Confidential Separation Agreement and General Release - Interactive Imaginations Inc. and Michael P. Paolucci


                        CONFIDENTIAL SEPARATION AGREEMENT
                               AND GENERAL RELEASE

     This Confidential Separation Agreement and General Release ('Agreement') is
made and entered into by and between Michael P. Paolucci on behalf of himself
and his agents, heirs, executors, assigns and any other person or entity acting
with him or on his behalf ('Paolucci'), on the one hand, and Interactive
Imaginations, Inc. on behalf of itself, its present and former principals,
owners, agents, officers, employees, directors, subsidiaries, affiliated
divisions and companies, parent companies, successors and assigns
('Interactive'), on the other hand. It is made pursuant to the following terms
and conditions.

     Effective at the close of business (Eastern Standard Time) on February 24,
1998, Paolucci's employment with Interactive shall have ceased and all
agreements regarding the employment of Paolucci as an executive of Interactive
are terminated, except as otherwise set forth herein. Paolucci continues to
serve as a Director of Interactive.

     1. Pending and Future Legal or Administrative Actions - Covenant Not to
Sue.

          Paolucci shall neither assist, participate or be represented in, nor
institute, submit or file, or permit to be instituted, submitted or filed on his
behalf, any lawsuit, charge, claim, complaint, or other proceeding, by Paolucci
or on his behalf with any administrative agency, court or other forum, under any
federal, state or local laws or regulations including, but not limited to, (a)
under the Fair Labor Standards Act; the Employee Retirement Income Security Act
of 1974; Title VII of the Civil Rights Act of 1964; the Civil Rights Act of
1991; the Agent Discrimination in Employment Act of 1967 as amended by the Older
Workers Benefit Protection Act; the Equal Pay Act of 1963; the Consolidated
Omnibus Budget Reconciliation Act of 1985; or any other federal, state, or local
insurance, human rights, civil rights, wage-hour, pension, or labor laws, rules
and/or regulations, public policy, contract or tort laws, or (b) any claim of
retaliation under such laws, or (c) any claim arising under common law,
including, but not limited to, causes of action for wrongful termination,
tortious wrongful termination in violation of public policy; discrimination or
harassment on the basis of age, sex, race, or national origin; intentional
infliction of emotional distress; negligent infliction of emotional distress;
fraudulent misrepresentation; negligent misrepresentation; fraud; conspiracy to
commit any act mentioned herein; breach of contract (whether express or implied,
oral or written); breach of the implied covenant of good faith and fair dealing;
interference with business advantage; defamation; interference with prospective
economic advantage; interference with contractual relationship; violation of any
national, state or local statute, law, or ordinance, or (d) any other action
whether cognizable in law or in equity, against Interactive based upon any
conduct up to and including the date of this Confidential Separation Agreement
and shall not, from any source or proceeding, seek or accept any award or
settlement therefrom. The provisions of this Section 1 shall not apply to any
obligations of Interactive pursuant to this Agreement.


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     2. Releases of Claims; Continuing Indemnification.

          2.1 Paolucci Release. It is understood and agreed by and between each
of the parties to this Agreement that in consideration for Interactive's promise
to pay to Paolucci the sums and benefits set forth in Paragraph 3 of this
Agreement, and Interactive's release of Paolucci contained in Section 2.2 of
this Agreement, and the other promises contained herein and other good and
valuable consideration the receipt of which is hereby acknowledged, Paolucci
completely releases and forever discharges Interactive and any present or former
officers, agents, employees, subsidiaries, affiliated companies, parent
companies, successors and assigns of Interactive from all causes of action,
claims, judgments, obligations, damages, or liabilities of whatever kind and
character, including, but not limited to, those arising under the Fair Labor
Standards Act; the Employee Retirement Income Security Act of 1974; Title VII of
the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Age
Discrimination in Employment Act of 1967; the Equal Pay Act of 1963; the
Consolidated Omnibus Budget Reconciliation Act of 1985; or any other federal,
state, or local insurance, human rights, civil rights, wage-hour, pension, or
labor laws, rules and/or regulations, public policy, contract or tort laws, or
any claim of retaliation under such laws, or any claim arising under common law,
including but not limited to, causes of action for wrongful termination;
tortious wrongful termination in violation of public policy; discrimination or
harassment on the basis of age, sex, race, or national origin; intentional
infliction of emotional distress; negligent infliction of emotional distress;
fraudulent misrepresentation; negligent misrepresentation; fraud; conspiracy to
commit any act mentioned herein; breach of contract (whether express or implied,
oral or written); breach of the implied covenant of good faith and fair dealing;
interference with business advantage; defamation; interference with prospective
economic advantage; interference with contractual relationship; violation of any
national, state or local statute, law, or ordinance; or any other action whether
cognizable in law or in equity, and agrees that he will not, from any source or
proceeding, seek or accept any award or settlement therefrom. The provisions of
this Section 2.1 shall not apply to any obligations of Interactive pursuant to
this Agreement.

          2.2 Interactive Release. It is understood and agreed by and between
each of the parties to this Agreement that in consideration of Paolucci's
release contained in Section 2.1 hereof and the other promises contained herein
and other good and valuable consideration the receipt of which is hereby
acknowledged, Interactive completely releases and forever discharges Paolucci
and his heirs, personal representatives, successors and assigns from all causes
of action, claims, judgments, obligations, damages, or liabilities of whatever
kind and character which relate to Paolucci's employment with Interactive or the
cessation of such employment or to his acting as an officer or Director of
Interactive or any of its affiliates, including, without limitation, any and all
tax claims, expense account claims and any other claims related to any conduct
taken or not taken by Paolucci on behalf of, or in his official capacities for
the Company prior to the date of this Agreement. The provisions of this Section
2.2 shall not apply to any obligations of Paolucci pursuant to this Agreement,
nor to any claims arising from Paolucci's willful misconduct in his official
capacities for the Company prior to the date of this Agreement.

          2.3 Notwithstanding any other provision hereof, the Company hereby
confirms that it agrees to maintain and continue in place all indemnification
obligations, and any agreements entered into by the Company for the provision
therefor, provided for Paolucci in the Company's


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Certificate of Incorporation and By-Laws, each as amended, and any and all
indemnification agreements executed by and between the Company and Paolucci. In
connection herewith, Interactive shall maintain officers' and directors'
liability insurance covering Paolucci for the period that he served as an
officer and director of Interactive, in an amount equal to that in effect on the
date hereof.

          2.4 Now and in the future, upon reasonable notice, as necessary or
reasonably requested by Interactive, Paolucci agrees to: (i) provide
cooperation, including, but not limited to, his appearance at interviews and/or
depositions, in all regulatory and litigation matters relating to his reasonable
employment, or area of responsibility at Interactive, whether or not such
matters have already been commenced and through the conclusion of such matters
or proceedings, and (ii) to provide Interactive's counsel with all documents in
his possession or control relating to such regulatory or litigation matters,
provided, however, that Interactive will reimburse Paolucci for all reasonable
travel expenses, including lodging and meals. Performance under this Section 2.4
shall not be a condition to the performance of any obligation of Interactive
hereunder.

     3. Settlement Sums and Other Consideration

          3.1 Pursuant to the other terms and conditions contained in this
Agreement, Interactive will issue to Paolucci a Common Stock Purchase Warrant,
substantially in the form of Exhibit A attached hereto (the 'Warrant'), which
Warrant shall entitle Paolucci to purchase up to two million five hundred
thousand (2,500,000) shares of Interactive's Common Stock, par value $.01 per
share, at an exercise price equal to $0.952 per share.

          3.2 Paolucci acknowledges that he has received notification of his
COBRA continuation rights as of the date hereof. As further consideration for
this Agreement, Interactive shall continue to pay for one year of health benefit
continuation coverage under Interactive's group policy through February, 1999.
Paolucci understands that Interactive's payment of these premiums will not
elongate Paolucci's 18 month COBRA continuation period.

          3.3 Paolucci acknowledges and understand that, in connection with the
execution of this Agreement, the option to purchase 250,000 shares of
Interactive's Common Stock granted (subject to shareholder approval of
increasing the number of shares available under the Amended and Restated 1995
Employee Stock Option Plan) by Interactive's Stock Option Committee as of
November 1, 1997 shall be cancelled in its entirety, whether or not any portion
thereof is vested, and Paolucci shall not be entitled to purchase any common
shares of Interactive pursuant to the option referred to in this Section 3.3.

          3.4 Interactive acknowledges that Paolucci cuurently holds an option
(which is fully vested in Paolucci) to purchase 52,000 shares of Interactive's
Common Stock, at an exercise price of $0.43 per share (the 'Vested Option'), and
agrees in connection herewith to extend the expiration date of such option
(originally January 31, 2000) by five years such that Paolucci's Vested Option
shall remain exercisable in full until it expires on January 31, 2005.


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     4. Denial of Liability.

          Each party expressly recognizes that the making of this Agreement does
not in any way constitute an admission or concession of wrongdoing on the part
of the other party.

     5. Confidentiality and Non-Disclosure

          5.1 Except as noted elsewhere in Paragraph 5 of this Agreement, the
parties shall keep the terms and conditions of this Agreement completely and
strictly confidential. Neither the terms nor conditions of this Agreement nor
the fact of its existence shall be disclosed to any person or body.

          5.2 The only exceptions to Paragraph 5.1 are as follows:

               5.2.1 If the terms or conditions of this Agreement must be
disclosed as required by law, regulation or stock exchange rules, or upon order
of any court of competent jurisdiction in any action in which Paolucci or
Interactive are parties, or Paolucci is subpoenaed as a witness, to agencies,
individuals, or entities, including but not limited to state or federal
employment or taxing entities; or

               5.2.2 If the terms or conditions must be disclosed to Paolucci's
tax, legal or financial advisors, on the further condition that Paolucci advise
such individuals in advance of disclosure that the terms and conditions of the
Agreement are strictly confidential; or

               5.2.3 If the terms or conditions of this Agreement must be
disclosed in order to remedy a breach of any term or condition herein.

          5.3 If disclosure is to be made pursuant to Paragraph 5.2.1, the party
or the party's representative making the disclosure shall immediately, but in no
event more than five (5) business days from receipt of a request or order for
such disclosure, and prior to any such disclosure, notify the other party and
shall not produce or otherwise disclose the existence or terms of this Agreement
unless and until the nondisclosing party has given written permission to do so,
or the nondisclosing party has had an opportunity to seek appropriate relief
from a court or tribunal of competent jurisdiction.

          5.4 The parties agree that Interactive shall be permitted to disclose
the terms of the Agreement to its directors, officers, attorneys, accountants or
as otherwise expressly required or compelled by law, regulation or stock
exchange rules.

          5.5 Neither Paolucci nor the officers or members of the Board of
Directors of Interactive shall speak disparagingly of the other regarding
Paolucci's directorship, employment or cessation of employment with Interactive
or, on the other hand, regarding the business or operations of Interactive or
any of its affiliates.


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          5.6 Performance under this Section 5 shall not be a condition to the
performance of any obligation of Interactive hereunder.

     6. Severability.

          If any provision of this Agreement is declared illegal or
unenforceable by any arbitrator or by any court of competent jurisdiction and
cannot be modified to be enforceable (the parties hereby agreeing that such
modification shall be made without further action on the part of the parties),
that provision will immediately become null and void, leaving the remainder of
this Agreement in full force and effect.

     7. Construction.

          Each party and counsel for each party have reviewed this Agreement
(and Paolucci hereby acknowledges that Interactive advised him to consult with
an attorney regarding this Agreement). This Agreement is entered into in the
State of New York and shall be construed and interpreted in accordance with its
laws.

     8. Integration.

          This Agreement represents the complete understanding between the
parties. No other promises or agreements shall be binding or shall modify this
Agreement unless signed by the parties hereto, provided, however, that the
parties agree that Section 5 of the Employment Agreement dated as of January 1,
1995 between Interactive and Paolucci which by its terms survives the
termination of Paolucci's employment shall continue in full force and effect and
be binding on the parties.

     9. Acceptance and Revocation.

          Paolucci understands that he has the right to consider the terms and
conditions of this Agreement for a period of twenty-one (21) days. Paolucci
further understands that he may revoke this Agreement within seven (7) days of
signing it. Paolucci further represents that he has been given all satisfactory
periods within which to consider the release of claims contained herein prior to
signing this Agreement. To revoke this Agreement, Paolucci must send a written
letter to: David J. Moore, Interactive Imaginations, Inc., 915 Broadway, Suite
1608, New York, New York 10010, stating, 'I hereby revoke my acceptance of our
Confidential Separation Agreement and General Release.' If Paolucci revokes this
Agreement, he will not be entitled to receive the severance payment, the
continuation of medical benefits, or any other consideration described in
paragraph 3 above. Paolucci represents that Interactive has advised him of his
right to consult with an attorney regarding this Agreement.


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     10. THE SIGNATORIES HAVE CAREFULLY READ THIS ENTIRE AGREEMENT AND RELEASE.
ITS CONTENTS HAVE BEEN FULLY EXPLAINED TO THEM BY THEIR ATTORNEYS. THE
SIGNATORIES FULLY UNDERSTAND THE FINAL AND BINDING EFFECT OF THIS AGREEMENT. THE
ONLY PROMISES OR REPRESENTATIONS MADE TO ANY SIGNATORY ABOUT THIS AGREEMENT, AND
TO SIGN THE AGREEMENT, ARE CONTAINED IN THIS AGREEMENT. THE SIGNATORIES ARE
SIGNING THIS AGREEMENT VOLUNTARILY.


Dated: as of February 24, 1998               /s/ Michael P. Paolucci
                                             -----------------------------------
                                             Michael P. Paolucci



                                             INTERACTIVE IMAGINATIONS, INC.


Dated: as of February 24, 1998               By: /s/ David J. Moore
                                                 -------------------------------
                                             Name: David J. Moore
                                             Title: Chief Executive Officer


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