses incurred in
         connection with this Agreement up to a maximum of $500,000.

                           (iii) Acquiror agrees that if either Acquiror or the
         Company shall terminate this Agreement pursuant to Sections 8.01(e)(i)
         or the Company shall terminate this Agreement pursuant to 8.01(f),
         Acquiror shall, on the Payment Date, pay to the Company the sum of the
         Company's Expenses incurred in connection with this Agreement up to a
         maximum of $500,000 and aggregate actual Damages sustained, directly or
         indirectly, by the Company as a result of such termination, not to
         exceed Ten Million Dollars ($10,000,000) (payment of which Damages
         shall, to the extent of outstanding indebtedness of the Company under
         the Commitment Notes, be satisfied by set-off against such outstanding
         indebtedness under the Commitment Notes).

                  (d) The parties hereto agree that, in the event of a
         termination of this Agreement pursuant to Section 8.01, the only relief
         and remedy available to either party therefor and the maximum monetary
         liability of either party therefor shall be as provided in this Section
         8.03.

                                      -59-
<PAGE>

                  (e) Any demand for the payment of Expenses shall itemize in
         reasonable detail all qualifying disbursements and accruals, and
         notwithstanding one party's payment of another party's Expenses, the
         party incurring such items may update and/or supplement its demand at
         any time and from time to time, until the expiration of sixty (60) days
         from the date of the initial demand. All Expenses owing in accordance
         with this Section 8.03 shall be made by wire transfer of immediately
         available funds to an account designated by the party so entitled to
         receive payment therefor and shall be made not later than two (2)
         business days after delivery by one party to the other of demand and
         proper itemization thereof ("PAYMENT DATE").

                  (f) (i) The Company agrees that (A) it shall promptly pay to
         Acquiror the aggregate actual Damages sustained, directly or
         indirectly, by Acquiror, not to exceed Ten Million Dollars
         ($10,000,000) and (B) all outstanding Funding Notes and Commitment
         Notes shall become due and immediately payable, if Acquiror shall
         terminate this Agreement pursuant to Section 8.01(b) under
         circumstances in which the Company's breach of this Agreement giving
         rise to such right of termination by Acquiror was a bad faith,
         intentional and willful and material breach of this Agreement, made
         with knowledge and understanding that the action or inaction, as the
         case made be, giving rise to such breach would in fact constitute such
         an intentional and willful and material breach.

                           (ii) The Company agrees that all outstanding Funding
         Notes and Commitment Notes shall become due and payable (at the 11%
         default interest rate set forth therein) within six (6) months after
         Acquiror's termination of this Agreement pursuant to Section 8.01(b)
         under circumstances in which the Company's breach of this Agreement
         giving rise to such right of termination by Acquiror was not in bad
         faith or willful (to the degree set forth in subsection (i) above.

                  (g) (i) Acquiror agrees that it shall promptly pay to the
         Company the aggregate actual Damages sustained, directly or indirectly,
         by the Company, not to exceed Ten Million Dollars ($10,000,000), (which
         payment shall, to the extent of the outstanding indebtedness under the
         Commitment Notes, be satisfied by Acquiror's set-off against the
         outstanding indebtedness owed by the Company under the Commitment
         Notes) if the Company shall terminate this Agreement pursuant to
         Section 8.01(c) under circumstances in which Acquiror's breach of this
         Agreement giving rise to such right of termination by the Company was a
         bad faith, intentional and willful and material breach of this
         Agreement, made with knowledge and understanding that the action or
         inaction, as the case made be, giving rise to such breach would in fact
         constitute such an intentional and willful and material breach.

                           (ii) Acquiror agrees that the respective maturity
         dates of the outstanding Commitment Notes and Funding Notes shall be
         extended by one (1) year if the Company's termination of this Agreement
         pursuant to Section 8.01(c) occurs under circumstances in which
         Acquiror's breach of this Agreement giving rise to such right of
         termination by the Company was not in bad faith or willful (to the
         degree set forth in subsection (i) above); provided that mandatory
         prepayment provisions under the terms of such notes shall remain in
         effect.

                                      -60-
<PAGE>

                  (h) The parties hereto also agree that, in the event of a
         termination of this Agreement pursuant to Section 8.01(e)(ii), which
         termination results from delays caused by the Commission's review of
         the Proxy Statement or by review under the HSR Act, the respective
         maturity dates of the Commitment Notes and Funding Notes shall be
         extended by one (1) year. Unless already extended pursuant to the
         previous sentence or accelerated pursuant to this Article VIII, the
         respective maturity dates of the Commitment Notes and Funding Notes
         shall be extended by one year if (i) this Agreement has been properly
         terminated pursuant to Section 8.01, (ii) the Company is not a
         breaching party of this Agreement and (iii) the Company is not able to
         repay its indebtedness reflected in any such note in the ordinary
         course of its business; provided that mandatory prepayment provisions
         under the terms of such notes shall remain in effect.

                                   ARTICLE IX

                             INDEMNIFICATION MATTERS

         SECTION 9.01  SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding the closing of the Merger, the representations
and warranties of the Company, Acquiror and Acquiror Sub contained in this
Agreement and in any certificate delivered hereunder shall survive the
Effective Time (the "SURVIVAL PERIOD") until the expiration of one (1) year
following the Effective Time. The covenants and agreements contained herein
to be performed or complied with on or prior to the Effective Time shall
expire at the Effective Time. The covenants and agreements contained herein
to be performed or complied with after the Effective Time and the parties'
liabilities in respect of a breach thereof (other than the covenant to
indemnify against breaches of the representations and warranties of the
parties), shall survive the Effective Time until such covenants and
agreements have been performed or complied with, or until they shall have
expired in accordance with their respective terms.

         SECTION 9.02  INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF
ACQUIROR. From and after the Effective Time, Acquiror and the Surviving
Corporation shall be indemnified and saved harmless from and against any and
all costs, expenses, losses, damages and liabilities (including reasonable
legal and other professional fees and costs of investigation) (collectively,
"DAMAGES") incurred or suffered directly or indirectly by Acquiror or the
Surviving Corporation and proximately resulting from the breach of any one or
more of the representations or warranties contained in this Agreement and in
any certificate delivered hereunder or covenants or agreements of the Company
made in this Agreement and in any certificate delivered hereunder; payment
thereof shall be made only by the delivery to Acquiror of shares of Acquiror
Common Stock or shares of Acquiror Series A Preferred Stock pursuant to the
Escrow Agreements. Except as provided in Section 9.03 hereof, such
indemnification and all Damages due to Acquiror or Acquiror Sub under this
Agreement shall be subject to the following limitations:

                  (a) in valuing the Acquiror Common Stock (including shares of
         Acquiror Common Stock issuable upon conversion of Acquiror Series A
         Preferred Stock), for purposes of payment of any indemnification
         obligation under this Section 9.02(a), such shares of Acquiror Common
         Stock shall in all events be valued at the Share Value; in valuing the
         Acquiror Series A Preferred Stock for payment of any indemnification
         obligation under this Section 9.02(a), such Shares of Acquiror Series A
         Preferred Stock

                                      -61-
<PAGE>

         shall in all events be valued at Liquidation Value (as such terms
         defined is the Certificate of Designation set forth on Exhibit K
         hereto). Any such set-off against the Acquiror Common Stock or
         Acquiror Series A Preferred Stock shall be treated as a reduction of
         the Merger Consideration received by the Stockholders in the Merger,
         and any and all Returns filed in connection with the Merger after
         such set-off shall so reflect; and

                  (b) Acquiror shall not be entitled to any recovery under this
         Section 9.02 unless a claim for indemnification is made within the one
         (1) year period immediately following the Effective Time.

                  (c) Acquiror shall not be entitled to recover under this
         Section 9.02 until the total amount which Acquiror would recover under
         Section 9.02, but for this paragraph, exceeds Five Million Dollars
         ($5,000,000), and then such Indemnitee shall be entitled to recover
         only for the excess over Five Million Dollars ($5,000,000);

                  (d)      Acquiror shall not be entitled to recover:

                           (i) with respect to consequential damages of any
         kind, damages consisting of business interruption or lost profits
         (regardless of the characterization thereof), damages computed on a
         multiple of revenues or earnings or projected revenue or earnings or
         any similar basis, or with respect to punitive damages;

                           (ii) to the extent the aggregate claims under this
         Section 9.02 exceed the Cap; or

                           (iii) to the extent the subject matter of the claim
         is covered by insurance (including title insurance) held by the
         Company, the Surviving Corporation or Acquiror.

         SECTION 9.03  OTHER PROVISIONS. Anything in this Agreement to the
contrary notwithstanding, following the Effective Time, any and all claims
for indemnification by Acquiror pursuant to Section 9.02 hereof shall be
enforceable solely to the extent of the Escrow Shares in the escrow accounts
to be established under and governed in accordance with the Escrow Agreements
referenced in Section 2.04. The shares of Acquiror Common Stock and Acquiror
Series A Preferred Stock held in such Escrow Agreements referenced in Section
2.04 shall be deemed to secure Acquiror and Acquiror Sub's rights to
indemnification hereunder and shall be Acquiror's and Acquiror Sub's sole
recourse for any claims for indemnification under Section 9.02 hereof.

         SECTION 9.04  ACQUIROR'S INDEMNIFICATION. From and after the
Effective Time, Acquiror covenants and agrees to indemnify and save harmless
all Stockholders from and against any and all Damages incurred or suffered
directly or indirectly by them and proximately resulting from or attributable
to the breach of any one or more of the representations or warranties or
covenants or agreements of Acquiror or Acquiror Sub made in this Agreement.
Such indemnification by Acquiror and all Damages due to Stockholders or the
Company under this Agreement shall be subject to the following limitations:

                                      -62-
<PAGE>

                  (a) the Stockholders shall not be entitled to any recovery
         under this Section 9.04 unless a claim for indemnification is made
         within the one (1) year period immediately following the Effective
         Time.

                  (b) the Stockholders shall not be entitled to recover under
         this Section 9.04 until the total amount which all Stockholders would
         recover under Section 9.04, but for this paragraph, exceeds Fifteen
         Million Dollars ($15,000,000), and then such Indemnitees shall be
         entitled to recover only for the excess over Fifteen Million Dollars
         ($15,000,000);

                  (c)      the Stockholders shall not be entitled to recover:

                           (i) with respect to consequential damages of any
         kind, damages consisting of business interruption or lost profits
         (regardless of the characterization thereof), damages computed on a
         multiple of revenues or earnings or projected revenue or earnings or
         any similar basis, or with respect to punitive damages; or

                           (ii) to the extent the aggregate claims under this
         Section 9.04 exceed Twenty Nine Million Dollars ($29,000,000).

         SECTION 9.05   INDEMNIFICATION PROCEDURES.

                  (a) In the event that any party hereto (which, for the
         purposes of this Section 9.05, includes all Stockholders) shall sustain
         or incur any Damages in respect of which indemnification may be sought
         by such party pursuant to this Agreement, the party to be indemnified
         hereunder (the "Indemnitee") shall assert a claim for indemnification,
         prior to the expiration of the applicable indemnification period by
         serving written notice on the party providing indemnification (the
         "Indemnitor"), stating the nature and basis of such claim.

                  (b) In case any party has received actual notice of any claim
         asserted by a third party or any action or administrative or other
         proceeding in respect of which claim, action or proceeding such party
         believes, in good faith, indemnity properly may be sought against the
         other party pursuant to this Agreement, the Indemnitee shall, within
         twenty (20) days of receiving such notice, give notice thereof in
         writing to the Indemnitor, but failure to give such notice within such
         time period shall relieve the Indemnitor of its indemnification
         obligation only to the extent of actual prejudice resulting therefrom.
         Within fifteen (15) days after receipt of notice of such claim, action
         or proceeding, the Indemnitor may give the Indemnitee written notice of
         its election to conduct the defense of such claim, action or
         proceeding; provided, however, that the Indemnitee shall have the right
         to participate in the defense thereof, but such participation shall be
         solely at the expense of the Indemnitee, without a right of further
         reimbursement. Until the Indemnitee has received notice of the
         Indemnitor's election whether to defend any claim, action or
         proceeding, the Indemnitee shall take reasonable steps to defend (but
         may not settle) such claim, action or proceeding. If the Indemnitor has
         not so notified the Indemnitee in writing within the time hereinabove
         provided of its election to conduct the defense of such claim, action
         or proceeding, the Indemnitee shall conduct the defense of

                                      -63-
<PAGE>

         any such claim, action or proceeding; provided that the Indemnitee
         shall not at any time settle, compromise or satisfy any such claim,
         action or proceeding without the written consent of the Indemnitor.
         Any such settlement, compromise or satisfaction made by the
         Indemnitee with the Indemnitor's consent of, or any such final
         judgment or decree entered in, any claim, action or proceeding
         defended only by the Indemnitee shall be binding upon the
         Indemnitor. The Indemnitor with respect to such Damages shall be
         subrogated to the right of action, if at all, of the Indemnitee
         against any other person arising from the matter from which the
         claim for Damages has arisen.

         SECTION 9.06  INDEMNIFICATION EXCLUSIVE REMEDY. Indemnification
pursuant to the provisions of this Article IX shall be the exclusive remedy
of the parties for any misrepresentation or breach of any warranty or
covenant contained herein or in any closing certificate required hereunder or
for any state of facts which could be deemed to constitute such a breach if
properly asserted. Without limiting the generality of the preceding sentence,
no legal action sounding in tort or strict liability may be maintained by any
party.

                                   ARTICLE X

                               GENERAL PROVISIONS

         SECTION 10.01  NOTICES. All notices and other communications given
or made pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given or made, and shall be effective upon receipt, if
delivered personally, or the next business day if sent by reputable overnight
courier to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission to the telecopier number specified below (with a copy
sent by overnight courier or delivered as provided hereinabove):

         If to Acquiror or Acquiror Sub:

                  HA-LO Industries, Inc.
                  5980 West Touhy Avenue
                  Niles, Illinois 60714
                  Attention:  Gregory J. Kilrea, CFO
                  Facsimile number:  847.647.4970

         with a copy to:

                  Barry J. Shkolnik
                  Neal, Gerber & Eisenberg
                  Two N. LaSalle Street
                  Suite 2100
                  Chicago, Illinois  60602
                  Facsimile number:  312.269.1747

                                      -64-
<PAGE>

         If to the Company:

                  Starbelly.com, Inc.
                  1225 W. Morse Avenue
                  Chicago, Illinois 60626
                  Attention:  Eric Lefkofsky
                  Facsimile number:  773.262.6694

         with a copy to:

                  Peter H. Lieberman
                  Altheimer & Gray
                  10 South Wacker Drive
                  Chicago, Illinois 60606
                  Facsimile number:  312.715.4800

         SECTION 10.02  AMENDMENT. This Agreement may only be amended by the
parties hereto by an instrument in writing signed by all of such parties.

         SECTION 10.03  WAIVER. Any party may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive in writing any inaccuracies in the representations and warranties of
the other party contained in this Agreement or in any document delivered
pursuant to this Agreement, and (iii) waive compliance by the other party
with any of the agreements or conditions contained in this Agreement. Any
such extension or waiver shall only be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.

         SECTION 10.04  HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. As used herein, "including" means
"including, without limitation."

         SECTION 10.05  SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by a court of
competent jurisdiction, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible in
an acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible. In the event the parties are unable to
agree upon any such modification, this Agreement shall remain in full force
and effect without the deleted provision.

         SECTION 10.06  ENTIRE AGREEMENT. This Agreement (together with the
Exhibits, and the Company Disclosure Schedules and Acquiror Disclosure
Schedules and the other documents delivered pursuant hereto), constitutes the
entire agreement of the parties and supersede all prior agreements and
undertakings, both written and oral, between the parties, or any of them,
with respect to the subject matter hereof, except for the Letter of
Confidentiality (which shall remain in full force and effect in accordance
with the terms and conditions

                                      -65-
<PAGE>

contained therein, notwithstanding anything contained in this Agreement which
can be construed to the contrary; such Letter of Confidentiality shall be
deemed void at the Effective Time) and, except as otherwise expressly
provided herein, is not intended to confer upon any other Person any rights
or remedies hereunder. The inclusion of any item in the Company Disclosure
Schedules or the Acquiror Disclosure Schedules shall not be deemed evidence
of the materiality of such item for purposes of this Agreement. The parties
make no representations or warranties to each other, except as contained in
this Agreement, and any and all prior representations and warranties made by
any party or its representatives, whether orally or in writing, shall be
deemed to have been merged into this Agreement, it being intended that no
such prior representations or warranties shall survive the execution and
delivery of this Agreement. Acquiror and Acquiror Sub acknowledge that they
have conducted an independent investigation of the financial condition,
assets (including, without limitation, the Company's Intellectual Property
and the Company's website), liabilities, properties, results of operations
and prospects of the Company in making its determination as to the propriety
of the transactions contemplated by this Agreement and the agreements
ancillary hereto, and in entering into this Agreement, have relied solely on
the results of said investigation and on the representations and warranties
of the Company expressly contained in this Agreement. The Company
acknowledges that it has conducted an independent investigation of the
financial condition, assets, liabilities, properties, results of operations
and prospects of Acquiror in making its determination as to the propriety of
the transactions contemplated by this Agreement and the agreements ancillary
hereto, and in entering into this Agreement, have relied solely on the
results of said investigation and on the representations and warranties of
Acquiror expressly contained in this Agreement.

         SECTION 10.07  SPECIFIC PERFORMANCE. Notwithstanding any termination
right granted in Article VIII, in the event of the nonfulfillment of any
condition to a party's closing obligations, in the alternative, such party
may elect to do one of the following: (i) proceed to close despite the
nonfulfillment of any closing condition, it being understood that
consummation of the Closing shall not be deemed a waiver of a breach of any
representation, warranty or covenant and of such party's rights and remedies
with respect thereto to the extent that such party shall have knowledge of
such breach and the Closing shall nonetheless occur; (ii) decline to close,
terminate this Agreement as provided in Article VIII, and thereafter seek
damages to the extent, but only to the extent, permitted in Article VIII; or
(iii) seek specific performance of the obligations of the other party. Each
party hereby agrees that in the event of any breach by such party of this
Agreement, the remedies available to the other party at law would be
inadequate and that such party's obligations under this Agreement may be
specifically enforced. The parties hereto recognize and agree that in the
event that, in breach of this Agreement, a party refuses to consummate the
Merger, money damages would be inadequate and the other party would have no
adequate remedy at law. Accordingly, the parties hereto agree that such a
party shall have the right, in addition to any other rights and remedies
existing in its favor, to enforce its rights and the other parties'
obligations under this Agreement by an action or actions for specific
performance, injunctive and/or equitable relief, without proof of actual
damages and without posting a bond or other security, in order to enforce or
prevent any violations (whether anticipatory, continuing or future) of this
Agreement. The rights granted under this Section 10.07 shall be in addition
to any other remedies available pursuant to this Agreement.

         SECTION 10.08  ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the written consent of all parties
hereto.

                                      -66-
<PAGE>

         SECTION 10.09  PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party, and nothing in this
Agreement, express or implied, other than the right to receive the
consideration payable in the Merger pursuant to Article II and the rights
under Sections 6.01, 6.03 and 6.16, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.

         SECTION 10.10  GOVERNING LAW. Except to the extent that Delaware Law
governs the Merger, this Agreement shall be governed by and construed in
accordance with the Laws of the State of Illinois, regardless of the Laws
that might otherwise govern under applicable principles of conflicts of law.

         SECTION 10.11  COUNTERPARTS. This Agreement may be executed in or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.

                                      -67-
<PAGE>

         IN WITNESS THEREOF, Acquiror, Acquiror Sub and the Company have caused
this Agreement to be executed as of the date first written above, in the case of
each corporate entity, by their respective officers duly authorized.

                                    HA-LO INDUSTRIES, INC.,  an Illinois
                                    corporation

                                    By:
                                         ----------------------------------
                                    Its:
                                         ----------------------------------

                                    HA-LO INDUSTRIES, INC., a Delaware
                                    corporation

                                    By:
                                         ----------------------------------
                                    Its:
                                         ----------------------------------

                                    STARBELLY.COM, INC., a Delaware corporation

                                    By:
                                         ----------------------------------
                                    Its:
                                         ----------------------------------

                                      -68-<PAGE>

                                                                   Exhibit 10.64

                                 PROMISSORY NOTE

$5,000,000.00                                                   JANUARY 6, 2000

         FOR VALUE RECEIVED, the undersigned, STARBELLY.COM, INC., a Delaware
Corporation ("Company"), hereby promises to pay to the order of HA-LO
INDUSTRIES, INC., an Illinois Corporation, the principal sum of FIVE MILLION AND
NO/100THS DOLLARS ($5,000,000.00) (the "Principal Balance"), plus interest
thereon as set forth below, in accordance with the following:

         I. INTEREST RATE. The Principal Balance shall bear interest at 6% per
annum. Interest shall be computed on the basis of a year consisting of 365 days
and charged for the actual number of days during the period for which the
Principal Balance is outstanding. If the Principal Balance is not paid when due
under Article II and III hereof, then the Principal Balance shall bear interest
at the rate of 11% per annum from the date of default.

         II. PAYMENT. The Principal Balance, together with all accrued and
unpaid interest on the Principal Balance, shall be payable on December 31, 2000
(the "Maturity Date"). Payment shall be made in lawful money of the United
States of America by payment to HA-LO Industries, Inc. either by wire transfer
or by certified check at the following address:

                              5980 West Touhy,
                              Niles, Illinois 60714

         III. PREPAYMENTS. This Promissory Note may be prepaid in whole or in
part at any time, without penalty or premium. Prepayment of the Principal
Balance and accrued and unpaid interest on the Principal Balance shall be made
if the Company obtains additional equity financing(s) in the amount of at least
FIVE MILLION DOLLARS AND NO/100THS DOLLARS ($5,000,000) or upon the occurrence
of an initial public offering (either being a "Capital Investment"). In the
event such prepayment shall be required, it shall be made to the extent of the
proceeds of the Capital Investment (up to the amount due) on or prior to the
expiration of five (5) business days from the date the Company receives such
proceeds from the Capital Investment.

         IV. GOVERNING LAW. This Promissory Note shall be construed in
accordance with and governed by the laws and decisions of the State of Illinois.
Any disputes arising under the terms of this Promissory Note shall be resolved
by and within Illinois courts.

         V. FEES. The non-prevailing party of any such dispute shall pay the
attorney's fees of the prevailing party.

<PAGE>

         VI. BANKRUPTCY. In the event of a bankruptcy, assignment for the
benefit of creditors or any such similar event involving the company, then the
Principal Balance plus all accrued and unpaid interest shall be immediately due
and payable.

         IN WITNESS WHEREOF, this Promissory Note has been executed and
delivered by the undersigned by its duly authorized officer on the date first
set forth above.

                                             STARBELLY.COM, INC., a Delaware
                                             Corporation

                                             By:
                                                -------------------------------
                                             Name:    Eric Lefkofsky
                                             Title:   Chairman

                                       2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00005-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00005-of-00352.parquet"}]]